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, 2013
Date of reporting period: December 31, 2013
Item 1. Reports to Stockholders.
Annual Report –
Baird Funds
December 31, 2013
Baird Short-Term Bond Fund
Baird Intermediate Bond Fund
Baird Intermediate Municipal Bond Fund
Baird Aggregate Bond Fund
Baird Core Plus Bond Fund
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Table of Contents
Letter to Shareholders | 1 |
2013 Bond Market Overview | 2 |
Baird Short-Term Bond Fund | 7 |
Baird Intermediate Bond Fund | 17 |
Baird Intermediate Municipal Bond Fund | 27 |
Baird Aggregate Bond Fund | 40 |
Baird Core Plus Bond Fund | 50 |
Additional Information on Fund Expenses | 60 |
Statements of Assets and Liabilities | 62 |
Statements of Operations | 64 |
Statements of Changes in Net Assets | 65 |
Financial Highlights | 70 |
Notes to the Financial Statements | 80 |
Report of Independent Registered Public Accounting Firm | 92 |
Directors and Officers | 93 |
Disclosure Regarding the Board of Directors’ Approval of the Investment Advisory Agreement for Baird Bond Funds | 96 |
Additional Information | 101 |
Privacy Notice | A-1 |
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Cautionary Note on Analyses, Opinions and Outlooks: In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events. These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect. These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate. It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds. Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.
Baird Funds
1-866-442-2473
www.bairdfunds.com
February 27, 2014
Dear Shareholder,
Overall, 2013 proved to be a mixed year for bond investors as shorter duration investments generated modestly positive nominal returns and longer duration investments generated slightly negative nominal returns. Given this market dynamic, the 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 2013 as all the Baird Bond Funds generated strong relative returns versus their respective benchmarks.
We strive to be good stewards of our shareholders’ assets. We employ a risk controlled, bottom-up process to investment decision making and portfolio management. This approach allows us to identify, research and invest based upon strong fundamentals that offer good relative value. We understand that our shareholders rely on us to maintain this consistent approach and focus on risk control to help them achieve their investment objectives through all market cycles.
Our long-term success rests on the trust you have placed in us and we want to thank you for your continued investment in the Baird Funds which experienced steady inflows during the year and increased total net assets to $9.3 billion at the end of 2013.
On the following pages, we review the bond market in 2013 and the performance and composition of each of the Baird Bond Funds.
We are privileged to provide you with fixed income investment management services and appreciate the confidence and trust you have placed in our experienced investment team.
Sincerely,
Mary Ellen Stanek, CFA
President
Baird Funds
Page 1
2013 Bond Market Overview
Treasury Yields Rise, Yield Curve Steepens on Introduction of Taper
The 10-year Treasury yield rose 127 bps in 2013, ending the year at its high (3.03%) as the Fed announced it will modestly reduce the pace of Quantitative Easing (QE) purchases from $85 to $75 billion per month and expects to further reduce and ultimately end purchases as the labor market and broader economy improve. The December announcement came after two months of nonfarm payroll reports showing job gains of over 200,000. The path to higher rates in 2013 was volatile (see chart below right) as sequestration (across the board federal spending cuts) pushed rates lower early in the year and then a partial government shutdown and eleventh hour vote to raise the debt ceiling to avoid technical default caused yields to drop in the fall. Despite these fiscal episodes, yields rose for the year primarily on the Fed’s move to taper QE bond purchases though modest improvement in the economy also contributed to the upward pressure on rates.
Treasury Yields
1 Year | ||||
Maturity | 12/31/12 | 12/31/13 | Change | |
1 | 0.14% | 0.11% | -0.03% | |
2 | 0.25% | 0.38% | 0.13% | |
3 | 0.35% | 0.76% | 0.41% | |
5 | 0.72% | 1.74% | 1.02% | |
7 | 1.18% | 2.45% | 1.27% | |
10 | 1.76% | 3.03% | 1.27% | |
30 | 2.95% | 3.97% | 1.02% | |
10 Year Treasury Yield | |
Short End Steepens, Long End Flattens |
A Tale of Two Curves
As many anticipated, the Fed paired its decision to taper QE purchases with an announcement that it would likely keep the Fed Funds rate near zero “well past the time” the unemployment rate dips below its 6.5% threshold. Forward guidance anchored short term interest rates, creating a very steep yield curve from two to ten years. However, the ten to thirty year portion of the curve actually flattened by 25 bps for the year (see chart at right), in part due to demand from defined benefit pension plans reallocating into long term bonds as U.S. equity markets delivered a 30%+ performance in 2013.
Page 2
2013 Bond Market Overview
Record Issuance Year for Credit
U.S. investment grade credit issuance of $1.106 trillion set a new record, exceeding last year’s record of $1.086 trillion, according to Barclays data. Many corporations were looking to opportunistically fund their businesses while interest rates remained near historic lows. Apple set a record with the largest corporate issuance ever in the second quarter at $17 billion, only to be out-done by Verizon’s $49 billion debt issuance in the third quarter to help fund its $130 billion acquisition of Vodafone’s 45% stake in Verizon Wireless. Looking ahead, it is expected that gross issuance will decline 5% - 15% in 2014.
Gross Issuance – Investment Grade Credit |
Source: Barclays |
Corporate Yield Spreads Tighten Further
In spite of the record issuance, corporate spreads tightened significantly on strong investor demand and solid credit fundamentals (see chart below). Within investment grade credit, financial spreads tightened the most (-46 bps) as financial institutions continued fortifying balance sheets to comply with higher regulatory capital and liquidity requirements. The spread on financials (109 bps) is now less than industrials (114 bps), a relationship that was typical prior to 2008. Given the solid fundamentals, expanding regulation in the sector, and expected decline in supply, we believe financial spreads could continue to tighten vs. industrials. Very strong demand for yield in a low interest rate environment drove spreads on high yield corporates tighter (-129 bps). Away from corporates, agency pass-throughs tightened 16 bps as the Fed continued to purchase the majority of new issuance. Commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) spreads widened, reflecting some of the selling pressure on the market as bond mutual fund flows turned distinctly negative starting in June (see chart on next page).
Option-Adjusted Spreads (in bps)
1 Year | ||||
6/30/07 | 12/31/12 | 12/31/13 | Change | |
U.S. Aggregate Index | 53 | 53 | 45 | -8 |
U.S. Agency (non-mortgage) | 34 | 13 | 17 | 4 |
Mortgage and ABS Sectors | ||||
U.S. Agency Pass-throughs | 65 | 50 | 34 | -16 |
Asset-Backed Securities | 57 | 43 | 55 | 12 |
CMBS | 82 | 124 | 126 | 2 |
Corporate Sectors | ||||
U.S. Investment Grade | 97 | 141 | 114 | -27 |
Industrial | 104 | 133 | 114 | -19 |
Utility | 100 | 144 | 125 | -19 |
Financial Institutions | 88 | 155 | 109 | -46 |
U.S. High Yield | 292 | 511 | 382 | -129 |
Source: Barclays |
Page 3
2013 Bond Market Overview
2013 Mutual Fund Net Flows
Source: ICI
Rising Yields Depress Returns
Most major bond indices and sectors posted negative returns for 2013 as rising yields detracted from returns. Only a handful of indices and sectors with shorter average durations (e.g. U.S. 1-3 Yr. Gov’t/Credit +0.64%, CMBS +0.23%), or with dramatic spread tightening (i.e. Corporate High Yield +7.44%) ended the year in positive territory. Treasuries (-2.75%) felt the full impact of the rise in rates in 2013 and municipals (-2.55%) followed close behind as mutual fund flows turned sharply negative mid-year (see chart above) and Detroit’s record bankruptcy filing and Puerto Rico’s challenges raised investors’ sensitivity to credit risk. Tightening spreads limited the fall of Investment Grade Corporates (-1.53%) while the return of the High Yield sector (+7.44%) mirrored the surge in equities. TIPS (-8.61%) were the weakest performing sector by far and moved back closer to fair value in 2013 (after an extended period of overvaluation) as inflation expectations eased and investors became painfully aware that while they do provide inflation protection, TIPS are not always an effective hedge against rising rates.
Total Returns of Selected Barclays Indices and Subsectors
Barclays Index/Sector | December | 4th Quarter | 2013 |
U.S. Aggregate Index | -0.57% | -0.14% | -2.02% |
U.S. Gov’t/Credit Index | -0.62% | -0.03% | -2.35% |
U.S. Intermediate Gov’t/Credit Index | -0.63% | -0.02% | -0.86% |
U.S. 1-3 Yr. Gov’t/Credit Index | -0.13% | 0.18% | 0.64% |
U.S. Treasury | -0.91% | -0.75% | -2.75% |
U.S. Agency | -0.56% | -0.17% | -1.38% |
MBS (Mortgage Backed Securities) | -0.47% | -0.42% | -1.41% |
CMBS (Commercial Mortgage Backed Securities) | -0.29% | 0.53% | 0.23% |
ABS (Asset-Backed Securities) | -0.22% | 0.32% | -0.27% |
U.S. Corporate - Investment Grade | -0.16% | 1.11% | -1.53% |
Corporate High Yield | 0.54% | 3.58% | 7.44% |
Municipal Bond Index | -0.26% | 0.32% | -2.55% |
TIPS (Treasury Inflation Protected Securities) | -1.47% | -2.00% | -8.61% |
Outlook
We expect economic growth to modestly improve in 2014 although many headwinds remain and inflation remains benign. The tapering of QE purchases will put some additional upward pressure on rates, although the magnitude of any rise will be limited by modest economic growth and tepid inflation. With the Fed keeping its policy rate near zero into 2015, the intermediate portion of the curve will remain very steep. As such, rolling down the yield curve will add significantly to returns of intermediate maturities. Due to the
Page 4
2013 Bond Market Overview
Taper, we see limited return potential for Treasuries and Agencies. Instead, we see good relative value in several non-government sectors along the steeper intermediate maturity segment of the curve. We expect Investment Grade Corporates to outperform, as strong fundamentals and reduced supply will allow spreads to tighten modestly. We also see attractive relative value in CMBS structures with superior credit enhancement. We hold a cautious view on Agency MBS as the Fed reduces extraordinarily accommodative purchases and the sector starts the year with historically tight spreads. With yields on Corporate High Yield at all-time lows, we are concerned that aggressive use of leverage could adversely impact the sector. In the municipal sector, higher yields and a steep curve brought in some demand from cross-over buyers. While state credit conditions are showing signs of improvement, high-profile challenges (e.g. Detroit, Puerto Rico) will keep investor sensitivity to credit risk high for municipals. Across tax-exempt markets we caution investors against going too far out the yield curve or too far down in quality given the high level of uncertainty and broad range of potential outcomes.
The Barclays Aggregate Bond Index is an index comprised of approximately 6,000 publicly traded bonds including U.S. Government, mortgage backed, corporate, and Yankee bonds with an average maturity of approximately 10 years.
The Barclays Government/Credit Index is a combination of the Government Index which measures government-bond general and Treasury funds, and the Credit Bond Index, which is a market value-weighted index which tracks the returns of all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC registered, investment grade Corporate Debt.
The Barclays Intermediate Government/Credit Index is a combination of the Government Index which measures government-bond general and Treasury funds, and the Credit Bond Index, which is a market value-weighted index which tracks the returns of all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC registered, investment grade Corporate Debt with maturities between one and ten years.
The Barclays Government/Credit Intermediate Index (1 – 3 yr) is a combination of the Government Index which measures government-bond general and Treasury funds, and the Credit Bond Index, which is a market value-weighted index which tracks the returns of all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC registered, investment grade Corporate Debt with maturities between zero and three years.
The Barclays U.S. Treasury Index includes public obligations of the U.S. Treasury. Treasury bills are excluded by the maturity constraint of at least one year but are part of a separate Short Treasury Index. In addition, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS, are excluded. STRIPS are excluded from the index because their inclusion would result in double-counting. Securities in the Index roll up to the U.S. Aggregate, U.S. Universal, and Global Aggregate Indices. The U.S. Treasury Index was launched on January 1, 1973.
The Barclays U.S. Agency Index: This index is the U.S. Agency component of the U.S. Government/Credit Index. It includes publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government (such as USAID securities). The largest issues are Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System (FHLB). The index includes both callable and non-callable agency securities.
The Barclays U.S. Corporate – Investment Grade Index: This index is the Corporate component of the U.S. Credit Index. It includes publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered.
The Barclays CMBS (Commercial Mortgage Backed Securities) Index: This index is the CMBS component of the U.S. Aggregate Index. The Barclays CMBS ERISA-Eligible Index is the ERISA-eligible component of the Barclays CMBS Index. This index, which includes investment grade securities that are ERISA eligible under the underwriter’s exemption, is the only CMBS sector that is included in the U.S. Aggregate Index.
Page 5
2013 Bond Market Overview
The Barclays MBS (Mortgage Backed Securities) Index: This index is the U.S. MBS component of the U.S. Aggregate Index. The MBS Index covers the mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The MBS Index is formed by grouping the universe of over 600,000 individual fixed rate MBS pools into approximately 3,500 generic aggregates.
The Barclays ABS (Asset Backed Securities) Index: This index is the ABS component of the U.S. Aggregate Index. The ABS index has three subsectors: credit and charge cards, autos, and utility. The index includes pass-through, bullet, and controlled amortization structures. The ABS Index includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche.
The Barclays Corporate High Yield Index: The Barclays U.S. High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, 144-As and pay-in-kind bonds (PIKs, as of October 1, 2009) are also included.
The Barclays Municipal Bond Index is a broad-based, total-return index. The bonds are all investment-grade, tax-exempt, and fixed-rate securities with long-term maturities (greater than 2 years). They are selected from issues larger than $50 million.
The Barclays TIPS Index consists of Treasury Inflation Protected Securities (TIPS). TIPS are securities whose principal is tied to the Consumer Price Index. TIPS pay interest semi-annually, based on the fixed rate applied to the adjusted principal.
A direct investment in an index is not possible.
Page 6
Baird Short-Term Bond Fund
December 31, 2013
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 1-3 Year U.S. Government/Credit Bond Index. The Barclays 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 credit 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 versus its benchmark index in 2013. Our long-term commitment to duration neutrality was very important as well. A number of the themes that drove performance in 2012 continued to positively impact the portfolio relative to its benchmark in 2013. The primary factors contributing to the Fund’s outperformance over its benchmark are described below.
• | The Fund’s overweight position to the corporate credit sector relative to the Fund’s benchmark positively impacted the Fund’s performance. Corporate bonds generally experienced favorable price returns relative to U.S. Treasuries of comparable maturity due to a significant narrowing of corporate bond spreads (the additional yield that investors demand above U.S. Treasury bonds for owning corporate debt) during the year. The narrowing was driven by generally solid corporate credit fundamentals and very strong investor demand. | |
• | An overweight to the financial sub-sector in particular was an important contributor to the Fund’s relative outperformance as holdings in this sub-sector outperformed other investment grade corporate bonds. The financial sub-sector’s performance continued to be driven by both strong and improving credit fundamentals and strong investor demand. | |
• | The Fund’s underweight to U.S. Treasuries and Agencies was a positive contributor to relative performance as nongovernment “spread sectors” such as corporate, mortgage-backed, and asset-backed securities outperformed equal-duration U.S. Government securities for the year. | |
• | Exposure to commercial mortgage-backed securities (CMBS) had an overall positive impact on the Fund’s performance for the year. As part of the risk management for the Fund’s exposure to this sector, the Fund holds short maturity, select super-senior issues with significant credit enhancement. |
We are pleased with the Fund’s performance in 2013 and are confident in the individual issues and the overall structure of the Fund. The Fund continues to maintain a significant yield advantage over the benchmark and we are optimistic regarding the Fund’s relative performance as we head into 2014.
Page 7
Baird Short-Term Bond Fund
December 31, 2013
Portfolio Characteristics
Quality Distribution(1)
Net Assets | $2,008,964,589 | |||
SEC 30-Day | ||||
Yield(2) | ||||
Institutional Class | 1.38% | |||
Investor Class | 1.10% | |||
Average | ||||
Effective | ||||
Duration | 1.91 years | |||
Average | ||||
Effective | ||||
Maturity | 2.35 years | |||
Annualized | ||||
Expense | ||||
Ratio | ||||
Institutional Class | 0.30% | |||
Sector Weightings(1) | Investor Class | 0.55%(3) | ||
Portfolio | ||||
Turnover | ||||
Rate | 45.1% | |||
Number of | ||||
Holdings | 473 | |||
(1) | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
(2) | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2013. |
(3) | Includes 0.25% 12b-1 fee. |
Page 8
Baird Short-Term Bond Fund
December 31, 2013
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.
Investor Class
Value of a $10,000 Investment
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/19/12), assuming reinvestment of all distributions.
Page 9
Baird Short-Term Bond Fund
December 31, 2013
Total Returns
Average Annual | ||||
Since | Since | |||
One | Five | Inception | Inception | |
For the Periods Ended December 31, 2013 | Year | Years | (8/31/04) | (9/19/12) |
Institutional Class Shares | 1.33% | 3.99% | 3.28% | N/A |
Investor Class Shares | 1.11% | N/A | N/A | 1.40% |
Barclays 1-3 Year U.S. Government/Credit Bond Index(1) | 0.64% | 2.02% | 2.98% | 0.68% |
(1) | The Barclays 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. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The line graph on the previous page and the returns shown in the table above 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The Fund’s gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund may invest in U.S. dollar denominated foreign securities which involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation. The Fund may also invest in mortgage- and asset-backed securities, which include interest rate and prepayment risks more pronounced than those of other fixed income securities.
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 10
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
This schedule summarizes the Fund’s holdings by asset type. Details are reported for each of the Fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the Fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The Fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter end. For the second and fourth fiscal quarters, the complete listing of the Fund’s holdings is available electronically in the Fund’s Form N-CSR at http://www.rwbaird.com/baird-funds/prospectus-applications/prospectus-applications.aspx and on the Securities and Exchange Commission’s website (www.sec.gov) or you can have it mailed to you without charge by calling 1-866-44BAIRD. For the first and third fiscal quarters, the Fund files the lists with the SEC on Form N-Q. Shareholders can look up the Fund’s Forms N-CSR and N-Q on the SEC’s website (www.sec.gov).
Long-Term Investments
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
U.S. Treasury Securities | ||||||||||||
U.S. Treasury Bonds | ||||||||||||
2.375%, 07/31/2017@ | $ | 185,800,000 | $ | 194,146,508 | 9.7 | % | ||||||
Total U.S. Treasury Securities | ||||||||||||
(Cost $194,511,368) | 194,146,508 | 9.7 | % | |||||||||
Taxable Municipal Bonds | ||||||||||||
Rhode Island Housing & Mortgage Finance Corp/RI | ||||||||||||
3.000%, 10/01/2034 (Callable 10/01/2022) | 12,500,000 | 12,395,000 | 0.6 | % | ||||||||
Other Taxable Municipal Bonds# | 44,037,927 | 2.2 | % | |||||||||
Total Taxable Municipal Bonds | ||||||||||||
(Cost $56,705,560) | 56,432,927 | 2.8 | % | |||||||||
Other Government Related Securities | ||||||||||||
Other Government Related Securities#~ | 22,958,440 | 1.1 | % | |||||||||
Total Other Government Related Securities | ||||||||||||
(Cost $22,822,243) | 22,958,440 | 1.1 | % | |||||||||
Corporate Bonds | ||||||||||||
Industrials | ||||||||||||
America Movil, S.A.B. de C.V. | ||||||||||||
1.244%, 09/12/2016 f | 9,000,000 | 9,093,366 | 0.5 | % | ||||||||
Computer Sciences Corporation | ||||||||||||
2.500%, 09/15/2015 | 9,550,000 | 9,747,847 | 0.5 | % | ||||||||
Fidelity National Information Services, Inc. | ||||||||||||
7.875%, 07/15/2020 | 8,520,000 | 9,294,971 | 0.5 | % | ||||||||
Ingredion Incorporated | ||||||||||||
1.800%, 09/25/2017 | 8,974,000 | 8,746,563 | 0.4 | % | ||||||||
Marathon Oil Corporation | ||||||||||||
6.000%, 10/01/2017 | 7,805,000 | 8,845,258 | 0.4 | % | ||||||||
Murphy Oil Corporation | ||||||||||||
2.500%, 12/01/2017 | 10,281,000 | 10,343,519 | 0.5 | % | ||||||||
Pioneer Natural Resources Company | ||||||||||||
5.875%, 07/15/2016 | 10,000,000 | 11,092,870 | 0.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Plum Creek Timberlands, L.P. | ||||||||||||
5.875%, 11/15/2015 | $ | 9,550,000 | $ | 10,337,503 | 0.5 | % | ||||||
Seagate HDD Cayman | ||||||||||||
6.875%, 05/01/2020 f | 8,400,000 | 9,082,500 | 0.4 | % | ||||||||
Staples, Inc. | ||||||||||||
9.750%, 01/15/2014 | 9,555,000 | 9,584,773 | 0.5 | % | ||||||||
Telecom Italia Capital, SA | ||||||||||||
5.250%, 10/01/2015 f | 10,960,000 | 11,521,700 | 0.6 | % | ||||||||
The Valspar Corporation | ||||||||||||
5.100%, 08/01/2015 | 10,450,000 | 11,020,194 | 0.5 | % | ||||||||
Time Warner Companies, Inc. | ||||||||||||
7.250%, 10/15/2017 | 7,831,000 | 9,335,382 | 0.5 | % | ||||||||
Vale Canada Limited | ||||||||||||
5.700%, 10/15/2015 f | 8,000,000 | 8,561,896 | 0.4 | % | ||||||||
Other Industrials#~ | 458,004,946 | 22.8 | % | |||||||||
Total Industrials | ||||||||||||
(Cost $591,982,346) | 594,613,288 | 29.6 | % | |||||||||
Utility | ||||||||||||
Entergy Corporation | ||||||||||||
4.700%, 01/15/2017 | 8,750,000 | 9,408,140 | 0.5 | % | ||||||||
Gulfstream Natural Gas System, L.L.C. | ||||||||||||
6.950%, 06/01/2016 (Acquired 07/22/2013 | ||||||||||||
through 08/27/2013, Cost $8,642,026)* | 7,646,000 | 8,573,865 | 0.4 | % | ||||||||
National Grid PLC | ||||||||||||
6.300%, 08/01/2016 f | 9,611,000 | 10,808,377 | 0.5 | % | ||||||||
Williams Partners L.P. | ||||||||||||
3.800%, 02/15/2015 | 9,000,000 | 9,298,089 | 0.5 | % | ||||||||
Other Utility#~ | 125,734,701 | 6.2 | % | |||||||||
Total Utility | ||||||||||||
(Cost $162,448,865) | 163,823,172 | 8.1 | % | |||||||||
Finance | ||||||||||||
ABN AMRO Bank N.V. | ||||||||||||
1.036%, 10/28/2016 (Acquired 10/23/2013 | ||||||||||||
through 12/27/2013, Cost $9,953,753)* f | 9,950,000 | 9,964,925 | 0.5 | % | ||||||||
Cie de Financement Foncier SA | ||||||||||||
2.500%, 09/16/2015 (Acquired 06/19/2012 | ||||||||||||
through 09/27/2013, Cost $8,807,060)* f | 8,600,000 | 8,846,037 | 0.4 | % | ||||||||
Credit Agricole SA | ||||||||||||
1.096%, 10/03/2016 | ||||||||||||
(Acquired 09/26/2013, Cost $10,000,000)*@ f | 10,000,000 | 10,027,090 | 0.5 | % | ||||||||
General Electric Capital Corporation: | ||||||||||||
0.894%, 07/12/2016 | 10,000,000 | 10,070,160 | 0.5 | % | ||||||||
5.625%, 09/15/2017 | 9,080,000 | 10,329,381 | 0.5 | % | ||||||||
1.000%-5.625%, 09/21/2015-05/01/2018@ | 8,925,000 | 9,347,803 | 0.5 | % |
The accompanying notes are an integral part of these financial statements.
Page 12
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Hutchison Whampoa International Ltd. | ||||||||||||
4.625%, 09/11/2015 (Acquired 09/24/2012 | ||||||||||||
through 06/25/2013, Cost $9,547,825)* f | $ | 9,090,000 | $ | 9,619,238 | 0.5 | % | ||||||
Kemper Corporation | ||||||||||||
6.000%, 11/30/2015 | 8,500,000 | 9,091,311 | 0.5 | % | ||||||||
KeyBank National Association | ||||||||||||
7.413%, 05/06/2015 | 9,854,000 | 10,677,104 | 0.5 | % | ||||||||
Macquarie Bank Limited | ||||||||||||
2.000%, 08/15/2016 (Acquired 08/07/2013 | ||||||||||||
through 09/27/2013, Cost $10,025,015)* f | 10,000,000 | 10,113,710 | 0.5 | % | ||||||||
Manulife Financial Corp. | ||||||||||||
3.400%, 09/17/2015 f | 9,761,000 | 10,160,508 | 0.5 | % | ||||||||
Nomura Holdings Inc. | ||||||||||||
2.000%, 09/13/2016 f | 9,155,000 | 9,230,684 | 0.5 | % | ||||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd. | ||||||||||||
3.850%, 01/22/2015 | ||||||||||||
(Acquired 07/22/2013, Cost $10,307,280)* f | 10,000,000 | 10,315,700 | 0.5 | % | ||||||||
The Bear Stearns Companies LLC | ||||||||||||
6.400%, 10/02/2017 | 7,700,000 | 8,936,320 | 0.4 | % | ||||||||
Other Finance#~ | 478,094,625 | 23.8 | % | |||||||||
Total Finance | ||||||||||||
(Cost $609,070,808) | 614,824,596 | 30.6 | % | |||||||||
Residential Mortgage-Backed Securities | ||||||||||||
U.S. Government Agency Issues | ||||||||||||
Other U.S. Government Agency Issues# | 1,152,444 | 0.1 | % | |||||||||
Total U.S. Government Agency Issues | ||||||||||||
(Cost $1,089,496) | 1,152,444 | 0.1 | % | |||||||||
Non-U.S. Government Agency Issues | ||||||||||||
Countrywide Alternative Loan Trust | ||||||||||||
Series 2004-2CB, Class 1A8, 5.750%, 03/25/2034 | 8,960,070 | 9,129,845 | 0.5 | % | ||||||||
MASTR Alternative Loan Trust: | ||||||||||||
Series 2003-5, Class 7A1, 5.000%, 07/25/2018 | 12,607,177 | 13,140,347 | 0.6 | % | ||||||||
Series 2003-9, Class 3A1, 4.750%, 11/25/2018 | 5,982,619 | 6,092,634 | 0.3 | % | ||||||||
Series 2003-5, Class 4A1, 5.500%, 07/25/2033 | 9,273,386 | 9,727,420 | 0.5 | % | ||||||||
Other Non-U.S. Government Agency Issues# | 16,461,276 | 0.8 | % | |||||||||
Total Non-U.S. Government Agency Issues | ||||||||||||
(Cost $54,873,028) | 54,551,522 | 2.7 | % | |||||||||
Asset Backed Securities | ||||||||||||
Accredited Mortgage Loan Trust | ||||||||||||
Series 2006-2, Class A3, 0.315%, 09/25/2036 | 10,942,014 | 10,542,412 | 0.5 | % | ||||||||
GSAA Trust | ||||||||||||
Series 2005-8, Class A4, 0.435%, 06/25/2035 | 12,922,206 | 11,869,563 | 0.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 13
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Nationstar Home Equity Loan Trust | ||||||||||||
Series 2006-B, Class AV3, 0.335%, 09/25/2036 | $ | 11,907,627 | $ | 11,594,349 | 0.6 | % | ||||||
RASC Trust | ||||||||||||
Series 2005-AHL2, Class A3, 0.515%, 10/25/2035 | 12,150,000 | 11,514,312 | 0.6 | % | ||||||||
Other Asset Backed Securities#~ | 71,090,147 | 3.5 | % | |||||||||
Total Asset Backed Securities | ||||||||||||
(Cost $118,122,724) | 116,610,783 | 5.8 | % | |||||||||
Commercial Mortgage-Backed Securities | ||||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 18,110,000 | 18,997,879 | 1.0 | % | ||||||||
CD Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 17,551,848 | 18,609,610 | 0.9 | % | ||||||||
COMM Mortgage Trust | ||||||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | 13,407,000 | 14,099,418 | 0.7 | % | ||||||||
Credit Suisse First Boston Mortgage Securities Corp. | ||||||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 15,208,250 | 15,965,104 | 0.8 | % | ||||||||
FHLMC Multifamily Structured | ||||||||||||
Pass Through Certificates | ||||||||||||
Series K-701, Class A2, 3.882%, 11/25/2017 | 10,000,000 | 10,762,920 | 0.5 | % | ||||||||
J.P. Morgan Chase Commercial Mortgage Trust | ||||||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 10,549,000 | 11,047,577 | 0.6 | % | ||||||||
Morgan Stanley Capital I Trust | ||||||||||||
Series 2005-HQ7, Class A4, 5.207%, 11/14/2042 | 13,020,000 | 13,693,837 | 0.7 | % | ||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 9,912,000 | 10,551,334 | 0.5 | % | ||||||||
Other Commercial Mortgage Backed Securities#~ | 16,981,754 | 0.8 | % | |||||||||
Total Commercial Mortgage Backed Securities | ||||||||||||
(Cost $133,435,803) | 130,709,433 | 6.5 | % | |||||||||
Total Long-Term Investments | ||||||||||||
(Cost $1,945,062,241) | 1,949,823,113 | 97.0 | % | |||||||||
Short-Term Investments | ||||||||||||
Shares | ||||||||||||
Money Market Mutual Funds | ||||||||||||
Dreyfus Institutional Cash Advantage Fund, 0.06%« | 23,737,892 | 23,737,892 | 1.2 | % | ||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 39,000,000 | 39,000,000 | 1.9 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $62,737,892) | 62,737,892 | 3.1 | % |
The accompanying notes are an integral part of these financial statements.
Page 14
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
Investments Purchased with Cash
Proceeds from Securities Lending
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Investment Companies | ||||||||||||
Mount Vernon Securities Lending | ||||||||||||
Trust Prime Portfolio, 0.19%« | 204,124,977 | $ | 204,124,977 | 10.2 | % | |||||||
Total Investment Companies | ||||||||||||
(Cost $204,124,977) | 204,124,977 | 10.2 | % | |||||||||
Total Investments Purchased With | ||||||||||||
Cash Proceeds From Securities Lending | ||||||||||||
(Cost $204,124,977) | 204,124,977 | 10.2 | % | |||||||||
Total Investments | ||||||||||||
(Cost $2,211,925,110) | 2,216,685,982 | 110.3 | % | |||||||||
Liabilities in Excess of Other Assets | (207,721,393 | ) | (10.3 | )% | ||||||||
TOTAL NET ASSETS | $ | 2,008,964,589 | 100.0 | % |
Notes to Summary Schedule of Investments
# | Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets. | |
* | Restricted Security Deemed Liquid | |
@ | This security or portion of this security is out on loan at December 31, 2013. | |
f | Foreign Security | |
« | 7-Day Yield | |
~ | Groupings contain, in aggregate, restricted securities totaling $305,270,462 representing 15.20% of net assets. |
Summary of Fair Value Exposure at December 31, 2013
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.
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 accompanying notes are an integral part of these financial statements.
Page 15
Baird Short-Term Bond Fund
Summary Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013 (cont.)
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, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 194,146,508 | $ | — | $ | 194,146,508 | ||||||||
Taxable Municipal Bonds | — | 56,432,927 | — | 56,432,927 | ||||||||||||
Other Government Related Securities | — | 22,958,440 | — | 22,958,440 | ||||||||||||
Corporate Bonds | — | 1,373,261,056 | — | 1,373,261,056 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
U.S. Government Agency Issues | — | 1,152,444 | — | 1,152,444 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
Non-U.S. Government Agency Issues | — | 54,551,522 | — | 54,551,522 | ||||||||||||
Asset Backed Securities | — | 116,610,783 | — | 116,610,783 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 130,709,433 | — | 130,709,433 | ||||||||||||
Total Fixed Income | — | 1,949,823,113 | — | 1,949,823,113 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 62,737,892 | — | — | 62,737,892 | ||||||||||||
Total Short-Term Investments | 62,737,892 | — | — | 62,737,892 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Investment Companies | 204,124,977 | — | — | 204,124,977 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 204,124,977 | — | — | 204,124,977 | ||||||||||||
Total Investments | $ | 266,862,869 | $ | 1,949,823,113 | $ | — | $ | 2,216,685,982 |
Changes in valuation techniques may result in transfers into or out of assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
The accompanying notes are an integral part of these financial statements.
Page 16
Baird Intermediate Bond Fund
December 31, 2013
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 Intermediate U.S. Government/Credit Bond Index. The Barclays Intermediate U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government and credit securities, with maturities between one and ten years.
Although the Fund generated a negative absolute return for the year resulting from the rise in market yields, the Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong relative returns versus its benchmark index in 2013. Our long-term commitment to duration neutrality was very important as well. A number of the themes that drove performance in 2012 continued to positively impact the portfolio relative to its benchmark in 2013. The primary factors contributing to the Fund’s outperformance over its benchmark in 2013 are described below.
• | The Fund’s continued overweight position to the corporate credit sector relative to the Fund’s benchmark positively impacted the Fund’s performance. Corporate bonds generally experienced favorable price returns relative to U.S. Treasuries of comparable maturity due to a significant narrowing of corporate bond spreads (the additional yield that investors demand above U.S. Treasury bonds for owning corporate debt) during the year. The narrowing was driven by generally solid corporate credit fundamentals and very strong investor demand. | |
• | An overweight to the financial sub-sector in particular was an important contributor to the Fund’s relative outperformance, as financials significantly outperformed other investment grade corporate bonds. The financial sub-sector’s performance was driven by both strong and improving credit fundamentals and strong investor demand. | |
• | The Fund’s underweight to U.S. Treasuries and Agencies was a positive contributor to relative performance, as nongovernment “spread sectors” such as corporate, mortgage-backed, and asset-backed securities outperformed equal-duration U.S. Government securities for the year. | |
• | Modest exposure to commercial mortgage-backed securities (CMBS) had an overall positive impact on the Fund’s performance for the year. As part of the risk management for the Fund’s exposure to this sector, the Fund holds short maturity, select super-senior issues with significant credit enhancement. | |
• | The Fund’s modest exposure to non-U.S. Agency mortgage-backed securities was a positive contributor as prices for those securities generally rose during 2013. The Fund also benefited from relatively high coupon payments, an important consideration in the current low interest rate environment when income is reinvested as rates rise. |
We are pleased with the Fund’s relative performance to its benchmark in 2013 and are confident in the individual issues and the overall structure of the Fund. The Fund’s current significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2014.
Page 17
Baird Intermediate Bond Fund
December 31, 2013
Portfolio Characteristics
Quality Distribution(1)
Net Assets | $1,155,705,925 | |||
SEC 30-Day | ||||
Yield(2) | ||||
Institutional Class | 2.08% | |||
Investor Class | 1.84% | |||
Average | ||||
Effective | ||||
Duration | 3.84 years | |||
Average | ||||
Effective | ||||
Maturity | 4.39 years | |||
Annualized | ||||
Expense | ||||
Ratio | ||||
Sector Weightings(1) | Institutional Class | 0.30% | ||
Investor Class | 0.55%(3) | |||
Portfolio | ||||
Turnover | ||||
Rate | 45.1% | |||
Number of | ||||
Holdings | 422 | |||
(1) | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
(2) | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2013. |
(3) | Includes 0.25% 12b-1 fee. |
Page 18
Baird Intermediate Bond Fund
December 31, 2013
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 19
Baird Intermediate Bond Fund
December 31, 2013
Total Returns
Average Annual | ||||
One | Five | Ten | Since | |
For the Periods Ended December 31, 2013 | Year | Years | Years | Inception(1) |
Institutional Class Shares | -0.17% | 6.29% | 4.69% | 5.60% |
Investor Class Shares | -0.41% | 6.02% | 4.41% | 5.33% |
Barclays Intermediate | ||||
U.S. Government/Credit Bond Index(2) | -0.86% | 3.96% | 4.09% | 5.10% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2013. |
(2) | The Barclays 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. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The line graph on the previous page and the returns shown in the table above 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The Fund’s gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund may invest in U.S. dollar denominated foreign securities which involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation. The Fund may also invest in mortgage- and asset-backed securities, which include interest rate and prepayment risks more pronounced than those of other fixed income securities.
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 20
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
This schedule summarizes the Fund’s holdings by asset type. Details are reported for each of the Fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the Fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The Fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter end. For the second and fourth fiscal quarters, the complete listing of the Fund’s holdings is available electronically in the Fund’s Form N-CSR at http://www.rwbaird.com/baird-funds/prospectus-applications/prospectus-applications.aspx and on the Securities and Exchange Commission’s website (www.sec.gov) or you can have it mailed to you without charge by calling 1-866-44BAIRD. For the first and third fiscal quarters, the Fund files the lists with the SEC on Form N-Q. Shareholders can look up the Fund’s Forms N-CSR and N-Q on the SEC’s website (www.sec.gov).
Long-Term Investments
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
U.S. Treasury Securities | ||||||||||||
U.S. Treasury Bonds: | ||||||||||||
3.875%, 05/15/2018@ | $ | 9,700,000 | $ | 10,691,224 | 0.9 | % | ||||||
9.125%, 05/15/2018@ | 13,950,000 | 18,505,540 | 1.6 | % | ||||||||
1.250%, 04/30/2019@ | 224,875,000 | 217,865,196 | 18.9 | % | ||||||||
7.875%, 02/15/2021@ | 31,000,000 | 42,179,375 | 3.6 | % | ||||||||
Total U.S. Treasury Securities | ||||||||||||
(Cost $290,915,764) | 289,241,335 | 25.0 | % | |||||||||
U.S. Government Agency Issues | ||||||||||||
Federal Home Loan Mortgage Corporation (FHLMC): | ||||||||||||
1.000%, 06/29/2017 | 9,200,000 | 9,144,818 | 0.8 | % | ||||||||
1.375%, 05/01/2020@ | 10,000,000 | 9,375,140 | 0.8 | % | ||||||||
2.375%, 01/13/2022@ | 300,000 | 286,790 | 0.0 | % | ||||||||
Total U.S. Government Agency Issues | ||||||||||||
(Cost $18,849,262) | 18,806,748 | 1.6 | % | |||||||||
Taxable Municipal Bonds | ||||||||||||
State of Illinois | ||||||||||||
3.636%, 02/01/2014 | 5,150,000 | 5,161,793 | 0.5 | % | ||||||||
Other Taxable Municipal Bonds# | 28,805,070 | 2.5 | % | |||||||||
Total Taxable Municipal Bonds | ||||||||||||
(Cost $33,486,123) | 33,966,863 | 3.0 | % | |||||||||
Other Government Related Securities | ||||||||||||
Petrobras International Finance Company | ||||||||||||
3.875%, 01/27/2016 f | 4,175,000 | 4,298,004 | 0.4 | % | ||||||||
Other Government Related Securities#~ | 10,607,760 | 0.9 | % | |||||||||
Total Other Government Related Securities | ||||||||||||
(Cost $13,984,332) | 14,905,764 | 1.3 | % | |||||||||
Corporate Bonds | ||||||||||||
Industrials | ||||||||||||
Computer Sciences Corporation | ||||||||||||
2.500%, 09/15/2015@ | 4,500,000 | 4,593,227 | 0.4 | % |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
CVS Caremark Corporation | ||||||||||||
4.000%, 12/05/2023 | $ | 4,425,000 | $ | 4,415,637 | 0.4 | % | ||||||
Fidelity National Information Services, Inc. | ||||||||||||
7.875%, 07/15/2020 | 4,800,000 | 5,236,603 | 0.4 | % | ||||||||
Glencore Funding LLC | ||||||||||||
2.500%, 01/15/2019 (Acquired 05/22/2013 | ||||||||||||
through 10/29/2013, Cost $4,292,532)* | 4,400,000 | 4,260,599 | 0.4 | % | ||||||||
Hyundai Capital Services Inc. | ||||||||||||
6.000%, 05/05/2015 (Acquired 03/27/2013 | ||||||||||||
through 05/30/2013, Cost $5,883,634)* f | 5,549,000 | 5,901,317 | 0.5 | % | ||||||||
Murphy Oil Corporation | ||||||||||||
3.700%, 12/01/2022 | 5,000,000 | 4,620,025 | 0.4 | % | ||||||||
Mylan Inc. | ||||||||||||
6.000%, 11/15/2018 (Acquired 01/15/2013 | ||||||||||||
through 02/12/2013, Cost $4,268,859)* | 4,000,000 | 4,262,380 | 0.4 | % | ||||||||
Petrohawk Energy Corporation | ||||||||||||
7.250%, 08/15/2018 | 4,000,000 | 4,312,000 | 0.4 | % | ||||||||
Telecom Italia Capital, SA | ||||||||||||
5.250%, 10/01/2015 f | 4,425,000 | 4,651,781 | 0.4 | % | ||||||||
Warner Chilcott Co LLC / | ||||||||||||
Warner Chilcott Finance LLC | ||||||||||||
7.750%, 09/15/2018 f | 5,000,000 | 5,412,500 | 0.5 | % | ||||||||
Waste Management, Inc. | ||||||||||||
7.375%, 03/11/2019 | 5,000,000 | 6,047,305 | 0.5 | % | ||||||||
Other Industrials#~ | 198,196,468 | 17.1 | % | |||||||||
Total Industrials | ||||||||||||
(Cost $248,407,897) | 251,909,842 | 21.8 | % | |||||||||
Utility | ||||||||||||
Ameren Corporation | ||||||||||||
8.875%, 05/15/2014 | 4,500,000 | 4,629,047 | 0.4 | % | ||||||||
National Grid PLC | ||||||||||||
6.300%, 08/01/2016 f | 3,925,000 | 4,413,992 | 0.4 | % | ||||||||
National Rural Utilities Corporation | ||||||||||||
10.375%, 11/01/2018 | 3,144,000 | 4,251,895 | 0.4 | % | ||||||||
Other Utility#~ | 65,428,119 | 5.6 | % | |||||||||
Total Utility | ||||||||||||
(Cost $77,059,019) | 78,723,053 | 6.8 | % | |||||||||
Finance | ||||||||||||
ABN AMRO Bank N.V. | ||||||||||||
4.250%, 02/02/2017 | ||||||||||||
(Acquired 11/22/2013, Cost $4,853,428)* f | 4,500,000 | 4,824,369 | 0.4 | % | ||||||||
BPCE | ||||||||||||
2.500%, 12/10/2018 f | 7,000,000 | 6,962,522 | 0.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 22
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Comerica Bank | ||||||||||||
5.200%, 08/22/2017 | $ | 4,095,000 | $ | 4,508,943 | 0.4 | % | ||||||
Commonwealth Bank of Australia | ||||||||||||
5.000%, 10/15/2019 | ||||||||||||
(Acquired 03/02/2012, Cost $4,264,500)* f | 4,000,000 | 4,458,520 | 0.4 | % | ||||||||
Deutsche Bank Aktiengesellschaft | ||||||||||||
3.250%, 01/11/2016 f | 4,250,000 | 4,444,926 | 0.4 | % | ||||||||
First Tennessee Bank, National Association | ||||||||||||
5.650%, 04/01/2016 | 4,263,000 | 4,599,334 | 0.4 | % | ||||||||
KeyBank National Association | ||||||||||||
7.413%, 05/06/2015 | 4,000,000 | 4,334,120 | 0.4 | % | ||||||||
Macquarie Bank Limited | ||||||||||||
2.000%, 08/15/2016 | ||||||||||||
(Acquired 08/07/2013, Cost $4,998,250)* f | 5,000,000 | 5,056,855 | 0.4 | % | ||||||||
The Goldman Sachs Group, Inc. | ||||||||||||
6.150%, 04/01/2018 | 3,900,000 | 4,472,041 | 0.4 | % | ||||||||
The Huntington National Bank | ||||||||||||
1.300%, 11/20/2016 | 4,850,000 | 4,850,732 | 0.4 | % | ||||||||
WEA Finance LLC / WT Finance Aust Pty Ltd | ||||||||||||
6.750%, 09/02/2019 | ||||||||||||
(Acquired 11/21/2013, Cost $4,806,637)* | 4,000,000 | 4,756,020 | 0.4 | % | ||||||||
Other Finance#~ | 247,426,557 | 21.4 | % | |||||||||
Total Finance | ||||||||||||
(Cost $293,148,726) | 300,694,939 | 26.0 | % | |||||||||
Residential Mortgage-Backed Securities | ||||||||||||
U.S. Government Agency Issues | ||||||||||||
Other U.S. Government Agency Issues# | 1,329,800 | 0.1 | % | |||||||||
Total U.S. Government Agency Issues | ||||||||||||
(Cost $1,261,290) | 1,329,800 | 0.1 | % | |||||||||
Non-U.S. Government Agency Issues | ||||||||||||
Countrywide Alternative Loan Trust | ||||||||||||
Series 2004-2CB, Class 1A8, 5.750%, 03/25/2034 | 5,145,064 | 5,242,553 | 0.5 | % | ||||||||
Washington Mutual Mortgage Pass Through Certificates | ||||||||||||
Series 2004-CB2, Class 3A, 6.000%, 08/25/2034 | 5,859,621 | 6,132,069 | 0.5 | % | ||||||||
Other Non-U.S. Government Agency Issues#~ | 10,058,099 | 0.9 | % | |||||||||
Total Non-U.S. Government Agency Issues | ||||||||||||
(Cost $21,467,472) | 21,432,721 | 1.9 | % | |||||||||
Asset Backed Securities | ||||||||||||
Master Credit Card Trust | ||||||||||||
Series 2012-2A, Class A, 0.780%, 04/21/2017 | ||||||||||||
(Acquired 10/24/2012, Cost $5,998,817)* f | 6,000,000 | 5,990,142 | 0.5 | % | ||||||||
Soundview Home Loan Trust | ||||||||||||
Series 2003-2, Class A2, 1.465%, 11/25/2033 | 4,851,513 | 4,792,504 | 0.4 | % |
The accompanying notes are an integral part of these financial statements.
Page 23
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Specialty Underwriting & Residential Finance Trust | ||||||||||||
Series 2004-BC4, Class A1A, 0.835%, 10/25/2035 | $ | 4,816,158 | $ | 4,683,184 | 0.4 | % | ||||||
Other Asset Backed Securities#~ | 13,840,101 | 1.2 | % | |||||||||
Total Asset Backed Securities | ||||||||||||
(Cost $29,279,128) | 29,305,931 | 2.5 | % | |||||||||
Commercial Mortgage-Backed Securities | ||||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 6,790,000 | 7,122,893 | 0.6 | % | ||||||||
CD Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 7,000,000 | 7,421,855 | 0.6 | % | ||||||||
Credit Suisse First Boston | ||||||||||||
Mortgage Securities Corporation | ||||||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 6,000,000 | 6,298,596 | 0.5 | % | ||||||||
DBUBS Mortgage Trust | ||||||||||||
Series 2011-LC3A, Class A2, 3.642%, 08/12/2044 | 5,000,000 | 5,252,645 | 0.4 | % | ||||||||
FHLMC Multifamily Structured | ||||||||||||
Pass Through Certificates: | ||||||||||||
Series K-708, Class A2, 2.130%, 01/25/2019 | 8,300,000 | 8,266,053 | 0.7 | % | ||||||||
Series K-003, Class A4, 5.053%, 01/25/2019 | 9,000,000 | 10,107,990 | 0.9 | % | ||||||||
Series K-004, Class A2, 4.186%, 08/25/2019 | 5,875,000 | 6,381,125 | 0.5 | % | ||||||||
Series K-005, Class A2, 4.317%, 11/25/2019 | 4,975,000 | 5,432,118 | 0.5 | % | ||||||||
Series KF02, Class A3, 0.795%, 07/25/2020 | 9,992,432 | 9,996,569 | 0.9 | % | ||||||||
1.655%-4.251%, 11/25/2016-01/25/2020 | 7,783,000 | 8,019,563 | 0.7 | % | ||||||||
J.P. Morgan Chase Commercial Mortgage Trust | ||||||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 5,000,000 | 5,236,315 | 0.5 | % | ||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 5,000,000 | 5,322,505 | 0.5 | % | ||||||||
Other Commercial Mortgage Backed Securities# | 6,518,765 | 0.6 | % | |||||||||
Total Commercial Mortgage Backed Securities | ||||||||||||
(Cost $91,727,345) | 91,376,992 | 7.9 | % | |||||||||
Total Long-Term Investments | ||||||||||||
(Cost $1,119,586,358) | 1,131,693,988 | 97.9 | % | |||||||||
Short-Term Investments | ||||||||||||
Shares | ||||||||||||
Money Market Mutual Fund | ||||||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 21,500,000 | 21,500,000 | 1.9 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $21,500,000) | 21,500,000 | 1.9 | % |
The accompanying notes are an integral part of these financial statements.
Page 24
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
Investments Purchased with Cash
Proceeds from Securities Lending
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Investment Companies | ||||||||||||
Mount Vernon Securities Lending | ||||||||||||
Trust Prime Portfolio, 0.19%« | 227,595,639 | $ | 227,595,639 | 19.7 | % | |||||||
Total Investment Companies | ||||||||||||
(Cost $227,595,639) | 227,595,639 | 19.7 | % | |||||||||
Total Investments Purchased With | ||||||||||||
Cash Proceeds From Securities Lending | ||||||||||||
(Cost $227,595,639) | 227,595,639 | 19.7 | % | |||||||||
Total Investments | ||||||||||||
(Cost $1,368,681,997) | 1,380,789,627 | 119.5 | % | |||||||||
Liabilities in Excess of Other Assets | (225,083,702 | ) | (19.5 | )% | ||||||||
TOTAL NET ASSETS | $ | 1,155,705,925 | 100.0 | % |
Notes to Summary Schedule of Investments
* | Restricted Security Deemed Liquid | |
@ | This security or portion of this security is out on loan at December 31, 2013. | |
f | Foreign Security | |
« | 7-Day Yield | |
# | Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets. | |
~ | Groupings contain, in aggregate, restricted securities totaling $134,618,531 representing 11.65% of net assets. |
Summary of Fair Value Exposure at December 31, 2013
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.
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 accompanying notes are an integral part of these financial statements.
Page 25
Baird Intermediate Bond Fund
Summary Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013 (cont.)
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 289,241,335 | $ | — | $ | 289,241,335 | ||||||||
U.S. Government Agency Issues | — | 18,806,748 | — | 18,806,748 | ||||||||||||
Taxable Municipal Bonds | — | 33,966,863 | — | 33,966,863 | ||||||||||||
Other Government Related Securities | — | 14,905,764 | — | 14,905,764 | ||||||||||||
Corporate Bonds | — | 631,327,834 | — | 631,327,834 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
U.S. Government Agency Issues | — | 1,329,800 | — | 1,329,800 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
Non-U.S. Government Agency Issues | — | 21,432,721 | — | 21,432,721 | ||||||||||||
Asset Backed Securities | — | 29,305,539 | 392 | 29,305,931 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 91,376,992 | — | 91,376,992 | ||||||||||||
Total Fixed Income | — | 1,131,693,596 | 392 | 1,131,693,988 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 21,500,000 | — | — | 21,500,000 | ||||||||||||
Total Short-Term Investments | 21,500,000 | — | — | 21,500,000 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Investment Companies | 227,595,639 | — | — | 227,595,639 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 227,595,639 | — | — | 227,595,639 | ||||||||||||
Total Investments | $ | 249,095,639 | $ | 1,131,693,596 | $ | 392 | $ | 1,380,789,627 |
Changes in valuation techniques may result in transfers into or out of assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements. One security priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor is valued using Level 3 inputs.
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, 2012 | $ | 1,461 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (48,605 | ) | ||
Change in unrealized appreciation (depreciation) | 47,635 | |||
Purchases | — | |||
Sales | (99 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2013 | $ | 392 |
* Transfers between levels are recognized at the end of the reporting period.
The accompanying notes are an integral part of these financial statements.
Page 26
Baird Intermediate Municipal Bond Fund
December 31, 2013
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 uses the Barclays 7-Year General Obligation Bond Index as its benchmark. The Barclays 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.
Although the Fund had a negative absolute return in 2013 along with most of the municipal bond market, the Fund produced attractive relative results compared to its benchmark. Its focus on intermediate-maturity issues limited the impact of the increase in market yields, which produced sharply negative returns on longer issues in the market. Furthermore, the Fund’s emphasis on high-quality issues also contributed to relative performance as lower quality issues in the market underperformed due to investors’ heightened sensitivity to credit risk as a result of the City of Detroit’s bankruptcy filing.
The Fund had a very broadly diversified portfolio at year end, with 53% of its investments in pre-refunded bonds. Pre-refunded municipal bonds are generally regarded as the safest municipal bonds available as their interest and principal payments are paid from an escrow account which holds U.S. Treasury and/or U.S. Agency securities. With its focus on high-quality holdings and intermediate duration, we believe the Fund is well-positioned for the uncertain environment for municipal bonds as we enter 2014.
Page 27
Baird Intermediate Municipal Bond Fund
December 31, 2013
Portfolio Characteristics
Quality Distribution(1)
Net Assets | $1,006,994,598 | |||
SEC 30-Day | ||||
Yield(3) | ||||
Institutional Class | 2.03% | |||
Investor Class | 1.77% | |||
Average | ||||
Effective | ||||
Duration | 4.88 years | |||
Average | ||||
Effective | ||||
Maturity | 5.33 years | |||
Annualized | ||||
Expense | ||||
Ratio | ||||
Sector Weightings(1) | Institutional Class | 0.30% | ||
Investor Class | 0.55%(4) | |||
Portfolio | ||||
Turnover | ||||
Rate | 9.0% | |||
Number of | ||||
Holdings | 275 | |||
(1) | Percentages shown are based on the Fund’s total investments. |
(2) | Includes pre-refunded and escrowed-to-maturity (ETM) bonds. |
(3) | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2013. |
(4) | Includes 0.25% 12b-1 fee. |
Page 28
Baird Intermediate Municipal Bond Fund
December 31, 2013
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 29
Baird Intermediate Municipal Bond Fund
December 31, 2013
Total Returns
Average Annual | ||||
One | Five | Ten | Since | |
For the Periods Ended December 31, 2013 | Year | Years | Years | Inception(1) |
Institutional Class Shares | -1.19% | 3.77% | 3.78% | 4.57% |
Investor Class Shares | -1.42% | 3.51% | 3.52% | 4.30% |
Barclays 7-Year General Obligation Bond Index(2) | -1.16% | 4.80% | 4.38% | 4.82% |
(1) | For the period from March 30, 2001 (commencement of operations) through December 31, 2013. |
(2) | The Barclays 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 line graph on the previous page and the returns shown in the table above 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The Fund’s gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund may invest up to 25% of its total assets in municipal obligations issued by persons in the same state. As a result, changes in economic, business or political conditions of a particular state may have a disproportionate impact on the Fund’s share price. Municipal securities investments are not appropriate for all investors, especially those taxed at lower rates. The Fund may also invest in U.S. dollar denominated foreign securities which involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation.
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 Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
This schedule summarizes the Fund’s holdings by asset type. Details are reported for each of the Fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the Fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The Fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter end. For the second and fourth fiscal quarters, the complete listing of the Fund’s holdings is available electronically in the Fund’s Form N-CSR at http://www.rwbaird.com/baird-funds/prospectus-applications/prospectus-applications.aspx and on the Securities and Exchange Commission’s website (www.sec.gov) or you can have it mailed to you without charge by calling 1-866-44BAIRD. For the first and third fiscal quarters, the Fund files the lists with the SEC on Form N-Q. Shareholders can look up the Fund’s Forms N-CSR and N-Q on the SEC’s website (www.sec.gov).
Long-Term Investments
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Municipal Bonds | ||||||||||||
Alabama | ||||||||||||
Other Alabama# | $ | 4,000,388 | 0.4 | % | ||||||||
Total Alabama | ||||||||||||
(Cost $3,793,792) | 4,000,388 | 0.4 | % | |||||||||
Alaska | ||||||||||||
Other Alaska# | 1,056,150 | 0.1 | % | |||||||||
Total Alaska | ||||||||||||
(Cost $1,013,067) | 1,056,150 | 0.1 | % | |||||||||
Arizona | ||||||||||||
Other Arizona# | 4,661,756 | 0.5 | % | |||||||||
Total Arizona | ||||||||||||
(Cost $4,514,269) | 4,661,756 | 0.5 | % | |||||||||
Arkansas | ||||||||||||
Other Arkansas# | 1,161,740 | 0.1 | % | |||||||||
Total Arkansas | ||||||||||||
(Cost $1,171,460) | 1,161,740 | 0.1 | % | |||||||||
California | ||||||||||||
San Joaquin Hills California Transportation | ||||||||||||
Corridor Agency Toll Road Revenue: | ||||||||||||
0.000%, 01/01/2020 (ETM)^ | $ | 6,865,000 | 6,072,367 | 0.6 | % | |||||||
0.000%, 01/01/2023 (ETM)^ | 14,000,000 | 10,722,740 | 1.1 | % | ||||||||
San Marcos California Public | ||||||||||||
Facilities Authority Revenue | ||||||||||||
0.000%, 09/01/2019 (ETM)^ | 17,295,000 | 15,541,633 | 1.5 | % | ||||||||
Other California# | 16,945,140 | 1.7 | % | |||||||||
Total California | ||||||||||||
(Cost $45,489,289) | 49,281,880 | 4.9 | % |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Colorado | ||||||||||||
Colorado Springs Colorado Utilities Revenue Bonds | ||||||||||||
5.875%, 11/15/2017 (ETM) | $ | 6,105,000 | $ | 6,562,020 | 0.6 | % | ||||||
Dawson Ridge Metropolitan District No. 1 Colorado: | ||||||||||||
0.000%, 10/01/2022 (ETM)^ | 16,595,000 | 12,662,483 | 1.3 | % | ||||||||
0.000%, 10/01/2022 (ETM)^ | 17,540,000 | 13,383,546 | 1.3 | % | ||||||||
Regional Transportation District | ||||||||||||
Colorado Sales Tax Revenue | ||||||||||||
5.000%, 11/01/2036 (Pre-refunded to 11/01/2016) | 6,785,000 | 7,646,831 | 0.8 | % | ||||||||
Other Colorado# | 2,846,651 | 0.3 | % | |||||||||
Total Colorado | ||||||||||||
(Cost $42,749,219) | 43,101,531 | 4.3 | % | |||||||||
Connecticut | ||||||||||||
Other Connecticut# | 5,142,402 | 0.5 | % | |||||||||
Total Connecticut | ||||||||||||
(Cost $5,121,617) | 5,142,402 | 0.5 | % | |||||||||
Florida | ||||||||||||
Broward County Florida School Board: | ||||||||||||
5.250%, 07/01/2022 (Callable 07/01/2021) | 8,390,000 | 9,455,446 | 0.9 | % | ||||||||
5.250%, 07/01/2023 (Callable 07/01/2021) | 4,915,000 | 5,508,044 | 0.5 | % | ||||||||
County of St. Lucie Florida | ||||||||||||
6.000%, 10/01/2020 (ETM) | 6,420,000 | 7,857,566 | 0.8 | % | ||||||||
Florida State Board of Education | ||||||||||||
5.000%, 06/01/2022 (Callable 06/01/2019) | 13,800,000 | 15,572,886 | 1.5 | % | ||||||||
Miami-Dade County Florida | ||||||||||||
4.500%, 10/01/2020 | 7,100,000 | 7,781,955 | 0.8 | % | ||||||||
Seminole County Florida Water & Sewage Revenue | ||||||||||||
6.000%, 10/01/2019 (ETM) | 5,200,000 | 6,027,996 | 0.6 | % | ||||||||
Other Florida# | 49,842,051 | 5.0 | % | |||||||||
Total Florida | ||||||||||||
(Cost $96,390,434) | 102,045,944 | 10.1 | % | |||||||||
Georgia | ||||||||||||
Atlanta Georgia Water & Wastewater Revenue | ||||||||||||
5.500%, 11/01/2017 (Insured by AGM) | 8,445,000 | 9,844,759 | 1.0 | % | ||||||||
Forsyth County Georgia Hospital | ||||||||||||
Authority Revenue Anticipation Certificates | ||||||||||||
6.375%, 10/01/2028 (Callable 02/03/2014)(ETM) | 8,050,000 | 9,789,605 | 1.0 | % | ||||||||
Georgia Municipal Electric Authority Power Revenue | ||||||||||||
6.500%, 01/01/2017 (Insured by AGM) | 7,350,000 | 7,884,786 | 0.8 | % | ||||||||
Gwinnett County Georgia School District | ||||||||||||
5.000%, 02/01/2026 (Pre-refunded to 02/01/2018) | 7,400,000 | 8,564,612 | 0.8 | % |
The accompanying notes are an integral part of these financial statements.
Page 32
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
State of Georgia | ||||||||||||
5.000%, 07/01/2020 (Callable 07/01/2017) | $ | 12,570,000 | $ | 14,250,734 | 1.4 | % | ||||||
Other Georgia# | 5,648,140 | 0.6 | % | |||||||||
Total Georgia | ||||||||||||
(Cost $55,431,442) | 55,982,636 | 5.6 | % | |||||||||
Illinois | ||||||||||||
Illinois Development Financial Authority | ||||||||||||
0.000%, 07/15/2023 (ETM)^ | 16,860,000 | 12,274,923 | 1.2 | % | ||||||||
Illinois Finance Authority | ||||||||||||
0.000%, 07/15/2025 (ETM)^ | 9,560,000 | 6,308,166 | 0.6 | % | ||||||||
Kane McHenry Cook & De Kalb | ||||||||||||
Counties Illinois School District No. 300 | ||||||||||||
7.000%, 01/01/2018 (Insured by AMBAC) | 6,140,000 | 7,394,218 | 0.7 | % | ||||||||
Kendall Kane & Will Counties Community | ||||||||||||
Unit School District No. 308 | ||||||||||||
0.000%, 02/01/2021^ | 13,625,000 | 10,518,364 | 1.1 | % | ||||||||
Village of Schaumburg IL | ||||||||||||
4.000%, 12/01/2024 (Callable 12/01/2022) | 5,750,000 | 6,022,205 | 0.6 | % | ||||||||
Other Illinois# | 63,592,583 | 6.3 | % | |||||||||
Total Illinois | ||||||||||||
(Cost $104,626,040) | 106,110,459 | 10.5 | % | |||||||||
Indiana | ||||||||||||
Other Indiana# | 15,799,334 | 1.6 | % | |||||||||
Total Indiana | ||||||||||||
(Cost $14,931,816) | 15,799,334 | 1.6 | % | |||||||||
Kansas | ||||||||||||
Other Kansas# | 3,083,370 | 0.3 | % | |||||||||
Total Kansas | ||||||||||||
(Cost $2,927,620) | 3,083,370 | 0.3 | % | |||||||||
Kentucky | ||||||||||||
Louisville & Jefferson County Metropolitan Government | ||||||||||||
6.125%, 02/01/2037 (Pre-refunded to 02/01/2018) | 13,665,000 | 16,456,896 | 1.6 | % | ||||||||
Other Kentucky# | 3,862,076 | 0.4 | % | |||||||||
Total Kentucky | ||||||||||||
(Cost $20,123,009) | 20,318,972 | 2.0 | % | |||||||||
Louisiana | ||||||||||||
Louisiana Public Facilities Authority Revenue: | ||||||||||||
5.500%, 05/15/2027 (Pre-refunded to 05/15/2026) | 9,810,000 | 11,874,220 | 1.2 | % | ||||||||
5.500%, 05/15/2032 (Pre-refunded to 05/15/2026) | 19,285,000 | 23,495,494 | 2.3 | % |
The accompanying notes are an integral part of these financial statements.
Page 33
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
State of Louisiana: | ||||||||||||
5.000%, 11/15/2018 | $ | 1,775,000 | $ | 2,083,726 | 0.2 | % | ||||||
5.000%, 11/15/2020 (Callable 05/15/2020) | 10,000,000 | 11,654,700 | 1.2 | % | ||||||||
Total Louisiana | ||||||||||||
(Cost $46,742,020) | 49,108,140 | 4.9 | % | |||||||||
Maryland | ||||||||||||
Other Maryland# | 2,698,662 | 0.3 | % | |||||||||
Total Maryland | ||||||||||||
(Cost $2,767,954) | 2,698,662 | 0.3 | % | |||||||||
Massachusetts | ||||||||||||
Massachusetts State: | ||||||||||||
5.000%, 08/01/2020 (Pre-refunded to 08/01/2016) | 5,820,000 | 6,502,104 | 0.6 | % | ||||||||
4.000%, 12/01/2022 (Callable 12/01/2019) | 15,000,000 | 16,066,950 | 1.6 | % | ||||||||
Other Massachusetts# | 7,775,727 | 0.8 | % | |||||||||
Total Massachusetts | ||||||||||||
(Cost $30,140,545) | 30,344,781 | 3.0 | % | |||||||||
Michigan | ||||||||||||
Michigan Finance Authority | ||||||||||||
5.000%, 01/01/2019 | 7,000,000 | 8,083,460 | 0.8 | % | ||||||||
Other Michigan# | 21,806,355 | 2.2 | % | |||||||||
Total Michigan | ||||||||||||
(Cost $29,463,438) | 29,889,815 | 3.0 | % | |||||||||
Minnesota | ||||||||||||
University of Minnesota | ||||||||||||
5.500%, 07/01/2021 (ETM) | 8,455,000 | 9,862,927 | 1.0 | % | ||||||||
Other Minnesota# | 4,039,601 | 0.4 | % | |||||||||
Total Minnesota | ||||||||||||
(Cost $14,041,130) | 13,902,528 | 1.4 | % | |||||||||
Mississippi | ||||||||||||
Other Mississippi# | 2,696,451 | 0.3 | % | |||||||||
Total Mississippi | ||||||||||||
(Cost $2,594,376) | 2,696,451 | 0.3 | % | |||||||||
Missouri | ||||||||||||
Other Missouri# | 1,138,340 | 0.1 | % | |||||||||
Total Missouri | ||||||||||||
(Cost $1,087,676) | 1,138,340 | 0.1 | % | |||||||||
Nebraska | ||||||||||||
Omaha Nebraska Public Electric Power District Revenue | ||||||||||||
6.200%, 02/01/2017 (ETM) | 7,410,000 | 8,032,218 | 0.8 | % | ||||||||
Total Nebraska | ||||||||||||
(Cost $7,901,463) | 8,032,218 | 0.8 | % |
The accompanying notes are an integral part of these financial statements.
Page 34
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Nevada | ||||||||||||
Other Nevada# | $ | 2,311,795 | 0.2 | % | ||||||||
Total Nevada | ||||||||||||
(Cost $2,097,143) | 2,311,795 | 0.2 | % | |||||||||
New Hampshire | ||||||||||||
Other New Hampshire# | 5,197,120 | 0.5 | % | |||||||||
Total New Hampshire | ||||||||||||
(Cost $5,100,406) | 5,197,120 | 0.5 | % | |||||||||
New Jersey | ||||||||||||
New Jersey State Housing & | ||||||||||||
Mortgage Finance Agency Bonds | ||||||||||||
4.500%, 10/01/2029 (Callable 04/01/2021) | $ | 7,700,000 | 7,817,194 | 0.8 | % | |||||||
Other New Jersey# | 13,190,899 | 1.3 | % | |||||||||
Total New Jersey | ||||||||||||
(Cost $20,929,428) | 21,008,093 | 2.1 | % | |||||||||
New Mexico | ||||||||||||
Other New Mexico# | 3,102,312 | 0.3 | % | |||||||||
Total New Mexico | ||||||||||||
(Cost $3,117,109) | 3,102,312 | 0.3 | % | |||||||||
New York | ||||||||||||
Metropolitan Transit Authority New York | ||||||||||||
6.000%, 04/01/2020 (ETM) | 13,430,000 | 16,213,368 | 1.6 | % | ||||||||
Westchester Tobacco Asset | ||||||||||||
Securitization Corp. New York | ||||||||||||
6.950%, 07/15/2039 (Pre-refunded to 07/15/2017) | 13,075,000 | 15,986,410 | 1.6 | % | ||||||||
Other New York# | 29,949,662 | 3.0 | % | |||||||||
Total New York | ||||||||||||
(Cost $59,078,418) | 62,149,440 | 6.2 | % | |||||||||
North Carolina | ||||||||||||
North Carolina Eastern Municipal Power Agency | ||||||||||||
5.000%, 01/01/2021 (ETM) | 7,790,000 | 9,148,809 | 0.9 | % | ||||||||
North Carolina Eastern Municipal | ||||||||||||
Power Agency Power Systems Revenue: | ||||||||||||
5.000%, 01/01/2017 (ETM) | 6,630,000 | 7,208,136 | 0.7 | % | ||||||||
6.400%, 01/01/2021 (ETM) | 5,750,000 | 6,766,773 | 0.7 | % | ||||||||
4.500%, 01/01/2024 (Pre-refunded to 01/01/2022) | 7,665,000 | 8,763,701 | 0.9 | % | ||||||||
6.000%, 01/01/2026 (Pre-refunded to 01/01/2022) | 1,895,000 | 2,384,952 | 0.2 | % | ||||||||
Total North Carolina | ||||||||||||
(Cost $33,930,672) | 34,272,371 | 3.4 | % |
The accompanying notes are an integral part of these financial statements.
Page 35
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Ohio | ||||||||||||
State of Ohio | ||||||||||||
5.000%, 06/15/2021 | $ | 6,740,000 | $ | 7,908,783 | 0.8 | % | ||||||
Other Ohio# | 14,328,021 | 1.4 | % | |||||||||
Total Ohio | ||||||||||||
(Cost $22,002,081) | 22,236,804 | 2.2 | % | |||||||||
Pennsylvania | ||||||||||||
Pennsylvania Convention | ||||||||||||
Center Authority Revenue Bonds | ||||||||||||
6.000%, 09/01/2019 (ETM) | 10,060,000 | 12,141,414 | 1.2 | % | ||||||||
Other Pennsylvania# | 18,554,879 | 1.8 | % | |||||||||
Total Pennsylvania | ||||||||||||
(Cost $29,534,121) | 30,696,293 | 3.0 | % | |||||||||
Puerto Rico | ||||||||||||
Other Puerto Rico# | 13,111,319 | 1.3 | % | |||||||||
Total Puerto Rico | ||||||||||||
(Cost $14,862,458) | 13,111,319 | 1.3 | % | |||||||||
South Carolina | ||||||||||||
Piedmont Municipal Power Agency | ||||||||||||
South Carolina Electric Revenue | ||||||||||||
6.750%, 01/01/2020 (ETM) | 6,450,000 | 8,187,049 | 0.8 | % | ||||||||
Other South Carolina# | 760,000 | 0.1 | % | |||||||||
Total South Carolina | ||||||||||||
(Cost $8,443,457) | 8,947,049 | 0.9 | % | |||||||||
South Dakota | ||||||||||||
Other South Dakota# | 701,659 | 0.1 | % | |||||||||
Total South Dakota | ||||||||||||
(Cost $694,238) | 701,659 | 0.1 | % | |||||||||
Tennessee | ||||||||||||
Other Tennessee# | 9,590,667 | 0.9 | % | |||||||||
Total Tennessee | ||||||||||||
(Cost $9,404,993) | 9,590,667 | 0.9 | % | |||||||||
Texas | ||||||||||||
Capital Area Housing Finance Corporation Texas | ||||||||||||
0.000%, 01/01/2016 (ETM)^ | 6,060,000 | 5,982,068 | 0.6 | % | ||||||||
Harris County Texas | ||||||||||||
5.750%, 10/01/2028 (Pre-refunded to 10/01/2018) | 6,830,000 | 8,256,446 | 0.8 | % | ||||||||
Houston Texas Water & Sewer System Revenue Bonds | ||||||||||||
5.500%, 12/01/2029 (ETM) | 16,050,000 | 19,618,236 | 1.9 | % | ||||||||
San Antonio Texas Electric & Gas Revenue | ||||||||||||
5.650%, 02/01/2019 (ETM) | 11,665,000 | 13,694,010 | 1.4 | % |
The accompanying notes are an integral part of these financial statements.
Page 36
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Tarrant County Texas Health Facilities Revenue | ||||||||||||
6.000%, 09/01/2024 (ETM) | $ | 7,990,000 | $ | 9,658,072 | 1.0 | % | ||||||
Texas State: | ||||||||||||
5.000%, 10/01/2018 | 6,285,000 | 7,370,482 | 0.7 | % | ||||||||
5.000%, 04/01/2020 (Callable 04/01/2016) | 3,965,000 | 4,313,286 | 0.4 | % | ||||||||
Other Texas# | 68,469,558 | 6.8 | % | |||||||||
Total Texas | ||||||||||||
(Cost $133,441,315) | 137,362,158 | 13.6 | % | |||||||||
Utah | ||||||||||||
Other Utah# | 6,664,941 | 0.7 | % | |||||||||
Total Utah | ||||||||||||
(Cost $6,494,250) | 6,664,941 | 0.7 | % | |||||||||
Virginia | ||||||||||||
Other Virginia# | 4,630,426 | 0.5 | % | |||||||||
Total Virginia | ||||||||||||
(Cost $4,600,354) | 4,630,426 | 0.5 | % | |||||||||
Washington | ||||||||||||
Washington Health Care Facilities Authority: | ||||||||||||
6.250%, 08/01/2036 (Pre-refunded to 08/01/2018) | 7,715,000 | 9,423,024 | 0.9 | % | ||||||||
6.125%-6.250%, 08/01/2028-11/15/2041 | 5,885,000 | 7,413,377 | 0.7 | % | ||||||||
Washington State: | ||||||||||||
5.000%, 01/01/2021 | 10,000,000 | 11,693,000 | 1.2 | % | ||||||||
5.500%, 07/01/2023 | 5,000,000 | 5,955,100 | 0.6 | % | ||||||||
Other Washington# | 13,828,256 | 1.4 | % | |||||||||
Total Washington | ||||||||||||
(Cost $47,894,373) | 48,312,757 | 4.8 | % | |||||||||
West Virginia | ||||||||||||
Other West Virginia# | 1,325,682 | 0.1 | % | |||||||||
Total West Virginia | ||||||||||||
(Cost $1,307,731) | 1,325,682 | �� | 0.1 | % | ||||||||
Wisconsin | ||||||||||||
Other Wisconsin# | 6,544,505 | 0.6 | % | |||||||||
Total Wisconsin | ||||||||||||
(Cost $6,261,528) | 6,544,505 | 0.6 | % | |||||||||
Total Long-Term Investments | ||||||||||||
(Cost $942,215,751) | 967,722,888 | 96.1 | % |
The accompanying notes are an integral part of these financial statements.
Page 37
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Short-Term Investments
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Money Market Mutual Fund | ||||||||||||
Goldman Sachs Financial Square Funds, 0.01%« | 3,275,138 | $ | 3,275,138 | 0.3 | % | |||||||
Total Short-Term Investments | ||||||||||||
(Cost $3,275,138) | 3,275,138 | 0.3 | % | |||||||||
Total Investments | ||||||||||||
(Cost $945,490,889) | 970,998,026 | 96.4 | % | |||||||||
Other Assets in Excess of Liabilities | 35,996,572 | 3.6 | % | |||||||||
TOTAL NET ASSETS | $ | 1,006,994,598 | 100.0 | % |
Notes to Summary Schedule of Investments
AGM – Assured Guaranty Municipal
AMBAC – Ambac Assurance Corporation.
ETM – Escrowed to Maturity
^ | Non-Income Producing | |
« | 7-Day Yield | |
# | Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets. |
Summary of Fair Value Exposure at December 31, 2013
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.
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 accompanying notes are an integral part of these financial statements.
Page 38
Baird Intermediate Municipal Bond Fund
Summary Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013 (cont.)
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Municipal Bonds | $ | — | $ | 967,722,888 | $ | — | $ | 967,722,888 | ||||||||
Total Fixed Income | — | 967,722,888 | — | 967,722,888 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 3,275,138 | — | — | 3,275,138 | ||||||||||||
Total Short-Term Investments | 3,275,138 | — | — | 3,275,138 | ||||||||||||
Total Investments | $ | 3,275,138 | $ | 967,722,888 | $ | — | $ | 970,998,026 |
Changes in valuation techniques may result in transfers into or out of assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
The accompanying notes are an integral part of these financial statements.
Page 39
Baird Aggregate Bond Fund
December 31, 2013
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 U.S. Aggregate Bond Index. The Barclays U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, credit, asset-backed, mortgage-backed and commercial mortgage-backed securities (CMBS) with maturities of at least one year.
Although the Fund generated a negative absolute return for the year resulting from the rise in market yields, the Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong relative returns versus its benchmark index in 2013. Our long-term commitment to duration neutrality was very important as well. The themes that drove performance in 2012 continued to positively impact the portfolio relative to its benchmark in 2013. The primary factors contributing to the Fund’s outperformance over its benchmark in 2013 are described below.
