William Blair Growth N NCSRS Certified semi-annual shareholder report (management investment company)

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 811-5344

William Blair Funds

(Exact name of registrant as specified in charter)


222 West Adams Street, Chicago, IL		60606
(Address of principal executive offices)		(Zip Code)

Michelle R. Seitz

William Blair Funds

222 West Adams Street, Chicago, IL 60606

(Name and address of agent for service)

Registrant’s telephone number, including area code: 312-236-1600

Date of fiscal year end: December 31

Date of reporting period: June 30, 2007

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A Registrant is not required to respond to the collection of information contained in Form N-CSR unless the form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimates and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. (ss) 3507.

Item 1.

Reports

June 30, 2007 Semi-Annual Reports transmitted to shareholders.

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Table of Contents


Growth Fund
An Overview from the Portfolio Managers		4
Portfolio of Investments		7

Tax-Managed Growth Fund
An Overview from the Portfolio Managers		8
Portfolio of Investments		12

Large Cap Growth Fund
An Overview from the Portfolio Managers		13
Portfolio of Investments		16

Small Cap Growth Fund
An Overview from the Portfolio Managers		17
Portfolio of Investments		20

Mid Cap Growth Fund
An Overview from the Portfolio Managers		22
Portfolio of Investments		25

Small-Mid Cap Growth Fund
An Overview from the Portfolio Managers		26
Portfolio of Investments		29

International Markets Overview		30

International Growth Fund
An Overview from the Portfolio Manager		31
Portfolio of Investments		34

International Equity Fund
An Overview from the Portfolio Manager		38
Portfolio of Investments		41

International Small Cap Growth Fund
An Overview from the Portfolio Manager		44
Portfolio of Investments		47

Emerging Markets Growth Fund
An Overview from the Portfolio Managers		50
Portfolio of Investments		53

Value Discovery Fund
An Overview from the Portfolio Managers		56
Portfolio of Investments		59

Bond Fund
An Overview from the Portfolio Managers		60
Portfolio of Investments		63

Income Fund
An Overview from the Portfolio Managers		65
Portfolio of Investments		68

Ready Reserves Fund
An Overview from the Portfolio Managers		71
Portfolio of Investments		74

Financial Statements		76

Notes to Financial Statements		88

Board of Trustees and Officers		115

Fund Expenses		124

This report is submitted for the general information of the shareholders of the William Blair Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by a prospectus of the William Blair Funds. Please carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money.

June 30, 2007

William Blair Funds 1

PERFORMANCE AS OF JUNE 30, 2007—CLASS N SHARES (unaudited)


	Year to Date	1 Yr.	3 Yr.	5 Yr.	10 Yr. (or since inception)	Inception Date	Overall Morningstar Rating

Growth Fund	7.88	18.45	12.66	9.06	5.71	3/20/1946	«««
Morningstar Large Growth	8.13	17.17	9.27	8.96	5.47		Among 1,426
Russell 3000^® Growth	8.22	18.84	8.97	9.58	4.42		large growth funds
Standard & Poor’s 500	6.96	20.59	11.68	10.71	7.13

Tax-Managed Growth Fund							«««
Return before Taxes	7.40	14.52	11.40	9.02	2.16	12/27/1999	Among 1,426
After Taxes on Distributions	7.40	14.52	11.40	9.02	2.16		large growth funds
After Taxes on distributions and Sale of
Fund Shares	4.81	9.44	9.83	7.85	1.86
Morningstar Large Growth	8.13	17.17	9.27	8.96	—
Russell 3000^® Growth	8.22	18.84	8.97	9.58	-3.09

Large Cap Growth Fund	5.81	13.57	7.38	6.08	-4.13	12/27/1999	««
Morningstar Large Growth	8.13	17.17	9.27	8.96	—		Among 1,426
Russell 1000^® Growth	8.13	19.04	8.70	9.28	-3.48		large growth funds

Small Cap Growth Fund	8.97	17.49	12.80	17.52	18.88	12/27/1999	««« «
Morningstar Small Growth	10.49	16.28	11.54	12.08	—		Among 645
Russell 2000^® Growth	9.33	16.83	11.76	13.08	1.66		small growth funds
Russell 2000^®	6.45	16.43	13.45	13.88	8.83
The Small Cap Growth Fund’s Performance during 2000 was primarily attributable to investments in initial public offerings (IPOs) during a rising market. Since then, IPOs have had an insignificant effect on the Fund’s performance.

Mid Cap Growth Fund	12.91	18.46	—	—	12.51	2/1/2006	Not rated.
Russell Mid Cap Growth^®	10.97	19.73	—	—	10.89

Small-Mid Cap Growth Fund	13.27	18.23	13.40	—	13.31	12/29/2003	«««
Morningstar Mid-Cap Growth	12.33	19.00	13.26	—	—		Among 814
Russell 2500™ Growth	11.30	19.03	13.60	—	13.06		mid cap growth funds

International Growth Fund	11.66	29.69	24.37	18.80	14.55	10/1/1992	«««««
Morningstar Foreign Large Growth	10.65	27.19	21.09	15.80	7.02		Among 183
MSCI All Country World Ex-US	12.58	30.15	25.03	19.93	8.58		foreign large growth funds

International Equity Fund	9.47	25.47	16.94	—	18.34	5/24/2004	«
Morningstar Foreign Large Growth	10.65	27.19	21.09	—	—		Among 183
MSCI All Country World Ex-US	12.58	30.15	25.03	—	25.95		foreign large growth funds

International Small Cap Growth Fund	14.36	26.81	—	—	29.38	11/1/2005	Not rated.
Morningstar Foreign Small/Mid Growth	14.91	32.70	—	—	—
MSCI World Small Cap ex-US	13.06	26.54	—	—	27.54

Please see the next page for important disclosure information.

See accompanying Notes to Financial Statements.

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June 30, 2007

PERFORMANCE AS OF JUNE 30, 2007—CLASS N SHARES—CONTINUED (unaudited)


	Year to Date	1 Yr.	3 Yr.	5 Yr.	10 Yr. (or since inception)	Inception Date	Overall Morningstar Rating


Emerging Markets Growth Fund	16.53	51.80	—	—	49.14	6/6/2005	Not rated.
Morningstar Diversified Emerging Markets	17.73	45.91	—	—	—
MSCI Emerging Markets	17.75	45.45	—	—	40.31

A portion of the Emerging Markets Growth Fund’s performance since inception is attributable to an investment in an initial public offering. (IPO)

Value Discovery Fund	6.45	19.41	11.52	10.11	12.52	12/23/1996	««
Morningstar Small Value	7.07	16.39	13.83	14.11	11.46		Among 305 small value funds
Russell 2000^®	6.45	16.43	13.45	13.88	9.06		Among 305 small value funds
Russell 2000^® Value	3.80	16.05	15.02	14.62	12.14

Bond Fund	—	—	—	—	-1.15	5/1/2007	Not rated.
Morningstar Short-term Bond	—	—	—	—	—
Lehman Aggregate Bond Index	—	—	—	—	-1.00

Income Fund	0.45	4.48	3.16	3.46	4.96	10/1/1990	««««
Morningstar Short-term Bond	1.72	4.96	2.90	3.05	4.47		Among 364 short-term bond funds
Lehman Intermediate Govt./Credit Bond Index	1.45	5.76	3.41	4.14	5.66		Among 364 short-term bond funds

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Returns shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or a loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. International and emerging markets investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. As interest rates rise, bond prices will fall and bond funds become more volatile. From time to time, the investment advisor may waive fees or reimburse expenses for certain Funds. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load.

Tax-Managed Growth Fund’s after-tax returns are calculated using the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class N and the after-tax returns for Class N shares will vary.

Morningstar Ratings^TMare as of 6/30/07 and are subject to change every month. The ratings are based on a risk-adjusted return measure that accounts for variation in a fund’s monthly performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each Category receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. The 3/5/10 year Morningstar ratings were as follows: Growth Fund ««««/«««/« ««, Tax-Managed Growth Fund ««««/«««/NA, and Large Cap Growth Fund «««/« «/NA, out of 1,426/1,151/471 large growth funds; Small Cap Growth Fund «««/ «««««/NA out of 645/533/NA small growth funds; Small-Mid Cap Growth Fund «««/NA/NA out of 814/NA/NA mid cap growth funds; Value Discovery Fund ««/«/««« out of 305/239/76 small value funds; International Growth Fund ««««/««««/««««« and International Equity Fund «/NA/NA out of 183/155/60 foreign large growth funds; Income Fund «««/ ««««/«««« out of 304/261/158 short-term bond funds.

Please carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money.

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 3

LOGO

David C. Fording

LOGO

John F. Jostrand

GROWTH FUND

The Growth Fund invests primarily in common stocks of domestic growth companies that the Advisor expects to have sustainable, above-average growth from one business cycle to the next.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Growth Fund posted a 7.88% increase on a total return basis (Class N Shares) for the six month period ended June 30, 2007. By comparison, the Fund’s benchmark, the Russell 3000^® Growth Index, posted a gain of 8.22% during the same period.

What were the most significant factors impacting Fund performance?

For the first six months of 2007, domestic equity markets experienced strong gains across the board. As measured by the Russell indices, Midcap growth stocks led the charge, appreciating over 10% during the period. Small Caps and Large Caps trailed behind, respectively, but still posted strong results during the period. Growth overtook value as style leader when the Federal Reserve paused with its interest rate hikes in August of 2006, and the lead was extended in the latter half of the year-to-date period.

There were several noteworthy trends that affected performance, many of which were more prevalent during the last months of the second quarter, which drove most of the performance of the entire period. The credit concerns that arose with respect to subprime lending in February re-emerged later in the period, putting significant pressure on financial stocks, particularly REITs and smaller capitalization banks. Second, although U.S. earnings growth is moderating, growth rates for international companies remains strong. In the first quarter of 2007, stocks with larger non-US exposure experienced twice as much year-over-year earnings growth relative to companies with less significant portions of non-US revenues. Generally speaking, most of these companies, with larger non-U.S. exposure, are ones with larger market capitalizations. Third, liquidity in the market continues to be significant, fueling continued merger and acquisition activity as well as sizeable share-buy backs. The impact of these “liquidity events” is causing price appreciation among primary and ancillary stocks that are moving on speculation that they may be a next candidate. Lastly, higher quality stocks (as measured by S&P quality ratings) continue to under-perform. Typically, higher quality stocks begin to out-perform in periods when earnings growth slows. Although earnings growth has slowed significantly over the last several quarters, overall growth is still at elevated levels compared to historical trends. Investors may not pursue higher quality stocks until earnings growth slows significantly below double-digit levels.

On the positive side, our portfolio does not have any exposure to REITs or banks, and our financial stocks performed well during the period. Conversely, due to our high quality philosophy, our stocks did not benefit significantly from some of these trends. Although larger capitalization stocks generally fared well during the period, ours were not quite as strong. But our stock selection among the smallest cap stocks overcame slight weakness in the other capitalization buckets.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

In the first half of 2007, the portfolio benefited the most from stock selection in Information Technology. WebEx Communications Inc. experienced strong price appreciation early in the quarter when the company reported continued robust growth in sales as well as improving margins for its on-line collaboration tools. Toward the end of the period, the company reached an agreement to be acquired by Cisco Systems, causing the stock price to climb

4 Semi-Annual Report

June 30, 2007

further. The performance of this stock in particular caused our smallest capitalization sector to have the greatest impact on relative returns. Similarly, j2 Global Communications, Inc., appreciated significantly during the period. The company provides outsourced, value-added messaging and communications services to individuals and businesses. During the last quarter, j2 Global Communications implemented a significant price increase to eFax customers, which is progressing on schedule. In addition, the company has multiple growth initiatives: international growth, expansion of voice services and faster adoption of digital fax services by large enterprises.

Stocks in the Energy sector were also strong contributors during the period, with Smith International Inc. being one of the top performers in the broad portfolio. During May, the company reported an excellent quarter and announced upbeat guidance. Consumer Discretionary placed third in terms of relative contribution for the six months. In January, Laureate Education announced a management-led buyout at a premium to the level at which the stock was trading, which was the basis for significant stock appreciation. Auto components and HVAC systems producer Johnson Controls experienced strong price appreciation as investors began to revalue the underlying earnings power of the company.

Were there any investment strategies or themes that did not measure up to your expectations?

Industrials were the largest detractor from relative performance, due in part to extremely strong performance by Russell 3000^® Growth stocks in this sector. Corporate Executive Board stock fell during the period, mainly due to disappointing guidance for 2007 results and concerns about current and future subscriber rates. During February, Danaher Corp. reported an in-line quarter which disappointed overly enthusiastic investors. Following strong price appreciation in 2006, the stock was likely due for a pause to consolidate its recent gains.

Health Care stocks in the portfolio were also relatively weak during the period. Both Amgen Inc. and Genentech Inc. in the biotechnology area suffered, although for different reasons. Amgen has had a significant overhang around its Aranesp franchise, and recent studies show that prospects for its pipeline products are likely less robust than originally thought. As a result the Fund liquidated its position in this holding. For Genentech, although there are some concerns about the growth rate of its core Avastin product, the pipeline is promising and the market, in our view, has overly discounted growth prospects for the company. ResMed, Inc., which manufactures and distributes medical equipment, primarily for treating, diagnosing and managing sleep-disordered breathing, had a significant setback in April as the company initiated a recall of its S8 flow generator product. Although a third party was hired to handle the bulk of this job, we believe that the company’s sales representatives spent more time than expected handling customer issues related to the recall, which led to lost selling time. As a result, investors have lowered revenue and earnings projections for the current quarter, which has negatively affected the stock price.

Although Technology stocks overall contributed to performance, it was in fact a tale of two sides; there were several stocks in this sector that offered disappointing results. Network Appliance Inc. announced weak guidance for the coming quarter as a result of a bookings slowdown. Investors have placed premium valuation on the growth of this company, and the stock has recently struggled to meet expectations. Cognizant Technology Solutions Corp., an offshore provider of application development and management services, modestly raised its utilization rates which in turned reduced its year-end hiring goal. Investors interpreted this lower hiring goal as a sign of decreased demand, although we believe that demand remains solid and that there were other, less concerning factors at play.

What is your current strategy? How is the Fund Positioned?

June 30, 2007

William Blair Funds 5

Growth Fund

Performance Highlights (unaudited)

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Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		10 Year		Since Inception
Growth Fund Class N	7.88	%	18.45	%	12.66	%	9.06	%	5.71	%	—	%
Growth Fund Class I	8.15		18.83		12.98		9.34		—		3.18
Russell 3000^® Growth Index	8.22		18.84		8.97		9.58		4.42		(.20	)(a)
S&P 500 Index	6.96		20.59		11.68		10.71		7.13		3.72	(a)

(a)

For the period from October 1, 1999 to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 3000^® Growth Index consists of large, medium, and small capitalization companies with above average price-to-book ratios and forecasted growth rates. The index is weighted by market capitalization and large/medium/small companies make up approximately 80%/15%/5% of the index.

The S&P 500 Index indicates broad larger capitalization equity market performance.