• | The Fund’s continued overweight position to the corporate credit sector relative to the Fund’s benchmark positively impacted the Fund’s performance. Corporate bonds generally experienced favorable price returns relative to U.S. Treasuries of comparable maturity due to a significant narrowing of corporate bond spreads (the additional yield that investors demand above U.S. Treasury bonds for owning corporate debt) during the year. The narrowing was driven by generally solid corporate credit fundamentals and very strong investor demand. | |
• | An overweight to the financial sub-sector in particular was an important contributor to the Fund’s relative outperformance as financials significantly outperformed other investment grade corporate bonds. The financial sub-sector’s performance was driven by both strong and improving credit fundamentals and strong investor demand. | |
• | The Fund’s underweight to U.S. Treasuries and Agencies was a positive contributor to relative performance as nongovernment “spread sectors” such as corporate, mortgage-backed, and asset-backed securities outperformed equal-duration U.S. Government securities for the year. | |
• | An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS was a positive contributor for the year while the Fund’s modest exposure to non-U.S. Agency CMO’s and underweight to U.S. Agency mortgage-backed securities were also positive contributors. | |
• | The Fund also benefited from relatively high coupon payments, an important consideration in the current low interest rate environment when income is reinvested as rates rise. |
We are pleased with the Fund’s relative performance to its benchmark in 2013 and are confident in the individual issues and the overall structure of the Fund. The Fund’s current significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2014.
Page 40
Baird Aggregate Bond Fund
December 31, 2013
Portfolio Characteristics
Quality Distribution(1)
Net Assets | $1,806,925,169 | |||
SEC 30-Day | ||||
Yield(2) | ||||
Institutional Class | 3.12% | |||
Investor Class | 2.87% | |||
Average | ||||
Effective | ||||
Duration | 5.55 years | |||
Average | ||||
Effective | ||||
Maturity | 7.18 years | |||
Annualized | ||||
Expense | ||||
Sector Weightings(1) | Ratio | |||
Institutional Class | 0.30% | |||
Investor Class | 0.55%(3) | |||
Portfolio | ||||
Turnover | ||||
Rate | 28.4% | |||
Number of | ||||
Holdings | 468 | |||
(1) | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
(2) | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2013. |
(3) | Includes 0.25% 12b-1 fee. |
Page 41
Baird Aggregate Bond Fund
December 31, 2013
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 42
Baird Aggregate Bond Fund
December 31, 2013
Total Returns
Average Annual | ||||
One | Five | Ten | Since | |
For the Periods Ended December 31, 2013 | Year | Years | Years | Inception(1) |
Institutional Class Shares | -1.25% | 6.66% | 4.92% | 5.95% |
Investor Class Shares | -1.54% | 6.39% | 4.67% | 5.70% |
Barclays U.S. Aggregate Bond Index(2) | -2.02% | 4.44% | 4.55% | 5.46% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2013. |
(2) | The Barclays U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The line graph on the previous page and the returns shown in the table above 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The Fund’s gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund maintains securities with longer maturities in order to provide a greater potential for return. Generally, the longer a bond’s maturity, the greater the interest rate risk. The Fund may also invest in U.S. dollar denominated foreign securities which involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation. The Fund may also invest in mortgage- and asset-backed securities, which include interest rate and prepayment risks more pronounced than those of other fixed income securities.
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 43
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
This schedule summarizes the Fund’s holdings by asset type. Details are reported for each of the Fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the Fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The Fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter end. For the second and fourth fiscal quarters, the complete listing of the Fund’s holdings is available electronically in the Fund’s Form N-CSR at http://www.rwbaird.com/baird-funds/prospectus-applications/prospectus-applications.aspx and on the Securities and Exchange Commission’s website (www.sec.gov) or you can have it mailed to you without charge by calling 1-866-44BAIRD. For the first and third fiscal quarters, the Fund files the lists with the SEC on Form N-Q. Shareholders can look up the Fund’s Forms N-CSR and N-Q on the SEC’s website (www.sec.gov).
Long-Term Investments
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
U.S. Treasury Securities | ||||||||||||
U.S. Treasury Bonds: | ||||||||||||
1.250%, 04/30/2019@ | $ | 148,924,400 | $ | 144,282,129 | 8.0 | % | ||||||
5.250%, 11/15/2028@ | 53,151,500 | 63,989,410 | 3.5 | % | ||||||||
4.375%, 02/15/2038@ | 32,287,400 | 35,142,833 | 2.0 | % | ||||||||
3.500%, 02/15/2039@ | 49,855,900 | 46,950,248 | 2.6 | % | ||||||||
Total U.S. Treasury Securities | ||||||||||||
(Cost $302,564,250) | 290,364,620 | 16.1 | % | |||||||||
Taxable Municipal Bond | ||||||||||||
Other Taxable Municipal Bonds# | 65,805,607 | 3.7 | % | |||||||||
Total Taxable Municipal Bonds | ||||||||||||
(Cost $64,070,048) | 65,805,607 | 3.7 | % | |||||||||
Other Government Related Securities | ||||||||||||
Other Government Related Securities# | 22,130,540 | 1.2 | % | |||||||||
Total Other Government Related Securities | ||||||||||||
(Cost $21,780,087) | 22,130,540 | 1.2 | % | |||||||||
Corporate Bonds | ||||||||||||
Industrials | ||||||||||||
LeasePlan Corporation N.V. | ||||||||||||
2.500%, 05/16/2018 (Acquired 08/02/2013 | ||||||||||||
through 09/24/2013, Cost $7,976,500)* f | 8,158,000 | 7,931,208 | 0.4 | % | ||||||||
Plains Exploration & Production Company | ||||||||||||
7.625%, 04/01/2020 | 7,627,000 | 8,417,325 | 0.5 | % | ||||||||
Time Warner, Inc. | ||||||||||||
7.700%, 05/01/2032 | 5,918,000 | 7,598,540 | 0.4 | % | ||||||||
Verizon Communications, Inc. | ||||||||||||
6.400%, 09/15/2033 | 7,140,000 | 8,211,864 | 0.5 | % | ||||||||
Other Industrials#~ | 252,774,029 | 14.0 | % | |||||||||
Total Industrials | ||||||||||||
(Cost $279,841,473) | 284,932,966 | 15.8 | % |
The accompanying notes are an integral part of these financial statements.
Page 44
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Utility | ||||||||||||
Petrofac Limited | ||||||||||||
3.400%, 10/10/2018 | ||||||||||||
(Acquired 10/03/2013, Cost $8,514,123)* f | $ | 8,546,000 | $ | 8,607,147 | 0.5 | % | ||||||
Other Utility#~ | 83,477,054 | 4.6 | % | |||||||||
Total Utility | ||||||||||||
(Cost $89,292,441) | 92,084,201 | 5.1 | % | |||||||||
Finance | ||||||||||||
ABN AMRO Bank N.V. | ||||||||||||
2.500%, 10/30/2018 | ||||||||||||
(Acquired 10/23/2013, Cost $8,020,227)* f | 8,033,000 | 8,015,649 | 0.4 | % | ||||||||
Macquarie Group Limited | ||||||||||||
3.000%, 12/03/2018 | ||||||||||||
(Acquired 11/25/2013, Cost $8,490,900)* f | 8,525,000 | 8,490,670 | 0.5 | % | ||||||||
National Australia Bank Limited | ||||||||||||
0.743%, 10/08/2015 | ||||||||||||
(Acquired 01/16/2013, Cost $8,907,256)* f | 8,900,000 | 8,897,001 | 0.5 | % | ||||||||
Protective Life Corporation | ||||||||||||
7.375%, 10/15/2019 | 7,096,000 | 8,654,189 | 0.5 | % | ||||||||
Rabobank Nederland | ||||||||||||
0.492%, 03/07/2016 | ||||||||||||
(Acquired 05/21/2013, Cost $8,873,483)* f | 8,926,000 | 8,916,101 | 0.5 | % | ||||||||
Sovereign Bank | ||||||||||||
8.750%, 05/30/2018 | 6,327,000 | 7,602,169 | 0.4 | % | ||||||||
Other Finance#~ | 314,740,726 | 17.4 | % | |||||||||
Total Finance | ||||||||||||
(Cost $352,879,633) | 365,316,505 | 20.2 | % | |||||||||
Residential Mortgage-Backed Securities | ||||||||||||
U.S. Government Agency Issues | ||||||||||||
Federal Gold Loan Mortgage Corporation (FGLMC): | ||||||||||||
3.500%, 11/01/2025 | 9,194,814 | 9,591,885 | 0.5 | % | ||||||||
4.500%, 11/01/2039 | 8,967,412 | 9,495,646 | 0.5 | % | ||||||||
4.500%, 03/01/2041 | 7,149,654 | 7,571,038 | 0.4 | % | ||||||||
3.500%, 06/01/2042 | 8,788,659 | 8,730,184 | 0.5 | % | ||||||||
3.500%, 07/01/2042 | 27,196,100 | 27,015,150 | 1.5 | % | ||||||||
3.000%, 08/01/2042 | 31,652,338 | 30,025,422 | 1.7 | % | ||||||||
3.000%, 10/01/2042 | 11,512,228 | 10,920,043 | 0.6 | % | ||||||||
2.500%-6.500%, 07/01/2014-02/01/2043 | 26,978,274 | 27,743,421 | 1.5 | % | ||||||||
Federal Home Loan Mortgage Corporation (FHLMC) | ||||||||||||
4.500%, 09/01/2040 | 9,625,090 | 10,198,113 | 0.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 45
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Federal National Mortgage Association (FNMA): | ||||||||||||
3.000%, 04/01/2027 | $ | 13,396,449 | $ | 13,686,108 | 0.8 | % | ||||||
2.500%, 12/01/2027 | 14,130,895 | 14,033,454 | 0.8 | % | ||||||||
5.000%, 10/01/2035 | 8,550,597 | 9,280,415 | 0.5 | % | ||||||||
3.500%, 02/01/2041 | 19,291,039 | 19,185,334 | 1.1 | % | ||||||||
4.000%, 02/01/2041 | 23,728,324 | 24,439,851 | 1.4 | % | ||||||||
4.000%, 09/01/2041 | 7,435,599 | 7,659,606 | 0.4 | % | ||||||||
4.000%, 12/01/2041 | 23,718,687 | 24,434,829 | 1.4 | % | ||||||||
3.000%, 05/01/2042 | 9,232,172 | 8,775,330 | 0.5 | % | ||||||||
3.500%-8.000%, 07/25/2019-12/01/2040 | 49,601,220 | 53,265,910 | 2.9 | % | ||||||||
Government National Mortgage Association (GNMA): | ||||||||||||
4.500%, 01/20/2041 | 20,472,515 | 21,977,958 | 1.2 | % | ||||||||
4.000%, 06/20/2042 | 18,144,036 | 18,898,537 | 1.0 | % | ||||||||
3.500%, 09/20/2042 | 11,570,892 | 11,691,082 | 0.6 | % | ||||||||
5.000%-6.000%, 11/20/2033-07/20/2040 | 6,941,238 | 7,606,835 | 0.4 | % | ||||||||
Other U.S. Government Agency Issues# | 340,617 | 0.0 | % | |||||||||
Total U.S. Government Agency Issues | ||||||||||||
(Cost $380,960,433) | 376,566,768 | 20.8 | % | |||||||||
Non-U.S. Government Agency Issues | ||||||||||||
Washington Mutual Mortgage Pass Through Certificates: | ||||||||||||
Series 2004-CB2, Class 3A, 6.000%, 08/25/2034 | 14,487,753 | 15,161,376 | 0.8 | % | ||||||||
Series 2004-CB3, Class 2A, 6.500%, 10/25/2034 | 8,023,630 | 8,641,650 | 0.5 | % | ||||||||
5.000%-6.000%, 06/25/2019-12/25/2019 | 2,644,771 | 2,744,753 | 0.2 | % | ||||||||
Other Non-U.S. Government Agency Issues# | 43,899,273 | 2.4 | % | |||||||||
Total Non-U.S. Government Agency Issues | ||||||||||||
(Cost $71,716,105) | 70,447,052 | 3.9 | % | |||||||||
Asset Backed Securities | ||||||||||||
Countrywide Asset-Backed Certificates | ||||||||||||
4.583%-5.693%, 01/25/2033-09/25/2046 | 28,120,341 | 26,863,661 | 1.5 | % | ||||||||
Nationstar Home Equity Loan Trust | ||||||||||||
Series 2006-B, Class AV3, 0.335%, 09/25/2036 | 10,627,954 | 10,348,343 | 0.6 | % | ||||||||
Other Asset Backed Securities# | 20,223,925 | 1.1 | % | |||||||||
Total Asset Backed Securities | ||||||||||||
(Cost $58,087,384) | 57,435,929 | 3.2 | % | |||||||||
Commercial Mortgage-Backed Securities | ||||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 11,113,286 | 11,658,137 | 0.7 | % | ||||||||
COMM Mortgage Trust: | ||||||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | 10,618,016 | 11,166,394 | 0.6 | % | ||||||||
Series 2012-CR1, Class A3, 3.391%, 05/15/2045 | 7,813,462 | 7,697,690 | 0.4 | % | ||||||||
Series 2012-CR2, Class A4, 3.147%, 08/15/2045 | 12,830,536 | 12,390,821 | 0.7 | % | ||||||||
Credit Suisse First Boston Mortgage Securities Corp. | ||||||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038@ | 14,413,936 | 15,131,260 | 0.8 | % |
The accompanying notes are an integral part of these financial statements.
��
Page 46
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
FHLMC Multifamily Structured | ||||||||||||
Pass Through Certificates | ||||||||||||
Series K-003, Class A4, 5.053%, 01/25/2019 | $ | 12,525,000 | $ | 14,066,953 | 0.8 | % | ||||||
GE Capital Commercial Mortgage Corporation | ||||||||||||
Series 2005-C4, Class A4, 5.310%, 11/10/2045 | 9,751,208 | 10,363,486 | 0.6 | % | ||||||||
GS Mortgage Securities Corp II | ||||||||||||
Series 2012-GCJ9, Class A3, 2.773%, 11/10/2045 | 11,246,320 | 10,467,096 | 0.6 | % | ||||||||
J.P. Morgan Chase Commercial Mortgage Trust: | ||||||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 10,224,264 | 10,707,494 | 0.6 | % | ||||||||
Series 2013-LC11, Class A5, 2.960%, 04/15/2046 | 9,452,913 | 8,843,304 | 0.5 | % | ||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | ||||||||||||
Series 2012-C6, Class A4, 2.858%, 11/15/2045 | 14,280,945 | 13,429,072 | 0.7 | % | ||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 8,925,591 | 9,501,301 | 0.5 | % | ||||||||
WF-RBS Commercial Mortgage Trust | ||||||||||||
Series 2012-C6, Class A4, 3.440%, 04/15/2045 | 10,889,220 | 10,849,953 | 0.6 | % | ||||||||
Total Commercial Mortgage Backed Securities | ||||||||||||
(Cost $149,872,584) | 146,272,961 | 8.1 | % | |||||||||
Total Long-Term Investments | ||||||||||||
(Cost $1,771,064,438) | 1,771,357,149 | 98.1 | % | |||||||||
Short-Term Investments | ||||||||||||
Shares | ||||||||||||
Money Market Mutual Fund | ||||||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 34,951,599 | 34,951,599 | 1.9 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $34,951,599) | 34,951,599 | 1.9 | % | |||||||||
Investments Purchased with Cash | ||||||||||||
Proceeds from Securities Lending | ||||||||||||
Investment Companies | ||||||||||||
Mount Vernon Securities Lending | ||||||||||||
Trust Prime Portfolio, 0.19%« | 220,382,583 | 220,382,583 | 12.2 | % | ||||||||
Total Investment Companies | ||||||||||||
(Cost $220,382,583) | 220,382,583 | 12.2 | % | |||||||||
Total Investments Purchased With | ||||||||||||
Cash Proceeds From Securities Lending | ||||||||||||
(Cost $220,382,583) | 220,382,583 | 12.2 | % | |||||||||
Total Investments | ||||||||||||
(Cost $2,026,398,620) | 2,026,691,331 | 112.2 | % | |||||||||
Liabilities in Excess of Other Assets | (219,766,162 | ) | (12.2 | )% | ||||||||
TOTAL NET ASSETS | $ | 1,806,925,169 | 100.0 | % |
The accompanying notes are an integral part of these financial statements.
Page 47
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
Notes to Summary Schedule of Investments
* | Restricted Security Deemed Liquid | |
@ | This security or portion of this security is out on loan at December 31, 2013. | |
f | Foreign Security | |
« | 7-Day Yield | |
# | Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets. | |
~ | Groupings contain, in aggregate, restricted securities totaling $172,489,146 representing 9.55% of net assets. |
Summary of Fair Value Exposure at December 31, 2013
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.
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 accompanying notes are an integral part of these financial statements.
Page 48
Baird Aggregate Bond Fund
Summary Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013 (cont.)
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 290,364,620 | $ | — | $ | 290,364,620 | ||||||||
Taxable Municipal Bonds | — | 65,805,607 | — | 65,805,607 | ||||||||||||
Other Government Related Securities | — | 22,130,540 | — | 22,130,540 | ||||||||||||
Corporate Bonds | — | 742,333,672 | — | 742,333,672 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
U.S. Government Agency Issues | — | 376,566,768 | — | 376,566,768 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
Non-U.S. Government Agency Issues | — | 70,447,052 | — | 70,447,052 | ||||||||||||
Asset Backed Securities | — | 57,435,929 | — | 57,435,929 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 146,272,961 | — | 146,272,961 | ||||||||||||
Total Fixed Income | — | 1,771,357,149 | — | 1,771,357,149 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 34,951,599 | — | — | 34,951,599 | ||||||||||||
Total Short-Term Investments | 34,951,599 | — | — | 34,951,599 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Investment Companies | 220,382,583 | — | — | 220,382,583 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 220,382,583 | — | — | 220,382,583 | ||||||||||||
Total Investments | $ | 255,334,182 | $ | 1,771,357,149 | $ | — | $ | 2,026,691,331 |
Changes in valuation techniques may result in transfers into or out of assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
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, 2012 | $ | 1,607 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (4,395 | ) | ||
Change in unrealized appreciation (depreciation) | 2,897 | |||
Purchases | — | |||
Sales | (109 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2013 | $ | — |
* Transfers between levels are recognized at the end of the reporting period.
The accompanying notes are an integral part of these financial statements.
Page 49
Baird Core Plus Bond Fund
December 31, 2013
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 U.S. Universal Bond Index. The Barclays 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, investment grade and non-investment grade credit, emerging market debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and commercial mortgage-backed securities (CMBS) with maturities of at least one year.
Although the Fund generated a negative absolute return for the year resulting from the rise in market yields, the Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong relative returns versus its benchmark index in 2013. Our long-term commitment to duration neutrality was very important as well. The themes that drove performance in 2012 continued to positively impact the portfolio relative to its benchmark in 2013. The primary factors contributing to the Fund’s Institutional Class Shares outperformance over its benchmark in 2013 are described below.
• | The Fund’s continued overweight position to the corporate credit sector relative to the Fund’s benchmark positively impacted the Fund’s performance. Corporate bonds generally experienced favorable price returns relative to U.S. Treasuries of comparable maturity due to a significant narrowing of corporate bond spreads (the additional yield that investors demand above U.S. Treasury bonds for owning corporate debt) during the year. The narrowing was driven by generally solid corporate credit fundamentals and very strong investor demand. | |
• | An overweight to the financial sub-sector in particular was an important contributor to the Fund’s Institutional Class Shares relative outperformance as financials significantly outperformed other investment grade corporate bonds. The financial sub-sector’s performance was driven by both strong and improving credit fundamentals and strong investor demand. | |
• | The Fund’s underweight to U.S. Treasuries and Agencies was a positive contributor to relative performance as nongovernment “spread sectors” such as corporate, mortgage-backed, and asset-backed securities, outperformed equal-duration U.S. Government securities for the year. | |
• | An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS was a positive contributor for the year, while the Fund’s modest exposure to non-U.S. Agency CMOs and underweight to U.S. Agency mortgage-backed securities were also positive contributors. | |
• | The Fund also benefited from relatively high coupon payments, an important consideration in the current low interest rate environment when income is reinvested as rates rise. |
We are pleased with the Fund’s relative performance to its benchmark in 2013 and are confident in the individual issues and the overall structure of the Fund. The Fund’s current significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2014.
Page 50
Baird Core Plus Bond Fund
December 31, 2013
Portfolio Characteristics
Quality Distribution(1)
Net Assets | $2,833,814,303 | |||
SEC 30-Day | ||||
Yield(2) | ||||
Institutional Class | 3.11% | |||
Investor Class | 2.86% | |||
Average | ||||
Effective | ||||
Duration | 5.39 years | |||
Average | ||||
Effective | ||||
Maturity | 6.95 years | |||
Annualized | ||||
Expense | ||||
Sector Weightings(1) | Ratio | |||
Institutional Class | 0.30% | |||
Investor Class | 0.55%(3) | |||
Portfolio | ||||
Turnover | ||||
Rate | 35.5% | |||
Number of | ||||
Holdings | 681 | |||
(1) | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
(2) | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2013. |
(3) | Includes 0.25% 12b-1 fee. |
Page 51
Baird Core Plus Bond Fund
December 31, 2013
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 52
Baird Core Plus Bond Fund
December 31, 2013
Total Returns
Average Annual | ||||
One | Five | Ten | Since | |
For the Periods Ended December 31, 2013 | Year | Years | Years | Inception(1) |
Institutional Class Shares | -1.32% | 7.80% | 5.79% | 6.53% |
Investor Class Shares | -1.61% | 7.53% | 5.53% | 6.27% |
Barclays U.S. Universal Bond Index(2) | -1.35% | 5.41% | 4.85% | 5.73% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2013. |
(2) | The Barclays 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 line graph on the previous page and the returns shown in the table above 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The Fund’s gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund may invest up to 20% of its net assets in non-investment grade debt securities (commonly referred to as junk bonds). While these types of debt securities typically offer higher yields than investment grade securities, they also include greater risks including increased credit risk and the increased risk of default or bankruptcy. The Fund maintains securities with longer maturities in order to provide a greater potential for return. Generally, the longer a bond’s maturity, the greater the interest rate risk. The Fund may also invest in U.S. dollar denominated foreign securities which involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation. The Fund may also invest in mortgage- and asset-backed securities, which include interest rate and prepayment risks more pronounced than those of other fixed income securities.
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 53
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
This schedule summarizes the Fund’s holdings by asset type. Details are reported for each of the Fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the Fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The Fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter end. For the second and fourth fiscal quarters, the complete listing of the Fund’s holdings is available electronically in the Fund’s Form N-CSR at http://www.rwbaird.com/baird-funds/prospectus-applications/prospectus-applications.aspx and on the Securities and Exchange Commission’s website (www.sec.gov) or you can have it mailed to you without charge by calling 1-866-44BAIRD. For the first and third fiscal quarters, the Fund files the lists with the SEC on Form N-Q. Shareholders can look up the Fund’s Forms N-CSR and N-Q on the SEC’s website (www.sec.gov).
Long-Term Investments
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
U.S. Treasury Securities | ||||||||||||
U.S. Treasury Bonds: | ||||||||||||
1.250%, 04/30/2019@ | $ | 53,450,000 | $ | 51,783,857 | 1.8 | % | ||||||
5.250%, 11/15/2028@ | 58,975,000 | 71,000,356 | 2.5 | % | ||||||||
4.375%, 02/15/2038@ | 43,000,000 | 46,802,834 | 1.7 | % | ||||||||
3.500%, 02/15/2039@ | 77,275,000 | 72,771,336 | 2.6 | % | ||||||||
Total U.S. Treasury Securities | ||||||||||||
(Cost $260,464,883) | 242,358,383 | 8.6 | % | |||||||||
Taxable Municipal Bonds | ||||||||||||
Other Taxable Municipal Bonds# | 67,072,508 | 2.4 | % | |||||||||
Total Taxable Municipal Bonds | ||||||||||||
(Cost $66,687,189) | 67,072,508 | 2.4 | % | |||||||||
Other Government Related Securities | ||||||||||||
Other Government Related Securities#~ | 54,436,938 | 1.9 | % | |||||||||
Total Other Government Related Securities | ||||||||||||
(Cost $54,365,319) | 54,436,938 | 1.9 | % | |||||||||
Corporate Bonds | ||||||||||||
Industrials | ||||||||||||
Cliffs Natural Resources Inc. | ||||||||||||
3.950%, 01/15/2018@ | 11,579,000 | 11,692,416 | 0.4 | % | ||||||||
Fidelity National Information Services, Inc. | ||||||||||||
7.875%, 07/15/2020 | 11,884,000 | 12,964,957 | 0.5 | % | ||||||||
Murphy Oil Corporation | ||||||||||||
4.000%, 06/01/2022 | 12,600,000 | 11,987,741 | 0.4 | % | ||||||||
Rio Tinto Finance (USA) Limited | ||||||||||||
9.000%, 05/01/2019 f | 11,000,000 | 14,361,842 | 0.5 | % | ||||||||
Walgreen Co. | ||||||||||||
5.250%, 01/15/2019 | 10,000,000 | 11,179,460 | 0.4 | % | ||||||||
Other Industrials#~ | 521,294,083 | 18.4 | % | |||||||||
Total Industrials | ||||||||||||
(Cost $588,539,857) | 583,480,499 | 20.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 54
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Utility | ||||||||||||
DCP Midstream, LLC | ||||||||||||
9.750%, 03/15/2019 (Acquired 02/29/2012 | ||||||||||||
through 12/12/2012, Cost $11,396,572)* | $ | 9,155,000 | $ | 11,390,990 | 0.4 | % | ||||||
Other Utility#~ | 177,099,895 | 6.3 | % | |||||||||
Total Utility | ||||||||||||
(Cost $189,606,175) | 188,490,885 | 6.7 | % | |||||||||
Finance | ||||||||||||
Associates Corporation of North America | ||||||||||||
6.950%, 11/01/2018 | 12,038,000 | 14,322,921 | 0.5 | % | ||||||||
Barclays Bank PLC | ||||||||||||
6.750%, 05/22/2019 f | 9,850,000 | 11,871,919 | 0.4 | % | ||||||||
Dresdner Bank AG | ||||||||||||
7.250%, 09/15/2015 f | 10,425,000 | 11,255,643 | 0.4 | % | ||||||||
John Hancock Life Insurance Company | ||||||||||||
7.375%, 02/15/2024 (Acquired 08/26/2010 | ||||||||||||
through 04/11/2013, Cost $12,119,934)* | 9,765,000 | 11,557,649 | 0.4 | % | ||||||||
Regions Bank | ||||||||||||
7.500%, 05/15/2018 | 14,034,000 | 16,606,236 | 0.6 | % | ||||||||
Simon Property Group, L.P. | ||||||||||||
1.500%, 02/01/2018 | ||||||||||||
(Acquired 12/10/2012, Cost $11,962,200)* | 12,000,000 | 11,657,484 | 0.4 | % | ||||||||
Societe Generale | ||||||||||||
5.200%, 04/15/2021 (Acquired 09/20/2011 | ||||||||||||
through 02/13/2013, Cost $9,985,417)* f | 10,100,000 | 11,102,486 | 0.4 | % | ||||||||
Other Finance#~ | 549,116,148 | 19.4 | % | |||||||||
Total Finance | ||||||||||||
(Cost $620,202,788) | 637,490,486 | 22.5 | % | |||||||||
Residential Mortgage-Backed Securities | ||||||||||||
U.S. Government Agency Issues | ||||||||||||
Federal Gold Loan Mortgage Corporation (FGLMC): | ||||||||||||
3.000%, 05/01/2027 | 13,613,016 | 13,877,134 | 0.5 | % | ||||||||
3.500%, 06/01/2042 | 13,781,185 | 13,689,491 | 0.5 | % | ||||||||
3.500%, 07/01/2042 | 46,266,322 | 45,958,488 | 1.6 | % | ||||||||
3.000%, 08/01/2042 | 37,952,612 | 36,001,865 | 1.3 | % | ||||||||
3.000%, 02/01/2043 | 11,966,500 | 11,350,948 | 0.4 | % | ||||||||
4.500%-6.500%, 12/01/2020-08/01/2040 | 28,867,611 | 30,626,388 | 1.1 | % |
The accompanying notes are an integral part of these financial statements.
Page 55
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
Federal National Mortgage Association (FNMA): | ||||||||||||
5.000%, 06/01/2026 | $ | 13,291,148 | $ | 14,312,438 | 0.5 | % | ||||||
3.000%, 04/01/2027 | 25,487,039 | 26,038,121 | 0.9 | % | ||||||||
2.500%, 12/01/2027 | 25,810,513 | 25,632,534 | 0.9 | % | ||||||||
4.500%, 07/01/2030 | 14,295,870 | 15,234,331 | 0.5 | % | ||||||||
4.000%, 11/01/2031 | 13,008,962 | 13,541,516 | 0.5 | % | ||||||||
5.000%, 07/01/2035 | 12,603,592 | 13,689,628 | 0.5 | % | ||||||||
4.500%, 08/01/2040 | 15,572,350 | 16,496,573 | 0.6 | % | ||||||||
4.000%, 12/01/2041 | 39,426,760 | 40,617,178 | 1.4 | % | ||||||||
3.500%, 06/01/2042 | 14,276,523 | 14,196,584 | 0.5 | % | ||||||||
3.000%-7.500%, 12/25/2019-05/01/2042 | 90,969,590 | 94,634,484 | 3.3 | % | ||||||||
Government National Mortgage Association (GNMA): | ||||||||||||
4.500%, 01/20/2041 | 20,220,299 | 21,707,195 | 0.8 | % | ||||||||
4.000%, 06/20/2042 | 40,726,986 | 42,420,576 | 1.5 | % | ||||||||
3.500%, 09/20/2042 | 21,181,411 | 21,401,430 | 0.7 | % | ||||||||
4.500%-6.500%, 12/20/2028-07/20/2040 | 7,595,050 | 8,200,560 | 0.3 | % | ||||||||
Other U.S. Government Agency Issues# | 229,028 | 0.0 | % | |||||||||
Total U.S. Government Agency Issues | ||||||||||||
(Cost $530,442,464) | 519,856,490 | 18.3 | % | |||||||||
Non-U.S. Government Agency Issues | ||||||||||||
Sequoia Mortgage Trust | ||||||||||||
Series 2013-6, Class A2, 3.000%, 05/25/2043 | 19,472,698 | 17,905,614 | 0.6 | % | ||||||||
Washington Mutual Mortgage | ||||||||||||
Pass Through Certificates | ||||||||||||
Series 2004-CB3, Class 1A, 6.000%, 10/25/2034 | 11,895,311 | 12,948,926 | 0.5 | % | ||||||||
Other Non-U.S. Government Agency Issues# | 108,748,683 | 3.8 | % | |||||||||
Total Non-U.S. Government Agency Issues | ||||||||||||
(Cost $140,910,656) | 139,603,223 | 4.9 | % | |||||||||
Asset Backed Securities | ||||||||||||
ACE Securities Corp Home Equity Loan Trust Series | ||||||||||||
Series 2006-OP1, Class A2C, 0.315%, 04/25/2036 | 22,108,930 | 20,568,513 | 0.7 | % | ||||||||
Morgan Stanley Home Equity Loan Trust | ||||||||||||
Series 2006-2, Class A3, 0.335%, 02/25/2036 | 11,734,747 | 11,491,967 | 0.4 | % | ||||||||
Soundview Home Equity Loan Trust | ||||||||||||
Series 2005-OPT4, Class 2A3, 0.425%, 12/25/2035 | 16,089,682 | 15,494,203 | 0.6 | % | ||||||||
Other Asset Backed Securities#~ | 108,057,632 | 3.8 | % | |||||||||
Total Asset Backed Securities | ||||||||||||
(Cost $155,815,220) | 155,612,315 | 5.5 | % | |||||||||
Commercial Mortgage-Backed Securities | ||||||||||||
CD Commercial Mortgage Trust | ||||||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 17,426,219 | 18,476,410 | 0.7 | % |
The accompanying notes are an integral part of these financial statements.
Page 56
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
Long-Term Investments (cont.)
Principal | % of | |||||||||||
Amount | Value | Net Assets | ||||||||||
COMM Mortgage Trust: | ||||||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | $ | 5,987,000 | $ | 6,296,205 | 0.2 | % | ||||||
Series 2012-CR1, Class A3, 3.391%, 05/15/2045 | 25,842,000 | 25,459,099 | 0.9 | % | ||||||||
Series 2012-CR2, Class A4, 3.147%, 08/15/2045 | 25,180,000 | 24,317,056 | 0.9 | % | ||||||||
Credit Suisse First Boston Mortgage Securities Corp. | ||||||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 10,650,000 | 11,180,008 | 0.4 | % | ||||||||
GE Capital Commercial Mortgage Corporation | ||||||||||||
Series 2005-C4, Class A4, 5.310%, 11/10/2045 | 12,795,000 | 13,598,398 | 0.5 | % | ||||||||
J.P. Morgan Chase Commercial Mortgage Trust: | ||||||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 17,525,000 | 18,353,284 | 0.6 | % | ||||||||
Series 2013-LC11, Class A5, 2.960%, 04/15/2046 | 12,075,000 | 11,296,295 | 0.4 | % | ||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | ||||||||||||
Series 2012-C6, Class A4, 2.858%, 11/15/2045 | 25,410,000 | 23,894,268 | 0.8 | % | ||||||||
Morgan Stanley Capital I Trust | ||||||||||||
Series 2005-HQ7, Class A4, 5.207%, 11/14/2042 | 19,785,000 | 20,808,953 | 0.7 | % | ||||||||
WF-RBS Commercial Mortgage Trust | ||||||||||||
Series 2012-C6, Class A4, 3.440%, 04/15/2045 | 14,000,000 | 13,949,516 | 0.5 | % | ||||||||
Other Commercial Mortgage Backed Securities# | 16,884,562 | 0.6 | % | |||||||||
Total Commercial Mortgage Backed Securities | ||||||||||||
(Cost $213,615,656) | 204,514,054 | 7.2 | % | |||||||||
Total Long-Term Investments | ||||||||||||
(Cost $2,820,650,207) | 2,792,915,781 | 98.6 | % | |||||||||
Short-Term Investments | ||||||||||||
Shares | ||||||||||||
Money Market Mutual Fund | ||||||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 31,161,267 | 31,161,267 | 1.1 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $31,161,267) | 31,161,267 | 1.1 | % |
The accompanying notes are an integral part of these financial statements.
Page 57
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
Investments Purchased with Cash
Proceeds from Securities Lending
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Investment Companies | ||||||||||||
Mount Vernon Securities Lending | ||||||||||||
Trust Prime Portfolio, 0.19%« | 242,165,078 | $ | 242,165,078 | 8.5 | % | |||||||
Total Investment Companies | ||||||||||||
(Cost $242,165,078) | 242,165,078 | 8.5 | % | |||||||||
Total Investments Purchased With | ||||||||||||
Cash Proceeds From Securities Lending | ||||||||||||
(Cost $242,165,078) | 242,165,078 | 8.5 | % | |||||||||
Total Investments | ||||||||||||
(Cost $3,093,976,552) | 3,066,242,126 | 108.2 | % | |||||||||
Liabilities in Excess of Other Assets | (232,427,823 | ) | (8.2 | )% | ||||||||
TOTAL NET ASSETS | $ | 2,833,814,303 | 100.0 | % |
Notes to Summary Schedule of Investments
# | Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets. | |
* | Restricted Security Deemed Liquid | |
@ | This security or portion of this security is out on loan at December 31, 2013. | |
f | Foreign Security | |
« | 7-Day Yield | |
~ | Groupings contain, in aggregate, restricted securities totaling $336,708,488 representing 11.88% of net assets. |
Summary of Fair Value Exposure at December 31, 2013
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.
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 accompanying notes are an integral part of these financial statements.
Page 58
Baird Core Plus Bond Fund
Summary Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013 (cont.)
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, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
U.S. Treasury Securities | $ | — | $ | 242,358,383 | $ | — | $ | 242,358,383 | ||||||||
Taxable Municipal Bonds | — | 67,072,508 | — | 67,072,508 | ||||||||||||
Other Government Related Securities | — | 54,436,938 | — | 54,436,938 | ||||||||||||
Corporate Bonds | — | 1,409,461,870 | — | 1,409,461,870 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
U.S. Government Agency Issues | — | 519,856,490 | — | 519,856,490 | ||||||||||||
Residential Mortgage-Backed Securities – | ||||||||||||||||
Non-U.S. Government Agency Issues | — | 139,603,223 | — | 139,603,223 | ||||||||||||
Asset Backed Securities | — | 155,612,315 | — | 155,612,315 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 204,514,054 | — | 204,514,054 | ||||||||||||
Total Fixed Income | — | 2,792,915,781 | — | 2,792,915,781 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 31,161,267 | — | — | 31,161,267 | ||||||||||||
Total Short-Term Investments | 31,161,267 | — | — | 31,161,267 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Investment Companies | 242,165,078 | — | — | 242,165,078 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 242,165,078 | — | — | 242,165,078 | ||||||||||||
Total Investments | $ | 273,326,345 | $ | 2,792,915,781 | $ | — | $ | 3,066,242,126 |
Changes in valuation techniques may result in transfers into or out of assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
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, 2012 | $ | 4,675 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (95,058 | ) | ||
Change in unrealized appreciation (depreciation) | 90,699 | |||
Purchases | — | |||
Sales | (316 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2013 | $ | — |
* Transfers between levels are recognized at the end of the reporting period.
The accompanying notes are an integral part of these financial statements.
Page 59
Additional Information on Fund Expenses
December 31, 2013
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 (7/1/13 – 12/31/13).
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 60
Additional Information on Fund Expenses
December 31, 2013
Actual vs. Hypothetical Returns
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) | 7/1/13 | 12/31/13 | Period(1) | 12/31/13 | Period(1) | ||||||
Baird Short-Term | |||||||||||
Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,011.60 | $1.52 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,010.40 | $2.79 | $1,022.43 | $2.80 | |||||
Baird Intermediate | |||||||||||
Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,011.50 | $1.52 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,009.80 | $2.79 | $1,022.43 | $2.80 | |||||
Baird Intermediate | |||||||||||
Municipal Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,010.00 | $1.52 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,009.30 | $2.79 | $1,022.43 | $2.80 | |||||
Baird Aggregate | |||||||||||
Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,008.40 | $1.52 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,006.80 | $2.78 | $1,022.43 | $2.80 | |||||
Baird Core Plus | |||||||||||
Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,013.10 | $1.52 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,011.30 | $2.79 | $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 61
Statement of Assets and Liabilities
December 31, 2013
Baird | ||||||||||||
Baird | Baird | Intermediate | ||||||||||
Short-Term | Intermediate | Municipal | ||||||||||
Bond Fund | Bond Fund | Bond Fund | ||||||||||
ASSETS: | ||||||||||||
Investments, at value (cost $2,211,925,110, | ||||||||||||
$1,368,681,997 and $945,490,889, respectively)* | $ | 2,216,685,982 | $ | 1,380,789,627 | $ | 970,998,026 | ||||||
Interest receivable | 17,690,438 | 10,314,905 | 12,078,489 | |||||||||
Receivable for investments sold or paid down | 131,872 | 31 | 20,406,237 | |||||||||
Receivable for Fund shares sold | 6,003,482 | 9,446,772 | 5,135,121 | |||||||||
Uninvested cash | 11,235 | 11,883 | — | |||||||||
Total assets | 2,240,523,009 | 1,400,563,218 | 1,008,617,873 | |||||||||
LIABILITIES: | ||||||||||||
Payable for collateral received | ||||||||||||
for securities loaned (Note 6) | 204,135,634 | 227,607,522 | — | |||||||||
Payable for securities purchased | 22,057,199 | 12,043,175 | 63,354 | |||||||||
Payable for Fund shares repurchased | 4,862,268 | 247,349 | 1,196,672 | |||||||||
Payable to Advisor and Distributor | 503,319 | 300,663 | 363,240 | |||||||||
Other liabilities | — | 4,658,584 | 9 | |||||||||
Total liabilities | 231,558,420 | 244,857,293 | 1,623,275 | |||||||||
NET ASSETS | $ | 2,008,964,589 | $ | 1,155,705,925 | $ | 1,006,994,598 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Capital stock | $ | 2,003,788,872 | $ | 1,143,585,771 | $ | 981,858,097 | ||||||
Undistributed net investment income | 87,597 | 34,180 | — | |||||||||
Accumulated net realized | ||||||||||||
gain (loss) on investments sold | 327,248 | (21,656 | ) | (370,636 | ) | |||||||
Net unrealized appreciation | ||||||||||||
on investments | 4,760,872 | 12,107,630 | 25,507,137 | |||||||||
NET ASSETS | $ | 2,008,964,589 | $ | 1,155,705,925 | $ | 1,006,994,598 | ||||||
INSTITUTIONAL CLASS SHARES | ||||||||||||
Net Assets | $ | 1,984,950,359 | $ | 1,113,650,428 | $ | 801,357,236 | ||||||
Shares outstanding ($0.01 par value, | ||||||||||||
unlimited shares authorized) | 204,832,563 | 101,253,258 | 69,393,191 | |||||||||
Net asset value, offering and | ||||||||||||
redemption price per share | $ | 9.69 | $ | 11.00 | $ | 11.55 | ||||||
INVESTOR CLASS SHARES | ||||||||||||
Net Assets | $ | 24,014,230 | $ | 42,055,497 | $ | 205,637,362 | ||||||
Shares outstanding ($0.01 par value, | ||||||||||||
unlimited shares authorized) | 2,478,333 | 3,678,501 | 17,430,650 | |||||||||
Net asset value, offering and | ||||||||||||
redemption price per share | $ | 9.69 | $ | 11.43 | $ | 11.80 |
*Includes securities out on loan to brokers with a market value of $199,826,892, $222,498,391 and $0, respectively.
The accompanying notes are an integral part of these financial statements.
Page 62
Statement of Assets and Liabilities
December 31, 2013
Baird | Baird | |||||||
Aggregate | Core Plus | |||||||
Bond Fund | Bond Fund | |||||||
ASSETS: | ||||||||
Investments, at value (cost $2,026,398,620 | ||||||||
and $3,093,976,552, respectively)* | $ | 2,026,691,331 | $ | 3,066,242,126 | ||||
Interest receivable | 14,292,239 | 25,090,427 | ||||||
Receivable for investments sold or paid down | 303,592 | 232 | ||||||
Receivable for Fund shares sold | 6,388,387 | 8,064,153 | ||||||
Uninvested cash | 11,506 | 5,252,371 | ||||||
Total assets | 2,047,687,055 | 3,104,649,309 | ||||||
LIABILITIES: | ||||||||
Payable for collateral received | ||||||||
for securities loaned (Note 6) | 220,394,089 | 242,177,722 | ||||||
Payable for securities purchased | 16,195,157 | 21,706,851 | ||||||
Payable for Fund shares repurchased | 1,843,893 | 5,772,096 | ||||||
Payable to Advisor and Distributor | 509,267 | 1,178,337 | ||||||
Other liabilities | 1,819,480 | — | ||||||
Total liabilities | 240,761,886 | 270,835,006 | ||||||
NET ASSETS | $ | 1,806,925,169 | $ | 2,833,814,303 | ||||
NET ASSETS CONSIST OF: | ||||||||
Capital stock | $ | 1,817,070,931 | $ | 2,874,721,206 | ||||
Undistributed net investment income | 63,323 | 269,644 | ||||||
Accumulated net realized | ||||||||
loss on investments sold | (10,501,796 | ) | (13,442,121 | ) | ||||
Net unrealized appreciation (depreciation) | ||||||||
on investments | 292,711 | (27,734,426 | ) | |||||
NET ASSETS | $ | 1,806,925,169 | $ | 2,833,814,303 | ||||
INSTITUTIONAL CLASS SHARES | ||||||||
Net Assets | $ | 1,665,048,627 | $ | 1,789,713,609 | ||||
Shares outstanding ($0.01 par value, | ||||||||
unlimited shares authorized) | 159,952,275 | 166,166,636 | ||||||
Net asset value, offering and | ||||||||
redemption price per share | $ | 10.41 | $ | 10.77 | ||||
INVESTOR CLASS SHARES | ||||||||
Net Assets | $ | 141,876,542 | $ | 1,044,100,694 | ||||
Shares outstanding ($0.01 par value, | ||||||||
unlimited shares authorized) | 13,229,616 | 93,561,566 | ||||||
Net asset value, offering and | ||||||||
redemption price per share | $ | 10.72 | $ | 11.16 |
*Includes securities out on loan to brokers with a market value of $215,120,316 and $236,213,040, respectively.
The accompanying notes are an integral part of these financial statements.
Page 63
Statement of Operations
Year Ended December 31, 2013
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 | $ | 32,599,508 | $ | 27,141,726 | $ | 33,299,063 | $ | 56,561,041 | $ | 87,845,639 | ||||||||||
Income from securities | ||||||||||||||||||||
lending (Note 6) | 161,267 | 215,960 | — | 190,280 | 341,596 | |||||||||||||||
Other income | — | — | 272 | — | — | |||||||||||||||
Total investment income | 32,760,775 | 27,357,686 | 33,299,335 | 56,751,321 | 88,187,235 | |||||||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fees | 4,077,563 | 2,486,930 | 2,819,080 | 4,289,357 | 7,036,173 | |||||||||||||||
Administration fees | 815,513 | 497,386 | 563,816 | 857,871 | 1,407,235 | |||||||||||||||
Distribution expense – | ||||||||||||||||||||
Investor Class | ||||||||||||||||||||
Shares (Note 8) | 13,571 | 88,386 | 588,292 | 271,268 | 2,744,717 | |||||||||||||||
Interest Expense (Note 7) | 2 | — | 855 | — | — | |||||||||||||||
Total expenses | 4,906,649 | 3,072,702 | 3,972,043 | 5,418,496 | 11,188,125 | |||||||||||||||
NET INVESTMENT | ||||||||||||||||||||
INCOME | 27,854,126 | 24,284,984 | 29,327,292 | 51,332,825 | 76,999,110 | |||||||||||||||
REALIZED AND | ||||||||||||||||||||
UNREALIZED | ||||||||||||||||||||
GAIN (LOSS) ON | ||||||||||||||||||||
INVESTMENTS: | ||||||||||||||||||||
Net realized gain (loss) | ||||||||||||||||||||
on investments | 4,483,161 | 280,244 | 393,206 | 378,075 | (5,595,901 | ) | ||||||||||||||
Change in unrealized | ||||||||||||||||||||
appreciation/depreciation | ||||||||||||||||||||
on investments | (9,991,149 | ) | (25,956,146 | ) | (45,857,361 | ) | (72,138,203 | ) | (116,074,581 | ) | ||||||||||
Net realized and | ||||||||||||||||||||
unrealized loss | ||||||||||||||||||||
on investments | (5,507,988 | ) | (25,675,902 | ) | (45,464,155 | ) | (71,760,128 | ) | (121,670,482 | ) | ||||||||||
NET INCREASE | ||||||||||||||||||||
(DECREASE) IN NET | ||||||||||||||||||||
ASSETS RESULTING | ||||||||||||||||||||
FROM OPERATIONS | $ | 22,346,138 | $ | (1,390,918 | ) | $ | (16,136,863 | ) | $ | (20,427,303 | ) | $ | (44,671,372 | ) |
The accompanying notes are an integral part of these financial statements.
Page 64
Statement of Changes in Net Assets
Baird Short-Term Bond Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 27,854,126 | $ | 25,548,054 | ||||
Net realized gain on investments | 4,483,161 | 2,915,046 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (9,991,149 | ) | 18,243,680 | |||||
Net increase in net assets resulting from operations | 22,346,138 | 46,706,780 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 1,321,429,969 | 638,547,205 | ||||||
Shares issued to holders in reinvestment of distributions | 28,803,751 | 25,364,865 | ||||||
Cost of shares redeemed | (628,082,008 | ) | (402,443,066 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 722,151,712 | 261,469,004 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (28,830,295 | ) | (26,295,016 | ) | ||||
From net realized gains | (3,715,930 | ) | (1,945,462 | ) | ||||
Total Distributions | (32,546,225 | ) | (28,240,478 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (101,725 | ) | (4,660 | ) | ||||
From net realized gains | (43,827 | ) | (2,217 | ) | ||||
Total Distributions | (145,552 | ) | (6,877 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 711,806,073 | 279,928,429 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 1,297,158,516 | 1,017,230,087 | ||||||
End of year (including undistributed net investment | ||||||||
income of $87,597 and $48,525, respectively) | $ | 2,008,964,589 | $ | 1,297,158,516 |
The accompanying notes are an integral part of these financial statements.
Page 65
Statement of Changes in Net Assets
Baird Intermediate Bond Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 24,284,984 | $ | 23,158,338 | ||||
Net realized gain on investments | 280,244 | 11,899,430 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (25,956,146 | ) | 14,062,432 | |||||
Net increase (decrease) in net assets | ||||||||
resulting from operations | (1,390,918 | ) | 49,120,200 | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 446,423,832 | 272,848,000 | ||||||
Shares issued to holders in reinvestment of distributions | 22,280,498 | 27,351,259 | ||||||
Cost of shares redeemed | (179,390,475 | ) | (139,799,278 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 289,313,855 | 160,399,981 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (23,931,138 | ) | (22,946,240 | ) | ||||
From net realized gains | (1,670,359 | ) | (9,536,285 | ) | ||||
Total Distributions | (25,601,497 | ) | (32,482,525 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (763,548 | ) | (496,752 | ) | ||||
From net realized gains | (60,340 | ) | (277,674 | ) | ||||
Total Distributions | (823,888 | ) | (774,426 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 261,497,552 | 176,263,230 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 894,208,373 | 717,945,143 | ||||||
End of year (including undistributed net investment | ||||||||
income of $34,180 and $143,175, respectively) | $ | 1,155,705,925 | $ | 894,208,373 |
The accompanying notes are an integral part of these financial statements.
Page 66
Statement of Changes in Net Assets
Baird Intermediate Municipal Bond Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 29,327,292 | $ | 28,802,477 | ||||
Net realized gain (loss) on investments | 393,206 | (576,946 | ) | |||||
Change in unrealized | ||||||||
appreciation/depreciation on investments | (45,857,361 | ) | 7,863,442 | |||||
Net increase (decrease) in net assets | ||||||||
resulting from operations | (16,136,863 | ) | 36,088,973 | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 375,180,193 | 466,665,428 | ||||||
Shares issued to holders in reinvestment of distributions | 24,773,117 | 24,192,460 | ||||||
Cost of shares redeemed | (569,130,806 | ) | (370,530,966 | ) | ||||
Net increase (decrease) in net assets | ||||||||
resulting from capital share transactions | (169,177,496 | ) | 120,326,922 | |||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (23,787,845 | ) | (23,091,313 | ) | ||||
Total Distributions | (23,787,845 | ) | (23,091,313 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (5,549,463 | ) | (5,746,219 | ) | ||||
Total Distributions | (5,549,463 | ) | (5,746,219 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (214,651,667 | ) | 127,578,363 | |||||
NET ASSETS: | ||||||||
Beginning of year | 1,221,646,265 | 1,094,067,902 | ||||||
End of year | $ | 1,006,994,598 | $ | 1,221,646,265 |
The accompanying notes are an integral part of these financial statements.
Page 67
Statement of Changes in Net Assets
Baird Aggregate Bond Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 51,332,825 | $ | 51,876,256 | ||||
Net realized gain on investments | 378,075 | 35,762,825 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (72,138,203 | ) | 23,619,570 | |||||
Net increase (decrease) in net assets | ||||||||
resulting from operations | (20,427,303 | ) | 111,258,651 | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 1,010,876,966 | 640,965,634 | ||||||
Shares issued to holders in reinvestment of distributions | 44,941,674 | 67,166,621 | ||||||
Cost of shares redeemed | (717,490,386 | ) | (700,577,380 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 338,328,254 | 7,554,875 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (52,544,503 | ) | (56,119,715 | ) | ||||
From net realized gains | — | (22,329,198 | ) | |||||
Total Distributions | (52,544,503 | ) | (78,448,913 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (3,280,448 | ) | (1,226,159 | ) | ||||
From net realized gains | — | (682,825 | ) | |||||
Total Distributions | (3,280,448 | ) | (1,908,984 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 262,076,000 | 38,455,629 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 1,544,849,169 | 1,506,393,540 | ||||||
End of year (including undistributed net investment | ||||||||
income of $63,323 and $96,715, respectively) | $ | 1,806,925,169 | $ | 1,544,849,169 |
The accompanying notes are an integral part of these financial statements.
Page 68
Statement of Changes in Net Assets
Baird Core Plus Bond Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 76,999,110 | $ | 55,364,378 | ||||
Net realized gain (loss) on investments | (5,595,901 | ) | 12,662,520 | |||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (116,074,581 | ) | 64,502,693 | |||||
Net increase (decrease) in net assets | ||||||||
resulting from operations | (44,671,372 | ) | 132,529,591 | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 1,377,196,811 | 1,745,509,776 | ||||||
Shares issued to holders in reinvestment of distributions | 81,644,399 | 61,568,260 | ||||||
Cost of shares redeemed | (1,103,175,773 | ) | (365,015,424 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 355,665,437 | 1,442,062,612 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (54,209,559 | ) | (39,973,418 | ) | ||||
From net realized gains | (1,221,572 | ) | (2,922,050 | ) | ||||
Total Distributions | (55,431,131 | ) | (42,895,468 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (30,443,741 | ) | (21,217,769 | ) | ||||
From net realized gains | (694,353 | ) | (1,858,946 | ) | ||||
Total Distributions | (31,138,094 | ) | (23,076,715 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 224,424,840 | 1,508,620,020 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,609,389,463 | 1,100,769,443 | ||||||
End of year (including undistributed net investment | ||||||||
income of $269,644 and $212,042, respectively) | $ | 2,833,814,303 | $ | 2,609,389,463 |
The accompanying notes are an integral part of these financial statements.
Page 69
Financial Highlights
Baird Short-Term Bond Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.75 | $ | 9.59 | $ | 9.68 | $ | 9.57 | $ | 9.25 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.17 | (1) | 0.22 | 0.23 | 0.29 | 0.41 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.04 | ) | 0.17 | (0.03 | ) | 0.13 | 0.32 | |||||||||||||
Total from investment operations | 0.13 | 0.39 | 0.20 | 0.42 | 0.73 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.17 | ) | (0.22 | ) | (0.23 | ) | (0.29 | ) | (0.41 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.02 | ) | (0.01 | ) | (0.06 | ) | (0.02 | ) | — | |||||||||||
Total distributions | (0.19 | ) | (0.23 | ) | (0.29 | ) | (0.31 | ) | (0.41 | ) | ||||||||||
Net asset value, end of year | $ | 9.69 | $ | 9.75 | $ | 9.59 | $ | 9.68 | $ | 9.57 | ||||||||||
Total return | 1.33 | % | 4.16 | % | 2.08 | % | 4.39 | % | 8.14 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 1,985.0 | $ | 1,295.7 | $ | 1,017.2 | $ | 919.0 | $ | 606.2 | ||||||||||
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 | 1.71 | % | 2.23 | % | 2.40 | % | 2.92 | % | 4.28 | % | ||||||||||
Portfolio turnover rate(2) | 45.1 | % | 40.1 | % | 61.1 | % | 58.7 | % | 55.5 | % |
(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 70
Financial Highlights
Baird Short-Term Bond Fund – Investor Class
September 19, 2012^ | ||||||||
Year Ended | through | |||||||
December 31, | December 31, | |||||||
2013 | 2012 | |||||||
Per Share Data: | ||||||||
Net asset value, beginning of period | $ | 9.75 | $ | 9.77 | ||||
Income from investment operations: | ||||||||
Net investment income | 0.15 | (1) | 0.06 | |||||
Net realized and unrealized | ||||||||
gains (losses) on investments | (0.04 | ) | 0.00 | (2) | ||||
Total from investment operations | 0.11 | 0.06 | ||||||
Less distributions: | ||||||||
Distributions from net investment income | (0.15 | ) | (0.07 | ) | ||||
Distributions from net realized gains | (0.02 | ) | (0.01 | ) | ||||
Total distributions | (0.17 | ) | (0.08 | ) | ||||
Net asset value, end of period | $ | 9.69 | $ | 9.75 | ||||
Total return | 1.11 | % | 0.68 | %(3) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period (millions) | $ | 2.5 | $ | 1.5 | ||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | %(4) | ||||
Ratio of net investment income to average net assets | 1.46 | % | 1.98 | %(4) | ||||
Portfolio turnover rate(5) | 45.1 | % | 40.1 | %(3) |
^ | Commencement of Operations |
(1) | Calculated using average shares outstanding during the year. |
(2) | Amount is less than $0.005. |
(3) | Not annualized. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 71
Financial Highlights
Baird Intermediate Bond Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.31 | $ | 11.06 | $ | 10.87 | $ | 10.61 | $ | 10.00 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.27 | 0.33 | (1) | 0.39 | 0.44 | (1) | 0.51 | (1) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.29 | ) | 0.38 | 0.27 | 0.35 | 0.63 | ||||||||||||||
Total from investment operations | (0.02 | ) | 0.71 | 0.66 | 0.79 | 1.14 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.27 | ) | (0.33 | ) | (0.39 | ) | (0.44 | ) | (0.51 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.02 | ) | (0.13 | ) | (0.08 | ) | (0.09 | ) | (0.02 | ) | ||||||||||
Total distributions | (0.29 | ) | (0.46 | ) | (0.47 | ) | (0.53 | ) | (0.53 | ) | ||||||||||
Net asset value, end of year | $ | 11.00 | $ | 11.31 | $ | 11.06 | $ | 10.87 | $ | 10.61 | ||||||||||
Total return | (0.17 | )% | 6.52 | % | 6.14 | % | 7.54 | % | 11.76 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 1,113.7 | $ | 867.5 | $ | 703.2 | $ | 591.2 | $ | 527.8 | ||||||||||
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 | 2.45 | % | 2.95 | % | 3.49 | % | 4.05 | % | 4.92 | % | ||||||||||
Portfolio turnover rate(2) | 45.1 | % | 45.1 | % | 24.1 | % | 38.7 | % | 38.6 | % |
(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 72
Financial Highlights
Baird Intermediate Bond Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.74 | $ | 11.47 | $ | 11.26 | $ | 10.97 | $ | 10.32 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.25 | 0.32 | (1) | 0.37 | 0.43 | (1) | 0.50 | (1) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.29 | ) | 0.39 | 0.28 | 0.36 | 0.65 | ||||||||||||||
Total from investment operations | (0.04 | ) | 0.71 | 0.65 | 0.79 | 1.15 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.25 | ) | (0.31 | ) | (0.36 | ) | (0.41 | ) | (0.48 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.02 | ) | (0.13 | ) | (0.08 | ) | (0.09 | ) | (0.02 | ) | ||||||||||
Total distributions | (0.27 | ) | (0.44 | ) | (0.44 | ) | (0.50 | ) | (0.50 | ) | ||||||||||
Net asset value, end of year | $ | 11.43 | $ | 11.74 | $ | 11.47 | $ | 11.26 | $ | 10.97 | ||||||||||
Total return | (0.41 | )% | 6.20 | % | 5.84 | % | 7.30 | % | 11.51 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 42.1 | $ | 26.7 | $ | 14.7 | $ | 12.7 | $ | 6.7 | ||||||||||
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 | 2.20 | % | 2.70 | % | 3.24 | % | 3.80 | % | 4.67 | % | ||||||||||
Portfolio turnover rate(2) | 45.1 | % | 45.1 | % | 24.1 | % | 38.7 | % | 38.6 | % |
(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 73
Financial Highlights
Baird Intermediate Municipal Bond Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.01 | $ | 11.94 | $ | 11.31 | $ | 11.35 | $ | 10.98 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.32 | (1) | 0.30 | 0.32 | 0.32 | 0.32 | (1) | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.46 | ) | 0.07 | 0.64 | (0.04 | ) | 0.36 | |||||||||||||
Total from investment operations | (0.14 | ) | 0.37 | 0.96 | 0.28 | 0.68 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.32 | ) | (0.30 | ) | (0.32 | ) | (0.32 | ) | (0.31 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | — | — | (0.01 | ) | — | — | ||||||||||||||
Total distributions | (0.32 | ) | (0.30 | ) | (0.33 | ) | (0.32 | ) | (0.31 | ) | ||||||||||
Net asset value, end of year | $ | 11.55 | $ | 12.01 | $ | 11.94 | $ | 11.31 | $ | 11.35 | ||||||||||
Total return | (1.19 | )% | 3.12 | % | 8.55 | % | 2.42 | % | 6.22 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 801.4 | $ | 963.1 | $ | 836.1 | $ | 739.0 | $ | 533.3 | ||||||||||
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 | 2.65 | % | 2.48 | % | 2.74 | % | 2.74 | % | 2.83 | % | ||||||||||
Portfolio turnover rate(2) | 9.0 | % | 5.1 | % | 8.0 | % | 8.7 | % | 0.7 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 74
Financial Highlights
Baird Intermediate Municipal Bond Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.26 | $ | 12.18 | $ | 11.53 | $ | 11.57 | $ | 11.19 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | (1) | 0.27 | 0.29 | 0.29 | 0.29 | (1) | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.46 | ) | 0.08 | 0.66 | (0.04 | ) | 0.37 | |||||||||||||
Total from investment operations | (0.17 | ) | 0.35 | 0.95 | 0.25 | 0.66 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.29 | ) | (0.27 | ) | (0.29 | ) | (0.29 | ) | (0.28 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | — | — | (0.01 | ) | — | — | ||||||||||||||
Total distributions | (0.29 | ) | (0.27 | ) | (0.30 | ) | (0.29 | ) | (0.28 | ) | ||||||||||
Net asset value, end of year | $ | 11.80 | $ | 12.26 | $ | 12.18 | $ | 11.53 | $ | 11.57 | ||||||||||
Total return | (1.42 | )% | 2.88 | % | 8.30 | % | 2.11 | % | 5.95 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 205.6 | $ | 258.5 | $ | 257.9 | $ | 202.8 | $ | 196.7 | ||||||||||
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 | 2.40 | % | 2.23 | % | 2.49 | % | 2.49 | % | 2.58 | % | ||||||||||
Portfolio turnover rate(2) | 9.0 | % | 5.1 | % | 8.0 | % | 8.7 | % | 0.7 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 75
Financial Highlights
Baird Aggregate Bond Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.89 | $ | 10.65 | $ | 10.52 | $ | 10.23 | $ | 9.74 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.32 | (1) | 0.38 | (1) | 0.44 | (1) | 0.47 | (2) | 0.54 | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.45 | ) | 0.45 | 0.36 | 0.37 | 0.49 | ||||||||||||||
Total from investment operations | (0.13 | ) | 0.83 | 0.80 | 0.84 | 1.03 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.35 | ) | (0.43 | ) | (0.46 | ) | (0.49 | ) | (0.54 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | — | (0.16 | ) | (0.21 | ) | (0.06 | ) | (0.00 | )(3) | |||||||||||
Total distributions | (0.35 | ) | (0.59 | ) | (0.67 | ) | (0.55 | ) | (0.54 | ) | ||||||||||
Net asset value, end of year | $ | 10.41 | $ | 10.89 | $ | 10.65 | $ | 10.52 | $ | 10.23 | ||||||||||
Total return | (1.25 | )% | 7.92 | % | 7.85 | % | 8.34 | % | 10.88 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 1,665.0 | $ | 1,495.4 | $ | 1,480.3 | $ | 1,658.4 | $ | 1,362.2 | ||||||||||
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 | 3.01 | % | 3.51 | % | 4.10 | % | 4.44 | % | 5.37 | % | ||||||||||
Portfolio turnover rate(4) | 28.4 | % | 64.4 | % | 45.9 | % | 41.4 | % | 37.7 | % |
(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 76
Financial Highlights
Baird Aggregate Bond Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.21 | $ | 10.94 | $ | 10.80 | $ | 10.48 | $ | 9.97 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | (1) | 0.37 | (1) | 0.42 | (1) | 0.46 | (2) | 0.52 | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.46 | ) | 0.46 | 0.37 | 0.38 | 0.50 | ||||||||||||||
Total from investment operations | (0.17 | ) | 0.83 | 0.79 | 0.84 | 1.02 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.32 | ) | (0.40 | ) | (0.44 | ) | (0.46 | ) | (0.51 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | — | (0.16 | ) | (0.21 | ) | (0.06 | ) | (0.00 | )(3) | |||||||||||
Total distributions | (0.32 | ) | (0.56 | ) | (0.65 | ) | (0.52 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 10.72 | $ | 11.21 | $ | 10.94 | $ | 10.80 | $ | 10.48 | ||||||||||
Total return | (1.54 | )% | 7.72 | % | 7.46 | % | 8.16 | % | 10.55 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 141.9 | $ | 49.4 | $ | 26.1 | $ | 38.9 | $ | 35.1 | ||||||||||
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 | 2.76 | % | 3.26 | % | 3.85 | % | 4.19 | % | 5.12 | % | ||||||||||
Portfolio turnover rate(4) | 28.4 | % | 64.4 | % | 45.9 | % | 41.4 | % | 37.7 | % |
(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 77
Financial Highlights
Baird Core Plus Bond Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.27 | $ | 10.82 | $ | 10.51 | $ | 10.18 | $ | 9.46 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.31 | (1) | 0.35 | (2) | 0.45 | (2) | 0.59 | (3) | 0.65 | (2) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.46 | ) | 0.50 | 0.36 | 0.39 | 0.74 | ||||||||||||||
Total from investment operations | (0.15 | ) | 0.85 | 0.81 | 0.98 | 1.39 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.34 | ) | (0.38 | ) | (0.46 | ) | (0.60 | ) | (0.65 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.01 | ) | (0.02 | ) | (0.04 | ) | (0.05 | ) | (0.02 | ) | ||||||||||
Total distributions | (0.35 | ) | (0.40 | ) | (0.50 | ) | (0.65 | ) | (0.67 | ) | ||||||||||
Net asset value, end of year | $ | 10.77 | $ | 11.27 | $ | 10.82 | $ | 10.51 | $ | 10.18 | ||||||||||
Total return | (1.32 | )% | 7.95 | % | 7.89 | % | 9.81 | % | 15.36 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 1,789.7 | $ | 1,573.4 | $ | 768.9 | $ | 452.4 | $ | 215.2 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 2.83 | % | 3.12 | % | 4.22 | % | 5.56 | % | 6.67 | % | ||||||||||
Portfolio turnover rate(4) | 35.5 | % | 36.7 | % | 34.6 | % | 61.5 | % | 33.2 | % |
(1) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for performance book to tax differences. |
(2) | Calculated using average shares outstanding during the year. |
(3) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 78
Financial Highlights
Baird Core Plus Bond Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.67 | $ | 11.18 | $ | 10.85 | $ | 10.49 | $ | 9.72 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | (1) | 0.33 | (2) | 0.44 | (2) | 0.57 | (3) | 0.64 | (2) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.48 | ) | 0.53 | 0.37 | 0.41 | 0.78 | ||||||||||||||
Total from investment operations | (0.19 | ) | 0.86 | 0.81 | 0.98 | 1.42 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.31 | ) | (0.35 | ) | (0.44 | ) | (0.57 | ) | (0.63 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.01 | ) | (0.02 | ) | (0.04 | ) | (0.05 | ) | (0.02 | ) | ||||||||||
Total distributions | (0.32 | ) | (0.37 | ) | (0.48 | ) | (0.62 | ) | (0.65 | ) | ||||||||||
Net asset value, end of year | $ | 11.16 | $ | 11.67 | $ | 11.18 | $ | 10.85 | $ | 10.49 | ||||||||||
Total return | (1.61 | )% | 7.80 | % | 7.57 | % | 9.53 | % | 15.06 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 1,044.1 | $ | 1,036.0 | $ | 331.9 | $ | 58.4 | $ | 45.5 | ||||||||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 2.58 | % | 2.87 | % | 3.97 | % | 5.31 | % | 6.42 | % | ||||||||||
Portfolio turnover rate(4) | 35.5 | % | 36.7 | % | 34.6 | % | 61.5 | % | 33.2 | % |
(1) | Net Investment income per share is calculated using ending balances prior to consideration of adjustments for performance book to tax differences. |
(2) | Calculated using average shares outstanding during the year. |
(3) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 79
Notes to the Financial Statements
December 31, 2013
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 nine 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 while the Investor Class shares commenced operations on September 19, 2012. 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%. See Note 8.
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 1-3 Year U.S. Government/Credit Bond Index. The Barclays 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 Intermediate U.S. Government/Credit Bond Index. The Barclays 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 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 U.S. Aggregate Bond Index. The Barclays U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year.
The investment objective of the Baird Core Plus Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays U.S. Universal Bond Index. The Barclays 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.
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 |
Page 80
Notes to the Financial Statements
December 31, 2013
2. | Significant Accounting Policies (cont.) |
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 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 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. | |
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 $372,731,027 (18.55% of net assets), $174,128,733 (15.07% of net assets), $223,346,922 (12.36% of net assets), and $382,417,097 (13.49% of net assets), respectively, at December 31, 2013. 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, 2013 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 |
Page 81
Notes to the Financial Statements
December 31, 2013
2. | Significant Accounting Policies (cont.) |
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 expense 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, 2013, or for any other tax years which are open for exam. As of December 31, 2013, open tax years include the tax years ended December 31, 2010 through 2013. 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 interest 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 or are divided equally amongst the Funds. |
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 82
Notes to the Financial Statements
December 31, 2013
2. | Significant Accounting Policies (cont.) |
j) | Recent Accounting Pronouncement – In January 2013, the FASB issued ASU No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” in GAAP and International Financial Reporting Standards (“IFRS”). ASU No. 2013-01 clarifies ASU No. 2011-11 to increase comparability and reduce presentation differences between financial statements prepared in accordance with GAAP and financial statements prepared in accordance with IFRS. This requires increased disclosure for both gross and net information for derivatives and other financial instruments that are offset in a reporting entity’s Statement of Assets and Liabilities and derivative instruments that are subject to a master netting agreement (“MNA”). Specifically, the ASU requires reporting entities to present separately for assets and liabilities, a) the gross amounts of those recognized assets and recognized liabilities, b) the amounts offset to determine the net amounts presented in the Statement of Assets and Liabilities, c) the net amount presented in the Statement of Assets and Liabilities, d) the amounts subject to an enforceable MNA not included in (b), and e) the net amount after deducting the amounts from (d) and (c) the effective date of each ASU is for interim and annual periods beginning on or after January 1, 2013. The Funds are not required to disclose the applicable requirements of this accounting standard in their Statement of Assets & Liabilities due to the absence of a master netting agreement relating to the Funds’ participation in securities lending. As such, no additional disclosures have been made on behalf of the Funds. |
3. | Capital Share Transactions |
The following table summarizes the capital share transactions of each Fund for the past two fiscal periods:
Baird Short-Term Bond Fund
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 133,023,716 | $ | 1,293,669,284 | Shares sold | 2,851,595 | $ | 27,760,685 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 2,957,005 | 28,726,556 | of dividends | 7,956 | 77,195 | |||||||||||||
Shares redeemed | (63,981,180 | ) | (622,888,419 | ) | Shares redeemed | (533,574 | ) | (5,193,589 | ) | |||||||||
Net increase | 71,999,541 | $ | 699,507,421 | Net increase | 2,325,977 | $ | 22,644,291 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 132,833,022 | Beginning of year | 152,356 | |||||||||||||||
End of year | 204,832,563 | End of year | 2,478,333 |
Page 83
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions (cont.) |
Baird Short-Term Bond Fund (cont.)
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | September 19, 2012^ through | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 65,489,880 | $ | 636,935,199 | Shares sold | 164,773 | $ | 1,612,006 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 2,609,918 | 25,358,257 | of dividends | 677 | 6,608 | |||||||||||||
Shares redeemed | (41,364,636 | ) | (402,314,887 | ) | Shares redeemed | (13,094 | ) | (128,179 | ) | |||||||||
Net increase | 26,735,162 | $ | 259,978,569 | Net increase | 152,356 | $ | 1,490,435 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 106,097,860 | Beginning of period | — | |||||||||||||||
End of year | 132,833,022 | End of period | 152,356 | |||||||||||||||
Baird Intermediate Bond Fund | ||||||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 37,134,677 | $ | 412,939,370 | Shares sold | 2,881,540 | $ | 33,484,462 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 1,931,633 | 21,480,431 | of dividends | 69,261 | 800,067 | |||||||||||||
Shares redeemed | (14,537,572 | ) | (161,463,957 | ) | Shares redeemed | (1,548,764 | ) | (17,926,518 | ) | |||||||||
Net increase | 24,528,738 | $ | 272,955,844 | Net increase | 1,402,037 | $ | 16,358,011 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 76,724,520 | Beginning of year | 2,276,464 | |||||||||||||||
End of year | 101,253,258 | End of year | 3,678,501 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 22,685,511 | $ | 256,806,194 | Shares sold | 1,360,552 | $ | 16,041,806 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 2,358,925 | 26,615,614 | of dividends | 62,775 | 735,645 | |||||||||||||
Shares redeemed | (11,927,363 | ) | (134,734,403 | ) | Shares redeemed | (430,341 | ) | (5,064,875 | ) | |||||||||
Net increase | 13,117,073 | $ | 148,687,405 | Net increase | 992,986 | $ | 11,712,576 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 63,607,447 | Beginning of year | 1,283,478 | |||||||||||||||
End of year | 76,724,520 | End of year | 2,276,464 |
^ Commencement of operations.
Page 84
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions (cont.) |
Baird Intermediate Municipal Bond Fund
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 26,493,640 | $ | 312,051,832 | Shares sold | 5,238,276 | $ | 63,128,361 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 1,665,529 | 19,521,896 | of dividends | 438,678 | 5,251,221 | |||||||||||||
Shares redeemed | (38,953,053 | ) | (457,319,983 | ) | Shares redeemed | (9,327,884 | ) | (111,810,823 | ) | |||||||||
Net decrease | (10,793,884 | ) | $ | (125,746,255 | ) | Net decrease | (3,650,930 | ) | $ | (43,431,241 | ) | |||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 80,187,075 | Beginning of year | 21,081,580 | |||||||||||||||
End of year | 69,393,191 | End of year | 17,430,650 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 32,138,671 | $ | 386,239,717 | Shares sold | 6,559,069 | $ | 80,425,711 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 1,565,719 | 18,794,190 | of dividends | 440,565 | 5,398,270 | |||||||||||||
Shares redeemed | (23,574,458 | ) | (283,394,100 | ) | Shares redeemed | (7,095,704 | ) | (87,136,866 | ) | |||||||||
Net increase | 10,129,932 | $ | 121,639,807 | Net decrease | (96,070 | ) | $ | (1,312,885 | ) | |||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 70,057,143 | Beginning of year | 21,177,650 | |||||||||||||||
End of year | 80,187,075 | End of year | 21,081,580 | |||||||||||||||
Baird Aggregate Bond Fund | ||||||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 81,532,396 | $ | 864,177,608 | Shares sold | 13,314,778 | $ | 146,699,358 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 3,939,511 | 41,769,235 | of dividends | 291,300 | 3,172,439 | |||||||||||||
Shares redeemed(1) | (62,786,649 | ) | (665,296,456 | ) | Shares redeemed | (4,783,014 | ) | (52,193,930 | ) | |||||||||
Net increase | 22,685,258 | $ | 240,650,387 | Net increase | 8,823,064 | $ | 97,677,867 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 137,267,017 | Beginning of year | 4,406,552 | |||||||||||||||
End of year | 159,952,275 | End of year | 13,229,616 |
(1) | In the fourth quarter of 2013, the Baird Aggregate Bond Fund satisfied a redemption request made by a large shareholder by distributing the Fund’s portfolio securities in kind to the redeeming shareholder. The redemption was effected in accordance with policies and procedures approved by the Board of Directors of the Funds. |
Page 85
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions (cont.) |
Baird Aggregate Bond Fund (cont.)
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 55,801,073 | $ | 610,473,223 | Shares sold | 2,703,995 | $ | 30,492,411 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 6,013,523 | 65,390,126 | of dividends | 158,565 | 1,776,495 | |||||||||||||
Shares redeemed | (63,578,566 | ) | (691,076,338 | ) | Shares redeemed | (842,629 | ) | (9,501,042 | ) | |||||||||
Net decrease | (1,763,970 | ) | $ | (15,212,989 | ) | Net increase | 2,019,931 | $ | 22,767,864 | |||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 139,030,987 | Beginning of year | 2,386,621 | |||||||||||||||
End of year | 137,267,017 | End of year | 4,406,552 | |||||||||||||||
Baird Core Plus Bond Fund | ||||||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 74,068,429 | $ | 816,081,945 | Shares sold | 48,901,785 | $ | 561,114,866 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 4,648,511 | 50,888,369 | of dividends | 2,710,437 | 30,756,030 | |||||||||||||
Shares redeemed | (52,145,086 | ) | (570,782,143 | ) | Shares redeemed | (46,866,443 | ) | (532,393,630 | ) | |||||||||
Net increase | 26,571,854 | $ | 296,188,171 | Net increase | 4,745,779 | $ | 59,477,266 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 139,594,782 | Beginning of year | 88,815,787 | |||||||||||||||
End of year | 166,166,636 | End of year | 93,561,566 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 82,310,272 | $ | 915,687,272 | Shares sold | 72,083,219 | $ | 829,822,504 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 3,481,543 | 38,771,265 | of dividends | 1,975,404 | 22,796,995 | |||||||||||||
Shares redeemed | (17,290,129 | ) | (192,491,925 | ) | Shares redeemed | (14,923,677 | ) | (172,523,499 | ) | |||||||||
Net increase | 68,501,686 | $ | 761,966,612 | Net increase | 59,134,946 | $ | 680,096,000 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 71,093,096 | Beginning of year | 29,680,841 | |||||||||||||||
End of year | 139,594,782 | End of year | 88,815,787 |
Page 86
Notes to the Financial Statements
December 31, 2013
4. | Investment Transactions and Income Tax Information |
During the year ended December 31, 2013, 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 | $ | — | $ | — | $ | — | $ | 17,953,453 | $ | 35,806,720 | ||||||||||
Other | $ | 1,428,771,739 | $ | 711,025,328 | $ | 99,004,503 | $ | 1,008,516,818 | $ | 1,337,747,205 | ||||||||||
Sales: | ||||||||||||||||||||
U.S. Government | $ | — | $ | 39,965 | $ | — | $ | 24,484,836 | $ | 23,235,220 | ||||||||||
Other | $ | 705,499,257 | $ | 455,466,106 | $ | 277,818,513 | $ | 649,800,701 | $ | 941,539,257 |
At December 31, 2013, 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 | $ | 2,212,265,085 | $ | 1,368,699,239 | $ | 945,496,398 | $ | 2,026,445,143 | $ | 3,094,265,952 | ||||||||||
Gross unrealized | ||||||||||||||||||||
appreciation | $ | 13,265,398 | $ | 23,781,743 | $ | 34,838,976 | $ | 40,732,991 | $ | 52,227,554 | ||||||||||
Gross unrealized | ||||||||||||||||||||
depreciation | (8,844,501 | ) | (11,691,355 | ) | (9,337,348 | ) | (40,486,803 | ) | (80,251,380 | ) | ||||||||||
Net unrealized | ||||||||||||||||||||
appreciation | ||||||||||||||||||||
(depreciation) | $ | 4,420,897 | $ | 12,090,388 | $ | 25,501,628 | $ | 246,188 | $ | (28,023,826 | ) | |||||||||
Undistributed | ||||||||||||||||||||
ordinary income | $ | 518,513 | $ | 34,180 | $ | — | $ | 63,323 | $ | 269,644 | ||||||||||
Undistributed | ||||||||||||||||||||
long-term | ||||||||||||||||||||
capital gain | 236,307 | — | — | — | — | |||||||||||||||
Total distributable | ||||||||||||||||||||
earnings | $ | 754,820 | $ | 34,180 | $ | — | $ | 63,323 | $ | 269,644 | ||||||||||
Other accumulated | ||||||||||||||||||||
losses | — | (4,414 | ) | (365,127 | ) | (10,455,273 | ) | (13,152,721 | ) | |||||||||||
Total accumulated | ||||||||||||||||||||
earnings/(losses) | $ | 5,175,717 | $ | 12,120,154 | $ | 25,136,501 | $ | (10,145,762 | ) | $ | (40,906,903 | ) |
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.
Page 87
Notes to the Financial Statements
December 31, 2013
4. | Investment Transactions and Income Tax Information (cont.) |
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 are primarily due to differing treatments for losses deferred due to wash sales, equalization accounting for tax purposes, and non-deductible expenses. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2013, 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 | $ | 1,116,966 | $ | (1,116,966 | ) | $ | — | |||||||
Baird Intermediate Bond Fund | 300,707 | (300,707 | ) | — | ||||||||||
Baird Intermediate Municipal Bond Fund | 10,016 | — | (10,016 | ) | ||||||||||
Baird Aggregate Bond Fund | 4,458,734 | (10,036,684 | ) | 5,577,950 | ||||||||||
Baird Core Plus Bond Fund | 7,711,792 | (7,711,792 | ) | — |
The tax components of dividends paid during the periods shown below were as follows:
Year Ended | Year Ended | |||||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||||||
Income | Capital Gains | Income | Capital Gains | |||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||
Baird Short-Term Bond Fund | $ | 29,397,102 | $ | 3,294,675 | $ | 26,769,714 | $ | 1,477,641 | ||||||||
Baird Intermediate Bond Fund | $ | 25,175,900 | $ | 1,249,485 | $ | 26,323,540 | $ | 6,933,411 | ||||||||
Baird Intermediate Municipal Bond Fund | $ | 209,368 | $ | — | $ | 203,893 | $ | — | ||||||||
Baird Aggregate Bond Fund | $ | 55,824,951 | $ | — | $ | 58,182,598 | $ | 22,175,299 | ||||||||
Baird Core Plus Bond Fund | $ | 84,668,834 | $ | 1,900,391 | $ | 63,215,308 | $ | 2,756,875 |
For the year ended December 31, 2013 and the year ended December 31, 2012, distributions of $29,127,940 and $28,633,639, respectively, from the Baird Intermediate Municipal Bond Fund were tax-exempt.
The Fund designated as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Fund related to net capital gain to zero for the tax year ended December 31, 2013. To the extent necessary to fully distribute such capital gains, the Funds also designate earnings and profits distributed to shareholders on the redemption of shares.
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, 2013, Baird Aggregate Bond Fund elected to defer capital losses occurring between November 1, 2013 and December 31, 2013 in the amount of $4,706,969.
At December 31, 2013, accumulated net realized capital loss carryovers, if any, and the year(s) in which the capital loss carryovers expire were:
Capital Loss | Year of | ||||||||
Carryover | Character | Expiration | |||||||
Baird Intermediate Bond Fund | $ | 4,414 | Short-Term | Indefinitely | |||||
Baird Intermediate Municipal Bond Fund | 365,127 | Short-Term | Indefinitely | ||||||
Baird Aggregate Bond Fund | 5,748,122 | Short-Term | Indefinitely | ||||||
4,707,151 | Long-Term | Indefinitely | |||||||
Baird Core Plus Bond Fund | 8,445,752 | Short-Term | Indefinitely |
To the extent a Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryovers. During the year ended December 31, 2013, the Baird Intermediate Municipal Bond Fund utilized capital loss carryover of $717,460.
Page 88
Notes to the Financial Statements
December 31, 2013
4. | Investment Transactions and Income Tax Information (cont.) |
Under the Regulated Investment Company Modernization Act of 2010, the Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
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 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.
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, 2013, 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 89
Notes to the Financial Statements
December 31, 2013
6. | Securities Lending (cont.) |
As of December 31, 2013, 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 | $ | 199,826,892 | $ | 204,135,634 | ||||||
Baird Intermediate Bond Fund | 222,498,391 | 227,607,522 | ||||||||
Baird Aggregate Bond Fund | 215,120,316 | 220,394,089 | ||||||||
Baird Core Plus Bond Fund | 236,213,040 | 242,177,722 |
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). The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2013.
For most of 2013, the Baird Short-Term Bond Fund, the Baird Intermediate Bond Fund, the Baird Aggregate Bond Fund, and the Baird Core Plus Bond Fund held interests in Atlantic East Funding, LLC (“AEF Interests”), which investment was held by those Funds as a securities lending cash collateral investment overseen by the Funds’ securities lending agent. On December 17, 2013, those Funds assigned their AEF Interests to the parent company of the Funds’ securities lending agent in exchange for consideration equal to the par value of the AEF Interests. The amounts paid to each Fund, and the respective par amounts, are shown in the table below.
Par Value of | ||||||||||
Payment Amount | AEF Interests | |||||||||
Short-Term Bond Fund | $ | 636,361 | $ | 636,361 | ||||||
Intermediate Bond Fund | 1,607,987 | 1,607,987 | ||||||||
Aggregate Bond Fund | 2,207,722 | 2,207,722 | ||||||||
Core Plus Bond Fund | 200,684 | 200,684 | ||||||||
Total Baird Bond Funds | $ | 4,652,754 | $ | 4,652,754 |
The assignment of the AEF Interests did not result in a gain or loss to any of the Funds. The support agreement was terminated in connection with the assignment.
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, 2013 for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund were $161,267, $215,960, $190,280, and $341,596, respectively.
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 2% (weighted average rate of 1.25% for 2013). For the year ended December 31, 2013, the Baird Short-Term Bond Fund and Baird Intermediate Municipal Bond Fund incurred $2 and $855 in interest charges, respectively, on average daily loan balances of $181 and $66,767, respectively. The Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund did not borrow from the LOC during the period.
Page 90
Notes to the Financial Statements
December 31, 2013
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 Short-Term Bond, Baird Intermediate Bond, Baird Intermediate Municipal Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds incurred $13,571, $88,386, $588,292, $271,268 and $2,744,717, respectively, in fees pursuant to the Plan during the year ended December 31, 2013.
9. | Subsequent Event: |
In preparing these financial statements, the Corporation has evaluated events after December 31, 2013. The Baird Ultra Short Bond Fund, a new series of the trust, commenced operations on December 31, 2013. The investment objective of the Baird Ultra Short Bond Fund is to seek current income consistent with preservation of capital. There were no additional subsequent events since December 31, 2013 through the date the financial statements were issued that would require adjustment to or additional disclosure in these financial statements.
Page 91
Report of Independent Registered Public
Accounting Firm
Board of Directors and Shareholders
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 nine funds constituting Baird Funds, Inc.) (collectively the “Funds”), including the summary schedules of investments, as of December 31, 2013 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. We were not engaged to perform an audit of the Funds’ 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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, 2013, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Chicago, Illinois
February 27, 2014
Page 92
Directors & Officers
As of December 31, 2013
G. Frederick Kasten, Jr.
Independent Director and Chairman
Term of Office: Indefinite
Length of Time Served: Since September 2000
Age: 74
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Retired; Chairman, the Advisor (January 2000-December 2005); Chairman and CEO, the Advisor (January 1998-January 2000); President, Chairman and CEO, the Advisor (June 1983-January 1998); President, the Advisor (January 1979-January 1983)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: None
John W. Feldt
Independent Director
Term of Office: Indefinite
Length of Time Served: Since September 2000
Age: 71
c/o University of Wisconsin Foundation
1848 University Avenue
Madison, WI 53726
Principal Occupation(s) During the Past 5 Years: Retired; Senior Vice President-Finance, University of Wisconsin Foundation (1985-2006); Vice President-Finance, University of Wisconsin Foundation (1980-1985); Associate Director, University of Wisconsin Foundation (1967-1980)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Thompson Plumb Funds, Inc., a mutual fund complex (3 portfolios)
Frederick P. Stratton, Jr.
Independent Director
Term of Office: Indefinite
Length of Time Served: Since May 2004
Age: 74
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Retired; Chairman Emeritus, Briggs & Stratton Corporation, a manufacturing company, since 2003; Chairman of the Board, Briggs & Stratton Corporation (2001-2002); Chairman and CEO, Briggs & Stratton Corporation (1986-2001)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Weyco Group, Inc., a men’s footwear distributor
Marlyn J. Spear, CFA
Independent Director
Term of Office: Indefinite
Length of Time Served: Since January 2008
Age: 60
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Investment Officer, Building Trades United Pension Trust Fund, since July 1989; Investment Officer, Northwestern Mutual Financial Network (1988-1989); Assistant Vice-President, Firstar Trust Company (1978-1987); Financial Analyst, Harco Holdings, Inc. (1976-1978)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Management Trustee of AFL-CIO Housing Investment Trust, a mutual fund complex (1 portfolio)
Page 93
Directors & Officers
As of December 31, 2013
Cory L. Nettles*
Interested Director
Term of Office: Indefinite
Length of Time Served: Since January 2008
Age: 43
c/o Generation Growth Capital, Inc.
411 East Wisconsin Avenue, Suite 1710
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, Generation Growth Capital, Inc., a private equity fund, since March 2007; Of Counsel, Quarles & Brady LLP, a law firm, since January 2005; Secretary, Wisconsin Department of Commerce (January 2003 – January 2005)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Weyco Group, Inc., a men’s footwear distributor;
Director of Associated Banc-Corp
Mary Ellen Stanek
President
Term of Office: Re-elected by Board annually
Length of Time Served: Since September 2000
Age: 57
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of the Advisor, since March 2000; Director, Baird Kailash Group, LLC since December 2013
Charles B. Groeschell
Vice President
Term of Office: Re-elected by Board annually
Length of Time Served: Since January 2010
Age: 60
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of the Advisor, since February 2000
Todd S. Nichol
Vice President and Chief Compliance Officer
Term of Office: Re-elected by Board annually
Length of Time Served: Since August 2004
Age: 51
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice President, the Advisor (January 2004-January 2005)
Dominick P. Zarcone
Treasurer
Term of Office: Re-elected by Board annually
Length of Time Served: Since March 2011
Age: 55
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor since February 1995
Charles M. Weber
Secretary
Term of Office: Re-elected by Board annually
Length of Time Served: Since September 2005
Age: 50
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Senior Associate General Counsel, the Advisor, since January 2013; Managing Director, the Advisor since January 2009; Chief Compliance Officer and Secretary, Baird Kailash Group, LLC since July 2013; Associate General Counsel, the Advisor (July 2005-December 2012)
Page 94
Directors & Officers
As of December 31, 2013
Peter J. Hammond
Vice President
Term of Office: Re-elected by Board annually
Length of Time Served: Since August 2012
Age: 50
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years:
Senior Vice President, the Advisor since March 2012; Vice President, Baird Kailash Group, LLC since July 2013; Executive VP and Chief Administrative Officer, UMB Fund Services (September 1996 to March 2012)
Dustin J. Hutter
Assistant Treasurer
Term of Office: Re-elected by Board annually
Length of Time Served: Since February 2011
Age: 37
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Director of Reporting and Analysis, Capital Markets Finance since February 2013; Senior Vice President, the Advisor since January 2011; Treasurer, Baird Kailash Group, LLC since July 2013; First Vice President, the Advisor (January 2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant Controller, the Advisor (January 2006-January 2013)
Andrew D. Ketter
Assistant Secretary
Term of Office: Re-elected by Board annually
Length of Time Served: Since February 2011
Age: 39
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: First Vice President and Associate General Counsel, the Advisor since September 2010; Associate, Quarles & Brady LLP, a law firm (September 2002-August 2010)
* | 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. The Advisor has invested in and may in the future invest in private equity funds managed by Generation Growth Capital, Inc., a company of which Mr. Nettles is affiliated, through its division, Baird Capital. |
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 95
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”), including the Directors who are not “interested persons” of the Corporation within the meaning of the Investment Company Act of 1940 (the “Independent Directors”), met on August 14 and August 21, 2013 to consider the annual renewal of the investment advisory agreement between Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) and the Corporation on behalf of the Baird Intermediate Bond, Aggregate Bond, Intermediate Municipal Bond, Core Plus Bond and Short-Term Bond Funds (collectively, the “Funds”). The Board, including the Independent Directors, approved the investment advisory agreement through a process that concluded at the August 21, 2013 meeting. In connection with its consideration of the investment advisory agreement, the Board reviewed and discussed various information, including the investment advisory agreement, a memorandum provided by legal counsel summarizing the guidelines relevant to the Board’s consideration of the renewal of the investment advisory agreement, information in response to requests from the Board from the Advisor (including the Advisor’s Form ADV, Form BD, annual report and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2013, management fees and expense ratios and other pertinent information. The Board also considered relevant case law.
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 took into account information reviewed periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information and discussions with the Funds’ portfolio managers. 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. In deciding to approve the investment advisory agreement for each Fund, the Board did not identify any single factor as determinative but considered all factors together.
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 Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients. However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements.
The Board considered the Advisor’s disciplined investment decision-making process used for the Funds. The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio transactions, ensuring adherence to the Funds’ investment policies and restrictions, compliance, risk management services, valuation, providing support services to the Board and committees 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 each 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 and
Page 96
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for Baird Fixed Income Funds (cont.)
certain other costs), 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 reviewed a summary of the Advisor’s risk management tools and process. The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the investment advisory agreement.
Investment Performance of the Advisor and the Funds
In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2013 regarding each Fund’s performance in comparison to its benchmark index and its peer group 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 generally trailed its benchmark index, the Board noted that the Fund’s high quality bias and emphasis on intermediate maturity holdings have detracted from relative returns in recent years and referred to the Advisor’s commentary in this regard. The Board noted that the Intermediate Municipal Bond Fund had outperformed its Lipper peer group average over longer time periods. The Board also noted that each of the other 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
Morningstar. 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 Morningstar 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 the extent of the significant additional services provided to the Funds that the Advisor did not provide in the other advisory relationships. Those services included certain administrative services, oversight of the Funds’ other service providers, director support, risk management, regulatory compliance and various other services. The Board also reviewed the subadvisory fee paid to the Advisor under a subadvisory arrangement with an unaffiliated mutual fund, noting that the subadvisory 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 subadvisory fee was 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
Page 97
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for Baird Fixed Income Funds (cont.)
management fee and an administration fee, Investor Class shareholders incurred the same expenses as the Institutional Class shareholders plus a 0.25% 12b-1 fee and the Advisor assumes almost all of the other expenses on behalf of each Fund. The Board noted that for the past fiscal year, the Advisor had incurred 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 discussed a report regarding payments to financial intermediaries with a representative of the Advisor, noting that all fees other than the Rule 12b-1 fee payable by the Investor Class shares of the Funds were paid by the Advisor and that any payments by the Advisor for distribution 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 reviewed the extent to which economies of scale may be realized as the Funds increase in size, noting that the Funds have experienced strong growth in assets over recent years. 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 bears almost 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 Board also considered the Advisor’s commitment to continue to evaluate advisory fee breakpoints in the future. The Directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future.
Benefits Derived from the Relationship with the Funds
The Board considered other benefits to the Advisor from serving as advisor to the Funds (in addition to the advisory fee). The Board considered the administration fees received by the Advisor under the Administration Agreement, noting that historically the Advisor has paid more in Fund expenses under the agreement than it has received in administration fees. The Board noted that the Advisor does not have any soft dollar arrangements in connection with its management of the fixed income Funds. The Board considered that the Advisor’s asset management business may experience some ancillary benefits from its association with the Funds. 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 98
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for the Baird Ultra Short Bond Fund
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”), including the Directors who are not “interested persons” of the Corporation as defined in the Investment Company Act of 1940, as amended (the “Independent Directors”), met on October 14, 2013 to consider the approval of the investment advisory agreement between Robert W. Baird & Co. Incorporated (the “Advisor”) and the Corporation on behalf of the Baird Ultra Short Bond Fund (the “Ultra Short Fund”), a new portfolio of the Corporation.
The Independent Directors met with Fund legal counsel and the President of the Corporation to review and consider the information provided by the Advisor regarding the proposed investment advisory agreement for the Fund. The Board considered, among other factors, the Advisor’s long-term relationship with the Corporation and the services the Advisor provides for other Funds of the Corporation. The Board reviewed and discussed various information, including the investment advisory agreement, a memorandum prepared by legal counsel summarizing the guidelines relevant to the Board’s consideration of the investment advisory agreement with respect to the Fund and the Advisor’s 15(c) response to the request for information from the Directors, including a memorandum from the Advisor and information about the Fund’s investment strategies and principal investments. The Board also reviewed the fee that would be payable by the Fund under the advisory agreement, the proposed fee waiver agreement between the Corporation and the Advisor on behalf of the Fund and comparative fee and expense information provided by an independent third party. The Board also evaluated the advisory agreement in light of the Advisor’s 15(c) response and other information it considered in connection with its annual review of the advisory agreement with respect to the other portfolios of the Corporation on August 21, 2013.
Based on their review, the Directors concluded that it was in the best interests of the Ultra Short Fund to approve the investment advisory agreement. 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. In deciding to approve the investment advisory agreement for the Ultra Short Fund, the Board did not identify any single factor as determinative but considered all factors together.
Nature, Extent and Quality of Services to be Provided to the Fund
The Board analyzed the nature, extent and quality of the services to be provided by the Advisor to the Fund. The Board considered the depth of the Advisor’s personnel and resources, including the experience and credentials of the Fund’s portfolio management team. The Board noted the continuity of management of the Advisor’s portfolio management teams for the other fixed income portfolios of the Corporation. The Board considered the Advisor’s significant role in constructing the Fund’s investment objective and strategy. The Board discussed the Advisor’s responsibilities for monitoring the Fund’s compliance with applicable requirements under the securities laws. The Board further noted that the Advisor, in its capacity as a registered broker-dealer, was proposed to serve as distributor and principal underwriter of shares of the Fund. The Board also considered other services the Advisor would provide the Fund, such as providing compliance support and overseeing the Fund’s other service providers. The Board concluded that the nature, extent and quality of the services to be provided by the Advisor to the Fund were appropriate and that the Fund was likely to benefit from services provided under the investment advisory agreement.
Investment Performance
Because the Fund had not yet commenced operations, the Board did not consider any performance information with respect to the Fund. The Board noted that the Advisor did not manage any other accounts similar to the Ultra Short Fund but considered the strong long-term performance of other fixed income funds managed by the Advisor with longer portfolio durations. The Board concluded that the Fund and its shareholders were likely to benefit from the Advisor’s management.
Page 99
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for the Baird Ultra Short Bond Fund (cont.)
Costs of Services Provided and Profitability
The Board examined the proposed fee and expense information for the Fund, including a comparison of such information to other similarly situated mutual funds as determined by Morningstar. The Board noted that the Fund’s advisory fee for both the Investor and Institutional Class shares was below the industry average and well below the category median and that the Fund’s total expense ratio for both the Institutional Class and the Investor Class, after giving effect to the proposed fee waiver agreement, was not only well below the average and median expense ratio for all mutual funds in the Fund’s Morningstar category but was in the lowest or the second lowest quartile. The Board considered the general financial condition of the Advisor and determined it to be sound. The Board did not consider any information regarding the costs of services to be provided or the profits the Advisor might realize because the Fund had not yet commenced operations. The Board noted that under the terms of the Administration Agreement, the Advisor would pay almost all of the Fund’s expenses other than the advisory fee and, with respect to the Investor Class shares, the Rule 12b-1 fee. In light of all of the information that it received and considered, the Board concluded that the proposed management fee and total expense ratio of the Fund were reasonable.
Economies of Scale and Fee Levels Reflecting Those Economies
Because the Fund had not yet commenced operations, the Board did not consider whether any alternative fee structures, such as breakpoint fees, would be appropriate to reflect any economies of scale that may result from increases in the Fund’s assets.
Benefits to be Derived from the Relationship with the Fund
The Board considered other potential benefits to the Advisor from serving as advisor to the Fund (in addition to the advisory fee). The Board noted that the Advisor would receive fees under the proposed Administration Agreement with the Fund but was also obligated to pay most of the Fund’s expenses under the agreement. The Board considered that the Advisor’s asset management business may experience some ancillary benefits from its association with the Baird Funds. The Board concluded that other benefits that may be realized by the Advisor from its relationship with the Fund 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 approval of the investment advisory agreement was in the best interest of the Ultra Short Fund.
Page 100
Additional Information
Proxy Voting
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
Each Fund’s proxy voting record for the most recent 12-month period ended June 30, if applicable, is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov. The Funds generally do not vote proxies because the securities held in their portfolios, consisting of bonds and other fixed-income securities, are not entitled to vote.
Portfolio Holdings Disclosure
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. The Funds’ Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.
Tax Information
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(c) for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund and Baird Core Plus Bond Fund were 1.58%, 1.91% and 0.02%, respectively.
Page 101
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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.
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, 20th Floor
Chicago, IL 60604
Annual Report –
Baird Funds
December 31, 2013
Baird LargeCap Fund
Baird MidCap Fund
Baird SmallCap Value Fund
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Sign up to receive your Baird Funds’ prospectuses and reports online.
Table of Contents
Letter to Shareholders | 1 |
2013 Economic and Stock Market Commentary | 2 |
Baird LargeCap Fund | 4 |
Baird MidCap Fund | 15 |
Baird SmallCap Value Fund | 25 |
Additional Information on Fund Expenses | 33 |
Statements of Assets and Liabilities | 35 |
Statements of Operations | 36 |
Statements of Changes in Net Assets | 37 |
Financial Highlights | 40 |
Notes to the Financial Statements | 46 |
Report of Independent Registered Public Accounting Firm | 57 |
Directors and Officers | 58 |
Disclosure Regarding the Board of Directors’ Approval of the Investment Advisory Agreement for Baird Equity Funds | 61 |
Additional Information | 68 |
Privacy Notice | A-1 |
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Cautionary Note on Analyses, Opinions and Outlooks: In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events. These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect. These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate. It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds. Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.
Baird Funds
1-866-442-2473
www.bairdfunds.com
February 27, 2014
Dear Shareholder,
Our equity portfolio management team adds long-term value with its quality conscious investment management approach. Equity returns for investors were strong in 2013 following a solid 2012, and we remain pleased with the overall performance of the Funds, notably our Small Cap product, which offered exceptional value-added performance. We are also pleased to enter into a sub-advisory relationship with Baird Kailash Group, LLC (“Baird Kailash”) to manage the Baird LargeCap Fund. The Baird Kailash team is experienced in offering an investment approach based on quantitative and fundamental processes.
We strive to be good stewards of our shareholders’ assets. We employ a risk controlled, bottom-up process to investment decision making and portfolio management. This approach allows us to identify, research and invest based upon strong fundamentals that offer good relative value. We understand that our shareholders rely on us to maintain this consistent approach and focus on risk control to help them achieve their investment objectives through all market cycles.
Our long-term success rests on the trust you have placed in us and we want to thank you for your continued investment in the Baird Funds, which experienced steady inflows during the year and increased total net assets to $9.3 billion at the end of 2013.
On the following pages, we review the equity market in 2013 and the performance and composition of the Baird SmallCap Value, MidCap and LargeCap Funds.
We are privileged to provide you with equity investment management services and appreciate the confidence and trust you have placed in our experienced investment team.
Sincerely,
Mary Ellen Stanek, CFA
President
Baird Funds
Page 1
2013 Economic and Stock Market Commentary
U.S. equity markets responded to solid improvement in the U.S. housing market, modest progress in the labor market, increasing budget certainty in Washington and stability in Europe to notch strong returns during 2013. The broad-based S&P 500 index rose 32.4% for the year, while the Dow Jones Industrial Average advanced 29.3%. Returns were reasonably consistent across the market capitalization spectrum as large cap companies included in the Russell 1000® Growth Index advanced 33.5%, the Russell Midcap Growth® Index increased 35.7%, and the Russell 2000® Value Index increased 34.5% for 2013.
Sector performance within the broad S&P 500 index was positive with financials and consumer discretionary leading the pack as they did last year. Healthcare also performed well given the prospect of stronger utilization and solid merger activity in the bio-pharma space. Industrials demonstrated good strength as manufacturing activity improved during the year, while technology did well given both fundamental strength and merger activity. Energy, which has been supported by increased U.S. activity in the past several years, continued to do well.
As in most years, equity returns were not steady on a quarter-to-quarter basis. First quarter and fourth quarter returns were quite strong, while mid-year returns, while positive, showed more moderation. Strong first quarter returns were fueled by a change from political acrimony and churning stock prices as 2012 ended towards investor relief as we moved past the fiscal cliff and sequestration deadlines coupled with adequate economic conditions in the U.S. and stability in Europe.
While the second quarter started strong, market volatility picked up in the latter part of the quarter as investors struggled to interpret comments made by Fed officials regarding the potential “tapering” of monetary stimulus. The addition of this term to the financial lexicon caused volatility, resulted in a rise in interest rates and put pressure on stocks. Thus the equity markets netted only modest gains for the quarter. As the calendar turned to the third quarter, stocks rallied. Domestic growth remained subdued but positive, international economies showed signs of stabilization and central banks reiterated their accommodative stance.
Strengthening in key economic indicators, a budget agreement in Washington and a roadmap for ending the Federal Reserve policy of Quantitative Easing (QE) provided the backdrop for higher stock prices in the fourth quarter of 2013. While slower than past recoveries, domestic economic growth carries an upward bias, inflation remains subdued, and we believe that interest rates will likely stay low for the foreseeable future – a supportive investment environment for stocks as we move forward.
Economic Outlook
As we turn the calendar to a new year, we expect further improvement in the health of the U.S. domestic economy. The recent announcement by the Federal Reserve, laying out the expected path for reduced QE, indicates to us that U.S. economic footing is more secure. Furthermore, rising levels of employment, improved consumer confidence, low levels of inflation and gains in corporate profits provide a solid investment backdrop for U.S. stocks. We see a mixed bag for the rest of the world. Europe should continue to gain traction, but show minimal growth. China appears to be set on further slowing its growth to manage relatively high inflation and speculation. Emerging markets have been pressured by inflation and we believe will be challenged to grow at prior rates as well.
We do, however, need to be mindful of risks that could upend the market. The elimination of QE represents unchartered territory and there is risk that sharply higher interest rates might challenge the housing market, which has been supportive of GDP growth. Europe’s recovery remains in its infancy and should it falter, investor confidence may wane. Finally, 2014 is an election year for the U.S. House of Representatives and part of the Senate, opening the door for a rather noisy summer and fall, decreasing the odds of productive legislation.
To conclude, we believe the backdrop for further economic and stock market growth is in place. We are more optimistic about the path of economic growth both here and in other parts of the world. We believe the likelihood of further improvement is above average and we have positioned our portfolios accordingly. We are
Page 2
2013 Economic and Stock Market Commentary
keeping a watchful eye on what is getting better and will advise you of those opportunities in the coming quarters. Thank you for your support of Baird Investment Management and Baird Kailash Group.
The S&P 500 Index is an unmanaged, market capitalization weighted index of 500 common stocks widely regarded to be representative of the U.S. market in general. Returns include reinvestment of dividends.
The Dow Jones Industrial Average is a price weighted average of 30 high quality stocks selected for total market value and broad public ownership. A price weighted benchmark results in the stocks with the highest prices contributing the most to the performance of the benchmark. The returns of this index do not include the reinvestment of dividend income.
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.
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.
The Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe and includes Russell 2000® Index companies with lower price-to-book ratios and lower forecasted growth values. This index does not reflect any deduction for fees, expenses or taxes.
A direct investment in an index is not possible.
Page 3
Baird LargeCap Fund
December 31, 2013
Portfolio Managers’ Commentary
For the year ended December 31, 2013, the Baird LargeCap Fund Institutional Class posted an advance of 32.68% (32.34% for the Investor Class), as compared to a return of 33.48% for the Russell 1000® Growth Index, the LargeCap Fund’s primary benchmark during most of 2013. On December 23, 2013, Baird Kailash Group, LLC took over management of the Fund, and the primary benchmark became the S&P 500, which posted a return of 32.39% during 2013.
January 1, 2013 — December 22, 2013
We were pleased with the solid absolute return produced by the Fund, but recognize that results trailed the benchmark. We remained positioned for an economic recovery, which was highlighted by the Fund’s heavier weights in the consumer discretionary, materials and technology sectors.
The most difficult sectors from a relative performance standpoint were healthcare, industrials, technology and materials. The highlight of the year was the relative outperformance of the Fund’s holdings in the energy, consumer staples and financial services sectors as compared to the benchmark.
While the performance of the Fund’s healthcare stocks lagged the corresponding holdings of the benchmark, we were generally pleased with the fundamental results of the majority of companies. However, relative performance in the sector fell short as two of our larger holdings within this sector failed to advance. Producer durables provided middle-of-the-pack returns for the Fund overall, but its sector performance lagged the same sector in its benchmark given the Fund’s lack of exposure to aerospace, which generally performed well.
The Fund’s holdings in the basic materials area lagged during the year, in part due to certain commodity-based businesses performing well, notably at the beginning of the year. Our bias towards higher quality selections can lead to underperformance during commodity improvement.
The technology sector continues to represent the largest weight in the Russell 1000 Growth Index® and remained the Fund’s largest sector weighing as well. The Fund’s performance in this area was hampered by relatively larger exposure to companies with revenues tied to government spending as compared to the benchmark.
Like last year, the Fund’s holdings in the energy sector produced solid outperformance. Drilling activity both onshore and in deep water continued at high levels, supporting equipment manufacturers and service suppliers. Also, a recovery in the price of natural gas benefitted the Fund’s holding in an exploration and development company possessing significant acreage and production in the Marcellus shale formation in the eastern U.S.
The consumer staples sector provided a modest contribution to the Fund’s performance largely due to the Fund’s underweight position in the sector.
Consumer discretionary provided the most strength in the market and in the Fund’s portfolio. This strength had a wide breadth, but notable performance came from larger and more well-established companies that benefited from continued economic recovery, particularly housing. Companies with strong internet exposure also did well. Happily, the Fund was exposed to these types of companies.
Portfolio Managers:
Douglas E. Guffy
Kenneth M. Hemauer, CFA
Page 4
Baird LargeCap Fund
December 31, 2013
December 23, 2013 — December 31, 2013
As Baird Kailash Group took over the Baird LargeCap Fund on December 23, we note a smooth transition in management and trading to the new investment strategy. Some investors might note that the Fund has a large weighting in a SPDR exchange traded fund. We have done this to help reduce portfolio turnover as our portfolio implementation process allows us to stagger the rate at which we transition the investment of the Fund’s assets, giving us an opportunity to reduce any potential friction costs.
Looking forward we struggle with the dichotomy of atypically high levels of market valuation, which contrasts with many of the Fund’s portfolio companies where we see excellent risk-reward characteristics. As stock pickers, we will maintain our discipline and stick with our rigorous process, which drives us to firms with business quality that we believe is not recognized by the market.
Portfolio Manager:
Matt Malgari
Page 5
Baird LargeCap Fund
December 31, 2013
A December 31, 2013 summary of the Fund’s top 10 holdings and equity sector analysis compared to the S&P 500® Index is shown below.
Top 10 Holdings* | Equity Sector Analysis** | ||
SPDR S&P 500 ETF Trust | 31.0% | ||
Alliance Data Systems Corporation | 2.1% | ||
Northrop Grumman Corporation | 2.0% | ||
Raytheon Company | 2.0% | ||
Moody’s Corporation | 1.9% | ||
Seagate Technology | |||
Public Limited Company | 1.8% | ||
DISH Network Corporation | 1.8% | ||
Phillips 66 | 1.7% | ||
Wells Fargo & Company | 1.7% | ||
Marathon Petroleum Corporation | 1.7% | ||
Net Assets: | $28,200,209 | ||
Portfolio Turnover Rate: | 127.7% | ||
Number of Equity Holdings: | 93 | ||
Annualized Portfolio Expense Ratio:*** | |||
Gross | |||
Institutional Class: | 1.35% | ||
Investor Class: | 1.60% | **** | |
Net | |||
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, 2013. | |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2013, and may not add up to 100% due to rounding. | |
*** | Reflects expense ratios as stated in the Fund’s current prospectus. 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, 2015. | |
**** | Includes 0.25% 12b-1 fee. |
Page 6
Baird LargeCap Fund
December 31, 2013
Institutional Class
Value of a $25,000 Investment
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Investor Class
Value of a $10,000 Investment
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Page 7
Baird LargeCap Fund
December 31, 2013
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2013 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 32.68% | 18.82% | 5.74% | 2.40% |
Investor Class Shares | 32.34% | 18.52% | 5.49% | 2.14% |
Russell 1000® Growth Index(2) | 33.48% | 20.39% | 7.83% | 1.66% |
S&P 500® Index(3)(4) | 32.39% | 17.94% | 7.41% | 3.91% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2013. |
(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. |
(3) | The S&P 500® Index has been selected to replace the Russell 1000® Growth Index as the Fund’s primary benchmark because the S&P 500® Index more accurately represents the Fund’s investment strategy once Baird Kailash Group began managing the Fund on December 23, 2013. |
(4) | The S&P 500® Index measures the performance of 500 common stocks chosen for market size, liquidity and industry group representation of U.S. equity performance. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in the index is not possible. |
Effective December 23, 2013, Baird Kailash Group, LLC became the Fund’s subadviser. 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund’s subadviser makes investment decisions for the Fund primarily using quantitative investment models which rank securities based on fundamental measures of value, past performance and indicators of recent positive changes. The success of the quantitative investment methodologies and processes employed by the subadviser depends on the analyses and assessments that were used in developing such methodologies and processes, as well as on the accuracy and reliability of models and data provided by third parties. Incorrect analyses and assessments or inaccurate or incomplete models and data would adversely affect performance. Certain low-probability events or factors that are assigned little weight may occur or prove to be more likely or may have more relevance than expected, for short or extended periods of time. It is also possible that prices of securities may move in directions that were not predicted by the subadviser’s quantitative methodologies. The Fund may invest in stocks (or ADRs representing stocks) of foreign companies that are traded on U.S. exchanges. Foreign investments involve additional risk such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 8
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Common Stocks
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Aerospace & Defense | ||||||||||||
Lockheed Martin Corporation | 435 | $ | 64,667 | 0.2 | % | |||||||
Northrop Grumman Corporation | 4,899 | 561,475 | 2.0 | % | ||||||||
Raytheon Company | 6,123 | 555,356 | 2.0 | % | ||||||||
Rockwell Collins, Inc. | 816 | 60,319 | 0.2 | % | ||||||||
The Boeing Company | 1,470 | 200,640 | 0.7 | % | ||||||||
1,442,457 | 5.1 | % | ||||||||||
Airlines | ||||||||||||
Delta Air Lines, Inc.* | 4,356 | 119,659 | 0.4 | % | ||||||||
Southwest Airlines Co. | 8,305 | 156,466 | 0.6 | % | ||||||||
276,125 | 1.0 | % | ||||||||||
Auto Components | ||||||||||||
Delphi Automotive PLC f | 6,260 | 376,414 | 1.3 | % | ||||||||
TRW Automotive Holdings Corp.* | 791 | 58,842 | 0.2 | % | ||||||||
435,256 | 1.5 | % | ||||||||||
Automobiles | ||||||||||||
Ford Motor Company* | 27,813 | 429,154 | 1.5 | % | ||||||||
General Motors Company* | 1,578 | 64,493 | 0.3 | % | ||||||||
493,647 | 1.8 | % | ||||||||||
Beverages | ||||||||||||
Coca-Cola Enterprises, Inc. | 4,352 | 192,054 | 0.7 | % | ||||||||
PepsiCo, Inc. | 5,444 | 451,525 | 1.6 | % | ||||||||
The Coca-Cola Company | 1,499 | 61,924 | 0.2 | % | ||||||||
705,503 | 2.5 | % | ||||||||||
Biotechnology | ||||||||||||
Amgen Inc. | 3,619 | 413,145 | 1.5 | % | ||||||||
Capital Markets | ||||||||||||
Ameriprise Financial, Inc. | 571 | 65,694 | 0.3 | % | ||||||||
TD Ameritrade Holding Corporation | 2,643 | 80,981 | 0.3 | % | ||||||||
The Goldman Sachs Group, Inc. | 354 | 62,750 | 0.2 | % | ||||||||
UBS AG* f | 3,055 | 58,809 | 0.2 | % | ||||||||
268,234 | 1.0 | % | ||||||||||
Chemicals | ||||||||||||
Celanese Corporation | 1,091 | 60,343 | 0.2 | % | ||||||||
International Flavors & Fragrances Inc. | 681 | 58,553 | 0.2 | % | ||||||||
LyondellBasell Industries N.V. – Class A f | 1,551 | 124,514 | 0.5 | % | ||||||||
Sigma-Aldrich Corporation | 681 | 64,021 | 0.2 | % | ||||||||
W. R. Grace & Co* | 1,253 | 123,884 | 0.4 | % | ||||||||
431,315 | 1.5 | % |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Commercial Banks | ||||||||||||
Huntington Bancshares Incorporated | 33,373 | $ | 322,049 | 1.1 | % | |||||||
KeyCorp | 9,589 | 128,684 | 0.5 | % | ||||||||
Regions Financial Corporation | 17,123 | 169,347 | 0.6 | % | ||||||||
U.S. Bancorp | 3,127 | 126,331 | 0.5 | % | ||||||||
Wells Fargo & Company | 10,807 | 490,638 | 1.7 | % | ||||||||
1,237,049 | 4.4 | % | ||||||||||
Computers & Peripherals | ||||||||||||
NetApp, Inc. | 5,582 | 229,643 | 0.8 | % | ||||||||
SanDisk Corporation* | 899 | 63,415 | 0.2 | % | ||||||||
Seagate Technology Public Limited Company f | 9,061 | 508,866 | 1.8 | % | ||||||||
Western Digital Corporation | 4,355 | 365,385 | 1.3 | % | ||||||||
1,167,309 | 4.1 | % | ||||||||||
Consumer Finance | ||||||||||||
American Express Company | 4,432 | 402,115 | 1.4 | % | ||||||||
Discover Financial Services | 8,003 | 447,768 | 1.6 | % | ||||||||
849,883 | 3.0 | % | ||||||||||
Containers & Packaging | ||||||||||||
Ball Corporation | 2,389 | 123,416 | 0.4 | % | ||||||||
Diversified Consumer Services | ||||||||||||
H&R Block, Inc. | 9,414 | 273,383 | 1.0 | % | ||||||||
Diversified Financial Services | ||||||||||||
J.P. Morgan Chase & Co. | 2,013 | 117,720 | 0.4 | % | ||||||||
McGraw Hill Financial, Inc. | 844 | 66,001 | 0.2 | % | ||||||||
Moody’s Corporation | 6,695 | 525,357 | 1.9 | % | ||||||||
709,078 | 2.5 | % | ||||||||||
Electrical Equipment | ||||||||||||
Rockwell Automation, Inc. | 1,252 | 147,936 | 0.5 | % | ||||||||
Energy Equipment & Services | ||||||||||||
Seadrill Limited f | 1,222 | 50,200 | 0.2 | % | ||||||||
Food Products | ||||||||||||
Archer-Daniels-Midland Company | 1,517 | 65,838 | 0.2 | % | ||||||||
Campbell Soup Company | 7,459 | 322,826 | 1.2 | % | ||||||||
General Mills, Inc. | 1,117 | 55,749 | 0.2 | % | ||||||||
444,413 | 1.6 | % | ||||||||||
Health Care Equipment & Supplies | ||||||||||||
Abbott Laboratories | 2,990 | 114,607 | 0.4 | % | ||||||||
Baxter International Inc. | 737 | 51,258 | 0.2 | % | ||||||||
Becton, Dickson and Company | 2,174 | 240,205 | 0.9 | % | ||||||||
C.R. Bard, Inc. | 1,931 | 258,638 | 0.9 | % |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Health Care Equipment & Supplies (cont.) | ||||||||||||
Edwards Lifesciences Corporation* | 925 | $ | 60,828 | 0.2 | % | |||||||
Medtronic, Inc. | 6,261 | 359,319 | 1.3 | % | ||||||||
St. Jude Medical, Inc. | 7,704 | 477,263 | 1.7 | % | ||||||||
Varian Medical Systems, Inc.* | 789 | 61,297 | 0.2 | % | ||||||||
1,623,415 | 5.8 | % | ||||||||||
Health Care Providers & Services | ||||||||||||
AmerisourceBergen Corporation | 3,836 | 269,709 | 1.0 | % | ||||||||
Household Products | ||||||||||||
Energizer Holdings, Inc. | 544 | 58,883 | 0.2 | % | ||||||||
Kimberly-Clark Corporation | 2,314 | 241,720 | 0.9 | % | ||||||||
The Clorox Company | 2,585 | 239,785 | 0.8 | % | ||||||||
540,388 | 1.9 | % | ||||||||||
Independent Power Producers & Energy Traders | ||||||||||||
The AES Corporation | 12,707 | 184,379 | 0.7 | % | ||||||||
Insurance | ||||||||||||
Aflac, Inc. | 927 | 61,923 | 0.2 | % | ||||||||
Principal Financial Group, Inc. | 2,857 | 140,879 | 0.5 | % | ||||||||
Prudential Financial, Inc. | 735 | 67,782 | 0.2 | % | ||||||||
Unum Group | 5,501 | 192,975 | 0.7 | % | ||||||||
463,559 | 1.6 | % | ||||||||||
IT Services | ||||||||||||
Alliance Data Systems Corporation* | 2,232 | 586,860 | 2.1 | % | ||||||||
The Western Union Company | 19,517 | 336,668 | 1.2 | % | ||||||||
923,528 | 3.3 | % | ||||||||||
Leisure Equipment & Products | ||||||||||||
Hasbro, Inc. | 1,143 | 62,876 | 0.2 | % | ||||||||
Life Sciences Tools & Services | ||||||||||||
Agilent Technologies, Inc. | 1,170 | 66,912 | 0.2 | % | ||||||||
Media | ||||||||||||
DISH Network Corporation – Class A* | 8,762 | 507,495 | 1.8 | % | ||||||||
Time Warner Cable Inc. | 3,103 | 420,457 | 1.5 | % | ||||||||
Viacom Inc. – Class B | 762 | 66,553 | 0.2 | % | ||||||||
994,505 | 3.5 | % | ||||||||||
Multiline Retail | ||||||||||||
Macys, Inc. | 1,116 | 59,594 | 0.2 | % | ||||||||
Nordstrom, Inc. | 2,911 | 179,900 | 0.6 | % | ||||||||
239,494 | 0.8 | % |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Multi-Utilities | ||||||||||||
CenterPoint Energy, Inc. | 4,594 | $ | 106,489 | 0.4 | % | |||||||
CMS Energy Corporation | 2,014 | 53,915 | 0.2 | % | ||||||||
160,404 | 0.6 | % | ||||||||||
Oil, Gas & Consumable Fuels | ||||||||||||
Denbury Resources Inc.* | 2,892 | 47,516 | 0.2 | % | ||||||||
Marathon Petroleum Corporation | 5,306 | 486,719 | 1.7 | % | ||||||||
Phillips 66 | 6,370 | 491,318 | 1.7 | % | ||||||||
Tesoro Corporation | 3,863 | 225,985 | 0.8 | % | ||||||||
Valero Energy Corporation | 1,414 | 71,266 | 0.3 | % | ||||||||
Whiting Petroleum Corporation* | 1,905 | 117,862 | 0.4 | % | ||||||||
1,440,666 | 5.1 | % | ||||||||||
Personal Products | ||||||||||||
Herbalife Ltd. f | 2,558 | 201,314 | 0.7 | % | ||||||||
Nu Skin Enterprises, Inc. – Class A | 490 | 67,728 | 0.3 | % | ||||||||
269,042 | 1.0 | % | ||||||||||
Pharmaceuticals | ||||||||||||
AbbVie Inc. | 2,476 | 130,758 | 0.5 | % | ||||||||
Road & Rail | ||||||||||||
Hertz Global Holdings, Inc.* | 11,182 | 320,029 | 1.1 | % | ||||||||
Semiconductors & Semiconductor Equipment | ||||||||||||
Intel Corporation | 11,998 | 311,468 | 1.1 | % | ||||||||
Linear Technology Corporation | 1,444 | 65,774 | 0.2 | % | ||||||||
NVIDIA Corporation | 7,512 | 120,342 | 0.4 | % | ||||||||
Texas Instruments Incorporated | 1,439 | 63,187 | 0.2 | % | ||||||||
560,771 | 1.9 | % | ||||||||||
Software | ||||||||||||
Check Point Software Technologies Ltd.* f | 3,102 | 200,141 | 0.7 | % | ||||||||
Microsoft Corporation | 5,034 | 188,422 | 0.7 | % | ||||||||
Oracle Corporation | 5,064 | 193,749 | 0.7 | % | ||||||||
Symantec Corporation | 2,446 | 57,677 | 0.2 | % | ||||||||
639,989 | 2.3 | % | ||||||||||
Thrifts & Mortgage Finance | ||||||||||||
New York Community Bancorp, Inc. | 3,707 | 62,463 | 0.2 | % | ||||||||
Tobacco | ||||||||||||
Reynolds American, Inc. | 1,146 | 57,288 | 0.2 | % | ||||||||
Total Common Stocks | ||||||||||||
(Cost $18,063,415) | 18,478,524 | 65.5 | % |
The accompanying notes are an integral part of these financial statements.
Page 12
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Exchange Traded Funds
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
SPDR S&P 500 ETF Trust | 47,382 | $ | 8,750,034 | 31.0 | % | |||||||
Total Exchange Traded Funds | ||||||||||||
(Cost $8,641,998) | 8,750,034 | 31.0 | % | |||||||||
Short-Term Investments | ||||||||||||
Money Market Mutual Funds | ||||||||||||
Dreyfus Institutional Cash Advantage Fund, 0.06%« | 259,566 | 259,566 | 0.9 | % | ||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 500,000 | 500,000 | 1.8 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $759,566) | 759,566 | 2.7 | % | |||||||||
Total Investments | ||||||||||||
(Cost $27,464,979) | 27,988,124 | 99.2 | % | |||||||||
Other Assets in Excess of Liabilities | 212,085 | 0.8 | % | |||||||||
TOTAL NET ASSETS | $ | 28,200,209 | 100.0 | % |
Notes to Schedule of Investments
* | Non-Income Producing | |
f | Foreign Security | |
« | 7-Day Yield |
Industry classifications shown in the Schedule of Investments are based off of 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 13
Baird LargeCap Fund
Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013
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. 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, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 18,478,524 | $ | — | $ | — | $ | 18,478,524 | ||||||||
Total Equity | 18,478,524 | — | — | 18,478,524 | ||||||||||||
Exchange Traded Funds | 8,750,034 | — | — | 8,750,034 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 759,566 | — | — | 759,566 | ||||||||||||
Total Short-Term Investments | 759,566 | — | — | 759,566 | ||||||||||||
Total Investments* | $ | 27,988,124 | $ | — | $ | — | $ | 27,988,124 |
* | 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 assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
Page 14
Baird MidCap Fund
December 31, 2013
Portfolio Managers’ Commentary
For the year ended December 31, 2013, the Baird MidCap Fund Institutional Class posted a total return of 32.90% (32.62% for the Investor Class), as compared with a gain of 35.74% for the Russell MidCap® Growth Index, the MidCap Fund’s primary benchmark.
As we review performance for the year, we note strength in multiple sectors, including healthcare, energy, financials, and materials. However, there was little room for error in such a strong market advance, and relative weakness in the Fund’s holdings in the technology, consumer, and producer durable sectors left the Fund pacing behind the benchmark.
The Fund’s sector weights remained relatively balanced compared to its benchmark during 2013, a continuation of our approach in recent years. However, we did maintain a modest pro-cyclical stance within economically-sensitive sectors. This positioning was based on continued U.S. economic growth, supported by the positive trend in U.S. employment, gains in industrial production, a healthier housing market and low levels of inflation.
The Fund’s holdings in the energy sector provided the Fund’s strong relative performance. Domestic exploration and drilling activity continued at favorable levels, supporting equipment manufacturers and service suppliers. Additionally, a recovery in the price of natural gas benefitted the Fund’s holdings in two exploration and development companies possessing significant acreage and production in key shale formations in the U.S.
The Fund’s healthcare stocks experienced fairly broad strength, which in our view reflects the benefits of diversification and good stock picking across the sector. We expect the healthcare sector to experience continued uncertainty, as confusion and execution challenges surround the Affordable Care Act (ACA) legislation, which we believe will suppress broad-based growth. Our strategy has been focused on identifying investment opportunities in companies that assist in reducing healthcare costs or have been aided in some way by the ACA legislation.
In the consumer staples sector, the performance of the Fund’s holdings fell short of corresponding benchmark sector returns. We were somewhat surprised all year that returns from the staples sector kept pace with the strong market advance. Many companies within the sector displayed meaningful price-earnings multiple expansion, which exceeded the performance of holdings in the Fund.
The overall consumer discretionary sector continued to outpace the market. While many of the Fund’s holdings, including retailers and auto parts manufacturers, delivered very strong performance, the Fund’s holdings in that sector lagged on a relative performance basis. The sector has been fertile ground for stock picking since the market bottom in 2009 and the backdrop for spending remains relatively favorable due to improved employment and the positive wealth effect from higher home and stock prices.
The Fund’s financial services holdings generated positive relative performance during the year. Strong equity market returns provided a favorable backdrop for the Fund’s holdings in asset managers. Continued employment growth and improving credit trends assisted the Fund’s holdings exposed to banking and consumer credit.
The Fund’s holdings in the basic materials sector made a positive contribution to relative performance. In our opinion this performance reflects holding companies with end market exposure tilted toward industrial and construction activity. We tend to avoid pure commodity-oriented business models, as those earnings patterns are often more volatile, making them, in our view, more appropriate for a shorter term investment horizon versus our preference for longer term investment prospects.
The Fund’s technology holdings overall lagged the corresponding benchmark sector in 2013. The Fund’s holdings were adversely impacted by the combination of the fiscal cliff, sequestration, and the federal government shutdown in 2013, which upended tech spending for much of the year and impacted spending and earnings visibility in several areas.
Page 15
Baird MidCap Fund
December 31, 2013
We believe the Fund is positioned to benefit from positive economic growth in the U.S. with an eye to improvement in established markets overseas. The investment process underlying the MidCap Fund remains focused on identifying high-quality companies that deliver attractive returns and above average growth relative to peers. Seeking to control risk at the sector and position level is also a priority of our process, with the goal of providing lower volatility of returns for the Fund compared to its benchmark index.
Portfolio Managers:
Charles F. Severson
Kenneth M. Hemauer
Page 16
Baird MidCap Fund
December 31, 2013
A December 31, 2013 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** | ||
Affiliated Managers Group, Inc. | 2.6% | ||
Illumina, Inc. | 2.6% | ||
PVH Corp. | 2.5% | ||
Greenhill & Co., Inc. | 2.4% | ||
Church & Dwight Co., Inc. | 2.3% | ||
Stericycle, Inc. | 2.3% | ||
Fortune Brands Home & Security, Inc. | 2.2% | ||
Alliance Data Systems Corporation | 2.2% | ||
McCormick & Co, Incorporated | 2.1% | ||
East West Bancorp, Inc. | 2.1% | ||
Net Assets: | $429,152,612 | ||
Portfolio Turnover Rate: | 36.3% | ||
Number of Equity Holdings: | 59 | ||
Annualized Portfolio Expense Ratio:*** | |||
Gross | |||
Institutional Class: | 0.98% | ||
Investor Class: | 1.23% | **** | |
Net | |||
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, 2013. | |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2013, and may not add up to 100% due to rounding. | |
*** | Reflects expense ratios as stated in the Fund’s current prospectus. 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, 2015. | |
**** | Includes 0.25% 12b-1 fee. |
Page 17
Baird MidCap Fund
December 31, 2013
Institutional Class
Value of a $25,000 Investment
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.
Investor Class
Value of a $10,000 Investment
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.
Page 18
Baird MidCap Fund
December 31, 2013
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2013 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 32.90% | 23.87% | 9.78% | 7.21% |
Investor Class Shares | 32.62% | 23.58% | 9.53% | 6.96% |
Russell MidCap® Growth Index(2) | 35.74% | 23.37% | 9.77% | 5.66% |
(1) | For the period from December 29, 2000 (commencement of operations) through December 31, 2013. |
(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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund focuses on growth-style stocks and therefore the performance of the Fund will typically be more volatile than the performance of funds that focus on types of stocks that have a broader investment style. The Fund may invest up to 15% of its total assets in U.S. dollar denominated foreign securities and ADRs. Foreign investments involve additional risks such as currency rate fluctuations, political and economic instability, and different and sometimes less strict financial reporting standards and regulation. The Fund invests a substantial portion of its assets in the stocks of mid-capitalization companies. Mid-capitalization companies often are more volatile and face greater risks than larger, more established companies.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 19
Baird MidCap Fund
Schedule of Investments, December 31, 2013
Common Stocks
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Biotechnology | ||||||||||||
Alexion Pharmaceuticals, Inc.* | 58,938 | $ | 7,842,290 | 1.8 | % | |||||||
Building Products | ||||||||||||
Fortune Brands Home & Security, Inc. | 206,501 | 9,437,096 | 2.2 | % | ||||||||
Capital Markets | ||||||||||||
Affiliated Managers Group, Inc.* | 52,345 | 11,352,584 | 2.6 | % | ||||||||
Greenhill & Co., Inc. | 176,244 | 10,211,577 | 2.4 | % | ||||||||
Invesco Limited f | 154,584 | 5,626,858 | 1.3 | % | ||||||||
27,191,019 | 6.3 | % | ||||||||||
Chemicals | ||||||||||||
Airgas, Inc. | 51,665 | 5,778,730 | 1.4 | % | ||||||||
Commercial Banks | ||||||||||||
East West Bancorp, Inc. | 259,694 | 9,081,499 | 2.1 | % | ||||||||
Commercial Services & Supplies | ||||||||||||
Stericycle, Inc.* | 83,762 | 9,730,632 | 2.3 | % | ||||||||
Construction & Engineering | ||||||||||||
Fluor Corporation | 85,904 | 6,897,232 | 1.6 | % | ||||||||
Containers & Packaging | ||||||||||||
AptarGroup, Inc. | 97,102 | 6,584,487 | 1.5 | % | ||||||||
Distributors | ||||||||||||
LKQ Corporation* | 253,016 | 8,324,226 | 1.9 | % | ||||||||
Electrical Equipment | ||||||||||||
Acuity Brands, Inc. | 77,231 | 8,442,893 | 2.0 | % | ||||||||
Regal-Beloit Corporation | 43,769 | 3,226,651 | 0.8 | % | ||||||||
Rockwell Automation, Inc. | 75,812 | 8,957,946 | 2.1 | % | ||||||||
Roper Industries, Inc. | 46,428 | 6,438,635 | 1.5 | % | ||||||||
27,066,125 | 6.4 | % | ||||||||||
Electronic Equipment, Instruments & Components | ||||||||||||
Trimble Navigation Limited* | 244,972 | 8,500,528 | 2.0 | % | ||||||||
Energy Equipment & Services | ||||||||||||
Core Laboratories N.V. f | 21,632 | 4,130,630 | 1.0 | % | ||||||||
Oceaneering International, Inc.* | 93,209 | 7,352,326 | 1.7 | % | ||||||||
11,482,956 | 2.7 | % | ||||||||||
Food & Staples Retailing | ||||||||||||
The Fresh Market, Inc.* | 157,296 | 6,370,488 | 1.5 | % | ||||||||
Food Products | ||||||||||||
McCormick & Co, Incorporated | 131,785 | 9,082,622 | 2.1 | % | ||||||||
Health Care Equipment & Supplies | ||||||||||||
Edwards Lifesciences Corporation* | 36,974 | 2,431,410 | 0.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird MidCap Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Health Care Providers & Services | ||||||||||||
Acadia Healthcare Company, Inc.* | 164,546 | $ | 7,787,962 | 1.8 | % | |||||||
Catamaran Corporation*f | 129,940 | 6,169,551 | 1.5 | % | ||||||||
13,957,513 | 3.3 | % | ||||||||||
Health Care Technology | ||||||||||||
Cerner Corporation* | 71,362 | 3,977,718 | 0.9 | % | ||||||||
Hotels Restaurants & Leisure | ||||||||||||
Buffalo Wild Wings Inc.* | 25,838 | 3,803,354 | 0.9 | % | ||||||||
InterContinental Hotels Group PLC f | 44,664 | 1,493,117 | 0.3 | % | ||||||||
5,296,471 | 1.2 | % | ||||||||||
Household Products | ||||||||||||
Church & Dwight Co., Inc. | 147,080 | 9,748,462 | 2.3 | % | ||||||||
IT Services | ||||||||||||
Alliance Data Systems Corporation* | 35,599 | 9,360,045 | 2.2 | % | ||||||||
Teradata Corporation* | 112,235 | 5,105,570 | 1.2 | % | ||||||||
14,465,615 | 3.4 | % | ||||||||||
Leisure Equipment & Products | ||||||||||||
Polaris Industries Inc. | 38,646 | 5,628,404 | 1.2 | % | ||||||||
Life Sciences Tools & Services | ||||||||||||
ICON Public Limited Company*f | 215,004 | 8,688,311 | 2.0 | % | ||||||||
Illumina, Inc.* | 100,214 | 11,085,673 | 2.6 | % | ||||||||
19,773,984 | 4.6 | % | ||||||||||
Machinery | ||||||||||||
Actuant Corporation – Class A | 184,238 | 6,750,480 | 1.6 | % | ||||||||
The Middleby Corporation* | 18,897 | 4,534,713 | 1.0 | % | ||||||||
WABCO Holdings Inc. | 87,238 | 8,148,902 | 1.9 | % | ||||||||
19,434,095 | 4.5 | % | ||||||||||
Multiline Retail | ||||||||||||
Dollar Tree, Inc.* | 147,415 | 8,317,154 | 1.9 | % | ||||||||
Oil, Gas & Consumable Fuels | ||||||||||||
Southwestern Energy Company* | 209,451 | 8,237,708 | 1.9 | % | ||||||||
Whiting Petroleum Corporation* | 136,597 | 8,451,256 | 2.0 | % | ||||||||
16,688,964 | 3.9 | % | ||||||||||
Pharmaceuticals | ||||||||||||
Perrigo Company PLC f | 47,161 | 7,237,327 | 1.7 | % | ||||||||
Professional Services | ||||||||||||
Manpower Inc. | 98,192 | 8,430,765 | 2.0 | % | ||||||||
Road & Rail | ||||||||||||
J.B. Hunt Transport Services, Inc. | 112,502 | 8,696,405 | 2.0 | % |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird MidCap Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Semiconductors & Semiconductor Equipment | ||||||||||||
Altera Corporation | 139,701 | $ | 4,544,474 | 1.1 | % | |||||||
Microchip Technology Incorporated | 94,311 | 4,220,417 | 1.0 | % | ||||||||
Skyworks Solutions, Inc.* | 200,864 | 5,736,676 | 1.3 | % | ||||||||
14,501,567 | 3.4 | % | ||||||||||
Software | ||||||||||||
ANSYS, Inc.* | 93,301 | 8,135,847 | 1.9 | % | ||||||||
Citrix Systems, Inc.* | 84,655 | 5,354,429 | 1.2 | % | ||||||||
Concur Technologies, Inc.* | 72,863 | 7,518,004 | 1.8 | % | ||||||||
Fortinet, Inc.* | 180,903 | 3,460,675 | 0.8 | % | ||||||||
The Ultimate Software Group, Inc.* | 28,539 | 4,372,746 | 1.0 | % | ||||||||
Qlik Technologies Inc.* | 125,099 | 3,331,386 | 0.8 | % | ||||||||
32,173,087 | 7.5 | % | ||||||||||
Specialty Retail | ||||||||||||
Dick’s Sporting Goods, Inc. | 152,342 | 8,851,070 | 2.1 | % | ||||||||
O’Reilly Automotive, Inc.* | 68,353 | 8,797,715 | 2.1 | % | ||||||||
Tiffany & Co. | 75,460 | 7,001,179 | 1.6 | % | ||||||||
Tractor Supply Company* | 85,592 | 6,640,227 | 1.5 | % | ||||||||
Urban Outfitters, Inc.* | 171,086 | 6,347,291 | 1.5 | % | ||||||||
37,637,482 | 8.8 | % | ||||||||||
Textiles, Apparel & Luxury Goods | ||||||||||||
PVH Corp. | 80,229 | 10,912,749 | 2.5 | % | ||||||||
Under Armour, Inc. – Class A* | 97,518 | 8,513,321 | 2.0 | % | ||||||||
19,426,070 | 4.5 | % | ||||||||||
Trading Companies & Distributors | ||||||||||||
Fastenal Company | 122,538 | 5,821,780 | 1.4 | % | ||||||||
Watsco, Inc. | 64,547 | 6,200,385 | 1.4 | % | ||||||||
12,022,165 | 2.8 | % | ||||||||||
Total Common Stocks | ||||||||||||
(Cost $316,292,556) | 413,214,588 | 96.3 | % |
The accompanying notes are an integral part of these financial statements.
Page 22
Baird MidCap Fund
Schedule of Investments, December 31, 2013
Short-Term Investments
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Money Market Mutual Funds | ||||||||||||
Dreyfus Institutional Cash Advantage Fund, 0.06%« | 7,210,072 | $ | 7,210,072 | 1.7 | % | |||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 8,000,000 | 8,000,000 | 1.8 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $15,210,072) | 15,210,072 | 3.5 | % | |||||||||
Total Investments | ||||||||||||
(Cost $331,502,628) | 428,424,660 | 99.8 | % | |||||||||
Other Assets in Excess of Liabilities | 727,952 | 0.2 | % | |||||||||
TOTAL NET ASSETS | $ | 429,152,612 | 100.0 | % |
Notes to Schedule of Investments
* | Non-Income Producing | |
f | Foreign Security | |
« | 7-Day Yield |
Industry classifications shown in the Schedule of Investments are based off of 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 23
Baird MidCap Fund
Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013
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. 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, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 413,214,588 | $ | — | $ | — | $ | 413,214,588 | ||||||||
Total Equity | 413,214,588 | — | — | 413,214,588 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 15,210,072 | — | — | 15,210,072 | ||||||||||||
Total Short-Term Investments | 15,210,072 | — | — | 15,210,072 | ||||||||||||
Total Investments* | $ | 428,424,660 | $ | — | $ | — | $ | 428,424,660 |
* | 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 assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
Page 24
Baird SmallCap Value Fund
December 31, 2013
Portfolio Manager’s Commentary
For the year ended December 31, 2013, the Baird SmallCap Value Fund Institutional Class posted a total return of 39.85% (39.58% for the Investor Class), as compared to a gain of 34.52% for the Russell 2000 Value Index, the SmallCap Value Fund’s primary benchmark.
As we reflect on what worked last year, we note that strong security selection was the primary determinant of outperformance. We witnessed our investment theses bear out for many of the Fund’s individual holdings, which posted better than anticipated profits, leading to upwards earnings revisions and the ultimate reward of market revaluation. All economic sectors in which the Fund was invested posted positive absolute returns for the year, with the strongest performance coming from the Fund’s information technology, consumer discretionary and industrial sector holdings. On a relative contribution basis, the financial services sector also added meaningfully to performance. The healthcare and consumer staples sectors were relative detractors, although only by a small margin.
Throughout the year, the Fund held a meaningful overweight in consumer discretionary stocks, which on average outpaced the returns of both the corresponding benchmark sector and the Fund overall. Our strategic focus on companies which operate primarily domestically helped to avoid the earnings disappointment experienced last year by many retailers with large foreign exposure. Two long-time positions, Hanesbrands and Jarden Corp, moved sharply higher as earnings growth accelerated from both margin improvement and accretive acquisitions. Conn’s Stores, a new position added to the Fund early in the year, saw its stock shoot higher as the benefit of store mix shift and organic growth pushed earnings higher.
The Fund benefited from our strategic repositioning of its financial sector holdings. Mortgage real estate investment trusts and alternative credit providers (companies that tend to do well in periods of falling interest rates and deteriorating credit trends) were sold in favor of companies that stand to benefit from an anticipated rise in interest rates and an improving credit environment. Two of the Fund’s positions, American Safety Insurance and Lender Processing Services, were also bought out at nice premiums to where their stocks were trading at the time.
Although underweight in information technology, the performance of the Fund’s holdings in the sector more than doubled during the year with all three positions posting strong absolute gains. It also should not go unmentioned that our aversion to materials stocks, predicated in our weak outlook for the Euro Area and China, was a benefit to the Fund. The materials sector was the worst-performing economic sector in the Russell 2000 Value Index in 2013 and the Fund had no exposure to that sector during the year.
Despite posting a very solid absolute return, the Fund’s healthcare position lagged the benchmark primarily due to a failed merger and earnings disappointment for ICU Medical. We took the opportunity to add to the Fund’s ICU Medical holding on weakness. Finally, the Fund’s lack of exposure in the consumer staples space for most of the year was a small detractor from relative performance. The Fund finished the year, however, with a new position in Pinnacle Foods, bringing the Fund’s sector exposure roughly in line with the benchmark weight.
As we look to 2014, we note that our outlook for an acceleration in domestic economic growth and an upward bias to interest rates provide a backdrop that has historically been favorable for small capitalization stocks. Further, valuations for the stocks in which the Fund is invested appear attractive relative to their expected growth rates. As always, we will seek to mitigate risk by maintaining a well-diversified portfolio of businesses, which we project can exceed growth expectations and which trade at compelling valuations. This strategy, we believe, when applied with discipline, yields attractive long-term returns for investors.
Portfolio Manager:
Michelle Stevens
Page 25
Baird SmallCap Value Fund
December 31, 2013
A December 31, 2013 summary of the Fund’s top 10 holdings and equity sector analysis compared to the Russell 2000® Value Index is shown below.
Top 10 Holdings* | Equity Sector Analysis** | ||
Hanesbrands, Inc. | 4.0% | ||
Conn’s Inc. | 3.9% | ||
Jarden Corporation | 3.5% | ||
Portfolio Recovery Associates, Inc. | 3.5% | ||
Generac Holdings Inc. | 3.4% | ||
Bofi Holding, Inc. | 3.1% | ||
Universal Truckload Services, Inc. | 3.1% | ||
Encore Capital Group, Inc. | 3.0% | ||
Hexcel Corporation | 3.0% | ||
Hilltop Holdings, Inc. | 3.0% | ||
Net Assets: | $20,115,977 | ||
Portfolio Turnover Rate: | 36.9% | ||
Number of Equity Holdings: | 44 | ||
Annualized Portfolio Expense Ratio:*** | |||
Gross | |||
Institutional Class: | 3.07% | ||
Investor Class: | 3.32% | **** | |
Net | |||
Institutional Class: | 1.00% | ||
Investor Class: | 1.25% | **** |
* | 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, 2013. | |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2013, and may not add up to 100% due to rounding. | |
*** | Reflects expense ratios as stated in the Fund’s current prospectus. The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 1.00% of average daily net assets for the Institutional Class shares and 1.25% of average daily net assets for the Investor Class shares, at least through April 30, 2015. | |
**** | Includes 0.25% 12b-1 fee. |
Page 26
Baird SmallCap Value Fund
December 31, 2013
Institutional Class
Value of a $25,000 Investment
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (5/1/12), 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 (5/1/12), assuming reinvestment of all distributions.
Page 27
Baird SmallCap Value Fund
December 31, 2013
Average Annual Total Returns
Since | ||
For the Periods Ended December 31, 2013 | One Year | Inception(1) |
Institutional Class Shares | 39.85% | 24.79% |
Investor Class Shares | 39.58% | 24.49% |
Russell 2000® Value Index(2) | 34.52% | 24.59% |
(1) | For the period from May 1, 2012 (commencement of operations) through December 31, 2013. |
(2) | The Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000® Index companies with lower price-to-book ratios and lower 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 the 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. The returns reflect the actual performance for each period and do not include the impact of trades executed on the last business day of the period that were recorded on the first business day of the next period.
The gross expense ratio for each Class, as reflected in the Fund’s current prospectus, is set forth under “Portfolio Characteristics”.
The Fund focuses on small cap value style stocks and therefore the performance of the Fund may be more volatile than the performance of funds that focus on types of stocks that have a broader investment style. The Fund may invest up to 15% of its total assets in U.S. dollar denominated foreign securities and ADRs. Foreign investments involve additional risks such as currency rate fluctuations and the potential for political and economic instability, and different and sometimes less strict financial reporting standards and regulation.
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 28
Baird SmallCap Value Fund
Schedule of Investments, December 31, 2013
Common Stocks
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Aerospace & Defense | ||||||||||||
Hexcel Corporation* | 13,511 | $ | 603,807 | 3.0 | % | |||||||
Auto Components | ||||||||||||
Motorcar Parts of America, Inc.* | 28,196 | 544,183 | 2.7 | % | ||||||||
Capital Markets | ||||||||||||
Diamond Hill Investment Group, Inc. | 4,245 | 502,353 | 2.5 | % | ||||||||
Construction & Engineering | ||||||||||||
MasTec, Inc.* | 13,891 | 454,513 | 2.3 | % | ||||||||
Quanta Services, Inc.* | 14,289 | 450,961 | 2.2 | % | ||||||||
905,474 | 4.5 | % | ||||||||||
Consumer Finance | ||||||||||||
Encore Capital Group, Inc.* | 12,146 | 610,458 | 3.1 | % | ||||||||
EZCORP, Inc.* | 13,849 | 161,895 | 0.8 | % | ||||||||
Portfolio Recovery Associates, Inc.* | 13,441 | 710,222 | 3.5 | % | ||||||||
1,482,575 | 7.4 | % | ||||||||||
Diversified Consumer Services | ||||||||||||
Steiner Leisure Limited*f | 7,611 | 374,385 | 1.9 | % | ||||||||
Diversified Telecommunication Services | ||||||||||||
Windstream Holdings, Inc. | 19,795 | 157,964 | 0.8 | % | ||||||||
Electric Utilities | ||||||||||||
UIL Holdings Corporation | 6,597 | 255,634 | 1.3 | % | ||||||||
Electrical Equipment | ||||||||||||
Generac Holdings Inc. | 12,186 | 690,215 | 3.4 | % | ||||||||
Energy Equipment & Services | ||||||||||||
Mitcham Industries, Inc.* | 11,461 | 202,974 | 1.0 | % | ||||||||
Pacific Drilling SA*f | 44,058 | 504,905 | 2.5 | % | ||||||||
Vantage Drilling Co.*f | 161,510 | 297,178 | 1.5 | % | ||||||||
Willbros Group, Inc.* | 16,085 | 151,521 | 0.7 | % | ||||||||
1,156,578 | 5.7 | % | ||||||||||
Food Products | �� | |||||||||||
Pinnacle Foods Inc. | 21,734 | 596,816 | 3.0 | % | ||||||||
Gas Utilities | ||||||||||||
South Jersey Industries, Inc. | 6,840 | 382,766 | 1.9 | % | ||||||||
Health Care Equipment & Supplies | ||||||||||||
ICU Medical, Inc.* | 5,673 | 361,427 | 1.8 | % | ||||||||
Health Care Providers & Services | ||||||||||||
Air Methods Corporation* | 8,902 | 519,254 | 2.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 29
Baird SmallCap Value Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Household Durables | ||||||||||||
Jarden Corporation* | 11,617 | $ | 712,703 | 3.5 | % | |||||||
Insurance | ||||||||||||
HCC Insurance Holdings, Inc. | 10,656 | 491,668 | 2.4 | % | ||||||||
Hilltop Holdings, Inc.* | 25,803 | 596,823 | 3.0 | % | ||||||||
1,088,491 | 5.4 | % | ||||||||||
Internet Software & Services | ||||||||||||
j2 Global, Inc. | 8,759 | 438,038 | 2.2 | % | ||||||||
IT Services | ||||||||||||
WEX Inc.* | 4,182 | 414,143 | 2.1 | % | ||||||||
Media | �� | |||||||||||
John Wiley & Sons, Inc. | 4,804 | 265,181 | 1.3 | % | ||||||||
Oil, Gas & Consumable Fuels | ||||||||||||
PDC Energy, Inc.* | 7,316 | 389,357 | 1.9 | % | ||||||||
Sandridge Energy, Inc.* | 28,523 | 173,135 | 0.9 | % | ||||||||
Targa Resources Corp. | 5,412 | 477,176 | 2.4 | % | ||||||||
1,039,668 | 5.2 | % | ||||||||||
Real Estate Investment Trusts (REITs) | ||||||||||||
BioMed Realty Trust, Inc. | 18,015 | 326,432 | 1.6 | % | ||||||||
DiamondRock Hospitality Company | 34,410 | 397,435 | 2.0 | % | ||||||||
LTC Properties, Inc. | 15,978 | 565,461 | 2.8 | % | ||||||||
Mid-America Apartment Communities, Inc. | 4,063 | 246,787 | 1.2 | % | ||||||||
Omega Healthcare Investors, Inc. | 16,675 | 496,915 | 2.5 | % | ||||||||
2,033,030 | 10.1 | % | ||||||||||
Road & Rail | ||||||||||||
Quality Distribution, Inc.* | 27,700 | 355,391 | 1.8 | % | ||||||||
Universal Truckload Services, Inc.* | 20,357 | 621,092 | 3.1 | % | ||||||||
976,483 | 4.9 | % | ||||||||||
Semiconductors & Semiconductor Equipment | ||||||||||||
Himax Technologies, Inc. f | 37,531 | 552,081 | 2.7 | % | ||||||||
Specialty Retail | ||||||||||||
Conn’s Inc.* | 9,909 | 780,730 | 3.9 | % | ||||||||
Rent-A-Center, Inc. | 11,217 | 373,975 | 1.8 | % | ||||||||
1,154,705 | 5.7 | % | ||||||||||
Textiles, Apparel & Luxury Goods | ||||||||||||
Hanesbrands, Inc.* | 11,445 | 804,240 | 4.0 | % |
The accompanying notes are an integral part of these financial statements.