This report identifies the Fund’s investments on June 30, 2007. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

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June 30, 2007

Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks*
Information Technology—30.6%
*Activision, Inc.	297,365	$	5,552
*Adobe Systems Incorporated	164,385		6,600
Arm Holding plc—ADR	501,615		4,389
*Cognizant Technology Solutions Corporation	86,105		6,466
*EMC Corporation	346,385		6,270
*Euronet Worldwide, Inc.	141,655		4,131
*FLIR Systems, Inc.	105,205		4,866
*j2 Global Communications, Inc.	234,870		8,197
*Network Appliance, Inc.	205,250		5,993
*Nuance Communications, Inc.	233,900		3,913
Paychex, Inc.	218,050		8,530
Qualcomm Incorporated	155,695		6,756
*Silicon Laboratories Inc.	113,950		3,944
Taiwan Semiconductor Mfg. Co. Ltd.—ADR	678,751		7,555
*Verisign Inc.	111,450		3,536
*Vistaprint Limited	121,528		4,648
*Yahoo!, Inc.	242,235		6,572

			97,918

Health Care—18.2%
C.R. Bard, Inc.	71,975		5,947
*Genentech, Inc.	102,740		7,773
*Gilead Sciences, Inc.	224,030		8,686
*Healthways, Inc.	136,595		6,470
*Integra Lifesciences Holding Corporation	100,745		4,979
*Kyphon, Inc.	132,760		6,392
Medtronic, Inc.	111,335		5,774
Pharmaceutical Product Development Inc.	203,955		7,805
ResMed, Inc.	104,740		4,322

			58,148

Industrials & Services—14.3%
Danaher Corporation	171,546		12,952
Fastenal Company	185,525		7,766
Graco, Inc.	115,190		4,640
*InnerWorkings, Inc.	270,540		4,334
Knight Transportation, Inc.	183,530		3,557
Rockwell Automation, Inc.	67,285		4,672
Rockwell Collins, Inc.	109,785		7,755

			45,676

Consumer Discretionary—10.2%
*Coinstar, Inc.	170,730		5,375
Johnson Controls, Inc.	72,917		8,442
*McCormick & Schmick’s Seafood Restaurants, Inc.	126,105		3,271
Staples, Inc.	293,315		6,960
*Starbucks Corporation	151,240		3,968
*Tractor Supply Company	89,235		4,645

			32,661

*Non-income producing securities

ADR = American Depository Receipt

† = U.S. listed foreign security

VRN = Variable Rate Note


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Staples—8.3%
PepsiCo, Inc.		243,530	$	15,793
Wal Mart De Mexico—ADR		126,225		4,752
Walgreen Co.		139,960		6,094

				26,639

Financials—6.9%
Charles Schwab & Co., Inc.		369,990		7,592
Goldman Sachs Group, Inc.		44,150		9,570
*IntercontinentalExchange Inc.		33,580		4,965

				22,127

Energy—5.0%
Smith International, Inc.		157,695		9,247
Suncor Energy, Inc.†		73,035		6,567

				15,814

Materials—3.3%
Praxair, Inc.		145,130		10,448

Total Common Stock—96.8% (cost $240,951)				309,431


*Investment in Affiliate*
William Blair Ready Reserves Fund		2,634,785		2,635

Total Investment in Affiliate—0.8% (cost $2,635)				2,635


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 07/02/07	$	4,330,000		4,330

Total Short-Term Investment—1.4% (cost $4,330)				4,330


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/02/2007, repurchase price $4,204, collateralized by SBA Pool # 506131	$	4,202,129		4,202

Total Repurchase Agreement—1.3% (cost $4,202)				4,202

Total Investments—100.3% (cost $252,118)				320,598
Liabilities, plus cash and other assets—(0.3)%				(1,051	)

Net assets—100.0%			$	319,547

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 7

LOGO

Mark A. Fuller III

LOGO

Gregory J. Pusinelli

TAX-MANAGED GROWTH FUND

The Tax-Managed Growth Fund invests primarily in common stocks of large, medium and small domestic growth companies that the Advisor expects will have sustainable, above-average growth from one business cycle to the next.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Tax-Managed Growth Fund posted a 7.40% gain on a total return basis (Class N Shares) for the six-months ended June 30, 2007. By comparison, the Fund’s benchmark, the Russell 3000^® Growth Index rose 8.22% while the Standard & Poor’s 500 Stock Index increased 6.96%.

What were the most significant market factors impacting Fund performance?

Although the year started off on a positive note, investors awakened the morning of February 27th to learn that many Asian markets had plummeted overnight, an amounts as great as 9%. This precipitated a decline in global stock markets as markets around the world opened, finally culminating in a sharp slide in U.S. equity prices. Weakness in the U.S. markets was exacerbated by concerns over a series of bankruptcies by issuers of sub-prime mortgage loans. Equity prices finally staged a rally in the final weeks of the first quarter to bring prices off their lows.

Following a relatively flat first quarter, and in spite of some setbacks along the way, the stock market forged ahead in the second quarter to a strong mid-year finish.

Facing strong headwinds from rising interest rates, a slump in housing prices and rising energy prices, the Standard & Poor’s 500-Stock Index set a record high in late May and gained 6.28% in the second quarter.

Boosting the market’s performance was a strong flow of private equity acquisitions, a pickup in manufacturing activity and signs that inflation has moderated.

Our stock selection in the Financials and Consumer Discretionary sectors contributed to the Fund’s strong performance in the first half of the year. On the other hand, the Information Technology (IT) and Health Care sectors were a drag on Fund performance.

What were among the best performing investments for the Fund?

All three of our top-performing investments were involved in acquisitions, which we believe lends credibility to our quality growth philosophy of investing in high quality companies with strong management and durable business franchises.

The best-performing investment, in terms of contribution to the Fund’s return, was Investors Financial Services Company. State Street Bank and Trust Company announced in February it had reached a definitive agreement to acquire Investors Financial Services Company. Investors Financial was up 46.9% for the Fund.

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June 30, 2007

MedImmune was the second-best performing investment for the Fund, in terms of contribution, up 75.5%. In late April, European drug manufacturer AstraZeneca announced it had entered into a definitive agreement to acquire MedImmune.

The third best-performing investment in terms of contribution to the Fund’s return was WebEx Communications. Cisco Systems announced it would be acquiring WebEx Communications during the first quarter, and WebEx was up 63.1% for the Fund.

What were among the weakest performing investments for the Fund?

The three worst-performing investments, in terms of contribution to return were Network Appliance, Resmed and Santarus.

Network Appliance sells hardware, software, and services for customers to store and manage critical data across their networks. Although Network Appliance’s fourth quarter earnings figures were in line with expectations, the company lowered guidance on earnings for the first quarter. The company experienced weak sales in March and said that many of its customers had put off making capital expenditures until the second quarter. Although April sales rebounded, Network Appliance was down 25.7% for the Fund.

ResMed, Inc., whose major focus is solutions for sleep-disordered breathing, missed its earnings estimates during the first quarter. A rival competitor launched a new product during the period and flooded the market with free product offers. ResMed, which was down 16.2% was a fairly large holding for the Fund, at 2.59%, and was the second worst performer in terms of contribution to return.

Santarus, a pharmaceutical company that makes less expensive versions of drugs made by large cap drug companies to treat gastrointestinal diseases and disorders, was down 34.0% for the Fund. Santarus missed its quarterly earnings due to lower revenues during the March-April period.

What is your current strategy? How is the Fund positioned?

We believe that in the months ahead growth in overseas economies will outpace that of the U.S. One of our current investment themes is to search for companies with a global “footprint,” that do a considerable amount of business outside the U.S. In particular, we are looking at industrial-oriented companies that are well positioned to capitalize on growth in the global economy.

Johnson Controls is a company that epitomizes this investment theme. Johnson Controls operates three distinct business segments: automotive interiors, vehicle batteries, and building controls and services. We chose this well-managed company in part to increase our exposure to the Industrial sector. The company’s interiors segment has experienced strong demand for its products in emerging markets countries.

Starbucks, a recent addition to the Fund’s portfolio, meets the profile of a company with a strong global brand. The company shows potential for good profit growth with a significant “runway” for further growth internationally, in spite of a somewhat slower rate of expansion in the U.S.

Another new addition to the Fund��s portfolio of investments was Allergan, a company we have owned before, and were able to purchase at what we believe was an attractive share price point. Allergan is one of the largest specialty pharmaceutical firms in the world and the maker of Botox. Roughly half of the company’s sales come from its eye care pharmaceutical

June 30, 2007

William Blair Funds 9

division, but last year the company acquired Inamed, and increased its exposure to the cosmetic surgical market, as it now sells breast implants, dermal fillers, and products to treat obesity.

Silicon Laboratories, a designer of integrated circuits and semiconductor chips used in various markets such as communications, industrial, consumer, medical, and power management, was also added to the Fund.

We continue to be selective investors in the Consumer Discretionary sector. The slump in the housing sector and recent problems in the sub-prime lending market are negative factors overhanging the market, and could eventually impact consumer spending.

We believe the environment remains favorable for corporate profit growth in 2007. And we are encouraged by the earnings growth potential of the companies in the Fund’s portfolio, despite what we expect to be a year of tempered economic growth. In such an environment, security selection becomes even more important. We think our high quality growth approach paid off during the first half of the year, and we believe our focus on quality franchise businesses and respect for downside risk is the appropriate time-tested approach as the year progresses.

10 Semi-Annual Report

June 30, 2007

Tax-Managed Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Tax-Managed Growth Fund Class N	7.40	%	14.52	%	11.40	%	9.02	%	2.16	%
Tax-Managed Growth Fund Class I	7.53		14.85		11.67		9.32		2.44
Russell 3000^® Growth Index	8.22		18.84		8.97		9.58		(3.09	)
S&P 500 Index	6.96		20.59		11.68		10.71		2.06

(a)

For the period from December 27, 1999 to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 3000^® Growth Index consists of large, medium, and small-capitalization companies with above average price-to-book ratios and forecasted growth rates. The index is weighted by market capitalization and large/medium/small companies make up approximately 80%/15%/5% of the index.

The S&P 500 Index indicates broad larger capitalization equity market performance.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 11

Tax-Managed Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks*
Information Technology—27.3%
*Activision, Inc.	8,453	$	158
*Adobe Systems Incorporated	6,160		247
*Alliance Data Systems Corporation	1,610		124
Arm Holdings plc—ADR	11,960		105
*Electronic Arts Inc.	2,950		140
*EMC Corporation	14,140		256
*Euronet Worldwide, Inc.	3,770		110
*F5 Networks, Inc.	2,580		208
Jabil Circuit Inc.	12,590		278
Microchip Technology Incorporated	5,250		194
*Network Appliance, Inc.	5,650		165
Paychex, Inc.	5,950		233
Qualcomm Incorporated	5,100		221
*Silicon Laboratories Inc.	3,300		114
Taiwan Semiconductor Mfg. Co. Ltd.—ADR	10,719		119
*Yahoo!, Inc.	6,450		175

			2,847

Health Care—22.8%
Allergan Inc.	2,600		150
C.R.Bard, Inc.	1,710		141
*Genzyme Corporation	1,500		97
*Gilead Sciences, Inc.	3,080		119
*Healthways, Inc.	5,710		271
IMS Health, Inc.	8,820		283
*Kyphon, Inc.	2,740		132
Medtronic, Inc.	2,730		142
Pharmaceutical Product Development, Inc.	5,970		228
*Psychiatric Solutions, Inc.	4,820		175
*ResMed, Inc.	5,534		228
*Santarus, Inc.	36,800		190
Stryker Corporation	3,600		227

			2,383

Industrials—12.1%
Danaher Corporation	3,810		288
Fastenal Company	6,350		266
General Electric Company	6,985		267
Knight Transportation, Inc.	7,832		152
Rockwell Collins, Inc.	4,110		290

			1,263

Consumer Staples—8.6%
Colgate-Palmolive Company	3,020		196
CVS/Caremark Corporation	3,774		138
PepsiCo, Inc.	4,595		298
Wal Mart De Mexico—ADR	3,810		143
Walgreen Co.	2,975		130

			905

*Non-income producing securities

ADR = American Depository Receipt

† = U.S. listed foreign security

VRN = Variable Rate Note


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Discretionary—8.5%
*CarMax, Inc.		6,840	$	174
International Game Technology		3,800		151
Johnson Controls, Inc.		1,890		219
McGraw-Hill Companies, Inc.		1,460		99
*Starbucks Corporation		5,190		136
*Tractor Supply Company		2,030		106

				885

Financials—6.3%
*Affiliated Managers Group, Inc.		1,040		134
American International Group		2,780		195
*IntercontinentalExchange, Inc.		930		138
Moody’s Corporation		3,060		190

				657

Energy—5.6%
Smith International, Inc.		4,360		256
Suncor Energy, Inc.†		3,630		326

				582

Materials—5.5%
Airgas, Inc.		4,870		233
Praxair, Inc.		4,750		342

				575

Total Common Stock—96.7% (cost $7,816)				10,097


*Investment in Affiliate*
William Blair Ready Reserves Fund		6,413		6

Total Investment in Affiliate—0.1% (cost $6)				6


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07	$	210,000		210

Total Short-Term Investment—2.0% (cost $210)				210


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $141, collateralized by SBA Pool # 505283	$	140,850		141

Total Repurchase Agreement—1.3% (cost $141)				141

Total Investments—100.1% (cost $8,173)				10,454
Liabilities, plus cash and other assets—( 0.1)%				(12	)

Net assets—100.0%			$	10,442

See accompanying Notes to Financial Statements.

12 Semi-Annual Report

June 30, 2007

LOGO

James S. Golan

LOGO

John F. Jostrand

LARGE CAP GROWTH FUND

The Large Cap Growth Fund invests primarily in common stocks of large domestic growth companies of high quality that the Advisor believes have demonstrated sustained growth over a long period of time.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Large Cap Growth Fund posted a 5.81% increase on a total return basis (Class N Shares) for the six-month period ended June 30, 2007. During the same period, the Fund’s benchmark, the Russell 1000 Growth^® Index, gained 8.13%.

What were the most significant factors impacting Fund performance?

For the first six months of 2007, domestic equity markets experienced strong gains across the board. As measured by the Russell indices, Midcap growth stocks led the charge, appreciating over 10% during the period. Small Caps and Large Caps trailed behind, respectively, but still posted strong results during the period. Growth overtook value as style leader when the Federal Reserve paused its interest rate hikes in August of 2006, and the lead was extended in the latter half of the year-to-date period.

There were several noteworthy trends that affected performance, many of which were more prevalent during the last months of the second quarter, which drove most of the performance of the entire period. The credit concerns that arose with respect to sub-prime lending in February re-emerged later in the period, putting significant pressure on financial stocks, particularly REITs and smaller capitalization banks. Second, although U.S. earnings growth is moderating, growth rates for international companies remain strong. In the first quarter of 2007, stocks with larger non-US exposure experienced twice as much year-over-year earnings growth relative to companies with less significant portions of non-US revenues. Generally speaking, most of these companies, with larger non-US exposure, are ones with larger market capitalizations. Third, liquidity in the market continues to be significant, fueling continued merger and acquisition activity as well as sizeable share-buy backs. The impact of these “liquidity events” is causing price appreciation among primary and ancillary stocks that are moving on speculation that they may be a next candidate. Lastly, higher quality stocks (as measured by S&P quality ratings) continue to under-perform. Typically, higher quality stocks begin to out-perform in periods when earnings growth slows. Although earnings growth has slowed significantly over the last several quarters, overall growth is still at elevated levels compared to historical trends. Investors may not pursue higher quality stocks until earnings growth slows significantly below double-digit levels.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

Financials provided the strongest benefit to relative returns during the first half of the year. The portfolio did not have any direct exposure to the highly interest-rate sensitive companies such as smaller cap banks and REITs, which pulled back in relation to concerns about the subprime lending market and related defaults. Charles Schwab Inc. fared well during the

June 30, 2007

William Blair Funds 13

period, as it continues to grow the asset-based part of its business. Additionally, the company announced a new initiative with respect to gaining additional assets. Similarly, Franklin Resources showed strong asset growth during the period, resulting in a stronger revenue outlook.

Energy stocks provided the second largest contribution to returns during the period. With rising oil prices, most stocks in this sector did well. Companies that produce oilfield services fared particularly well, as the oil companies are seeking to expand production. Schlumberger Ltd. provides project management and information solutions to the oil and gas industry. While the current global demand for oil has benefited Schlumberger tremendously, the company has also experienced strong earnings growth from Eastern Hemisphere markets as well as services from its seismic division. Similarly, Praxair Inc., a company that produces and delivers a variety of gasses for industrial uses, enjoyed strong price appreciation during the quarter. The company continues to exhibit strong earnings growth, not only from its excellence of product and services, but from the strength in the Energy and Industrials areas as well.

Were there any investment strategies or themes that did not measure up to your expectations?

Although Information Technology stocks were the greatest contributors in terms of contribution to portfolio return, this sector was the largest detractor from performance relative to the benchmark during the six months. In part, this was due to the strength in these companies in the Russell 1000^® Growth Index, which in aggregate were up nearly 10%. A couple of stocks in the portfolio that had disappointing results during the period include Jabil Circuit Inc. and Network Appliance Inc. Jabil is one of the largest global suppliers of electronic manufacturing services (EMS) used in the communication products, computer peripherals, and automobile industries. Shares sold off after the company announced disappointing revenue guidance during the quarter. Additionally, Jabil lost a contract from one of its biggest customers due to aggressive pricing from an Asian competitor, further eroding growth prospects for the company. Network Appliance Inc. sells data management and storage solutions to corporate customers. Although Network Appliance, Inc. has continued to gain traction and market share in the storage space, the company announced weak guidance for the coming quarter as a result of a bookings slowdown. Investors have placed premium valuation on the growth of this company, and the stock has recently struggled to meet expectations.

What is your current strategy? How is the Fund Positioned?

Impact of credit quality on the broader market, and concerns about the health of the consumer given flat to eroding housing prices and rising fuel costs are looming over the market. Despite these overhangs, significant amounts of global liquidity continue to bolster prices of financial instruments. Merger and acquisition activity is continuing at record levels, and numerous corporate share buybacks have had a sizeable impact on stocks. Additionally, stock valuations remain in a reasonable range, providing additional support for prices. Regardless of the macro issues on the market, we continue to find high quality stocks that offer growth opportunities. Although it sounds paradoxical, growth stocks, particularly high quality growth stocks, tend to perform well in a slowing economy, as investors will commonly pay a premium for companies that can sustain earnings during this time. We believe that as overall earnings growth decelerates, investors will pay more attention to earnings multiples, and reward stocks with longer, more sustainable earnings trends.

14 Semi-Annual Report

June 30, 2007

Large Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Large Cap Growth Fund Class N	5.81	%	13.57	%	7.38	%	6.08	%	(4.13	)%
Large Cap Growth Fund Class I	5.72		13.69		7.55		6.28		(3.93	)
Russell 1000^® Growth Index	8.13		19.04		8.70		9.28		-3.48

(a)

For the period from December 27, 1999 to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 1000^® Growth Index consists of large capitalization companies with above average price-to-book ratios and forecasted growth rates.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 15

Large Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks*
Information Technology—28.5%
*Adobe Systems Incorporated	21,115	$	848
*Cisco Systems Incorporated	47,729		1,329
*Corning Incorporated	22,170		566
*EMC Corporation	47,675		863
Infosys Technologies Ltd.—ADR	7,985		402
*Network Appliance, Inc.	14,380		420
Paychex, Inc.	27,325		1,069
Qualcomm Incorporated	18,735		813
Taiwan Semiconductor Mfg. Co. Ltd.—ADR	59,726		665
*Verisign, Inc.	9,700		308
*Yahoo!, Inc.	23,925		649

			7,932

Industrials—13.0%
ABB LTD—ADR	27,640		625
Danaher Corporation	21,237		1,603
Rockwell Automation, Inc.	5,990		416
Rockwell Collins, Inc.	13,825		977

			3,621

Financials—10.8%
Charles Schwab & Co, Inc.	38,205		784
Franklin Resources, Inc.	5,835		773
Goldman Sachs Group, Inc.	4,740		1,027
*IntercontinentalExchange, Inc.	2,920		432

			3,016

Consumer Discretionary—10.7%
*Coach, Inc.	8,720		413
Johnson Controls, Inc.	8,545		989
Marriott International, Inc., Class “A”	11,469		496
Staples, Inc.	31,390		745
*Starbucks Corporation	13,230		347

			2,990

Consumer Staples—10.5%
PepsiCo, Inc.	24,105		1,563
Wal Mart De Mexico—ADR	11,160		420
Walgreen Co.	21,575		939

			2,922

*Non-income producing securities

ADR = American Depository Receipt

† = U.S. listed foreign security

VRN = Variable Rate Note


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Health Care—10.2%
Allergan, Inc.		9,700	$	559
C. R. Bard, Inc.		6,425		531
*Genentech, Inc.		12,570		951
*Gilead Sciences, Inc.		20,310		787

				2,828

Energy—7.4%
Apache Corporation		5,050		412
Schlumberger Limited†		11,375		966
Suncor Energy, Inc.†		7,595		683

				2,061

Materials—4.2%
Praxair, Inc.		16,150		1,163

Total Common Stock—95.3% (cost $22,800)				26,533


*Investment in Affiliate*
William Blair Ready Reserves Fund		238,607		239

Total Investment in Affiliate—0.9% (cost $239)				239


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07	$	1,040,000		1,040

Total Short-Term Investment—3.7% (cost $1,040)				1,040


*Repurchase Agreement*
IBT Repurchase Agreement, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $557, collateralized by SBA Pool # 503694	$	556,652		557

Total Repurchase Agreement—2.0% (cost $557)				557

Total Investments—101.9% (cost $24,636)				28,369
Liabilities, plus cash and other assets—(1.9)%				(530	)

Net assets—100.0%			$	27,839

See accompanying Notes to Financial Statements.

16 Semi-Annual Report

June 30, 2007

LOGO

Karl W. Brewer

LOGO

Colin J. Williams

SMALL CAP GROWTH FUND

The Small Cap Growth Fund invests primarily in common stocks of small domestic growth companies that the Advisor expects to have solid growth in earnings.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform in the first six months of 2007? How did the Fund’s performance compare to its benchmark?

The William Blair Small Cap Growth Fund gained 8.97% on a total return basis (Class N shares) during the first six months of 2007. By comparison the Fund’s benchmark, the Russell 2000^® Growth Index, increased 9.33%.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

The domestic equity market posted a sizeable return during the first half of 2007. Small caps finished just behind mid caps as the strongest group along the market cap spectrum. Within the small cap market spectrum, while the entire small cap growth universe performed well, the largest quintile of market cap companies performed significantly better than the rest of the space. From a style perspective within the small cap space, growth stocks have outperformed their value peers by over 5% thus far in 2007. This style dynamic has been maintained since the Federal Reserve stopped raising interest rates in August of 2006.

Although the market turned in positive results during the first quarter, the bulk of the year’s return came during the second quarter. The year began relatively slow during January and February as many companies guided Wall Street to lower earnings growth expectations for the coming year. This brief skittishness culminated in a short lived market sell-off prompted by rising sub-prime mortgage defaults, a fall off in housing starts and a correction in the Chinese stock market that made investors question the strength in the global economy and financial markets. However, the domestic market sell-off was relatively modest and short-lived as the market rebounded in March and maintained that momentum throughout the second quarter. This momentum was helped by increasingly encouraging data points about the global economy and the US industrial economy outside of residential real estate. The market strength was also aided by a continued robust environment for mergers and acquisitions and corporate stock repurchase programs.

The Small Cap Growth Fund narrowly underperformed the Russell 2000^® Growth Index during the first half of 2007. One of the main reasons for the Fund’s benchmark-like performance was its smaller average market capitalization than the benchmark. We discussed earlier that larger was better within small capitalization stocks. As we have said in the past, we often like to find under-followed and misunderstood companies in our quality growth research process. This typically positions us overweight the smallest market cap quintile within the Russell 2000^® Growth Index, and underweight the largest market cap quintile – both of which detracted from relative performance. From a sector perspective, negative stock selection in the Consumer Discretionary and Industrials sectors were the leading detractors. Strong stock selection in the Financials and Consumer Staples sectors was the largest positive contributor to relative performance.

What were among the best performing investments for the Fund?

Two of the best performing stocks during the period were Laureate Education and WebEx Communications.

June 30, 2007

William Blair Funds 17

Laureate Education is a leader in the post secondary education market. The company operates online and campus-based institutions both in the US and abroad. During January, Laureate announced that it would be taken private at a premium to its then current stock price by a consortium of investors led by their CEO, Doug Becker, and several private equity firms.

WebEx is the leading web collaboration services company. The stock experienced two legs of appreciation during the early part of 2007. First, the company released an impressive earnings report in early February and, at the same time, increased forward revenue and earnings expectations. However, the main driver of the stock’s solid first quarter return was Cisco Systems’ announcement that they would be acquiring the company.

What were among the weakest performing investments for the Fund?

Two of the worst performing stocks during the period were Rackable Systems and Santarus.

Rackable Systems sells computer servers and data storage systems to corporate customers. During the quarter, the company pre-announced that revenues and earnings would come in below expectations. This was mainly due to a large competitor in the server market undercutting Rackable on price which caused the company to lose one of their largest customers. We sold the position due to the significant change in the company’s growth outlook.

Santarus is a specialty pharmaceutical company primarily focused on the treatment of acid reflux disease and the associated ailments. Although the number of prescriptions written for their main drug, Zegerid, was encouraging, pricing was worse than expected. Revenue was therefore lower than anticipated and the stock moved lower on the uncertainty of pricing going forward. We continue to own the stock and feel that management’s investment in their direct sales force should improve sales as we look forward a few quarters.

What is your current outlook?

In May as the economy seemed to be stronger than most expected, interest rates began to move higher on fears that the Federal Reserve may have to move interest rates higher to preempt any pick up in inflation. The relatively flat market returns experienced during June would suggest investors are still concerned about the potential inflationary effects of the current economic strength. However, core inflation remains at a reasonable level and we remain—as we have for the past few quarters—in a balance of healthy economic activity and moderate inflation. The consumer remains arguably the largest risk to the economy and equity markets. With higher energy prices, continued weakness in housing activity and rising defaults in the sub-prime mortgage market, pressure on consumer spending remains significant. Fortunately, employment trends remain solid and should help offset weakness related to housing for now. Regardless of the macro issues facing the market, we continue to find high quality stocks that offer attractive growth opportunities. We believe that as overall earnings growth becomes less broad-based, investors will rotate to stocks with more company specific and sustainable growth initiatives.

Is there any other news with respect to the Fund?

With respect to illiquid securities in the Fund, there are five companies for which we hold illiquid securities or warrants. These securities amounted to roughly 2.2% of the Fund as of June 30, 2007. The Fund holds common stock and warrants to buy common stock of Motorcar Parts of America, an auto parts company. The common shares and those shares underlying the warrants are expected to become freely tradable by the end of 2007. Likewise, the Fund’s shares of BancTec are expected to become freely tradable by the end of the year. BancTec provides automation solutions to the retail banking industry. Shares of Kona Grill, a restaurant company, were purchased in two private transactions during 2006 and remain illiquid. The Fund’s Pricing Committee and Valuation Committee are currently pricing these securities at fair value.

18 Semi-Annual Report

June 30, 2007

Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Small Cap Growth Fund Class N	8.97	%	17.49	%	12.80	%	17.52	% 18.88%
Small Cap Growth Fund Class I	9.14		17.85		13.12		17.82		19.17
Russell 2000^® Growth Index	9.33		16.83		11.76		13.08		1.66
Russell 2000^® Index	6.45		16.43		13.45		13.88		8.83

(a)

For the period from December 27, 1999 to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2000^® Growth Index consists of small-capitalization companies with above average price-to-book ratios and forecasted growth rates.

The Russell 2000^® Index is an unmanaged composite of the smallest 2000 stocks of the Russell 3000^® Index.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 19

Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands)


Issuer	Shares	Value

*Common Stocks*
Information Technology—29.4%
*Access Integrated Technologies, Inc.	2,213,981	$	17,911
*CyberSource Corporation	480,100		5,790
*DTS, Inc.	956,740		20,828
*EarthLink, Inc.	2,053,038		15,336
*Euronet Worldwide, Inc.	1,278,782		37,289
*GigaMedia Limited†	2,030,547		27,372
*j2 Global Communications, Inc.	952,847		33,254
*MathStar, Inc.	2,708,904		4,172
*Miva, Inc.	1,141,513		7,420
*Monolithic Power Systems	744,248		12,987
*Nuance Communications, Inc.	1,149,944		19,238
*Optimal Group, Inc.†	2,859,908		21,592
Patni Computer Systems Limited—ADR	151,453		3,818
*PDF Solutions, Inc.	1,283,793		15,187
*Silicon Laboratories, Inc.	604,091		20,908
*Skillsoft, plc—ADR	1,883,815		17,501
*Think Partnership, Inc.	4,626,270		13,833
*Transaction Systems Architect, Inc.	416,619		14,023
*Ultimate Software Group, Inc.	519,585		15,032
*VistaPrint Limited†	250,805		9,593
*Volterra Semiconductor Corporation	1,856,618		26,364
*Website Pros, Inc.	1,331,800		12,546
*WNS Holdings Limited—ADR	773,079		22,002
*Xyratex Ltd†	599,973		13,337

			407,333

Health Care—27.3%
*Air Methods Corporation	983,803		36,076
*American Medical Systems Holdings, Inc.	1,166,917		21,051
*Axcan Pharma, Inc.†	1,587,690		30,690
*Capital Senior Living Corporation	1,247,946		11,756
*DJO, Inc.	360,358		14,872
*Healthways, Inc.	506,540		23,995
*Hythiam, Inc.	1,802,434		15,591
*Integra Lifesciences Holdings Corporation	563,254		27,836
*Iris International, Inc.	482,281		8,122
*Kensey Nash Corporation	305,400		8,188
*Kyphon, Inc.	378,536		18,226
*LifeCell Corporation	534,477		16,323
*Lifecore Biomedical, Inc.	1,095,112		17,379
*Providence Service Corporation	821,861		21,960
*PSS World Medical, Inc.	629,099		11,462
*Psychiatric Solutions, Inc.	430,078		15,595
*Sangamo Biosciences, Inc.	918,074		7,455
*Santarus, Inc.	3,631,472		18,775
*Surmodics, Inc.	601,437		30,072
*Trinity Biotech plc—ADR	1,142,849		13,268
*Zila, Inc.	7,237,388		10,060

			378,752

Consumer Discretionary—19.2%
*4 Kids Entertainment, Inc.	702,478		10,537
*BUCA, Inc.	220,429		772
*Century Casinos, Inc.	1,566,233		14,080
*Coinstar, Inc.	722,124		22,732
*DG Fastchannel, Inc	1,126,830		22,965
*Duckwall-ALCO Stores, Inc.	405,838		15,138
*Granite City Food & Brewery Ltd.	1,372,423		7,480
*Jarden Corporation	568,715		24,460


Issuer	Shares	Value

*Common Stocks—(continued)*
Consumer Discretionary—(continued)
*Jos. A. Bank Clothiers, Inc.	304,412	$	12,624
*Kona Grill, Inc.	322,795		5,885
Kona Grill, Inc.* (restricted)	435,134		6,417
*Laureate Education, Inc.	364,253		22,460
*Lions Gate Entertainment Corporation†	1,263,532		13,937
*Mertiage Homes Corporation	196,244		5,250
Motorcar Parts of America, Inc.* (restricted)	743,836		9,086
*Select Comfort Corporation	839,318		13,614
*Shuffle Master, Inc.	694,768		11,533
*Smith & Wesson Holdings	344,725		5,774
Standard Pacific Corporation	598,403		10,490
Strayer Education, Inc.	116,506		15,345
*ValueVision Media, Inc., Class “A”	1,444,377		16,350

			266,929

Industrials—9.2%
*American Reprographics Company	433,384		13,344
Frozen Food Express Industries, Inc.	902,303		9,149
*GEO Group, Inc.	921,246		26,808
*Hudson Highland Group, Inc.	301,635		6,452
*InnerWorkings, Inc.	1,679,752		26,910
*Kforce, Inc.	1,219,650		19,490
*Mobile Mini, Inc.	450,564		13,156
*NCI Building Systems, Inc.	254,908		12,575

			127,884

Financials—7.7%
Banctec, Inc.* (restricted)	1,809,982		14,480
*First Cash Financial Services, Inc.	569,889		13,358
*FirstService Corporation†	545,721		19,657
*Marlin Business Services Corporation	832,213		17,734
National Financials Partners Corporation	468,450		21,694
*Signature Bank New York	601,373		20,507

			107,430

Energy—4.4%
*Carrizo Oil & Gas, Inc.	86,397		3,583
*Edge Petroleum Corporation	699,054		9,794
*Oil States International, Inc.	422,192		17,453
*Petrohawk Energy Corporation	1,877,867		29,783

			60,613

Consumer Staples—0.9%
*Overhill Farms, Inc.	1,903,720		10,699
*Physicians Formula Holdings, Inc.	132,220		2,079

			12,778

Total Common Stock—98.1% (Total Cost $1,169,503)			1,361,719


*Investment in Warrants*
Motorcar Parts of America, Inc.*	111,575		—
Think Partnership, Inc., 2011, $2.50*	1,424,000		698
Think Partnership, Inc., 2011, $3.05*	448,409		—
Think Partnership, Inc., 2011, $4.00*	224,205		—
Zila, Inc., 2011, $2.21*	2,271,528		—

Total Investment in Warrants—0.1% (cost $0)			698

See accompanying Notes to Financial Statements.

20 Semi-Annual Report

June 30, 2007

Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares or Principal Amount		Value

*Investment in Affiliate*
William Blair Ready Reserves Fund		5,496,989	$	5,497

Total Investment in Affiliate—0.4% (cost $5,497)				5,497


*Short-Term Investments*
American Express Demand Note, VRN 5.170%, due 7/2/07	$	3,110,000		3,110
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07		2,702,000		2,702

Total Short-Term Investments—0.4% (cost $5,812)				5,812

*Non-income producing securities

ADR = American Depository Receipt

† = U.S. listed foreign security

VRN = Variable Rate Note

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. The holdings represents 2.2% of the Fund’s net assets at June 30, 2007. These securities were also deemed illiquid pursuant to Liquidity Procedures approved by Board of Trustees.