Page 30
Baird SmallCap Value Fund
Schedule of Investments, December 31, 2013
Common Stocks (cont.)
% of | ||||||||||||
Shares | Value | Net Assets | ||||||||||
Thrifts & Mortgage Finance | ||||||||||||
Bofi Holding, Inc.* | 8,013 | $ | 628,460 | 3.1 | % | |||||||
Capitol Federal Financial, Inc. | 15,708 | 190,224 | 0.9 | % | ||||||||
Chicopee Bancorp, Inc. | 17,180 | 299,104 | 1.5 | % | ||||||||
Westfield Financial, Inc. | 22,955 | 171,244 | 0.9 | % | ||||||||
1,289,032 | 6.4 | % | ||||||||||
Total Common Stocks | ||||||||||||
(Cost $15,183,652) | 19,301,226 | 96.0 | % | |||||||||
Short-Term Investments | ||||||||||||
Money Market Mutual Funds | ||||||||||||
Dreyfus Institutional Cash Advantage Fund, 0.06%« | 439,013 | 439,013 | 2.2 | % | ||||||||
Short-Term Investments Trust – | ||||||||||||
Liquid Assets Portfolio, 0.07%« | 350,000 | 350,000 | 1.7 | % | ||||||||
Total Short-Term Investments | ||||||||||||
(Cost $789,013) | 789,013 | 3.9 | % | |||||||||
Total Investments | ||||||||||||
(Cost $15,972,665) | 20,090,239 | 99.9 | % | |||||||||
Other Assets in Excess of Liabilities | 25,738 | 0.1 | % | |||||||||
TOTAL NET ASSETS | $ | 20,115,977 | 100.0 | % |
Notes to Schedule of Investments
* | Non-Income Producing | |
f | Foreign Security | |
« | 7-Day Yield |
Industry classifications shown in the Schedule of Investments are based off of 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 31
Baird SmallCap Value Fund
Schedule of Investments, December 31, 2013
Summary of Fair Value Exposure at December 31, 2013
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. 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, 2013:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 19,301,226 | $ | — | $ | — | $ | 19,301,226 | ||||||||
Total Equity | 19,301,226 | — | — | 19,301,226 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 789,013 | — | — | 789,013 | ||||||||||||
Total Short-Term Investments | 789,013 | — | — | 789,013 | ||||||||||||
Total Investments* | $ | 20,090,239 | $ | — | $ | — | $ | 20,090,239 |
* | 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 assigned levels within the fair value hierarchy. There were no 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. See the Fund’s valuation policy in Note 2a to the financial statements.
Page 32
Additional Information on Fund Expenses
December 31, 2013
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 (7/1/13 – 12/31/13).
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 33
Additional Information on Fund Expenses
December 31, 2013
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2013
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) | 7/1/13 | 12/31/13 | Period(1) | 12/31/13 | Period(1) | ||||||
Baird LargeCap Fund | |||||||||||
Institutional Class | 0.75% | $1,000.00 | $1,223.70 | $4.20 | $1,021.42 | $3.82 | |||||
Investor Class | 1.00% | $1,000.00 | $1,222.60 | $5.60 | $1,020.16 | $5.09 | |||||
Baird MidCap Fund | |||||||||||
Institutional Class | 0.85% | $1,000.00 | $1,194.30 | $4.70 | $1,020.92 | $4.33 | |||||
Investor Class | 1.10% | $1,000.00 | $1,193.20 | $6.08 | $1,019.66 | $5.60 | |||||
Baird SmallCap Value Fund | |||||||||||
Institutional Class | 1.00% | $1,000.00 | $1,209.90 | $5.57 | $1,020.16 | $5.09 | |||||
Investor Class | 1.25% | $1,000.00 | $1,208.40 | $6.96 | $1,018.90 | $6.36 |
(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 34
Statements of Assets and Liabilities
December 31, 2013
Baird | Baird | Baird | ||||||||||
LargeCap | MidCap | SmallCap | ||||||||||
Fund | Fund | Value Fund | ||||||||||
ASSETS: | ||||||||||||
Investments, at value (cost $27,464,979, | ||||||||||||
$331,502,628 and $15,972,665, respectively) | $ | 27,988,124 | $ | 428,424,660 | $ | 20,090,239 | ||||||
Dividends receivable | 16,941 | 95,127 | 24,117 | |||||||||
Interest receivable | 25 | 913 | 72 | |||||||||
Receivable for investments sold | — | 4,245,063 | — | |||||||||
Receivable for Fund shares sold | 229,466 | 1,275,674 | 22,607 | |||||||||
Prepaid expenses and other assets | 7,787 | 7,330 | 12,509 | |||||||||
Total assets | 28,242,343 | 434,048,767 | 20,149,544 | |||||||||
LIABILITIES: | ||||||||||||
Payable for securities purchased | — | 4,376,075 | — | |||||||||
Payable for Fund shares repurchased | — | 93,599 | 1,654 | |||||||||
Payable to Advisor and Distributor | 2,685 | 327,768 | 3,713 | |||||||||
Accrued expenses and other liabilities | 39,449 | 98,713 | 28,200 | |||||||||
Total liabilities | 42,134 | 4,896,155 | 33,567 | |||||||||
NET ASSETS | $ | 28,200,209 | $ | 429,152,612 | $ | 20,115,977 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Capital stock | $ | 27,687,067 | $ | 329,653,238 | $ | 15,945,310 | ||||||
Accumulated undistributed net investment income | 297 | — | — | |||||||||
Accumulated net realized gain (loss) on investments sold | (10,300 | ) | 2,577,342 | 53,093 | ||||||||
Net unrealized appreciation on investments | 523,145 | 96,922,032 | 4,117,574 | |||||||||
NET ASSETS | $ | 28,200,209 | $ | 429,152,612 | $ | 20,115,977 | ||||||
INSTITUTIONAL CLASS SHARES | ||||||||||||
Net Assets | $ | 28,045,893 | $ | 286,082,415 | $ | 19,041,291 | ||||||
Shares outstanding ($0.01 par value, | ||||||||||||
unlimited shares authorized) | 3,541,784 | 19,073,652 | 1,358,724 | |||||||||
Net asset value, offering and redemption price per share | $ | 7.92 | $ | 15.00 | $ | 14.01 | ||||||
INVESTOR CLASS SHARES | ||||||||||||
Net Assets | $ | 154,316 | $ | 143,070,197 | $ | 1,074,686 | ||||||
Shares outstanding ($0.01 par value, | ||||||||||||
unlimited shares authorized) | 19,617 | 9,902,857 | 76,873 | |||||||||
Net asset value, offering and redemption price per share | $ | 7.87 | $ | 14.45 | $ | 13.98 |
The accompanying notes are an integral part of these financial statements.
Page 35
Statements of Operations
Year Ended December 31, 2013
Baird | Baird | Baird | ||||||||||
LargeCap | MidCap | SmallCap | ||||||||||
Fund | Fund | Value Fund | ||||||||||
INVESTMENT INCOME: | ||||||||||||
Dividends (net of foreign taxes withheld | ||||||||||||
of $656, $6,128 and $0, respectively) | $ | 285,440 | $ | 2,583,368 | $ | 207,677 | ||||||
Income from securities lending (Note 6) | 567 | 9,046 | — | |||||||||
Interest | 480 | 11,691 | 451 | |||||||||
Other income | 404 | 3,456 | 191 | |||||||||
Total investment income | 286,891 | 2,607,561 | 208,319 | |||||||||
EXPENSES: | ||||||||||||
Investment advisory fees | 181,629 | 2,445,146 | 111,139 | |||||||||
Administration fees | 7,183 | 35,602 | 2,518 | |||||||||
Shareholder servicing fees | 15,242 | 152,556 | 9,715 | |||||||||
Fund accounting fees | 15,819 | 32,522 | 15,216 | |||||||||
Professional fees | 32,890 | 32,890 | 18,970 | |||||||||
Federal and state registration | 38,062 | 56,071 | 42,037 | |||||||||
Directors fees | 46,925 | 46,975 | 53,625 | |||||||||
Custody fees | 5,270 | 17,937 | 8,559 | |||||||||
Reports to shareholders | 3,180 | 24,190 | 2,437 | |||||||||
Distribution expense – Investor Class Shares (Note 8) | 816 | 278,071 | 934 | |||||||||
Miscellaneous expenses | 149 | 1,195 | 63 | |||||||||
Total expenses | 347,165 | 3,123,155 | 265,213 | |||||||||
Expense reimbursement by Advisor (Note 5) | (136,777 | ) | (73,919 | ) | (133,527 | ) | ||||||
Net expenses | 210,388 | 3,049,236 | 131,686 | |||||||||
NET INVESTMENT INCOME (LOSS) | 76,503 | (441,675 | ) | 76,633 | ||||||||
REALIZED AND UNREALIZED | ||||||||||||
GAIN (LOSS) ON INVESTMENTS: | ||||||||||||
Net realized gain on investments | 13,127,622 | 12,919,158 | 345,941 | |||||||||
Change in unrealized appreciation/depreciation | ||||||||||||
on investments and support agreement (Note 6) | (5,351,781 | ) | 78,465,897 | 3,905,459 | ||||||||
Net realized and unrealized gain on investments | 7,775,841 | 91,385,055 | 4,251,400 | |||||||||
NET INCREASE IN NET ASSETS | ||||||||||||
RESULTING FROM OPERATIONS | $ | 7,852,344 | $ | 90,943,380 | $ | 4,328,033 |
The accompanying notes are an integral part of these financial statements.
Page 36
Statement of Changes in Net Assets
Baird LargeCap Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 76,503 | $ | 87,901 | ||||
Net realized gain on investments | 13,127,622 | 1,226,478 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (5,351,781 | ) | 1,573,815 | |||||
Net increase in net assets resulting from operations | 7,852,344 | 2,888,194 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 4,465,469 | 4,396,047 | ||||||
Shares issued to holders in reinvestment of dividends | 11,004,303 | 87,560 | ||||||
Cost of shares redeemed | (8,523,677 | ) | (3,519,081 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 6,946,095 | 964,526 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (76,300 | ) | (87,281 | ) | ||||
From net realized gains | (10,867,055 | ) | — | |||||
Total Distributions | (10,943,355 | ) | (87,281 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (552 | ) | |||||
From net realized gains | (60,948 | ) | — | |||||
Total Distributions | (60,948 | ) | (552 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 3,794,136 | 3,764,887 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 24,406,073 | 20,641,186 | ||||||
End of year (including undistributed net investment | ||||||||
income of $297 and $94, respectively) | $ | 28,200,209 | $ | 24,406,073 |
The accompanying notes are an integral part of these financial statements.
Page 37
Statement of Changes in Net Assets
Baird MidCap Fund
Year Ended | Year Ended | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (441,675 | ) | $ | 696,185 | |||
Net realized gain on investments | 12,919,158 | 650,959 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | 78,465,897 | 10,853,958 | ||||||
Net increase in net assets resulting from operations | 90,943,380 | 12,201,102 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 184,044,271 | 194,674,969 | ||||||
Shares issued to holders in reinvestment of dividends | 8,466,032 | 1,807,198 | ||||||
Cost of shares redeemed | (66,916,146 | ) | (28,924,851 | ) | ||||
Other capital contribution (Note 3) | 118 | — | ||||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 125,594,275 | 167,557,316 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (484,795 | ) | |||||
From net realized gains | (5,756,644 | ) | (704,473 | ) | ||||
Total Distributions | (5,756,644 | ) | (1,189,268 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (211,430 | ) | |||||
From net realized gains | (2,987,660 | ) | (459,510 | ) | ||||
Total Distributions | (2,987,660 | ) | (670,940 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 207,793,351 | 177,898,210 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 221,359,261 | 43,461,051 | ||||||
End of year | $ | 429,152,612 | $ | 221,359,261 |
The accompanying notes are an integral part of these financial statements.
Page 38
Statement of Changes in Net Assets
Baird SmallCap Value Fund
May 1, 2012^ | ||||||||
Year Ended | through | |||||||
December 31, 2013 | December 31, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 76,633 | $ | 92,988 | ||||
Net realized gain on investments | 345,941 | 9,231 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments | 3,905,459 | 212,115 | ||||||
Net increase in net assets resulting from operations | 4,328,033 | 314,334 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 9,409,735 | 8,131,922 | ||||||
Shares issued to holders in reinvestment of dividends | 325,192 | 117,482 | ||||||
Cost of shares redeemed | (1,934,888 | ) | (104,132 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 7,800,039 | 8,145,272 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (70,596 | ) | (89,865 | ) | ||||
From net realized gains | (265,202 | ) | (25,034 | ) | ||||
Total Distributions | (335,798 | ) | (114,899 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (3,119 | ) | (2,036 | ) | ||||
From net realized gains | (15,228 | ) | (621 | ) | ||||
Total Distributions | (18,347 | ) | (2,657 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 11,773,927 | 8,342,050 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 8,342,050 | — | ||||||
End of period | $ | 20,115,977 | $ | 8,342,050 |
^ Commencement of operations.
The accompanying notes are an integral part of these financial statements.
Page 39
Financial Highlights
Baird LargeCap Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013(1) | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.86 | $ | 8.71 | $ | 8.93 | $ | 7.57 | $ | 5.59 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income | 0.03 | (2) | 0.04 | (2) | 0.01 | 0.01 | 0.03 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 3.16 | 1.15 | (0.22 | ) | 1.36 | 1.98 | ||||||||||||||
Total from investment operations | 3.19 | 1.19 | (0.21 | ) | 1.37 | 2.01 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | (0.04 | ) | (0.04 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (5.09 | ) | — | — | — | — | ||||||||||||||
Total distributions | (5.13 | ) | (0.04 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||||
Net asset value, end of year | $ | 7.92 | $ | 9.86 | $ | 8.71 | $ | 8.93 | $ | 7.57 | ||||||||||
Total return | 32.68 | % | 13.62 | % | (2.34 | )% | 18.06 | % | 36.27 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 28.0 | $ | 24.0 | $ | 20.5 | $ | 23.4 | $ | 20.7 | ||||||||||
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) | 1.24 | % | 1.34 | % | 1.35 | % | 1.40 | % | 1.39 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 0.28 | % | 0.37 | % | 0.12 | % | 0.14 | % | 0.46 | % | ||||||||||
Ratio of net investment loss to | ||||||||||||||||||||
average net assets (before waivers) | (0.21 | )% | (0.22 | )% | (0.48 | )% | (0.51 | )% | (0.18 | )% | ||||||||||
Portfolio turnover rate(3) | 127.7 | % | 39.2 | % | 38.2 | % | 52.0 | % | 58.7 | % |
(1) | Effective December 23, 2013, Baird Kailash Group, LLC became the Fund’s subadviser. |
(2) | Calculated using average shares outstanding during the year. |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. The Baird LargeCap Fund’s portfolio turnover rate in 2013 was higher than previous years primarily due to the implementation of a new investment strategy for the Fund by Baird Kailash Group, LLC, the Fund’s subadviser. |
The accompanying notes are an integral part of these financial statements.
Page 40
Financial Highlights
Baird LargeCap Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013(1) | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.82 | $ | 8.68 | $ | 8.91 | $ | 7.56 | $ | 5.59 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.00 | (2)(3) | 0.01 | (2) | (0.01 | ) | (0.02 | ) | 0.02 | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 3.14 | 1.15 | (0.22 | ) | 1.37 | 1.97 | ||||||||||||||
Total from investment operations | 3.14 | 1.16 | (0.23 | ) | 1.35 | 1.99 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | — | (0.02 | ) | — | — | (0.02 | ) | |||||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (5.09 | ) | — | — | — | — | ||||||||||||||
Total distributions | (5.09 | ) | (0.02 | ) | — | — | (0.02 | ) | ||||||||||||
Net asset value, end of year | $ | 7.87 | $ | 9.82 | $ | 8.68 | $ | 8.91 | $ | 7.56 | ||||||||||
Total return | 32.34 | % | 13.32 | % | (2.58 | )% | 17.86 | % | 35.79 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 0.2 | $ | 0.4 | $ | 0.2 | $ | 0.1 | $ | 0.3 | ||||||||||
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) | 1.49 | % | 1.59 | % | 1.60 | % | 1.65 | % | 1.64 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | 0.03 | % | 0.12 | % | (0.13 | )% | (0.11 | )% | 0.21 | % | ||||||||||
Ratio of net investment loss to | ||||||||||||||||||||
average net assets (before waivers) | (0.46 | )% | (0.47 | )% | (0.73 | )% | (0.76 | )% | (0.43 | )% | ||||||||||
Portfolio turnover rate(4) | 127.7 | % | 39.2 | % | 38.2 | % | 52.0 | % | 58.7 | % |
(1) | Effective December 23, 2013, Baird Kailash Group, LLC became the Fund’s subadviser. |
(2) | Calculated using average shares outstanding during the year. |
(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 Baird LargeCap Fund’s portfolio turnover rate in 2013 was higher than previous years primarily due to the implementation of a new investment strategy for the Fund by Baird Kailash Group, LLC, the Fund’s subadviser. |
The accompanying notes are an integral part of these financial statements.
Page 41
Financial Highlights
Baird MidCap Fund – Institutional Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.52 | $ | 9.98 | $ | 10.04 | $ | 7.90 | $ | 5.63 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.01 | ) | 0.07 | (1) | (0.01 | )(1) | (0.01 | )(1) | 0.02 | (1) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains on investments | 3.80 | 1.57 | 0.54 | 2.15 | 2.27 | |||||||||||||||
Total from investment operations | 3.79 | 1.64 | 0.53 | 2.14 | 2.29 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | — | (0.04 | ) | — | — | (0.02 | ) | |||||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.31 | ) | (0.06 | ) | (0.59 | ) | — | — | ||||||||||||
Total distributions | (0.31 | ) | (0.10 | ) | (0.59 | ) | — | (0.02 | ) | |||||||||||
Net asset value, end of year | $ | 15.00 | $ | 11.52 | $ | 9.98 | $ | 10.04 | $ | 7.90 | ||||||||||
Total return | 32.90 | % | 16.49 | % | 5.19 | % | 27.09 | % | 40.90 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 286.1 | $ | 137.2 | $ | 40.9 | $ | 33.4 | $ | 25.5 | ||||||||||
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) | 0.87 | % | 0.97 | % | 1.21 | % | 1.30 | % | 1.34 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.04 | )% | 0.65 | % | (0.10 | )% | (0.10 | )% | 0.25 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets (before waivers) | (0.06 | )% | 0.53 | % | (0.46 | )% | (0.55 | )% | (0.24 | )% | ||||||||||
Portfolio turnover rate(2) | 36.3 | % | 29.5 | % | 44.8 | % | 62.7 | % | 61.3 | % |
(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 42
Financial Highlights
Baird MidCap Fund – Investor Class
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.13 | $ | 9.66 | $ | 9.76 | $ | 7.69 | $ | 5.49 | ||||||||||
Income from | ||||||||||||||||||||
investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | ) | 0.04 | (1) | (0.03 | )(1) | (0.03 | )(1) | 0.00 | (1)(2) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains on investments | 3.66 | 1.52 | 0.52 | 2.10 | 2.21 | |||||||||||||||
Total from investment operations | 3.63 | 1.56 | 0.49 | 2.07 | 2.21 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from | ||||||||||||||||||||
net investment income | — | (0.03 | ) | — | — | (0.01 | ) | |||||||||||||
Distributions from | ||||||||||||||||||||
net realized gains | (0.31 | ) | (0.06 | ) | (0.59 | ) | — | — | ||||||||||||
Total distributions | (0.31 | ) | (0.09 | ) | (0.59 | ) | — | (0.01 | ) | |||||||||||
Net asset value, end of year | $ | 14.45 | $ | 11.13 | $ | 9.66 | $ | 9.76 | $ | 7.69 | ||||||||||
Total return | 32.62 | % | 16.16 | % | 4.93 | % | 26.92 | % | 40.52 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year (millions) | $ | 143.1 | $ | 84.1 | $ | 2.6 | $ | 1.1 | $ | 1.6 | ||||||||||
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) | 1.12 | % | 1.22 | % | 1.46 | % | 1.55 | % | 1.59 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.29 | )% | 0.40 | % | (0.35 | )% | (0.35 | )% | 0.00 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets (before waivers) | (0.31 | )% | 0.28 | % | (0.71 | )% | (0.80 | )% | (0.49 | )% | ||||||||||
Portfolio turnover rate(3) | 36.3 | % | 29.5 | % | 44.8 | % | 62.7 | % | 61.3 | % |
(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 43
Financial Highlights
Baird SmallCap Value Fund – Institutional Class
May 1, 2012^ | ||||||||
Year Ended | through | |||||||
December 31, 2013 | December 31, 2012 | |||||||
Per Share Data: | ||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 10.00 | ||||
Income from investment operations: | ||||||||
Net investment income(1) | 0.07 | 0.15 | ||||||
Net realized and unrealized gains on investments | 3.99 | 0.20 | ||||||
Total from investment operations | 4.06 | 0.35 | ||||||
Less distributions: | ||||||||
Distributions from net investment income | (0.05 | ) | (0.12 | ) | ||||
Distributions from net realized gains | (0.20 | ) | (0.03 | ) | ||||
Total distributions | (0.25 | ) | (0.15 | ) | ||||
Net asset value, end of period | $ | 14.01 | $ | 10.20 | ||||
Total return | 39.85 | % | 3.52 | %(2) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period (millions) | $ | 19.0 | $ | 8.1 | ||||
Ratio of expenses to average net assets | 1.00 | % | 1.00 | %(3) | ||||
Ratio of expenses to average net assets (before waivers) | 2.02 | % | 3.06 | %(3) | ||||
Ratio of net investment income to average net assets | 0.71 | % | 2.32 | %(3) | ||||
Ratio of net investment income (loss) | ||||||||
to average net assets (before waivers) | (0.31 | )% | 0.26 | %(3) | ||||
Portfolio turnover rate(4) | 36.9 | % | 24.6 | %(2) |
^ | Commencement of operations. |
(1) | Calculated using average shares outstanding during the period. |
(2) | Not annualized. |
(3) | Annualized. |
(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 44
Financial Highlights
Baird SmallCap Value Fund – Investor Class
May 1, 2012^ | ||||||||
Year Ended | through | |||||||
December 31, 2013 | December 31, 2012 | |||||||
Per Share Data: | ||||||||
Net asset value, beginning of period | $ | 10.19 | $ | 10.00 | ||||
Income from investment operations: | ||||||||
Net investment income(1) | 0.04 | 0.14 | ||||||
Net realized and unrealized gains on investments | 3.99 | 0.19 | ||||||
Total from investment operations | 4.03 | 0.33 | ||||||
Less distributions: | ||||||||
Distributions from net investment income | (0.04 | ) | (0.11 | ) | ||||
Distributions from net realized gains | (0.20 | ) | (0.03 | ) | ||||
Total distributions | (0.24 | ) | (0.14 | ) | ||||
Net asset value, end of period | $ | 13.98 | $ | 10.19 | ||||
Total return | 39.58 | % | 3.32 | %(2) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period (millions) | $ | 1.1 | $ | 0.2 | ||||
Ratio of expenses to average net assets | 1.25 | % | 1.25 | %(3) | ||||
Ratio of expenses to average net assets (before waivers) | 2.27 | % | 3.31 | %(3) | ||||
Ratio of net investment income to average net assets | 0.46 | % | 2.07 | %(3) | ||||
Ratio of net investment income (loss) | ||||||||
to average net assets (before waivers) | (0.56 | )% | 0.01 | %(3) | ||||
Portfolio turnover rate(4) | 36.9 | % | 24.6 | %(2) |
^ | Commencement of operations. |
(1) | Calculated using average shares outstanding during the period. |
(2) | Not annualized. |
(3) | Annualized. |
(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 45
Notes to the Financial Statements
December 31, 2013
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, the Baird MidCap Fund and the Baird SmallCap Value Fund (each a “Fund” and collectively the “Funds”), three of the nine 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 Baird SmallCap Value Fund commenced operations with the sale of both Institutional and Investor Class Shares on May 1, 2012. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%. See Note 8.
The Baird LargeCap Fund seeks long-term growth of capital through investments in equity securities of large-capitalization companies.
The Baird MidCap Fund seeks long-term growth of capital through investments in equity securities of mid-capitalization companies.
The Baird SmallCap Value Fund seeks long-term growth of capital through investments in equity securities of small-capitalization companies.
On December 31, 2013, shareholders affiliated with the Advisor held 86% of the Institutional Class shares of the Baird LargeCap Fund, 13% of the Institutional Class shares of the Baird MidCap Fund and 57% of the Institutional Class shares of the Baird SmallCap Value 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, 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: 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 |
Page 46
Notes to the Financial Statements
December 31, 2013
2. | Significant Accounting Policies (cont.) |
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. | |
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 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. All of the foreign securities owned by the Funds as of December 31, 2013 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 expense 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, 2013, or for any other tax years which are open for exam. As of December 31, 2013, open tax years include the tax years ended December 31, 2010 through 2013. 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 interest expense and other expense, respectively, in the Statement of Operations. During the year, the Funds did not incur any interest or penalties. |
Page 47
Notes to the Financial Statements
December 31, 2013
2. | Significant Accounting Policies (cont.) |
d) | Distributions to Shareholders – Dividends from net investment income, if any, are declared and paid annually. 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. |
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 of the Corporation in proportion to their assets. |
f) | Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
g) | Securities Transactions and Investment Income – Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date net of withholding taxes, if any, and interest income is recognized on an accrual basis. |
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 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. |
i) | Recent Accounting Pronouncement – In January, 2013, the FASB issued ASU No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” in GAAP and International Financial Reporting Standards (“IFRS”). ASU No. 2013-01 clarifies ASU No. 2011-11, to increase comparability and reduce presentation differences between financial statements prepared in accordance with GAAP and financial statements prepared in accordance with IFRS. This requires increased disclosure for both gross and net information for derivatives and other financial instruments that are offset in a reporting entity’s Statement of Assets and Liabilities and derivative instruments that are subject to a master netting agreement (“MNA”). Specifically, the ASU requires reporting entities to present separately for assets and liabilities, a) the gross amounts of those recognized assets and recognized liabilities, b) the amounts offset to determine the net amounts presented in the Statement of Assets and Liabilities, c) the net amount presented in the Statement of Assets and Liabilities, d) the amounts subject to an enforceable MNA not included in (b), and e) the net amount after deducting the amounts from (d) and (c). The effective date of each ASU is for interim and annual periods beginning on or after January 1, 2013. The Funds are not required to disclose the applicable requirements of this accounting standard in their Statement of Assets & Liabilities due to the absence of a master netting agreement relating to the Funds’ participation in securities lending. As such, no additional disclosures have been made on behalf of the Funds. |
Page 48
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions |
The following table summarizes the capital share transactions of each Fund for the past two fiscal years:
Baird LargeCap Fund
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 412,836 | $ | 4,388,931 | Shares sold | 7,175 | $ | 76,538 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 1,390,515 | 10,943,355 | of dividends | 7,794 | 60,948 | |||||||||||||
Shares redeemed | (700,194 | ) | (8,160,107 | ) | Shares redeemed | (31,739 | ) | (363,570 | ) | |||||||||
Net increase | 1,103,157 | $ | 7,172,179 | Net decrease | (16,770 | ) | $ | (226,084 | ) | |||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 2,438,627 | Beginning of year | 36,387 | |||||||||||||||
End of year | 3,541,784 | End of year | 19,617 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 441,736 | $ | 4,208,785 | Shares sold | 19,311 | $ | 187,262 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 8,906 | 87,008 | of dividends | 57 | 552 | |||||||||||||
Shares redeemed | (363,417 | ) | (3,510,278 | ) | Shares redeemed | (877 | ) | (8,803 | ) | |||||||||
Net increase | 87,225 | $ | 785,515 | Net increase | 18,491 | $ | 179,011 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 2,351,402 | Beginning of year | 17,896 | |||||||||||||||
End of year | 2,438,627 | End of year | 36,387 |
Page 49
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions (cont.) |
Baird MidCap Fund
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 9,558,656 | $ | 126,368,466 | Shares sold | 4,440,509 | $ | 57,675,805 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 374,122 | 5,585,636 | of dividends | 200,305 | 2,880,396 | |||||||||||||
Shares redeemed | (2,772,115 | ) | (37,423,433 | ) | Shares redeemed | (2,295,565 | ) | (29,492,713 | ) | |||||||||
Other capital | Other capital | |||||||||||||||||
contribution(1) | — | 75 | contribution(1) | — | 43 | |||||||||||||
Net increase | 7,160,663 | $ | 94,530,744 | Net increase | 2,345,249 | $ | 31,063,531 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 11,912,989 | Beginning of year | 7,557,608 | |||||||||||||||
End of year | 19,073,652 | End of year | 9,902,857 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 9,309,112 | $ | 105,381,603 | Shares sold | 8,244,350 | $ | 89,293,366 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 101,019 | 1,151,612 | of dividends | 59,491 | 655,586 | |||||||||||||
Shares redeemed | (1,594,189 | ) | (17,822,841 | ) | Shares redeemed | (1,013,547 | ) | (11,102,010 | ) | |||||||||
Net increase | 7,815,942 | $ | 88,710,374 | Net increase | 7,290,294 | $ | 78,846,942 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 4,097,047 | Beginning of year | 267,314 | |||||||||||||||
End of year | 11,912,989 | End of year | 7,557,608 |
(1) Reimbursement from Advisor for trade error.
Page 50
Notes to the Financial Statements
December 31, 2013
3. | Capital Share Transactions (cont.) |
Baird SmallCap Value Fund
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2013 | December 31, 2013 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 686,823 | $ | 8,629,742 | Shares sold | 58,124 | $ | 779,993 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 22,607 | 314,468 | of dividends | 773 | 10,724 | |||||||||||||
Shares redeemed | (149,451 | ) | (1,918,409 | ) | Shares redeemed | (1,298 | ) | (16,479 | ) | |||||||||
Net increase | 559,979 | $ | 7,025,801 | Net increase | 57,599 | $ | 774,238 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 798,745 | Beginning of year | 19,274 | |||||||||||||||
End of year | 1,358,724 | End of year | 76,873 | |||||||||||||||
Institutional Class Shares | Investor Class Shares | |||||||||||||||||
May 1, 2012^ through | May 1, 2012^ through | |||||||||||||||||
December 31, 2012 | December 31, 2012 | |||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||
Shares sold | 797,462 | $ | 7,940,296 | Shares sold | 19,510 | $ | 191,626 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment | reinvestment | |||||||||||||||||
of dividends | 11,425 | 114,825 | of dividends | 264 | 2,657 | |||||||||||||
Shares redeemed | (10,142 | ) | (99,362 | ) | Shares redeemed | (500 | ) | (4,770 | ) | |||||||||
Net increase | 798,745 | $ | 7,955,759 | Net increase | 19,274 | $ | 189,513 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of period | — | Beginning of period | — | |||||||||||||||
End of period | 798,745 | End of period | 19,274 |
^ Commencement of operations.
Page 51
Notes to the Financial Statements
December 31, 2013
4. | Investment Transactions and Income Tax Information |
During the year ended December 31, 2013, purchases and sales of investment securities (excluding short-term investments) were as follows:
Baird | Baird | Baird | |
LargeCap Fund | MidCap Fund | SmallCap Value Fund | |
Purchases: | $34,720,813 | $219,564,140 | $12,274,722 |
Sales: | $39,139,909 | $112,369,563 | $ 4,650,864 |
The Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Value Fund did not purchase or sell U.S. Government securities during the year ended December 31, 2013.
At December 31, 2013, accumulated earnings/losses on a tax basis were as follows:
Baird | Baird | Baird | ||||||||||
LargeCap | MidCap | SmallCap | ||||||||||
Fund | Fund | Value Fund | ||||||||||
Cost of Investments | $ | 27,493,646 | $ | 332,454,069 | $ | 16,021,197 | ||||||
Gross unrealized appreciation | 561,125 | 102,894,237 | 4,473,127 | |||||||||
Gross unrealized depreciation | (66,647 | ) | (6,923,646 | ) | (404,085 | ) | ||||||
Net unrealized appreciation | $ | 494,478 | $ | 95,970,591 | $ | 4,069,042 | ||||||
Undistributed ordinary income | 297 | 1,023,078 | 30,444 | |||||||||
Undistributed long-term capital gain | 18,367 | 2,505,705 | 71,181 | |||||||||
Total distributable earnings | $ | 18,664 | $ | 3,528,783 | $ | 101,625 | ||||||
Other accumulated losses | — | — | — | |||||||||
Total accumulated earnings | $ | 513,142 | $ | 99,499,374 | $ | 4,170,667 |
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 are primarily due to differing treatments for losses deferred due to wash sales, equalization accounting for tax purposes, and non-deductible expenses. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2013, the following table shows the reclassifications made:
Undistributed | Accumulated | |||||||||||
Net Investment | Net Realized | Paid In | ||||||||||
Income/(Loss) | Gain/(Loss) | Capital | ||||||||||
Baird LargeCap Fund | $ | — | $ | — | $ | — | ||||||
Baird MidCap Fund | 441,675 | (991,493 | ) | 549,818 | ||||||||
Baird SmallCap Value Fund | (2,918 | ) | 2,919 | (1 | ) |
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, 2013, the Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Value Fund did not defer any capital losses occurring between November 1, 2013 and December 31, 2013.
Page 52
Notes to the Financial Statements
December 31, 2013
4. | Investment Transactions and Income Tax Information (cont.) |
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, 2013, the Baird LargeCap Fund utilized capital loss carryovers of $2,199,210.
During the year ended December 31, 2013, the Funds paid the following dividends:
Ordinary Income Dividends | Long-Term Capital Gain | |||||||||
Baird LargeCap Fund | $ | 76,300 | $ | 10,928,003 | ||||||
Baird MidCap Fund | 5,304,795 | 3,439,509 | ||||||||
Baird SmallCap Value Fund | 98,898 | 255,247 |
A significant portion of the long-term capital gain realized by the Baird LargeCap Fund was attributable to the implementation of a new investment strategy for the Fund by Baird Kailash Group LLC (“BKG”), the Fund’s subadviser. The implementation of the new strategy resulted in the sale of nearly all of the Fund’s holdings.
The Funds designated as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Funds related to net capital gain to zero for the tax year ended December 31, 2013. To the extent necessary to fully distribute such capital gains, the Baird MidCap Fund also designated earnings and profits distributed to shareholders on the redemption of shares.
During the year ended December 31, 2012, the Funds paid the following dividends:
Ordinary Income Dividends | Long-Term Capital Gain | |||||||||
Baird LargeCap Fund | $ | 87,833 | $ | — | ||||||
Baird MidCap Fund | 696,185 | 1,164,023 | ||||||||
Baird SmallCap Value Fund | 115,676 | 1,880 |
5. | Investment Advisory and Other Agreements |
The Funds have entered into Investment Advisory Agreements with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreements, 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, 0.75% for the Baird MidCap Fund and 0.85% for the Baird SmallCap Value Fund as applied to the respective Fund’s average daily net assets. Certain officers of the Advisor are also officers of the Funds.
Baird has entered into a Sub-Advisory Agreement with BKG, pursuant to which BKG acts as subadviser to the Baird LargeCap Fund (the “Sub-Advisory Agreement”). Baird is responsible for paying BKG a subadvisory fee, which is calculated daily and paid monthly at the annual rate of 0.45% of the average daily net assets of the Baird LargeCap Fund, out of the advisory fee that the Baird LargeCap Fund pays to Baird. Certain officers of BKG are also officers of the Funds.
For the year ended December 31, 2013 and through April 30, 2015, 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 | % | ||||||
Baird SmallCap Value Fund | 1.00 | % | 1.25 | % |
Page 53
Notes to the Financial Statements
December 31, 2013
5. | Investment Advisory and Other Agreements (cont.) |
To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which expenses were reimbursed or absorbed. A Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed.
Fiscal Year Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Reimbursed/Absorbed Expenses Subject | ||||||||||||
to Recovery by Advisor Until: | 2016 | 2015 | 2014 | |||||||||
Baird LargeCap Fund | $ | 136,777 | $ | 141,680 | $ | 136,264 | ||||||
Baird MidCap Fund | $ | 73,919 | $ | 153,676 | $ | 136,295 | ||||||
Baird SmallCap Value Fund | $ | 133,527 | $ | 91,176 | (1) | N/A |
(1) | Amount shown reflects expense reimbursements made by the Advisor from May 1, 2012 (commencement of operations) through December 31, 2012. |
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, Baird MidCap Fund and Baird SmallCap Value Fund for the year ended December 31, 2013.
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.
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, 2013, none of the Funds had securities on loan. When a Fund engages in securities lending, loaned securities are 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 54
Notes to the Financial Statements
December 31, 2013
6. | Securities Lending (cont.) |
The Funds receive cash as collateral in return for securities lent as part of a securities lending program. The collateral is invested in the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act).
For most of 2013, the Baird LargeCap Fund and the Baird MidCap Fund held interests in Atlantic East Funding, LLC (“AEF Interests”), which investment was held by those Funds as a securities lending cash collateral investment overseen by the Funds' securities lending agent. On December 17, 2013, those Funds assigned their AEF Interests to the parent company of the Funds' securities lending agent in exchange for consideration equal to the par value of the AEF Interests. The amounts paid to each Fund, and the respective par amounts, are shown in the table below.
Par Value of | ||||||||||
Payment Amount | AEF Interests | |||||||||
LargeCap Fund | $ | 116,298 | $ | 116,298 | ||||||
MidCap Fund | 163,713 | 163,713 | ||||||||
Total Baird Equity Funds | $ | 280,011 | $ | 280,011 |
The assignment of the AEF Interests did not result in a gain or loss to any of the Funds. The support agreement was terminated in connection with the assignment.
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, 2013 for the Baird LargeCap Fund and Baird MidCap Fund was $567 and $9,046, respectively. The SmallCap Value Fund did not participate in the securities lending program during the year.
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 charged interest at the Bank’s Prime Rate less 2% (weighted average rate of 1.25% during 2013). For the year ended December 31, 2013, the Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Value 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, Baird MidCap Fund and Baird SmallCap Value Fund incurred $816, $278,071 and $934, respectively, in fees pursuant to the Plan during the year ended December 31, 2013.
Page 55
Notes to the Financial Statements
December 31, 2013
9. | Special Meeting of Baird LargeCap Fund Shareholders |
A special meeting of the shareholders of the Baird LargeCap Fund (the “Fund”), a series of Baird Funds, Inc. (the “Corporation”), was held at the offices of the Corporation at 777 East Wisconsin Avenue, 29th Floor, Milwaukee, Wisconsin 53202 on Friday, December 20, 2013, at 8:00 a.m. (Central Time). The special meeting was held pursuant to notice to all shareholders of record as of the close of business on October 25, 2013. The purpose of the special meeting was to consider three proposals: (1) the approval of a new investment advisory agreement between the Company, on behalf of the Fund, and Robert W. Baird & Co. Incorporated, the Fund’s existing investment adviser (the “Advisor”); (2) the approval of a new subadvisory agreement between the Advisor and Baird Kailash Group, LLC, the proposed new subadvisor to the Fund; and (3) the approval of an amendment to the Fund’s investment objective to remove dividend income as a secondary consideration. Those proposals were more fully described in the Fund’s proxy statement dated November 4, 2013 (“Proxy Statement”). At the special meeting, the shareholders of the Fund voted unanimously to approve all three proposals as described in the Proxy Statement. A report of the votes cast is set forth below.
Proposal | For | Against | Abstain | |
1. | To approve a new investment advisory agreement | |||
between the Company and the Advisor. | 2,036,269 | 0 | 0 | |
2. | To approve a new subadvisory agreement between | |||
the Advisor and Baird Kailash Group, LLC. | 2,036,269 | 0 | 0 | |
3. | To approve an amendment to the | |||
Fund’s investment objective. | 2,036,269 | 0 | 0 |
10. | Subsequent Event |
In preparing these financial statements, the Corporation has evaluated events after December 31, 2013. The Baird Ultra Short Bond Fund, a new series of the trust, commenced operations on December 31, 2013. The investment objective of the Baird Ultra Short Bond Fund is to seek current income consistent with preservation of capital. There were no additional subsequent events since December 31, 2013 through the date the financial statements were issued that would require adjustment to or additional disclosure in these financial statements.
Page 56
Report of Independent Registered Public
Accounting Firm
Board of Directors and Shareholders
Baird Funds, Inc.
We have audited the accompanying statements of assets and liabilities of Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Value Fund (three of the nine funds constituting Baird Funds, Inc.) (collectively the “Funds”), including the schedules of investments, as of December 31, 2013 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 for the Baird LargeCap Fund and Baird MidCap Fund, the statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for the year ended December 31, 2013 and for the period from May 1, 2012 (inception) to December 31, 2012 for the Baird SmallCap Value Fund. 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. We were not engaged to perform an audit of the Funds’ 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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, 2013, and the results of their operations, the changes in their net assets, and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America.
Chicago, Illinois
February 27, 2014
Page 57
Directors & Officers
As of December 31, 2013
G. Frederick Kasten, Jr.
Independent Director and Chairman
Term of Office: Indefinite
Length of Time Served: Since September 2000
Age: 74
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Retired; Chairman, the Advisor (January 2000-December 2005); Chairman and CEO, the Advisor (January 1998-January 2000); President, Chairman and CEO, the Advisor (June 1983-January 1998); President, the Advisor (January 1979-January 1983)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: None
John W. Feldt
Independent Director
Term of Office: Indefinite
Length of Time Served: Since September 2000
Age: 71
c/o University of Wisconsin Foundation
1848 University Avenue
Madison, WI 53726
Principal Occupation(s) During the Past 5 Years: Retired; Senior Vice President-Finance, University of Wisconsin Foundation (1985-2006); Vice President-Finance, University of Wisconsin Foundation (1980-1985); Associate Director, University of Wisconsin Foundation (1967-1980)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Thompson Plumb Funds, Inc., a mutual fund complex (3 portfolios)
Frederick P. Stratton, Jr.
Independent Director
Term of Office: Indefinite
Length of Time Served: Since May 2004
Age: 74
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Retired; Chairman Emeritus, Briggs & Stratton Corporation, a manufacturing company, since 2003; Chairman of the Board, Briggs & Stratton Corporation (2001-2002); Chairman and CEO, Briggs & Stratton Corporation (1986-2001)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Weyco Group, Inc., a men’s footwear distributor.
Marlyn J. Spear, CFA
Independent Director
Term of Office: Indefinite
Length of Time Served: Since January 2008
Age: 60
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Investment Officer, Building Trades United Pension Trust Fund, since July 1989; Investment Officer, Northwestern Mutual Financial Network (1988-1989); Assistant Vice-President, Firstar Trust Company (1978-1987); Financial Analyst, Harco Holdings, Inc. (1976-1978)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Management Trustee of AFL-CIO Housing Investment Trust, a mutual fund complex (1 portfolio)
Page 58
Directors & Officers
As of December 31, 2013
Cory L. Nettles*
Interested Director
Term of Office: Indefinite
Length of Time Served: Since January 2008
Age: 43
c/o Generation Growth Capital, Inc.
411 East Wisconsin Avenue, Suite 1710
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, Generation Growth Capital, Inc., a private equity fund, since March 2007; Of Counsel, Quarles & Brady LLP, a law firm, since January 2005; Secretary, Wisconsin Department of Commerce (January 2003 – January 2005)
Number of Portfolios in Complex Overseen by Director: 8
Other Directorships Held by Director: Director of Weyco Group, Inc., a men’s footwear distributor;
Director of Associated Banc-Corp
Mary Ellen Stanek
President
Term of Office: Re-elected by Board annually
Length of Time Served: Since September 2000
Age: 57
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of the Advisor, since March 2000; Director, Baird Kailash Group, LLC since December 2013
Charles B. Groeschell
Vice President
Term of Office: Re-elected by Board annually
Length of Time Served: Since January 2010
Age: 60
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of the Advisor, since February 2000
Todd S. Nichol
Vice President and Chief Compliance Officer
Term of Office: Re-elected by Board annually
Length of Time Served: Since August 2004
Age: 51
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice President, the Advisor (January 2004-January 2005)
Dominick P. Zarcone
Treasurer
Term of Office: Re-elected by Board annually
Length of Time Served: Since March 2011
Age: 55
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor since February 1995
Charles M. Weber
Secretary
Term of Office: Re-elected by Board annually
Length of Time Served: Since September 2005
Age: 50
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Senior Associate General Counsel, the Advisor, since January 2013; Managing Director, the Advisor since January 2009; Chief Compliance Officer and Secretary, Baird Kailash Group, LLC since July 2013; Associate General Counsel, the Advisor (July 2005-December 2012)
Page 59
Directors & Officers
As of December 31, 2013
Peter J. Hammond
Vice President
Term of Office: Re-elected by Board annually
Length of Time Served: Since August 2012
Age: 50
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years:
Senior Vice President, the Advisor since March 2012; Vice President, Baird Kailash Group, LLC since July 2013; Executive VP and Chief Administrative Officer, UMB Fund Services (September 1996-March 2012)
Dustin J. Hutter
Assistant Treasurer
Term of Office: Re-elected by Board annually
Length of Time Served: Since February 2011
Age: 37
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: Director of Reporting and Analysis, Capital Markets Finance since February 2013; Senior Vice President, the Advisor since January 2011; Treasurer, Baird Kailash Group, LLC since July 2013; First Vice President, the Advisor (January 2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant Controller, the Advisor (January 2006-January 2013)
Andrew D. Ketter
Assistant Secretary
Term of Office: Re-elected by Board annually
Length of Time Served: Since February 2011
Age: 39
777 East Wisconsin Avenue
Milwaukee, WI 53202
Principal Occupation(s) During the Past 5 Years: First Vice President and Associate General Counsel, the Advisor since September 2010; Associate, Quarles & Brady LLP, a law firm (September 2002-August 2010)
* | 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.. The Advisor has invested in and may in the future invest in private equity funds managed by Generation Growth Capital, Inc., a company of which Mr. Nettles is affiliated, through its division, Baird Capital. |
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 60
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for the Baird Equity Funds
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”), including the directors who are not “interested persons” of the Corporation within the meaning of the Investment Company Act of 1940 (the “Independent Directors”), met on August 14 and August 21, 2013 to consider the annual renewal of the investment advisory agreement between Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) and the Corporation on behalf of the Baird LargeCap, MidCap and SmallCap Value Funds (the “Funds”). The Board, including the Independent Directors, approved the investment advisory agreement through a process that concluded at the August 21, 2013 meeting. In connection with its consideration of the investment advisory agreement, the Board reviewed and discussed various information, including the investment advisory agreement, a memorandum provided by legal counsel summarizing the guidelines relevant to the Board’s consideration of the renewal of the investment advisory agreement, information in response to requests from the Board from the Advisor (including the Advisor’s Form ADV, Form BD, annual report and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2013, management fees and expense ratios and other pertinent information. The Board also considered relevant case law.
The Independent Directors met separately in executive session with Fund’s legal counsel to consider the investment advisory agreement. The Board discussed the Advisor’s 15(c) response with the President of the Funds and the Director of Baird Investment Management. The Board also took into account information reviewed periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information and discussions with the Funds’ portfolio managers. 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. In deciding to approve the investment advisory agreement for each Fund, the Board did not identify any single factor as determinative but considered all factors together.
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 Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients. However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements.
The Board considered the Advisor’s disciplined investment decision-making process used for the Funds. The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio transactions, ensuring adherence to the Funds’ investment policies and restrictions, compliance, risk management services, valuation, providing support services to the Board and committees 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
Page 61
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for the Baird Equity Funds (cont.)
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 reviewed a summary of the Advisor’s risk management tools and process. The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the investment advisory agreement.
Investment Performance of the Advisor and the Funds
In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2013 regarding each Fund’s performance in comparison to its benchmark index and its peer group as determined by Lipper. The Board noted that the Baird LargeCap Fund had outperformed the Lipper peer group average and benchmark index for the since inception period but lagged the average and benchmark index for the one-year, five-year and ten-year periods. The Board also considered the 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 Lipper peer group average for the five-year, ten-year and since inception periods but lagged the average for the one-year period. The Fund’s performance had exceeded the benchmark index for the five-year and since inception periods but lagged the index for the one-year and ten-year periods. With respect to the SmallCap Value Fund, the Board noted that the Fund had trailed its Lipper peer group average and benchmark index for the one-year period, had exceeded the peer group average for the since inception period and trailed the benchmark index for the since inception period.
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 Morningstar. The Board noted that each Fund’s advisory fee was comparable to the average and median for all mutual funds in its Morningstar 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 LargeCap and MidCap Funds was 10 basis points (or 0.10%) less than what the Advisor charges on the first $10 million of a separately managed account. With respect to the SmallCap Value Fund, the Fund’s investment management fee was 15 basis points (or 0.15%) less than what the Advisor charges on the first $20 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 Funds’ 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 Morningstar 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 lower than the average and median expense ratios for all funds in its Morningstar category and also in the lowest or second lowest quartile.
Page 62
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement for the 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 discussed a report regarding payments made to financial intermediaries with a representative of the Advisor, noting that all fees other than the Rule 12b-1 fee payable by the Investor Class shares of the Funds were paid by the Advisor and that any payments by the Advisor for distribution 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 reviewed the extent to which economies of scale may be realized as the Funds increase in size. The Board noted that the Funds’ advisory fee structure does not contain any breakpoint reductions as the Funds grow in size. However, the Board recognized that the Advisor has been waiving fees and/or reimbursing expenses for the Funds since their inception. The Board also recognized that the advisory fee rates paid by the Funds were designed to be lower than the fees otherwise charged by the Advisor to its separately managed account clients and to be comparable to the second or third breakpoint advisory fee levels paid by other comparable mutual funds. The directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future.
Benefits Derived from the Relationship with the Funds
The Board considered other benefits to the Advisor from serving as advisor to the Funds (in addition to the advisory fee). 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 considered that the Advisor’s asset management business may experience some ancillary benefits from its association with the Funds. 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 63
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement and Subadvisory Agreement
for the Baird LargeCap Fund
Board Considerations of New Advisory Agreement
The Board reviewed a new advisory agreement between the Advisor and the Corporation on behalf of the LargeCap Fund (the “New Advisory Agreement”) at a special meeting on October 14, 2013. The Board was provided with materials relevant to its consideration of the New Advisory Agreement, such as the information about the Advisor’s services under the New Advisory Agreement, including supervision of Baird Kailash Group, LLC (“Baird Kailash”) as subadvisor to the Fund, updated information to the Advisor’s 15(c) response as provided to the Board at the August 2013 meeting, information about changes to the Funds’ compliance program, the Code of Ethics for the Baird Funds and the Advisor and a memorandum provided by the Company’s legal counsel. The Board reviewed the advisory fee that would be paid by the Fund under the New Agreement, the expense limitation agreement and comparative fee and expense information provided by an independent third party. The Board discussed the New Advisory Agreement and information provided by the Advisor with the President of the Corporation.
The Board also evaluated the New Advisory Agreement in light of the conclusions it reached and information considered in connection with the approval of the prior advisory agreement between the Company and the Advisor with respect to the Fund on August 21, 2013. The Board also took into account information reviewed periodically throughout the year that was relevant to its consideration of the New Advisory Agreement, including performance, management fee and other expense information and discussions with Fund management.
In considering the New Advisory Agreement, the Board reviewed and analyzed various factors with respect to the Fund that it determined were relevant, including the factors below, and made the following conclusions. In their deliberations, the Board did not identify any single factor as determinative but considered all factors together.
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 Fund, noting that the Advisor has served as the Fund’s investment adviser since its inception in 2000. The Board noted the Advisor’s long-term relationship with the Company and the services the Advisor provides to the Fund and the other series of the Company. The Board discussed the fact that the Advisor had chosen the investment strategy to be employed by Baird Kailash as subadvisor and had selected Baird Kailash to make the day-to-day investment decisions for the Fund. The Board discussed the Advisor’s responsibilities for overseeing Baird Kailash as subadvisor and for monitoring the Fund’s compliance with applicable requirements under the securities laws. The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Fund was appropriate and that the Fund was likely to benefit from services provided under the New Advisory Agreement.
Investment Performance of the Advisor and the Fund
As part of its annual contract review at the August 21, 2013 regular meeting, the Board reviewed information as of June 30, 2013 regarding the Fund’s performance in comparison to its benchmark index and peer group as determined by Lipper. At that meeting, the Board noted that the Fund had outperformed the Lipper peer group average and benchmark index for the since inception period but lagged the average and benchmark index for the one-year, five-year and ten-year periods. The Board also considered the Advisor’s quarterly commentary and discussion of the reasons for the Fund’s underperformance during such periods. At the October 14 meeting, in considering the Fund’s performance, the Board considered the Advisor’s recommendation to employ Baird Kailash as the Fund’s subadvisor. After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, the Fund and its shareholders were likely to benefit from the Advisor’s management.
Page 64
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement and Subadvisory Agreement
for the Baird LargeCap Fund (cont.)
Costs of Services Provided and Profits Realized by the Advisor
The Board examined the Fund’s fee and expense information, noting that the advisory fee under the New Advisory Agreement is identical to the advisory fee under the prior advisory agreement. The Board noted that the Fund’s advisory fee was slightly below the average and median for all mutual funds in its Morningstar category. As part of its review at the August 21, 2013 meeting, the Board had reviewed and considered management fees charged by the Advisor to other investment advisory clients and found that the investment management fee paid by the Fund was 10 basis points (or 0.10%) less than what the Advisor charges on the first $10 million of a separately managed account. The Board recognized the extent of the significant additional services provided to the Fund that the Advisor did not provide to its other clients, such as certain administrative services, oversight of the Fund’s other service providers and regulatory compliance.
The Board considered that the Advisor has agreed to continue the contractual expense limitation for the Fund through at least April 30, 2015. The Board examined the Fund’s total expense ratio relative to all other mutual funds in its Morningstar category. The Board noted that the 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 Morningstar category, but in the lowest or second lowest quartile.
As part of its review at the August 21, 2013 meeting, the Board considered the fees realized, and the costs incurred, by the Advisor in providing investment management services to the Fund and the profitability to the Advisor of having a relationship with the Fund. The Board noted that the Advisor had waived significant fees and/or reimbursed expenses for the Fund since inception. The Board reviewed and considered the general financial condition of the Advisor and determined it to be sound.
The Board noted that under the New Advisory Agreement, the Advisor would be responsible for paying the subadvisory fee to Baird Kailash, although the Advisor’s parent company would be entitled to a portion of the subadvisory fee due to its ownership interest in Baird Kailash. In light of all of the information that it received and considered, the Board concluded that the Fund’s advisory fee and total expense ratio were reasonable.
Economies of Scale and Fee Levels Reflecting Those Economies
The Board noted that the Fund’s advisory fee structure does not contain any breakpoint reductions as the Fund grows in size. However, the Board recognized that the Advisor has been waiving fees and/or reimbursing expenses for the Fund since inception. The Board also recognized that the advisory fee rate paid by the Fund was 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 the Fund was reasonable given the Fund’s current asset size.
Benefits Derived from the Relationship with the Fund
The Board noted that the Advisor derives ancillary benefits from its association with the Fund, in the form of research products and services received from unaffiliated broker dealers who execute portfolio trades for the Fund. However, the Board determined such products and services have been used for legitimate purposes relating to the Fund by providing assistance in the investment decision making process. The Board noted that the Advisor would no longer receive research products and services with respect to trades executed by the Fund if Baird Kailash becomes the Fund’s subadvisor. Due to the Advisor’s parent company’s ownership interest in Baird Kailash, the Board noted that affiliates of the Advisor would benefit from Baird Kailash’s financial performance and would be entitled to a portion of the subadvisory fee. Because of its affiliation with Baird
Page 65
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement and Subadvisory Agreement
for the Baird LargeCap Fund (cont.)
Kailash, the Advisor may enhance its reputation for equity asset management and increase its advisory fees for serving as investment advisor if Baird Kailash is successful. The Board also considered that Baird Kailash would provide research services to institutional equity clients of the Advisor. The Board concluded that the other benefits realized by the Advisor from its relationship with the Fund were appropriate.
Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the New Advisory Agreement, the directors, including all of the Independent Directors, concluded that the approval of the New Advisory Agreement was in the best interest of the Fund and its shareholders.
Board Considerations Sub-Advisory Agreement
The Board reviewed a subadvisory agreement between the Advisor and Baird Kailash on behalf of the LargeCap Fund (the “Subadvisory Agreement”) at a special meeting on October 14, 2013. The Board was provided with materials relevant to its consideration of the Subadvisory Agreement, a copy of the proposed Subadvisory Agreement, information regarding the process by which the Advisor selected and recommended Baird Kailash as the subadvisor to the Fund, the fees proposed to be paid by the Advisor to Baird Kailash, information regarding Baird Kailash’s investment strategy, personnel, compliance program and operations, information regarding Baird Kailash’s financial condition and other information in response to the 15(c) request sent to Baird Kailash on behalf of the Board of Directors. The Board discussed the Subadvisory Agreement and the 15(c) response with the representatives of the Advisor and Baird Kailash. The Board also received a presentation from representatives of Baird Kailash regarding the firm’s investment strategy, stock selection process and related performance information.
In considering the Subadvisory Agreement, the Board reviewed and analyzed various factors with respect to the Fund that it determined were relevant, including the factors below, and made the following conclusions. In their deliberations, the Board did not identify any single factor as determinative but considered all factors together.
Nature, Extent and Quality of Services to be Provided by Baird Kailash
The Board considered Baird Kailash’s organization, qualification and background, as well as the qualifications of its personnel; and its expertise in developing and providing quantitative and fundamental investment methodologies to select stocks for the Fund. The Board considered Baird Kailash’s investment process and research capabilities. The Board also considered the experience of the investment professionals of Kailash Capital, who would provide the fundamental analysis and quantitative methodologies behind the investment model to be employed by the Fund through a licensing agreement with Baird Kailash. The Board concluded that the nature, extent and quality of the services to be provided by Baird Kailash to the Fund was appropriate and that the Fund was likely to benefit from services provided by Baird Kailash under the Subadvisory Agreement.
Investment Performance of Baird Kailash
The Board reviewed and considered certain back-tested performance data for an investment model similar to the model proposed for the Fund. After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, the Fund and its shareholders were likely to benefit from Baird Kailash’s management.
Costs of Services to be Provided and Profitability
The Board considered the proposed fee payable under the Subadvisory Agreement, noting that the fee would be paid by the Advisor (not the Fund) and therefore would not impact the fees paid by the Fund. The Board considered that the Fund would be receiving additional investment management expertise from Baird Kailash without any additional fees charged to the Fund.
Page 66
Baird Funds, Inc.
Disclosure Regarding the Board of Directors’ Approval of the Investment
Advisory Agreement and Subadvisory Agreement
for the Baird LargeCap Fund (cont.)
Economies of Scale and Fee Levels Reflecting Those Economies
Because the subadvisory fee is not paid by the Fund, the Board did not consider whether the fees should reflect any potential economies of scale that might be realized as the Fund assets increase.
Benefits to be Derived from the Relationship with the Fund
The Board noted that the under the subadvisory agreement, Baird Kailash is entitled to receive research products and services received from unaffiliated broker dealers who execute portfolio trades for the Fund. The Board noted that Baird Kailash generates its own research and therefore is unlikely to benefit from third-party research. The Board considered that Baird Kailash may benefit from its association with the Fund in terms of name recognition and asset growth in other products managed by Baird Kailash. The Board also noted that Baird Kailash and Kailash Capital, an entity related to the portfolio manager of the Fund, receive fees from Baird for licensing, consulting and research services. The Board concluded that the other benefits to be realized by Baird Kailash from its relationship with the Fund were appropriate.
Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the Subadvisory Agreement, the directors, including all of the Independent Directors, concluded that the approval of the Subadvisory Agreement was in the best interest of the Fund and its shareholders.
Page 67
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, 2013, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Baird LargeCap Fund | 100.00% | |
Baird MidCap Fund | 43.44% | |
Baird SmallCap Value Fund | 100.00% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2013 was as follows:
Baird LargeCap Fund | 100.00% | |
Baird MidCap Fund | 30.82% | |
Baird SmallCap Value Fund | 100.00% |
Other Tax Information
For the fiscal year ended December 31, 2013, 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 each Fund were as follows:
Baird LargeCap Fund | 0.00% | |
Baird MidCap Fund | 100.00% | |
Baird SmallCap Value Fund | 27.93% |
Page 68
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, 20th 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 12/31/2013 | FYE 12/31/2012 | |
Audit Fees | $103,950 | $100,800 |
Audit-Related Fees | - | - |
Tax Fees | $31,920 | $29,988 |
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 2013. 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 2013 and 2012 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: $581,261 for 2013 and $455,398 for 2012. 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.