Issuer	Principal Amount		Value

*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/02/2007, repurchase price $8,645, collateralized by SBA Pool #506485	$	8,641,962	$	8,642

Total Repurchase Agreement—0.6% (cost $8,642)				8,642

Total Investments—99.6% (cost $1,189,454)				1,382,368
Cash and other assets, less liabilities—0.4%				5,678

Net assets—100.0%			$	1,388,046

If a Fund’s portfolio holding represents ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined in the Investment Company Act of 1940. The Small Cap Growth Fund had the following transactions during the period ended June 30, 2007 with affiliated companies:


	Share Activity				Period Ended June 30, 2007
					(in thousands)
Security Name	Balance 12/31/2006	Purchases	Sales	Balance 6/30/2007	Value		Dividends Included in Income
4 Kids Entertainment, Inc.	696,575	23,800	17,897	702,478	$	10,537	$	—
Access Integrated Technologies, Inc.	1,530,387	740,427	56,833	2,213,981		17,911		—
Century Casinos, Inc.	1,546,133	75,400	56,300	1,565,233		14,080		—
DG Fastchannel, Inc	971,150	555,237	399,557	1,126,830		22,965		—
Duckwall-ALCO Stores, Inc.	325,133	80,705	—	405,838		15,138		—
Frozen Food Express Industries, Inc.	894,816	30,400	22,913	902,303		9,149		28
Granite City Food & Brewery, Ltd.	—	1,372,423	—	1,372,423		7,480		—
Kona Grill, Inc.	764,729	—	6,800	757,929		12,302		—
Lifecore Biomedical, Inc.	1,117,713	29,700	52,301	1,095,112		17,379		—
Marlin Business Services Corp.	756,915	96,400	21,102	832,213		17,734		—
Optimal Group, Inc.	2,150,379	780,542	71,013	2,859,908		21,592		—
Overhill Farms, Inc.	1,903,720	—	—	1,903,720		10,699		—
Providence Service Corporation	548,734	294,699	21,572	821,861		21,960		—
Santarus, Inc.	3,588,835	113,500	70,863	3,631,472		18,775		—
Stratasys, Inc.	590,537	19,400	609,937	—		—		—
Think Partnership, Inc.	4,627,970	125,400	127,100	4,626,270		13,833		—
Trinity Biotech plc-ADR	95,627	1,074,353	27,131	1,142,849		13,268		—
Volterra Semiconductor Corporation	1,842,933	57,700	44,015	1,856,618		26,364		—
Website Pros, Inc.	—	1,331,800	—	1,331,800		12,546		—
Zila, Inc.	7,312,888	—	75,500	7,237,388		10,060		—

					$	293,772

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 21

LOGO

Harvey H. Bundy, III

LOGO

Robert C. Lanphier, IV

LOGO

David P. Ricci

MID CAP GROWTH FUND

The Mid Cap Growth Fund primarily invests in a diversified portfolio of common stocks of medium-sized domestic growth companies.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform in the first six months of 2007? How did the Fund’s performance compare to its benchmark?

The Mid Cap Growth Fund posted a 12.91% increase on a total return basis (Class N Shares) for the six month period ending June 30, 2007. By comparison, the Fund’s benchmark, the Russell Midcap Growth^® Index, gained 10.97% during the period.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

The domestic equity market posted an impressive return during the first half of 2007. The Russell Midcap Growth Index returned 10.97%, more than a full year’s return from a long-term historical perspective. Mid caps finished ahead of their large and small cap counterparts during the period. From a style perspective within the mid cap space, growth stocks have outperformed their value peers by over 2% thus far in 2007. This style dynamic has been maintained since the Federal Reserve stopped raising interest rates in August of 2006.

Although the market turned in positive results during the first quarter, the bulk of the year’s return came during the second quarter. The year began relatively slowly during January and February as many companies guided Wall Street to lower earnings growth expectations for the coming year. This brief skittishness culminated in a short-lived market sell-off prompted by rising sub-prime mortgage defaults, a fall off in housing starts and volatility in the Chinese stock market that made investors question the resiliency of the global financial markets. However, the market rebounded in March and maintained that momentum throughout the second quarter. This momentum was helped by increasingly encouraging data points about the global economy and the US industrial economy outside of residential real estate. The market strength was also aided by a continued robust environment for mergers and acquisitions and corporate stock repurchase programs.

The Mid Cap Growth Fund’s outperformance of the Russell Midcap Growth Index during the first half of 2007 was due to strong stock selection. This was most pronounced in the Financials sector, but it was also a significant contributor in the Health Care and Consumer Discretionary sectors. The Fund’s smaller than benchmark average market capitalization was a positive contributor as well. Stock selection in the Industrials sector was the largest detractor from relative performance. Although hard to measure on a relative basis, the Fund benefited from merger and acquisition activity that also helped the market as a whole. Six of the Fund’s holdings announced either that they were being taken private or being purchased by another public company during the first half of the year.

What were among the best performing investments for the Fund?

Two of the best performing stocks for the Fund were Investors Financial Services Corporation and MedImmune.

Investors Financial is a global trust and custody bank. After reporting solid earnings results during January, the company announced in early February that it was being acquired by State

22 Semi-Annual Report

June 30, 2007

Street Bank and Trust Company at a sizeable premium to the then current price. The transaction closed in the third quarter and we liquidated the Fund’s holding prior to that event.

MedImmune is a biotechnology company. Its products are used to prevent and treat infectious diseases, inflammatory diseases and cancer. We had originally purchased the company in large part due to our opinion that the market was undervaluing their significant pipeline of new drugs. During April, AstraZeneca PLC announced it would be acquiring MedImmune for a significant premium to its then market price.

What were among the weakest performing investments for the Fund?

Two of the weakest performing stocks for the Fund were Network Appliance and Corporate Executive Board.

Network Appliance sells data storage and management solutions to corporate customers. The company reported a disappointing quarter during May. The company noted weakness in end market demand which suggests IT buyers are being cautious in the near term. We added to our position on this weakness as the company continues to take market share and we feel the long term growth potential of this company remains intact.

Corporate Executive Board sells subscription-based, best-practices research on a variety of pertinent topics to corporate leaders. During the first quarter, the company had announced a disappointing quarter. We had managed the position down after observing slowing revenue growth and cross selling patterns with existing clients. This was explained by management as a sales force execution issue, and we sought evidence as to whether this was a one-time event, or if the company’s market opportunity was perhaps becoming saturated. After seeing the company’s earnings report in April, we feel this may be a bigger issue from a growth perspective (not enough new products and not enough corporate demand for additional research services). We therefore decided to exit the position.

What is your current outlook?

In May as the economy seemed to be stronger than most expected, interest rates began to move higher on fears that the Federal Reserve may have to move interest rates higher to preempt any pick up in inflation. The relatively flat market returns experienced during June would suggest investors are still concerned about the potential inflationary effects of the current economic strength. However, core inflation remains at a reasonable level and we remain—as we have for the past few quarters—in a balance of healthy economic activity and moderate inflation. The consumer remains arguably the largest risk to the economy and equity markets. With higher energy prices, continued weakness in housing activity and rising defaults in the sub-prime mortgage market, pressure on consumer spending remains significant. Fortunately, employment trends remain solid and continue to offset weakness related to housing. Regardless of the macro issues facing the market, we continue to find high quality stocks that offer above-average growth opportunities. We believe that as overall earnings growth becomes less broad-based, investors will rotate to stocks with more company-specific and sustainable growth initiatives.

June 30, 2007

William Blair Funds 23

Mid Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 year		Since Inception(a)
Mid Cap Growth Fund Class N	12.91	%	18.46	%	12.51	%
Mid Cap Growth Fund Class I	13.16		18.94		12.91
Russell Midcap^® Growth Index	10.97		19.73		10.89

(a)

For the period from February 1, 2006 (Commencement of Operations) to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Mid Cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell Mid Cap Growth^® Index is an index that is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

24 Semi-Annual Report

June 30, 2007

Mid Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)



Issuer	Shares	Value

*Common Stocks*
Information Technology—28.8%
*Activision, Inc.	55,695	$	1,040
*Autodesk, Inc.	8,640		407
*Cognizant Technology Solutions, Class “A”	10,165		763
*F5 Networks, Inc.	6,779		546
*FLIR Systems, Inc.	19,850		918
*Intuit, Inc.	25,530		768
*Iron Mountain, Inc.	28,567		747
*j2 Global Communications, Inc.	24,765		864
Jabil Circuit, Inc.	47,395		1,046
Maxim Intergrated Products, Inc.	13,920		465
Microchip Technology, Inc.	14,985		555
*Network Appliance, Inc.	24,256		708
Paychex, Inc.	34,815		1,362
*Silicon Laboratories, Inc.	22,620		783
*ValueClick, Inc.	9,510		280

			11,252

Health Care—19.3%
C.R. Bard, Inc.	9,605		794
*Express Scripts, Inc., Class “A”	21,724		1,086
*Healthways, Inc.	15,015		711
*IDEXX Laboratories, Inc.	10,435		987
IMS Health, Incorporated	21,405		688
*Integra LifeSciences Holdings Corporation	13,505		667
*Kyphon, Inc.	14,529		700
Pharmaceutical Product Development, Inc.	31,045		1,188
*ResMed, Inc.	17,245		712

			7,533

Consumer Discretionary—17.2%
*Dick’s Sporting Goods, Inc.	7,195		419
Lamar Advertising Company, Class “A”	6,325		397
*Laureate Education, Inc.	20,280		1,250
*Life Time Fitness, Inc.	23,510		1,251
*O’Reilly Automotive, Inc.	21,483		785
PetSmart, Inc.	22,785		739
Strayer Education, Inc.	6,390		842
*Tractor Supply Company	19,876		1,035

			6,718

Industrials — 11.6%
C. H. Robinson Worldwide, Inc.	7,565		397
Fastenal Company	30,555		1,279
Precision Castparts Corp.	4,140		503
Robert Half International, Inc.	16,285		594
Rockwell Automation, Inc.	8,410		584
Rockwell Collins, Inc.	10,985		776
*Stericycle, Inc.	9,350		416

			4,549

*Non-income producing securities

VRN = Variable Rate Note

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(Continued)*
Energy—8.5%
*Grant Prideco, Inc.		13,350	$	719
Smith International, Inc.		16,230		952
*Southwestern Energy Company		5,630		250
*Ultra Petroleum Corp.†		13,485		745
XTO Energy Corporation		11,300		679

				3,345

Financials—5.0%
*Affiliated Managers Group, Inc.		8,005		1,031
BOK Financial Corporation		5,590		299
*IntercontinetalExchange, Inc.		4,263		630

				1,960

Materials—2.5%
Airgas, Inc.		8,920		427
Ecolab Inc.		12,570		537

				964

Consumer Staples—2.3%
*Hansen Natural Corporation		9,890		425
Whole Foods Market, Inc.		12,360		474

				899

Total Common Stock—95.2% (cost $33,637)				37,220


*Investment in Affiliate*
William Blair Ready Reserves Fund		109,861		110

Total Investment In Affiliate—0.3% (cost $110)				110


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07	$	324,000		324

Total Short-Term Investment—0.8% (cost $324)				324


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $1,384, collateralized by SBA Pool # 505656	$	1,383,259		1,383

Total Repurchase Agreement—3.5% (cost $1,383)				1,383

Total Investments—99.8% (cost $35,454)				39,037
Cash and other assets, less liabilities—0.2%				74

Net Assets—100%			$	39,111

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 25

LOGO

Karl W. Brewer

LOGO

Harvey H. Bundy, III

LOGO

Robert C. Lanphier, IV

SMALL-MID CAP GROWTH FUND

The Small-Mid Cap Growth Fund primarily invests in a diversified portfolio of common stocks of small and medium-sized domestic growth companies that the Advisor expects to experience solid growth in earnings.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform in the first six months of 2007? How did the Fund’s performance compare to its benchmark?

The Small-Mid Cap Growth Fund gained 13.27% on a total return basis (Class N Shares) for the six month period ending June 30, 2007. By comparison, the Fund’s benchmark, the Russell 2500 Growth^™ Index, increased11.30% during the period.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

The domestic equity market posted a substantial return during the first half of 2007. The Russell 2500 Growth^™ Index returned 11.30%, more than a full year’s return from a long-term historical perspective. Looking across the entire market cap spectrum, mid caps finished ahead of small caps, and both finished ahead of the large caps. Drilling down further into the Russell benchmarks, the “small-mid” asset class finished ahead of the pure “mid” space as the Russell Midcap Growth Index returned 10.97%. This was due to significant strength in the roughly $2-4 billion market cap range – which constitutes roughly 40% of the Russell 2500 Growth^™ Index. The growth investment style outperformed the value style within the small-mid cap space by over 5% in the first half of 2007, continuing a trend that has persisted since the Federal Reserve ceased raising interest rates in August of 2006.

Although the market turned in positive results during the first quarter, the bulk of the year’s return came during the second quarter. The year began relatively slowly during January and February as many companies guided Wall Street to lower earnings growth expectations for the coming year. This brief skittishness culminated in a short-lived market correction prompted by rising sub-prime mortgage defaults, a fall off in housing starts and volatility in the Chinese stock market that tested the resiliency of the global financial markets. Domestic equities rebounded in March and maintained that momentum throughout the second quarter. This momentum was helped by increasingly encouraging data points about the global economy and the US industrial economy outside of residential real estate. The market strength was also aided by a continued robust environment for mergers and acquisitions and corporate stock repurchase programs.

The Small-Mid Cap Growth Fund turned in positive results across all economic sectors during the first half of the year. The most significant factor in the Fund’s outperformance of the Russell 2500 Growth^™ Index was strong stock selection in the Financials sector. Information Technology and Energy stock selection produced sizeable relative strength as well. On the downside, Industrials stock selection was the biggest detractor relative to the benchmark. The average market capitalization of the Fund’s holdings was larger than the benchmark’s average, which also detracted from relative performance. This was due to being underweight the aforementioned $2-4 billion market cap range that witnessed significant strength during the quarter. Although hard to measure on a relative basis, the Fund’s absolute performance benefited from the merger and acquisition activity that also helped the market as a whole. Five of the Fund’s holdings announced that they were being acquired during the first half of the year.

26 Semi-Annual Report

June 30, 2007

What were among the best performing investments for the Fund?

Two of the best performing stocks during the period were WebEx Communications and SurModics.

WebEx develops and markets various web-based services. The stock experienced two legs of appreciation during the early part of 2007. First, the company released an impressive earnings report in early February and, at the same time, increased forward revenue and earnings expectations. However, the main reason for the stock’s solid return was Cisco Systems’ announcement that they would be acquiring the company.

SurModics is the market leader in surface modification and drug delivery technologies in the healthcare industry. The company’s main exposure currently is in the drug coated stent market but it continues to develop relationships with many of the large medical device and pharmaceutical companies in order to develop additional uses for its proprietary technologies. In June, SurModics announced that it was entering an agreement with Merck to develop and commercialize products using Merck’s drug compounds and SurModics’ I-Vation drug delivery system to treat various retinal diseases in the ophthalmology market.

What were among the weakest performing investments for the Fund?

Two of the weakest performing stocks for the Fund were ResMed and Corporate Executive Board.

ResMed develops, manufactures and distributes medical equipment, primarily for treating, diagnosing and managing sleep apnea. In April, ResMed initiated a recall of its S8 flow generator product, which amounted to replacing 300,000 units. Although a third party was hired to handle the bulk of this job, we believe that the company’s sales representatives spent more time than expected handling customer issues related to the recall, which led to lost selling time. As a result, investors have lowered revenue and earnings projections, which has negatively affected the stock price.

Corporate Executive Board sells subscription-based, best-practices research on a variety of pertinent topics to corporate leaders. During the first quarter, the company had announced a disappointing quarter. We had managed the position down after observing slowing revenue growth and cross selling patterns with existing clients. This was explained by management as a sales force execution issue, and we sought evidence as to whether this was a one-time event, or if the company’s market opportunity was perhaps becoming saturated. After seeing the company’s earnings report in April, we felt this may be a bigger issue from a growth perspective (not enough new products and not enough corporate demand for additional research services). We therefore decided to exit the position.

What is your current outlook?