Baird Short-Term Bond Fund | ||||||||
Schedule of Investments | ||||||||
December 31, 2013 | ||||||||
Principal | % of | |||||||
Amount | Value | Net Assets | ||||||
LONG-TERM INVESTMENTS | ||||||||
U.S. Treasury Securities | ||||||||
U.S. Treasury Bonds, | ||||||||
2.375%, 07/31/2017 @ | $ | 185,800,000 | $ | 194,146,508 | ||||
194,146,508 | 9.7% | |||||||
Taxable Municipal Bonds | ||||||||
City of Passaic NJ, | ||||||||
1.882%, 02/01/2016 | 1,020,000 | 1,025,222 | ||||||
City of Trenton NJ: | ||||||||
1.430%, 04/01/2015 | 1,440,000 | 1,438,042 | ||||||
1.722%, 04/01/2016 | 1,470,000 | 1,457,799 | ||||||
County of Dauphin PA, | ||||||||
1.194%, 03/01/2016 | 1,200,000 | 1,189,932 | ||||||
County of Miami-Dade FL Aviation Revenue, | ||||||||
5.000%, 10/01/2016 | 6,200,000 | 6,839,220 | ||||||
Government Development Bank for Puerto Rico: | ||||||||
3.670%, 05/01/2014 | 6,450,000 | 6,275,398 | ||||||
4.704%, 05/01/2016 | 725,000 | 594,725 | ||||||
Illinois State: | ||||||||
4.071%, 01/01/2014 | 970,000 | 970,000 | ||||||
4.422%, 04/01/2015 | 2,210,000 | 2,284,831 | ||||||
4.961%, 03/01/2016 | 1,110,000 | 1,181,584 | ||||||
5.090%, 04/01/2017 | 2,785,000 | 2,975,104 | ||||||
Indiana Bond Bank, | ||||||||
1.689%, 01/15/2017 | 1,000,000 | 993,510 | ||||||
New Hampshire Housing Finance Authority: | ||||||||
1.250%, 07/01/2016 | 980,000 | 973,787 | ||||||
1.500%, 01/01/2017 | 945,000 | 940,870 | ||||||
1.650%, 07/01/2017 | 895,000 | 886,873 | ||||||
Ohio Air Quality Development Authority, | ||||||||
5.750%, 06/01/2033 | 3,000,000 | 3,222,270 | ||||||
Rhode Island Housing & Mortgage Finance Corp/RI: | ||||||||
1.150%, 04/01/2016 | 1,175,000 | 1,167,233 | ||||||
1.930%, 04/01/2017 | 600,000 | 601,722 | ||||||
3.000%, 10/01/2034 (Callable 10/01/2022) | 12,500,000 | 12,395,000 | ||||||
South Carolina State Public Service Authority, | ||||||||
1.270%, 06/01/2016 (Callable 12/01/2015) | 6,800,000 | 6,852,428 | ||||||
State of Illinois, | ||||||||
3.636%, 02/01/2014 | 1,700,000 | 1,703,893 | ||||||
Tobacco Settlement Authority Iowa, | ||||||||
6.500%, 06/01/2023 (Callable 06/01/2015) | 155,000 | 150,435 | ||||||
Tulsa Airports Improvement Trust: | ||||||||
1.389%, 06/01/2015 | 100,000 | 99,777 | ||||||
2.592%, 06/01/2017 | 115,000 | 114,108 | ||||||
3.042%, 06/01/2018 | 100,000 | 99,164 | ||||||
56,432,927 | 2.8% | |||||||
Other Government Related Securities | ||||||||
CNOOC Finance 2013 Ltd, | ||||||||
1.125%, 05/09/2016 f | 2,500,000 | 2,490,790 | ||||||
Corp Andina de Fomento, | ||||||||
5.750%, 01/12/2017 f | 250,000 | 273,252 | ||||||
Korea Hydro & Nuclear Power Co., Ltd., | ||||||||
2.875%, 10/02/2018 (Acquired 09/25/2013, Cost $2,982,150) * f | 3,000,000 | 2,982,639 | ||||||
Petrobras International Finance Company, | ||||||||
3.875%, 01/27/2016 f | 6,650,000 | 6,845,922 | ||||||
Petroleos Mexicanos, | ||||||||
4.875%, 03/15/2015 f | 5,270,000 | 5,517,690 | ||||||
The Korea Development Bank: | ||||||||
3.875%, 05/04/2017 f | 2,250,000 | 2,371,568 | ||||||
3.000%, 03/17/2019 f | 2,475,000 | 2,476,579 | ||||||
22,958,440 | 1.1% |
Corporate Bonds | ||||||||
Industrials | ||||||||
AbbVie Inc., | ||||||||
1.750%, 11/06/2017 | 3,000,000 | 2,994,861 | ||||||
Agrium Inc., | ||||||||
7.700%, 02/01/2017 f | 5,000,000 | 5,615,220 | ||||||
Altera Corporation, | ||||||||
2.500%, 11/15/2018 | 3,000,000 | 2,974,608 | ||||||
America Movil, S.A.B. de C.V., | ||||||||
1.244%, 09/12/2016 f | 9,000,000 | 9,093,366 | ||||||
American Honda Finance Corporation: | ||||||||
1.450%, 02/27/2015 (Acquired 02/21/2012, Cost $1,998,940) * | 2,000,000 | 2,018,670 | ||||||
1.000%, 08/11/2015 (Acquired 09/04/2012, Cost $4,989,550) * | 5,000,000 | 5,019,600 | ||||||
0.612%, 05/26/2016 (Acquired 05/22/2013, Cost $800,000) * | 800,000 | 801,840 | ||||||
Anadarko Petroleum Corporation: | ||||||||
5.950%, 09/15/2016 | 5,255,000 | 5,854,411 | ||||||
6.375%, 09/15/2017 | 2,400,000 | 2,755,366 | ||||||
Anglo American Capital PLC, | ||||||||
9.375%, 04/08/2014 (Acquired 03/23/2012 through 06/19/2012, Cost $917,942) * f | 900,000 | 919,951 | ||||||
ArcelorMittal: | ||||||||
9.500%, 02/15/2015 f | 341,000 | 370,411 | ||||||
4.250%, 02/25/2015 f | 1,000,000 | 1,027,500 | ||||||
4.250%, 08/05/2015 f | 1,525,000 | 1,578,375 | ||||||
AT&T Inc., | ||||||||
0.624%, 02/12/2016 | 3,800,000 | 3,792,655 | ||||||
Avon Products, Inc., | ||||||||
2.375%, 03/15/2016 @ | 2,000,000 | 2,013,260 | ||||||
Beam, Inc., | ||||||||
5.375%, 01/15/2016 | 1,269,000 | 1,373,379 | ||||||
BP Capital Markets P.L.C.: | ||||||||
3.200%, 03/11/2016 f | 775,000 | 813,811 | ||||||
0.876%, 09/26/2018 f | 7,000,000 | 7,009,793 | ||||||
Bunge Limited Finance Corp.: | ||||||||
5.350%, 04/15/2014 | 6,550,000 | 6,633,251 | ||||||
5.100%, 07/15/2015 | 1,635,000 | 1,730,715 | ||||||
3.200%, 06/15/2017 | 425,000 | 437,098 | ||||||
Bunge N.A. Finance L.P., | ||||||||
5.900%, 04/01/2017 | 1,820,000 | 1,987,143 | ||||||
CNPC HK Overseas Capital Ltd, | ||||||||
3.125%, 04/28/2016 (Acquired 12/18/2012, Cost $2,370,312) * f | 2,300,000 | 2,381,981 | ||||||
Coca-Cola FEMSA, S.A.B. de C.V., | ||||||||
2.375%, 11/26/2018 @ f | 4,000,000 | 3,970,448 | ||||||
Comcast Corporation, | ||||||||
5.850%, 11/15/2015 | 1,380,000 | 1,509,829 | ||||||
Computer Sciences Corporation, | ||||||||
2.500%, 09/15/2015 | 9,550,000 | 9,747,847 | ||||||
ConAgra Foods, Inc.: | ||||||||
1.350%, 09/10/2015 | 3,840,000 | 3,866,661 | ||||||
5.819%, 06/15/2017 | 4,734,000 | 5,335,190 | ||||||
COX Communications, Inc.: | ||||||||
5.500%, 10/01/2015 | 200,000 | 214,676 | ||||||
7.250%, 11/15/2015 | 2,000,000 | 2,199,772 | ||||||
CRH America, Inc., | ||||||||
6.000%, 09/30/2016 | 5,865,000 | 6,551,921 | ||||||
CSX Corporation, | ||||||||
7.900%, 05/01/2017 | 2,221,000 | 2,653,749 | ||||||
Daimler Finance North America LLC: | ||||||||
2.300%, 01/09/2015 (Acquired 01/04/2012 through 06/12/2013, Cost $4,127,606) * @ | 4,125,000 | 4,182,309 | ||||||
1.250%, 01/11/2016 (Acquired 01/07/2013, Cost $2,846,495) * | 2,850,000 | 2,852,012 | ||||||
0.922%, 08/01/2016 (Acquired 07/24/2013, Cost $2,000,000) * | 2,000,000 | 2,004,112 | ||||||
Deutsche Telekom International Finance B.V.: | ||||||||
5.750%, 03/23/2016 f | 400,000 | 439,185 | ||||||
3.125%, 04/11/2016 (Acquired 03/14/2012 through 06/25/2013, Cost $5,904,696) * f | 5,775,000 | 6,014,847 | ||||||
Devon Energy Corporation: | ||||||||
5.625%, 01/15/2014 | 625,000 | 626,079 | ||||||
2.400%, 07/15/2016 | 375,000 | 385,609 | ||||||
1.875%, 05/15/2017 | 3,100,000 | 3,122,580 | ||||||
DIRECTV Holdings LLC / DIRECTV Financing Co., Inc., | ||||||||
3.500%, 03/01/2016 | 400,000 | 419,876 | ||||||
Dollar General Corporation, | ||||||||
4.125%, 07/15/2017 | 6,480,000 | 6,879,959 | ||||||
Eaton Corporation, | ||||||||
1.500%, 11/02/2017 | 5,000,000 | 4,901,660 | ||||||
Express Scripts Holding Company: | ||||||||
3.125%, 05/15/2016 @ | 3,000,000 | 3,131,139 | ||||||
3.500%, 11/15/2016 @ | 525,000 | 555,038 | ||||||
2.650%, 02/15/2017 | 200,000 | 206,135 | ||||||
FBG Finance Limited, | ||||||||
5.125%, 06/15/2015 (Acquired 03/12/2012, Cost $540,279) * f | 515,000 | 546,397 | ||||||
Federal Express Corp. 1998 Pass Through Trust, | ||||||||
Series 981B, 6.845%, 01/15/2019 | 3,547,778 | 3,914,899 | ||||||
Federal Express Corp. 2012 Pass Through Trust, | ||||||||
2.625%, 01/15/2018 (Acquired 01/20/2012 through 05/07/2012, Cost $1,946,723) * | 1,945,111 | 1,961,332 | ||||||
FedEx Corporation, | ||||||||
7.375%, 01/15/2014 | 3,291,000 | 3,298,569 | ||||||
Fidelity National Information Services, Inc., | ||||||||
7.875%, 07/15/2020 | 8,520,000 | 9,294,971 | ||||||
Fiserv, Inc.: | ||||||||
3.125%, 10/01/2015 | 2,486,000 | 2,573,865 | ||||||
3.125%, 06/15/2016 | 3,195,000 | 3,334,002 | ||||||
Ford Motor Credit Company LLC: | ||||||||
2.750%, 05/15/2015 | 4,000,000 | 4,103,368 | ||||||
2.500%, 01/15/2016 | 500,000 | 512,972 | ||||||
6.625%, 08/15/2017 | 4,000,000 | 4,633,732 | ||||||
France Telecom, | ||||||||
4.375%, 07/08/2014 f | 2,125,000 | 2,165,154 | ||||||
Freeport-McMoRan Copper & Gold Inc.: | ||||||||
1.400%, 02/13/2015 | 3,500,000 | 3,519,533 | ||||||
2.150%, 03/01/2017 @ | 2,000,000 | 2,013,032 | ||||||
General Mills, Inc., | ||||||||
0.537%, 01/29/2016 | 3,775,000 | 3,778,269 | ||||||
Georgia-Pacific LLC, | ||||||||
7.700%, 06/15/2015 | 5,300,000 | 5,803,076 | ||||||
Gilead Sciences, Inc., | ||||||||
2.400%, 12/01/2014 | 1,000,000 | 1,016,477 | ||||||
Glencore Funding LLC: | ||||||||
6.000%, 04/15/2014 (Acquired 01/12/2010 through 12/18/2013, Cost $7,431,936) * | 7,390,000 | 7,496,268 | ||||||
1.700%, 05/27/2016 (Acquired 05/22/2013, Cost $2,998,770) * @ | 3,000,000 | 3,002,526 | ||||||
2.500%, 01/15/2019 (Acquired 05/22/2013, Cost $597,012) * | 600,000 | 580,991 | ||||||
Heineken N.V., | ||||||||
1.400%, 10/01/2017 (Acquired 10/02/2012, Cost $1,993,400) * @ f | 2,000,000 | 1,962,146 | ||||||
Hewlett-Packard Company: | ||||||||
4.750%, 06/02/2014 | 475,000 | 482,606 | ||||||
3.000%, 09/15/2016 @ | 450,000 | 468,100 | ||||||
Hospira, Inc., | ||||||||
6.050%, 03/30/2017 | 2,654,000 | 2,928,397 | ||||||
Husky Energy, Inc., | ||||||||
6.200%, 09/15/2017 f | 1,000,000 | 1,139,970 | ||||||
Husky Oil Limited, | ||||||||
7.550%, 11/15/2016 f | 2,500,000 | 2,891,090 | ||||||
Hyundai Capital Services Inc.: | ||||||||
6.000%, 05/05/2015 (Acquired 11/01/2012 through 04/30/2013, Cost $6,278,679) * f | 5,924,000 | 6,300,127 | ||||||
4.375%, 07/27/2016 (Acquired 05/11/2012 through 12/05/2013, Cost $6,532,686) * f | 6,230,000 | 6,628,215 | ||||||
Ingredion Incorporated, | ||||||||
1.800%, 09/25/2017 | 8,974,000 | 8,746,563 | ||||||
Johnson Controls Inc., | ||||||||
5.500%, 01/15/2016 @ | 7,270,000 | 7,896,907 | ||||||
Laboratory Corporation of America Holdings, | ||||||||
5.625%, 12/15/2015 | 650,000 | 705,743 | ||||||
LeasePlan Corporation N.V., | ||||||||
2.500%, 05/16/2018 (Acquired 05/07/2013 through 07/11/2013, Cost $8,703,819) * f | 8,805,000 | 8,560,221 | ||||||
Marathon Oil Corporation, | ||||||||
6.000%, 10/01/2017 | 7,805,000 | 8,845,258 | ||||||
Marathon Petroleum Corporation, | ||||||||
3.500%, 03/01/2016 | 1,503,000 | 1,569,464 | ||||||
Masco Corporation, | ||||||||
6.125%, 10/03/2016 | 2,750,000 | 3,080,000 | ||||||
Medco Health Solutions, Inc., | ||||||||
2.750%, 09/15/2015 | 250,000 | 258,068 | ||||||
Mizuho Bank, Ltd., | ||||||||
2.550%, 03/17/2017 (Acquired 05/30/2013, Cost $7,069,563) * f | 6,900,000 | 7,037,414 | ||||||
Murphy Oil Corporation, | ||||||||
2.500%, 12/01/2017 | 10,281,000 | 10,343,519 | ||||||
Mylan Inc.: | ||||||||
1.800%, 06/24/2016 (Acquired 07/30/2013, Cost $1,004,643) * | 1,000,000 | 1,019,457 | ||||||
6.000%, 11/15/2018 (Acquired 02/01/2013, Cost $2,668,372) * | 2,500,000 | 2,663,988 | ||||||
7.875%, 07/15/2020 (Acquired 07/16/2013 through 09/16/2013, Cost $6,779,975) * | 6,000,000 | 6,789,252 | ||||||
Nabisco, Inc., | ||||||||
7.550%, 06/15/2015 | 3,489,000 | 3,820,664 | ||||||
Nabors Industries, Inc., | ||||||||
2.350%, 09/15/2016 (Acquired 09/04/2013, Cost $1,998,840) * | 2,000,000 | 2,020,150 | ||||||
National Oilwell Varco Inc., | ||||||||
Series B, 6.125%, 08/15/2015 | 4,700,000 | 4,705,217 | ||||||
NBCUniversal Enterprise Inc., | ||||||||
0.781%, 04/15/2016 (Acquired 07/03/2013 through 10/21/2013, Cost $3,109,944) * | 3,100,000 | 3,116,923 | ||||||
Nissan Motor Acceptance Corporation, | ||||||||
0.946%, 09/26/2016 (Acquired 09/19/2013, Cost $5,000,000) * | 5,000,000 | 5,026,600 | ||||||
Noble Holding International Limited: | ||||||||
3.450%, 08/01/2015 f | 4,552,000 | 4,720,014 | ||||||
2.500%, 03/15/2017 f | 5,510,000 | 5,527,434 | ||||||
Pearson Dollar Finance PLC, | ||||||||
5.700%, 06/01/2014 (Acquired 06/20/2011 through 06/25/2013, Cost $1,354,300) * f | 1,332,000 | 1,357,027 | ||||||
Pentair Finance S.A., | ||||||||
1.875%, 09/15/2017 f | 4,000,000 | 3,951,736 | ||||||
Petrohawk Energy Corporation: | ||||||||
7.875%, 06/01/2015 | 5,000,000 | 5,131,250 | ||||||
7.250%, 08/15/2018 | 3,975,000 | 4,285,050 | ||||||
Phillips 66, | ||||||||
2.950%, 05/01/2017 | 3,000,000 | 3,121,170 | ||||||
Pioneer Natural Resources Company, | ||||||||
5.875%, 07/15/2016 | 10,000,000 | 11,092,870 | ||||||
Plains Exploration & Production Company, | ||||||||
7.625%, 04/01/2020 | 6,850,000 | 7,559,811 | ||||||
Plum Creek Timberlands, L.P., | ||||||||
5.875%, 11/15/2015 | 9,550,000 | 10,337,503 | ||||||
POSCO, | ||||||||
8.750%, 03/26/2014 (Acquired 03/19/2009 through 01/18/2013, Cost $7,673,016) * f | 7,610,000 | 7,740,991 | ||||||
PPG Industries, Inc., | ||||||||
1.900%, 01/15/2016 | 1,452,000 | 1,473,397 | ||||||
Quest Diagnostics Incorporated, | ||||||||
3.200%, 04/01/2016 | 5,050,000 | 5,237,062 | ||||||
Rio Tinto Alcan, Inc., | ||||||||
5.200%, 01/15/2014 f | 4,110,000 | 4,116,584 | ||||||
Rohm and Haas Company, | ||||||||
6.000%, 09/15/2017 | 646,000 | 732,842 | ||||||
RPM United Kingdom G.P., | ||||||||
6.700%, 11/01/2015 (Acquired 03/04/2013, Cost $8,204,689) * f | 7,500,000 | 8,145,727 | ||||||
Sabmiller Holdings Inc.: | ||||||||
1.850%, 01/15/2015 (Acquired 01/10/2012, Cost $1,999,880) * | 2,000,000 | 2,023,974 | ||||||
0.932%, 08/01/2018 (Acquired 08/06/2013, Cost $2,600,000) * | 2,600,000 | 2,612,875 | ||||||
SABMiller PLC, | ||||||||
6.500%, 07/01/2016 (Acquired 03/01/2012 through 03/20/2012, Cost $1,334,088) * f | 1,214,000 | 1,369,585 | ||||||
Seagate HDD Cayman, | ||||||||
6.875%, 05/01/2020 f | 8,400,000 | 9,082,500 | ||||||
Southwestern Bell Telephone, L.P., | ||||||||
7.000%, 07/01/2015 | 875,000 | 952,629 | ||||||
Staples, Inc., | ||||||||
9.750%, 01/15/2014 | 9,555,000 | 9,584,773 | ||||||
Talisman Energy, Inc., | ||||||||
5.125%, 05/15/2015 f | 3,557,000 | 3,738,969 | ||||||
TCI Communications, Inc., | ||||||||
8.750%, 08/01/2015 | 4,136,000 | 4,651,598 | ||||||
Telecom Italia Capital, SA, | ||||||||
5.250%, 10/01/2015 f | 10,960,000 | 11,521,700 | ||||||
Telefonica Emisiones S.A.U.: | ||||||||
6.421%, 06/20/2016 f | 7,290,000 | 8,123,612 | ||||||
6.221%, 07/03/2017 f | 590,000 | 665,119 | ||||||
Telefonica Moviles Chile SA, | ||||||||
2.875%, 11/09/2015 (Acquired 11/03/2010 through 04/04/2012, Cost $1,016,734) * @ f | 1,020,000 | 1,038,656 | ||||||
The ADT Corporation, | ||||||||
2.250%, 07/15/2017 | 6,700,000 | 6,593,222 | ||||||
The Clorox Company, | ||||||||
5.000%, 01/15/2015 @ | 2,000,000 | 2,090,644 | ||||||
The Valspar Corporation, | ||||||||
5.100%, 08/01/2015 | 10,450,000 | 11,020,194 | ||||||
Thomson Reuters Corporation, | ||||||||
0.875%, 05/23/2016 f | 4,550,000 | 4,517,982 | ||||||
Time Warner Cable Inc., | ||||||||
5.850%, 05/01/2017 | 2,355,000 | 2,568,594 | ||||||
Time Warner Companies, Inc., | ||||||||
7.250%, 10/15/2017 | 7,831,000 | 9,335,382 | ||||||
Total Capital International, | ||||||||
0.809%, 08/10/2018 f | 4,350,000 | 4,373,738 | ||||||
Toyota Motor Credit Corporation, | ||||||||
2.050%, 01/12/2017 | 400,000 | 408,797 | ||||||
Transocean Inc.: | ||||||||
5.050%, 12/15/2016 f | 400,000 | 441,868 | ||||||
2.500%, 10/15/2017 f | 7,400,000 | 7,478,396 | ||||||
TSMC Global Ltd, | ||||||||
0.950%, 04/03/2016 (Acquired 03/27/2013, Cost $1,999,760) * f | 2,000,000 | 1,986,554 | ||||||
Tyco Electronics Group S.A., | ||||||||
1.600%, 02/03/2015 f | 1,000,000 | 1,009,840 | ||||||
Union Pacific Railroad Co. 2004 Pass Through Trust, | ||||||||
5.214%, 09/30/2014 (Acquired 10/22/2010 through 07/03/2013, Cost $6,825,585) * | 6,674,000 | 6,849,199 | ||||||
Vale Canada Limited, | ||||||||
5.700%, 10/15/2015 f | 8,000,000 | 8,561,896 | ||||||
Vale Overseas Limited, | ||||||||
6.250%, 01/23/2017 f | 400,000 | 443,655 | ||||||
Valero Energy Corporation, | ||||||||
6.125%, 06/15/2017 | 1,120,000 | 1,277,015 | ||||||
Verizon Communications, Inc.: | ||||||||
2.500%, 09/15/2016 @ | 3,000,000 | 3,102,108 | ||||||
3.650%, 09/14/2018 @ | 6,000,000 | 6,351,384 | ||||||
Viacom Inc.: | ||||||||
1.250%, 02/27/2015 | 1,000,000 | 1,004,980 | ||||||
6.250%, 04/30/2016 | 2,125,000 | 2,369,528 | ||||||
Vodafone Group PLC: | ||||||||
0.623%, 02/19/2016 f | 5,000,000 | 4,997,670 | ||||||
5.625%, 02/27/2017 f | 2,000,000 | 2,237,368 | ||||||
Warner Chilcott Co LLC / Warner Chilcott Finance LLC, | ||||||||
7.750%, 09/15/2018 f | 7,585,000 | 8,210,762 | ||||||
Wm. Wrigley Jr. Company, | ||||||||
3.700%, 06/30/2014 (Acquired 03/15/2012 through 08/12/2013, Cost $6,801,827) * | 6,731,000 | 6,834,496 | ||||||
Woodside Finance Limited: | ||||||||
8.125%, 03/01/2014 (Acquired 09/14/2012 through 03/26/2013, Cost $2,526,783) * f | 2,500,000 | 2,530,877 | ||||||
4.500%, 11/10/2014 (Acquired 11/15/2012 through 07/30/2013, Cost $2,817,140) * f | 2,740,000 | 2,824,765 | ||||||
Xerox Corporation: | ||||||||
8.250%, 05/15/2014 | 7,135,000 | 7,326,225 | ||||||
6.400%, 03/15/2016 | 2,583,000 | 2,854,964 | ||||||
Xstrata Canada Corporation, | ||||||||
6.000%, 10/15/2015 f | 450,000 | 487,288 | ||||||
Xstrata Finance (Canada) Limited, | ||||||||
2.050%, 10/23/2015 (Acquired 10/18/2012, Cost $2,999,040) * @ f | 3,000,000 | 3,038,181 | ||||||
Yara International ASA, | ||||||||
5.250%, 12/15/2014 (Acquired 09/25/2012 through 02/13/2013, Cost $8,051,389) * f | 7,775,000 | 8,063,367 | ||||||
Yum! Brands, Inc.: | ||||||||
4.250%, 09/15/2015 | 6,425,000 | 6,783,444 | ||||||
6.250%, 04/15/2016 | 2,000,000 | 2,217,922 | ||||||
Zoetis Inc., | ||||||||
1.150%, 02/01/2016 | 1,000,000 | 1,001,135 | ||||||
594,613,288 | 29.6% |
Utility | ||||||||
Ameren Corporation, | ||||||||
8.875%, 05/15/2014 | 6,364,000 | 6,546,500 | ||||||
Beaver Valley Funding Corporation Debentures, | ||||||||
9.000%, 06/01/2017 | 905,000 | 910,169 | ||||||
Centrais Eletricas Brasileiras S.A., | ||||||||
7.750%, 11/30/2015 (Acquired 12/06/2012, Cost $3,316,264) * f | 3,000,000 | 3,285,000 | ||||||
Commonwealth Edison Company: | ||||||||
Series 104, 5.950%, 08/15/2016 | 550,000 | 614,904 | ||||||
6.150%, 09/15/2017 | 100,000 | 115,554 | ||||||
Constellation Energy Group Inc., | ||||||||
4.550%, 06/15/2015 | 3,069,000 | 3,221,615 | ||||||
DCP Midstream, LLC, | ||||||||
5.375%, 10/15/2015 (Acquired 01/13/2012, Cost $1,792,411) * | 1,708,000 | 1,816,699 | ||||||
Duke Energy Corp., | ||||||||
6.300%, 02/01/2014 | 2,080,000 | 2,089,140 | ||||||
El Paso Pipeline Partners Operating Company, L.L.C., | ||||||||
4.100%, 11/15/2015 | 5,286,000 | 5,559,640 | ||||||
Enbridge Inc., | ||||||||
0.897%, 10/01/2016 f | 2,000,000 | 2,007,598 | ||||||
Energy Transfer Partners, L.P.: | ||||||||
8.500%, 04/15/2014 | 3,496,000 | 3,569,552 | ||||||
5.950%, 02/01/2015 | 5,570,000 | 5,868,257 | ||||||
6.125%, 02/15/2017 | 600,000 | 667,359 | ||||||
9.700%, 03/15/2019 | 1,000,000 | 1,294,759 | ||||||
Entergy Corporation, | ||||||||
4.700%, 01/15/2017 | 8,750,000 | 9,408,140 | ||||||
Enterprise Products Operating LLC: | ||||||||
Series O, 9.750%, 01/31/2014 | 3,074,000 | 3,095,503 | ||||||
3.700%, 06/01/2015 | 1,075,000 | 1,119,211 | ||||||
1.250%, 08/13/2015 | 3,000,000 | 3,019,932 | ||||||
Exelon Corporation, | ||||||||
4.900%, 06/15/2015 | 2,159,000 | 2,276,240 | ||||||
Florida Gas Transmission Company, LLC, | ||||||||
4.000%, 07/15/2015 (Acquired 09/12/2012 through 10/15/2013, Cost $3,590,566) * | 3,450,000 | 3,597,187 | ||||||
GG1C Funding Corporation, | ||||||||
5.129%, 01/15/2014 (Acquired 07/28/2011, Cost $1,859,023) * | 1,858,917 | 1,860,566 | ||||||
Gulfstream Natural Gas System, L.L.C., | ||||||||
6.950%, 06/01/2016 (Acquired 07/22/2013 through 08/27/2013, Cost $8,642,026) * | 7,646,000 | 8,573,865 | ||||||
Kinder Morgan Energy Partners, L.P., | ||||||||
6.000%, 02/01/2017 @ | 250,000 | 280,223 | ||||||
Maritimes & Northeast Pipeline, LLC, | ||||||||
7.500%, 05/31/2014 (Acquired 06/19/2013, Cost $2,943,421) * | 2,879,800 | 2,942,436 | ||||||
Midcontinent Express Pipeline LLC, | ||||||||
5.450%, 09/15/2014 (Acquired 07/05/2013, Cost $1,820,239) * | 1,780,000 | 1,817,597 | ||||||
National Grid PLC, | ||||||||
6.300%, 08/01/2016 f | 9,611,000 | 10,808,377 | ||||||
NextEra Energy Capital Holdings, Inc., | ||||||||
1.339%, 09/01/2015 | 5,000,000 | 5,033,300 | ||||||
Nisource Finance Corp.: | ||||||||
5.400%, 07/15/2014 @ | 8,121,000 | 8,320,679 | ||||||
5.250%, 09/15/2017 | 2,375,000 | 2,622,409 | ||||||
ONEOK Partners, L.P.: | ||||||||
6.150%, 10/01/2016 | 4,695,000 | 5,272,354 | ||||||
2.000%, 10/01/2017 | 2,630,000 | 2,617,147 | ||||||
ONEOK, Inc., | ||||||||
5.200%, 06/15/2015 | 2,000,000 | 2,112,148 | ||||||
Pepco Holdings, Inc., | ||||||||
2.700%, 10/01/2015 | 1,395,000 | 1,430,420 | ||||||
Petrofac Limited, | ||||||||
3.400%, 10/10/2018 (Acquired 10/03/2013, Cost $3,985,080) * f | 4,000,000 | 4,028,620 | ||||||
PG&E Corporation, | ||||||||
5.750%, 04/01/2014 | 1,255,000 | 1,270,488 | ||||||
PPL Energy Supply, LLC: | ||||||||
Series A, 5.700%, 10/15/2015 | 5,827,000 | 6,148,482 | ||||||
6.200%, 05/15/2016 | 830,000 | 912,911 | ||||||
PSEG Power LLC, | ||||||||
5.320%, 09/15/2016 | 4,905,000 | 5,396,878 | ||||||
Rockies Express Pipeline LLC, | ||||||||
3.900%, 04/15/2015 (Acquired 02/17/2011, Cost $2,000,101) * | 2,000,000 | 2,000,000 | ||||||
Southwestern Public Service Company, | ||||||||
5.600%, 10/01/2016 | 3,000,000 | 3,302,610 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, 08/15/2014 | 6,414,000 | 6,604,714 | ||||||
Sunoco, Inc., | ||||||||
5.750%, 01/15/2017 | 475,000 | 516,395 | ||||||
Tennessee Gas Pipeline Company, L.L.C., | ||||||||
8.000%, 02/01/2016 | 1,000,000 | 1,131,041 | ||||||
Trans-Allegheny Interstate Line Company, | ||||||||
4.000%, 01/15/2015 (Acquired 01/19/2010 through 06/19/2012, Cost $5,135,341) * | 5,090,000 | 5,235,482 | ||||||
TransCanada PipeLines Ltd., | ||||||||
0.927%, 06/30/2016 f | 2,575,000 | 2,599,200 | ||||||
Union Electric Company, | ||||||||
4.750%, 04/01/2015 | 500,000 | 525,595 | ||||||
Williams Partners L.P.: | ||||||||
3.800%, 02/15/2015 | 9,000,000 | 9,298,089 | ||||||
7.250%, 02/01/2017 | 935,000 | 1,078,187 | ||||||
163,823,172 | 8.1% |
Finance | ||||||||
Abbey National Treasury Services PLC, | ||||||||
3.875%, 11/10/2014 (Acquired 12/29/2011 through 09/13/2012, Cost $3,717,830) * f | 3,722,000 | 3,823,633 | ||||||
ABN AMRO Bank N.V.: | ||||||||
1.036%, 10/28/2016 (Acquired 10/23/2013 through 12/27/2013, Cost $9,953,753) * f | 9,950,000 | 9,964,925 | ||||||
4.250%, 02/02/2017 (Acquired 08/23/2013 through 11/22/2013, Cost $3,417,708) * f | 3,200,000 | 3,430,662 | ||||||
AEGON N.V., | ||||||||
4.625%, 12/01/2015 f | 1,275,000 | 1,360,160 | ||||||
Aetna Inc., | ||||||||
6.000%, 06/15/2016 | 3,625,000 | 4,051,826 | ||||||
American Express Company, | ||||||||
5.500%, 09/12/2016 | 1,213,000 | 1,349,200 | ||||||
American Express Credit Corporation, | ||||||||
0.747%, 07/29/2016 | 5,000,000 | 5,024,290 | ||||||
American International Group, Inc.: | ||||||||
2.375%, 08/24/2015 | 1,100,000 | 1,123,585 | ||||||
5.600%, 10/18/2016 @ | 5,120,000 | 5,704,443 | ||||||
5.450%, 05/18/2017 | 2,500,000 | 2,794,300 | ||||||
Ameriprise Financial, Inc., | ||||||||
5.650%, 11/15/2015 | 1,350,000 | 1,466,213 | ||||||
AmSouth Bank, | ||||||||
Series AI, 5.200%, 04/01/2015 | 3,215,000 | 3,367,712 | ||||||
ANZ New Zealand (Int'l) Limited: | ||||||||
3.125%, 08/10/2015 (Acquired 07/23/2013, Cost $3,045,135) * f | 2,950,000 | 3,057,471 | ||||||
1.125%, 03/24/2016 (Acquired 03/20/2013, Cost $4,998,250) * f | 5,000,000 | 4,990,385 | ||||||
AON Corporation: | ||||||||
3.500%, 09/30/2015 f | 3,778,000 | 3,943,053 | ||||||
3.125%, 05/27/2016 f | 1,582,000 | 1,649,821 | ||||||
Arden Realty Limited Partnership, | ||||||||
5.250%, 03/01/2015 | 1,708,000 | 1,783,437 | ||||||
Australia and New Zealand Banking Group Limited, | ||||||||
1.875%, 10/06/2017 (Acquired 07/17/2013 through 11/21/2013, Cost $749,592) * f | 750,000 | 749,535 | ||||||
Banco Santander-Chile: | ||||||||
2.239%, 02/14/2014 (Acquired 02/09/2012, Cost $1,500,000) * @ f | 1,500,000 | 1,499,127 | ||||||
3.750%, 09/22/2015 (Acquired 11/21/2013, Cost $1,476,221) * f | 1,425,000 | 1,469,755 | ||||||
Bank of America Corporation: | ||||||||
10.200%, 07/15/2015 | 3,725,000 | 4,186,125 | ||||||
5.750%, 12/01/2017 | 5,000,000 | 5,690,565 | ||||||
Barclays Bank PLC, | ||||||||
Series 1, 5.000%, 09/22/2016 @ f | 5,180,000 | 5,702,890 | ||||||
BB&T Corporation, | ||||||||
1.103%, 06/15/2018 | 3,000,000 | 3,021,042 | ||||||
BNP Paribas: | ||||||||
Series 0212, 3.250%, 03/11/2015 f | 2,350,000 | 2,421,825 | ||||||
2.375%, 09/14/2017 @ f | 3,000,000 | 3,062,898 | ||||||
BPCE: | ||||||||
1.488%, 04/25/2016 f | 8,000,000 | 8,104,104 | ||||||
2.500%, 12/10/2018 f | 3,275,000 | 3,257,466 | ||||||
Branch Banking and Trust Company, | ||||||||
0.538%, 05/23/2017 | 3,500,000 | 3,459,866 | ||||||
Canadian Imperial Bank of Commerce: | ||||||||
2.350%, 12/11/2015 f | 850,000 | 877,854 | ||||||
0.766%, 07/18/2016 f | 3,000,000 | 3,012,126 | ||||||
1.350%, 07/18/2016 @ f | 5,000,000 | 5,035,695 | ||||||
Capital One Financial Corporation: | ||||||||
7.375%, 05/23/2014 | 5,765,000 | 5,913,460 | ||||||
2.150%, 03/23/2015 | 4,000,000 | 4,066,324 | ||||||
6.150%, 09/01/2016 | 450,000 | 503,317 | ||||||
5.250%, 02/21/2017 | 1,000,000 | 1,081,218 | ||||||
Cie de Financement Foncier SA, | ||||||||
2.500%, 09/16/2015 (Acquired 06/19/2012 through 09/27/2013, Cost $8,807,060) * f | 8,600,000 | 8,846,037 | ||||||
CIGNA Corporation: | ||||||||
2.750%, 11/15/2016 | 5,331,000 | 5,548,622 | ||||||
5.375%, 03/15/2017 | 2,300,000 | 2,548,740 | ||||||
Citigroup Inc.: | ||||||||
6.010%, 01/15/2015 | 5,370,000 | 5,654,841 | ||||||
5.300%, 01/07/2016 | 2,000,000 | 2,161,850 | ||||||
0.921%, 11/15/2016 | 2,000,000 | 2,002,804 | ||||||
CNA Financial Corporation: | ||||||||
5.850%, 12/15/2014 | 2,225,000 | 2,330,434 | ||||||
6.500%, 08/15/2016 | 4,995,000 | 5,617,672 | ||||||
Comerica Bank: | ||||||||
5.750%, 11/21/2016 | 1,425,000 | 1,603,236 | ||||||
5.200%, 08/22/2017 | 4,125,000 | 4,541,976 | ||||||
Commonwealth Bank of Australia: | ||||||||
3.500%, 03/19/2015 (Acquired 08/30/2010 through 07/18/2012, Cost $4,457,579) * f | 4,401,000 | 4,555,633 | ||||||
0.843%, 10/08/2015 (Acquired 12/05/2013, Cost $1,198,800) * f | 1,200,000 | 1,199,388 | ||||||
0.745%, 09/20/2016 (Acquired 09/16/2013 through 12/20/2013, Cost $6,103,725) * f | 6,100,000 | 6,114,805 | ||||||
Countrywide Financial Corporation, | ||||||||
6.250%, 05/15/2016 | 4,050,000 | 4,469,167 | ||||||
Coventry Health Care, Inc., | ||||||||
6.125%, 01/15/2015 | 1,125,000 | 1,188,040 | ||||||
Credit Agricole SA, | ||||||||
1.096%, 10/03/2016 (Acquired 09/26/2013, Cost $10,000,000) * @ f | 10,000,000 | 10,027,090 | ||||||
Credit Suisse, | ||||||||
6.000%, 02/15/2018 f | 225,000 | 260,524 | ||||||
Deutsche Bank Aktiengesellschaft, | ||||||||
6.000%, 09/01/2017 f | 400,000 | 456,869 | ||||||
Dresdner Bank AG, | ||||||||
7.250%, 09/15/2015 f | 3,797,000 | 4,099,537 | ||||||
Fifth Third Bancorp: | ||||||||
3.625%, 01/25/2016 | 1,305,000 | 1,371,019 | ||||||
0.665%, 12/20/2016 | 2,900,000 | 2,872,473 | ||||||
5.450%, 01/15/2017 | 619,000 | 680,275 | ||||||
Fifth Third Bank (Cincinnati), | ||||||||
0.647%, 02/26/2016 | 5,000,000 | 5,001,255 | ||||||
First Empire Capital Trust I, | ||||||||
8.234%, 02/01/2027 | 1,000,000 | 1,013,978 | ||||||
First Hawaiian Capital Trust I, | ||||||||
Series B, 8.343%, 07/01/2027 | 1,500,000 | 1,524,375 | ||||||
First Horizon National Corporation, | ||||||||
5.375%, 12/15/2015 | 1,050,000 | 1,128,657 | ||||||
First Tennessee Bank, National Association: | ||||||||
5.050%, 01/15/2015 | 1,000,000 | 1,038,322 | ||||||
5.650%, 04/01/2016 | 7,170,000 | 7,735,684 | ||||||
General Electric Capital Corporation: | ||||||||
4.375%, 09/21/2015 | 2,350,000 | 2,490,690 | ||||||
1.000%, 01/08/2016 | 1,000,000 | 1,002,500 | ||||||
2.950%, 05/09/2016 | 5,400,000 | 5,653,649 | ||||||
0.894%, 07/12/2016 | 10,000,000 | 10,070,160 | ||||||
5.625%, 09/15/2017 | 9,080,000 | 10,329,381 | ||||||
5.625%, 05/01/2018 @ | 175,000 | 200,964 | ||||||
Genworth Holdings, Inc.: | ||||||||
5.750%, 06/15/2014 @ | 4,508,000 | 4,601,532 | ||||||
8.625%, 12/15/2016 | 1,000,000 | 1,187,439 | ||||||
Hana Bank, | ||||||||
1.364%, 11/09/2016 (Acquired 11/05/2013, Cost $7,006,860) * f | 7,000,000 | 7,030,331 | ||||||
HSBC Bank USA NA, | ||||||||
6.000%, 08/09/2017 | 925,000 | 1,041,342 | ||||||
HSBC Finance Corporation: | ||||||||
5.000%, 06/30/2015 | 3,400,000 | 3,592,841 | ||||||
5.500%, 01/19/2016 | 556,000 | 602,788 | ||||||
6.676%, 01/15/2021 | 221,000 | 253,937 | ||||||
HSBC USA Capital Trust III, | ||||||||
8.380%, 05/15/2027 (Acquired 11/06/2007, Cost $1,521,277) * | 1,500,000 | 1,524,771 | ||||||
HSBC USA Inc.: | ||||||||
2.375%, 02/13/2015 | 600,000 | 612,220 | ||||||
1.128%, 09/24/2018 | 1,000,000 | 1,001,388 | ||||||
Hutchison Whampoa International Ltd., | ||||||||
4.625%, 09/11/2015 (Acquired 09/24/2012 through 06/25/2013, Cost $9,547,825) * f | 9,090,000 | 9,619,238 | ||||||
ING Bank N.V.: | ||||||||
2.375%, 06/09/2014 (Acquired 02/24/2012, Cost $1,197,887) * f | 1,200,000 | 1,210,129 | ||||||
4.000%, 03/15/2016 (Acquired 03/08/2012 through 07/15/2013, Cost $6,018,559) * @ f | 5,783,000 | 6,112,070 | ||||||
3.750%, 03/07/2017 (Acquired 05/30/2013 through 11/20/2013, Cost $3,274,173) * f | 3,100,000 | 3,264,982 | ||||||
ING U.S., Inc., | ||||||||
2.900%, 02/15/2018 @ | 5,000,000 | 5,113,930 | ||||||
J.P. Morgan Chase & Co., | ||||||||
5.125%, 09/15/2014 | 723,000 | 744,887 | ||||||
Kemper Corporation: | ||||||||
6.000%, 11/30/2015 | 8,500,000 | 9,091,311 | ||||||
6.000%, 05/15/2017 | 4,565,000 | 5,005,449 | ||||||
KeyBank National Association: | ||||||||
7.413%, 05/06/2015 | 9,854,000 | 10,677,104 | ||||||
4.950%, 09/15/2015 | 820,000 | 872,240 | ||||||
Kookmin Bank, | ||||||||
7.250%, 05/14/2014 (Acquired 05/26/2009 through 02/08/2013, Cost $7,100,097) * f | 7,000,000 | 7,160,111 | ||||||
Liberty Mutual Group Inc., | ||||||||
5.750%, 03/15/2014 (Acquired 09/03/2009 through 11/15/2012, Cost $3,576,852) * | 3,588,000 | 3,623,801 | ||||||
Lloyds TSB Bank PLC: | ||||||||
4.375%, 01/12/2015 (Acquired 01/05/2010 through 10/25/2013, Cost $5,247,672) * f | 5,210,000 | 5,399,311 | ||||||
4.875%, 01/21/2016 f | 1,700,000 | 1,813,274 | ||||||
M&I Marshall & Ilsley Bank: | ||||||||
4.850%, 06/16/2015 | 6,682,000 | 7,042,734 | ||||||
5.000%, 01/17/2017 | 2,150,000 | 2,319,678 | ||||||
Macquarie Bank Limited, | ||||||||
2.000%, 08/15/2016 (Acquired 08/07/2013 through 09/27/2013, Cost $10,025,015) * f | 10,000,000 | 10,113,710 | ||||||
Manufacturers and Traders Trust Company: | ||||||||
0.542%, 03/07/2016 | 6,300,000 | 6,286,657 | ||||||
6.625%, 12/04/2017 | 1,000,000 | 1,157,686 | ||||||
Manulife Financial Corp., | ||||||||
3.400%, 09/17/2015 f | 9,761,000 | 10,160,508 | ||||||
Marsh & McLennan Companies, Inc.: | ||||||||
5.750%, 09/15/2015 | 758,000 | 818,745 | ||||||
2.300%, 04/01/2017 | 1,197,000 | 1,205,516 | ||||||
MassMutual Global Funding II, | ||||||||
3.125%, 04/14/2016 (Acquired 01/19/2012, Cost $2,051,128) * | 2,000,000 | 2,093,512 | ||||||
Metropolitan Life Global Funding I, | ||||||||
3.125%, 01/11/2016 (Acquired 01/04/2011 through 03/05/2012, Cost $2,309,527) * @ | 2,300,000 | 2,397,387 | ||||||
Morgan Stanley: | ||||||||
4.750%, 04/01/2014 | 75,000 | 75,596 | ||||||
4.000%, 07/24/2015 | 1,108,000 | 1,156,911 | ||||||
1.750%, 02/25/2016 | 2,000,000 | 2,026,850 | ||||||
5.450%, 01/09/2017 | 2,950,000 | 3,271,553 | ||||||
National Australia Bank Limited: | ||||||||
3.750%, 03/02/2015 (Acquired 03/14/2012 through 01/14/2013, Cost $1,802,100) * f | 1,750,000 | 1,815,209 | ||||||
2.000%, 03/09/2015 @ f | 2,000,000 | 2,035,492 | ||||||
0.743%, 10/08/2015 (Acquired 03/26/2013, Cost $1,098,900) * f | 1,100,000 | 1,099,629 | ||||||
0.669%, 12/02/2016 (Acquired 11/21/2013, Cost $6,000,000) * f | 6,000,000 | 5,999,940 | ||||||
National City Bank, | ||||||||
5.800%, 06/07/2017 | 1,675,000 | 1,887,864 | ||||||
Nomura Holdings Inc.: | ||||||||
5.000%, 03/04/2015 f | 1,000,000 | 1,044,690 | ||||||
2.000%, 09/13/2016 f | 9,155,000 | 9,230,684 | ||||||
Nordea Bank AB: | ||||||||
2.250%, 03/20/2015 (Acquired 03/14/2012, Cost $2,993,610) * f | 3,000,000 | 3,060,150 | ||||||
3.125%, 03/20/2017 (Acquired 10/03/2012 through 08/21/2013, Cost $5,330,254) * f | 5,140,000 | 5,374,800 | ||||||
Paine Webber Group Inc., | ||||||||
7.990%, 06/09/2017 | 300,000 | 338,770 | ||||||
PNC Bank, National Association, | ||||||||
0.557%, 04/29/2016 | 4,000,000 | 4,001,944 | ||||||
PNC Funding Corp, | ||||||||
4.250%, 09/21/2015 | 450,000 | 476,143 | ||||||
Principal Financial Group, Inc., | ||||||||
1.850%, 11/15/2017 @ | 3,500,000 | 3,468,343 | ||||||
Prudential Covered Trust 2012-1, | ||||||||
2.997%, 09/30/2015 (Acquired 10/16/2012 through 07/15/2013, Cost $2,811,159) * | 2,741,250 | 2,826,171 | ||||||
Prudential Financial Inc.: | ||||||||
6.200%, 01/15/2015 | 3,629,000 | 3,832,043 | ||||||
6.100%, 06/15/2017 | 4,720,000 | 5,372,785 | ||||||
Rabobank Nederland: | ||||||||
0.723%, 03/18/2016 f | 3,000,000 | 3,011,223 | ||||||
3.375%, 01/19/2017 f | 1,092,000 | 1,149,756 | ||||||
Raymond James Financial, Inc., | ||||||||
4.250%, 04/15/2016 | 5,000,000 | 5,289,155 | ||||||
Regions Bank, | ||||||||
7.500%, 05/15/2018 | 250,000 | 295,822 | ||||||
Regions Financial Corporation, | ||||||||
5.750%, 06/15/2015 | 3,500,000 | 3,729,334 | ||||||
Santander Holdings USA, Inc., | ||||||||
3.000%, 09/24/2015 | 2,975,000 | 3,072,131 | ||||||
SLM Corporation, | ||||||||
5.375%, 05/15/2014 | 4,757,000 | 4,840,248 | ||||||
Societe Generale, | ||||||||
3.100%, 09/14/2015 (Acquired 02/06/2013 through 06/19/2013, Cost $3,570,777) * @ f | 3,475,000 | 3,608,200 | ||||||
Sumitomo Mitsui Banking Corporation: | ||||||||
1.350%, 07/18/2015 f | 2,000,000 | 2,016,086 | ||||||
3.150%, 07/22/2015 (Acquired 02/06/2013 through 08/06/2013, Cost $2,170,435) * f | 2,100,000 | 2,171,528 | ||||||
1.450%, 07/19/2016 @ f | 4,000,000 | 4,020,520 | ||||||
SunTrust Bank: | ||||||||
0.547%, 04/01/2015 | 7,080,000 | 7,045,004 | ||||||
0.528%, 08/24/2015 | 1,000,000 | 991,749 | ||||||
5.000%, 09/01/2015 | 2,396,000 | 2,538,569 | ||||||
SunTrust Banks, Inc., | ||||||||
6.000%, 09/11/2017 | 525,000 | 594,575 | ||||||
SUSA Partnership, L.P., | ||||||||
8.200%, 06/01/2017 | 714,000 | 844,834 | ||||||
Svenska Handelsbanken AB: | ||||||||
0.696%, 03/21/2016 f | 2,000,000 | 2,004,548 | ||||||
3.125%, 07/12/2016 f | 175,000 | 183,034 | ||||||
0.716%, 09/23/2016 f | 5,000,000 | 5,005,435 | ||||||
2.875%, 04/04/2017 f | 275,000 | 286,457 | ||||||
The Bank of New York Mellon Corporation, | ||||||||
0.469%, 03/04/2016 | 7,000,000 | 6,989,374 | ||||||
The Bank of Nova Scotia: | ||||||||
0.643%, 03/15/2016 f | 7,000,000 | 7,011,179 | ||||||
0.664%, 12/13/2016 f | 2,575,000 | 2,578,723 | ||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd., | ||||||||
3.850%, 01/22/2015 (Acquired 07/22/2013, Cost $10,307,280) * f | 10,000,000 | 10,315,700 | ||||||
The Bear Stearns Companies LLC: | ||||||||
5.300%, 10/30/2015 | 4,152,000 | 4,478,438 | ||||||
6.400%, 10/02/2017 | 7,700,000 | 8,936,320 | ||||||
7.250%, 02/01/2018 | 275,000 | 329,277 | ||||||
The Charles Schwab Corporation, | ||||||||
0.850%, 12/04/2015 | 3,000,000 | 3,008,343 | ||||||
The Dai-ichi Mutual Life Insurance Company, | ||||||||
5.730%, 03/17/2014 (Acquired 03/02/2011, Cost $4,069,525) * f | 4,050,000 | 4,082,846 | ||||||
The Goldman Sachs Group, Inc.: | ||||||||
6.250%, 09/01/2017 | 6,476,000 | 7,414,113 | ||||||
2.375%, 01/22/2018 | 1,000,000 | 1,003,801 | ||||||
2.900%, 07/19/2018 @ | 1,000,000 | 1,017,674 | ||||||
The Hartford Financial Services Group, Inc.: | ||||||||
4.000%, 03/30/2015 | 3,290,000 | 3,417,958 | ||||||
7.300%, 11/01/2015 | 233,000 | 258,912 | ||||||
5.500%, 10/15/2016 | 3,050,000 | 3,388,840 | ||||||
5.375%, 03/15/2017 | 2,140,000 | 2,358,104 | ||||||
The Huntington National Bank, | ||||||||
1.350%, 08/02/2016 | 5,000,000 | 4,998,155 | ||||||
The NASDAQ OMX Group Inc., | ||||||||
4.000%, 01/15/2015 | 6,140,000 | 6,300,543 | ||||||
The Retail Property Trust, | ||||||||
7.875%, 03/15/2016 (Acquired 05/21/2013, Cost $1,144,776) * | 1,000,000 | 1,129,852 | ||||||
The Royal Bank of Scotland Group PLC: | ||||||||
4.875%, 08/25/2014 (Acquired 08/18/2009 through 01/27/2011, Cost $2,999,198) * @ f | 3,000,000 | 3,075,258 | ||||||
2.550%, 09/18/2015 f | 3,875,000 | 3,963,183 | ||||||
Union Bank, National Association: | ||||||||
3.000%, 06/06/2016 | 6,200,000 | 6,483,452 | ||||||
2.125%, 06/16/2017 | 3,150,000 | 3,164,515 | ||||||
Wachovia Bank, National Association, | ||||||||
6.000%, 11/15/2017 | 125,000 | 144,237 | ||||||
Wells Fargo & Company: | ||||||||
3.676%, 06/15/2016 | 150,000 | 159,712 | ||||||
0.772%, 07/20/2016 | 8,000,000 | 8,028,416 | ||||||
Wells Fargo Bank, National Association, | ||||||||
Series AI, 4.750%, 02/09/2015 | 5,250,000 | 5,485,883 | ||||||
Westpac Banking Corporation: | ||||||||
0.950%, 01/12/2016 @ f | 3,000,000 | 3,005,136 | ||||||
2.000%, 08/14/2017 f | 2,000,000 | 2,011,944 | ||||||
Willis North America, Inc., | ||||||||
5.625%, 07/15/2015 | 6,650,000 | 7,097,419 | ||||||
614,824,596 | 30.6% | |||||||
Total Corporate Bonds | 1,373,261,056 | 68.3% |
Residential Mortgage-Backed Securities | ||||||||
U.S. Government Agency Issues | ||||||||
Federal Home Loan Mortgage Corporation (FHLMC), | ||||||||
Series 5, Class B, 0.867%, 05/15/2019 | 10,436 | 10,496 | ||||||
Federal National Mortgage Association (FNMA): | ||||||||
5.500%, 07/01/2015 | 40,460 | 42,943 | ||||||
Series 2004-W6, Class 1A4, 5.500%, 07/25/2034 | 652,460 | 665,055 | ||||||
Series 2004-W6, Class 1A6, 5.500%, 07/25/2034 | 423,165 | 433,950 | ||||||
1,152,444 | 0.1% | |||||||
Non-U.S. Government Agency Issues | ||||||||
Banc of America Mortgage Trust, | ||||||||
Series 2003-10, Class 3A1, 5.000%, 01/25/2019 | 1,346,563 | 1,396,138 | ||||||
Bank of America Alternative Loan Trust: | ||||||||
Series 2003-4, Class 2A1, 5.000%, 06/25/2018 | 194,396 | 200,316 | ||||||
Series 2004-2, Class 5A1, 5.500%, 03/25/2019 | 937,926 | 961,356 | ||||||
Series 2003-3, Class A1, 5.500%, 05/25/2033 | 2,102,957 | 2,165,547 | ||||||
Series 2004-B, Class 2A2, 2.869%, 03/25/2034 | 2,360,549 | 2,356,112 | ||||||
Countrywide Alternative Loan Trust: | ||||||||
Series 2004-12CB, Class 1A1, 5.000%, 07/25/2019 | 2,080,975 | 2,159,767 | ||||||
Series 2005-50CB, Class 4A1, 5.000%, 11/25/2020 § | 384,668 | 380,753 | ||||||
Series 2004-2CB, Class 1A8, 5.750%, 03/25/2034 | 8,960,070 | 9,129,845 | ||||||
Series 2004-J2, Class 3A3, 5.500%, 04/25/2034 | 412,053 | 426,957 | ||||||
Series 2005-73CB, Class 1A7, 5.500%, 01/25/2036 § | 165,805 | 152,744 | ||||||
Series 2006-28CB, Class A17, 6.000%, 10/25/2036 § | 1,219,773 | 936,296 | ||||||
HSI Asset Securitization Corp. Trust, | ||||||||
Series 2005-NC1, Class 2A3, 0.525%, 07/25/2035 | 2,047,972 | 2,037,085 | ||||||
J.P. Morgan Mortgage Trust, | ||||||||
Series 2005-A4, Class 1A1, 5.243%, 07/25/2035 | 2,751,410 | 2,807,084 | ||||||
MASTR Alternative Loan Trust: | ||||||||
Series 2003-5, Class 7A1, 5.000%, 07/25/2018 | 12,607,177 | 13,140,347 | ||||||
Series 2003-9, Class 3A1, 4.750%, 11/25/2018 | 5,982,619 | 6,092,634 | ||||||
Series 2003-5, Class 4A1, 5.500%, 07/25/2033 | 9,273,386 | 9,727,420 | ||||||
Merrill Lynch Mortgage Investors Trust, | ||||||||
Series 2005-A8, Class A1C1, 5.250%, 08/25/2036 | 25,196 | 25,186 | ||||||
Washington Mutual Mortgage Pass Through Certificates: | ||||||||
Series 2004-CB4, Class 21A, 5.500%, 12/25/2019 | 166,531 | 173,550 | ||||||
Series 2004-CB4, Class 22A, 6.000%, 12/25/2019 | 268,357 | 282,385 | ||||||
54,551,522 | 2.7% |
Asset Backed Securities | ||||||||
Accredited Mortgage Loan Trust, | ||||||||
Series 2006-2, Class A3, 0.315%, 09/25/2036 | 10,942,014 | 10,542,412 | ||||||
Argent Securities Inc., | ||||||||
Series 2005-W2, Class A2B1, 0.365%, 10/25/2035 | 2,780,307 | 2,730,790 | ||||||
Bombardier Capital Mortgage Securitization, | ||||||||
Series 1998-A, Class A3, 6.230%, 04/15/2028 | 10,212 | 10,375 | ||||||
Carrington Mortgage Loan Trust, | ||||||||
Series 2006-OPT1, Class A3, 0.345%, 02/25/2036 | 7,544,615 | 7,068,814 | ||||||
Citifinancial Mortgage Securities Inc, | ||||||||
Series 2003-4, Class AF6, 4.493%, 10/25/2033 | 1,478,860 | 1,507,586 | ||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||
Series 2006-WFH3, Class A3, 0.315%, 10/25/2036 | 2,493,703 | 2,474,507 | ||||||
Conseco Financial Corp.: | ||||||||
Series 1996-3, Class A5, 7.350%, 05/15/2027 | 15,376 | 15,486 | ||||||
Series 1998-2, Class A5, 6.240%, 12/01/2028 | 26,264 | 27,027 | ||||||
Series 1997-5, Class A6, 6.820%, 05/15/2029 | 320,210 | 328,569 | ||||||
Series 1998-3, Class A5, 6.220%, 03/01/2030 | 329,761 | 351,320 | ||||||
Countrywide Asset-Backed Certificates: | ||||||||
Series 2006-13, Class 1AF3, 5.120%, 01/25/2037 § | 1,837,909 | 1,939,691 | ||||||
Series 2006-9, Class 1AF3, 5.859%, 10/25/2046 § | 1,432,144 | 967,889 | ||||||
Credit Based Asset Servicing and Securitization LLC, | ||||||||
Series 2005-CB8, Class AF2, 4.416%, 12/25/2035 | 325,260 | 304,844 | ||||||
GSAA Trust, | ||||||||
Series 2005-8, Class A4, 0.435%, 06/25/2035 | 12,922,206 | 11,869,563 | ||||||
Home Equity Asset Trust, | ||||||||
Series 2006-4, Class 2A3, 0.335%, 08/25/2036 | 5,220,556 | 5,094,500 | ||||||
J.P. Morgan Mortgage Acquisition Trust, | ||||||||
Series 2007-CH1, Class AV4, 0.295%, 11/25/2036 | 3,970,588 | 3,926,074 | ||||||
Master Credit Card Trust II: | ||||||||
Series 2012-2A, Class A, 0.780%, 04/21/2017 (Acquired 10/24/2012, Cost $6,723,674) * f | 6,725,000 | 6,713,951 | ||||||
Series 2013-3A, Class A, 0.595%, 01/22/2018 (Acquired 07/25/2013, Cost $8,000,000) * f | 8,000,000 | 8,000,000 | ||||||
Mastr Asset Backed Securities Trust, | ||||||||
Series 2006-AB1, Class A2, 0.395%, 02/25/2036 | 1,609,231 | 1,574,840 | ||||||
Morgan Stanley ABS Capital I Trust, | ||||||||
Series 2005-HE2, Class A3B, 0.385%, 01/25/2035 | 8,206,362 | 7,916,357 | ||||||
Nationstar Home Equity Loan Trust, | ||||||||
Series 2006-B, Class AV3, 0.335%, 09/25/2036 | 11,907,627 | 11,594,349 | ||||||
RAMP Trust: | ||||||||
Series 2003-RS7, Class AI6, 5.340%, 08/25/2033 | 101,288 | 101,593 | ||||||
Series 2003-RS11, Class AI7, 4.828%, 12/25/2033 | 587,921 | 593,257 | ||||||
RASC Trust: | ||||||||
Series 2005-AHL2, Class A3, 0.515%, 10/25/2035 | 12,150,000 | 11,514,312 | ||||||
Series 2006-KS1, Class A4, 0.465%, 02/25/2036 | 5,139,000 | 4,962,619 | ||||||
Renaissance Home Equity Loan Trust, | ||||||||
Series 2007-2, Class AF2, 5.675%, 06/25/2037 | 1,981,272 | 1,048,887 | ||||||
Soundview Home Equity Loan Trust, | ||||||||
Series 2005-OPT4, Class 2A3, 0.425%, 12/25/2035 | 3,624,915 | 3,490,757 | ||||||
Specialty Underwriting & Residential Finance, | ||||||||
Series 2006-BC1, Class A2C, 0.365%, 12/25/2036 | 4,370,133 | 4,304,813 | ||||||
Springleaf Mortgage Loan Trust: | ||||||||
Series 2012-1A, Class A, 2.667%, 09/25/2057 (Acquired 04/11/2012, Cost $2,833,132) * | 2,833,165 | 2,894,962 | ||||||
Series 2012-2A, Class A, 2.220%, 10/25/2057 (Acquired 07/31/2012, Cost $2,689,959) * | 2,690,263 | 2,740,639 | ||||||
116,610,783 | 5.8% | |||||||
Commercial Mortgage-Backed Securities | ||||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 18,110,000 | 18,997,879 | ||||||
CD Commercial Mortgage Trust, | ||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 17,551,848 | 18,609,610 | ||||||
COMM Mortgage Trust, | ||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | 13,407,000 | 14,099,418 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 15,208,250 | 15,965,104 | ||||||
DBUBS Mortgage Trust, | ||||||||
Series 2011-LC3A, Class A2, 3.642%, 08/10/2044 | 7,075,000 | 7,432,493 | ||||||
FHLMC Multifamily Structured Pass Through Certificates, | ||||||||
Series K-701, Class A2, 3.882%, 11/25/2017 | 10,000,000 | 10,762,920 | ||||||
GE Capital Commercial Mortgage Corporation, | ||||||||
Series 2004-C3, Class A4, 5.189%, 07/10/2039 | 6,382,092 | 6,468,562 | ||||||
J.P. Morgan Chase Commercial Mortgage Trust, | ||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 10,549,000 | 11,047,577 | ||||||
Morgan Stanley Capital I Trust, | ||||||||
Series 2005-HQ7, Class A4, 5.207%, 11/14/2042 | 13,020,000 | 13,693,837 | ||||||
RBSCF Trust, | ||||||||
Series 2010-MB1, Class A1, 2.367%, 04/15/2024 (Acquired 04/09/2010 through 10/25/2013, Cost $3,065,950) * | 3,051,944 | 3,080,699 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 9,912,000 | 10,551,334 | ||||||
130,709,433 | 6.5% | |||||||
Total Long-Term Investments (Cost $1,945,062,241) | 1,949,823,113 | 97.0% | ||||||
SHORT-TERM INVESTMENTS | Shares | |||||||
Money Market Mutual Funds | ||||||||
Dreyfus Institutional Cash Advantage Fund, 0.06% « | 23,737,892 | 23,737,892 | ||||||
Short-Term Investments Trust - Liquid Assets Portfolio, 0.07% « | 39,000,000 | 39,000,000 | ||||||
Total Short-Term Investments (Cost $62,737,892) | 62,737,892 | 3.1% | ||||||
INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING | ||||||||
Investment Companies | ||||||||
Mount Vernon Securities Lending Trust Prime Portfolio, 0.19% « | 204,124,977 | 204,124,977 | ||||||
Total Investment Companies (Cost $204,124,977) | 204,124,977 | 10.2% | ||||||
Total Investments Purchased With Cash Proceeds From | ||||||||
Securities Lending (Cost $204,124,977) | 204,124,977 | 10.2% | ||||||
Total Investments (Cost $2,211,925,110) | 2,216,685,982 | 110.3% | ||||||
Liabilities in Excess of Other Assets | (207,721,393) | (10.3)% | ||||||
TOTAL NET ASSETS | $ | 2,008,964,589 | 100.0% | |||||
Notes to Schedule of Investments | ||||||||
* | Restricted Security Deemed Liquid | |||||||
@ | This security or portion of this security is out on loan at December 31, 2013. | |||||||
f | Foreign Security | |||||||
« | 7-Day Yield | |||||||
§ | Security in Default |
Baird Intermediate Bond Fund | ||||||||
Schedule of Investments | ||||||||
December 31, 2013 | ||||||||
Principal | % of | |||||||
Amount | Value | Net Assets | ||||||
LONG-TERM INVESTMENTS | ||||||||
U.S. Treasury Securities | ||||||||
U.S. Treasury Bonds: | ||||||||
3.875%, 05/15/2018 @ | $ | 9,700,000 | $ | 10,691,224 | ||||
9.125%, 05/15/2018 @ | 13,950,000 | 18,505,540 | ||||||
1.250%, 04/30/2019 @ | 224,875,000 | 217,865,196 | ||||||
7.875%, 02/15/2021 @ | 31,000,000 | 42,179,375 | ||||||
289,241,335 | 25.0% | |||||||
U.S. Government Agency Issues | ||||||||
Federal Home Loan Mortgage Corporation (FHLMC): | ||||||||
1.000%, 06/29/2017 | 9,200,000 | 9,144,818 | ||||||
1.375%, 05/01/2020 @ | 10,000,000 | 9,375,140 | ||||||
2.375%, 01/13/2022 @ | 300,000 | 286,790 | ||||||
18,806,748 | 1.6% | |||||||
Taxable Municipal Bonds | ||||||||
Alaska Municipal Bond Bank Authority: | ||||||||
4.309%, 08/01/2018 | 1,000,000 | 1,064,720 | ||||||
4.459%, 08/01/2019 | 1,340,000 | 1,422,772 | ||||||
California Qualified School Construction Bonds, | ||||||||
5.955%, 03/01/2019 | 3,375,000 | 3,596,906 | ||||||
California School Finance Authority, | ||||||||
4.426%, 07/01/2020 | 2,500,000 | 2,597,025 | ||||||
California State: | ||||||||
5.450%, 04/01/2015 | 900,000 | 954,234 | ||||||
5.500%, 03/01/2016 | 500,000 | 546,850 | ||||||
Central Valley Support Joint Power Agency, | ||||||||
5.326%, 09/01/2022 | 2,000,000 | 2,033,380 | ||||||
Contra Costa County California Pension Obligation, | ||||||||
5.140%, 06/01/2017 | 2,500,000 | 2,689,000 | ||||||
Dallas Independent School District, | ||||||||
4.950%, 02/15/2022 (Callable 02/15/2021) | 1,965,000 | 2,157,963 | ||||||
Davie Florida Water & Sewer Revenue, | ||||||||
6.062%, 10/01/2025 (Callable 10/01/2020) | 1,000,000 | 1,052,060 | ||||||
Government Development Bank for Puerto Rico, | ||||||||
4.704%, 05/01/2016 | 3,525,000 | 2,891,593 | ||||||
New Hampshire Housing Finance Authority, | ||||||||
2.600%, 01/01/2020 | 2,080,000 | 2,034,822 | ||||||
North Carolina Housing Finance Agency, | ||||||||
4.000%, 01/01/2030 (Callable 07/01/2021) | 505,000 | 493,042 | ||||||
North East Independent School District Texas, | ||||||||
5.240%, 08/01/2027 | 2,100,000 | 2,285,010 | ||||||
Portigon AG, | ||||||||
4.796%, 07/15/2015 f | 1,811,000 | 1,913,235 | ||||||
State of Illinois, | ||||||||
3.636%, 02/01/2014 | 5,150,000 | 5,161,793 | ||||||
Tobacco Settlement Authority Iowa, | ||||||||
6.500%, 06/01/2023 (Callable 06/01/2015) | 1,105,000 | 1,072,458 | ||||||
33,966,863 | 3.0% | |||||||
Other Government Related Securities | ||||||||
Corp Andina de Fomento, | ||||||||
4.375%, 06/15/2022 f | 680,000 | 673,323 | ||||||
KFW, | ||||||||
4.875%, 06/17/2019 f | 3,250,000 | 3,708,900 | ||||||
Korea Hydro & Nuclear Power Co., Ltd., | ||||||||
6.250%, 06/17/2014 (Acquired 06/10/2009, Cost $989,350) * f | 1,000,000 | 1,023,173 | ||||||
Petrobras International Finance Company, | ||||||||
3.875%, 01/27/2016 f | 4,175,000 | 4,298,004 | ||||||
The Korea Development Bank, | ||||||||
3.875%, 05/04/2017 f | 2,150,000 | 2,266,164 | ||||||
United Mexican States, | ||||||||
5.125%, 01/15/2020 f | 2,650,000 | 2,936,200 | ||||||
14,905,764 | 1.3% | |||||||
Corporate Bonds | ||||||||
Industrials | ||||||||
Altera Corporation, | ||||||||
2.500%, 11/15/2018 | 2,000,000 | 1,983,072 | ||||||
America Movil, S.A.B. de C.V., | ||||||||
1.244%, 09/12/2016 f | 3,200,000 | 3,233,197 | ||||||
Ameritech Capital Funding Debentures: | ||||||||
9.100%, 06/01/2016 | 590,400 | 660,009 | ||||||
6.450%, 01/15/2018 | 2,758,000 | 3,125,181 | ||||||
Anadarko Petroleum Corporation: | ||||||||
5.950%, 09/15/2016 | 2,270,000 | 2,528,928 | ||||||
6.375%, 09/15/2017 | 2,000,000 | 2,296,138 | ||||||
6.950%, 06/15/2019 | 1,000,000 | 1,190,231 | ||||||
Anglo American Capital PLC: | ||||||||
9.375%, 04/08/2014 (Acquired 09/05/2012, Cost $1,225,147) * f | 1,200,000 | 1,226,602 | ||||||
9.375%, 04/08/2019 (Acquired 07/11/2012, Cost $2,544,881) * f | 2,000,000 | 2,534,200 | ||||||
Apple, Inc., | ||||||||
2.400%, 05/03/2023 @ | 2,000,000 | 1,798,422 | ||||||
Boston Scientific Corporation, | ||||||||
4.125%, 10/01/2023 @ | 3,000,000 | 2,975,730 | ||||||
BP Capital Markets P.L.C.: | ||||||||
3.200%, 03/11/2016 f | 375,000 | 393,780 | ||||||
4.750%, 03/10/2019 f @ | 2,500,000 | 2,786,592 | ||||||
3.245%, 05/06/2022 f | 1,000,000 | 969,262 | ||||||
British Telecommunications PLC, | ||||||||
5.950%, 01/15/2018 f | 2,000,000 | 2,286,936 | ||||||
Bunge Limited Finance Corp.: | ||||||||
5.350%, 04/15/2014 | 1,557,000 | 1,576,790 | ||||||
5.100%, 07/15/2015 | 1,085,000 | 1,148,517 | ||||||
4.100%, 03/15/2016 | 2,505,000 | 2,645,132 | ||||||
3.200%, 06/15/2017 | 1,300,000 | 1,337,007 | ||||||
Bunge N.A. Finance L.P., | ||||||||
5.900%, 04/01/2017 | 425,000 | 464,031 | ||||||
Celgene Corporation, | ||||||||
4.000%, 08/15/2023 @ | 2,000,000 | 1,969,196 | ||||||
Coca-Cola FEMSA, S.A.B. de C.V., | ||||||||
2.375%, 11/26/2018 f @ | 3,375,000 | 3,350,065 | ||||||
Comcast Cable Communications LLC, | ||||||||
8.875%, 05/01/2017 | 500,000 | 613,998 | ||||||
Comcast Corporation: | ||||||||
6.500%, 01/15/2017 | 175,000 | 200,480 | ||||||
2.850%, 01/15/2023 @ | 1,425,000 | 1,317,565 | ||||||
Computer Sciences Corporation, | ||||||||
2.500%, 09/15/2015 @ | 4,500,000 | 4,593,227 | ||||||
ConAgra Foods, Inc., | ||||||||
7.000%, 04/15/2019 | 1,000,000 | 1,185,111 | ||||||
Cox Communications, Inc., | ||||||||
3.250%, 12/15/2022 (Acquired 11/26/2012, Cost $3,594,456) * | 3,600,000 | 3,257,582 | ||||||
CVS Caremark Corporation, | ||||||||
4.000%, 12/05/2023 | 4,425,000 | 4,415,637 | ||||||
D.R. Horton, Inc., | ||||||||
6.500%, 04/15/2016 | 1,000,000 | 1,092,500 | ||||||
Daimler Finance North America LLC, | ||||||||
2.250%, 07/31/2019 (Acquired 07/25/2012, Cost $2,285,234) * | 2,300,000 | 2,254,214 | ||||||
Deutsche Telekom International Finance B.V.: | ||||||||
3.125%, 04/11/2016 (Acquired 04/04/2011, Cost $2,197,778) * f | 2,200,000 | 2,291,371 | ||||||
6.000%, 07/08/2019 f @ | 1,300,000 | 1,504,981 | ||||||
Devon Energy Corporation, | ||||||||
6.300%, 01/15/2019 | 760,000 | 880,732 | ||||||
DIRECTV Holdings LLC / DIRECTV Financing Co., Inc., | ||||||||
3.500%, 03/01/2016 | 250,000 | 262,422 | ||||||
Donnelley (R.R.) & Sons Co.: | ||||||||
8.600%, 08/15/2016 | 1,000,000 | 1,157,500 | ||||||
6.125%, 01/15/2017 | 43,000 | 46,870 | ||||||
7.625%, 06/15/2020 @ | 1,000,000 | 1,087,500 | ||||||
Ecolab Inc., | ||||||||
1.450%, 12/08/2017 | 4,000,000 | 3,908,884 | ||||||
Express Scripts Holding Co, | ||||||||
2.650%, 02/15/2017 @ | 2,000,000 | 2,061,350 | ||||||
Express Scripts Holding Company, | ||||||||
7.250%, 06/15/2019 | 1,000,000 | 1,212,973 | ||||||
Federal Express Corp. 1995 Pass Through Trust, | ||||||||
Series B2, 7.110%, 01/02/2014 | 234,934 | 234,973 | ||||||
Federal Express Corp. 1998 Pass Through Trust, | ||||||||
Series 981B, 6.845%, 01/15/2019 | 2,342,175 | 2,584,541 | ||||||
FedEx Corporation, | ||||||||
7.375%, 01/15/2014 | 2,250,000 | 2,255,175 | ||||||
Fidelity National Information Services, Inc., | ||||||||
7.875%, 07/15/2020 | 4,800,000 | 5,236,603 | ||||||
Fiserv, Inc.: | ||||||||
4.750%, 06/15/2021 | 1,630,000 | 1,660,085 | ||||||
3.500%, 10/01/2022 | 300,000 | 278,582 | ||||||
FMC Corporation, | ||||||||
4.100%, 02/01/2024 | 2,000,000 | 1,986,036 | ||||||
Ford Motor Credit Company LLC, | ||||||||
2.500%, 01/15/2016 @ | 3,000,000 | 3,077,829 | ||||||
Freeport-McMoRan Copper & Gold Inc.: | ||||||||
3.100%, 03/15/2020 | 2,000,000 | 1,943,064 | ||||||
3.875%, 03/15/2023 | 1,100,000 | 1,040,209 | ||||||
Glencore Funding LLC: | ||||||||
6.000%, 04/15/2014 (Acquired 03/31/2004 through 02/02/2010, Cost $3,446,845) * | 3,456,000 | 3,505,697 | ||||||
2.500%, 01/15/2019 (Acquired 05/22/2013 through 10/29/2013, Cost $4,292,532) * | 4,400,000 | 4,260,599 | ||||||
GTE Corporation: | ||||||||
6.840%, 04/15/2018 | 1,670,000 | 1,945,143 | ||||||
8.750%, 11/01/2021 | 2,150,000 | 2,721,706 | ||||||
Hanson PLC Notes, | ||||||||
6.125%, 08/15/2016 f | 650,000 | 713,375 | ||||||
Hess Corporation, | ||||||||
8.125%, 02/15/2019 @ | 1,200,000 | 1,490,537 | ||||||
Hewlett-Packard Co., | ||||||||
3.300%, 12/09/2016 | 3,500,000 | 3,663,191 | ||||||
Historic Time Warner Inc., | ||||||||
6.875%, 06/15/2018 | 392,000 | 466,048 | ||||||
Hyundai Capital Services Inc., | ||||||||
6.000%, 05/05/2015 (Acquired 03/27/2013 through 05/30/2013, Cost $5,883,634) * f | 5,549,000 | 5,901,317 | ||||||
Ingersoll-Rand Company Debentures, | ||||||||
6.391%, 11/15/2027 f | 1,195,000 | 1,364,161 | ||||||
Ingersoll-Rand Global Holding Company, Ltd., | ||||||||
2.875%, 01/15/2019 (Acquired 06/17/2013, Cost $2,995,500) * f | 3,000,000 | 2,956,881 | ||||||
Ingredion Incorporated, | ||||||||
1.800%, 09/25/2017 | 1,275,000 | 1,242,686 | ||||||
Johnson Controls Inc.: | ||||||||
5.500%, 01/15/2016 | 1,625,000 | 1,765,127 | ||||||
4.250%, 03/01/2021 | 2,000,000 | 2,078,040 | ||||||
Kraft Foods Group, Inc., | ||||||||
3.500%, 06/06/2022 | 2,000,000 | 1,949,188 | ||||||
Laboratory Corporation of America Holdings, | ||||||||
4.625%, 11/15/2020 | 400,000 | 418,391 | ||||||
Lafarge SA: | ||||||||
6.200%, 07/09/2015 (Acquired 07/06/2010, Cost $999,140) * f | 1,000,000 | 1,060,000 | ||||||
6.500%, 07/15/2016 f | 625,000 | 690,625 | ||||||
LeasePlan Corporation N.V.: | ||||||||
3.000%, 10/23/2017 (Acquired 02/07/2013, Cost $4,046,912) * f | 4,000,000 | 4,029,180 | ||||||
2.500%, 05/16/2018 (Acquired 05/29/2013, Cost $987,016) * f | 1,000,000 | 972,200 | ||||||
Limited Brands, Inc., | ||||||||
5.250%, 11/01/2014 | 180,000 | 185,625 | ||||||
Martin Marietta Materials, Inc., | ||||||||
6.600%, 04/15/2018 | 75,000 | 85,219 | ||||||
Masco Corporation, | ||||||||
6.125%, 10/03/2016 | 2,200,000 | 2,464,000 | ||||||
MeadWestvaco Corporation, | ||||||||
7.375%, 09/01/2019 | 2,033,000 | 2,412,895 | ||||||
Medco Health Solutions, Inc.: | ||||||||
2.750%, 09/15/2015 | 215,000 | 221,938 | ||||||
7.125%, 03/15/2018 | 1,850,000 | 2,198,296 | ||||||
Murphy Oil Corporation, | ||||||||
3.700%, 12/01/2022 | 5,000,000 | 4,620,025 | ||||||
Mylan Inc.: | ||||||||
6.000%, 11/15/2018 (Acquired 01/15/2013 through 02/12/2013, Cost $4,268,859) * | 4,000,000 | 4,262,380 | ||||||
7.875%, 07/15/2020 (Acquired 07/22/2013, Cost $1,129,893) * | 1,000,000 | 1,131,542 | ||||||
Nabors Industries, Inc., | ||||||||
6.150%, 02/15/2018 | 825,000 | 927,076 | ||||||
Noble Energy, Inc.: | ||||||||
8.250%, 03/01/2019 | 1,000,000 | 1,242,946 | ||||||
4.150%, 12/15/2021 | 450,000 | 462,712 | ||||||
Pearson Dollar Finance PLC, | ||||||||
5.700%, 06/01/2014 (Acquired 09/28/2005 through 12/14/2007, Cost $922,252) * f | 925,000 | 942,380 | ||||||
Petrohawk Energy Corporation, | ||||||||
7.250%, 08/15/2018 | 4,000,000 | 4,312,000 | ||||||
Plains Exploration & Production Company, | ||||||||
7.625%, 04/01/2020 | 2,000,000 | 2,207,244 | ||||||