In May as it became apparent that the U.S. economy was gaining momentum, interest rates began to move higher on the realization that the Federal Reserve may have to move interest rates higher to preempt inflationary pressures. The relatively flat market returns experienced during June would suggest investors are still concerned about the potential inflationary effects of the current economic strength. However, core inflation remains at a reasonable level and the United States remains—as it has for the past few quarters—in a balance of healthy economic activity and moderate inflation. The American consumer remains arguably the “most significant uncertainty” to the economy and equity markets. With higher energy prices, continued weakness in housing activity and rising defaults in the sub-prime mortgage market, pressure on consumer spending remains significant. Fortunately, employment trends remain solid and continue to offset weakness related to housing. Regardless of the macro issues facing the market, we continue to find high quality stocks that offer above-average growth opportunities. We believe that as overall earnings growth becomes less broad-based, investors will rotate to stocks with more company-specific and sustainable growth initiatives.

June 30, 2007

William Blair Funds 27

Small-Mid Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		Since Inception(a)
Small-Mid Cap Growth Fund Class N	13.27	%	18.23	%	13.40	%	13.31	%
Small-Mid Cap Growth Fund Class I	13.40		18.59		13.68		13.58
Russell 2500^™ Growth Index	11.30		19.03		13.60		13.06

(a)

For the period from December 29, 2003 to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Small and Mid cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2500^™ Growth Index measures the performance of those Russell 2500 companies with above average price-to-book ratios and forecasted growth rates.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

28 Semi-Annual Report

June 30, 2007

Small-Mid Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks*
Information Technology—25.9%
*Activision, Inc.	153,939	$	2,874
*Autodesk, Inc.	25,030		1,178
*Cybersource Corporation	36,200		437
*Euronet Worldwide, Inc.	105,923		3,089
*Intuit, Inc.	58,680		1,765
*Iron Mountain, Inc.	92,146		2,408
*j2 Global Communications, Inc.	83,000		2,897
Jabil Circuit, Inc.	123,095		2,717
Microchip Technology, Inc.	37,285		1,381
*Nuance Communications, Inc.	162,590		2,720
*PDF Solutions, Inc.	70,600		835
*Silicon Laboratories, Inc.	52,990		1,834
*Transaction Systems Architects, Inc.	34,390		1,157
*Ultimate Software Group, Inc.	61,410		1,777
United Online, Inc.	69,280		1,142
*ValueClick, Inc.	29,117		858
*VistaPrint Limited†	17,600		673

			29,742

Health Care—21.4%
C.R.Bard, Inc.	17,220		1,423
*DJO, Inc.	43,880		1,811
*Healthways, Inc.	54,065		2,561
*IDEXX Laboratories, Inc.	19,310		1,827
IMS Health, Incorporated	61,270		1,969
*Integra LifeSciences Holdings Corporation	51,825		2,561
*Kyphon, Inc.	62,355		3,002
Pharmaceutical Product Development, Inc.	86,125		3,296
*PSS World Medical, Inc.	85,545		1,559
* ResMed, Inc.	42,710		1,762
* Santarus, Inc.	93,600		484
*SurModics, Inc.	45,570		2,279

			24,534

Consumer Discretionary—19.6%
*Apollo Group, Inc., Class “A”	23,270		1,360
*Coinstar, Inc.	70,708		2,226
*Jarden Corporation	46,980		2,021
Lamar Advertising Company, Class “A”	17,905		1,124
*Laureate Education, Inc.	60,789		3,748
*Life Time Fitness, Inc.	53,870		2,867
*O’Reilly Automotive, Inc.	66,735		2,439
PetSmart, Inc.	52,035		1,689
*Shuffle Master, Inc.	59,470		987
Strayer Education, Inc.	13,760		1,812
*Tractor Supply Company	42,290		2,201

			22,474

*Non-income producing securities

VRN = Variable Rate Note

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Industrials—13.0%
*Allegiant Travel Company		30,090	$	925
C.H. Robinson Worldwide, Inc.		24,040		1,263
*Corrections Corporation of America		40,490		2,555
Fastenal Company		91,345		3,824
*Houston Wire & Cable Company		21,180		602
*InnerWorkings, Inc.		78,920		1,264
*Kforce, Inc.		100,190		1,601
Rockwell Collins, Inc.		40,240		2,842

				14,876

Energy—7.4%
*Grant Prideco, Inc.		49,465		2,663
Smith International, Inc.		41,145		2,413
*Southwestern Energy Company		41,880		1,864
*Ultra Petroleum Corp.†		27,725		1,531

				8,471

Financials—6.1%
*Affiliated Managers Group, Inc.		19,735		2,541
*IntercontinentalExchange, Inc.		11,085		1,639
*Philadelphia Consolidated Holding Corp.		23,300		974
*Signature Bank New York		53,010		1,807

				6,961

Materials—3.3%
Airgas, Inc.		59,085		2,830
The Scotts Miracle-Gro Company		23,930		1,028

				3,858

Consumer Staples—1.1%
*Hansen Natural Corporation		28,780		1,237

Total Common Stock—97.8% (cost $92,162)				112,153


*Investment in Affiliate*
William Blair Ready Reserves Fund		21,341		21

Total Investment In Affiliate—0.0% (cost $21)				21


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07	$	504,000		504

Total Short-Term Investment—0.4% (cost $5,04)				504


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $2,205, collateralized by SBA Pool #505831	$	2,204,136		2,204

Total Repurchase Agreement—1.9% (cost $2,204)				2,204

Total Investments—100.1% (cost $94,891)				114,882
Liabilities, plus cash and other assets—(0.1)%				(147	)

Net Assets—100%			$	114,735

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 29

INTERNATIONAL MARKETS OVERVIEW

Powerful economic momentum continues to be the driving force behind positive global equity returns. Of the 42 countries whose growth is tracked by the Economist, over two thirds are currently reporting real growth above 3%; the median growth rate for emerging market economies is 6.1%. Among G7 economies, only the US is below its trend rate of growth, held back by the ongoing housing slowdown.

Listed companies outside the US, as represented by the MSCI All Country World ex US Index, have shown remarkable profit gains over the last five years, with 14% annual growth leading to a historically high return on equity of 20%. Strong underlying growth combined with improving productivity and balance sheet management have produced exceptional cash flow and value creation. In turn, with capital costs and inflation subdued, the environment for equity returns overall, and for buyouts and M&A activity in particular, has been consistently strong.

Capital flows to both bonds and equities have followed these growth trends, especially in emerging markets. Corporate bonds and emerging market sovereign debt have strengthened, while historically volatile equity subclasses (small cap and emerging markets) have outperformed.

Since the global recovery began in 2003, there have been three ‘hypotheticals’ that have acted as braking mechanisms on equity returns: concern that a US-led slowdown would stall global growth; concern that commodity price increases and high utilization rates might spill over into wage and price inflation; and worries that either lower growth or higher interest rates could destabilize credit and liquidity and cause a financial accident.

Most recently, in the second quarter, both inflation and financial risk have been in the headlines. In May, US and European rates rose significantly on fears of an inflation/tightening cycle, and in June, the Bear Stearns hedge fund dislocations gave rise to speculation that mortgage-related derivatives might carry the seeds of systemic financial risk.

The market corrections associated with these events seem to have been orderly adjustments to relatively cautious changes in consensus expectations. Risk-awareness seems relatively close to the surface among market participants; there are few if any signs of any kind of asset bubble, in spite of widespread efforts to identify one (or more).

Outlook

For the present, the global economy and financial markets continue to function in relatively stable equilibrium. Anomalies like isolated property booms, errant exchange rates, hedge fund stresses, and weakness in the US mortgage market are relatively minor in the context of a global economy adding nearly $2 trillion a year in output. Global saving seems to be funding a level of real investment activity adequate to sustain non-inflationary growth; consumption growth is reasonably well-balanced across income strata and regions; and capital market activity is well within rational valuation parameters.

Risks and challenges to the sustainability of growth have historically increased with the age of the economic cycle, and the potential for imbalances continues to exist. The conventional end-of-cycle overheating scenario probably remains the key risk to monitor (along with rising tensions in the Middle East), but a more stable phase of expansion may continue to provide a relatively benign market environment for some time to come.

30 Semi-Annual Report

June 30, 2007

LOGO

W. George Greig

INTERNATIONAL GROWTH FUND

The International Growth Fund invests primarily in common stocks of foreign growth companies.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 30 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The International Growth Fund posted a 11.66% gain (Class N Shares) for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World (ACWI) ex-US Index, rose 12.58%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI ACWI ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the MSCI Europe, Asia and Far-East (EAFE) Index, which rose 11.09% in US dollar terms. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

Within this environment, the Fund trailed the benchmark during the second quarter, and therefore year to date. The primary detractor to relative results was the Fund’s overall sector positioning during the second quarter despite strong stock selection across most sectors, as it was underweighted in Materials and Energy, which gained and overweighted in the Consumer sectors, which lagged. In addition, Materials and Industrials stock selection, while strong on an absolute basis, trailed comparable Index results. Within Materials, there were several Japanese and UK stocks that dragged on results, while relative Industrials performance was hampered by airline-related companies, coupled with underperformance in Japan. While stock selection was strong across most sectors during the first half of the year, the most significant value added was in Health Care, Energy, and Telecommunication Services. Within Health Care, the focus on diagnostics and medical technology at the expense of pharmaceuticals added value, while energy stock selection benefited from the focus on energy services, engineering, and high production growth exploration and production companies. Telecommunication Services stock selection was bolstered by alternative cable providers in Europe, coupled with emerging markets mobile phone companies, which benefited from strong subscriber growth during the period. The Fund’s

June 30, 2007

William Blair Funds 31

higher weightings in Industrials added value, as did its underweighting in the underperforming Financials sector. Stock selection was strong across most regions, with the most significant value added in Pacific ex-Japan, particularly in Australia and Singapore. At the margin, regional positioning also added value during the period.

How is the Fund positioned?

As of June 30, the Fund was overweighted in Pacific ex-Japan, emerging Asia and Latin America versus the Index, and significantly underweighted in Japan. These weightings were largely the result of relative growth opportunities available in these markets. The Fund maintained its focus on the Consumer area, particularly in European Consumer Staples and emerging markets Consumer Discretionary and Staples companies. In addition, Industrials remained a significant percentage of the Fund, with a concentration on companies exposed to the aircraft, commodity, and energy complexes, coupled with those exposed to additional infrastructure spending globally. Financials, although underweighted versus the Index, was the largest sector at approximately 26% of the Fund, and was focused in companies exposed to capital markets, real estate, and securities exchanges. While the weighting in Materials and Telecommunication Services remained underweighted versus the benchmark, these weightings increased as additional names were added in these sectors during the quarter.

32 Semi-Annual Report

June 30, 2007

International Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		10 Year		Since Inception
International Growth Fund Class N	11.66	%	29.69	%	24.37	%	18.80	%	14.55	%	—	%
International Growth Fund Class I	11.85		30.08		24.70		19.12		—		13.96	(a)
MSCI All Country World Ex-US Index	12.58		30.15		25.03		19.93		8.58		9.18	(a)
Lipper International Index	10.86		27.69		22.61		17.42		8.47		—

(a)

For the period from October 1, 1999 to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-US Index is an unmanaged index that includes developed and emerging markets and reduced Japanese portion, making it more comparable to the International Growth Fund in terms of investment approach.

The Lipper International Index is a composite of international growth mutual funds.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 33

International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Europe—33.2%*
Austria—1.5%
Erste Bank (Commercial banks)	458,592	$	35,743
Raiffeisen International Bank (Commercial banks)	470,054		74,244

			109,987

Belgium—1.3%
InBev NV (Beverages)	1,229,500		97,383

Finland—0.5%
Nokian Renkaat OYJ (Auto components)	1,062,800		37,234

France—10.9%
April Group S.A. (Insurance)	203,139		10,675
AXA (Insurance)	2,682,100		115,291
Capgemini S.A. (IT services)	781,400		57,127
EDF Energies Nouvelles S.A. (Electric utilities)	469,805		30,753
Essilor International (Health care equipment & supplies)	474,900		56,563
Eurazeo (Diversified financial services)	339,702		49,088
Group Danone (Food products)	1,220,600		98,583
Iliad S.A. (Internet software & services)	268,950		27,091
Klepierre (Real estate investment trusts)	138,500		23,453
L’Oreal S.A. (Personal products)	875,100		103,437
LVMH Moet Hennessey Louis Vuitton SA (Textiles, apparel & luxury goods)	732,900		84,331
*Orpea (Health care providers & services)	187,312		19,685
*Seloger.com (Media)	271,400		15,068
Veolia Environnement (Multi-utilities)	1,334,813		104,837

			795,982

Germany—1.6%
*Colonia Real Estate AG (Real estate management & development)	227,900		9,565
CTS Eventim AG (Media)	242,903		11,972
*Q-Cells AG (Electrical equipment)	494,420		42,649
Solarworld AG (Electrical equipment)	644,200		29,739
*Wire Card AG (Commercial services & supplies)	1,560,400		20,988

			114,913

Greece—1.8%
Coca-Cola Hellenic Bottling S.A. (Beverages)	845,571		38,911
EFG Eurobank (Commercial banks)	803,760		26,186
Jumbo S.A. (Leisure equipment & products)	599,700		20,739
National Bank of Greece (Commercial banks)	747,152		42,542

			128,378

Ireland—1.7%
Anglo Irish Bank plc (Commercial banks)	3,086,800		63,352
Kingspan Group plc (Building products)	1,517,100		42,552
United Drug plc (Health care providers & services)	2,625,500		14,365

			120,269


Italy—3.0%
Azimut Holding SpA (Capital markets)	1,481,600		25,299
Credito Emiliano SpA (Commercial banks)	1,379,400		19,543
Luxottica Group SpA (Textiles, apparel & luxury goods)	1,049,400		40,766


Issuer	Shares	Value

*Common Stocks—Europe—(continued)*
Italy—(continued)
Saipem SpA (Energy equipment & services)	3,308,000	$	112,870
Tod’s SpA (Textiles, apparel & luxury goods)	246,700		22,015

			220,493

Netherlands—1.2%
*Qiagen NV (Life science tools & services)	1,227,600		22,055
Royal Numico NV (Food products)	861,800		44,784
*Tomtom NV (Software)	432,500		22,055

			88,894

Norway—0.8%
Acergy S.A. (Energy equipment & services)	1,767,700		39,796
*Electromagnetic GeoServices AS (Energy equipment & services)	1,033,600		20,858

			60,654

Spain—1.7%
Grifols S.A. (Biotechnology)	2,046,412		44,334
Industria De Textile (Specialty retail)	849,600		50,007
Tecnicas Reunidas S.A. (Construction & engineering)	409,100		27,498

			121,839

Sweden—1.0%
Ericsson (LM) (Communications equipment)	11,691,000		46,634
Hemtex AB (Specialty retail)	331,300		6,347
Nobia AB (Specialty retail)	1,783,950		22,218

			75,199

Switzerland—6.2%
ABB Ltd. (Electrical equipment)	5,645,100		127,284
*Barry Callebaut AG (Food products)	35,550		26,911
EFG International (Capital markets)	789,700		36,311
Geberit AG (Building products)	196,280		33,444
Kuehne & Nagel International AG (Marine)	670,940		61,795
Nobel Biocare Holdings AG (Health care equipment & supplies)	109,950		35,891
Partners Group Global Opporunites, Ltd. (Capital markets)	217,278		29,155
Roche Holdings AG (Pharmaceuticals)	427,700		75,783
SGS S.A. (Commercial services & supplies)	18,710		22,124

			448,698

United Kingdom—17.6%
Amlin plc (Insurance)	4,931,800		27,648
Ashmore Group plc (Capital markets)	2,382,800		12,839
*Autonomy Corporation plc (Software)	2,136,500		30,646
BG Group plc (Oil, gas & consumable fuels)	6,209,200		101,784
*Blinkx plc (Internet software & services)	3,836,900		3,352
*BlueBay Asset Management plc (Capital markets)	1,716,900		16,967
*Cairn Energy plc (Oil, gas & consumable fuels)	855,481		30,154
Capita Group plc (Commercial services & supplies)	5,613,500		81,490
Carphone Warehouse Group plc (Specialty retail)	4,517,180		29,692

See accompanying Notes to Financial Statements.