Plum Creek Timberlands, L.P., | ||||||||
5.875%, 11/15/2015 | 2,445,000 | 2,646,617 | ||||||
POSCO, | ||||||||
5.250%, 04/14/2021 (Acquired 04/08/2011 through 09/22/2011, Cost $2,977,929) * f | 3,000,000 | 3,239,418 | ||||||
Rio Tinto Alcan, Inc., | ||||||||
5.000%, 06/01/2015 f | 450,000 | 475,522 | ||||||
Rio Tinto Finance (USA) Limited: | ||||||||
9.000%, 05/01/2019 f | 2,975,000 | 3,884,225 | ||||||
3.500%, 11/02/2020 f @ | 500,000 | 510,487 | ||||||
RPM United Kingdom G.P., | ||||||||
6.700%, 11/01/2015 (Acquired 03/06/2013, Cost $3,608,785) * f | 3,300,000 | 3,584,120 | ||||||
Schneider Electric SA, | ||||||||
2.950%, 09/27/2022 (Acquired 09/20/2012, Cost $1,994,680) * f | 2,000,000 | 1,862,446 | ||||||
Southwestern Bell Telephone, L.P., | ||||||||
7.000%, 07/01/2015 | 125,000 | 136,090 | ||||||
Sprint Nextel Corporation, | ||||||||
6.000%, 12/01/2016 | 500,000 | 545,625 | ||||||
Sysco Corporation, | ||||||||
2.600%, 06/12/2022 | 150,000 | 136,738 | ||||||
TCI Communications, Inc., | ||||||||
8.750%, 08/01/2015 | 3,498,000 | 3,934,064 | ||||||
Teck Resources Limited, | ||||||||
3.150%, 01/15/2017 f | 1,000,000 | 1,035,364 | ||||||
Telecom Italia Capital, SA, | ||||||||
5.250%, 10/01/2015 f | 4,425,000 | 4,651,781 | ||||||
Telefonica Emisiones S.A.U.: | ||||||||
6.421%, 06/20/2016 f | 3,450,000 | 3,844,508 | ||||||
6.221%, 07/03/2017 f @ | 1,000,000 | 1,127,321 | ||||||
3.192%, 04/27/2018 f | 1,000,000 | 1,018,417 | ||||||
Teva Pharmaceutical Finance IV, LLC, | ||||||||
2.250%, 03/18/2020 @ | 1,250,000 | 1,188,631 | ||||||
The Mosaic Company, | ||||||||
4.250%, 11/15/2023 | 2,000,000 | 1,975,192 | ||||||
Time Warner Cable Inc., | ||||||||
5.850%, 05/01/2017 @ | 1,000,000 | 1,090,698 | ||||||
Time Warner, Inc.: | ||||||||
4.700%, 01/15/2021 | 1,325,000 | 1,406,735 | ||||||
4.750%, 03/29/2021 | 2,000,000 | 2,132,744 | ||||||
Toyota Motor Credit Corporation, | ||||||||
2.050%, 01/12/2017 | 2,375,000 | 2,427,231 | ||||||
TSMC Global Ltd, | ||||||||
1.625%, 04/03/2018 (Acquired 03/27/2013, Cost $3,297,789) * f | 3,300,000 | 3,160,199 | ||||||
Tyco Electronics Group S.A., | ||||||||
6.550%, 10/01/2017 f | 1,245,000 | 1,424,773 | ||||||
United AirLines, Inc. Pass Through Trust, | ||||||||
Series 91A2, 10.020%, 03/22/2014 | 89,785 | 49,382 | ||||||
Vale Overseas Limited: | ||||||||
6.250%, 01/23/2017 f | 1,650,000 | 1,830,076 | ||||||
4.375%, 01/11/2022 f @ | 2,425,000 | 2,356,113 | ||||||
Valero Energy Corporation, | ||||||||
9.375%, 03/15/2019 | 1,898,000 | 2,446,114 | ||||||
Verizon Communications, Inc., | ||||||||
5.500%, 04/01/2017 | 1,000,000 | 1,127,333 | ||||||
Viacom Inc., | ||||||||
6.250%, 04/30/2016 | 500,000 | 557,536 | ||||||
Vulcan Materials Co., | ||||||||
7.000%, 06/15/2018 | 2,000,000 | 2,275,000 | ||||||
Wabtec Corporation, | ||||||||
4.375%, 08/15/2023 | 3,000,000 | 2,964,903 | ||||||
Walgreen Co., | ||||||||
5.250%, 01/15/2019 | 637,000 | 712,132 | ||||||
Warner Chilcott Co LLC / Warner Chilcott Finance LLC, | ||||||||
7.750%, 09/15/2018 f | 5,000,000 | 5,412,500 | ||||||
Waste Management, Inc., | ||||||||
7.375%, 03/11/2019 | 5,000,000 | 6,047,305 | ||||||
Wesfarmers Limited, | ||||||||
1.874%, 03/20/2018 (Acquired 03/13/2013, Cost $3,900,000) * f | 3,900,000 | 3,824,941 | ||||||
Xerox Corporation: | ||||||||
8.250%, 05/15/2014 | 3,000,000 | 3,080,403 | ||||||
1.058%, 05/16/2014 | 2,000,000 | 2,001,654 | ||||||
Xstrata Canada Corporation, | ||||||||
6.000%, 10/15/2015 f | 1,024,000 | 1,108,852 | ||||||
Yara International ASA, | ||||||||
5.250%, 12/15/2014 (Acquired 01/15/2013 through 05/03/2013, Cost $1,688,709) * f | 1,625,000 | 1,685,270 | ||||||
251,909,842 | 21.8% |
Utility | ||||||||
Ameren Corporation, | ||||||||
8.875%, 05/15/2014 | 4,500,000 | 4,629,047 | ||||||
Centrais Eletricas Brasileiras SA, | ||||||||
5.750%, 10/27/2021 (Acquired 10/20/2011 through 10/25/2011, Cost $1,152,044) * f @ | 1,150,000 | 1,116,938 | ||||||
Commonwealth Edison Company, | ||||||||
Series 104, 5.950%, 08/15/2016 | 375,000 | 419,253 | ||||||
DCP Midstream, LLC, | ||||||||
9.750%, 03/15/2019 (Acquired 10/15/2012, Cost $2,020,819) * | 1,600,000 | 1,990,779 | ||||||
Dominion Resources, Inc., | ||||||||
Series 07-A, 6.000%, 11/30/2017 | 966,000 | 1,105,611 | ||||||
DTE Energy Company, | ||||||||
7.625%, 05/15/2014 | 1,411,000 | 1,446,790 | ||||||
El Paso Pipeline Partners Operating Company, L.L.C., | ||||||||
4.100%, 11/15/2015 @ | 3,000,000 | 3,155,301 | ||||||
Energy Transfer Partners, L.P.: | ||||||||
8.500%, 04/15/2014 | 3,580,000 | 3,655,319 | ||||||
5.950%, 02/01/2015 | 1,336,000 | 1,407,539 | ||||||
9.700%, 03/15/2019 | 2,457,000 | 3,181,223 | ||||||
Enterprise Products Operating LLC, | ||||||||
Series O, 9.750%, 01/31/2014 | 3,824,000 | 3,850,749 | ||||||
Exelon Corporation, | ||||||||
4.900%, 06/15/2015 | 1,000,000 | 1,054,303 | ||||||
Kinder Morgan Finance, | ||||||||
5.700%, 01/05/2016 f @ | 2,500,000 | 2,685,330 | ||||||
Korea Electric Power Corporation, | ||||||||
6.750%, 08/01/2027 f | 300,000 | 357,971 | ||||||
Korea Gas Corporation, | ||||||||
2.875%, 07/29/2018 (Acquired 07/22/2013, Cost $994,790) * f | 1,000,000 | 1,007,205 | ||||||
Maritimes & Northeast Pipeline, LLC, | ||||||||
7.500%, 05/31/2014 (Acquired 06/19/2013, Cost $2,775,225) * | 2,715,240 | 2,774,296 | ||||||
National Grid PLC, | ||||||||
6.300%, 08/01/2016 f | 3,925,000 | 4,413,992 | ||||||
National Rural Utilities Corporation, | ||||||||
10.375%, 11/01/2018 | 3,144,000 | 4,251,895 | ||||||
Nisource Finance Corp., | ||||||||
4.450%, 12/01/2021 | 2,000,000 | 2,026,494 | ||||||
ONEOK, Inc., | ||||||||
5.200%, 06/15/2015 | 3,047,000 | 3,217,857 | ||||||
Petrofac Limited, | ||||||||
3.400%, 10/10/2018 (Acquired 10/03/2013, Cost $3,486,945) * f | 3,500,000 | 3,525,042 | ||||||
PPL Capital Funding, Inc., | ||||||||
3.400%, 06/01/2023 | 2,475,000 | 2,302,968 | ||||||
PPL Energy Supply, LLC, | ||||||||
Series A, 5.700%, 10/15/2015 | 1,950,000 | 2,057,583 | ||||||
PSEG Power LLC: | ||||||||
5.320%, 09/15/2016 @ | 994,000 | 1,093,679 | ||||||
5.125%, 04/15/2020 | 220,000 | 239,922 | ||||||
Public Service Company of New Mexico, | ||||||||
7.950%, 05/15/2018 | 2,820,000 | 3,352,047 | ||||||
RGS (I&M) Funding Corporation Debentures, | ||||||||
Series F*, 9.820%, 12/07/2022 | 507,016 | 617,936 | ||||||
Rockies Express Pipeline LLC: | ||||||||
3.900%, 04/15/2015 (Acquired 02/17/2011, Cost $3,000,152) * @ | 3,000,000 | 3,000,000 | ||||||
5.625%, 04/15/2020 (Acquired 03/17/2010, Cost $999,110) * @ | 1,000,000 | 887,500 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, 08/15/2014 | 2,700,000 | 2,780,282 | ||||||
Sunoco, Inc., | ||||||||
5.750%, 01/15/2017 | 1,175,000 | 1,277,398 | ||||||
Texas Eastern Transmission, LP, | ||||||||
6.000%, 09/15/2017 (Acquired 11/07/2013 through 11/22/2013, Cost $2,224,522) * | 1,948,000 | 2,210,614 | ||||||
Trans-Allegheny Interstate Line Company, | ||||||||
4.000%, 01/15/2015 (Acquired 01/19/2010 through 02/22/2013, Cost $3,697,179) * | 3,673,000 | 3,777,982 | ||||||
TransCanada PipeLines Ltd., | ||||||||
9.875%, 01/01/2021 f | 150,000 | 204,132 | ||||||
West Penn Power Company, | ||||||||
5.875%, 08/15/2016 (Acquired 10/25/2010, Cost $2,138,449) * | 2,000,000 | 2,195,790 | ||||||
Williams Partners L.P.: | ||||||||
5.250%, 03/15/2020 @ | 1,000,000 | 1,093,474 | ||||||
4.125%, 11/15/2020 | 350,000 | 358,812 | ||||||
78,723,053 | 6.8% |
Finance | ||||||||
Abbey National Treasury Services plc, | ||||||||
3.050%, 08/23/2018 f | 1,050,000 | 1,078,907 | ||||||
ABN AMRO Bank N.V.: | ||||||||
4.250%, 02/02/2017 (Acquired 11/22/2013, Cost $4,853,428) * f | 4,500,000 | 4,824,369 | ||||||
2.500%, 10/30/2018 (Acquired 10/23/2013, Cost $798,728) * f | 800,000 | 798,272 | ||||||
AEGON N.V., | ||||||||
4.625%, 12/01/2015 f | 795,000 | 848,100 | ||||||
Ally Financial Inc., | ||||||||
6.750%, 12/01/2014 @ | 200,000 | 209,250 | ||||||
American International Group, Inc.: | ||||||||
8.250%, 08/15/2018 | 1,000,000 | 1,250,880 | ||||||
4.875%, 06/01/2022 | 3,000,000 | 3,224,469 | ||||||
AmSouth Bancorp, | ||||||||
6.750%, 11/01/2025 | 630,000 | 660,515 | ||||||
ANZ New Zealand (Int'l) Limited: | ||||||||
3.125%, 08/10/2015 (Acquired 02/28/2012, Cost $2,260,176) * f | 2,239,000 | 2,320,569 | ||||||
1.850%, 10/15/2015 (Acquired 08/29/2013, Cost $1,012,425) * f | 1,000,000 | 1,015,269 | ||||||
Associates Corporation of North America, | ||||||||
6.950%, 11/01/2018 | 2,579,000 | 3,068,517 | ||||||
Australia and New Zealand Banking Group Limited, | ||||||||
3.250%, 03/01/2016 (Acquired 02/22/2011, Cost $1,693,081) * f | 1,700,000 | 1,781,348 | ||||||
Bank of America Corporation, | ||||||||
3.300%, 01/11/2023 | 3,350,000 | 3,169,994 | ||||||
Bank of America Corporation Subordinated Notes, | ||||||||
10.200%, 07/15/2015 | 1,035,000 | 1,163,125 | ||||||
Banponce Trust I, | ||||||||
Series A, 8.327%, 02/01/2027 | 2,500,000 | 2,150,000 | ||||||
Barclays Bank PLC: | ||||||||
Series 1, 5.000%, 09/22/2016 f @ | 2,565,000 | 2,823,921 | ||||||
6.750%, 05/22/2019 f @ | 2,000,000 | 2,410,542 | ||||||
BB&T Corporation, | ||||||||
6.850%, 04/30/2019 @ | 2,322,000 | 2,792,242 | ||||||
Berkshire Hathaway Finance Corporation, | ||||||||
1.600%, 05/15/2017 | 3,800,000 | 3,836,647 | ||||||
BPCE, | ||||||||
2.500%, 12/10/2018 f | 7,000,000 | 6,962,522 | ||||||
Capital One Financial Corporation: | ||||||||
7.375%, 05/23/2014 | 1,000,000 | 1,025,752 | ||||||
3.150%, 07/15/2016 | 2,596,000 | 2,713,010 | ||||||
Capital One National Association, | ||||||||
0.696%, 03/22/2016 | 2,000,000 | 1,997,950 | ||||||
CDP Financial Inc., | ||||||||
4.400%, 11/25/2019 (Acquired 11/20/2009, Cost $997,520) * f | 1,000,000 | 1,100,854 | ||||||
CIGNA Corporation, | ||||||||
2.750%, 11/15/2016 | 3,781,000 | 3,935,348 | ||||||
Citigroup, Inc.: | ||||||||
6.010%, 01/15/2015 | 1,499,000 | 1,578,512 | ||||||
4.450%, 01/10/2017 | 1,800,000 | 1,950,838 | ||||||
6.125%, 11/21/2017 | 435,000 | 501,428 | ||||||
CNA Financial Corporation: | ||||||||
6.500%, 08/15/2016 | 2,000,000 | 2,249,318 | ||||||
7.350%, 11/15/2019 | 2,395,000 | 2,903,248 | ||||||
5.750%, 08/15/2021 | 435,000 | 487,393 | ||||||
Comerica Bank, | ||||||||
5.200%, 08/22/2017 | 4,095,000 | 4,508,943 | ||||||
Commonwealth Bank of Australia: | ||||||||
0.745%, 09/20/2016 (Acquired 12/20/2013, Cost $1,003,421) * f | 1,000,000 | 1,002,427 | ||||||
5.000%, 10/15/2019 (Acquired 03/02/2012, Cost $4,264,500) * f | 4,000,000 | 4,458,520 | ||||||
Countrywide Financial Corporation, | ||||||||
6.250%, 05/15/2016 @ | 2,200,000 | 2,427,696 | ||||||
Credit Suisse New York, | ||||||||
5.300%, 08/13/2019 f | 3,220,000 | 3,614,572 | ||||||
Deutsche Bank Aktiengesellschaft, | ||||||||
3.250%, 01/11/2016 f | 4,250,000 | 4,444,926 | ||||||
Dresdner Bank AG, | ||||||||
7.250%, 09/15/2015 f | 2,652,000 | 2,863,306 | ||||||
Fifth Third Bank, | ||||||||
4.750%, 02/01/2015 | 2,930,000 | 3,051,870 | ||||||
First National Bank of Chicago Pass Through Trust, | ||||||||
Series 93-A, 8.080%, 01/05/2018 | 393,946 | 428,323 | ||||||
First Tennessee Bank, National Association, | ||||||||
5.650%, 04/01/2016 | 4,263,000 | 4,599,334 | ||||||
General Electric Capital Corporation: | ||||||||
6.000%, 08/07/2019 | 1,600,000 | 1,877,299 | ||||||
5.500%, 01/08/2020 @ | 2,550,000 | 2,920,166 | ||||||
5.550%, 05/04/2020 @ | 2,850,000 | 3,279,572 | ||||||
Genworth Holdings, Inc.: | ||||||||
5.750%, 06/15/2014 | 1,400,000 | 1,429,047 | ||||||
4.900%, 08/15/2023 | 1,500,000 | 1,499,256 | ||||||
GMAC Inc., | ||||||||
8.000%, 12/31/2018 | 96,000 | 113,280 | ||||||
Great West Life & Annuity Insurance, | ||||||||
7.153%, 05/16/2046 (Acquired 05/16/2006 through 11/08/2007, Cost $1,792,736) * | 1,800,000 | 1,854,000 | ||||||
HSBC Finance Corporation, | ||||||||
6.676%, 01/15/2021 | 2,059,000 | 2,365,867 | ||||||
HSBC USA Inc., | ||||||||
2.375%, 02/13/2015 | 1,000,000 | 1,020,367 | ||||||
Humana Inc., | ||||||||
7.200%, 06/15/2018 | 2,000,000 | 2,366,098 | ||||||
Hutchison Whampoa International Ltd., | ||||||||
7.625%, 04/09/2019 (Acquired 10/16/2009 through 09/19/2011, Cost $3,073,480) * f @ | 2,800,000 | 3,410,176 | ||||||
ING Bank N.V.: | ||||||||
3.000%, 09/01/2015 (Acquired 08/17/2010 through 09/14/2012, Cost $2,319,842) * f | 2,300,000 | 2,373,027 | ||||||
5.000%, 06/09/2021 (Acquired 06/12/2013, Cost $2,182,203) * f | 2,000,000 | 2,174,060 | ||||||
ING U.S., Inc., | ||||||||
2.900%, 02/15/2018 @ | 2,000,000 | 2,045,572 | ||||||
Invesco Finance PLC, | ||||||||
3.125%, 11/30/2022 f | 4,225,000 | 3,909,371 | ||||||
Istar Financial, Inc., | ||||||||
5.850%, 03/15/2017 | 75,000 | 80,344 | ||||||
J.P. Morgan Chase & Co., | ||||||||
4.500%, 01/24/2022 | 3,000,000 | 3,173,193 | ||||||
Jefferies Group, Inc., | ||||||||
6.875%, 04/15/2021 | 2,000,000 | 2,278,060 | ||||||
John Hancock Life Insurance Company, | ||||||||
7.375%, 02/15/2024 (Acquired 04/10/2013 through 04/11/2013, Cost $2,985,604) * | 2,325,000 | 2,751,821 | ||||||
Kemper Corporation, | ||||||||
6.000%, 05/15/2017 | 600,000 | 657,890 | ||||||
KeyBank National Association, | ||||||||
7.413%, 05/06/2015 | 4,000,000 | 4,334,120 | ||||||
Kookmin Bank, | ||||||||
7.250%, 05/14/2014 (Acquired 06/12/2009, Cost $2,603,804) * f | 2,600,000 | 2,659,470 | ||||||
Korea Housing Finance Corporation, | ||||||||
1.625%, 09/15/2018 (Acquired 02/26/2013 through 04/18/2013, Cost $842,436) * f | 850,000 | 801,394 | ||||||
Liberty Mutual Group Inc.: | ||||||||
5.750%, 03/15/2014 (Acquired 09/03/2009 through 10/15/2010, Cost $998,455) * | 1,000,000 | 1,009,978 | ||||||
4.250%, 06/15/2023 (Acquired 06/13/2013, Cost $1,987,300) * | 2,000,000 | 1,931,062 | ||||||
Lloyds TSB Bank PLC: | ||||||||
4.875%, 01/21/2016 f | 225,000 | 239,992 | ||||||
5.800%, 01/13/2020 (Acquired 02/09/2010 through 03/16/2012, Cost $2,904,831) * f @ | 2,900,000 | 3,324,760 | ||||||
M&I Marshall & Ilsley Bank: | ||||||||
4.850%, 06/16/2015 | 3,075,000 | 3,241,007 | ||||||
5.000%, 01/17/2017 | 1,000,000 | 1,078,920 | ||||||
Macquarie Bank Limited, | ||||||||
2.000%, 08/15/2016 (Acquired 08/07/2013, Cost $4,998,250) * f | 5,000,000 | 5,056,855 | ||||||
Manulife Financial Corp., | ||||||||
4.900%, 09/17/2020 f | 2,300,000 | 2,468,705 | ||||||
Marsh & McLennan Companies, Inc.: | ||||||||
5.750%, 09/15/2015 | 574,000 | 620,000 | ||||||
2.550%, 10/15/2018 | 1,000,000 | 1,001,474 | ||||||
MassMutual Global Funding II, | ||||||||
2.000%, 04/05/2017 (Acquired 03/29/2012, Cost $3,783,470) * | 3,800,000 | 3,811,164 | ||||||
MBIA Insurance Corp., | ||||||||
11.504%, 01/15/2033 (Acquired 01/11/2008, Cost $500,000) * @ | 500,000 | 377,500 | ||||||
Merey Sweeny, L.P., | ||||||||
8.850%, 12/18/2019 (Acquired 06/11/2013, Cost $1,925,814) * | 1,648,580 | 1,856,344 | ||||||
Merrill Lynch & Company: | ||||||||
5.700%, 05/02/2017 | 1,000,000 | 1,111,566 | ||||||
6.875%, 04/25/2018 | 1,000,000 | 1,182,368 | ||||||
Metropolitan Life Global Funding I, | ||||||||
3.000%, 01/10/2023 (Acquired 01/03/2013, Cost $1,299,337) * @ | 1,300,000 | 1,211,201 | ||||||
Metropolitan Life Insurance Company, | ||||||||
7.700%, 11/01/2015 (Acquired 11/21/2013, Cost $2,232,154) * | 2,000,000 | 2,197,264 | ||||||
Morgan Stanley: | ||||||||
4.750%, 04/01/2014 | 150,000 | 151,192 | ||||||
3.800%, 04/29/2016 | 125,000 | 132,229 | ||||||
6.625%, 04/01/2018 | 1,600,000 | 1,872,150 | ||||||
7.300%, 05/13/2019 | 2,700,000 | 3,278,902 | ||||||
National Australia Bank Limited: | ||||||||
0.743%, 10/08/2015 (Acquired 02/19/2013, Cost $3,101,308) * f | 3,100,000 | 3,098,956 | ||||||
3.000%, 07/27/2016 (Acquired 07/20/2011, Cost $1,720,239) * f | 1,725,000 | 1,805,523 | ||||||
0.669%, 12/02/2016 (Acquired 11/21/2013, Cost $1,175,000) * f | 1,175,000 | 1,174,988 | ||||||
Nationwide Financial Services, Inc., | ||||||||
5.375%, 03/25/2021 (Acquired 10/07/2013, Cost $892,812) * | 828,000 | 887,746 | ||||||
Nomura Holdings Inc.: | ||||||||
5.000%, 03/04/2015 f @ | 2,500,000 | 2,611,725 | ||||||
2.000%, 09/13/2016 f | 2,450,000 | 2,470,254 | ||||||
NYSE Euronext, | ||||||||
2.000%, 10/05/2017 | 800,000 | 801,041 | ||||||
PNC Bank, National Association, | ||||||||
2.950%, 01/30/2023 @ | 4,000,000 | 3,681,256 | ||||||
Protective Life Corporation, | ||||||||
7.375%, 10/15/2019 | 1,425,000 | 1,737,912 | ||||||
Prudential Covered Trust 2012-1, | ||||||||
2.997%, 09/30/2015 (Acquired 11/06/2012 through 07/23/2013, Cost $2,616,119) * | 2,550,000 | 2,628,997 | ||||||
Prudential Financial, Inc.: | ||||||||
3.875%, 01/14/2015 | 200,000 | 206,753 | ||||||
7.375%, 06/15/2019 | 850,000 | 1,043,534 | ||||||
Prudential Holdings, LLC, | ||||||||
8.695%, 12/18/2023 (Acquired 03/26/2013 through 12/12/2013, Cost $1,753,912) * | 1,387,857 | 1,760,988 | ||||||
Regions Bank, | ||||||||
7.500%, 05/15/2018 | 2,475,000 | 2,928,633 | ||||||
Regions Financial Corporation, | ||||||||
5.750%, 06/15/2015 | 1,500,000 | 1,598,286 | ||||||
Royal Bank of Canada, | ||||||||
1.200%, 09/19/2017 f | 2,800,000 | 2,774,332 | ||||||
Santander UK PLC, | ||||||||
5.000%, 11/07/2023 (Acquired 10/31/2013, Cost $996,810) * f | 1,000,000 | 1,003,720 | ||||||
Simon Property Group, L.P., | ||||||||
5.750%, 12/01/2015 | 610,000 | 660,727 | ||||||
SLM Corporation, | ||||||||
5.375%, 05/15/2014 | 1,578,000 | 1,605,615 | ||||||
Societe Generale: | ||||||||
2.750%, 10/12/2017 f @ | 2,750,000 | 2,834,425 | ||||||
2.625%, 10/01/2018 f @ | 1,000,000 | 1,008,770 | ||||||
5.200%, 04/15/2021 (Acquired 01/28/2013, Cost $1,391,465) * f | 1,250,000 | 1,374,070 | ||||||
Sovereign Bank, | ||||||||
8.750%, 05/30/2018 | 3,080,000 | 3,700,756 | ||||||
Sumitomo Mitsui Banking Corporation, | ||||||||
2.500%, 07/19/2018 f | 3,000,000 | 3,013,326 | ||||||
SunTrust Bank: | ||||||||
3.600%, 04/15/2016 | 2,450,000 | 2,580,622 | ||||||
5.450%, 12/01/2017 | 500,000 | 545,143 | ||||||
7.250%, 03/15/2018 | 1,506,000 | 1,771,939 | ||||||
SUSA Partnership, L.P., | ||||||||
8.200%, 06/01/2017 | 2,800,000 | 3,313,075 | ||||||
Svenska Handelsbanken AB: | ||||||||
3.125%, 07/12/2016 f | 275,000 | 287,624 | ||||||
2.875%, 04/04/2017 f @ | 1,500,000 | 1,562,492 | ||||||
2.500%, 01/25/2019 f | 1,000,000 | 1,007,778 | ||||||
Swedbank AB, | ||||||||
1.750%, 03/12/2018 (Acquired 03/05/2013, Cost $3,236,382) * f @ | 3,250,000 | 3,193,210 | ||||||
Symetra Financial Corporation, | ||||||||
6.125%, 04/01/2016 (Acquired 08/12/2011 through 12/02/2013, Cost $1,330,136) * | 1,269,000 | 1,350,842 | ||||||
Talent Yield Investments Ltd., | ||||||||
4.500%, 04/25/2022 (Acquired 04/18/2012, Cost $3,774,008) * f @ | 3,800,000 | 3,736,240 | ||||||
The Bank of Nova Scotia: | ||||||||
0.660%, 12/13/2016 f | 3,600,000 | 3,605,205 | ||||||
2.550%, 01/12/2017 f | 150,000 | 155,567 | ||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd., | ||||||||
2.700%, 09/09/2018 (Acquired 09/03/2013, Cost $2,547,756) * f | 2,550,000 | 2,578,435 | ||||||
The Bear Stearns Companies LLC: | ||||||||
6.400%, 10/02/2017 | 1,450,000 | 1,682,814 | ||||||
7.250%, 02/01/2018 | 2,275,000 | 2,724,019 | ||||||
The Charles Schwab Corporation, | ||||||||
6.375%, 09/01/2017 | 325,000 | 371,159 | ||||||
The Goldman Sachs Group, Inc.: | ||||||||
6.150%, 04/01/2018 | 3,900,000 | 4,472,041 | ||||||
2.900%, 07/19/2018 | 1,000,000 | 1,017,674 | ||||||
7.500%, 02/15/2019 | 865,000 | 1,053,543 | ||||||
The Hartford Financial Services Group, Inc.: | ||||||||
4.000%, 03/30/2015 | 1,000,000 | 1,038,893 | ||||||
5.500%, 10/15/2016 | 1,500,000 | 1,666,643 | ||||||
The Huntington National Bank, | ||||||||
1.300%, 11/20/2016 | 4,850,000 | 4,850,732 | ||||||
The Royal Bank of Scotland Group PLC: | ||||||||
2.550%, 09/18/2015 f | 200,000 | 204,551 | ||||||
5.625%, 08/24/2020 f | 3,300,000 | 3,694,423 | ||||||
6.125%, 01/11/2021 f | 1,300,000 | 1,471,419 | ||||||
UBS AG, | ||||||||
5.875%, 12/20/2017 f | 2,000,000 | 2,295,052 | ||||||
Union Bank, National Association, | ||||||||
2.125%, 06/16/2017 | 1,800,000 | 1,808,294 | ||||||
UnionBanCal Corp., | ||||||||
3.500%, 06/18/2022 @ | 225,000 | 220,700 | ||||||
Wachovia Bank, National Association, | ||||||||
6.000%, 11/15/2017 | 1,479,000 | 1,706,618 | ||||||
WEA Finance LLC / WT Finance Aust Pty Ltd, | ||||||||
6.750%, 09/02/2019 (Acquired 11/21/2013, Cost $4,806,637) * | 4,000,000 | 4,756,020 | ||||||
Wells Fargo & Company, | ||||||||
0.772%, 07/20/2016 | 3,000,000 | 3,010,656 | ||||||
Wells Fargo Bank, National Association, | ||||||||
Series AI, 4.750%, 02/09/2015 | 1,015,000 | 1,060,604 | ||||||
Westpac Banking Corporation, | ||||||||
1.600%, 01/12/2018 f | 1,250,000 | 1,231,416 | ||||||
Willis Group Holdings Limited, | ||||||||
5.750%, 03/15/2021 f | 3,250,000 | 3,496,054 | ||||||
300,694,939 | 26.0% | |||||||
Total Corporate Bonds | 631,327,834 | 54.6% | ||||||
Residential Mortgage-Backed Securities | ||||||||
U.S. Government Agency Issues | ||||||||
Federal Gold Loan Mortgage Corporation (FGLMC): | ||||||||
6.000%, 06/01/2021 | 181,985 | 199,454 | ||||||
6.000%, 07/01/2028 | 11,719 | 13,109 | ||||||
Federal Home Loan Mortgage Corporation (FHLMC): | ||||||||
Series 74, Class F, 6.000%, 10/15/2020 | 1,859 | 2,002 | ||||||
Series 1395, Class G, 6.000%, 10/15/2022 | 14,720 | 15,871 | ||||||
Federal National Mortgage Association (FNMA): | ||||||||
Series 1989-2, Class D, 8.800%, 01/25/2019 | 8,061 | 8,961 | ||||||
Series 1990-108, Class G, 7.000%, 09/25/2020 | 7,131 | 7,937 | ||||||
Series G-29, Class O, 8.500%, 09/25/2021 | 803 | 919 | ||||||
Series 1991-137, Class H, 7.000%, 10/25/2021 | 49,234 | 55,393 | ||||||
Series 1993-32, Class H, 6.000%, 03/25/2023 | 26,505 | 28,534 | ||||||
Series 2004-W6, Class 1A6, 5.500%, 07/25/2034 | 817,035 | 837,859 | ||||||
Government National Mortgage Association (GNMA), | ||||||||
Series 1999-4, Class ZB, 6.000%, 02/20/2029 | 143,301 | 159,761 | ||||||
1,329,800 | 0.1% | |||||||
Non-U.S. Government Agency Issues | ||||||||
Bank of America Alternative Loan Trust: | ||||||||
Series 2003-11, Class 4A1, 4.750%, 01/25/2019 | 140,873 | 142,573 | ||||||
Series 2004-2, Class 5A1, 5.500%, 03/25/2019 | 464,703 | 476,312 | ||||||
Series 2004-11, Class 4A1, 5.500%, 12/25/2019 | 561,869 | 581,309 | ||||||
Series 2005-6, Class 7A1, 5.500%, 07/25/2020 | 26,142 | 26,696 | ||||||
Series 2006-2, Class 7A1, 6.000%, 03/25/2021 | 342,573 | 355,357 | ||||||
Series 2006-3, Class 6A1, 6.000%, 04/25/2036 | 434,295 | 448,508 | ||||||
Series 2006-4, Class 3CB4, 6.000%, 05/25/2046 § | 599,277 | 506,719 | ||||||
Countrywide Alternative Loan Trust: | ||||||||
Series 2005-5R, Class A2, 4.750%, 12/25/2018 | 24,853 | 24,954 | ||||||
Series 2005-50CB, Class 4A1, 5.000%, 11/25/2020 § | 442,368 | 437,866 | ||||||
Series 2005-85CB, Class 3A1, 5.250%, 02/25/2021 (Acquired 09/26/2007 through 01/28/2009, Cost $366,918) * § | 373,305 | 340,332 | ||||||
Series 2006-7CB, Class 3A1, 5.250%, 05/25/2021 § | 676,259 | 658,963 | ||||||
Series 2004-2CB, Class 1A8, 5.750%, 03/25/2034 | 5,145,064 | 5,242,553 | ||||||
Series 2005-11CB, Class 2A1, 5.500%, 06/25/2035 § | 94,936 | 86,838 | ||||||
Credit Suisse First Boston Mortgage Securities Corporation, | ||||||||
Series 2005-3, Class 3A27, 5.500%, 07/25/2035 | 42,332 | 42,839 | ||||||
J.P. Morgan Alternative Loan Trust: | ||||||||
Series 2005-S1, Class 3A1, 5.500%, 10/25/2020 § | 1,021,349 | 1,037,842 | ||||||
Series 2006-A1, Class 2A1, 2.621%, 03/25/2036 § | 713,523 | 558,588 | ||||||
Lehman Mortgage Trust, | ||||||||
Series 2006-4, Class 3A1, 5.000%, 08/25/2021 | 167,688 | 164,384 | ||||||
Master Alternative Loans Trust: | ||||||||
Series 2004-1, Class 1A1, 5.000%, 01/25/2019 | 541,920 | 553,424 | ||||||
Series 2004-3, Class 1A1, 5.000%, 03/25/2019 | 137,028 | 141,097 | ||||||
Series 2005-3, Class 4A1, 5.500%, 03/25/2020 | 128,240 | 133,922 | ||||||
Merrill Lynch Mortgage Investors Trust, | ||||||||
Series 2005-A8, Class A1C1, 5.250%, 08/25/2036 | 3,779 | 3,778 | ||||||
Residential Accredit Loans, Inc., | ||||||||
Series 2004-QS6, Class A1, 5.000%, 05/25/2019 | 51,779 | 52,703 | ||||||
Salomon Brothers Mortgage Securities VII, | ||||||||
Series 2003-UP2, Class A2, 4.000%, 06/25/2033 | 122,655 | 133,254 | ||||||
Washington Mutual Mortgage Pass Through Certificates: | ||||||||
Series 2004-CB1, Class 5A, 5.000%, 06/25/2019 | 727,139 | 749,390 | ||||||
Series 2004-CB3, Class 3A, 5.500%, 10/25/2019 | 1,218,304 | 1,278,656 | ||||||
Series 2004-CB3, Class 4A, 6.000%, 10/25/2019 | 381,378 | 399,994 | ||||||
Series 2004-CB4, Class 21A, 5.500%, 12/25/2019 | 399,673 | 416,520 | ||||||
Series 2004-CB4, Class 22A, 6.000%, 12/25/2019 | 290,116 | 305,281 | ||||||
Series 2004-CB2, Class 3A, 6.000%, 08/25/2034 | 5,859,621 | 6,132,069 | ||||||
21,432,721 | 1.9% | |||||||
Asset Backed Securities | ||||||||
Amresco Residential Securities Mortgage Loan Trust, | ||||||||
Series 1998-1, Class A6, 6.510%, 08/25/2027 | 24,354 | 24,482 | ||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||
Series 2006-WFH3, Class A3, 0.315%, 10/25/2036 | 2,003,659 | 1,988,235 | ||||||
Cityscape Home Equity Loan Trust, | ||||||||
Series 1997-C, Class A4, 7.000%, 07/25/2028 † ** | 3,921 | 392 | ||||||
Countrywide Asset-Backed Certificates: | ||||||||
Series 2006-S3, Class A2, 6.085%, 06/25/2021 § | 669,008 | 779,696 | ||||||
Series 2004-12, Class AF6, 4.634%, 03/25/2035 | 39,503 | 40,280 | ||||||
Series 2005-1, Class AF6, 5.030%, 07/25/2035 | 1,956,744 | 1,995,190 | ||||||
Series 2006-13, Class 1AF3, 5.120%, 01/25/2037 § | 276,239 | 291,537 | ||||||
Series 2006-9, Class 1AF3, 5.859%, 10/25/2046 § | 1,317,573 | 890,458 | ||||||
Delta Funding Home Equity Loan Trust: | ||||||||
Series 1997-2, Class A6, 7.040%, 06/25/2027 | 6,856 | 7,029 | ||||||
Series 1999-1, Class A6F, 6.340%, 12/15/2028 | 329 | 328 | ||||||
Series 1999-2, Class A7F, 7.030%, 08/15/2030 | 519,410 | 526,175 | ||||||
Equivantage Home Equity Loan Trust, | ||||||||
Series 1996-3, Class A3, 7.700%, 09/25/2027 | 375 | 374 | ||||||
Green Tree Financial Corporation: | ||||||||
Series 1993-4, Class A5, 7.050%, 01/15/2019 | 9,813 | 10,141 | ||||||
Series 1998-2, Class A5, 6.240%, 12/01/2028 | 409,017 | 420,899 | ||||||
Series 1998-3, Class A5, 6.220%, 03/01/2030 | 602,363 | 641,744 | ||||||
Series 1998-4, Class A5, 6.180%, 04/01/2030 | 234,660 | 241,292 | ||||||
IMC Home Equity Loan Trust, | ||||||||
Series 1998-1, Class A6, 7.020%, 06/20/2029 | 7,858 | 7,868 | ||||||
Master Credit Card Trust, | ||||||||
Series 2012-2A, Class A, 0.780%, 04/21/2017 (Acquired 10/24/2012, Cost $5,998,817) * f | 6,000,000 | 5,990,142 | ||||||
Oakwood Mortgage Investors, Inc., | ||||||||
Series 1999-B, Class A3, 6.450%, 11/15/2017 | 101,755 | 106,218 | ||||||
RAAC Series, | ||||||||
Series 2004-SP1, Class AI4, 5.285%, 08/25/2027 | 39,070 | 39,059 | ||||||
RAMP Trust, | ||||||||
Series 2003-RS7, Class AI6, 5.340%, 08/25/2033 | 13,913 | 13,955 | ||||||
Residential Asset Mortgage Products, Inc., | ||||||||
Series 2005-RS1, Class AI6, 4.713%, 01/25/2035 | 208,727 | 204,463 | ||||||
Saxon Asset Securities Trust, | ||||||||
Series 2005-4, Class A1B, 0.545%, 11/25/2037 | 2,970,909 | 2,715,324 | ||||||
Soundview Home Loan Trust, | ||||||||
Series 2003-2, Class A2, 1.465%, 11/25/2033 | 4,851,513 | 4,792,504 | ||||||
Specialty Underwriting & Residential Finance Trust, | ||||||||
Series 2004-BC4, Class A1A, 0.835%, 10/25/2035 | 4,816,158 | 4,683,184 | ||||||
Springleaf Mortgage Loan Trust, | ||||||||
Series 2012-1A, Class A, 2.667%, 09/25/2057 (Acquired 04/11/2012, Cost $2,833,132) * | 2,833,165 | 2,894,962 | ||||||
29,305,931 | 2.5% | |||||||
Commercial Mortgage Backed Securities | ||||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 6,790,000 | 7,122,893 | ||||||
CD Commercial Mortgage Trust, | ||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 7,000,000 | 7,421,855 | ||||||
Credit Suisse First Boston Mortgage Securities Corporation, | ||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 6,000,000 | 6,298,596 | ||||||
DBUBS Mortgage Trust, | ||||||||
Series 2011-LC3A, Class A2, 3.642%, 08/12/2044 | 5,000,000 | 5,252,645 | ||||||
Federal National Mortgage Association (FNMA): | ||||||||
Series 2013-M1, Class ASQ2, 1.074%, 11/25/2016 | 3,325,311 | 3,335,620 | ||||||
Series 2012-M9, Class ASQ2, 1.513%, 12/25/2017 | 1,125,000 | 1,117,227 | ||||||
FHLMC Multifamily Structured Pass Through Certificates: | ||||||||
Series K-501, Class A2, 1.655%, 11/25/2016 | 2,345,000 | 2,377,736 | ||||||
Series K-702, Class A2, 3.154%, 02/25/2018 | 275,000 | 288,497 | ||||||
Series K-704, Class A2, 2.412%, 08/25/2018 | 300,000 | 305,705 | ||||||
Series K-705, Class A2, 2.303%, 09/25/2018 | 3,000,000 | 3,032,211 | ||||||
Series K-708, Class A2, 2.130%, 01/25/2019 | 8,300,000 | 8,266,053 | ||||||
Series K-003, Class A4, 5.053%, 01/25/2019 | 9,000,000 | 10,107,990 | ||||||
Series K-004, Class A2, 4.186%, 08/25/2019 | 5,875,000 | 6,381,125 | ||||||
Series K-005, Class A2, 4.317%, 11/25/2019 | 4,975,000 | 5,432,118 | ||||||
Series K-006, Class A2, 4.251%, 01/25/2020 | 1,863,000 | 2,015,414 | ||||||
Series KF02, Class A3, 0.795%, 07/25/2020 | 9,992,432 | 9,996,569 | ||||||
J.P. Morgan Chase Commercial Mortgage Trust, | ||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 5,000,000 | 5,236,315 | ||||||
NCUA Guaranteed Notes, | ||||||||
Series 2010-C1, Class A2, 2.900%, 10/29/2020 | 2,000,000 | 2,065,918 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 5,000,000 | 5,322,505 | ||||||
91,376,992 | 7.9% | |||||||
Total Long-Term Investments (Cost $1,119,586,358) | 1,131,693,988 | 97.9% | ||||||
SHORT-TERM INVESTMENTS | Shares | |||||||
Money Market Mutual Fund | ||||||||
Short-Term Investments Trust - Liquid Assets Portfolio, 0.07% « | 21,500,000 | 21,500,000 | ||||||
Total Short-Term Investments (Cost $21,500,000) | 21,500,000 | 1.9% | ||||||
INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING | ||||||||
Investment Companies | ||||||||
Mount Vernon Securities Lending Trust Prime Portfolio, 0.19% « | 227,595,639 | 227,595,639 | ||||||
Total Investment Companies (Cost $227,595,639) | 227,595,639 | 19.7% | ||||||
Total Investments Purchased With Cash Proceeds From | ||||||||
Securities Lending (Cost $227,595,639) | 227,595,639 | 19.7% | ||||||
Total Investments (Cost $1,368,681,997) | 1,380,789,627 | 119.5% | ||||||
Liabilities in Excess of Other Assets | (225,083,702) | (19.5)% | ||||||
TOTAL NET ASSETS | $ | 1,155,705,925 | 100.0% | |||||
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, 2013. | |||||||
f | Foreign Security | |||||||
« | 7-Day Yield | |||||||
§ | Security in Default | |||||||
† | Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds' Board of Directors. | |||||||
Baird Intermediate Municipal Bond Fund | ||||||||
Schedule of Investments | ||||||||
December 31, 2013 | ||||||||
Principal | % of | |||||||
Amount | Value | Net Assets | ||||||
Municipal Bonds | ||||||||
Alabama | ||||||||
Alabama State Public School & College Authority, | ||||||||
5.000%, 05/01/2019 | $ | 1,000,000 | $ | 1,165,470 | ||||
Gulf Shores Alabama, | ||||||||
5.000%, 12/15/2018 (Callable 12/15/2017) | 1,080,000 | 1,232,917 | ||||||
Montgomery Alabama Special Care Facility Revenue, | ||||||||
5.000%, 11/15/2015 (Pre-refunded to 11/15/2014) | 1,540,000 | 1,602,001 | ||||||
4,000,388 | 0.4% | |||||||
Alaska | ||||||||
Alaska State Housing Finance Corporation, | ||||||||
5.000%, 06/01/2017 (Callable 06/01/2015)(Insured by NPFGC) | 1,000,000 | 1,056,150 | 0.1% | |||||
Arizona | ||||||||
Gila County Arizona Unified School District Bonds, | ||||||||
5.250%, 07/01/2027 (Callable 07/01/2017) | 1,000,000 | 1,064,200 | ||||||
Maricopa County Arizona University School District No. 48 Scottsdale, | ||||||||
4.000%, 07/01/2026 (Pre-refunded to 07/01/2016) | 1,860,000 | 2,022,583 | ||||||
Phoenix Arizona Civic Corporation of Wastewater Systems Revenue, | ||||||||
5.000%, 07/01/2015 (Callable 07/01/2014)(Partially Pre-refunded)(Insured by NPFGC) | 1,540,000 | 1,574,973 | ||||||
4,661,756 | 0.5% | |||||||
Arkansas | ||||||||
Arkansas Development Finance Authority, | ||||||||
5.500%, 12/01/2018 (ETM) | 1,000,000 | 1,161,740 | 0.1% | |||||
California | ||||||||
Bakersfield California Certificates Participation, | ||||||||
0.000%, 04/15/2021 (ETM) ^ | 7,045,000 | 5,867,428 | ||||||
Coalinga California Regional Medical Center, | ||||||||
5.125%, 03/01/2032 (Pre-refunded to 03/01/2015) | 2,420,000 | 2,549,978 | ||||||
Commerce Community Development Commission, | ||||||||
0.000%, 08/01/2021 (ETM) ^ | 965,000 | 677,941 | ||||||
Pittsburg California Redevelopment Agency Residential Mortgage Revenue, | ||||||||
9.600%, 06/01/2016 (ETM) | 3,725,000 | 4,507,511 | ||||||
Port Oakland California Revenue, | ||||||||
5.000%, 11/01/2017 (Insured by NPFGC) | 1,800,000 | 2,071,314 | ||||||
San Joaquin Hills California Transportation Corridor Agency Toll Road Revenue: | ||||||||
0.000%, 01/01/2020 (ETM) ^ | 6,865,000 | 6,072,367 | ||||||
0.000%, 01/01/2023 (ETM) ^ | 14,000,000 | 10,722,740 | ||||||
San Marcos California Public Facilities Authority Revenue, | ||||||||
0.000%, 09/01/2019 (ETM) ^ | 17,295,000 | 15,541,633 | ||||||
Woodside California Elementary School District Government School Bonds, | ||||||||
5.000%, 10/01/2023 (Pre-refunded to 10/01/2016) | 1,130,000 | 1,270,968 | ||||||
49,281,880 | 4.9% | |||||||
Colorado | ||||||||
Colorado Springs Colorado Hospital Revenue Bonds, | ||||||||
5.000%, 12/15/2032 (Pre-refunded to 12/15/2018) | 1,300,000 | 1,526,759 | ||||||
Colorado Springs Colorado Utilities Revenue Bonds, | ||||||||
5.875%, 11/15/2017 (ETM) | 6,105,000 | 6,562,020 | ||||||
County of El Paso Colorado Mortgage Revenue Bonds, | ||||||||
0.000%, 09/01/2015 (ETM) ^ | 1,330,000 | 1,319,892 | ||||||
Dawson Ridge Metropolitan District No. 1 Colorado: | ||||||||
0.000%, 10/01/2022 (ETM) ^ | 16,595,000 | 12,662,483 | ||||||
0.000%, 10/01/2022 (ETM) ^ | 17,540,000 | 13,383,546 | ||||||
Regional Transportation District Colorado Sales Tax Revenue, | ||||||||
5.000%, 11/01/2036 (Pre-refunded to 11/01/2016) | 6,785,000 | 7,646,831 | ||||||
43,101,531 | 4.3% | |||||||
Connecticut | ||||||||
State of Connecticut, | ||||||||
5.000%, 10/15/2020 | 4,390,000 | 5,142,402 | 0.5% | |||||
Florida | ||||||||
Brevard County Florida School Board, | ||||||||
5.000%, 07/01/2020 (Callable 07/01/2017)(Insured by AMBAC) | 1,925,000 | 2,099,501 | ||||||
Broward County Florida School Board: | ||||||||
5.250%, 07/01/2022 (Callable 07/01/2021) | 8,390,000 | 9,455,446 | ||||||
5.250%, 07/01/2023 (Callable 07/01/2021) | 4,915,000 | 5,508,044 | ||||||
County of St. Lucie Florida, | ||||||||
6.000%, 10/01/2020 (ETM) | 6,420,000 | 7,857,566 | ||||||
Dade County Florida Health Facility Authority Hospital Revenue, | ||||||||
5.750%, 05/01/2021 (ETM) | 1,750,000 | 2,037,910 | ||||||
Escambia County Florida Housing Finance Authority Multifamily Housing Revenue, | ||||||||
0.000%, 10/15/2018 (ETM) ^ | 4,130,000 | 3,791,299 | ||||||
Florida State Board of Education, | ||||||||
5.000%, 06/01/2022 (Callable 06/01/2019) | 13,800,000 | 15,572,886 | ||||||
Florida State Department of Management Services, | ||||||||
5.000%, 08/01/2018 | 2,500,000 | 2,868,325 | ||||||
Florida State Mid-Bay Bridge Authority Revenue: | ||||||||
6.875%, 10/01/2022 (ETM) | 4,675,000 | 5,938,419 | ||||||
6.875%, 10/01/2022 (ETM) | 3,175,000 | 4,033,044 | ||||||
Florida State Municipal Power Agency Revenue, | ||||||||
5.000%, 10/01/2017 (Callable 02/03/2014)(ETM) | 1,590,000 | 1,835,941 | ||||||
Gulf Environmental Services Inc. Florida Revenue Bonds, | ||||||||
5.000%, 10/01/2018 (ETM) | 1,285,000 | 1,428,046 | ||||||
Hillsborough County Florida School Board Master Lease Program, | ||||||||
5.500%, 07/01/2018 (Insured by NPFGC) | 2,000,000 | 2,344,880 | ||||||
Hillsborough County Industrial Development Authority: | ||||||||
5.625%, 08/15/2029 (Pre-refunded to 08/15/2018) | 2,285,000 | 2,742,640 | ||||||
8.000%, 08/15/2032 (Pre-refunded to 08/15/2019) | 1,940,000 | 2,614,945 | ||||||
Miami Beach Florida Resort Tax Revenue, | ||||||||
6.250%, 10/01/2022 (ETM) | 1,470,000 | 1,792,371 | ||||||
Miami Dade County Florida Entitlement Revenue Bonds, | ||||||||
5.000%, 08/01/2015 (Insured by NPFGC) | 3,000,000 | 3,192,690 | ||||||
Miami-Dade County Florida, | ||||||||
4.500%, 10/01/2020 | 7,100,000 | 7,781,955 | ||||||
Miami-Dade County Florida School Board, | ||||||||
5.000%, 05/01/2016 (Insured by NPFGC) | 3,000,000 | 3,287,490 | ||||||
Miami-Dade County Florida Water & Sewer Revenue, | ||||||||
5.250%, 10/01/2022 | 1,125,000 | 1,299,499 | ||||||
Orlando Florida Utilities Commission Water & Electric Revenue, | ||||||||
6.750%, 10/01/2017 (ETM) | 830,000 | 941,469 | ||||||
Palm Beach County Florida Revenue, | ||||||||
5.000%, 11/01/2018 (Callable 11/01/2017) | 1,000,000 | 1,145,060 | ||||||
Pinellas County Housing Finance Authority, | ||||||||
4.250%, 03/01/2027 (Callable 09/01/2019) | 1,880,000 | 1,962,852 | ||||||
Sarasota County Florida School Board, | ||||||||
5.000%, 07/01/2015 (Insured by NPFGC) | 1,000,000 | 1,066,540 | ||||||
Seminole County Florida Water & Sewage Revenue, | ||||||||
6.000%, 10/01/2019 (ETM) | 5,200,000 | 6,027,996 | ||||||
Sunrise Florida Utility System Revenue, | ||||||||
5.500%, 10/01/2018 (ETM) | 3,000,000 | 3,419,130 | ||||||
102,045,944 | 10.1% | |||||||
Georgia | ||||||||
Atlanta Georgia Water & Wastewater Revenue, | ||||||||
5.500%, 11/01/2017 (Insured by AGM) | 8,445,000 | 9,844,759 | ||||||
Forsyth County Georgia Hospital Authority Revenue Anticipation Certificates, | ||||||||
6.375%, 10/01/2028 (Callable 02/03/2014)(ETM) | 8,050,000 | 9,789,605 | ||||||
Georgia Municipal Electric Authority Power Revenue: | ||||||||
6.500%, 01/01/2017 (Pre-refunded to 01/01/2014)( Insured by AGM) | 120,000 | 120,000 | ||||||
6.500%, 01/01/2017 (Insured by AGM) | 7,350,000 | 7,884,786 | ||||||
Gwinnett County Georgia School District, | ||||||||
5.000%, 02/01/2026 (Pre-refunded to 02/01/2018) | 7,400,000 | 8,564,612 | ||||||
Northwestern Gwinnett County Georgia Facilities Corporation I Certificate Participation, | ||||||||
5.750%, 06/15/2019 (Pre-refunded to 06/15/2014) | 2,030,000 | 2,145,832 | ||||||
Richmond County Development Authority: | ||||||||
0.000%, 12/01/2021 (ETM) ^ | 720,000 | 575,712 | ||||||
0.000%, 12/01/2021 (ETM) ^ | 3,510,000 | 2,806,596 | ||||||
State of Georgia, | ||||||||
5.000%, 07/01/2020 (Callable 07/01/2017) | 12,570,000 | 14,250,734 | ||||||
55,982,636 | 5.6% | |||||||
Illinois | ||||||||
Chicago Illinois, | ||||||||
5.000%, 01/01/2017 (Callable 01/01/2016)(Insured by AGM) | 2,360,000 | 2,497,281 | ||||||
Chicago Illinois Board of Education: | ||||||||
5.000%, 12/01/2017 (Callable 12/01/2016)(Insured by AGM) | 4,345,000 | 4,693,817 | ||||||
5.000%, 12/01/2017 (Insured by AMBAC) | 2,100,000 | 2,274,027 | ||||||
6.000%, 01/01/2020 (Insured by NPFGC) | 1,745,000 | 1,902,783 | ||||||
Chicago Illinois Public Building Community Building Revenue: | ||||||||
7.000%, 01/01/2015 (ETM) | 1,990,000 | 2,049,501 | ||||||
7.000%, 01/01/2020 (ETM) | 1,555,000 | 1,932,243 | ||||||
Cook County Community High School District No. 233, | ||||||||
4.000%, 12/01/2026 (Callable 06/01/2022) | 3,695,000 | 3,889,098 | ||||||
Cook County Illinois School District No. 097, | ||||||||
9.000%, 12/01/2015 (Insured by NPFGC) | 2,605,000 | 3,021,253 | ||||||
Cook County Illinois School District No. 100, | ||||||||
8.100%, 12/01/2016 (ETM) | 1,430,000 | 1,737,693 | ||||||
Cook County Illinois School District No. 159, | ||||||||
0.000%, 12/01/2022 (ETM) ^ | 2,000,000 | 1,489,220 | ||||||
Dupage County Illinois Stormwater Project, | ||||||||
5.600%, 01/01/2021 | 1,095,000 | 1,210,851 | ||||||
Illinois Development Financial Authority, | ||||||||
0.000%, 07/15/2023 (ETM) ^ | 16,860,000 | 12,274,923 | ||||||
Illinois Finance Authority, | ||||||||
0.000%, 07/15/2025 (ETM) ^ | 9,560,000 | 6,308,166 | ||||||
Illinois Municipal Electric Agency Power Supply Revenue Bonds, | ||||||||
5.250%, 02/01/2016 (Insured by NPFGC) | 1,000,000 | 1,089,410 | ||||||
Illinois State: | ||||||||
5.000%, 01/01/2019 (Insured by AGM) | 1,000,000 | 1,109,750 | ||||||
4.000%, 09/01/2019 (Callable 09/01/2018)(Insured by AGM) | 5,000,000 | 5,209,200 | ||||||
6.000%, 11/01/2026 (Insured by NPFGC) | 3,000,000 | 3,372,300 | ||||||
Illinois State Toll Highway Authority Priority Revenue Bonds, | ||||||||
5.500%, 01/01/2016 (Insured by AGM) | 2,100,000 | 2,286,249 | ||||||
Illinois State Toll Highway Authority Revenue Bonds: | ||||||||
5.000%, 01/01/2026 (Pre-refunded to 07/01/2016) | 1,065,000 | 1,184,387 | ||||||
5.000%, 01/01/2031 (Pre-refunded to 07/01/2016) | 2,055,000 | 2,285,365 | ||||||
Kane McHenry Cook & De Kalb Counties Illinois School District No. 300: | ||||||||
9.000%, 01/01/2015 (Insured by AMBAC) | 1,000,000 | 1,082,950 | ||||||
7.000%, 01/01/2018 (Insured by AMBAC) | 6,140,000 | 7,394,218 | ||||||
Kendall Kane & Will Counties Community Unit School District No. 308, | ||||||||
0.000%, 02/01/2021 ^ | 13,625,000 | 10,518,364 | ||||||
Lake County Illinois Community Consolidated School District, | ||||||||
0.000%, 12/01/2014 (Insured by NPFGC) ^ | 1,875,000 | 1,847,138 | ||||||
Lake County Illinois Community High School District No. 124 Grant, | ||||||||
5.000%, 12/01/2017 | 1,050,000 | 1,201,126 | ||||||
McHenry & Kane Counties Illinois Community School District No. 158: | ||||||||
0.000%, 01/01/2016 (ETM) ^ | 1,245,000 | 1,230,272 | ||||||
0.000%, 01/01/2016 ^ | 725,000 | 699,683 | ||||||
Metropolitan Pier & Exposition Authority Illinois: | ||||||||
5.500%, 06/15/2016 (ETM) | 1,805,000 | 2,018,586 | ||||||
5.500%, 12/15/2023 (ETM) | 2,250,000 | 2,661,547 | ||||||
Regional Transportation Authority Illinois, | ||||||||
6.000%, 07/01/2022 (Insured by NPFGC) | 4,705,000 | 5,600,173 | ||||||
Southern Illinois University Revenue: | ||||||||
5.250%, 04/01/2018 (Insured by NPFGC) | 1,075,000 | 1,215,255 | ||||||
5.250%, 04/01/2019 (Insured by NPFGC) | 1,390,000 | 1,574,995 | ||||||
Village of Schaumburg IL, | ||||||||
4.000%, 12/01/2024 (Callable 12/01/2022) | 5,750,000 | 6,022,205 | ||||||
Winnebago County Illinois School District No. 122 Harlam-Loves Park: | ||||||||
0.000%, 01/01/2018 (ETM) ^ | 155,000 | 147,256 | ||||||
0.000%, 01/01/2018 (Insured by AGM) ^ | 1,205,000 | 1,079,174 | ||||||
106,110,459 | 10.5% |
Indiana | ||||||||
Franklin Community Multi-School Building Corp, | ||||||||
5.000%, 07/15/2020 | 1,990,000 | 2,204,363 | ||||||
Hammond Indiana Multi-School Building Corporation Revenue Bonds: | ||||||||
6.000%, 01/15/2018 (ETM) | 1,000,000 | 1,100,460 | ||||||
5.000%, 07/15/2018 (Insured by NPFGC) | 1,330,000 | 1,487,126 | ||||||
Indiana State Office Building Commissions Facilities Revenue Bonds, | ||||||||
5.250%, 07/01/2017 | 1,115,000 | 1,268,725 | ||||||
Indiana Toll Road Commission, | ||||||||
9.000%, 01/01/2015 (ETM) | 455,000 | 474,510 | ||||||
Indianapolis Local Public Improvement Bond Bank, | ||||||||
5.500%, 01/01/2019 (Insured by NPFGC) | 1,155,000 | 1,324,069 | ||||||
Indianapolis Local Public Improvement Bond Waterworks Project, | ||||||||
5.500%, 07/01/2018 (Insured by NPFGC) | 3,460,000 | 3,991,594 | ||||||
Perry Township Multi School Building Corporation, | ||||||||
5.000%, 07/10/2018 (Callable 07/10/2015) | 1,000,000 | 1,056,420 | ||||||
Purdue University Indiana Revenue, | ||||||||
5.000%, 07/01/2015 | 1,650,000 | 1,766,837 | ||||||
South Bend Indiana Community School Building Corporation, | ||||||||
5.000%, 07/15/2017 (Insured by NPFGC) | 1,000,000 | 1,125,230 | ||||||
15,799,334 | 1.6% |
Kansas | ||||||||
City of Wichita KS, | ||||||||
5.000%, 11/15/2034 (Pre-refunded to 11/15/2019) | 810,000 | 963,406 | ||||||
Wyandotte County Kansas Revenue, | ||||||||
5.000%, 09/01/2019 (Callable 03/01/2019)(Insured by BHAC) | 1,865,000 | 2,119,964 | ||||||
3,083,370 | 0.3% | |||||||
Kentucky | ||||||||
Jefferson County Kentucky School District Financial School Building Revenue Bonds, | ||||||||
5.500%, 01/01/2018 (Insured by AGM) | 3,340,000 | 3,862,076 | ||||||
Louisville & Jefferson County Metropolitan Government, | ||||||||
6.125%, 02/01/2037 (Pre-refunded to 02/01/2018) | 13,665,000 | 16,456,896 | ||||||
20,318,972 | 2.0% | |||||||
Louisiana | ||||||||
Louisiana Public Facilities Authority Revenue: | ||||||||
5.500%, 05/15/2027 (Pre-refunded to 05/15/2026) | 9,810,000 | 11,874,220 | ||||||
5.500%, 05/15/2032 (Pre-refunded to 05/15/2026) | 19,285,000 | 23,495,494 | ||||||
State of Louisiana: | ||||||||
5.000%, 11/15/2018 | 1,775,000 | 2,083,726 | ||||||
5.000%, 11/15/2020 (Callable 05/15/2020) | 10,000,000 | 11,654,700 | ||||||
49,108,140 | 4.9% | |||||||
Maryland | ||||||||
City of Baltimore MD, | ||||||||
5.000%, 07/01/2024 (ETM) | 1,195,000 | 1,406,419 | ||||||
State of Maryland, | ||||||||
5.000%, 03/15/2019 (Pre-refunded to 03/15/2017) | 1,135,000 | 1,292,243 | ||||||
2,698,662 | 0.3% | |||||||
Massachusetts | ||||||||
Massachusetts Department of Transportation, | ||||||||
5.000%, 01/01/2020 (ETM) | 1,975,000 | 2,226,319 | ||||||
Massachusetts State: | ||||||||
5.000%, 08/01/2020 (Pre-refunded to 08/01/2016) | 5,820,000 | 6,502,104 | ||||||
4.000%, 12/01/2022 (Callable 12/01/2019) | 15,000,000 | 16,066,950 | ||||||
Massachusetts State Water Resources Authority: | ||||||||
5.250%, 12/01/2015 (ETM) | 2,165,000 | 2,254,025 | ||||||
6.500%, 07/15/2019 (ETM) | 2,855,000 | 3,295,383 | ||||||
30,344,781 | 3.0% | |||||||
Michigan | ||||||||
Brighton Area School District/MI: | ||||||||
5.000%, 05/01/2020 | 1,300,000 | 1,467,960 | ||||||
5.000%, 05/01/2021 | 500,000 | 561,825 | ||||||
Detroit Michigan City School District, | ||||||||
5.000%, 05/01/2016 (Callable 05/01/2015)(Insured by AGM) | 1,000,000 | 1,035,740 | ||||||
Harper Creek Michigan Community School District, | ||||||||
5.000%, 05/01/2016 (Callable 05/01/2015)(Insured by AGM) | 1,550,000 | 1,635,374 | ||||||
Jenison Michigan Public Schools, | ||||||||
5.250%, 05/01/2015 (Insured by NPFGC) | 1,390,000 | 1,478,793 | ||||||
Lakeview Public School District, | ||||||||
5.000%, 05/01/2017 (Insured by NPFGC) | 2,275,000 | 2,550,616 | ||||||
Livonia Michigan Public Schools School District: | ||||||||
5.000%, 05/01/2017 (Callable 05/01/2014)(Insured by NPFGC) | 4,295,000 | 4,351,437 | ||||||
5.000%, 05/01/2022 (Callable 05/01/2014)(Insured by NPFGC) | 3,000,000 | 3,030,330 | ||||||
Michigan Finance Authority, | ||||||||
5.000%, 01/01/2019 | 7,000,000 | 8,083,460 | ||||||
Michigan State Housing Development Authority, | ||||||||
4.750%, 06/01/2016 | 4,000,000 | 4,171,400 | ||||||
State of Michigan, | ||||||||
0.000%, 06/01/2022 (ETM) ^ | 2,000,000 | 1,522,880 | ||||||
29,889,815 | 3.0% | |||||||
Minnesota | ||||||||
Minnesota State Housing Finance Agency Homeownership Finance Bond: | ||||||||
4.250%, 07/01/2028 (Callable 01/01/2020) | 885,000 | 922,612 | ||||||
4.500%, 07/01/2034 (Callable 07/01/2021) | 1,745,000 | 1,855,511 | ||||||
University of Minnesota, | ||||||||
5.500%, 07/01/2021 (ETM) | 8,455,000 | 9,862,927 | ||||||
Western Minnesota Municipal Power Agency, | ||||||||
6.375%, 01/01/2016 (ETM) | 1,195,000 | 1,261,478 | ||||||
13,902,528 | 1.4% | |||||||
Mississippi | ||||||||
Mississippi Development Bank Special Obligations, | ||||||||
5.250%, 10/01/2030 (Pre-refunded to 10/01/2015) | 1,110,000 | 1,204,461 | ||||||
Mississippi Housing Financial Corporation, | ||||||||
0.000%, 06/01/2015 (ETM) ^ | 1,500,000 | 1,491,990 | ||||||
2,696,451 | 0.3% | |||||||
Missouri | ||||||||
St. Charles County Missouri Francis Howell School District, | ||||||||
4.500%, 03/01/2018 | 1,000,000 | 1,138,340 | 0.1% | |||||
Nebraska | ||||||||
Omaha Nebraska Public Electric Power District Revenue, | ||||||||
6.200%, 02/01/2017 (ETM) | 7,410,000 | 8,032,218 | 0.8% | |||||
Nevada | ||||||||
Las Vegas Clark County Nevada Library District, | ||||||||
5.000%, 01/01/2017 | 2,080,000 | 2,311,795 | 0.2% | |||||
New Hampshire | ||||||||
New Hampshire Housing Finance Authority Revenue Bonds, | ||||||||
5.250%, 07/01/2028 (Callable 01/01/2021) | 3,765,000 | 4,029,190 | ||||||
State of New Hampshire, | ||||||||
5.000%, 07/01/2021 (Callable 07/01/2020) | 1,000,000 | 1,167,930 | ||||||
5,197,120 | 0.5% | |||||||
New Jersey | ||||||||
County of Hudson NJ, | ||||||||
3.000%, 03/15/2021 | 1,140,000 | 1,109,186 | ||||||
New Jersey State Housing & Mortgage Finance Agency Bonds, | ||||||||
4.500%, 10/01/2029 (Callable 04/01/2021) | 7,700,000 | 7,817,194 | ||||||
New Jersey State Transportation Trust Fund Authority: | ||||||||
5.500%, 12/15/2015 (Insured by AMBAC) | 2,595,000 | 2,845,911 | ||||||
5.250%, 12/15/2020 | 5,000,000 | 5,812,350 | ||||||
New Jersey State Turnpike Authority: | ||||||||
6.500%, 01/01/2016 (ETM) | 970,000 | 1,027,860 | ||||||
6.500%, 01/01/2016 (ETM) | 80,000 | 84,772 | ||||||
5.500%, 01/01/2025 | 2,000,000 | 2,310,820 | ||||||
21,008,093 | 2.1% | |||||||
New Mexico | ||||||||
New Mexico Mortgage Financial Authority: | ||||||||
4.625%, 09/01/2025 (Callable 03/01/2020) | 1,060,000 | 1,094,598 | ||||||
4.500%, 09/01/2028 (Callable 03/01/2020) | 895,000 | 937,164 | ||||||
New Mexico State Hospital Equipment Loan Council Hospital Revenue, | ||||||||
5.250%, 07/01/2025 (Pre-refunded to 07/01/2015) | 1,000,000 | 1,070,550 | ||||||
3,102,312 | 0.3% | |||||||
New York | ||||||||
Cattaraugus-Little Valley Central School District: | ||||||||
3.125%, 06/15/2016 | 1,520,000 | 1,582,183 | ||||||
3.125%, 06/15/2017 | 1,000,000 | 1,040,370 | ||||||
Churchville-Chili Central School District: | ||||||||
3.000%, 06/15/2017 | 1,045,000 | 1,104,377 | ||||||
3.000%, 06/15/2018 | 1,070,000 | 1,113,945 | ||||||
Long Island Power Authority and Electric System Revenue, | ||||||||
5.000%, 12/01/2017 (Callable 12/01/2016)(Insured by NPFGC) | 2,000,000 | 2,195,080 | ||||||
Metropolitan Transit Authority New York, | ||||||||
6.000%, 04/01/2020 (ETM) | 13,430,000 | 16,213,368 | ||||||
New York State Dormitory Authority and Personal Income Tax Revenue, | ||||||||
5.000%, 12/15/2017 | 2,000,000 | 2,316,840 | ||||||
New York State Thruway Authority, | ||||||||
5.000%, 03/15/2022 (Callable 03/15/2019) | 4,040,000 | 4,560,231 | ||||||
New York, New York: | ||||||||
5.000%, 03/01/2016 (Callable 03/01/2015)(Partially Pre-refunded)(Insured by FGIC-TCRS) | 1,000,000 | 1,053,590 | ||||||
5.000%, 08/01/2017 | 5,000,000 | 5,687,900 | ||||||
5.250%, 08/15/2021 (Callable 08/15/2018) | 1,125,000 | 1,274,287 | ||||||
Suffolk County Water Authority, | ||||||||
6.000%, 06/01/2017 (ETM) | 4,715,000 | 5,263,732 | ||||||
Susquehanna Valley Central School District: | ||||||||
3.125%, 06/15/2017 | 1,155,000 | 1,199,664 | ||||||
3.125%, 06/15/2019 | 1,375,000 | 1,398,127 | ||||||
TSASC Inc. New York, | ||||||||
4.750%, 06/01/2022 (Callable 06/01/2016) | 165,000 | 159,336 | ||||||
Westchester Tobacco Asset Securitization Corp. New York, | ||||||||
6.950%, 07/15/2039 (Pre-refunded to 07/15/2017) | 13,075,000 | 15,986,410 | ||||||
62,149,440 | 6.2% | |||||||
North Carolina | ||||||||
North Carolina Eastern Municipal Power Agency, | ||||||||
5.000%, 01/01/2021 (ETM) | 7,790,000 | 9,148,809 | ||||||
North Carolina Eastern Municipal Power Agency Power Systems Revenue: | ||||||||
5.000%, 01/01/2017 (ETM) | 6,630,000 | 7,208,136 | ||||||
6.400%, 01/01/2021 (ETM) | 5,750,000 | 6,766,773 | ||||||
4.500%, 01/01/2024 (Pre-refunded to 01/01/2022) | 7,665,000 | 8,763,701 | ||||||
6.000%, 01/01/2026 (Pre-refunded to 01/01/2022) | 1,895,000 | 2,384,952 | ||||||
34,272,371 | 3.4% | |||||||
Ohio | ||||||||
Cincinnati Ohio City School District, | ||||||||
5.000%, 12/01/2016 (Insured by AGM) | 2,000,000 | 2,238,140 | ||||||
Cleveland Municipal School District: | ||||||||
4.000%, 12/01/2017 | 1,790,000 | 1,960,784 | ||||||
4.000%, 12/01/2018 | 1,865,000 | 2,045,028 | ||||||
4.000%, 12/01/2019 | 1,940,000 | 2,117,898 | ||||||
5.000%, 12/01/2020 | 2,015,000 | 2,306,732 | ||||||
Miamisburg Ohio Water Revenue, | ||||||||
7.000%, 11/15/2016 (Callable 02/03/2014)(ETM) | 60,000 | 64,859 | ||||||
Ohio Housing Finance Agency, | ||||||||
5.000%, 11/01/2028 (Callable 05/01/2020) | 2,055,000 | 2,159,086 | ||||||
State of Ohio: | ||||||||
5.500%, 02/01/2020 | 1,195,000 | 1,435,494 | ||||||
5.000%, 06/15/2021 | 6,740,000 | 7,908,783 | ||||||
22,236,804 | 2.2% |
Pennsylvania | ||||||||
Central Dauphin Pennsylvania School District, | ||||||||
6.750%, 02/01/2024 (Pre-refunded to 02/01/2016) | 1,275,000 | 1,441,681 | ||||||
Erie Pennsylvania Sewer Authority Revenue, | ||||||||
5.125%, 06/01/2020 (ETM) | 1,380,000 | 1,585,551 | ||||||
Lampeter Strasburg School District, | ||||||||
4.000%, 06/01/2019 | 1,715,000 | 1,878,062 | ||||||
Pennsylvania Convention Center Authority Revenue Bonds, | ||||||||
6.000%, 09/01/2019 (ETM) | 10,060,000 | 12,141,414 | ||||||
Pennsylvania Housing Finance Agency: | ||||||||
3.700%, 04/01/2018 | 2,130,000 | 2,209,470 | ||||||
3.750%, 10/01/2018 | 1,760,000 | 1,836,806 | ||||||
3.900%, 04/01/2019 | 1,025,000 | 1,066,328 | ||||||
3.900%, 10/01/2019 (Callable 04/01/2019) | 1,675,000 | 1,734,329 | ||||||
Philadelphia Pennsylvania Authority For Industrial Development Revenue, | ||||||||
5.250%, 01/01/2027 (Pre-refunded to 01/01/2017) | 1,790,000 | 2,026,853 | ||||||
Philadelphia Pennsylvania Gas Works, | ||||||||
7.000%, 05/15/2020 (ETM) | 2,395,000 | 2,870,575 | ||||||
Pittsburgh Pennsylvania Water & Sewer Authority Revenue Bonds, | ||||||||
7.250%, 09/01/2014 (Callable 01/21/2014)(ETM) | 315,000 | 329,584 | ||||||
St. Mary Hospital Authority Pennsylvania Health Revenue, | ||||||||
5.375%, 11/15/2034 (Pre-refunded to 11/15/2014) | 1,510,000 | 1,575,640 | ||||||
30,696,293 | 3.0% | |||||||
Puerto Rico | ||||||||
Commonwealth of Puerto Rico, | ||||||||
5.000%, 07/01/2021 | 6,000,000 | 4,602,360 | ||||||
Puerto Rico Electric Power Authority: | ||||||||
0.000%, 07/01/2017 (Pre-refunded to 07/01/2017)(ETM) ^ | 5,010,000 | 4,525,182 | ||||||
0.000%, 07/01/2017 (Pre-refunded to 07/01/2017) ^ | 3,000,000 | 2,668,110 | ||||||
Puerto Rico Public Finance Corp., | ||||||||
6.000%, 08/01/2026 (ETM) | 1,080,000 | 1,315,667 | ||||||
13,111,319 | 1.3% | |||||||
South Carolina | ||||||||
Piedmont Municipal Power Agency South Carolina Electric Revenue, | ||||||||
6.750%, 01/01/2020 (ETM) | 6,450,000 | 8,187,049 | ||||||
South Carolina State Public Service Authority, | ||||||||
5.000%, 01/01/2018 (Pre-refunded to 01/01/2014) | 760,000 | 760,000 | ||||||
8,947,049 | 0.9% | |||||||
South Dakota | ||||||||
Heartland Consumers Power District, | ||||||||
7.000%, 01/01/2016 (ETM) | 660,000 | 701,659 | 0.1% | |||||
Tennessee | ||||||||
Metropolitan Government Nashville & Davidson County Tennessee H&E, | ||||||||
0.000%, 06/01/2021 (ETM) ^ | 1,050,000 | 861,557 | ||||||
Shelby County Tennessee Health Educational & Housing Facilities Revenue, | ||||||||
5.500%, 08/15/2019 (ETM) | 4,395,000 | 4,842,894 | ||||||
Tennessee Housing Development Agency, | ||||||||
4.500%, 07/01/2028 (Callable 01/01/2020) | 3,695,000 | 3,886,216 | ||||||
9,590,667 | 0.9% | |||||||
Texas | ||||||||
Barbers Hill Texas Independent School District General Obligation, | ||||||||
5.000%, 02/15/2017 (Callable 02/15/2015)(PSF Guaranteed) | 2,125,000 | 2,231,101 | ||||||
Capital Area Housing Finance Corporation Texas, | ||||||||
0.000%, 01/01/2016 (ETM) ^ | 6,060,000 | 5,982,068 | ||||||
Central Texas Housing Finance Corporation, | ||||||||
0.000%, 09/01/2016 (ETM) ^ | 1,500,000 | 1,471,980 | ||||||
City of Austin TX Water & Wastewater System Revenue, | ||||||||
5.000%, 11/15/2024 (Callable 11/15/2022) | 3,000,000 | 3,413,550 | ||||||
City of Houston TX Utility System Revenue, | ||||||||
5.500%, 12/01/2024 (ETM) | 1,735,000 | 2,126,694 | ||||||
Conroe Independent School District: | ||||||||
5.000%, 02/15/2022 (Callable 02/15/2021)(PSF Guaranteed) | 1,000,000 | 1,172,710 | ||||||
5.000%, 02/15/2023 (Callable 02/15/2021)(PSF Guaranteed) | 2,680,000 | 3,131,392 | ||||||
Cypress-Fairbanks Independent School District: | ||||||||
5.000%, 02/15/2017 (Pre-refunded to 02/15/2016) | 1,085,000 | 1,190,885 | ||||||
5.000%, 02/15/2017 (Callable 02/15/2016) | 415,000 | 452,885 | ||||||
Dallas Texas Independent School District, | ||||||||
5.000%, 02/15/2020 (PSF Guaranteed) | 2,410,000 | 2,837,920 | ||||||
El Paso Texas Waterworks & Sewer Revenue, | ||||||||
5.000%, 08/15/2018 | 1,355,000 | 1,563,128 | ||||||
Frisco Texas Independent School District, | ||||||||
6.000%, 08/15/2018 (Callable 08/15/2016)(PSF Guaranteed) | 1,625,000 | 1,832,057 | ||||||
Georgetown Independent School District, | ||||||||
4.000%, 02/15/2020 (PSF Guaranteed) | 1,900,000 | 2,130,508 | ||||||
Georgetown Texas Independent School District, | ||||||||
5.000%, 02/15/2016 (Callable 02/15/2015)(PSF Guaranteed) | 1,000,000 | 1,050,270 | ||||||