34 Semi-Annual Report

June 30, 2007

International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Europe—(continued)*
United Kingdom—(continued)
Carter & Carter Group plc (Commercial services & supplies)	515,300	$	4,955
Detica Group plc (IT services)	2,104,700		16,208
Domino’s Pizza UK & IRL plc (Hotels, restaurants, & leisure)	2,850,540		15,837
HBOS plc (Commercial banks)	3,167,400		62,300
Homeserve plc (Commercial services & supplies)	693,100		24,856
Man Group plc (Capital markets)	6,959,600		84,656
Michael Page International (Commercial services & supplies)	4,596,500		48,290
Northern Rock plc (Thrifts & mortgage finance)	467,850		8,095
Reckitt Benckiser plc (Household products)	2,414,300		132,171
Restaurant Group plc (Hotels, restaurants, & leisure)	2,252,000		14,856
Rightmove plc (Media)	1,574,511		19,743
*Rolls-Royce Group plc (Aerospace & defense)	9,003,300		96,943
*Rolls-Royce Group plc, Class “B” (Aerospace & defense)	532,995,360		1,070
Rotork plc (Electronic equipment & instruments)	1,579,064		28,849
RPS Group plc (Commercial services & supplies)	3,545,000		24,874
Serco Group plc (Commercial services & supplies)	4,877,209		43,966
Tesco plc (Food & staples retailing)	16,116,300		134,839
Tullow Oil plc (Oil, gas & consumable fuels)	2,909,190		28,402
Ultra Electronic Holdings plc (Aerospace & defense)	879,900		19,026
Victrex plc (Chemicals)	611,700		8,745
VT Group plc (Aerospace & defense)	2,472,900		29,080
Xstrata plc (Metals & mining)	1,662,500		98,973

			1,281,306


*Emerging Asia—10.9%*
China—3.8%
*Belle International Holdings Limited (Specialty retail)	24,204,000		26,714
China Infrastructure Machinery Holdings, Ltd. (Machinery)	9,598,000		20,987
China Mengniu Dairy Co. (Food products)	8,825,000		30,449
China Oilfield Services Limited (Energy equipment & services)	11,974,000		12,087
China Vanke Company Ltd. (Real estate management & development)	18,503,550		38,300
*Focus Media Holding Ltd.—ADR (Media)	362,800		18,321
*Foxconn International (Communications equipment)	11,594,000		33,217
Fu Ji Food & Catering (Hotels, restaurants & leisure)	6,424,000		22,117
Hopson Development Holdings Ltd. (Real estate management & development)	1,925,900		5,416
Lee and Man Paper Manufacturing Ltd. (Containers & packaging)	6,734,000		18,646


Issuer	Shares	Value

*Common Stocks—Emerging Asia—(continued)*
China—(continued)
Li Ning Co. Ltd. (Leisure equipment & products)	9,334,000	$	22,635
Parkson Retail Group Ltd. (Multiline retail)	3,268,000		20,938
Wumart Stores, Inc., Class “H” (Food & staples retailing) **	13,480,000		4,310

			274,137

India—2.5%
Bharat Heavy Electricals Ltd. (Electrical equipment)	496,800		18,790
*Bharti Airtel Ltd. (Wireless telecommunication services)	1,788,200		36,755
Dabur India Ltd. (Personal products)	8,037,450		20,311
Financial Technologies (India) Ltd. (Software)	396,500		29,400
Housing Development Finance Corp. (Thrifts & mortgage finance)	374,800		18,714
Infosys Technologies, Ltd. (IT services)	734,348		34,755
Unitech Limited (Construction & engineering)	1,620,700		20,047

			178,772

Indonesia—0.9%
PT Bank Rakyat Indonesia (Commercial banks)	36,379,500		23,169
PT Telekomunikasi Tbk (Diversified telecommunication services)	39,130,600		42,448

			65,617

Malaysia—1.0%
Bumiputra Commerce Holdings Bhd (Commercial banks)	14,428,800		48,891
Kuala Lumpur Kepong Bhd (Food products)	4,577,550		17,120
Zelan Bhd (Construction & engineering)	2,463,300		8,585

			74,596

South Korea—0.8%
*NHN Corp. (Internet software & services)	323,320		58,852

Taiwan—1.9%
Himax Technologies, Inc.— ADR (Semiconductors & semiconductor equipment)	927,400		5,351
Hon Hai Precision Industry (Electronic equipment & instrument)	8,909,780		76,959
Mediatek Inc. (Semiconductors & semiconductor equipment)	3,651,450		56,811

			139,121


*Asia—10.3%*
Australia—5.3%
Allco Finance Group, Limited (Capital markets)	2,763,604		24,873
Macquarie Bank, Ltd. (Capital markets)	1,903,200		136,697
Seek Ltd. (Commercial services & supplies)	4,228,163		26,398
United Group Ltd. (Construction & engineering)	1,958,500		27,600
Woolworths Limited (Food & staples retailing)	5,153,300		117,768
WorleyParsons, Ltd. (Energy equipment & services)	1,698,222		48,850

			382,186

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 35

International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Asia—(continued)*
Hong Kong—1.6%
Esprit Holdings Ltd. (Specialty retail)	6,103,000	$	77,541
Li & Fung Ltd. (Distributors)	11,153,200		40,145

			117,686

Singapore—3.4%
Capitaland, Ltd. (Real estate management & development)	26,969,000		142,884
Olam International, Ltd. (Food & staples retailing)	11,735,000		23,672
Osim International Ltd. (Specialty retail)	9,957,240		4,631
Raffles Education Corp. Ltd. (Diversified consumer services)	11,779,000		17,561
Singapore Exchange, Ltd. (Diversified financial services)	9,054,000		58,089

			246,837

Japan—9.6%
Aeon Mall Co., Ltd. (Real estate management & development)	1,003,800		30,863
DeNA Co., Ltd. (Internet & catalog retail)	5,283		18,317
Denso Corporation (Auto components)	1,479,600		57,868
En-Japan Inc. (Commercial services & supplies)	4,504		16,782
Fujimi, Inc. (Chemicals)	402,500		10,585
*Fukuoka Financial Group, Inc. (Commercial banks)	7,270,000		48,063
Honeys Company, Ltd. (Specialty retail)	370,400		14,938
*Jupiter Telecommunications Co., Ltd. (Media)	46,518		38,431
*K.K. DaVinci Advisors (Real estate management & development)	18,402		16,065
Kenedix, Inc. (Real estate management & development)	5,962		11,097
Komatsu Ltd. (Machinery)	2,267,800		65,728
Miraial Company, Ltd. (Semiconductors & semiconductor equipment)	85,300		11,788
Nakanishi Inc. (Health care equipment & supplies)	106,000		13,255
Nintendo Co., Ltd. (Software)	231,800		84,571
Nitori Company Ltd. (Specialty retail)	409,920		20,464
Orix Corporation (Consumer finance)	412,400		108,703
Park 24 Co., Ltd. (Commercial services & supplies)	974,900		9,787
Suruga Bank (Commercial banks)	4,063,000		51,204
Yamada Denki Company (Specialty retail)	532,980		55,663
Zensho Company, Ltd. (Hotels, restaurants, & leisure)	1,196,400		11,373

			695,545


*Emerging Latin America—6.8%*
Brazil—3.3%
*Anhanguera Eduacional Participacoes S.A. (Diversified consumer services)	1,224,600		17,141
*BR Malls Participacoes S.A. (Real estate management & development)	1,939,800		25,240
Companhia Vale do Rio Doce .—ADR (Metals & mining)	1,941,700		86,503
Cyrela Brazil Realty S.A. (Household durables)	1,477,200		18,333


Issuer	Shares	Value

*Common Stocks—Emerging Latin America—(continued)*
Brazil—(continued)
Iguatemi Empresa de Shopping Centers S.A. (Commercial services & supplies)	844,900	$	15,251
Localiza Rent a Car S.A. (Road & rail)	1,509,900		17,032
Lojas Renner S.A. (Multiline retail)	1,123,500		20,851
Submarino S.A.(Internet & catalog retail)	636,400		26,475
Totvs S.A. (Software)	343,900		11,194

			238,020

Chile—0.5%
*Cencosud S.A.—ADR 144A (Specialty retail)	620,130		38,585

Mexico—2.7%
America Movil S.A. (Wireless telecommunication services)	21,001,500		64,850
*Banco Compartamos S.A. de C.V. (Commercial banks)	2,152,200		13,447
*Desarrolladora Homex S.A.—ADR (Household durables)	327,400		19,837
Grupo Aeropuertario Del—ADR (Transportation infrastructure)	262,800		12,962
*Urbi Desarrollos Urbanos S.A. (Household durables)	8,358,600		38,491
Walmart de Mexico (Food & staples retailing)	12,629,600		47,930

			197,517

Panama—0.3%
Copa Holdings S.A., Class “A” (Airlines)†	369,900		24,872


*Emerging Europe, Mid-East, Africa—4.4%*
Czech Republic—0.2%
*Central European Media Enterprises Ltd. Class “A” (Media)†	177,000		17,272

Egypt—0.8%
Egyptian Financial Group- Hermes Holding (Capital markets)	2,457,100		19,808
Orascom Construction Industries (Construction & engineering)	533,100		34,849

			54,657

Kazakhstan—0.4%
*Kazkommertsbank—GDR 144A (Commercial banks)	1,452,951		31,965

Russia—1.0%
*CTC Media, Inc. (Media)†	775,352		21,043
Sberbank—CLS (Commercial banks)	8,598		33,532
*X5 Retail Group N.V. (Food & staples retailing)	701,300		20,548

			75,123

South Africa—1.6%
MTN Group, Ltd. (Wireless telecommunication services)	3,458,200		47,007
Naspers Ltd. (Media)	887,590		22,804
The Spar Group Limited (Food & staples retailing)	1,924,625		14,400

See accompanying Notes to Financial Statements.

36 Semi-Annual Report

June 30, 2007

International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—(continued)*
South Africa—(continued)
Truworths International Ltd. (Specialty retail)		4,763,400	$	24,505
Wilson Bayly Holmes-Ovcon (Construction & engineering)		737,653		10,773

				119,489

United Arab Emirates—0.4%
Emaar Properties PJSC (Real estate management & development)		8,849,400		28,551


*Canada—3.7%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)		1,511,050		60,442
Canadian Western Bank (Commercial banks)		542,300		14,376
*Gildan Activewear, Inc. (Textiles,apparel & luxury goods)		803,200		27,423
Rogers Communications, Inc. Class “B” (Wireless telecommunication services)		2,467,800		105,222
Shoppers Drug Mart Corp. (Food & staples retailing)		1,395,700		64,646

				272,109

Total Common Stock—96.5% (cost $4,963,702)				7,032,738


*Preferred Stock*
Brazil—1.3%
Banco Itau Holding (Commercial banks)		840,600		37,324
*Banco Sofisa S.A. (Commercial banks)		1,775,800		13,072
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,740,700		46,473

				96,869

Total Preferred Stock—1.3% (cost $55,410)				96,869


*Investment in Affiliate*
William Blair Ready Reserves Fund		5,676,235		5,676

Total Investment in Affiliate—0.1% (cost $5,676)				5,676


*Short-Term Investments*
American Express Demand Note, VRN 5.170% due 07/02/07	$	49,668,000	$	49,668
Prudential Funding Demand Note, VRN 5.305% due 07/02/07		45,352,000		45,352

Total Short-term Investments—1.3% (cost $95,020)				95,020


Issuer	Principal Amount		Value

*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 06/29/2007, due 07/02/2007, repurchase price $13,139, collateralized by FN, Pool# 820971	$	13,134,245	$	13,134

Total Repurchase Agreement—0.2% (cost $13,134)				13,134

Total Investments—99.4% (cost $5,132,942)				7,243,437
Cash and other assets, less liabilities—0.6%				40,964

Net assets—100.0%			$	7,284,401

* Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed foreign security

** Fair valued pursuant to Valuation Procedures adopted by Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to liquidity procedures securities pursuant to Valuation Procedures adopted by the Board of Trustees.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund uses an independent pricing service on a daily basis to fair value price the securities pursuant to Valuation Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Financials		25.7%
Consumer Discretionary		15.9%
Consumer Staples		15.1%
Industrials		14.7%
Information Technology		8.2%
Energy		6.8%
Telecommunication Services		4.6%
Health Care		4.0%
Materials		3.1%
Utilities		1.9%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


Euro		25.7%
British Pound Sterling		18.0%
Japanese Yen		9.8%
Swiss Franc		6.3%
Australian Dollar		5.4%
Hong Kong Dollar		5.2%
United States Dollar		4.6%
Canadian Dollar		3.8%
Singapore Dollar		3.5%
Brazilian Real		3.5%
Indian Rupee		2.5%
Mexico Nuevo Peso		2.3%
Taiwan Dollar		1.9%
South African Rand		1.7%
Swedish Krona		1.1%
All other currencies		4.7%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 37

LOGO

W. George Greig

INTERNATIONAL EQUITY FUND

The International Equity Fund invests primarily in common stocks of companies included in the Morgan Stanley Capital International All Country World ex-U.S. Index.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 30 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The International Equity Fund posted a 9.47% increase for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World (ACWI) ex-US Index, rose 12.58%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI ACWI ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as measured by the MSCI Emerging Markets Index compared to the MSCI Europe, Asia and Far East (EAFE) Index, which rose 11.09% in US dollar terms. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

Within this environment, the Fund trailed the benchmark. The primary detractor to relative results was the Fund’s overall sector positioning during the second quarter despite strong stock selection across a number of sectors. The Fund underweighted in Materials and Energy, which gained and overweighted in the Consumer sectors, which lagged. In addition, Materials and Consumer stock selection, while strong on an absolute basis, trailed comparable Index results. Within Materials, Japanese exposure dragged on results, as did the absence of exposure in Canada and Pacific ex-Japan. Within Consumer, Japanese Consumer Discretionary exposure and stock selection was a primary detractor, as was European stock selection in Consumer Discretionary. While stock selection was strong across a number of sectors during the first half of the year, the most significant value added was in Health Care, Energy, and Telecommunication Services. Within Health Care, the focus on diagnostics and medical technology at the expense of pharmaceuticals added value, while energy stock selection benefited from the focus on energy services and high production growth exploration and production companies. European alternative cable providers and emerging markets mobile phone companies, which have benefited from strong subscriber growth, augmented strong Telecommunication Services stock selection. The Fund’s higher weightings in Industrials added value, as did its underweighting in the underperforming Financials sector. At the margin, regional positioning also added value during the period.

38 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of June 30, the Fund was overweighted in Pacific ex-Japan, emerging Asia and Latin America versus the Index, and significantly underweighted in Japan. These weightings were largely the result of relative growth opportunities available in these markets. The Fund maintained its focus on the Consumer area, particularly in European and Pacific ex-Japan Consumer Staples companies. In addition, Industrials increased to a larger overweighting in the Fund, with a concentration on companies exposed to the aircraft, commodity, and energy complexes, coupled with those exposed to additional infrastructure spending globally. Financials, although underweighted versus the Index, was the largest sector at approximately 26% of the Fund, and was focused in companies exposed to capital markets, real estate, and securities exchanges. While the weighting in Materials remained underweighted versus the benchmark, this allocation increased as additional names were added in these sectors during the quarter.

June 30, 2007

William Blair Funds 39

International Equity Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		Since Inception(a)
International Equity Fund Class N	9.47	%	25.47	%	16.94	%	18.34	%
International Equity Fund Class I	9.60		25.74		17.32		18.70
MSCI All Country World Ex-US	12.58		30.15		25.03		25.95

(a)

For the period from May 24, 2004 to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Lipper International Index is a composite of international growth mutual funds.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

40 Semi-Annual Report

June 30, 2007

International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Europe—34.6%*
Austria—0.7%
Raiffeisen International Bank (Commercial banks)	15,700	$	2,480

Belguim—1.7%
InBev N.V. (Beverages)	74,500		5,901

France—9.7%
AXA (Insurance)	144,200		6,199
Essilor International (Health care equipment & supplies)	29,600		3,526
Eurazeo (Diversified financial services)	20,230		2,923
Iliad S.A. (Diversified telecommunication services)	19,100		1,924
L’Oreal S.A. (Personal products)	57,700		6,820
Schneider Electric SA (Electrical equipment)	49,700		6,963
Veolia Environnement (Multi-utilities)	83,588		6,565

			34,920

Germany—4.6%
DaimlerChrysler AG (Automobiles)	68,900		6,374
*Q-Cells AG (Electrical equipment)	14,000		1,208
Siemens AG (Industrial conglomerates)	61,100		8,793

			16,375

Greece—1.0%
National Bank of Greece (Commercial banks)	61,660		3,511

Ireland—1.0%
Anglo Irish Bank plc (Commercial banks)	175,600		3,604

Italy—1.9%
Saipem SpA (Energy equipment & services)	203,600		6,947

Netherlands—1.0%
Randstad N.V. (Commercial services & supplies)	44,400		3,514

Norway—0.5%
Acergy S.A. (Energy equipment & services)	74,500		1,677

Spain—1.4%
Industria De Textile (Specialty retail)	84,100		4,950

Switzerland—9.8%
ABB Ltd. (Electrical equipment)	423,000		9,538
EFG International (Capital markets)	48,300		2,221
Geberit AG (Building products)	9,700		1,653
Julius Baer Holding AG (Capital markets)	42,500		3,041
Kuehne & Nagel International AG (Marine)	33,700		3,104
Nestle S.A. (Food products)	14,660		5,570
Nobel Biocare Holding AG (Health care equipment & supplies)	5,740		1,874
Roche Holdings AG (Pharmaceuticals)	30,450		5,395
SGS S.A. (Commercial services & supplies)	2,181		2,579

			34,975


*United Kingdom—16.6%*
BG Group plc (Oil, gas & consumable fuels)	536,600		8,796
Capita Group plc (Commercial services & supplies)	281,600		4,088
Carphone Warehouse Group plc (Specialty retail)	231,600		1,522
HBOS plc (Commercial banks)	385,400		7,581
Man Group plc (Capital markets)	351,300		4,273


Issuer	Shares	Value

*Common Stocks—United Kingdom—15.3%—(continued)*
Reckitt Benckiser plc (Household products)	162,500	$	8,896
*Rolls-Royce Group plc (Aerospace & defense)	711,300		7,659
*Rolls-Royce Group plc, Class “B” (Aerospace & defense)	39,877,120		80
Rotork plc (Electronic equipment & instruments)	67,200		1,228
Serco Group plc (Commercial services & supplies)	210,700		1,899
Tesco plc (Food & staples retailing)	1,063,800		8,900
Xstrata plc (Metal & mining)	82,100		4,888

			59,810


*Japan—12.4%*
Aeon Mall Co., Ltd. (Real estate management & development)	76,200		2,343
FANUC Ltd. (Machinery)	52,300		5,398
*Fukuoka Financial Group, Inc. (Commercial banks)	642,000		4,244
Honeys Company, Ltd. (Specialty retail)	18,200		734
*Jupiter Telecommunications Co., Ltd. (Media)	2,503		2,068
*K.K. DaVinci Advisors (Real estate management & development)	761		664
Komatsu Ltd. (Machinery)	154,900		4,489
NGK Insulators Ltd (Machinery)	185,000		4,543
Nintendo Co., Ltd. (Software)	17,400		6,348
Orix Corporation (Consumer finance)	29,800		7,855
Shin-Etsu Chemical Co., Ltd. (Chemicals)	49,500		3,534
Suruga Bank Ltd. (Commercial banks)	164,000		2,067

			44,287


*Asia—11.2%*
Australia—6.7%
Allco Finance Group Limited (Capital markets)	143,800		1,294
Macquarie Bank Ltd. (Capital markets)	106,300		7,635
QBE Insurance Group Limited (Insurance)	163,100		4,303
Toll Holdings Limited (Air freight & logistics)	236,900		2,903
Woolworths Limited (Food & staples retailing)	304,600		6,961
WorleyParsons, Ltd. (Energy equipment & services)	36,500		1,050

			24,146

Hong Kong—2.2%
Esprit Holdings Ltd. (Specialty retail)	310,500		3,945
Li & Fung Ltd. (Distributors)	1,103,200		3,971

			7,916

Singapore—2.3%
Capitaland, Ltd. (Real estate management & development)	1,537,000		8,143


*Emerging Asia—10.2%*
China—2.2%
China Communications Construction Co. Ltd. (Construction & engineering)	1,299,000		2,328
China Merchants Bank Co. Ltd (Commercial banks)	840,900		2,561

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 41

International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Emerging Asia—10.2%—(continued)*
China—(continued)
*Focus Media Holding Ltd.—ADR (Media)	42,400	$	2,141
Hopson Development Holding Ltd. (Real estate management & development)	93,100		262
Nine Dragons Papers Hldgs Lt (Paper & forest product)	276,000		644
Shandong Weigao Gp Medical (Health care equipment & supplies)	25,800		58

			7,994

India—3.0%
*Bharti Airtel Limited (Wireless telecommunication services)	168,973		3,473
Infosys Technologies Ltd. (IT services)	73,400		3,474
Vedanta Resources Plc (Metals & mining)	118,200		3,810

			10,757

Indonesia—1.1%
PT Bank Rakyat Indonesia (Commercial banks)	2,629,000		1,674
PT Telekomunikasi Indonesia Tbk (Diversified telecommunication services)	2,281,000		2,474

			4,148

South Korea—0.5%
*NHN Corp. (Internet software & services)	11,072	$	2,015

Malaysia—0.8%
Bumiputra Commerce Holdings Bhd (Commercial banks)	469,400		1,591
Kuala Lumpur Kepong Bhd (Food product)	313,700		1,173

			2,764

Taiwan—2.6%
Hon Hai Precision Industry Corp. (Electronic equipment & instruments)	577,117		4,985
Mediatek, Inc. (Semiconductors & semiconductor equipment)	170,000		2,645
Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors & semiconductor equipment)	741,000		1,599

			9,229


*Emerging Latin America—5.4%*
Brazil—1.8%
Companhia Vale do Rio Doce—ADR (Metals & mining)	146,300		6,518

Chile—0.5%
*Cencosud S.A.—ADR 144A (Specialty retail)	31,000		1,929

Mexico—3.1%
America Movil S.A. (Wireless telecommunications services)	2,052,400		6,338
Walmart de Mexico (Food & staples retailing)	1,259,700		4,781

			11,119


*Canada—3.6%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)	112,850		4,514
Rogers Communications, Inc. Class “B” (Wireless telecommunication services)	123,200		5,253


Issuer	Shares or Principal Amount		Value

*Common Stocks—Canada—3.6%—(continued)*
Shoppers Drug Mart Corporation (Food & staples retailing)		69,200	$	3,205

				12,972

Egypt—0.1%
Egyptian Financial Group- Hermes Holding (Capital markets)		30,474	$	246

South Africa—1.3%
MTN Group, Ltd. (Wireless telecommunication services)		219,400		2,982
Naspers Ltd. (Media)		67,700		1,739

				4,721

Russia—0.4%
* PIK Group (Real Estate management & development)**		52,000		1,300

United Arab Emirates—0.7%
Emaar Properties PJSC (Real estate management & development)		805,200		2,598

Total Common Stock—95.2% (cost $273,804)				341,466


*Preferred Stocks*
Brazil—0.7%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		91,400		2,440

Total Preferred Stocks—0.7% (cost $1,525)				2,440


*Investment in Affiliate*
William Blair Ready Reserves Fund		5,159,194		5,159

Total Investment in Affiliate—1.4% (cost $5,159)				5,159


*Short-Term Investments*
American Express Demand Note, VRN, 5.170%, due 7/02/07	$	993,000		993
Prudential Funding Demand Note, VRN, 5.305%, due 7/02/07		1,072,000		1,072

Total Short-Term Investments—0.6% (cost $2,065)				2,065

Total Investments—97.9% (cost $282,553)				351,130
Cash and other assets, less liabilities—2.1%				7,466

Net assets—100.0%			$	358,596

*Non-income producing securities

ADR = American Depository Receipt

VRN = Variable Rate Note

** Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.36% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

See accompanying Notes to Financial Statements.

42 Semi-Annual Report

June 30, 2007

International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Financials		25.9%
Industrials		20.2%
Consumer Staples		15.7%
Consumer Discretionary		8.0%
Telecommunication Services		6.5%
Information Technology		6.5%
Energy		6.5%
Materials		5.6%
Health Care		3.2%
Utilities		1.9%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


Euro		23.9%
British Pound Sterling		18.5%
Japanese Yen		12.9%
Swiss Franc		10.2%
Australian Dollar		7.0%
Hong Kong Dollar		4.0%
Canadian Dollar		3.8%
United States Dollar		3.5%
Mexico Nuevo Peso		3.2%
Taiwan Dollar		2.7%
Singapore Dollar		2.4%
Indian Rupee		2.0%
South African Rand		1.4%
Indonesian Rupiah		1.2%
Other Currencies		3.3%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 43

LOGO

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund primarily invests in a diversified portfolio of common stocks of small cap companies in developed and emerging markets.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 30 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The International Small Cap Growth Fund posted a 14.36% increase (Class N Shares) for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) World Small Cap ex-U.S. Index, gained 13.06%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI All Country World Index ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the EAFE Index, which rose 11.09% in US dollar terms, while developed non-US small cap stocks were also strong, up 13.09%. Within small cap stocks, Pacific ex-Japan and Canada were the strongest regions, up 17.99% and 18.83%, respectively, year to date, while the UK 10.84% and Japan 2.89% trailed. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

The Fund outpaced the benchmark year to date, with significant value derived from stock selection in a number of sectors, with most value added in Consumer Discretionary, Energy, Financials and Health Care. In particular, Consumer Discretionary names were strong on a relative basis in Japan and emerging markets, while Energy stock selection benefited from a focus on European and Australian energy services and engineering companies. Financials stock selection contributed by strong relative stock selection in Japan, Europe and emerging markets, with a focus on real estate, asset management, and capital markets stocks. The European weighting and stock selection in Health Care added value in that sector. Regionally, the Fund’s underweighting in Japan and overweighting in Europe ex-UK and emerging markets added value, as did stock selection across most regions. Somewhat mitigating these strong results was general sector positioning, underweighting in Canada, and Materials stock selection.

44 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of period end, the portfolio was overweighted in emerging markets and Europe ex-UK with corresponding underweightings in developed Asia. From a sector perspective, the portfolio remained focused in Consumer Discretionary, Financials and Industrials holdings, with corresponding underweightings in Information Technology (IT) and Materials. These weightings are largely the result of the team’s bottom up fundamental analysis, in addition to its strategic viewpoint.

June 30, 2007

William Blair Funds 45

International Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		Since Inception(a)
International Small Cap Growth Fund Class N	14.36	%	26.81	%	29.38	%
International Small Cap Growth Fund Class I	14.47		27.09		29.68
MSCI World Ex-US Small Cap Index	13.06		26.54		27.54

(a)

For the period from November 1, 2005 (Commencement of Operations) to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) World Ex-US Small Cap Index is an unmanaged index that is designed to measure equity performance of small cap stocks in developed and emerging markets.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

46 Semi-Annual Report

June 30, 2007

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Europe—44.2%*
Finland—6.1%
Konecranes OYJ (Machinery)	83,100	$	3,473
Nokian Renkaat OYJ (Auto Components)	213,000		7,462
Outotec OYJ (Construction & engineering)	83,500		4,583
Ramirent OYJ (Trading companies & distributors)	212,900		5,765

			21,283

France—5.5%
*Aufeminin.com SA (Media)	21,610		918
April Group S.A. (Insurance)	121,582		6,389
EDF Energies Nouvelles S.A. (Electric utilities)	60,100		3,934
*Orpea (Heath care providers & services)	37,363		3,927
*Seloger.com (Media)	73,900		4,103

			19,271

Germany—8.6%
*Colonia Real Estate AG (Real estate management & development)	89,960		3,776
CTS Eventim AG (Media)	88,800		4,376
MTU Aero Engines Holding AG (Aerospace & defense)	112,014		7,289
*Q-Cells AG (Electrical equipment)	74,280		6,408
Solarworld AG (Electrical equipment)	96,262		4,444
*Wire Card AG (Commercial services & supplies)	298,600		4,016

			30,309

Greece—2.1%
Jumbo S.A. (Leisure equipment & products)	216,700		7,494

Ireland—3.1%
Kingspan Group plc (Building products)	245,390		6,883
*Norkom Group plc (Software)	286,500		820
United Drug plc (Heath care providers & services)	610,780		3,341

			11,044

Italy—4.8%
Azimut Holdings SpA (Capital markets)	423,317		7,228
Credito Emiliano SpA (Commercial banks)	204,872		2,902
Tod’s SpA (Textiles, apparel & luxury goods)	35,600		3,177
Trevi Finanziaria SpA (Construction & engineering)	199,100		3,578

			16,885

Netherlands—1.3%
*Qiagen NV (Lifesciences tools & services)	258,073		4,637

Norway—2.9%
Acergy S.A. (Energy equipment & services)	319,800		7,200
*Electromagnetic GeoServices AS (Energy equipment & services)	154,200		3,112

			10,312

Spain—3.4%
Grifols S.A. (Biotechnolgy)	366,303		7,936
Tecnicas Reunidas S.A. (Construction & engineering)	56,800		3,818

			11,754


Issuer	Shares	Value

*Common Stocks—Europe—(continued)*
Sweden—1.7%
Hemtex AB (Specialty retail)	71,900	$	1,377
Nobia AB (Specialty retail)	357,700		4,455

			5,832

Switzerland—4.7%
*Barry Callebaut Ag (Food products)	8,530		6,457
Partners Group Global Opportunities, Ltd (Capital markets)	74,400		9,983

			16,440


*United Kingdom—20.9%*
Amlin plc (Insurance)	1,057,000		5,926
Ashmore Group plc (Capital markets)	579,800		3,124
*Autonomy Corporation plc (Software)	348,700		5,002
*Blinkx plc (Internet software & services)	1,876,700		1,639
*BlueBay Asset Management plc (Capital markets)	365,900		3,616
Carter & Carter Group plc (Commercial services & supplies)	126,600		1,217
*Ceres Power Holdings plc (Electrical equipment)	684,900		3,965
*Climate Exchage plc (Diversified financial services)	64,700		2,381
Detica Group plc (IT services)	451,500		3,477
Domino’s Pizza UK & IRL plc (Hotels, restaurants, & leisure)	687,780		3,821
Homeserve plc (Commercial services & supplies)	137,380		4,927
Mears Group plc (Construction & engineering)	449,300		2,926
Michael Page International (Commercial services & supplies)	301,970		3,172
Restaurant Group plc (Hotels, restaurants, & leisure)	221,500		1,461
Rightmove plc (Media)	250,400		3,140
Rotork plc (Electronic equipement & instruments)	185,550		3,390
RPS Group plc (Commercial services & supplies)	487,000		3,417
Serco Group plc (Commercial services & supplies)	758,440		6,837
Ultra Electronic Holdings plc (Aerospace & defense)	133,850		2,894
Victrex plc (Chemicals)	204,850		2,929
VT Group plc (Aerospace & defense)	329,150		3,871

			73,132


*Japan—11.0%*
Aeon Mall Co., Ltd. (Real estate management & development)	190,900		5,869
DeNA Co., Ltd. (Internet & catalog retail)	1,607		5,572
En-Japan Inc. (Commercial services & supplies)	611		2,277
Fujimi Inc (Chemicals)	111,200		2,924
Honeys Company, Ltd. (Specialty retail)	93,630		3,776
*K.K. DaVinci Advisors (Real estate management & development)	1,491		1,302
Kenedix, Inc. (Real estate management & development)	646		1,202
Miraial Company, Ltd. (Semiconductors & semiconductor equipment)	28,700		3,966

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 47

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Japan—(continued)*
Nitori Company Ltd. (Specialty retail)	63,300	$	3,160
Park 24 Co., Ltd. (Commercial services & supplies)	194,600		1,954
Suruga Bank (Commercial banks)	296,000		3,730
Zensho Company, Ltd. (Hotels, restaurants, & leisure)	285,800		2,717

			38,449


*Emerging Asia—8.2%*
China—3.8%
China High Speed Transmission (Independent power producers & energy traders)*	45,000		41
China Infrastructure Machinery Holdings, Ltd. (Machinery)	1,836,000		4,015
Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	20,520		1,613
*Focus Media Holdings—ADR (Media)	33,200		1,677
Li Ning Co. Ltd. (Leisure equipment & products)	836,873		2,029
Ports Design Limited (Textiles, apparel & luxury goods)	604,500		1,700
Shandong Weigao GP (Health care equipment & supplies)	976,000		2,200

			13,275

India—2.6%
ABB Ltd. India (Electrical equipment)	78,500		2,110
Financial Technologies, Ltd. (Diversified financial services)	73,900		5,480
*Inox Leisure, Ltd. (Media)	436,579		1,439

			9,029

Malaysia—1.1%
Kuala Lumpur Kepong Berhad (Food products)	1,046,350		3,913

Philippines—0.2%
*Paxys Inc. (Commercial services & supplies)	1,455,100		779

South Korea—0.5%
Hana Tour Service Inc. (Hotels, restaurants & leisure)	17,400		1,693


*Asia—6.1%*
Australia—3.7.%
Allco Finance Group, Limited (Capital markets)	323,265		2,909
Seek Limited (Commercial services & supplies)	802,680		5,011
United Group, Ltd. (Construction & engineering)	368,470		5,193

			13,113

Singapore—2.4%
Olam International, Ltd. (Food & staples retailing)	1,592,000		3,211
Osim International Ltd. (Specialty retail)	1,393,700		648
Petra Foods, Ltd. (Food products)	1,219,000		1,259
Raffles Education Corp. Ltd. (Diversified consumer services)	2,225,000		3,318

			8,436


Issuer	Shares	Value

*Emerging Latin America—4.5%*
Brazil—2.1%
*Anhanguera Educational Parti (Diversified consumer services)	162,100	$	2,269
Cyrela Brazil Realty S.A. (Household durables)	273,900		3,399
Submarino S.A.(Internet & catalog retail)	42,300		1,760

			7,428


*Mexico—1.9%*
*Banco Compartamos SA (Commercial banks)	491,700		3,072
*Urbi Desarrollos Urbanos S.A. (Household durables)	784,900		3,614

			6,686

Panama—0.5%
Copa Holdings S.A., Class “A” (Airlines)†	25,400		1,708


*Emerging Europe, Mid-East, Africa—2.1%*
Czech Republic—0.5%
*Central European Media Enterprises Ltd., Class “A” (Media)†	16,600		1,620

Eqypt—0.6%
*Orascom Hotels & Development (Hotels, restaurants & leisure)	193,100		2,026

Poland—0.5%
*Cinema City International N.V. (Media)	142,700		1,793

Russia—0.5%
*CTC Media, Inc. (Media)†	63,538		1,724


*Canada—1.7%*
Canadian Western Bank (Commercial banks)	102,200		2,709
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	98,600		3,367

			6,076

Total Common Stock—98.7% (cost $286,620)			346,141


*Preferred Stock*
Brazil—0.5%
*Banco Sofisa S.A. (Commercial banks)	248,900		1,832

Total Preferred Stock—0.5% (cost $1,532)			1,832


*Investment in Affiliate*
William Blair Ready Reserves Fund	2,147,561		2,148

Total Investment in Affiliate—0.6% (cost $2,148)			2,148

See accompanying Notes to Financial Statements.