Harris County Texas: | ||||||||
5.000%, 10/01/2019 | 1,525,000 | 1,794,711 | ||||||
5.750%, 10/01/2020 (Pre-refunded to 10/01/2018) | 175,000 | 211,549 | ||||||
5.750%, 10/01/2028 (Pre-refunded to 10/01/2018) | 6,830,000 | 8,256,446 | ||||||
Harris County Texas Health Facilities Development Corporation Hospital Revenue, | ||||||||
5.500%, 10/01/2019 (ETM) | 4,780,000 | 5,523,338 | ||||||
Houston Texas Utility System Revenue, | ||||||||
5.250%, 05/15/2015 (Callable 05/15/2014)(Insured by NPFGC) | 3,000,000 | 3,053,250 | ||||||
Houston Texas Water & Sewer System Revenue Bonds, | ||||||||
5.500%, 12/01/2029 (ETM) | 16,050,000 | 19,618,236 | ||||||
Humble Texas Independent School District, | ||||||||
5.000%, 02/15/2021 (PSF Guaranteed) | 1,500,000 | 1,763,355 | ||||||
Killeen Independent School District, | ||||||||
4.000%, 02/15/2024 (Callable 02/15/2021)(PSF Guaranteed) | 1,145,000 | 1,205,090 | ||||||
La Porte Independent School District/TX, | ||||||||
5.000%, 02/15/2018 (Callable 02/15/2015) | 85,000 | 88,873 | ||||||
Lower Colorado River Authority, | ||||||||
4.750%, 01/01/2028 (ETM) | 800,000 | 917,016 | ||||||
Lubbock Texas, | ||||||||
5.000%, 02/15/2021 (Callable 02/15/2018)(Insured by AGM) | 3,425,000 | 3,776,234 | ||||||
Lubbock Texas Housing Finance Corp., | ||||||||
8.000%, 10/01/2021 (ETM) | 1,780,000 | 2,421,174 | ||||||
Lubbock Texas Independent School District, | ||||||||
4.000%, 02/15/2022 (Callable 02/15/2020)(PSF Guaranteed) | 1,000,000 | 1,072,240 | ||||||
Lufkin Texas Independent School District, | ||||||||
5.000%, 08/15/2015 (Callable 08/15/2014)(PSF Guaranteed) | 1,735,000 | 1,785,957 | ||||||
Magnolia Texas Independent School District, | ||||||||
5.000%, 08/15/2016 (PSF Guaranteed) | 1,475,000 | 1,643,637 | ||||||
Mission Consolidation Independent School District, | ||||||||
5.000%, 02/15/2019 (Callable 02/15/2015)(PSF Guaranteed) | 1,265,000 | 1,321,039 | ||||||
Pasadena Independent School District, | ||||||||
5.000%, 02/15/2022 (Callable 02/15/2021)(PSF Guaranteed) | 1,115,000 | 1,285,461 | ||||||
Retama Texas Development Corporation Special Facilites Revenue, | ||||||||
8.750%, 12/15/2018 (ETM) | 2,035,000 | 2,713,347 | ||||||
San Antonio Texas Electric & Gas Revenue, | ||||||||
5.650%, 02/01/2019 (ETM) | 11,665,000 | 13,694,010 | ||||||
San Antonio Texas Hotel Occupancy Tax Revenue Bonds, | ||||||||
0.000%, 08/15/2015 (ETM) ^ | 2,100,000 | 2,085,552 | ||||||
San Antonio Texas Independent School District, | ||||||||
5.000%, 08/15/2017 (Callable 08/15/2015)(PSF Guaranteed) | 2,000,000 | 2,147,760 | ||||||
Spring Texas Independent School District, | ||||||||
5.000%, 08/15/2019 (Callable 08/15/2018)(PSF Guaranteed) | 1,020,000 | 1,183,588 | ||||||
Tarrant County Texas Health Facilities Revenue, | ||||||||
6.000%, 09/01/2024 (ETM) | 7,990,000 | 9,658,072 | ||||||
Tarrant County Texas Housing Finance Corporation Revenue Bonds, | ||||||||
0.000%, 09/15/2016 (ETM) ^ | 1,800,000 | 1,770,732 | ||||||
Temple Independent School District, | ||||||||
4.000%, 02/01/2022 (Callable 02/01/2021)(PSF Guaranteed) | 1,120,000 | 1,212,467 | ||||||
Texas State: | ||||||||
5.000%, 10/01/2018 | 6,285,000 | 7,370,482 | ||||||
5.000%, 04/01/2020 (Callable 04/01/2016) | 3,965,000 | 4,313,286 | ||||||
Tomball Hospital Authority, | ||||||||
5.000%, 07/01/2020 (Pre-refunded to 07/01/2015) | 2,200,000 | 2,352,174 | ||||||
University of Texas Revenue Bonds, | ||||||||
5.000%, 08/15/2018 (Pre-refunded to 08/15/2016) | 1,225,000 | 1,369,023 | ||||||
Ysleta Independent School District, | ||||||||
5.000%, 08/15/2023 (Callable 08/15/2021) | 1,020,000 | 1,166,911 | ||||||
137,362,158 | 13.6% | |||||||
Utah | ||||||||
Granite School District Board of Education: | ||||||||
5.000%, 06/01/2022 (Callable 06/01/2021) | 3,900,000 | 4,498,767 | ||||||
5.000%, 06/01/2023 (Callable 06/01/2021) | 1,750,000 | 1,995,963 | ||||||
Salt Lake City Utah Hospital Revenue, | ||||||||
8.125%, 05/15/2015 (Callable 02/03/2014)(ETM) | 160,000 | 170,211 | ||||||
6,664,941 | 0.7% | |||||||
Virginia | ||||||||
Bristol Virginia Utility Systems General Obligations, | ||||||||
5.500%, 11/01/2018 (ETM) | 1,095,000 | 1,266,619 | ||||||
Danville Industrial Development Authority, | ||||||||
5.250%, 10/01/2028 (ETM) | 1,500,000 | 1,776,960 | ||||||
Virginia Public School Authority, | ||||||||
6.250%, 12/01/2028 (Pre-refunded to 12/01/2018) | 1,285,000 | 1,586,847 | ||||||
4,630,426 | 0.5% | |||||||
Washington | ||||||||
Snohomish County School District No. 201, | ||||||||
4.000%, 12/01/2021 (Callable 12/01/2020) | 4,500,000 | 4,952,925 | ||||||
Snohomish County Washington Public Utilities Revenue, | ||||||||
6.800%, 01/01/2020 (Callable 02/03/2014)(ETM) | 3,605,000 | 4,373,190 | ||||||
Thurston & Pierce Counties Washington Community Schools, | ||||||||
4.250%, 12/01/2021 (Callable 12/01/2020) | 2,755,000 | 3,020,692 | ||||||
Walla Walla County School District No 250 College Place, | ||||||||
5.000%, 12/01/2019 | 1,290,000 | 1,481,449 | ||||||
Washington Health Care Facilities Authority: | ||||||||
6.250%, 08/01/2028 (Pre-refunded to 08/01/2018) | 1,305,000 | 1,593,914 | ||||||
6.125%, 11/15/2031 (Pre-refunded to 05/15/2021) | 415,000 | 524,124 | ||||||
6.250%, 08/01/2036 (Pre-refunded to 08/01/2018) | 7,715,000 | 9,423,024 | ||||||
6.250%, 11/15/2041 (Pre-refunded to 05/15/2021) | 4,165,000 | 5,295,339 | ||||||
Washington State: | ||||||||
5.000%, 01/01/2021 | 10,000,000 | 11,693,000 | ||||||
5.500%, 07/01/2023 | 5,000,000 | 5,955,100 | ||||||
48,312,757 | 4.8% | |||||||
West Virginia | ||||||||
Ohio County Board of Education, | ||||||||
5.250%, 06/01/2018 (ETM) | 1,130,000 | 1,325,682 | 0.1% | |||||
Wisconsin | ||||||||
Ladysmith-Hawkins Wisconsin School District General Obligation, | ||||||||
5.200%, 04/01/2018 (Callable 04/01/2016)(Insured by NPFGC) | 3,000,000 | 3,152,760 | ||||||
Wisconsin State Health & Educational Facilities Revenue, | ||||||||
5.000%, 12/01/2019 (Callable 12/01/2014)(Insured by NPFGC) | 3,320,000 | 3,391,745 | ||||||
6,544,505 | 0.6% | |||||||
Total Municipal Bonds (Cost $942,215,751) | 967,722,888 | 96.1% | ||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS | ||||||||
Money Market Mutual Fund | ||||||||
Goldman Sachs Financial Square Funds, 0.01% « | 3,275,138 | 3,275,138 | ||||||
Total Short-Term Investments (Cost $3,275,138) | 3,275,138 | 0.3% | ||||||
Total Investments (Cost $945,490,889) | 970,998,026 | 96.4% | ||||||
Other Assets in Excess of Liabilities | 35,996,572 | 3.6% | ||||||
TOTAL NET ASSETS | $ | 1,006,994,598 | 100.0% | |||||
Notes to Schedule of Investments | ||||||||
AGM - Assured Guaranty Municipal | ||||||||
AMBAC - Ambac Assurance Corporation. | ||||||||
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 |
Baird Aggregate Bond Fund | ||||||||
Schedule of Investments | ||||||||
December 31, 2013 | ||||||||
Principal | % of | |||||||
Amount | Value | Net Assets | ||||||
LONG-TERM INVESTMENTS | ||||||||
U.S. Treasury Securities | ||||||||
U.S. Treasury Bonds: | ||||||||
1.250%, 04/30/2019 @ | $ | 148,924,400 | $ | 144,282,129 | ||||
5.250%, 11/15/2028 @ | 53,151,500 | 63,989,410 | ||||||
4.375%, 02/15/2038 @ | 32,287,400 | 35,142,833 | ||||||
3.500%, 02/15/2039 @ | 49,855,900 | 46,950,248 | ||||||
290,364,620 | 16.1% | |||||||
Taxable Municipal Bonds | ||||||||
Atlanta Independent School System, | ||||||||
5.557%, 03/01/2026 | 4,465,000 | 4,688,920 | ||||||
California Qualified School Bond Joint Powers Authority, | ||||||||
7.155%, 03/01/2027 | 6,695,000 | 7,090,139 | ||||||
California School Finance Authority: | ||||||||
5.041%, 07/01/2020 | 2,230,000 | 2,363,309 | ||||||
5.043%, 01/01/2021 (Callable 12/31/2015) | 1,785,000 | 1,812,132 | ||||||
Contra Costa County California Pension Obligation, | ||||||||
5.140%, 06/01/2017 | 5,335,000 | 5,738,326 | ||||||
Cuyahoga County Ohio Industrial Development Revenue, | ||||||||
9.125%, 10/01/2023 | 895,000 | 816,446 | ||||||
Eaton Ohio Community City Schools, | ||||||||
5.390%, 08/25/2027 (Callable 06/01/2020) | 2,305,000 | 2,333,720 | ||||||
Elgin Ohio LOC School District, | ||||||||
5.499%, 08/31/2027 (Callable 12/01/2019) | 4,440,000 | 4,452,876 | ||||||
New Hampshire Housing Finance Authority: | ||||||||
3.050%, 01/01/2021 | 1,110,000 | 1,092,362 | ||||||
3.750%, 07/01/2034 (Callable 07/01/2023) | 3,275,000 | 3,222,011 | ||||||
North Carolina Housing Finance Agency, | ||||||||
2.812%, 07/01/2035 (Callable 01/01/2024) | 5,585,000 | 5,499,829 | ||||||
Portigon AG | ||||||||
4.796%, 07/15/2015 f | 2,488,000 | 2,628,452 | ||||||
San Dieguito California Public Facilities, | ||||||||
6.459%, 05/01/2027 | 5,675,000 | 6,001,766 | ||||||
State Public School Building Authorities Revenue, | ||||||||
5.000%, 09/15/2027 | 4,458,000 | 4,635,161 | ||||||
Three Rivers Ohio LOC School District, | ||||||||
5.209%, 09/15/2027 (Callable 12/01/2020) | 2,365,000 | 2,371,906 | ||||||
Tobacco Settlement Authority Iowa, | ||||||||
6.500%, 06/01/2023 (Callable 06/01/2015) | 5,795,000 | 5,624,337 | ||||||
West Contra Costa Unified School District, | ||||||||
6.250%, 08/01/2030 | 1,785,000 | 1,747,069 | ||||||
Westlake Ohio City School District, | ||||||||
5.227%, 12/01/2026 (Callable 12/01/2020) | 3,570,000 | 3,686,846 | ||||||
65,805,607 | 3.7% | |||||||
Other Government Related Securities | ||||||||
Corp Andina de Fomento, | ||||||||
4.375%, 06/15/2022 f | 6,107,000 | 6,047,035 | ||||||
Nexen Inc., | ||||||||
6.400%, 05/15/2037 f | 3,392,000 | 3,861,165 | ||||||
PEMEX Project Funding Master Trust: | ||||||||
5.750%, 03/01/2018 | 2,499,000 | 2,786,385 | ||||||
6.625%, 06/15/2035 | 893,000 | 939,883 | ||||||
Petrobras Global Finance B.V., | ||||||||
4.375%, 05/20/2023 f | 1,785,000 | 1,590,242 | ||||||
Petrobras International Finance Company: | ||||||||
3.500%, 02/06/2017 f | 4,463,000 | 4,503,841 | ||||||
5.750%, 01/20/2020 f | 893,000 | 918,842 | ||||||
The Export-Import Bank of Korea, | ||||||||
4.000%, 01/11/2017 f | 1,400,000 | 1,483,147 | ||||||
22,130,540 | 1.2% | |||||||
Corporate Bonds | ||||||||
Industrials | ||||||||
Acuity Brands Lighting Inc., | ||||||||
6.000%, 12/15/2019 | 3,749,000 | 4,042,408 | ||||||
Altera Corporation, | ||||||||
4.100%, 11/15/2023 | 2,000,000 | 1,928,062 | ||||||
Ameritech Capital Funding Debentures: | ||||||||
9.100%, 06/01/2016 | 1,127,664 | 1,260,617 | ||||||
6.450%, 01/15/2018 | 2,668,000 | 3,023,199 | ||||||
Anadarko Petroleum Corporation: | ||||||||
6.375%, 09/15/2017 | 5,355,000 | 6,147,910 | ||||||
8.700%, 03/15/2019 | 2,432,000 | 3,079,087 | ||||||
Anglo American Capital PLC: | ||||||||
9.375%, 04/08/2014 (Acquired 08/29/2012, Cost $3,644,419) * f | 3,570,000 | 3,649,140 | ||||||
9.375%, 04/08/2019 (Acquired 04/02/2009, Cost $1,785,000) * f | 1,785,000 | 2,261,773 | ||||||
Apple, Inc., | ||||||||
2.400%, 05/03/2023 @ | 2,678,000 | 2,408,087 | ||||||
Bunge Limited Finance Corp.: | ||||||||
5.100%, 07/15/2015 | 1,151,000 | 1,218,381 | ||||||
8.500%, 06/15/2019 | 2,500,000 | 3,071,207 | ||||||
Bunge N.A. Finance L.P., | ||||||||
5.900%, 04/01/2017 | 3,392,000 | 3,703,511 | ||||||
Canadian Natural Resources Limited: | ||||||||
5.700%, 05/15/2017 f | 50,000 | 56,191 | ||||||
6.500%, 02/15/2037 f @ | 982,000 | 1,110,244 | ||||||
Celgene Corporation, | ||||||||
4.000%, 08/15/2023 @ | 2,477,000 | 2,438,849 | ||||||
CenturyLink Inc., | ||||||||
Series R, 5.150%, 06/15/2017 @ | 2,678,000 | 2,872,155 | ||||||
Comcast Corporation: | ||||||||
4.250%, 01/15/2033 @ | 5,712,000 | 5,305,985 | ||||||
6.950%, 08/15/2037 | 893,000 | 1,097,765 | ||||||
Computer Sciences Corporation, | ||||||||
2.500%, 09/15/2015 | 4,686,000 | 4,783,080 | ||||||
ConAgra Foods, Inc.: | ||||||||
5.819%, 06/15/2017 | 1,506,000 | 1,697,253 | ||||||
4.950%, 08/15/2020 | 1,785,000 | 1,916,365 | ||||||
9.750%, 03/01/2021 | 107,000 | 138,120 | ||||||
Continental Airlines, Inc. Pass Through Trust, | ||||||||
Series 974A, 6.900%, 01/02/2018 | 234,405 | 251,106 | ||||||
D.R. Horton, Inc., | ||||||||
6.500%, 04/15/2016 | 893,000 | 975,602 | ||||||
Deutsche Telekom International Finance B.V., | ||||||||
8.750%, 06/15/2030 f | 411,000 | 579,832 | ||||||
Donnelley (R.R.) & Sons Co.: | ||||||||
8.600%, 08/15/2016 | 2,231,000 | 2,582,383 | ||||||
6.125%, 01/15/2017 | 88,000 | 95,920 | ||||||
7.625%, 06/15/2020 @ | 893,000 | 971,137 | ||||||
Express Scripts Holding Co, | ||||||||
2.650%, 02/15/2017 @ | 2,678,000 | 2,760,148 | ||||||
Federal Express Corp. 1998 Pass Through Trust, | ||||||||
Series 981B, 6.845%, 01/15/2019 | 2,256,378 | 2,489,866 | ||||||
Fidelity National Information Services, Inc.: | ||||||||
7.875%, 07/15/2020 | 3,994,000 | 4,357,290 | ||||||
3.500%, 04/15/2023 @ | 3,570,000 | 3,254,102 | ||||||
Fiserv, Inc., | ||||||||
4.625%, 10/01/2020 | 1,785,000 | 1,827,390 | ||||||
FMC Corporation, | ||||||||
4.100%, 02/01/2024 | 3,000,000 | 2,979,054 | ||||||
Fomento Economico Mexicano SAB de CV, | ||||||||
4.375%, 05/10/2043 f | 4,374,000 | 3,608,830 | ||||||
Ford Motor Credit Company LLC: | ||||||||
7.000%, 04/15/2015 | 1,160,000 | 1,248,586 | ||||||
2.875%, 10/01/2018 @ | 6,806,000 | 6,966,587 | ||||||
Glencore Funding LLC: | ||||||||
6.000%, 04/15/2014 (Acquired 10/31/2005 through 06/20/2011, Cost $7,229,899) * | 7,223,000 | 7,326,867 | ||||||
2.500%, 01/15/2019 (Acquired 05/22/2013 through 10/29/2013, Cost $4,440,774) * | 4,463,000 | 4,321,603 | ||||||
4.125%, 05/30/2023 (Acquired 07/22/2013, Cost $405,877) * @ | 446,000 | 416,794 | ||||||
GTE Corporation: | ||||||||
6.840%, 04/15/2018 | 4,137,000 | 4,818,596 | ||||||
8.750%, 11/01/2021 | 89,000 | 112,666 | ||||||
Health Management Association, | ||||||||
6.125%, 04/15/2016 | 580,000 | 642,350 | ||||||
Holcim U.S. Finance, | ||||||||
6.000%, 12/30/2019 (Acquired 09/24/2009 through 09/04/2013, Cost $1,253,158) * f | 1,232,000 | 1,392,480 | ||||||
Hospira, Inc., | ||||||||
6.050%, 03/30/2017 | 4,463,000 | 4,924,430 | ||||||
Hyundai Capital Services Inc.: | ||||||||
6.000%, 05/05/2015 (Acquired 05/20/2013, Cost $1,892,857) * f | 1,785,000 | 1,898,333 | ||||||
4.375%, 07/27/2016 (Acquired 04/23/2013, Cost $2,135,795) * f | 2,008,000 | 2,136,350 | ||||||
3.500%, 09/13/2017 (Acquired 03/07/2012 through 12/03/2013, Cost $1,658,305) * f | 1,650,000 | 1,705,709 | ||||||
Johnson Controls Inc., | ||||||||
6.000%, 01/15/2036 | 893,000 | 959,739 | ||||||
Lafarge S.A., | ||||||||
7.125%, 07/15/2036 f @ | 893,000 | 930,952 | ||||||
LeasePlan Corporation N.V.: | ||||||||
3.000%, 10/23/2017 (Acquired 12/03/2013, Cost $508,327) * f | 500,000 | 503,647 | ||||||
2.500%, 05/16/2018 (Acquired 08/02/2013 through 09/24/2013, Cost $7,976,500) * f | 8,158,000 | 7,931,208 | ||||||
Martin Marietta Materials, Inc., | ||||||||
6.250%, 05/01/2037 | 893,000 | 836,352 | ||||||
Masco Corporation, | ||||||||
6.125%, 10/03/2016 | 1,450,000 | 1,624,000 | ||||||
Mega Advance Investments Ltd, | ||||||||
5.000%, 05/12/2021 (Acquired 05/09/2011, Cost $4,858,830) * f | 4,909,000 | 5,028,348 | ||||||
Mizuho Bank, Ltd., | ||||||||
1.850%, 03/21/2018 (Acquired 03/14/2013, Cost $3,119,689) * f | 3,124,000 | 3,044,869 | ||||||
Murphy Oil Corporation, | ||||||||
4.000%, 06/01/2022 | 4,463,000 | 4,246,134 | ||||||
Mylan Inc., | ||||||||
6.000%, 11/15/2018 (Acquired 02/01/2013 through 02/12/2013, Cost $5,860,936) * | 5,496,000 | 5,856,510 | ||||||
Nabors Industries, Inc., | ||||||||
6.150%, 02/15/2018 | 982,000 | 1,103,502 | ||||||
National Oilwell Varco Inc., | ||||||||
Series B, 6.125%, 08/15/2015 | 6,288,000 | 6,294,980 | ||||||
New Cingular Wireless Services, Inc., | ||||||||
8.750%, 03/01/2031 | 1,160,000 | 1,641,094 | ||||||
Noble Energy, Inc., | ||||||||
8.250%, 03/01/2019 | 2,684,000 | 3,336,067 | ||||||
Pactiv Corporation, | ||||||||
7.950%, 12/15/2025 | 286,000 | 268,125 | ||||||
Petrohawk Energy Corporation, | ||||||||
7.250%, 08/15/2018 | 6,166,000 | 6,646,948 | ||||||
Plains Exploration & Production Company, | ||||||||
7.625%, 04/01/2020 | 7,627,000 | 8,417,325 | ||||||
Plum Creek Timberlands, L.P., | ||||||||
5.875%, 11/15/2015 | 3,887,000 | 4,207,526 | ||||||
Questar Market Resources Inc., | ||||||||
6.800%, 03/01/2020 | 893,000 | 937,650 | ||||||
Rio Tinto Alcan, Inc., | ||||||||
5.750%, 06/01/2035 f | 446,000 | 467,686 | ||||||
Rio Tinto Finance (USA) Limited, | ||||||||
9.000%, 05/01/2019 f @ | 4,909,000 | 6,409,298 | ||||||
Samarco Mineracao S.A., | ||||||||
5.750%, 10/24/2023 (Acquired 10/22/2013, Cost $4,478,404) * f | 4,463,000 | 4,418,370 | ||||||
Seagate HDD Cayman, | ||||||||
6.875%, 05/01/2020 f | 3,000,000 | 3,243,750 | ||||||
SK Telecom, | ||||||||
6.625%, 07/20/2027 (Acquired 07/13/2007, Cost $1,322,945) * f | 1,339,000 | 1,551,839 | ||||||
Sprint Capital Corporation: | ||||||||
6.900%, 05/01/2019 @ | 2,499,000 | 2,730,157 | ||||||
8.750%, 03/15/2032 | 320,000 | 343,200 | ||||||
Talisman Energy Inc., | ||||||||
7.750%, 06/01/2019 f | 1,071,000 | 1,282,700 | ||||||
Telecom Italia Capital, SA: | ||||||||
7.175%, 06/18/2019 f @ | 1,785,000 | 2,003,662 | ||||||
7.200%, 07/18/2036 f | 5,350,000 | 5,149,375 | ||||||
Telefonica Emisiones S.A.U.: | ||||||||
6.421%, 06/20/2016 f | 1,830,000 | 2,039,261 | ||||||
6.221%, 07/03/2017 f | 4,530,000 | 5,106,764 | ||||||
The Mosaic Company, | ||||||||
5.450%, 11/15/2033 | 2,000,000 | 2,037,696 | ||||||
Time Warner Cable Inc.: | ||||||||
6.550%, 05/01/2037 | 893,000 | 826,340 | ||||||
6.750%, 06/15/2039 | 2,767,000 | 2,605,690 | ||||||
Time Warner, Inc.: | ||||||||
7.625%, 04/15/2031 | 982,000 | 1,242,786 | ||||||
7.700%, 05/01/2032 | 5,918,000 | 7,598,540 | ||||||
TSMC Global Ltd, | ||||||||
1.625%, 04/03/2018 (Acquired 12/03/2013, Cost $1,138,923) * f | 1,175,000 | 1,125,222 | ||||||
Tyco Electronics Group S.A., | ||||||||
6.550%, 10/01/2017 f | 6,248,000 | 7,150,186 | ||||||
U.S. Airways Pass Through Trust, | ||||||||
Series 981A, 6.850%, 01/30/2018 | 213,355 | 224,022 | ||||||
Vale Overseas Limited: | ||||||||
8.250%, 01/17/2034 f | 3,526,000 | 4,061,755 | ||||||
6.875%, 11/21/2036 f | 1,383,000 | 1,428,297 | ||||||
6.875%, 11/10/2039 f | 893,000 | 923,740 | ||||||
Valero Energy Corporation, | ||||||||
9.375%, 03/15/2019 | 2,000,000 | 2,577,570 | ||||||
Verizon Communications, Inc., | ||||||||
6.400%, 09/15/2033 | 7,140,000 | 8,211,864 | ||||||
Vulcan Materials Co.: | ||||||||
7.000%, 06/15/2018 | 1,785,000 | 2,030,437 | ||||||
7.150%, 11/30/2037 | 446,000 | 441,540 | ||||||
Wabtec Corporation, | ||||||||
4.375%, 08/15/2023 | 2,678,000 | 2,646,670 | ||||||
Westvaco Corporation: | ||||||||
9.750%, 06/15/2020 | 143,000 | 180,901 | �� | |||||
8.200%, 01/15/2030 | 4,463,000 | 5,288,387 | ||||||
Woodside Finance Limited, | ||||||||
8.125%, 03/01/2014 (Acquired 02/24/2009, Cost $2,599,194) * f | 2,600,000 | 2,632,113 | ||||||
Xerox Corporation, | ||||||||
8.250%, 05/15/2014 | 4,659,000 | 4,783,866 | ||||||
Xstrata Finance Canada Ltd, | ||||||||
5.800%, 11/15/2016 (Acquired 12/06/2011, Cost $646,749) * f | 616,000 | 678,688 | ||||||
Yara International ASA, | ||||||||
5.250%, 12/15/2014 (Acquired 10/02/2012 through 11/09/2012, Cost $5,815,157) * f | 5,614,000 | 5,822,218 | ||||||
284,932,966 | 15.8% |
Utility | ||||||||
Ameren Corporation, | ||||||||
8.875%, 05/15/2014 | 6,159,000 | 6,335,622 | ||||||
Arizona Public Service Senior Unsecured Notes, | ||||||||
8.750%, 03/01/2019 | 759,000 | 964,680 | ||||||
Beaver Valley Funding Corporation Debentures, | ||||||||
9.000%, 06/01/2017 | 456,000 | 458,605 | ||||||
Comision Federal de Electricidad, | ||||||||
4.875%, 01/15/2024 (Acquired 10/17/2013, Cost $2,662,655) * f | 2,678,000 | 2,657,915 | ||||||
Constellation Energy Group Inc., | ||||||||
4.550%, 06/15/2015 | 5,232,000 | 5,492,177 | ||||||
DCP Midstream, LLC, | ||||||||
9.750%, 03/15/2019 (Acquired 02/29/2012 through 10/15/2012, Cost $6,330,492) * | 5,065,000 | 6,302,060 | ||||||
El Paso Pipeline Partners Operating Co LLC, | ||||||||
7.500%, 11/15/2040 | 4,017,000 | 4,818,809 | ||||||
Enel Finance International: | ||||||||
5.125%, 10/07/2019 (Acquired 09/30/2009, Cost $2,199,280) * f | 2,209,000 | 2,358,439 | ||||||
6.800%, 09/15/2037 (Acquired 09/13/2007, Cost $1,691,506) * f | 1,696,000 | 1,757,938 | ||||||
Energy Transfer Partners, L.P., | ||||||||
9.700%, 03/15/2019 | 893,000 | 1,156,220 | ||||||
Exelon Generation Company, LLC, | ||||||||
6.200%, 10/01/2017 | 1,964,000 | 2,219,410 | ||||||
FPL Group Capital, Inc., | ||||||||
Series D, 7.300%, 09/01/2067 | 2,455,000 | 2,700,500 | ||||||
GG1C Funding Corporation, | ||||||||
5.129%, 01/15/2014 (Acquired 06/27/2006, Cost $163,373) * | 163,421 | 163,566 | ||||||
Kinder Morgan Energy Partners, L.P.: | ||||||||
9.000%, 02/01/2019 | 893,000 | 1,134,597 | ||||||
6.950%, 01/15/2038 | 2,008,000 | 2,306,786 | ||||||
6.500%, 09/01/2039 | 893,000 | 979,022 | ||||||
Kinder Morgan Finance, | ||||||||
5.700%, 01/05/2016 f @ | 803,000 | 862,528 | ||||||
Korea Electric Power Corporation, | ||||||||
6.750%, 08/01/2027 f | 1,932,000 | 2,305,335 | ||||||
Korea Gas Corp., | ||||||||
4.250%, 11/02/2020 (Acquired 10/26/2010, Cost $2,309,418) * f | 2,321,000 | 2,410,721 | ||||||
Maritimes & Northeast Pipeline, LLC, | ||||||||
7.500%, 05/31/2014 (Acquired 06/18/2013, Cost $7,505,693) * | 7,344,312 | 7,504,051 | ||||||
National Rural Utilities Corporation: | ||||||||
10.375%, 11/01/2018 | 547,000 | 739,754 | ||||||
8.000%, 03/01/2032 | 2,834,000 | 3,801,584 | ||||||
ONEOK Partners, L.P.: | ||||||||
6.150%, 10/01/2016 | 3,036,000 | 3,409,343 | ||||||
8.625%, 03/01/2019 | 2,937,000 | 3,683,527 | ||||||
Petrofac Limited, | ||||||||
3.400%, 10/10/2018 (Acquired 10/03/2013, Cost $8,514,123) * f | 8,546,000 | 8,607,147 | ||||||
PPL Energy Supply, LLC, | ||||||||
Series A, 5.700%, 10/15/2015 | 1,839,000 | 1,940,459 | ||||||
PSEG Power LLC: | ||||||||
5.320%, 09/15/2016 @ | 2,877,000 | 3,165,508 | ||||||
5.125%, 04/15/2020 | 3,575,000 | 3,898,727 | ||||||
RGS (I&M) Funding Corporation Debentures, | ||||||||
Series F*, 9.820%, 12/07/2022 | 878,631 | 1,070,850 | ||||||
Rockies Express Pipeline LLC, | ||||||||
5.625%, 04/15/2020 (Acquired 03/17/2010, Cost $1,783,411) * @ | 1,785,000 | 1,584,188 | ||||||
Southern Natural Gas, | ||||||||
5.900%, 04/01/2017 (Acquired 03/14/2007, Cost $1,247,925) * | 1,250,000 | 1,400,850 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, 08/15/2014 | 893,000 | 919,552 | ||||||
Williams Partners L.P., | ||||||||
6.300%, 04/15/2040 | 2,767,000 | 2,973,731 | ||||||
92,084,201 | 5.1% |
Finance | ||||||||
ABN AMRO Bank N.V., | ||||||||
2.500%, 10/30/2018 (Acquired 10/23/2013, Cost $8,020,227) * f | 8,033,000 | 8,015,649 | ||||||
Ally Financial Inc., | ||||||||
6.750%, 12/01/2014 | 134,000 | 140,198 | ||||||
American General Finance Corporation, | ||||||||
6.900%, 12/15/2017 @ | 400,000 | 437,200 | ||||||
American International Group, Inc.: | ||||||||
5.450%, 05/18/2017 | 2,678,000 | 2,993,254 | ||||||
8.250%, 08/15/2018 | 1,785,000 | 2,232,821 | ||||||
6.400%, 12/15/2020 | 830,000 | 980,945 | ||||||
4.125%, 02/15/2024 | 893,000 | 887,823 | ||||||
8.175%, 05/15/2058 | 893,000 | 1,080,530 | ||||||
Ameriprise Financial, Inc., | ||||||||
7.300%, 06/28/2019 | 1,785,000 | 2,189,219 | ||||||
AmSouth Bancorp, | ||||||||
6.750%, 11/01/2025 | 223,000 | 233,801 | ||||||
Associates Corporation of North America, | ||||||||
6.950%, 11/01/2018 | 4,664,000 | 5,549,269 | ||||||
BAC Capital Trust VI, | ||||||||
5.625%, 03/08/2035 | 357,000 | 348,577 | ||||||
Bank of America Corporation Subordinated Notes, | ||||||||
10.200%, 07/15/2015 | 1,531,000 | 1,720,526 | ||||||
Banponce Trust I, | ||||||||
Series A, 8.327%, 02/01/2027 | 1,941,000 | 1,669,260 | ||||||
Barclays Bank PLC, | ||||||||
6.750%, 05/22/2019 f | 3,570,000 | 4,302,817 | ||||||
BNP Paribas, | ||||||||
3.250%, 03/03/2023 f | 3,570,000 | 3,377,727 | ||||||
BPCE: | ||||||||
1.488%, 04/25/2016 f | 2,544,000 | 2,577,105 | ||||||
2.500%, 12/10/2018 f | 2,500,000 | 2,486,615 | ||||||
5.700%, 10/22/2023 (Acquired 10/15/2013, Cost $5,346,111) * f | 5,355,000 | 5,517,042 | ||||||
Cie de Financement Foncier SA, | ||||||||
2.500%, 09/16/2015 (Acquired 08/13/2012 through 08/14/2012, Cost $1,321,974) * f | 1,300,000 | 1,337,192 | ||||||
Citigroup, Inc.: | ||||||||
4.450%, 01/10/2017 | 893,000 | 967,833 | ||||||
6.125%, 11/21/2017 | 2,477,000 | 2,855,260 | ||||||
CNA Financial Corporation, | ||||||||
6.500%, 08/15/2016 | 4,463,000 | 5,019,353 | ||||||
Commonwealth Bank of Australia, | ||||||||
0.843%, 10/08/2015 (Acquired 01/09/2013, Cost $4,464,815) * f | 4,463,000 | 4,460,724 | ||||||
Countrywide Financial Corporation, | ||||||||
6.250%, 05/15/2016 @ | 4,757,000 | 5,249,340 | ||||||
Credit Agricole S.A.: | ||||||||
1.096%, 10/03/2016 (Acquired 09/26/2013, Cost $1,750,000) * f @ | 1,750,000 | 1,754,741 | ||||||
6.637%, 05/29/2049 (Acquired 05/23/2007, Cost $893,000) * f @ | 893,000 | 892,963 | ||||||
Credit Suisse New York, | ||||||||
5.300%, 08/13/2019 f | 1,406,000 | 1,578,288 | ||||||
Dresdner Bank AG, | ||||||||
7.250%, 09/15/2015 f | 2,151,000 | 2,322,387 | ||||||
First Empire Capital Trust I, | ||||||||
8.234%, 02/01/2027 | 2,798,000 | 2,837,110 | ||||||
First Empire Capital Trust II, | ||||||||
8.277%, 06/01/2027 | 1,406,000 | 1,433,984 | ||||||
First Hawaiian Capital Trust I, | ||||||||
Series B, 8.343%, 07/01/2027 | 3,346,000 | 3,400,373 | ||||||
First National Bank of Chicago Pass Through Trust, | ||||||||
Series 93-A, 8.080%, 01/05/2018 | 379,876 | 413,026 | ||||||
First Tennessee Bank, National Association, | ||||||||
5.050%, 01/15/2015 | 4,503,000 | 4,675,564 | ||||||
FMR LLC, | ||||||||
4.950%, 02/01/2033 (Acquired 01/29/2013, Cost $1,747,795) * | 1,750,000 | 1,717,130 | ||||||
General Electric Capital Corporation: | ||||||||
5.550%, 05/04/2020 | 5,534,000 | 6,368,123 | ||||||
4.650%, 10/17/2021 @ | 5,355,000 | 5,833,994 | ||||||
Genworth Holdings, Inc.: | ||||||||
5.750%, 06/15/2014 @ | 1,264,000 | 1,290,225 | ||||||
4.900%, 08/15/2023 | 1,339,000 | 1,338,336 | ||||||
GMAC Inc., | ||||||||
8.000%, 12/31/2018 | 360,000 | 424,800 | ||||||
Goldman Sachs Capital I, | ||||||||
6.345%, 02/15/2034 @ | 1,053,000 | 1,062,481 | ||||||
Great West Life & Annuity Insurance, | ||||||||
7.153%, 05/16/2046 (Acquired 05/16/2006 through 11/08/2007, Cost $2,482,656) * | 2,499,000 | 2,573,970 | ||||||
Highmark Inc. Notes, | ||||||||
4.750%, 05/15/2021 (Acquired 05/03/2011, Cost $2,667,181) * | 2,678,000 | 2,517,947 | ||||||
HSBC Holdings PLC, | ||||||||
6.500%, 09/15/2037 f | 1,874,000 | 2,216,447 | ||||||
HSBC USA Capital Trust I, | ||||||||
7.808%, 12/15/2026 (Acquired 03/08/2007, Cost $303,459) * | 300,000 | 303,750 | ||||||
HSBC USA Capital Trust III, | ||||||||
8.380%, 05/15/2027 (Acquired 11/06/2007, Cost $452,326) * | 446,000 | 453,365 | ||||||
Humana Inc., | ||||||||
7.200%, 06/15/2018 | 1,785,000 | 2,111,742 | ||||||
Hutchison Whampoa International Ltd., | ||||||||
7.625%, 04/09/2019 (Acquired 10/22/2009 through 10/29/2009, Cost $5,495,675) * f @ | 5,088,000 | 6,196,777 | ||||||
ING Bank N.V.: | ||||||||
4.000%, 03/15/2016 (Acquired 03/08/2011, Cost $3,256,241) * f @ | 3,258,000 | 3,443,390 | ||||||
3.750%, 03/07/2017 (Acquired 03/28/2012, Cost $1,903,782) * f | 1,919,000 | 2,021,129 | ||||||
ING U.S., Inc., | ||||||||
5.500%, 07/15/2022 | 2,000,000 | 2,174,984 | ||||||
Invesco Finance PLC, | ||||||||
3.125%, 11/30/2022 f | 5,902,000 | 5,461,091 | ||||||
J.P. Morgan Chase & Co.: | ||||||||
4.250%, 10/15/2020 | 536,000 | 568,180 | ||||||
5.600%, 07/15/2041 | 4,106,000 | 4,456,016 | ||||||
J.P. Morgan Chase Bank NA, | ||||||||
5.875%, 06/13/2016 | 2,678,000 | 2,970,140 | ||||||
Jefferies Group, Inc.: | ||||||||
6.875%, 04/15/2021 | 3,570,000 | 4,066,337 | ||||||
6.250%, 01/15/2036 | 1,290,000 | 1,244,850 | ||||||
John Hancock Life Insurance Company, | ||||||||
7.375%, 02/15/2024 (Acquired 08/26/2010, Cost $6,743,936) * | 6,069,000 | 7,183,141 | ||||||
Kookmin Bank, | ||||||||
7.250%, 05/14/2014 (Acquired 08/24/2009 through 03/10/2010, Cost $4,542,412) * f | 4,500,000 | 4,602,929 | ||||||
Liberty Mutual Group Inc.: | ||||||||
4.250%, 06/15/2023 (Acquired 06/13/2013, Cost $2,660,995) * | 2,678,000 | 2,585,692 | ||||||
10.750%, 06/15/2058 (Acquired 05/21/2008, Cost $2,182,029) * | 2,231,000 | 3,335,345 | ||||||
Liberty Mutual Insurance Company, | ||||||||
7.697%, 10/15/2097 (Acquired 03/26/2003, Cost $297,699) * | 465,000 | 474,275 | ||||||
Lincoln National Corporation: | ||||||||
8.750%, 07/01/2019 | 5,218,000 | 6,716,380 | ||||||
6.050%, 04/20/2067 | 1,004,000 | 996,470 | ||||||
Lloyds TSB Bank PLC, | ||||||||
5.800%, 01/13/2020 (Acquired 02/10/2010, Cost $1,399,205) * f | 1,428,000 | 1,637,158 | ||||||
M&I Marshall & Ilsley Bank, | ||||||||
4.850%, 06/16/2015 | 5,355,000 | 5,644,095 | ||||||
Macquarie Group Limited, | ||||||||
3.000%, 12/03/2018 (Acquired 11/25/2013, Cost $8,490,900) * f | 8,525,000 | 8,490,670 | ||||||
Marsh & McLennan Companies, Inc.: | ||||||||
2.300%, 04/01/2017 | 2,231,000 | 2,246,871 | ||||||
9.250%, 04/15/2019 | 1,473,000 | 1,908,214 | ||||||
Massachusetts Mutual Life Insurance Company, | ||||||||
8.875%, 06/01/2039 (Acquired 05/27/2009 through 12/05/2013, Cost $5,273,987) * | 3,936,000 | 5,640,532 | ||||||
MBIA Insurance Corp., | ||||||||
11.504%, 01/15/2033 (Acquired 01/11/2008, Cost $714,000) * | 714,000 | 539,070 | ||||||
Merrill Lynch & Company: | ||||||||
6.400%, 08/28/2017 | 893,000 | 1,029,545 | ||||||
6.875%, 04/25/2018 | 1,562,000 | 1,846,859 | ||||||
7.750%, 05/14/2038 | 1,138,000 | 1,469,232 | ||||||
MetLife, Inc.: | ||||||||
7.717%, 02/15/2019 | 982,000 | 1,217,196 | ||||||
6.500%, 12/15/2032 | 466,000 | 554,462 | ||||||
Morgan Stanley: | ||||||||
4.750%, 04/01/2014 | 960,000 | 967,632 | ||||||
4.000%, 07/24/2015 | 893,000 | 932,420 | ||||||
7.300%, 05/13/2019 | 5,110,000 | 6,205,625 | ||||||
5.625%, 09/23/2019 | 1,941,000 | 2,206,307 | ||||||
National Australia Bank Limited, | ||||||||
0.743%, 10/08/2015 (Acquired 01/16/2013, Cost $8,907,256) * f | 8,900,000 | 8,897,001 | ||||||
National City Bank, | ||||||||
5.800%, 06/07/2017 | 1,750,000 | 1,972,395 | ||||||
Nomura Holdings Inc., | ||||||||
2.000%, 09/13/2016 f | 6,248,000 | 6,299,652 | ||||||
PNC Bank, National Association, | ||||||||
4.200%, 11/01/2025 | 2,678,000 | 2,625,037 | ||||||
Protective Life Corporation, | ||||||||
7.375%, 10/15/2019 | 7,096,000 | 8,654,189 | ||||||
Prudential Covered Trust 2012-1, | ||||||||
2.997%, 09/30/2015 (Acquired 12/19/2012 through 07/23/2013, Cost $6,946,569) * | 6,771,100 | 6,980,862 | ||||||
Prudential Holdings, LLC, | ||||||||
8.695%, 12/18/2023 (Acquired 08/13/2013 through 12/17/2013, Cost $2,070,911) * | 1,654,900 | 2,099,826 | ||||||
Rabobank Nederland, | ||||||||
0.492%, 03/07/2016 (Acquired 05/21/2013, Cost $8,873,483) * f | 8,926,000 | 8,916,101 | ||||||
Regions Bank, | ||||||||
7.500%, 05/15/2018 | 4,463,000 | 5,281,005 | ||||||
Regions Financial Corporation: | ||||||||
7.750%, 11/10/2014 | 252,000 | 265,873 | ||||||
5.750%, 06/15/2015 | 1,785,000 | 1,901,960 | ||||||
Republic New York Capital I, | ||||||||
7.750%, 11/15/2026 | 893,000 | 902,823 | ||||||
Republic New York Corporation Debentures, | ||||||||
9.125%, 05/15/2021 | 625,000 | 784,125 | ||||||
Santander Issuances, | ||||||||
6.500%, 08/11/2019 (Acquired 10/18/2007 through 03/19/2012, Cost $1,631,723) * f @ | 1,600,000 | 1,643,666 | ||||||
Santander UK PLC, | ||||||||
5.000%, 11/07/2023 (Acquired 10/31/2013, Cost $1,993,620) * f | 2,000,000 | 2,007,440 | ||||||
Skandinaviska Enskilda Banken AB, | ||||||||
2.375%, 11/20/2018 (Acquired 11/13/2013, Cost $4,995,550) * f | 5,000,000 | 4,967,450 | ||||||
SLM Corporation: | ||||||||
5.375%, 05/15/2014 | 3,492,000 | 3,553,110 | ||||||
5.625%, 08/01/2033 | 446,000 | 369,622 | ||||||
Sovereign Bank, | ||||||||
8.750%, 05/30/2018 | 6,327,000 | 7,602,169 | ||||||
Sparebank 1 Boligkreditt AS, | ||||||||
1.750%, 11/15/2019 (Acquired 11/07/2012, Cost $4,428,322) * f | 4,463,000 | 4,237,618 | ||||||
Sumitomo Mitsui Banking Corporation, | ||||||||
3.950%, 07/19/2023 f | 1,850,000 | 1,841,854 | ||||||
SunTrust Bank, | ||||||||
7.250%, 03/15/2018 | 1,874,000 | 2,204,922 | ||||||
SUSA Partnership, L.P., | ||||||||
8.200%, 06/01/2017 | 921,000 | 1,089,765 | ||||||
Swedbank AB, | ||||||||
2.125%, 09/29/2017 (Acquired 09/24/2012, Cost $1,782,305) * f | 1,785,000 | 1,785,543 | ||||||
Symetra Financial Corporation, | ||||||||
6.125%, 04/01/2016 (Acquired 03/23/2006, Cost $889,044) * | 893,000 | 950,592 | ||||||
Talent Yield Investments Ltd., | ||||||||
4.500%, 04/25/2022 (Acquired 04/18/2012, Cost $1,772,791) * f @ | 1,785,000 | 1,755,049 | ||||||
TD Ameritrade Holding Corporation, | ||||||||
5.600%, 12/01/2019 | 2,945,000 | 3,399,467 | ||||||
The Bank of Nova Scotia, | ||||||||
0.643%, 03/15/2016 f | 7,000,000 | 7,011,179 | ||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd., | ||||||||
4.100%, 09/09/2023 (Acquired 09/03/2013, Cost $1,978,255) * f | 1,986,000 | 1,989,724 | ||||||
The Bear Stearns Companies LLC, | ||||||||
5.300%, 10/30/2015 | 2,276,000 | 2,454,944 | ||||||
The Goldman Sachs Group, Inc.: | ||||||||
6.250%, 09/01/2017 | 893,000 | 1,022,360 | ||||||
6.150%, 04/01/2018 | 5,534,000 | 6,345,711 | ||||||
7.500%, 02/15/2019 | 1,964,000 | 2,392,091 | ||||||
The Hartford Financial Services Group, Inc.: | ||||||||
4.000%, 10/15/2017 | 4,463,000 | 4,746,941 | ||||||
8.125%, 06/15/2038 @ | 1,964,000 | 2,289,042 | ||||||
The NASDAQ OMX Group Inc., | ||||||||
4.000%, 01/15/2015 | 893,000 | 916,349 | ||||||
The Royal Bank of Scotland Group PLC, | ||||||||
6.125%, 01/11/2021 f | 2,812,000 | 3,182,793 | ||||||
UBS AG, | ||||||||
5.750%, 04/25/2018 f | 2,678,000 | 3,074,478 | ||||||
Wachovia Bank, National Association, | ||||||||
6.000%, 11/15/2017 | 3,789,000 | 4,372,127 | ||||||
WEA Finance LLC / WT Finance Aust Pty Ltd, | ||||||||
6.750%, 09/02/2019 (Acquired 11/06/2013, Cost $3,002,708) * | 2,500,000 | 2,972,513 | ||||||
WellPoint, Inc., | ||||||||
5.100%, 01/15/2044 @ | 1,584,000 | 1,570,769 | ||||||
Westpac Banking Corporation, | ||||||||
1.600%, 01/12/2018 f | 7,029,000 | 6,924,500 | ||||||
Willis North America, Inc.: | ||||||||
5.625%, 07/15/2015 | 669,000 | 714,011 | ||||||
7.000%, 09/29/2019 | 4,463,000 | 5,164,017 | ||||||
365,316,505 | 20.2% | |||||||
Total Corporate Bonds | 742,333,672 | 41.1% |
Residential Mortgage-Backed Securities | ||||||||
U.S. Government Agency Issues | ||||||||
Federal Gold Loan Mortgage Corporation (FGLMC): | ||||||||
6.500%, 07/01/2014 | 661 | 665 | ||||||
6.000%, 06/01/2020 | 194,624 | 208,443 | ||||||
5.500%, 11/01/2022 | 115,387 | 125,896 | ||||||
5.000%, 06/01/2023 | 116,723 | 125,826 | ||||||
5.500%, 07/01/2023 | 132,216 | 144,358 | ||||||
3.500%, 11/01/2025 | 9,194,814 | 9,591,885 | ||||||
2.500%, 04/01/2028 | 5,873,835 | 5,826,638 | ||||||
6.500%, 06/01/2029 | 377,025 | 422,391 | ||||||
5.500%, 01/01/2036 | 781,219 | 853,001 | ||||||
6.000%, 12/01/2036 | 586,063 | 649,026 | ||||||
5.000%, 03/01/2038 | 5,700,806 | 6,139,862 | ||||||
5.500%, 05/01/2038 | 2,659,004 | 2,897,979 | ||||||
4.500%, 11/01/2039 | 4,032,226 | 4,270,501 | ||||||
4.500%, 11/01/2039 | 8,967,412 | 9,495,646 | ||||||
4.500%, 03/01/2041 | 7,149,654 | 7,571,038 | ||||||
3.500%, 06/01/2042 | 8,788,659 | 8,730,184 | ||||||
3.500%, 07/01/2042 | 27,196,100 | 27,015,150 | ||||||
3.000%, 08/01/2042 | 31,652,338 | 30,025,422 | ||||||
3.000%, 10/01/2042 | 11,512,228 | 10,920,043 | ||||||
3.000%, 02/01/2043 | 6,408,485 | 6,078,835 | ||||||
Federal Home Loan Mortgage Corporation (FHLMC): | ||||||||
Series 206, Class E, 0.000%, 07/15/2019 ^ | 45,029 | 44,935 | ||||||
Series 141, Class D, 5.000%, 05/15/2021 | 23,158 | 24,501 | ||||||
Series 1074, Class I, 6.750%, 05/15/2021 | 21,716 | 23,614 | ||||||
Series 1081, Class K, 7.000%, 05/15/2021 | 135,651 | 151,743 | ||||||
Series 163, Class F, 6.000%, 07/15/2021 | 20,583 | 22,581 | ||||||
Series 188, Class H, 7.000%, 09/15/2021 | 49,351 | 54,785 | ||||||
Series 1286, Class A, 6.000%, 05/15/2022 | 17,079 | 18,459 | ||||||
4.500%, 09/01/2040 | 9,625,090 | 10,198,113 | ||||||
Federal National Mortgage Association (FNMA): | ||||||||
Series 1989-37, Class G, 8.000%, 07/25/2019 | 143,290 | 157,622 | ||||||
5.000%, 12/01/2019 | 461,637 | 491,866 | ||||||
Series 1989-94, Class G, 7.500%, 12/25/2019 | 40,075 | 44,241 | ||||||
Series 1990-58, Class J, 7.000%, 05/25/2020 | 6,371 | 7,065 | ||||||
Series 1990-76, Class G, 7.000%, 07/25/2020 | 45,251 | 50,178 | ||||||
Series 1990-105, Class J, 6.500%, 09/25/2020 | 24,503 | 26,564 | ||||||
Series 1990-108, Class G, 7.000%, 09/25/2020 | 8,223 | 9,153 | ||||||
Series 1991-1, Class G, 7.000%, 01/25/2021 | 11,762 | 13,125 | ||||||
Series 1991-86, Class Z, 6.500%, 07/25/2021 | 17,845 | 19,535 | ||||||
5.000%, 11/01/2021 | 3,945,112 | 4,224,301 | ||||||
5.500%, 01/01/2023 | 5,849,558 | 6,425,957 | ||||||
Series 1993-58, Class H, 5.500%, 04/25/2023 | 234,376 | 254,982 | ||||||
5.500%, 07/01/2023 | 465,887 | 511,835 | ||||||
5.000%, 11/01/2023 | 1,098,875 | 1,192,066 | ||||||
6.000%, 03/01/2026 | 437,170 | 486,108 | ||||||
6.000%, 05/01/2026 | 965,408 | 1,073,080 | ||||||
3.000%, 04/01/2027 | 13,396,449 | 13,686,108 | ||||||
2.500%, 12/01/2027 | 14,130,895 | 14,033,454 | ||||||
5.000%, 05/01/2028 | 709,593 | 772,890 | ||||||
Series 1998-66, Class C, 6.000%, 12/25/2028 | 146,763 | 159,551 | ||||||
4.500%, 08/01/2029 | 5,180,145 | 5,519,792 | ||||||
4.500%, 09/01/2029 | 5,545,254 | 5,908,932 | ||||||
6.000%, 03/01/2033 | 136,074 | 152,718 | ||||||
5.000%, 11/01/2033 | 141,869 | 154,426 | ||||||
5.500%, 04/01/2034 | 2,784,259 | 3,082,956 | ||||||
Series 2004-W6, Class 1A4, 5.500%, 07/25/2034 | 448,416 | 457,073 | ||||||
Series 2004-W6, Class 1A6, 5.500%, 07/25/2034 | 1,545,665 | 1,585,059 | ||||||
5.500%, 09/01/2034 | 546,637 | 601,496 | ||||||
6.000%, 11/01/2034 | 142,712 | 160,142 | ||||||
5.500%, 02/01/2035 | 1,931,394 | 2,124,745 | ||||||
5.000%, 10/01/2035 | 8,550,597 | 9,280,415 | ||||||
5.000%, 11/01/2035 | 3,542,088 | 3,843,245 | ||||||
5.500%, 11/01/2036 | 860,247 | 945,387 | ||||||
5.500%, 04/01/2037 | 4,326,261 | 4,765,972 | ||||||
6.000%, 08/01/2037 | 177,852 | 191,943 | ||||||
4.500%, 11/01/2039 | 744,759 | 789,033 | ||||||
4.000%, 08/01/2040 | 4,665,870 | 4,805,374 | ||||||
3.500%, 12/01/2040 | 2,270,019 | 2,257,497 | ||||||
3.500%, 02/01/2041 | 19,291,039 | 19,185,334 | ||||||
4.000%, 02/01/2041 | 23,728,324 | 24,439,851 | ||||||
4.000%, 09/01/2041 | 7,435,599 | 7,659,606 | ||||||
4.000%, 12/01/2041 | 23,718,687 | 24,434,829 | ||||||
3.000%, 05/01/2042 | 9,232,172 | 8,775,330 | ||||||
Government National Mortgage Association (GNMA): | ||||||||
6.000%, 11/20/2033 | 119,013 | 135,030 | ||||||
5.000%, 07/20/2040 | 6,822,225 | �� 7,471,805 | ||||||
4.500%, 01/20/2041 | 20,472,515 | 21,977,958 | ||||||
4.000%, 06/20/2042 | 18,144,036 | 18,898,537 | ||||||
3.500%, 09/20/2042 | 11,570,892 | 11,691,082 | ||||||
376,566,768 | 20.8% |
Non-U.S. Government Agency Issues | ||||||||
Bank of America Alternative Loan Trust: | ||||||||
Series 2003-4, Class 2A1, 5.000%, 06/25/2018 | 132,018 | 136,039 | ||||||
Series 2003-5, Class 2A1, 5.000%, 07/25/2018 | 1,651,801 | 1,700,980 | ||||||
Series 2003-11, Class 4A1, 4.750%, 01/25/2019 | 247,983 | 250,975 | ||||||
Series 2004-6, Class 4A1, 5.000%, 07/25/2019 | 173,778 | 176,937 | ||||||
Series 2004-7, Class 4A1, 5.000%, 08/25/2019 | 3,245,260 | 3,329,896 | ||||||
Series 2004-11, Class 4A1, 5.500%, 12/25/2019 | 177,697 | 183,845 | ||||||
Series 2005-2, Class 4A1, 5.500%, 03/25/2020 | 275,167 | 286,835 | ||||||
Series 2005-4, Class 3A1, 5.500%, 05/25/2020 | 1,296,030 | 1,333,072 | ||||||
Series 2005-10, Class 5A1, 5.250%, 11/25/2020 | 662,649 | 678,015 | ||||||
Series 2007-1, Class 1A1, 8.638%, 04/25/2022 | 1,131,097 | 1,166,001 | ||||||
Series 2003-11, Class 2A1, 6.000%, 01/25/2034 | 676,710 | 707,653 | ||||||
Series 2005-2, Class 1CB2, 5.500%, 03/25/2035 | 215,446 | 205,387 | ||||||
Series 2005-9, Class 1CB3, 5.500%, 10/25/2035 § | 446,380 | 394,591 | ||||||
Series 2005-11, Class 1CB4, 5.500%, 12/25/2035 § | 253,031 | 223,411 | ||||||
Series 2006-5, Class CB7, 6.000%, 06/25/2046 § | 990,165 | 815,199 | ||||||
Bear Stearns Asset Backed Securities Trust, | ||||||||
Series 2004-AC2, Class 2A, 5.000%, 05/25/2034 | 1,287,575 | 1,294,393 | ||||||
Chase Mortgage Finance Corporation, | ||||||||
Series 2006-A1, Class 2A3, 2.704%, 09/25/2036 § | 3,321,912 | 2,794,874 | ||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||
Series 2005-9, Class 2A2, 5.500%, 11/25/2035 § | 395,085 | 391,759 | ||||||
Countrywide Alternative Loan Trust: | ||||||||
Series 2005-50CB, Class 4A1, 5.000%, 11/25/2020 § | 429,097 | 424,730 | ||||||
Series 2006-7CB, Class 3A1, 5.250%, 05/25/2021 § | 1,928,900 | 1,879,564 | ||||||
Series 2006-J5, Class 3A1, 5.409%, 07/25/2021 § | 438,593 | 428,147 | ||||||
Series 2006-43CB, Class 2A1, 6.000%, 02/25/2022 | 489,728 | 503,719 | ||||||
Series 2002-11, Class A4, 6.250%, 10/25/2032 | 58,697 | 59,998 | ||||||
Series 2003-20CB, Class 1A1, 5.500%, 10/25/2033 | 6,739,791 | 7,127,963 | ||||||
Series 2006-28CB, Class A17, 6.000%, 10/25/2036 § | 1,224,809 | 940,162 | ||||||
Deutsche Mortgage Securities Inc., | ||||||||
Series 2006-AR5, Class 21A, 6.000%, 10/25/2021 § | 690,560 | 596,789 | ||||||
First Horizon Alternative Mortgage Securities: | ||||||||
Series 2005-FA7, Class 2A1, 5.000%, 09/25/2020 | 272,258 | 278,641 | ||||||
Series 2006-FA6, Class 3A1, 5.750%, 11/25/2021 | 464,560 | 460,908 | ||||||
Series 2006-FA8, Class 2A1, 5.750%, 02/25/2037 | 1,459,571 | 1,295,083 | ||||||
J.P. Morgan Alternative Loan Trust, | ||||||||
Series 2006-A1, Class 2A1, 2.622%, 03/25/2036 § | 636,862 | 498,572 | ||||||
J.P. Morgan Mortgage Trust: | ||||||||
Series 2005-A4, Class 1A1, 5.243%, 07/25/2035 | 4,966,076 | 5,066,565 | ||||||
Series 2006-A7, Class 2A2, 2.530%, 01/25/2037 § | 357,879 | 315,488 | ||||||
Series 2006-A7, Class 2A4R, 2.530%, 01/25/2037 § | 1,529,018 | 1,338,683 | ||||||
Series 2007-A2, Class 2A3, 2.683%, 04/25/2037 § | 3,967,632 | 3,364,611 | ||||||
Master Alternative Loans Trust: | ||||||||
Series 2004-1, Class 1A1, 5.000%, 01/25/2019 | 677,173 | 691,549 | ||||||
Series 2004-2, Class 4A1, 5.000%, 02/25/2019 | 41,790 | 43,121 | ||||||
Series 2004-4, Class 4A1, 5.000%, 04/25/2019 | 556,833 | 571,426 | ||||||
Series 2003-5, Class 6A1, 6.000%, 08/25/2033 | 535,499 | 553,837 | ||||||
Residential Accredit Loans, Inc., | ||||||||
Series 2004-QS6, Class A1, 5.000%, 05/25/2019 | 269,138 | 273,943 | ||||||
Residential Funding Mortgage Security I, | ||||||||
Series 2003-S11, Class A2, 4.000%, 06/25/2018 | 30,983 | 31,251 | ||||||
Salomon Brothers Mortgage Securities VII, | ||||||||
Series 2003-UP2, Class A2, 7.000%, 06/25/2033 | 441,555 | 479,712 | ||||||
Structured Asset Securities Corporation, | ||||||||
Series 2005-7XS, Class 1A4B, 5.440%, 04/25/2035 | 585,202 | 604,950 | ||||||
Washington Mutual Mortgage Pass Through Certificates: | ||||||||
Series 2004-CB1, Class 5A, 5.000%, 06/25/2019 | 652,638 | 672,608 | ||||||
Series 2004-CB2, Class 7A, 5.500%, 08/25/2019 | 1,235,551 | 1,280,330 | ||||||
Series 2004-CB3, Class 3A, 5.500%, 10/25/2019 | 101,398 | 106,421 | ||||||
Series 2004-CB3, Class 4A, 6.000%, 10/25/2019 | 389,122 | 408,116 | ||||||
Series 2004-CB4, Class 21A, 5.500%, 12/25/2019 | 266,063 | 277,277 | ||||||
Series 2004-CB2, Class 3A, 6.000%, 08/25/2034 | 14,487,753 | 15,161,376 | ||||||
Series 2004-CB3, Class 2A, 6.500%, 10/25/2034 | 8,023,630 | 8,641,650 | ||||||
70,447,052 | 3.9% | |||||||
Asset Backed Securities | ||||||||
Amresco Residential Securities Mortgage Loan Trust, | ||||||||
Series 1997-3, Class A9, 6.960%, 03/25/2027 | 16 | 16 | ||||||
Bayview Financial Acquisition Trust: | ||||||||
Series 2006-A, Class 1A2, 5.483%, 02/28/2041 | 552,058 | 558,399 | ||||||
Series 2007-B, Class 1A2, 6.831%, 08/28/2047 | 2,231,398 | 1,863,664 | ||||||
Conseco Financial Corp.: | ||||||||
Series 1993-3, Class A7, 6.400%, 10/15/2018 | 95,278 | 97,791 | ||||||
Series 1997-1, Class A5, 6.860%, 03/15/2028 | 9,206 | 9,382 | ||||||
Series 1997-6, Class A8, 7.070%, 01/15/2029 | 23,635 | 24,386 | ||||||
Contimortgage Home Equity Trust, | ||||||||
Series 1997-2, Class A9, 7.090%, 04/15/2028 | 41 | 41 | ||||||
Countrywide Asset-Backed Certificates: | ||||||||
Series 2004-13, Class AF4, 4.583%, 01/25/2033 | 2,460,275 | 2,509,537 | ||||||
Series 2004-S1, Class A3, 5.115%, 02/25/2035 | 1,437,224 | 1,467,653 | ||||||
Series 2004-15, Class AF6, 4.613%, 04/25/2035 | 2,579,845 | 2,498,193 | ||||||
Series 2005-1, Class AF6, 5.030%, 07/25/2035 | 4,208,956 | 4,291,654 | ||||||
Series 2005-11, Class AF3, 4.778%, 02/25/2036 | 7,600,044 | 7,316,326 | ||||||
Series 2005-10, Class AF6, 4.915%, 02/25/2036 | 2,501,430 | 2,419,643 | ||||||
Series 2005-13, Class AF3, 5.100%, 04/25/2036 | 3,440,145 | 2,945,555 | ||||||
Series 2005-17, Class 1AF2, 5.143%, 05/25/2036 § | 457,561 | 490,642 | ||||||
Series 2005-17, Class 1AF5, 5.143%, 05/25/2036 § | 1,097,300 | 1,131,314 | ||||||
Series 2007-S1, Class A6, 5.693%, 11/25/2036 | 998,723 | 978,224 | ||||||
Series 2006-10, Class 1AF3, 5.106%, 09/25/2046 | 1,338,839 | 814,921 | ||||||
Credit Based Asset Servicing and Securitization LLC, | ||||||||
Series 2005-CB8, Class AF2, 4.416%, 12/25/2035 | 309,668 | 290,231 | ||||||
Deutsche Mortgage Securities Inc., | ||||||||
Series 2004-4, Class 1A6, 5.650%, 04/25/2034 | 71,140 | 71,163 | ||||||
Equivantage Home Equity Loan Trust, | ||||||||
Series 1996-3, Class A3, 7.700%, 09/25/2027 | 2,740 | 2,729 | ||||||
GE Capital Mortgage Services, Inc.: | ||||||||
Series 1997-HE4, Class A7, 6.735%, 12/25/2028 | 131 | 130 | ||||||
Series 1999-HE1, Class A7, 6.265%, 04/25/2029 | 4,338 | 4,316 | ||||||
Green Tree Financial Corporation: | ||||||||
Series 1993-4, Class A5, 7.050%, 01/15/2019 | 46,830 | 48,398 | ||||||
Series 1998-2, Class A5, 6.240%, 12/01/2028 | 817,622 | 841,373 | ||||||
Series 1998-3, Class A5, 6.220%, 03/01/2030 | 811,322 | 864,363 | ||||||
Series 1998-4, Class A5, 6.180%, 04/01/2030 | 471,784 | 485,118 | ||||||
IMC Home Equity Loan Trust, | ||||||||
Series 1997-5, Class A10, 6.880%, 11/20/2028 | 10,755 | 10,741 | ||||||
Impac CMB Trust, | ||||||||
Series 2004-4, Class 2A2, 4.618%, 09/25/2034 | 164,480 | 161,561 | ||||||
J.P. Morgan Mortgage Acquisition Trust, | ||||||||
Series 2007-CH1, Class AV4, 0.295%, 11/25/2036 | 3,675,999 | 3,634,787 | ||||||
Nationstar Home Equity Loan Trust, | ||||||||
Series 2006-B, Class AV3, 0.335%, 09/25/2036 | 10,627,954 | 10,348,343 | ||||||
Oakwood Mortgage Investors, Inc., | ||||||||
Series 1999-B, Class A3, 6.450%, 11/15/2017 | 45,411 | 47,403 | ||||||
PEMEX Finance Ltd., | ||||||||
10.610%, 08/15/2017 f | 2,510,625 | 2,889,934 | ||||||
RAAC Series, | ||||||||
Series 2004-SP1, Class AI4, 5.285%, 08/25/2027 | 109,847 | 109,817 | ||||||
RAMP Trust, | ||||||||
Series 2003-RS7, Class AI6, 5.340%, 08/25/2033 | 655,189 | 657,168 | ||||||
Renaissance Home Equity Loan Trust, | ||||||||
Series 2007-1, Class AF3, 5.612%, 04/25/2037 | 2,624,756 | 1,375,642 | ||||||
Residential Asset Mortgage Products, Inc., | ||||||||
Series 2005-RS1, Class AI6, 4.713%, 01/25/2035 | 266,145 | 260,707 | ||||||
Residential Asset Securities Corporation: | ||||||||
Series 2003-KS2, Class AI6, 3.990%, 04/25/2033 | 822,930 | 822,360 | ||||||
Series 2003-KS5, Class AI6, 3.620%, 07/25/2033 | 48,855 | 46,731 | ||||||
Series 2004-KS2, Class AI6, 4.300%, 03/25/2034 | 101,123 | 102,283 | ||||||
Specialty Underwriting & Residential Finance Trust, | ||||||||
Series 2004-BC4, Class A1A, 0.835%, 10/25/2035 | 5,083,649 | 4,943,290 | ||||||
57,435,929 | 3.2% | |||||||
Commercial Mortgage Backed Securities | ||||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
Series 2005-PWR9, Class A4A, 4.871%, 09/11/2042 | 11,113,286 | 11,658,137 | ||||||
COMM Mortgage Trust: | ||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | 10,618,016 | 11,166,394 | ||||||
Series 2012-CR1, Class A3, 3.391%, 05/15/2045 | 7,813,462 | 7,697,690 | ||||||
Series 2012-CR2, Class A4, 3.147%, 08/15/2045 | 12,830,536 | 12,390,821 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 @ | 14,413,936 | 15,131,260 | ||||||
FHLMC Multifamily Structured Pass Through Certificates, | ||||||||
Series K-003, Class A4, 5.053%, 01/25/2019 | 12,525,000 | 14,066,953 | ||||||
GE Capital Commercial Mortgage Corporation, | ||||||||
Series 2005-C4, Class A4, 5.310%, 11/10/2045 | 9,751,208 | 10,363,486 | ||||||
GS Mortgage Securities Corp II, | ||||||||
Series 2012-GCJ9, Class A3, 2.773%, 11/10/2045 | 11,246,320 | 10,467,096 | ||||||
J.P. Morgan Chase Commercial Mortgage Trust: | ||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 10,224,264 | 10,707,494 | ||||||
Series 2013-LC11, Class A5, 2.960%, 04/15/2046 | 9,452,913 | 8,843,304 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust, | ||||||||
Series 2012-C6, Class A4, 2.858%, 11/15/2045 | 14,280,945 | 13,429,072 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 8,925,591 | 9,501,301 | ||||||
WF-RBS Commercial Mortgage Trust, | ||||||||
Series 2012-C6, Class A4, 3.440%, 04/15/2045 | 10,889,220 | 10,849,953 | ||||||
146,272,961 | 8.1% | |||||||
Total Long-Term Investments (Cost $1,771,064,438) | 1,771,357,149 | 98.1% | ||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS | ||||||||
Money Market Mutual Fund | ||||||||
Short-Term Investments Trust - Liquid Assets Portfolio, 0.07% « | 34,951,599 | 34,951,599 | ||||||
Total Short-Term Investments (Cost $34,951,599) | 34,951,599 | 1.9% | ||||||
INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING | ||||||||
Investment Companies | ||||||||
Mount Vernon Securities Lending Trust Prime Portfolio, 0.19% « | 220,382,583 | 220,382,583 | ||||||
Total Investment Companies (Cost $220,382,583) | 220,382,583 | 12.2% | ||||||
Total Investments Purchased With Cash Proceeds From | ||||||||
Securities Lending (Cost $220,382,583) | 220,382,583 | 12.2% | ||||||
Total Investments (Cost $2,026,398,620) | 2,026,691,331 | 112.2% | ||||||
Liabilities in Excess of Other Assets | (219,766,162) | (12.2)% | ||||||
TOTAL NET ASSETS | $ | 1,806,925,169 | 100.0% | |||||
Notes to Schedule of Investments | ||||||||
* | Restricted Security Deemed Liquid | |||||||
@ | This security or portion of this security is out on loan at December 31, 2013. | |||||||
f | Foreign Security | |||||||
^ | Non-Income Producing | |||||||
« | 7-Day Yield | |||||||
§ | Security in Default | |||||||
Baird Core Plus Bond Fund | ||||||||
Schedule of Investments | ||||||||
December 31, 2013 | ||||||||
Principal | % of | |||||||
Amount | Value | Net Assets | ||||||
LONG-TERM INVESTMENTS | ||||||||
U.S. Treasury Securities | ||||||||
U.S. Treasury Bonds: | ||||||||
1.250%, 04/30/2019 @ | $ | 53,450,000 | $ | 51,783,857 | ||||
5.250%, 11/15/2028 @ | 58,975,000 | 71,000,356 | ||||||
4.375%, 02/15/2038 @ | 43,000,000 | 46,802,834 | ||||||
3.500%, 02/15/2039 @ | 77,275,000 | 72,771,336 | ||||||
242,358,383 | 8.6% | |||||||
Taxable Municipal Bonds | ||||||||
Bellevue California Union School District, | ||||||||
5.000%, 08/01/2028 | 625,000 | 584,950 | ||||||
California Qualified School Bond Joint Powers Authority: | ||||||||
6.739%, 09/01/2026 | 2,415,000 | 2,495,613 | ||||||
7.155%, 03/01/2027 | 1,700,000 | 1,800,334 | ||||||
California School Finance Authority, | ||||||||
5.041%, 07/01/2020 | 1,500,000 | 1,589,670 | ||||||
California State, | ||||||||
5.500%, 03/01/2016 | 2,000,000 | 2,187,400 | ||||||
Central Valley Support Joint Powers Agency, | ||||||||
5.676%, 09/01/2024 | 1,500,000 | 1,506,240 | ||||||
Colton Joint Unified School District, | ||||||||
6.008%, 08/01/2026 | 1,250,000 | 1,322,113 | ||||||
Contra Costa County California Pension Obligation, | ||||||||
5.140%, 06/01/2017 | 1,300,000 | 1,398,280 | ||||||
Davie Florida Water & Sewer Revenue, | ||||||||
6.599%, 10/01/2030 (Callable 10/01/2020) | 1,000,000 | 1,065,920 | ||||||
Elgin Ohio LOC School District, | ||||||||
5.499%, 08/31/2027 (Callable 12/01/2019) | 1,000,000 | 1,002,900 | ||||||
Illinois State: | ||||||||
4.026%, 03/01/2014 | 2,000,000 | 2,010,060 | ||||||
4.421%, 01/01/2015 | 1,600,000 | 1,648,048 | ||||||
4.961%, 03/01/2016 | 2,000,000 | 2,128,980 | ||||||
5.163%, 02/01/2018 | 3,000,000 | 3,176,790 | ||||||
New Hampshire Housing Finance Authority: | ||||||||
3.100%, 07/01/2021 | 2,085,000 | 2,041,840 | ||||||
3.750%, 07/01/2034 (Callable 07/01/2023) | 9,145,000 | 8,997,034 | ||||||
North Carolina Housing Finance Agency, | ||||||||
2.812%, 07/01/2035 (Callable 01/01/2024) | 10,000,000 | 9,847,500 | ||||||
North East Independent School District Texas, | ||||||||
5.240%, 08/01/2027 | 3,000,000 | 3,264,300 | ||||||
Port of Oakland, | ||||||||
5.000%, 11/01/2020 (Callable 11/01/2017) | 2,900,000 | 3,129,477 | ||||||
Portigon AG, | ||||||||
4.796%, 07/15/2015 f | 1,885,000 | 1,991,412 | ||||||
San Dieguito California Public Facilities, | ||||||||
6.459%, 05/01/2027 | 1,825,000 | 1,930,083 | ||||||
State Public School Building Authorities Revenue, | ||||||||
5.000%, 09/15/2027 | 1,998,000 | 2,077,401 | ||||||
Three Rivers Ohio LOC School District, | ||||||||
5.209%, 09/15/2027 (Callable 12/01/2020) | 1,350,000 | 1,353,942 | ||||||
Tobacco Settlement Authority Iowa, | ||||||||
6.500%, 06/01/2023 (Callable 06/01/2015) | 3,190,000 | 3,096,054 | ||||||
West Contra Costa Unified School District, | ||||||||
6.250%, 08/01/2030 | �� 4,320,000 | 4,228,200 | ||||||
Westlake Ohio City School District, | ||||||||
5.227%, 12/01/2026 (Callable 12/01/2020) | 1,160,000 | 1,197,967 | ||||||
67,072,508 | 2.4% | |||||||
Other Government Related Securities | ||||||||
CNOOC Finance 2013 Ltd, | ||||||||
3.000%, 05/09/2023 f | 1,000,000 | 893,183 | ||||||
Corp Andina de Fomento, | ||||||||
4.375%, 06/15/2022 f | 3,956,000 | 3,917,156 | ||||||
Eksportfinans ASA, | ||||||||
2.000%, 09/15/2015 f | 10,000,000 | 9,850,000 | ||||||
Export-Import Bank of Korea Notes: | ||||||||
5.875%, 01/14/2015 f | 3,500,000 | 3,678,062 | ||||||
4.000%, 01/29/2021 f | 1,000,000 | 1,025,653 | ||||||
Korea Hydro & Nuclear Power Co., Ltd.: | ||||||||
6.250%, 06/17/2014 (Acquired 03/21/2011, Cost $1,014,979) * f | 1,000,000 | 1,023,173 | ||||||
3.125%, 09/16/2015 (Acquired 09/09/2010, Cost $493,770) * f | 500,000 | 515,023 | ||||||
Petrobras Global Finance B.V., | ||||||||
3.000%, 01/15/2019 @ f | 3,000,000 | 2,807,496 | ||||||
Petrobras International Finance Company: | ||||||||
3.875%, 01/27/2016 f | 5,800,000 | 5,970,879 | ||||||
7.875%, 03/15/2019 f | 5,000,000 | 5,663,710 | ||||||
5.375%, 01/27/2021 f | 3,200,000 | 3,175,642 | ||||||
Petroleos Mexicanos: | ||||||||
4.875%, 03/15/2015 f | 4,809,000 | 5,035,023 | ||||||
4.875%, 01/24/2022 f | 2,500,000 | 2,568,750 | ||||||
6.500%, 06/02/2041 f | 4,000,000 | 4,180,000 | ||||||
The Korea Development Bank, | ||||||||
3.000%, 09/14/2022 @ f | 4,400,000 | 4,133,188 | ||||||
54,436,938 | 1.9% |
Corporate Bonds | ||||||||
Industrials | ||||||||
AbbVie Inc., | ||||||||
1.750%, 11/06/2017 | 2,450,000 | 2,445,803 | ||||||
Access Midstream Partners LP / ACMP Finance Corp, | ||||||||
6.125%, 07/15/2022 @ | 300,000 | 321,000 | ||||||
Acuity Brands Lighting Inc., | ||||||||
6.000%, 12/15/2019 | 700,000 | 754,784 | ||||||
Altera Corporation, | ||||||||
4.100%, 11/15/2023 | 3,000,000 | 2,892,093 | ||||||
Ameritech Capital Funding Corporation, | ||||||||
6.450%, 01/15/2018 | 3,000,000 | 3,399,399 | ||||||
Anadarko Petroleum Corporation: | ||||||||
5.950%, 09/15/2016 | 2,225,000 | 2,478,795 | ||||||
6.375%, 09/15/2017 | 968,000 | �� 1,111,331 | ||||||
8.700%, 03/15/2019 | 3,700,000 | 4,684,466 | ||||||
Anglo American Capital PLC: | ||||||||
9.375%, 04/08/2014 (Acquired 09/05/2012, Cost $1,837,721) * f | 1,800,000 | 1,839,902 | ||||||
9.375%, 04/08/2019 (Acquired 09/20/2011 through 07/11/2012, Cost $6,884,211) * f | 5,500,000 | 6,969,050 | ||||||
ArcelorMittal: | ||||||||
5.000%, 02/25/2017 f | 5,000,000 | 5,362,500 | ||||||
6.750%, 02/25/2022 @ f | 2,000,000 | 2,175,000 | ||||||
AT&T Inc., | ||||||||
5.550%, 08/15/2041 | 1,000,000 | 1,014,860 | ||||||
Atlas Air, Inc. Pass Through Trust, | ||||||||
Series 00-1, 8.707%, 01/02/2019 | 196,806 | 211,074 | ||||||
Beam, Inc., | ||||||||
3.250%, 05/15/2022 | 2,000,000 | 1,916,770 | ||||||
Bemis Company, Inc., | ||||||||
4.500%, 10/15/2021 | 1,000,000 | 1,021,408 | ||||||
BP Capital Markets P.L.C.: | ||||||||
0.876%, 09/26/2018 f | 5,000,000 | 5,006,995 | ||||||
4.750%, 03/10/2019 f | 1,500,000 | 1,671,955 | ||||||
Browning-Ferris Industries Inc., | ||||||||
9.250%, 05/01/2021 | 1,600,000 | 1,951,632 | ||||||
Bunge Limited Finance Corp.: | ||||||||
5.100%, 07/15/2015 | 2,527,000 | 2,674,933 | ||||||
8.500%, 06/15/2019 | 7,940,000 | 9,754,155 | ||||||
Bunge N.A. Finance L.P., | ||||||||
5.900%, 04/01/2017 | 2,424,000 | 2,646,613 | ||||||
CenturyLink Inc., | ||||||||
Series R, 5.150%, 06/15/2017 | 2,000,000 | 2,145,000 | ||||||
CF Industries, Inc., | ||||||||
3.450%, 06/01/2023 | 2,000,000 | 1,826,454 | ||||||
Chesapeake Energy Corporation, | ||||||||
6.500%, 08/15/2017 @ | 3,544,000 | 3,995,860 | ||||||
Cliffs Natural Resources Inc., | ||||||||
3.950%, 01/15/2018 @ | 11,579,000 | 11,692,416 | ||||||
CNPC HK Overseas Capital Ltd, | ||||||||
5.950%, 04/28/2041 (Acquired 04/20/2011, Cost $978,120) * f | 1,000,000 | 1,063,895 | ||||||
Comcast Cable Communications Holdings, Inc., | ||||||||
9.455%, 11/15/2022 | 2,030,000 | 2,811,704 | ||||||
Comcast Corporation: | ||||||||
4.250%, 01/15/2033 @ | 5,900,000 | 5,480,622 | ||||||
4.650%, 07/15/2042 | 2,000,000 | 1,861,208 | ||||||
Computer Sciences Corporation, | ||||||||
4.450%, 09/15/2022 | 2,000,000 | 1,929,080 | ||||||
ConocoPhillips Canada Funding Company I, | ||||||||
5.950%, 10/15/2036 f | 845,000 | 985,812 | ||||||
Continental Airlines, Inc. Pass Through Trust, | ||||||||
Series 974A, 6.900%, 01/02/2018 | 40,268 | 43,138 | ||||||
Cox Communications, Inc.: | ||||||||
2.950%, 06/30/2023 (Acquired 04/24/2013, Cost $5,226,900) * @ | 5,250,000 | 4,587,665 | ||||||
4.700%, 12/15/2042 (Acquired 11/26/2012, Cost $4,999,050) * | 5,000,000 | 4,199,130 | ||||||
CSX Corporation, | ||||||||
6.220%, 04/30/2040 | 175,000 | 197,835 | ||||||
D.R. Horton, Inc., | ||||||||
4.750%, 05/15/2017 @ | 1,000,000 | 1,057,500 | ||||||
Daimler Finance North America LLC: | ||||||||
2.300%, 01/09/2015 (Acquired 08/22/2012, Cost $1,911,722) * | 1,890,000 | 1,916,258 | ||||||
1.650%, 04/10/2015 (Acquired 07/17/2012 through 07/23/2013, Cost $3,625,333) * | 3,609,000 | 3,636,955 | ||||||
1.875%, 01/11/2018 (Acquired 01/07/2013, Cost $2,116,138) * | 2,125,000 | 2,093,214 | ||||||
Danone, | ||||||||
3.000%, 06/15/2022 (Acquired 05/29/2012, Cost $3,489,465) * f | 3,500,000 | 3,280,876 | ||||||
Deutsche Telekom International Finance B.V.: | ||||||||
3.125%, 04/11/2016 (Acquired 11/09/2011, Cost $2,471,461) * f | 2,450,000 | 2,551,753 | ||||||
8.750%, 06/15/2030 f | 825,000 | 1,163,896 | ||||||
Devon Financing Corporation, L.L.C., | ||||||||
7.875%, 09/30/2031 | 5,000,000 | 6,431,010 | ||||||
DISH DBS Corporation, | ||||||||
5.000%, 03/15/2023 @ | 2,500,000 | 2,331,250 | ||||||
Dollar General Corporation, | ||||||||
1.875%, 04/15/2018 | 2,100,000 | 2,031,481 | ||||||
Donnelley (R.R.) & Sons Co.: | ||||||||
8.600%, 08/15/2016 | 1,250,000 | 1,446,875 | ||||||
6.125%, 01/15/2017 | 76,000 | 82,840 | ||||||
Eaton Corporation: | ||||||||
2.750%, 11/02/2022 | 2,500,000 | 2,332,145 | ||||||
4.000%, 11/02/2032 | 3,660,000 | 3,361,381 | ||||||
Ecolab Inc., | ||||||||
1.450%, 12/08/2017 | 5,200,000 | 5,081,549 | ||||||
Encana Corporation, | ||||||||
6.500%, 05/15/2019 f | 500,000 | 584,073 | ||||||
Express Scripts Holding Company: | ||||||||
3.500%, 11/15/2016 | 5,000,000 | 5,286,080 | ||||||
7.250%, 06/15/2019 | 4,600,000 | 5,579,676 | ||||||
4.750%, 11/15/2021 | 4,700,000 | 4,966,321 | ||||||
Federal Express Corp. 1995 Pass Through Trust, | ||||||||
Series B2, 7.110%, 01/02/2014 | 102,784 | 102,801 | ||||||
Fidelity National Information Services, Inc.: | ||||||||
7.875%, 07/15/2020 | 11,884,000 | 12,964,957 | ||||||
3.500%, 04/15/2023 | 4,100,000 | 3,737,203 | ||||||
Fiserv, Inc.: | ||||||||
3.125%, 06/15/2016 | 2,475,000 | 2,582,677 | ||||||
4.625%, 10/01/2020 | 3,000,000 | 3,071,244 | ||||||
3.500%, 10/01/2022 | 6,650,000 | 6,175,237 | ||||||
Fomento Economico Mexicano SAB de CV: | ||||||||
2.875%, 05/10/2023 f | 6,000,000 | 5,301,966 | ||||||
4.375%, 05/10/2043 f | 4,000,000 | 3,300,256 | ||||||
Ford Motor Credit Company LLC: | ||||||||
3.875%, 01/15/2015 | 2,000,000 | 2,063,708 | ||||||
2.500%, 01/15/2016 | 2,000,000 | 2,051,886 | ||||||
4.207%, 04/15/2016 | 2,680,000 | 2,855,642 | ||||||
3.000%, 06/12/2017 | 3,000,000 | 3,117,954 | ||||||
France Telecom SA, | ||||||||
2.750%, 09/14/2016 @ f | 1,050,000 | 1,090,370 | ||||||
Freeport-McMoRan Copper & Gold Inc.: | ||||||||
3.100%, 03/15/2020 | 3,800,000 | 3,691,822 | ||||||
3.550%, 03/01/2022 @ | 5,000,000 | 4,752,000 | ||||||
Georgia-Pacific LLC, | ||||||||
5.400%, 11/01/2020 (Acquired 10/27/2010, Cost $994,130) * | 1,000,000 | 1,117,301 | ||||||
Glencore Funding LLC: | ||||||||
6.000%, 04/15/2014 (Acquired 03/31/2004 through 06/19/2012, Cost $7,152,464) * | 7,115,000 | 7,217,314 | ||||||
4.125%, 05/30/2023 (Acquired 05/22/2013, Cost $9,094,813) * @ | 9,100,000 | 8,504,086 | ||||||
GTE Corporation, | ||||||||
8.750%, 11/01/2021 | 975,000 | 1,234,262 | ||||||
H. J. Heinz Finance Company, | ||||||||
6.750%, 03/15/2032 | 10,000,000 | 10,200,000 | ||||||
Hanson PLC Notes, | ||||||||
6.125%, 08/15/2016 f | 8,583,000 | 9,419,843 | ||||||
Health Management Association, | ||||||||
6.125%, 04/15/2016 | 5,725,000 | 6,340,438 | ||||||
Hewlett-Packard Co., | ||||||||
4.650%, 12/09/2021 @ | 4,000,000 | 4,118,704 | ||||||
Hospira, Inc., | ||||||||
6.050%, 03/30/2017 | 5,000,000 | 5,516,950 | ||||||
Hyundai Capital Services Inc.: | ||||||||
4.375%, 07/27/2016 (Acquired 04/05/2013, Cost $1,173,238) * f | 1,100,000 | 1,170,311 | ||||||
3.500%, 09/13/2017 (Acquired 03/06/2012 through 04/24/2013, Cost $5,309,166) * f | 5,140,000 | 5,313,542 | ||||||
Ingredion Incorporated, | ||||||||
1.800%, 09/25/2017 | 5,650,000 | 5,506,806 | ||||||
Johnson Controls Inc., | ||||||||
5.250%, 12/01/2041 | 1,150,000 | 1,117,970 | ||||||
Kinross Gold Corporation, | ||||||||
6.875%, 09/01/2041 f | 5,500,000 | 4,928,435 | ||||||
Kraft Foods Group, Inc., | ||||||||
5.000%, 06/04/2042 | 1,000,000 | 985,792 | ||||||
Lafarge S.A.: | ||||||||
6.200%, 07/09/2015 (Acquired 10/01/2013, Cost $528,674) * f | 500,000 | 530,000 | ||||||
6.500%, 07/15/2016 f | 3,993,000 | 4,412,265 | ||||||
7.125%, 07/15/2036 @ f | 1,225,000 | 1,277,063 | ||||||
LeasePlan Corporation N.V.: | ||||||||
3.000%, 10/23/2017 (Acquired 10/15/2012 through 02/07/2013, Cost $10,055,390) * f | 10,000,000 | 10,072,950 | ||||||
2.500%, 05/16/2018 (Acquired 05/07/2013, Cost $4,976,700) * f | 5,000,000 | 4,861,000 | ||||||
Martin Marietta Materials, Inc.: | ||||||||
6.600%, 04/15/2018 | 475,000 | 539,719 | ||||||
6.250%, 05/01/2037 | 450,000 | 421,454 | ||||||
Masco Corporation: | ||||||||
6.125%, 10/03/2016 | 2,150,000 | 2,408,000 | ||||||
7.125%, 03/15/2020 | 1,000,000 | 1,141,509 | ||||||
Mega Advance Investments Ltd, | ||||||||
5.000%, 05/12/2021 (Acquired 05/09/2011 through 05/23/2012, Cost $2,815,849) * f | 2,800,000 | 2,868,074 | ||||||
Mizuho Bank, Ltd., | ||||||||
1.850%, 03/21/2018 (Acquired 03/14/2013, Cost $1,847,447) * f | 1,850,000 | 1,803,139 | ||||||
Murphy Oil Corporation, | ||||||||
4.000%, 06/01/2022 | 12,600,000 | 11,987,741 | ||||||
Mylan Inc.: | ||||||||
6.000%, 11/15/2018 (Acquired 02/06/2013, Cost $4,266,841) * | 4,000,000 | 4,262,380 | ||||||
7.875%, 07/15/2020 (Acquired 07/16/2013, Cost $5,645,771) * | 5,000,000 | 5,657,710 | ||||||
4.200%, 11/29/2023 | 4,525,000 | 4,450,754 | ||||||
Nabors Industries, Inc., | ||||||||
6.150%, 02/15/2018 | 250,000 | 280,932 | ||||||
National Oilwell Varco Inc., | ||||||||
Series B, 6.125%, 08/15/2015 | 2,655,000 | 2,657,947 | ||||||
Nationwide Mutual Insurance Company, | ||||||||
7.875%, 04/01/2033 (Acquired 10/13/2009, Cost $90,621) * | 100,000 | 121,937 | ||||||
New Cingular Wireless Services, Inc., | ||||||||
8.750%, 03/01/2031 | 3,050,000 | 4,314,945 | ||||||
Northern Tier Energy LLC, | ||||||||
7.125%, 11/15/2020 | 250,000 | 261,250 | ||||||
Oi S.A., | ||||||||
5.750%, 02/10/2022 (Acquired 02/06/2012, Cost $3,000,000) * f | 3,000,000 | 2,760,000 | ||||||
Pactiv Corporation, | ||||||||
7.950%, 12/15/2025 | 475,000 | 445,312 | ||||||
PCCW-HKT Capital No. 3 Limited, | ||||||||
5.250%, 07/20/2015 (Acquired 09/29/2008 through 12/20/2010, Cost $780,343) * f | 775,000 | 818,129 | ||||||
Pearson Funding Two plc, | ||||||||
4.000%, 05/17/2016 (Acquired 07/17/2012, Cost $9,142,252) * f | 8,700,000 | 9,180,988 | ||||||
Pentair Finance S.A., | ||||||||
2.650%, 12/01/2019 f | 5,000,000 | 4,752,580 | ||||||
Petrohawk Energy Corporation: | ||||||||
7.875%, 06/01/2015 | 3,000,000 | 3,078,750 | ||||||
7.250%, 08/15/2018 | 8,510,000 | 9,173,780 | ||||||
Plum Creek Timberlands, L.P.: | ||||||||
5.875%, 11/15/2015 | 1,200,000 | 1,298,953 | ||||||
4.700%, 03/15/2021 | 1,200,000 | 1,243,994 | ||||||
3.250%, 03/15/2023 | 8,375,000 | 7,530,892 | ||||||
POSCO: | ||||||||
8.750%, 03/26/2014 (Acquired 09/23/2011 through 01/11/2012, Cost $3,772,669) * f | 3,725,000 | 3,789,118 | ||||||
4.250%, 10/28/2020 (Acquired 10/21/2010, Cost $2,165,365) * f | 2,175,000 | 2,216,732 | ||||||
PTT Public Company Limited, | ||||||||
3.375%, 10/25/2022 (Acquired 10/19/2012, Cost $4,958,500) * @ f | 5,000,000 | 4,460,825 | ||||||
Qwest Capital Funding, Inc., | ||||||||
7.625%, 08/03/2021 | 200,000 | 210,000 | ||||||
Republic Services, Inc., | ||||||||
3.550%, 06/01/2022 | 4,000,000 | 3,856,936 | ||||||
Rio Tinto Finance (USA) Limited, | ||||||||
9.000%, 05/01/2019 f | 11,000,000 | 14,361,842 | ||||||
Samarco Mineracao S.A., | ||||||||
5.750%, 10/24/2023 (Acquired 10/21/2013, Cost $2,447,255) * f | 2,475,000 | 2,450,250 | ||||||
Schneider Electric SA, | ||||||||
2.950%, 09/27/2022 (Acquired 09/20/2012, Cost $4,986,700) * f | 5,000,000 | 4,656,115 | ||||||
Seagate HDD Cayman, | ||||||||
6.875%, 05/01/2020 f | 2,000,000 | 2,162,500 | ||||||
Sealed Air Corp., | ||||||||
8.375%, 09/15/2021 (Acquired 09/16/2011 through 09/19/2011, Cost $2,288,360) * | 2,250,000 | 2,553,750 | ||||||
SK Telecom, | ||||||||
6.625%, 07/20/2027 (Acquired 07/13/2007 through 04/30/2013, Cost $999,567) * f | 960,000 | 1,112,596 | ||||||
Sonoco Products Co., | ||||||||
4.375%, 11/01/2021 | 1,000,000 | 1,016,069 | ||||||
Sprint Capital Corporation: | ||||||||
6.900%, 05/01/2019 | 675,000 | 737,437 | ||||||
8.750%, 03/15/2032 | 300,000 | 321,750 | ||||||
Sprint Nextel Corporation, | ||||||||
6.000%, 12/01/2016 | 200,000 | 218,250 | ||||||
SunGard Data Systems Inc., | ||||||||
4.875%, 01/15/2014 | 1,181,000 | 1,181,000 | ||||||
Telecom Italia Capital, SA: | ||||||||
5.250%, 10/01/2015 f | 4,100,000 | 4,310,125 | ||||||
7.200%, 07/18/2036 f | 2,500,000 | 2,406,250 | ||||||
Telefonica Emisiones S.A.U.: | ||||||||
6.421%, 06/20/2016 f | 3,950,000 | 4,401,683 | ||||||
6.221%, 07/03/2017 f | 8,942,000 | 10,080,504 | ||||||
5.462%, 02/16/2021 f | 1,000,000 | 1,055,143 | ||||||
4.570%, 04/27/2023 f | 1,000,000 | 986,087 | ||||||
7.045%, 06/20/2036 f | 100,000 | 110,234 | ||||||
The ADT Corporation: | ||||||||
2.250%, 07/15/2017 | 2,810,000 | 2,765,217 | ||||||
3.500%, 07/15/2022 | 1,200,000 | 1,044,542 | ||||||
The Dow Chemical Co., | ||||||||
4.125%, 11/15/2021 | 835,000 | 862,527 | ||||||
Time Warner Cable Inc.: | ||||||||
8.750%, 02/14/2019 | 1,132,000 | 1,350,297 | ||||||
Time Warner Companies, Inc., | ||||||||
7.250%, 10/15/2017 | 2,300,000 | 2,741,844 | ||||||
Time Warner, Inc.: | ||||||||
7.625%, 04/15/2031 | 3,050,000 | 3,859,977 | ||||||
7.700%, 05/01/2032 | 408,000 | 523,860 | ||||||
Transocean Inc.: | ||||||||
6.375%, 12/15/2021 f | 5,500,000 | 6,180,433 | ||||||
3.800%, 10/15/2022 f | 5,000,000 | 4,739,130 | ||||||
6.800%, 03/15/2038 f | 878,000 | 977,225 | ||||||
TSMC Global Ltd, | ||||||||
1.625%, 04/03/2018 (Acquired 03/27/2013, Cost $2,997,990) * f | 3,000,000 | 2,872,908 | ||||||
Tyco Electronics Group S.A.: | ||||||||
6.550%, 10/01/2017 f | 5,243,000 | 6,000,068 | ||||||
7.125%, 10/01/2037 f | 500,000 | 585,141 | ||||||
U.S. Airways Pass-Through Trust, | ||||||||
Series 981B, 7.350%, 01/30/2018 | 417,669 | 440,641 | ||||||
United AirLines, Inc. Pass Through Trust, | ||||||||
Series 91A2, 10.020%, 03/22/2014 | 74,821 | 41,152 | ||||||
Vale Overseas Limited: | ||||||||
6.250%, 01/23/2017 f | 3,850,000 | 4,270,178 | ||||||
4.375%, 01/11/2022 f | 2,700,000 | 2,623,301 | ||||||
8.250%, 01/17/2034 f | 425,000 | 489,576 | ||||||
6.875%, 11/10/2039 f | 5,625,000 | 5,818,629 | ||||||
Verizon Communications, Inc.: | ||||||||
5.150%, 09/15/2023 | 10,000,000 | 10,736,920 | ||||||
6.400%, 09/15/2033 | 5,725,000 | 6,584,443 | ||||||
Vodafone Group PLC, | ||||||||
6.150%, 02/27/2037 f | 500,000 | 541,883 | ||||||
Vulcan Materials Co.: | ||||||||
6.400%, 11/30/2017 | 200,000 | 225,000 | ||||||
7.000%, 06/15/2018 | 1,400,000 | 1,592,500 | ||||||
7.150%, 11/30/2037 | 500,000 | 495,000 | ||||||
Walgreen Co., | ||||||||
5.250%, 01/15/2019 | 10,000,000 | 11,179,460 | ||||||
Weatherford International Ltd., | ||||||||
6.750%, 09/15/2040 f | 1,250,000 | 1,351,944 | ||||||
Westvaco Corporation: | ||||||||
9.750%, 06/15/2020 | 930,000 | 1,176,487 | ||||||
8.200%, 01/15/2030 | 1,540,000 | 1,824,808 | ||||||
Woodside Finance Limited, | ||||||||
8.125%, 03/01/2014 (Acquired 02/24/2009, Cost $999,690) * f | 1,000,000 | 1,012,351 | ||||||
WPX Energy, Inc., | ||||||||
6.000%, 01/15/2022 | 4,000,000 | 4,000,000 | ||||||
Wynn Las Vegas LLC, | ||||||||
4.250%, 05/30/2023 (Acquired 05/15/2013, Cost $4,000,000) * | 4,000,000 | 3,750,000 | ||||||
Xerox Corporation: | ||||||||
8.250%, 05/15/2014 | 6,587,000 | 6,763,538 | ||||||
1.058%, 05/16/2014 | 3,000,000 | 3,002,481 | ||||||
Xstrata Canada Corporation, | ||||||||
5.375%, 06/01/2015 f | 2,000,000 | 2,096,744 | ||||||
Xstrata Finance (Canada) Limited: | ||||||||
4.950%, 11/15/2021 (Acquired 11/03/2011, Cost $1,997,480) * f | 2,000,000 | 2,025,866 | ||||||
4.250%, 10/25/2022 (Acquired 10/18/2012 through 05/22/2013, Cost $7,133,597) * f | 7,000,000 | 6,674,367 | ||||||
Yara International ASA, | ||||||||
7.875%, 06/11/2019 (Acquired 12/03/2012 through 10/31/2013, Cost $7,357,732) * f | 5,880,000 | 7,099,771 | ||||||
583,480,499 | 20.6% |
Utility | ||||||||
Ameren Corporation, | ||||||||
8.875%, 05/15/2014 | 1,816,000 | 1,868,077 | ||||||
Appalachian Power Company Senior Unsecured Notes, | ||||||||
6.700%, 08/15/2037 | 1,150,000 | 1,332,009 | ||||||
Arizona Public Service Senior Unsecured Notes, | ||||||||
8.750%, 03/01/2019 | 1,150,000 | 1,461,636 | ||||||
Centrais Eletricas Brasileiras SA: | ||||||||
6.875%, 07/30/2019 (Acquired 12/06/2012, Cost $3,438,711) * f | 3,000,000 | 3,210,000 | ||||||
5.750%, 10/27/2021 (Acquired 10/20/2011, Cost $4,000,000) * @ f | 4,000,000 | 3,885,000 | ||||||
CMS Energy Corporation: | ||||||||
4.250%, 09/30/2015 | 3,000,000 | 3,160,728 | ||||||
5.050%, 03/15/2022 @ | 1,000,000 | 1,079,570 | ||||||
Comision Federal de Electricidad, | ||||||||
5.750%, 02/14/2042 (Acquired 02/08/2012, Cost $5,116,800) * f | 5,200,000 | 4,849,000 | ||||||
Constellation Energy Group Inc., | ||||||||
4.550%, 06/15/2015 | 750,000 | 787,296 | ||||||
DCP Midstream, LLC: | ||||||||
9.750%, 03/15/2019 (Acquired 02/29/2012 through 12/12/2012, Cost $11,396,572) * | 9,155,000 | 11,390,990 | ||||||
4.750%, 09/30/2021 (Acquired 09/14/2011 through 11/18/2011, Cost $2,251,297) * | 2,245,000 | 2,244,014 | ||||||
Dominion Resources, Inc., | ||||||||
Series B, 5.950%, 06/15/2035 | 1,880,000 | 2,075,184 | ||||||
El Paso Pipeline Partners Operating Co LLC, | ||||||||
7.500%, 11/15/2040 | 2,500,000 | 2,999,010 | ||||||
Enel Finance International, | ||||||||
6.800%, 09/15/2037 (Acquired 09/13/2007 through 09/29/2008, Cost $498,897) * f | 500,000 | 518,260 | ||||||
Energy Transfer Partners, L.P.: | ||||||||
9.700%, 03/15/2019 | 1,189,000 | 1,539,468 | ||||||
5.200%, 02/01/2022 | 1,000,000 | 1,052,794 | ||||||
3.600%, 02/01/2023 | 5,000,000 | 4,630,190 | ||||||
Enogex LLC, | ||||||||
6.250%, 03/15/2020 (Acquired 10/25/2012 through 05/10/2013, Cost $3,622,310) * | 3,190,000 | 3,451,976 | ||||||
Entergy Arkansas, Inc., | ||||||||
5.000%, 07/01/2018 | 358,000 | 357,521 | ||||||
Enterprise Products Operating LLC, | ||||||||
3.350%, 03/15/2023 @ | 10,000,000 | 9,499,120 | ||||||
Exelon Corporation, | ||||||||
4.900%, 06/15/2015 | 500,000 | 527,152 | ||||||
Exelon Generation Company, LLC: | ||||||||
6.200%, 10/01/2017 | 4,350,000 | 4,915,700 | ||||||
5.600%, 06/15/2042 | 6,100,000 | 5,694,228 | ||||||
Florida Gas Transmission Company, LLC, | ||||||||
3.875%, 07/15/2022 (Acquired 06/12/2012, Cost $2,996,190) * | 3,000,000 | 2,939,967 | ||||||
FPL Group Capital, Inc., | ||||||||
Series D, 7.300%, 09/01/2067 | 2,500,000 | 2,750,000 | ||||||
GG1C Funding Corporation, | ||||||||
5.129%, 01/15/2014 (Acquired 11/21/2008, Cost $140,824) * | 140,880 | 141,005 | ||||||
Gulf South Pipeline Company, LP, | ||||||||
4.000%, 06/15/2022 | 3,000,000 | 2,925,162 | ||||||
IPALCO Enterprises Inc., | ||||||||
5.000%, 05/01/2018 | 1,000,000 | 1,047,500 | ||||||
KeySpan Corp., | ||||||||
8.000%, 11/15/2030 | 1,875,000 | 2,411,325 | ||||||
Kinder Morgan Energy Partners, L.P.: | ||||||||
9.000%, 02/01/2019 | 1,658,000 | 2,106,564 | ||||||
6.850%, 02/15/2020 | 4,645,000 | 5,521,437 | ||||||
6.500%, 02/01/2037 | 400,000 | 438,325 | ||||||
6.950%, 01/15/2038 | 350,000 | 402,079 | ||||||
Kinder Morgan Finance: | ||||||||
5.700%, 01/05/2016 f | 1,886,000 | 2,025,813 | ||||||
6.000%, 01/15/2018 (Acquired 12/06/2010, Cost $999,930) * | 1,000,000 | 1,095,783 | ||||||
Korea Electric Power Corporation, | ||||||||
6.750%, 08/01/2027 f | 490,000 | 584,686 | ||||||
National Grid PLC, | ||||||||
6.300%, 08/01/2016 f | 4,790,000 | 5,386,757 | ||||||
National Rural Utilities Corporation, | ||||||||
10.375%, 11/01/2018 | 6,673,000 | 9,024,458 | ||||||
Nisource Finance Corp., | ||||||||
5.400%, 07/15/2014 | 2,233,000 | 2,287,905 | ||||||
NuStar Logistics L.P.: | ||||||||
4.800%, 09/01/2020 | 4,275,000 | 4,028,619 | ||||||
6.750%, 02/01/2021 | 3,000,000 | 3,095,748 | ||||||
ONEOK, Inc.: | ||||||||
4.250%, 02/01/2022 | 6,150,000 | 5,785,526 | ||||||
3.375%, 10/01/2022 | 3,000,000 | 2,804,433 | ||||||
Petrofac Limited, | ||||||||
3.400%, 10/10/2018 (Acquired 10/03/2013, Cost $8,966,430) * f | 9,000,000 | 9,064,395 | ||||||
PPL Energy Supply, LLC: | ||||||||
Series A, 5.700%, 10/15/2015 | 1,500,000 | 1,582,757 | ||||||
6.200%, 05/15/2016 | 1,950,000 | 2,144,791 | ||||||
PSEG Power LLC, | ||||||||
5.320%, 09/15/2016 | 3,077,000 | 3,385,565 | ||||||
Public Service Company of New Mexico, | ||||||||
7.950%, 05/15/2018 | 6,553,000 | 7,789,348 | ||||||
RGS (I&M) Funding Corporation Debentures, | ||||||||
Series F*, 9.820%, 12/07/2022 | 178,947 | 218,095 | ||||||
Rockies Express Pipeline LLC: | ||||||||
3.900%, 04/15/2015 (Acquired 09/15/2011 through 01/08/2013, Cost $2,856,832) * | 2,850,000 | 2,850,000 | ||||||
6.850%, 07/15/2018 (Acquired 12/21/2011, Cost $2,029,945) * @ | 2,000,000 | 1,945,000 | ||||||
5.625%, 04/15/2020 (Acquired 12/10/2010 through 12/29/2011, Cost $2,701,073) * | 2,695,000 | 2,391,813 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, 08/15/2014 | 5,030,000 | 5,179,562 | ||||||
Sunoco Logistics Partners Operations LP: | ||||||||
3.450%, 01/15/2023 | 2,000,000 | 1,837,694 | ||||||
6.100%, 02/15/2042 @ | 1,000,000 | 1,020,987 | ||||||
Sunoco, Inc., | ||||||||
5.750%, 01/15/2017 | 701,000 | 762,090 | ||||||
The Williams Companies, Inc.: | ||||||||
7.875%, 09/01/2021 | 1,335,000 | 1,539,403 | ||||||
3.700%, 01/15/2023 | 3,000,000 | 2,618,424 | ||||||
Series A, 7.500%, 01/15/2031 | 120,000 | 126,836 | ||||||
7.750%, 06/15/2031 | 3,500,000 | 3,752,774 | ||||||
Trans-Allegheny Interstate Line Company, | ||||||||
4.000%, 01/15/2015 (Acquired 08/03/2012, Cost $2,918,437) * | 2,850,000 | 2,931,459 | ||||||
Transcontinental Gas Pipe Line Company, LLC, | ||||||||
4.450%, 08/01/2042 | 2,600,000 | 2,313,189 | ||||||
Veolia Environnement SA, | ||||||||
6.000%, 06/01/2018 f | 1,489,000 | 1,689,612 | ||||||
Williams Partners L.P.: | ||||||||
7.250%, 02/01/2017 | 2,000,000 | 2,306,282 | ||||||
6.300%, 04/15/2040 | 1,590,000 | 1,708,794 | ||||||
188,490,885 | 6.7% |
Finance | ||||||||
Abbey National Treasury Services PLC, | ||||||||
3.875%, 11/10/2014 (Acquired 02/25/2010 through 12/29/2011, Cost $1,037,035) * f | 1,045,000 | 1,073,535 | ||||||
ABN AMRO Bank N.V.: | ||||||||
4.250%, 02/02/2017 (Acquired 01/30/2012, Cost $4,995,100) * f | 5,000,000 | 5,360,410 | ||||||
2.500%, 10/30/2018 (Acquired 10/23/2013, Cost $1,996,820) * f | 2,000,000 | 1,995,680 | ||||||
AIG SunAmerica Global Financing X, | ||||||||
6.900%, 03/15/2032 (Acquired 11/10/2011, Cost $2,131,131) * | 2,000,000 | 2,424,772 | ||||||
Ally Financial Inc.: | ||||||||
6.750%, 12/01/2014 | 250,000 | 261,563 | ||||||
8.300%, 02/12/2015 | 1,065,000 | 1,144,875 | ||||||
0.000%, 06/15/2015 ^ | 2,000,000 | 1,920,000 | ||||||
4.625%, 06/26/2015 | 5,000,000 | 5,203,940 | ||||||
5.500%, 02/15/2017 | 7,275,000 | 7,875,187 | ||||||
American General Finance Corporation, | ||||||||
6.900%, 12/15/2017 @ | 1,000,000 | 1,093,000 | ||||||
American International Group, Inc.: | ||||||||
3.800%, 03/22/2017 | 2,500,000 | 2,669,747 | ||||||
8.250%, 08/15/2018 | 4,525,000 | 5,660,232 | ||||||
6.400%, 12/15/2020 | 3,500,000 | 4,136,514 | ||||||
4.875%, 06/01/2022 | 3,625,000 | 3,896,233 | ||||||
AmSouth Bancorp, | ||||||||
6.750%, 11/01/2025 | 710,000 | 744,390 | ||||||
AON Corporation, | ||||||||
3.500%, 09/30/2015 f | 2,500,000 | 2,609,220 | ||||||
Arden Realty Limited Partnership, | ||||||||
5.250%, 03/01/2015 | 1,090,000 | 1,138,142 | ||||||
Associates Corporation of North America, | ||||||||
6.950%, 11/01/2018 | 12,038,000 | 14,322,921 | ||||||
Banco Santander (Brasil) S.A., | ||||||||
4.625%, 02/13/2017 (Acquired 02/06/2012, Cost $994,140) * @ f | 1,000,000 | 1,040,000 | ||||||
Bank of America Corporation: | ||||||||
10.200%, 07/15/2015 | 2,675,000 | 3,006,144 | ||||||
7.625%, 06/01/2019 | 6,000,000 | 7,441,962 | ||||||
3.300%, 01/11/2023 | 4,450,000 | 4,210,888 | ||||||
Banponce Trust I, | ||||||||
Series A, 8.327%, 02/01/2027 | 2,185,000 | 1,879,100 | ||||||
Barclays Bank PLC, | ||||||||
6.750%, 05/22/2019 f | 9,850,000 | 11,871,919 | ||||||
Berkshire Hathaway Finance Corporation, | ||||||||
4.400%, 05/15/2042 | 3,500,000 | 3,200,673 | ||||||
BNP Paribas: | ||||||||
2.375%, 09/14/2017 f | 3,000,000 | 3,062,898 | ||||||
5.000%, 01/15/2021 f | 5,000,000 | 5,484,935 | ||||||
3.250%, 03/03/2023 f | 4,000,000 | 3,784,568 | ||||||
BPCE: | ||||||||
2.500%, 12/10/2018 f | 11,000,000 | 10,941,106 | ||||||
5.700%, 10/22/2023 (Acquired 10/15/2013, Cost $5,990,040) * f | 6,000,000 | 6,181,560 | ||||||
Capital One Financial Corporation: | ||||||||
3.150%, 07/15/2016 | 1,015,000 | 1,060,749 | ||||||
6.150%, 09/01/2016 | 4,425,000 | 4,949,283 | ||||||
CIT Group, Inc.: | ||||||||
4.250%, 08/15/2017 | 1,000,000 | 1,041,250 | ||||||
5.500%, 02/15/2019 (Acquired 02/02/2012, Cost $500,000) * @ | 500,000 | 536,250 | ||||||
5.000%, 08/01/2023 @ | 5,000,000 | 4,812,500 | ||||||
Citigroup Inc., | ||||||||
6.010%, 01/15/2015 | 306,000 | 322,231 | ||||||
4.450%, 01/10/2017 | 1,800,000 | 1,950,838 | ||||||
8.500%, 05/22/2019 | 1,389,000 | 1,780,127 | ||||||
CNA Financial Corporation: | ||||||||
6.500%, 08/15/2016 | 1,000,000 | 1,124,659 | ||||||
7.350%, 11/15/2019 | 1,175,000 | 1,424,349 | ||||||
5.875%, 08/15/2020 | 4,839,000 | 5,516,610 | ||||||
Comerica Bank: | ||||||||
5.750%, 11/21/2016 | 3,200,000 | 3,600,249 | ||||||
5.200%, 08/22/2017 | 2,855,000 | 3,143,598 | ||||||
Commonwealth Bank of Australia, | ||||||||
5.000%, 10/15/2019 (Acquired 03/02/2012 through 08/16/2012, Cost $6,320,950) * f | 5,900,000 | 6,576,317 | ||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA: | ||||||||
1.700%, 03/19/2018 @ f | 5,250,000 | 5,185,010 | ||||||
3.875%, 02/08/2022 f | 4,150,000 | 4,172,622 | ||||||
Countrywide Financial Corporation, | ||||||||
6.250%, 05/15/2016 | 2,100,000 | 2,317,346 | ||||||
Credit Mutuel-CIC Home Loan SFH, | ||||||||
1.500%, 11/16/2017 (Acquired 11/08/2012, Cost $4,981,300) * @ f | 5,000,000 | 4,956,000 | ||||||
Credit Suisse New York, | ||||||||
5.300%, 08/13/2019 f | 6,966,000 | 7,819,600 | ||||||
Dresdner Bank AG, | ||||||||
7.250%, 09/15/2015 f | 10,425,000 | 11,255,643 | ||||||
First Empire Capital Trust I, | ||||||||
8.234%, 02/01/2027 | 500,000 | 506,989 | ||||||
First Empire Capital Trust II, | ||||||||
8.277%, 06/01/2027 | 2,300,000 | 2,345,777 | ||||||
First Horizon National Corporation, | ||||||||
5.375%, 12/15/2015 | 2,420,000 | 2,601,285 | ||||||
First National Bank of Chicago Pass Through Trust, | ||||||||
Series 93-A, 8.080%, 01/05/2018 | 267,321 | 290,648 | ||||||
FMR LLC: | ||||||||
4.950%, 02/01/2033 (Acquired 01/29/2013, Cost $2,696,598) * | 2,700,000 | 2,649,286 | ||||||
6.500%, 12/14/2040 (Acquired 04/04/2013 through 10/28/2013, Cost $2,287,335) * | 1,820,000 | 2,089,682 | ||||||
General Electric Capital Corporation: | ||||||||
5.500%, 01/08/2020 | 1,875,000 | 2,147,181 | ||||||
5.550%, 05/04/2020 | 4,185,000 | 4,815,792 | ||||||
4.375%, 09/16/2020 | 2,925,000 | 3,170,083 | ||||||
5.300%, 02/11/2021 | 3,000,000 | 3,355,860 | ||||||
4.650%, 10/17/2021 | 8,450,000 | 9,205,836 | ||||||
Genworth Financial, Inc., | ||||||||
7.625%, 09/24/2021 | 1,000,000 | 1,189,994 | ||||||
GMAC Inc., | ||||||||
8.000%, 12/31/2018 | 1,176,000 | 1,387,680 | ||||||
Goldman Sachs Capital I, | ||||||||
6.345%, 02/15/2034 | 125,000 | 126,125 | ||||||
HSBC Bank USA NA, | ||||||||
6.000%, 08/09/2017 | 2,720,000 | 3,062,108 | ||||||
HSBC Finance Corporation, | ||||||||
5.500%, 01/19/2016 | 1,120,000 | 1,214,249 | ||||||
Humana Inc., | ||||||||
7.200%, 06/15/2018 | 800,000 | 946,439 | ||||||
Hutchison Whampoa International Ltd.: | ||||||||
4.625%, 09/11/2015 (Acquired 08/19/2010 through 12/28/2011, Cost $3,646,473) * f | 3,563,000 | 3,770,445 | ||||||
3.500%, 01/13/2017 (Acquired 01/10/2012, Cost $1,990,380) * f | 2,000,000 | 2,087,336 | ||||||
3.250%, 11/08/2022 (Acquired 11/05/2012, Cost $3,581,424) * @ f | 3,600,000 | 3,292,765 | ||||||
ING Bank N.V.: | ||||||||
4.000%, 03/15/2016 (Acquired 03/08/2011 through 09/20/2011, Cost $1,600,359) * f | 1,600,000 | 1,691,045 | ||||||
3.750%, 03/07/2017 (Acquired 02/29/2012 through 04/24/2013, Cost $4,988,027) * f | 5,000,000 | 5,266,100 | ||||||
5.000%, 06/09/2021 (Acquired 10/12/2011, Cost $2,468,800) * f | 2,500,000 | 2,717,575 | ||||||
ING U.S., Inc., | ||||||||
5.500%, 07/15/2022 | 3,000,000 | 3,262,476 | ||||||
Invesco Finance PLC, | ||||||||
3.125%, 11/30/2022 f | 5,500,000 | 5,089,122 | ||||||
Istar Financial, Inc., | ||||||||
5.850%, 03/15/2017 | 500,000 | 535,625 | ||||||
J.P. Morgan Chase & Co.: | ||||||||
4.250%, 10/15/2020 | 3,100,000 | 3,286,115 | ||||||
4.350%, 08/15/2021 | 2,400,000 | 2,529,408 | ||||||
4.500%, 01/24/2022 | 4,400,000 | 4,654,016 | ||||||
3.200%, 01/25/2023 @ | 5,350,000 | 5,071,939 | ||||||
Jefferies Group, Inc., | ||||||||
6.450%, 06/08/2027 | 1,000,000 | 1,039,071 | ||||||
John Hancock Life Insurance Company, | ||||||||
7.375%, 02/15/2024 (Acquired 08/26/2010 through 04/11/2013, Cost $12,119,934) * | 9,765,000 | 11,557,649 | ||||||
Kemper Corporation: | ||||||||
6.000%, 11/30/2015 | 2,500,000 | 2,673,915 | ||||||
6.000%, 05/15/2017 | 1,000,000 | 1,096,484 | ||||||
KeyBank National Association: | ||||||||
7.413%, 05/06/2015 | 5,100,000 | 5,526,003 | ||||||
5.450%, 03/03/2016 | 1,279,000 | 1,391,887 | ||||||
4.625%, 06/15/2018 | 2,670,000 | 2,874,114 | ||||||
Kookmin Bank, | ||||||||
7.250%, 05/14/2014 (Acquired 03/10/2010 through 01/18/2012, Cost $3,953,769) * f | 3,900,000 | 3,989,205 | ||||||
Liberty Mutual Group Inc.: | ||||||||
5.750%, 03/15/2014 (Acquired 12/21/2010 through 04/24/2012, Cost $984,022) * | 980,000 | 989,779 | ||||||
6.500%, 03/15/2035 (Acquired 09/29/2008 through 04/16/2013, Cost $700,463) * | 700,000 | 764,240 | ||||||
10.750%, 06/15/2058 (Acquired 05/21/2008 through 05/06/2009, Cost $750,894) * | 900,000 | 1,345,500 | ||||||
Liberty Mutual Insurance Company, | ||||||||
7.697%, 10/15/2097 (Acquired 03/26/2003, Cost $240,080) * | 375,000 | 382,480 | ||||||
Lincoln National Corporation: | ||||||||
8.750%, 07/01/2019 | 7,801,000 | 10,041,104 | ||||||
6.050%, 04/20/2067 | 825,000 | 818,812 | ||||||
Lloyds TSB Bank PLC: | ||||||||
4.200%, 03/28/2017 @ f | 2,000,000 | 2,158,240 | ||||||
5.800%, 01/13/2020 (Acquired 01/05/2010 through 01/19/2012, Cost $6,406,849) * f | 6,350,000 | 7,280,078 | ||||||
M&I Marshall & Ilsley Bank, | ||||||||
4.850%, 06/16/2015 | 2,189,000 | 2,307,175 | ||||||
Macquarie Bank Limited, | ||||||||
2.000%, 08/15/2016 (Acquired 09/27/2013, Cost $3,518,736) * f | 3,500,000 | 3,539,799 | ||||||
Manufacturer and Traders Trust Co., | ||||||||
5.585%, 12/28/2020 | 265,000 | 270,285 | ||||||
Manufacturers and Traders Trust Company, | ||||||||
6.625%, 12/04/2017 | 1,120,000 | 1,296,608 | ||||||
Manulife Financial Corp., | ||||||||
4.900%, 09/17/2020 f | 1,840,000 | 1,974,964 | ||||||
Marsh & McLennan Companies, Inc., | ||||||||
4.800%, 07/15/2021 | 1,000,000 | 1,066,032 | ||||||
Massachusetts Mutual Life Insurance Company: | ||||||||
7.625%, 11/15/2023 (Acquired 10/10/2012, Cost $4,248,172) * | 3,184,000 | 3,799,413 | ||||||
8.875%, 06/01/2039 (Acquired 10/03/2012 through 02/13/2013, Cost $2,403,443) * | 1,575,000 | 2,257,073 | ||||||
MBIA Insurance Corp., | ||||||||
11.504%, 01/15/2033 (Acquired 01/11/2008, Cost $700,000) * | 700,000 | 528,500 | ||||||
Merrill Lynch & Company: | ||||||||
6.875%, 04/25/2018 | 800,000 | 945,895 | ||||||
7.750%, 05/14/2038 | 725,000 | 936,022 | ||||||
Metlife Capital Trust IV, | ||||||||
7.875%, 12/15/2037 (Acquired 03/26/2012 through 04/05/2013, Cost $1,049,668) * | 900,000 | 1,032,750 | ||||||
MetLife, Inc., | ||||||||
7.717%, 02/15/2019 | 1,157,000 | 1,434,110 | ||||||
Metropolitan Life Global Funding I: | ||||||||
3.125%, 01/11/2016 (Acquired 09/27/2011 through 06/01/2012, Cost $2,430,590) * @ | 2,415,000 | 2,517,256 | ||||||
3.875%, 04/11/2022 (Acquired 12/18/2012, Cost $1,617,901) * | 1,500,000 | 1,512,550 | ||||||
Morgan Stanley: | ||||||||
4.750%, 04/01/2014 | 2,505,000 | 2,524,915 | ||||||
6.000%, 04/28/2015 | 650,000 | 692,272 | ||||||
5.450%, 01/09/2017 | 2,000,000 | 2,218,002 | ||||||
6.625%, 04/01/2018 | 1,275,000 | 1,491,870 | ||||||
7.300%, 05/13/2019 | 4,675,000 | 5,677,357 | ||||||
5.625%, 09/23/2019 | 3,100,000 | 3,523,727 | ||||||
3.750%, 02/25/2023 @ | 1,000,000 | 973,065 | ||||||
National Australia Bank Limited: | ||||||||
0.788%, 07/25/2016 f | 5,000,000 | 5,017,805 | ||||||
3.000%, 07/27/2016 (Acquired 07/20/2011, Cost $2,991,720) * f | 3,000,000 | 3,140,040 | ||||||
National Australia Bank/New York, | ||||||||
2.750%, 03/09/2017 f | 6,000,000 | 6,218,160 | ||||||
National City Bank, | ||||||||
5.800%, 06/07/2017 | 6,170,000 | 6,954,102 | ||||||
New England Mutual Life Insurance Company, | ||||||||
7.875%, 02/15/2024 (Acquired 11/07/2012, Cost $4,294,574) * | 3,200,000 | 3,935,962 | ||||||
Nippon Life Insurance Company, | ||||||||
5.000%, 10/18/2042 (Acquired 10/11/2012, Cost $2,000,000) * f | 2,000,000 | 2,065,000 | ||||||
Nomura Holdings Inc.: | ||||||||
2.000%, 09/13/2016 f | 3,000,000 | 3,024,801 | ||||||
6.700%, 03/04/2020 f | 2,525,000 | 2,895,367 | ||||||
Nordea Bank AB, | ||||||||
3.125%, 03/20/2017 (Acquired 03/14/2012 through 05/09/2012, Cost $8,034,033) * f | 8,000,000 | 8,365,448 | ||||||
Principal Financial Group, Inc.: | ||||||||
3.300%, 09/15/2022 | 1,000,000 | 952,087 | ||||||
3.125%, 05/15/2023 | 3,550,000 | 3,294,517 | ||||||
Prudential Financial Inc.: | ||||||||
6.200%, 01/15/2015 | 3,147,000 | 3,323,075 | ||||||
6.000%, 12/01/2017 | 2,000,000 | 2,299,800 | ||||||
Prudential Holdings, LLC, | ||||||||
8.695%, 12/18/2023 (Acquired 11/29/2011 through 01/18/2013, Cost $8,001,981) * | 6,404,243 | 8,126,049 | ||||||
Rabobank Nederland, | ||||||||
3.375%, 01/19/2017 f | 2,000,000 | 2,105,780 | ||||||
Raymond James Financial, Inc., | ||||||||
8.600%, 08/15/2019 | 1,427,000 | 1,794,584 | ||||||
Regions Bank, | ||||||||
7.500%, 05/15/2018 | 14,034,000 | 16,606,236 | ||||||
Reliance Holdings USA Inc.: | ||||||||
4.500%, 10/19/2020 (Acquired 10/14/2010 through 10/18/2010, Cost $1,988,700) * | 2,000,000 | 1,976,178 | ||||||
5.400%, 02/14/2022 (Acquired 02/09/2012 through 02/23/2012, Cost $3,516,542) * | 3,500,000 | 3,539,697 | ||||||
Santander Financial Issuances, | ||||||||
7.250%, 11/01/2015 @ f | 300,000 | 322,902 | ||||||
Santander UK PLC, | ||||||||
5.000%, 11/07/2023 (Acquired 10/31/2013, Cost $996,810) * f | 1,000,000 | 1,003,720 | ||||||
Simon Property Group, L.P., | ||||||||
1.500%, 02/01/2018 (Acquired 12/10/2012, Cost $11,962,200) * | 12,000,000 | 11,657,484 | ||||||
SLM Corporation: | ||||||||
5.375%, 05/15/2014 | 8,000,000 | 8,140,000 | ||||||
5.625%, 08/01/2033 | 50,000 | 41,437 | ||||||
Societe Generale: | ||||||||
2.750%, 10/12/2017 f | 3,000,000 | 3,092,100 | ||||||
5.200%, 04/15/2021 (Acquired 09/20/2011 through 02/13/2013, Cost $9,985,417) * f | 10,100,000 | 11,102,486 | ||||||
Sovereign Bank, | ||||||||
8.750%, 05/30/2018 | 7,034,000 | 8,451,660 | ||||||
Sparebank 1 Boligkreditt AS, | ||||||||
1.750%, 11/15/2019 (Acquired 11/07/2012, Cost $4,961,150) * f | 5,000,000 | 4,747,500 | ||||||
State Bank of India, | ||||||||
4.125%, 08/01/2017 (Acquired 07/25/2012, Cost $6,939,800) * f | 7,000,000 | 7,078,890 | ||||||
Sumitomo Mitsui Banking Corporation, | ||||||||
3.000%, 01/18/2023 f | 2,500,000 | 2,319,820 | ||||||
SunTrust Bank: | ||||||||
3.500%, 01/20/2017 | 4,250,000 | 4,468,947 | ||||||
7.250%, 03/15/2018 | 5,682,000 | 6,685,362 | ||||||
SUSA Partnership, L.P., | ||||||||
8.200%, 06/01/2017 | 1,000,000 | 1,183,241 | ||||||
Svenska Handelsbanken AB, | ||||||||
2.875%, 04/04/2017 f | 2,425,000 | 2,526,028 | ||||||
Swedbank AB, | ||||||||
2.125%, 09/29/2017 (Acquired 09/24/2012, Cost $2,995,470) * f | 3,000,000 | 3,000,912 | ||||||
Symetra Financial Corporation, | ||||||||
6.125%, 04/01/2016 (Acquired 10/12/2010 through 10/16/2012, Cost $3,747,032) * | 3,620,000 | 3,853,465 | ||||||
Talent Yield Investments Ltd., | ||||||||
4.500%, 04/25/2022 (Acquired 04/18/2012, Cost $5,958,960) * @ f | 6,000,000 | 5,899,326 | ||||||
TD Ameritrade Holding Corporation, | ||||||||
5.600%, 12/01/2019 | 1,000,000 | 1,154,318 | ||||||
The Bank of Tokyo-Mitsubishi UFJ, Ltd., | ||||||||
2.350%, 02/23/2017 (Acquired 02/14/2012, Cost $5,996,640) * f | 6,000,000 | 6,089,886 | ||||||
The Bear Stearns Companies LLC, | ||||||||
7.250%, 02/01/2018 | 2,250,000 | 2,694,085 | ||||||
The Chubb Corp., | ||||||||
6.375%, 03/29/2067 | 1,320,000 | 1,428,900 | ||||||
The Goldman Sachs Group, Inc.: | ||||||||
5.950%, 01/18/2018 | 3,000,000 | 3,410,814 | ||||||
6.150%, 04/01/2018 | 6,500,000 | 7,453,400 | ||||||
7.500%, 02/15/2019 | 1,825,000 | 2,222,793 | ||||||
5.250%, 07/27/2021 | 1,000,000 | 1,094,842 | ||||||
5.750%, 01/24/2022 | 3,100,000 | 3,489,633 | ||||||
6.750%, 10/01/2037 | 300,000 | 333,764 | ||||||
The Hartford Financial Services Group, Inc.: | ||||||||
7.300%, 11/01/2015 | 465,000 | 516,712 | ||||||
5.375%, 03/15/2017 | 2,913,000 | 3,209,887 | ||||||
4.000%, 10/15/2017 | 3,000,000 | 3,190,863 | ||||||
8.125%, 06/15/2038 | 1,365,000 | 1,590,908 | ||||||
The Royal Bank of Scotland Group PLC: | ||||||||
5.050%, 01/08/2015 f | 1,528,000 | 1,573,232 | ||||||
2.550%, 09/18/2015 f | 4,225,000 | 4,321,148 | ||||||
6.125%, 01/11/2021 f | 7,850,000 | 8,885,109 | ||||||
Torchmark Corporation, | ||||||||
3.800%, 09/15/2022 | 1,275,000 | 1,237,571 | ||||||
UnionBanCal Corp., | ||||||||
3.500%, 06/18/2022 @ | 1,100,000 | 1,078,978 | ||||||
UnitedHealth Group, Inc., | ||||||||
6.000%, 02/15/2018 | 1,000,000 | 1,155,314 | ||||||
Wachovia Bank, National Association, | ||||||||
6.000%, 11/15/2017 | 8,322,000 | 9,602,756 | ||||||
Westpac Banking Corporation: | ||||||||
2.000%, 08/14/2017 f | 8,000,000 | 8,047,776 | ||||||
4.875%, 11/19/2019 f | 636,000 | 705,731 | ||||||
Willis North America, Inc.: | ||||||||
5.625%, 07/15/2015 | 2,600,000 | 2,774,930 | ||||||
7.000%, 09/29/2019 | 7,803,000 | 9,028,641 | ||||||
637,490,486 | 22.5% | |||||||
Total Corporate Bonds | 1,409,461,870 | 49.8% |
Residential Mortgage-Backed Securities | ||||||||
U.S. Government Agency Issues | ||||||||
Federal Gold Loan Mortgage Corporation (FGLMC): | ||||||||
5.000%, 12/01/2020 | 85,824 | 91,118 | ||||||
5.000%, 05/01/2021 | 161,580 | 171,532 | ||||||
6.000%, 06/01/2021 | 31,650 | 34,688 | ||||||
3.000%, 05/01/2027 | 13,613,016 | 13,877,134 | ||||||
6.500%, 12/01/2028 | 42,206 | 47,735 | ||||||
6.500%, 06/01/2029 | 18,646 | 20,890 | ||||||
5.500%, 04/01/2037 | 449,752 | 490,173 | ||||||
5.500%, 04/01/2038 | 275,888 | 300,683 | ||||||
5.500%, 05/01/2038 | 552,819 | 602,503 | ||||||
4.500%, 11/01/2039 | 7,146,911 | 7,567,907 | ||||||
4.500%, 11/01/2039 | 2,362,283 | 2,501,877 | ||||||
4.500%, 08/01/2040 | 10,361,009 | 10,978,490 | ||||||
4.500%, 08/01/2040 | 7,379,044 | 7,818,790 | ||||||
3.500%, 06/01/2042 | 13,781,185 | 13,689,491 | ||||||
3.500%, 07/01/2042 | 46,266,322 | 45,958,488 | ||||||
3.000%, 08/01/2042 | 37,952,612 | 36,001,865 | ||||||
3.000%, 02/01/2043 | 11,966,500 | 11,350,948 | ||||||
Federal Home Loan Mortgage Corporation (FHLMC): | ||||||||
Series 1053, Class G, 7.000%, 03/15/2021 | 4,975 | 5,744 | ||||||
Series 136, Class E, 6.000%, 04/15/2021 | 9,415 | 10,145 | ||||||
Series 2804, Class VC, 5.000%, 07/15/2021 | 163,792 | 177,019 | ||||||
Series 1122, Class G, 7.000%, 08/15/2021 | 10,375 | 11,448 | ||||||
Series 1186, Class I, 7.000%, 12/15/2021 | 21,744 | 24,672 | ||||||
Federal National Mortgage Association (FNMA): | ||||||||
Series 1989-94, Class G, 7.500%, 12/25/2019 | 5,756 | 6,355 | ||||||
Series 1990-15, Class J, 7.000%, 02/25/2020 | 18,401 | 20,083 | ||||||
Series 1991-21, Class J, 7.000%, 03/25/2021 | 3,769 | 4,199 | ||||||
Series 1991-43, Class J, 7.000%, 05/25/2021 | 68,796 | 77,247 | ||||||
Series 1991-65, Class Z, 6.500%, 06/25/2021 | 74,469 | 80,166 | ||||||
5.000%, 11/01/2021 | 640,214 | 685,521 | ||||||
Series 1992-129, Class L, 6.000%, 07/25/2022 | 134,349 | 147,312 | ||||||
5.500%, 03/01/2023 | 331,555 | 364,233 | ||||||
Series 1993-32, Class H, 6.000%, 03/25/2023 | 30,646 | 32,992 | ||||||
Series 1993-58, Class H, 5.500%, 04/25/2023 | 148,338 | 161,380 | ||||||
5.500%, 07/01/2023 | 158,931 | 174,605 | ||||||
5.500%, 12/01/2023 | 228,414 | 250,770 | ||||||
6.000%, 03/01/2026 | 48,979 | 54,462 | ||||||
5.000%, 06/01/2026 | 13,291,148 | 14,312,438 | ||||||
3.000%, 04/01/2027 | 25,487,039 | 26,038,121 | ||||||
2.500%, 12/01/2027 | 25,810,513 | 25,632,534 | ||||||
5.000%, 05/01/2028 | 149,064 | 162,361 | ||||||
6.500%, 09/01/2028 | 32,274 | 36,065 | ||||||
6.500%, 02/01/2029 | 71,931 | 81,113 | ||||||
4.500%, 07/01/2030 | 14,295,870 | 15,234,331 | ||||||
4.000%, 11/01/2031 | 13,008,962 | 13,541,516 | ||||||
5.500%, 01/01/2032 | 29,709 | 32,774 | ||||||
5.500%, 04/01/2034 | 2,366,525 | 2,607,613 | ||||||
5.500%, 04/01/2034 | 2,281,701 | 2,526,484 | ||||||
Series 2004-90, Class LH, 5.000%, 04/25/2034 | 4,304,871 | 4,542,487 | ||||||
Series 2004-W6, Class 1A6, 5.500%, 07/25/2034 | 253,899 | 260,370 | ||||||
Series 2004-W6, Class 1A4, 5.500%, 07/25/2034 | 166,740 | 169,959 | ||||||
5.500%, 09/01/2034 | 74,229 | 81,678 | ||||||
5.500%, 02/01/2035 | 37,022 | 40,729 | ||||||
5.000%, 04/01/2035 | 4,263,172 | 4,629,409 | ||||||
5.000%, 07/01/2035 | 12,603,592 | 13,689,628 | ||||||
5.000%, 02/01/2036 | 6,744,482 | 7,319,858 | ||||||
5.000%, 03/01/2036 | 2,644,792 | 2,870,686 | ||||||
5.500%, 04/01/2036 | 6,873,680 | 7,556,133 | ||||||
6.000%, 08/01/2037 | 199,260 | 215,048 | ||||||
4.000%, 08/01/2040 | 2,998,509 | 3,088,161 | ||||||
4.500%, 08/01/2040 | 15,572,350 | 16,496,573 | ||||||
4.000%, 10/01/2040 | 2,058,060 | 2,119,721 | ||||||
4.000%, 12/01/2040 | 7,565,442 | 7,811,914 | ||||||
3.500%, 01/01/2041 | 4,421,515 | 4,396,949 | ||||||
4.000%, 01/01/2041 | 10,540,119 | 10,856,415 | ||||||
3.500%, 02/01/2041 | 4,922,225 | 4,895,254 | ||||||
3.500%, 03/01/2041 | 6,054,500 | 6,021,316 | ||||||
4.500%, 07/01/2041 | 4,183,432 | 4,433,827 | ||||||
4.000%, 09/01/2041 | 9,582,070 | 9,870,743 | ||||||
4.000%, 12/01/2041 | 39,426,760 | 40,617,178 | ||||||
3.000%, 05/01/2042 | 6,257,750 | 5,948,093 | ||||||
3.500%, 06/01/2042 | 14,276,523 | 14,196,584 | ||||||
Government National Mortgage Association (GNMA): | ||||||||
6.000%, 12/20/2028 | 45,198 | 50,360 | ||||||
6.500%, 01/20/2029 | 20,900 | 24,191 | ||||||
Series 2003-2, Class PB, 5.500%, 03/20/2032 | 9,455 | 9,471 | ||||||
6.000%, 11/20/2033 | 35,557 | 40,342 | ||||||
4.500%, 05/20/2040 | 5,199,151 | 5,573,861 | ||||||
5.000%, 07/20/2040 | 2,284,789 | 2,502,336 | ||||||
4.500%, 01/20/2041 | 20,220,299 | 21,707,195 | ||||||
4.000%, 06/20/2042 | 40,726,986 | 42,420,576 | ||||||
3.500%, 09/20/2042 | 21,181,411 | 21,401,430 | ||||||
519,856,490 | 18.3% |
Non-U.S. Government Agency Issues | ||||||||
Bank of America Alternative Loan Trust: | ||||||||
Series 2004-1, Class 5A2, 5.500%, 02/25/2019 | 1,415,400 | 1,460,631 | ||||||
Series 2004-2, Class 5A1, 5.500%, 03/25/2019 | 321,420 | 329,449 | ||||||
Series 2004-8, Class 3A1, 5.500%, 09/25/2019 | 1,798,989 | 1,884,734 | ||||||
Series 2005-2, Class 4A1, 5.500%, 03/25/2020 | 54,404 | 56,711 | ||||||
Series 2005-4, Class 3A1, 5.500%, 05/25/2020 | 876,601 | 901,655 | ||||||
Series 2005-8, Class 5A1, 5.500%, 09/25/2020 | 212,579 | 218,401 | ||||||
Series 2006-2, Class 6A1, 5.500%, 03/25/2021 | 214,540 | 220,885 | ||||||
Series 2007-1, Class 1A1, 8.638%, 04/25/2022 | 722,333 | 744,624 | ||||||
Series 2005-2, Class 1CB2, 5.500%, 03/25/2035 | 2,775,871 | 2,646,268 | ||||||
Series 2006-3, Class 6A1, 6.000%, 04/25/2036 | 306,178 | 316,198 | ||||||
Series 2006-5, Class CB7, 6.000%, 06/25/2046 § | 499,210 | 410,997 | ||||||
Bank of America Mortgage Securities Inc: | ||||||||
Series 2003-L, Class 2A1, 2.867%, 01/25/2034 | 6,431,418 | 6,366,184 | ||||||
Series 2005-9, Class 1A5, 5.500%, 10/25/2035 | 118,694 | 118,133 | ||||||
Chase Mortgage Finance Corporation, | ||||||||
Series 2006-A1, Class 2A3, 2.704%, 09/25/2036 § | 682,372 | 574,111 | ||||||
Citicorp Mortgage Securities Trust, | ||||||||
Series 2007-2, Class 1A3, 6.000%, 02/25/2037 | 3,226,903 | 3,317,024 | ||||||
Citigroup Mortgage Loan Trust, Inc.: | ||||||||
Series 2005-9, Class 2A2, 5.500%, 11/25/2035 § | 205,672 | 203,941 | ||||||
Series 2005-9, Class 22A2, 6.000%, 11/25/2035 § | 285,982 | 266,619 | ||||||
Countrywide Alternative Loan Trust: | ||||||||
Series 2005-3CB, Class 2A1, 5.000%, 03/25/2020 | 3,162,713 | 3,214,265 | ||||||
Series 2005-50CB, Class 4A1, 5.000%, 11/25/2020 § | 754,910 | 747,227 | ||||||
Series 2006-7CB, Class 3A1, 5.250%, 05/25/2021 § | 785,028 | 764,950 | ||||||
Series 2006-43CB, Class 2A1, 6.000%, 02/25/2022 | 348,960 | 358,929 | ||||||
Series 2005-73CB, Class 1A7, 5.500%, 01/25/2036 § | 899,328 | 828,486 | ||||||
Series 2006-J2, Class A3, 6.000%, 04/25/2036 § | 174,724 | 156,908 | ||||||
Series 2006-28CB, Class A17, 6.000%, 10/25/2036 § | 1,044,430 | 801,704 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust, | ||||||||
Series 2005-6, Class 2A1, 5.500%, 04/25/2035 | 1,642,256 | 1,519,813 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||
Series 2005-7, Class 3A1, 5.000%, 08/25/2020 | 880,495 | 880,633 | ||||||
Deutsche ALT-A Securities Inc. Alternate Loan Trust, | ||||||||
Series 2005-3, Class 4A5, 5.250%, 06/25/2035 | 1,099,391 | 1,062,084 | ||||||
Deutsche Mortgage Securities Inc., | ||||||||
Series 2006-AR5, Class 21A, 6.000%, 10/25/2021 § | 637,732 | 551,135 | ||||||
First Horizon Alternative Mortgage Securities: | ||||||||
Series 2006-FA6, Class 3A1, 5.750%, 11/25/2021 | 337,862 | 335,206 | ||||||
Series 2006-FA8, Class 2A1, 5.750%, 02/25/2037 | 1,031,410 | 915,174 | ||||||
GSR Mortgage Loan Trust: | ||||||||
Series 2004-15F, Class 5A1, 5.500%, 01/25/2020 | 1,952,617 | 2,008,837 | ||||||
Series 2005-3F, Class 2A4, 6.000%, 03/25/2035 | 10,391,867 | 10,522,295 | ||||||
J.P. Morgan Alternative Loan Trust: | ||||||||
Series 2005-S1, Class 3A1, 5.500%, 10/25/2020 § | 2,757,643 | 2,802,173 | ||||||
Series 2006-A1, Class 2A1, 2.622%, 03/25/2036 § | 196,219 | 153,612 | ||||||
Series 2006-S3, Class A3A, 6.000%, 08/25/2036 | 239,976 | 214,575 | ||||||
J.P. Morgan Mortgage Trust: | ||||||||
Series 2006-S3, Class 2A3, 5.000%, 08/25/2021 § | 710,337 | 706,677 | ||||||
Series 2006-A7, Class 2A2, 2.530%, 01/25/2037 | 5,720,865 | 5,043,217 | ||||||
Series 2006-A7, Class 2A4R, 2.530%, 01/25/2037 § | 2,395,539 | 2,097,337 | ||||||
Series 2007-A2, Class 2A3, 2.683%, 04/25/2037 § | 11,328,054 | 9,606,360 | ||||||
Master Alternative Loans Trust: | ||||||||
Series 2004-1, Class 1A1, 5.000%, 01/25/2019 | 216,768 | 221,370 | ||||||
Series 2004-5, Class 4A1, 5.500%, 07/25/2019 | 663,065 | 695,198 | ||||||
Series 2005-3, Class 4A1, 5.500%, 03/25/2020 | 1,228,646 | 1,283,078 | ||||||
Series 2003-5, Class 6A1, 6.000%, 08/25/2033 | 81,244 | 84,027 | ||||||
Series 2004-2, Class 2A1, 6.000%, 02/25/2034 | 6,984,010 | 7,574,920 | ||||||
Series 2004-8, Class 2A1, 6.000%, 09/25/2034 | 6,070,989 | 6,069,617 | ||||||
Series 2005-6, Class 1A5, 5.500%, 12/25/2035 | 7,089,330 | 6,309,184 | ||||||
Master Asset Securitization Trust, | ||||||||
Series 2005-2, Class 1A1, 5.250%, 11/25/2035 | 61,611 | 61,437 | ||||||
Merrill Lynch Mortgage Investors Trust, | ||||||||
Series 2005-A8, Class A1C1, 5.250%, 08/25/2036 | 20,787 | 20,778 | ||||||
Residential Accredit Loans, Inc.: | ||||||||
Series 2004-QS3, Class CB, 5.000%, 03/25/2019 | 2,391,683 | 2,469,318 | ||||||
Series 2004-QS13, Class CB, 5.000%, 09/25/2019 | 2,002,521 | 2,053,629 | ||||||
Series 2004-QS5, Class A5, 4.750%, 04/25/2034 | 11,359 | 11,492 | ||||||
Series 2005-QS2, Class A1, 5.500%, 02/25/2035 | 629,625 | 608,717 | ||||||
Sequoia Mortgage Trust, | ||||||||
Series 2013-6, Class A2, 3.000%, 05/25/2043 | 19,472,698 | 17,905,614 | ||||||
Structured Asset Securities Corporation: | ||||||||
Series 2003-31A, Class 2A7, 2.450%, 10/25/2033 | 4,509,453 | 4,515,153 | ||||||
Series 2005-7XS, Class 1A4B, 5.440%, 04/25/2035 | 850,567 | 879,269 | ||||||
Washington Mutual Mortgage Pass Through Certificates: | ||||||||
Series 2004-CB1, Class 5A, 5.000%, 06/25/2019 | 102,126 | 105,251 | ||||||
Series 2004-CB2, Class 5A, 5.000%, 07/25/2019 | 90,222 | 92,582 | ||||||
Series 2004-CB2, Class 7A, 5.500%, 08/25/2019 | 194,137 | 201,173 | ||||||
Series 2004-CB3, Class 4A, 6.000%, 10/25/2019 | 56,711 | 59,479 | ||||||
Series 2004-CB4, Class 22A, 6.000%, 12/25/2019 | 290,116 | 305,281 | ||||||
Series 2004-CB3, Class 1A, 6.000%, 10/25/2034 | 11,895,311 | 12,948,926 | ||||||
Series 2004-CB3, Class 2A, 6.500%, 10/25/2034 | 8,989,298 | 9,681,699 | ||||||
Wells Fargo Alternative Loan Trust, | ||||||||
Series 2007-PA1, Class A4, 6.000%, 03/25/2037 § | 139,952 | 117,869 | ||||||
139,603,223 | 4.9% | |||||||
Asset Backed Securities | ||||||||
ACE Securities Corp Home Equity Loan Trust Series, | ||||||||
Series 2006-OP1, Class A2C, 0.315%, 04/25/2036 | 22,108,930 | 20,568,513 | ||||||
Amresco Residential Securities Mortgage Loan Trust, | ||||||||
Series 1998-2, Class A6, 6.405%, 12/25/2027 | 12,329 | 11,981 | ||||||
Banc of America Funding Trust, | ||||||||
Series 2005-C, Class A1, 0.407%, 05/20/2035 | 10,526,353 | 9,488,055 | ||||||
Bayview Financial Acquisition Trust: | ||||||||
Series 2007-A, Class 1A2, 6.205%, 05/28/2037 | 961,865 | 1,027,015 | ||||||
Series 2007-B, Class 1A2, 6.831%, 08/28/2047 | 150,000 | 125,280 | ||||||
Bear Stearns Asset Backed Securities I Trust, | ||||||||
Series 2007-HE4, Class 1A1, 0.285%, 05/25/2037 § | 7,735,437 | 7,403,316 | ||||||
Carrington Mortgage Loan Trust, | ||||||||
Series 2006-OPT1, Class A3, 0.345%, 02/25/2036 | 3,235,896 | 3,031,824 | ||||||
Citigroup Mortgage Loan Trust, Inc.: | ||||||||
Series 2006-WFH3, Class A3, 0.315%, 10/25/2036 | 3,670,740 | 3,642,483 | ||||||
Series 2007-WFH1, Class A3, 0.315%, 01/25/2037 | 9,753,515 | 9,508,097 | ||||||
Conseco Financial Corp.: | ||||||||
Series 1997-1, Class A5, 6.860%, 03/15/2028 | 4,128 | 4,207 | ||||||
Series 1997-4, Class A5, 6.880%, 02/15/2029 | 20,590 | 21,507 | ||||||
Series 1997-5, Class A6, 6.820%, 05/15/2029 | 210,424 | 215,917 | ||||||
Countrywide Asset-Backed Certificates: | ||||||||
Series 2005-1, Class AF4, 5.147%, 02/25/2033 | 1,067,475 | 1,079,954 | ||||||
Series 2004-12, Class AF6, 4.634%, 03/25/2035 | 711,058 | 725,038 | ||||||
Series 2004-15, Class AF6, 4.613%, 04/25/2035 | 649,153 | 628,607 | ||||||
Series 2005-7, Class AF6, 4.693%, 10/25/2035 | 1,849,146 | 1,840,572 | ||||||
Series 2005-11, Class AF3, 4.778%, 02/25/2036 | 1,560,477 | 1,502,223 | ||||||
Series 2005-10, Class AF6, 4.915%, 02/25/2036 | 3,985,066 | 3,854,770 | ||||||
Series 2005-13, Class AF3, 5.099%, 04/25/2036 | 1,485,952 | 1,272,317 | ||||||
Series 2006-S9, Class A3, 5.728%, 08/25/2036 | 184,831 | 177,387 | ||||||
Series 2007-S1, Class A6, 5.693%, 11/25/2036 | 108,285 | 106,062 | ||||||
Series 2006-13, Class 1AF3, 5.120%, 01/25/2037 § | 184,159 | 194,358 | ||||||
Series 2007-S2, Class A2, 5.649%, 05/25/2037 | 46,379 | 46,701 | ||||||
Series 2006-10, Class 1AF3, 5.106%, 09/25/2046 | 1,300,000 | 791,280 | ||||||
Series 2006-9, Class 1AF3, 5.859%, 10/25/2046 § | 588,134 | 397,480 | ||||||
Series 2007-4, Class A3, 5.714%, 04/25/2047 | 550,000 | 399,990 | ||||||
Series 2006-24, Class 2A2, 0.285%, 06/25/2047 | 10,812,179 | 10,689,536 | ||||||
Series 2006-25, Class 2A2, 0.285%, 06/25/2047 | 65,262 | 65,186 | ||||||
Credit Based Asset Servicing and Securitization LLC, | ||||||||
Series 2005-CB8, Class AF2, 4.416%, 12/25/2035 | 1,679,556 | 1,574,134 | ||||||
GE Capital Mortgage Services, Inc., | ||||||||
Series 1999-HE1, Class A7, 6.265%, 04/25/2029 | 2,617 | 2,604 | ||||||
Green Tree Financial Corporation: | ||||||||
Series 1993-4, Class A5, 7.050%, 01/15/2019 | 5,284 | 5,461 | ||||||
Series 1998-3, Class A5, 6.220%, 03/01/2030 | 467,381 | 497,937 | ||||||
Series 1998-4, Class A5, 6.180%, 04/01/2030 | 202,394 | 208,114 | ||||||
Home Equity Asset Trust, | ||||||||
Series 2006-4, Class 2A3, 0.335%, 08/25/2036 | 1,369,477 | 1,336,410 | ||||||
J.P. Morgan Mortgage Acquisition Corp: | ||||||||
Series 2007-CH4, Class A2, 0.225%, 12/25/2029 | 1,651,745 | 1,644,575 | ||||||
Series 2007-CH1, Class AV5, 0.405%, 11/25/2036 | 10,000,000 | 9,151,270 | ||||||
Series 2007-CH3, Class A3, 0.315%, 03/25/2037 | 2,562,298 | 2,437,893 | ||||||
Long Beach Mortgage Loan Trust, | ||||||||
Series 2006-WL2, Class 2A3, 0.365%, 01/25/2036 | 3,448,816 | 3,145,072 | ||||||
Morgan Stanley ABS Capital I, | ||||||||
Series 2006-HE1, Class A3, 0.345%, 01/25/2036 | 7,093,570 | 6,987,748 | ||||||
Morgan Stanley Home Equity Loan Trust, | ||||||||
Series 2006-2, Class A3, 0.335%, 02/25/2036 | 11,734,747 | 11,491,967 | ||||||
Nationstar Home Equity Loan Trust, | ||||||||
Series 2006-B, Class AV3, 0.335%, 09/25/2036 | 6,497,595 | 6,326,650 | ||||||
Oakwood Mortgage Investors, Inc., | ||||||||
Series 1999-B, Class A3, 6.450%, 11/15/2017 | 29,073 | 30,348 | ||||||
Option One Mortgage Loan Trust, | ||||||||
Series 2005-4, Class A3, 0.425%, 11/25/2035 | 702,049 | 688,968 | ||||||
Renaissance Home Equity Loan Trust: | ||||||||
Series 2005-1, Class AF6, 4.970%, 05/25/2035 | 158,025 | 153,552 | ||||||
Series 2006-2, Class AF3, 5.797%, 08/25/2036 | 1,419,000 | 880,675 | ||||||
Series 2006-3, Class AF2, 5.580%, 11/25/2036 | 1,312,584 | 797,618 | ||||||
Series 2007-1, Class AF2, 5.512%, 04/25/2037 | 490,118 | 252,321 | ||||||
Series 2007-1, Class AF3, 5.612%, 04/25/2037 | 294,071 | 154,123 | ||||||
Series 2007-2, Class AF2, 5.675%, 06/25/2037 | 1,485,954 | 786,666 | ||||||
Residential Asset Mortgage Products, Inc.: | ||||||||
Series 2003-RS10, Class A17, 4.850%, 11/25/2033 | 51,966 | 52,276 | ||||||
Series 2004-RS4, Class AI6, 5.072%, 04/25/2034 | 2,768,167 | 2,835,926 | ||||||
Residential Asset Securities Corporation: | ||||||||
Series 2003-KS5, Class AI6, 3.620%, 07/25/2033 | 70,375 | 67,315 | ||||||
Series 2003-KS9, Class AI6, 4.710%, 11/25/2033 | 110,578 | 106,480 | ||||||
Series 2006-EMX8, Class 1A2, 0.285%, 10/25/2036 | 33,165 | 33,062 | ||||||
Soundview Home Equity Loan Trust, | ||||||||
Series 2005-OPT4, Class 2A3, 0.425%, 12/25/2035 | 16,089,682 | 15,494,203 | ||||||
Specialty Underwriting & Residential Finance Trust, | ||||||||
Series 2004-BC4, Class A1A, 0.835%, 10/25/2035 | 5,695,589 | 5,538,333 | ||||||
Springleaf Mortgage Loan Trust, | ||||||||
Series 2012-2A, Class A, 2.220%, 10/25/2057 (Acquired 07/31/2012, Cost $4,034,938) * | 4,035,395 | 4,110,958 | ||||||
155,612,315 | 5.5% | |||||||
Commercial Mortgage-Backed Securities | ||||||||
CD Commercial Mortgage Trust, | ||||||||
Series 2005-CD1, Class A4, 5.218%, 07/15/2044 | 17,426,219 | 18,476,410 | ||||||
COMM Mortgage Trust: | ||||||||
Series 2005-C6, Class A5A, 5.116%, 06/10/2044 | 5,987,000 | 6,296,205 | ||||||
Series 2012-CR1, Class A3, 3.391%, 05/15/2045 | 25,842,000 | 25,459,099 | ||||||
Series 2012-CR2, Class A4, 3.147%, 08/15/2045 | 25,180,000 | 24,317,056 | ||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||
Series 2005-C5, Class A4, 5.100%, 08/15/2038 | 10,650,000 | 11,180,008 | ||||||
GE Capital Commercial Mortgage Corporation: | ||||||||
Series 2004-C3, Class A4, 5.189%, 07/10/2039 | 1,621,120 | 1,643,084 | ||||||
Series 2005-C4, Class A4, 5.310%, 11/10/2045 | 12,795,000 | 13,598,398 | ||||||
GMAC Commercial Mortgage Securities, Inc., | ||||||||
Series 2004-C2, Class A4, 5.301%, 08/10/2038 | 6,659,685 | 6,725,470 | ||||||
J.P. Morgan Chase Commercial Mortgage Trust: | ||||||||
Series 2005-CB12, Class A4, 4.895%, 09/12/2037 | 17,525,000 | 18,353,284 | ||||||
Series 2013-LC11, Class A5, 2.960%, 04/15/2046 | 12,075,000 | 11,296,295 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust, | ||||||||
Series 2012-C6, Class A4, 2.858%, 11/15/2045 | 25,410,000 | 23,894,268 | ||||||
Morgan Stanley Capital I Trust, | ||||||||
Series 2005-HQ7, Class A4, 5.207%, 11/14/2042 | 19,785,000 | 20,808,953 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
Series 2005-C22, Class A4, 5.289%, 12/15/2044 | 8,000,000 | 8,516,008 | ||||||
WF-RBS Commercial Mortgage Trust, | ||||||||
Series 2012-C6, Class A4, 3.440%, 04/15/2045 | 14,000,000 | 13,949,516 | ||||||
204,514,054 | 7.2% | |||||||
Total Long-Term Investments (Cost $2,820,650,207) | 2,792,915,781 | 98.6% | ||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS | ||||||||
Money Market Mutual Fund | ||||||||
Short-Term Investments Trust - Liquid Assets Portfolio, 0.07% « | 31,161,267 | 31,161,267 | ||||||
Total Short-Term Investments (Cost $31,161,267) | 31,161,267 | 1.1% | ||||||
INVESTMENTS PURCHASED WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING | ||||||||
Investment Companies | ||||||||
Mount Vernon Securities Lending Trust Prime Portfolio, 0.19% « | 242,165,078 | 242,165,078 | ||||||
Total Investment Companies (Cost $242,165,078) | 242,165,078 | 8.5% | ||||||
Total Investments Purchased With Cash Proceeds From | ||||||||
Securities Lending (Cost $242,165,078) | 242,165,078 | 8.5% | ||||||
Total Investments (Cost $3,093,976,552) | 3,066,242,126 | 108.2% | ||||||
Liabilities in Excess of Other Assets | (232,427,823) | (8.2)% | ||||||
TOTAL NET ASSETS | $ | 2,833,814,303 | 100.0% | |||||
Notes to Schedule of Investments | ||||||||
* | Restricted Security Deemed Liquid | |||||||
@ | This security or portion of this security is out on loan at December 31, 2013. | |||||||
f | Foreign Security | |||||||
^ | Non-Income Producing | |||||||
« | 7-Day Yield | |||||||
§ | Security in Default |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Board of Directors and Shareholders
Baird Funds, Inc.
We have audited the financial statements of Baird Funds, Inc. (including the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Core Plus Bond Fund, Baird Short-Term Bond Fund, Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Value Fund) (the “Funds”) as of December 31, 2013, and for the year then ended and have issued our unqualified report thereon dated February 27, 2014 (which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our audits included an audit of Baird Funds, Inc.’s schedules of investments in securities (the “Schedules”) as of December 31, 2013 appearing in Item 6 of this Form N-CSR. These Schedules are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Schedules based on our audits.
In our opinion, the Schedules referred to above, when read in conjunction with the financial statements of the Funds referred to above, present fairly, in all material respects, the information set forth therein.
/s/ GRANT THORNTON LLP
Chicago, Illinois
March 10, 2014
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 have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Code of ethics. |
(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 10, 2014
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 10, 2014
By: /s/Dominick Zarcone
Dominick Zarcone, Treasurer
Date: March 10, 2014