48 Semi-Annual Report

June 30, 2007

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Principal Amount		Value

*Short-Term Investments*
American Express Demand Note, VRN 5.170%, due 7/02/07	$	2,004,000	$	2,004
Prudential Funding Demand Note, VRN 5.305%, due 7/02/2007		2,000,000		2,000

Total Short-term Investments—1.2% (cost $4,004)				4,004


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/07, due 7/02/07, repurchase price $2,588, collateralized by SBA Pool # 505984	$	2,586,723	$	2,587

Total Repurchase Agreement—0.7% (cost $2,587)				2,587

Total Investments—101.7% (cost $296,891)				356,712
Liabilities plus, cash and other assets—(1.7)%				(5,941	)

Net assets—100.0%			$	350,771

* Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed foreign security

** Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.01% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange the Fund uses an independent pricing service on a daily basis to fair value price the securities pursuant to Valuation Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Industrials		28.8%
Consumer Discretionary		26.6%
Financials		19.6%
Information Technology		6.8%
Health Care		6.3%
Energy		4.8%
Consumer Staples		4.3%
Materials		1.7%
Utilities		1.1%

		100.0%

At June 30, 2007 the Fund's Portfolio of Investments includes the following currency categories:


Euro		35.3%
British Pound Sterling		21.0%
Japanese Yen		11.0%
Swiss Franc		4.7%
Australian Dollar		3.8%
Norwegian Krone		3.0%
Hong Kong Dollar		2.9%
Brazilian Real		2.7%
Indian Rupee		2.6%
Singapore Dollar		2.4%
United States Dollar		2.4%
Mexican Neuvo Peso		1.9%
Canadian Dollar		1.7%
Swedish Krona		1.7%
Malaysian Ringgit		1.1%
All other currencies		1.8%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 49

LOGO

W. George Greig

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund primarily invests in a diversified portfolio of equity securities issued by growth companies in emerging economies worldwide.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

See page 30 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Emerging Markets Growth Fund posted a 16.53% increase (Class N Shares) for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, gained 17.75%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI All Country World Index ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the Europe, Australia and Far East Index, which rose 11.09% in US dollar terms. Latin America was the strongest emerging markets region, up 27.09%, while Asia returned 18.78%. MSCI Emerging Markets Europe, Mid-East and Africa (EMEA) was the relative laggard, returning 9.18% during the first half of the year. In particular, the Latin American markets of Brazil, Chile and Peru performed well as did the Asian markets of Korea, Malaysia and China. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Healthcare lagged.

What factors were behind the Fund’s performance versus the benchmark?

The Fund’s year-to-date return, trailed the benchmark by approximately 1%, due to first quarter’s relative results. While stock selection across a number of sectors was strong, Energy, Staples and Industrials stock selection hampered relative results, particularly during the first quarter. Specifically, several of the Fund’s Consumer Staples names in Latin America underperformed, while Energy stock selection was hurt by Russian and South African stock selection. Within Industrials, the Fund’s Asian stocks trailed the Index. In addition, the Fund’s underweighting in the strong Materials sector hurt performance, as did stock selection within the sector. Conversely, the Fund’s strong absolute results were bolstered by Consumer Discretionary stock selection across regions, along with the weighting and stock selection in Chinese, Indian, and Malaysian Financials. Moreover, the Fund’s Chinese healthcare stock selection was strong, as was the focus on Asian Information Technology (IT) stocks. In addition, the Fund’s weighting in Latin America at the expense of EMEA augmented performance.

50 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of quarter end, the Fund remained overweighted in Latin America with corresponding underweightings in EMEA and Asia, due primarily to minimal exposure in Russia and Korea, respectively. From a sector perspective, the Fund remained focused on the emerging markets consumer through Consumer Discretionary, Consumer Staples and Financials, holdings. In addition, the Fund maintained a higher than Index weighting in Industrials, with corresponding underweightings in Energy, IT and Materials. These exposures are largely based upon the team’s bottom up fundamental analysis, in accordance with its strategic viewpoint.

June 30, 2007

William Blair Funds 51

Emerging Markets Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		Since Inception(a)
Emerging Markets Growth Fund Class N	16.53	%	51.80	%	49.14	%
Emerging Markets Growth Fund Class I	16.74		52.08		49.47
MSCI Emerging Markets Index	17.75		45.45		40.31

(a)

For the period from June 6, 2005 (Commencement of Operations) to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Index is an index that is designed to measure equity performance in the global emerging markets.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

52 Semi-Annual Report

June 30, 2007

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Emerging Asia—45.4%*
China—16.4%
*Belle International Holdings Limited (Specialty retail)	8,546,000	$	9,432
China High Speed Transmission Equipment Group Co. (Independent power producers & energy traders)*	276,000		250
China Infrastructure Machinery Holdings, Ltd. (Machinery)	5,188,000		11,344
China Mengniu Dairy Co. Ltd. (Food products)	3,054,000		10,537
China Merchants Bank (Commercial banks)	3,398,000		10,348
China Mobile Ltd. (Wireless telecommunication services)	2,897,800		31,178
China Oilfield Services (Energy equipment & services)	2,132,000		2,152
China Vanke Company Ltd. (Real estate management & development)	10,707,347		22,163
*China Water Affairs Group (Household durables)	7,790,000		4,547
Ctrip.com International Ltd.—ADR (Hotels, restaurants & leisure)	67,600		5,315
*Focus Media Holding Ltd.—ADR (Media)	219,800		11,100
Fu Ji Food and Catering Services Holdings Ltd (Hotels, restaurants & leisure)	1,764,000		6,073
Hopson Development Holdings Ltd. (Real estate management & development)	848,800		2,387
Lee and Man Paper Manufacturing Ltd. (Paper & forest products)	3,834,000		10,616
Li Ning Co. Ltd (Leisure equipment & products)	3,094,000		7,503
Parkson Retail Group Ltd. (Multiline retail)	849,900		5,445
Ports Design Ltd. (Textiles, apparel & luxury goods)	2,260,000		6,357
Shangdong Weigao GP Medical (Health care equipment & supplies)	2,800,000		6,311
Wumart Stores, Inc., Class “H” (Food & staples retailing)**	8,680,000		2,775
Xinyu Hengdeli Holdings Ltd. (Distributors)	10,920,000		5,355

			171,188

India—12.6%
ABB Ltd. India (Electrical equipment)	264,000		7,097
Bharat Heavy Electricals, Ltd. (Electrical equipment)	327,800		12,398
*Bharti Airtel Ltd. (Wireless telecommunication services)	615,500		12,651
*Carin India Ltd. (Oil, gas & consumable fuels)	1,471,300		5,273
Dabur India Ltd. (Personal products)	1,862,200		4,706
Financial Technologies, Ltd. (Software)	95,410		7,075
Housing Development Finance Corp. (Thrifts & mortgage finance)	123,700		6,176
Infosys Technologies, Ltd. (IT services)	195,500		9,252
*Inox Leisure Ltd. (Media)	1,208,500		3,983
Larsen & Toubro Ltd. (Construction & engineering)	315,700		17,058
Shopper’s Stop Ltd. (Multiline retail)	280,860		4,038
Unitech Limited (Real estate management & development)	715,500		8,850
Vedanta Resources Plc (Metals & mining)	1,032,500		33,281

			131,838


Issuer	Shares	Value

*Common Stocks—Emerging Asia—45.4%—(continued)*
Indonesia—2.7%
PT Bank Rakyat Indonesia (Commercial banks)	16,908,500	$	10,768
PT London Sumatra Indones (Food products)	12,863,500		9,246
PT Telekomunikasi Tbk (Diversified telecommunication services)	7,867,900		8,535

			28,549

Philippines—1.2%
Bank of Philippine Islands (Commercial banks)	6,818,900		10,095
*Paxys Inc. (Commercial services & supplies)	4,184,700		2,239

			12,334

Malaysia—4.1%
*Airasia Bhd (Airlines)	8,883,600		4,894
Bumiputra Commerce Holding Bhd (Commercial banking)	6,429,500		21,786
Kuala Lumpur Kepong Berhad Bhd (Food products)	2,845,650		10,643
Zelan Bhd (Construction & engineering)	1,424,300		4,964

			42,287

South Korea—3.4%
Hana Tour Service (Hotels, restaurants & leisure)	67,800		6,598
*NHN Corporation (Internet software & services)	65,500		11,923
Shinsegae Co. Ltd. (Food & staples retailing)	14,550		9,469
Taewoong Co Ltd (Machinery)	99,500		6,981

			34,971

Taiwan—5.0%
*Himax Technologies, Inc.—ADR (Semiconductors & semiconductor equipment)	1,693,315		9,770
Hon Hai Precision Industry (Electronic equipment & instruments)	3,527,528		30,469
Mediatek, Inc. (Semiconductors & semiconductor equipment)	765,040		11,903

			52,142


*Emerging Latin America—27.6%*
Argentina—0.8%
Banco Macro Sa—ADR (Commercial banks)	246,900		8,116

Brazil—11.9%
All America Latin Logistica (Road & rail)	709,600		9,660
*Anhanguera Eduacional Participacoes S.A. (Commercial services & supplies)	467,000		6,537
*BR Malls Participacoes SA (Real estate management & development)	1,177,100		15,316
CIA Vale Do Rio Doce—ADR (Metals & mining)	682,400		30,401
Cyrela Brazil Realty S.A. (Household durables)	905,200		11,234
Iguatemi Empresa de Shopping Centers S.A. (Commercial services & supplies)	581,600		10,499
Localiza Rent a Car S.A. (Road & rail)	946,600		10,678
Lojas Renner S.A. (Multiline retail)	348,600		6,470

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 53

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Emerging Latin America—27.6%—(continued)*
Brazil—(continued)
Lupatech SA (Machinery)	240,300	$	5,793
Rodobens Negocioa Imobiliarios S.A. (Household durables)	444,800		6,051
Submarino S.A. (Internet & catalog retail)	122,400		5,092
Totvs S.A. (Software)	189,500		6,168

			123,899

Chile—2.0%
*Cencosud S.A.—ADR 144A (Specialty retail)	163,900		10,198
S.A.C.I. Falabella S.A. (Multiline retail)	2,107,954		10,888

			21,086

Mexico—10.7%
Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)	3,098,800		5,450
America Movil S.A. (Wireless telecommunication services)	7,188,200		22,196
*Banco Compartamos SA (Commercial banks)	1,520,700		9,501
*Desarrolladora Homex S.A. de C.V.—ADR (Household durables)	160,900		9,749
*Groupo Famsa S.A. (Multiline retail)	1,868,700		10,897
Grupo Financiero Banorte S.A. de C.V. (Commercial banks)	4,145,500		18,986
Grupo Aeropuertario Del—ADR (Transportation infrastructure)	208,200		10,268
*Promotora Ambiental Sab de C.V. (Commercial services & supplies)	1,291,350		3,586
*Urbi Desarrollos Urbanos S.A. (Household durables)	2,391,400		11,012
Walmart de Mexico (Food & staples retailing)	2,670,400		10,134

			111,779

Panama—1.3%
Copa Holdings S.A., Class “A” (Airlines)†	205,600		13,825

Peru—0.9%
Credicorp Ltd. (Commercial banks)	157,500		9,634


*Emerging Europe, Mid-East, Africa—21.9%*
Czech Republic—1.1%
*Central European Media Enterprises Ltd., Class “A” (Media)†	112,300		10,958

Egypt—3.4%
Egyptian Financial Group—Hermes Holding SAE (Capital markets)	1,415,700		11,413
Orascom Construction Industries (Construction & engineering)	274,200		17,925
*Orascom Hotels and Development (Hotels, restaurants & leisure)	567,500		5,954

			35,292

Kazakhstan—1.0%
*Kazkommertsbank—GDR 144A (Commercial banks)	482,226		10,609

Poland—0.5%
*Cinema City International NV (Media)	401,500		5,045


Issuer	Shares or Principal Amount	Value

Common Stocks—Emerging Europe, Mid-East, Africa—21.9%—(continued)
Russia—5.9%
*CTC Media, Inc. (Media)†	376,645	$	10,222
*Magnit—CLS (Multiline retail)†	118,800		5,221
PIK Group—CLS (Real estate development & management)*	597,900		14,948
Sberbank—CLS (Commercial banks)†	5,838		22,768
*X5 Retail Group N.V.—GDR (Food & staples retailing)	295,300		8,652

			61,811

South Africa— 6.6%
Anglo Platinum Ltd (Metals & mining)	61,500		10,100
MTN Group Ltd. (Wireless telecommunication services)	1,031,400		14,020
Naspers Ltd. (Media)	750,390		19,279
Spar Group Limited (Food & staples retailing)	1,444,300		10,806
Truworths International Ltd. (Specialty retail)	1,966,300		10,116
Wilson Bayly Holmes-Ovcon (Construction & engineering)	318,500		4,651

			68,972

Turkey—1.6%
Bim Birlesik Magazalar A.S. (Food & staples retailing)	186,800		12,382
Coca Cola Icecek A.S. (Beverages)	500,200		3,749

			16,131

United Arab Emirates—1.8%
Emaar Properties PJSC (Real estate development & management)	5,808,100		18,739

Total Common Stock—94.9% (cost $743,583)			989,205


*Preferred Stock*
Brazil—4.7%
Banco Itau Holding (Commercial banks)	221,700		9,844
* Banco Sofisa S.A. (Commercial banks)	686,200		5,051
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)	829,300		22,141
* Net Servicos De Counicacao S.A. (Media)	704,800		11,637

			48,673

Total Preferred Stock—4.7% (cost $35,402)			48,673


*Investment in Affiliate*
William Blair Ready Reserves Fund	1,295,575		1,296

Total Investment in Affiliate—0.1% (cost $1,296)			1,296

See accompanying Notes to Financial Statements.

54 Semi-Annual Report

June 30, 2007

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Principal Amount		Value

*Short-Term Investments*
American Express Demand Note, VRN 5.170% due 7/2/07	$	6,875,000	$	6,875
Prudential Funding Demand Note, VRN 5.305% due 7/2/07		5,983,000		5,983

Total Short-Term Investments—1.2% (cost $12,858)				12,858


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $14,646, collateralized by SBA, Pool# 507256	$	14,640,762		14,641

Total Repurchase Agreement—1.4% (cost $14,641)				14,641

Total Investments—102.3% (cost $807,780)				1,066,673
Liabilities plus cash and other assets—(2.3)%				(24,322	)

Net assets—100.0%			$	1,042,351

*Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed Foreign Security

**Fair value pursuant to Valuation Procedures adopted by Board of Trustees. These holdings represent 1.72% of the Fund’s net assets at June 30, 2007. These securities was also deemed illiquid pursuant to Liquidity Procedures securities pursuant to Valuation Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Finance		24.5%
Consumer Discretionary		22.3%
Industrials		14.9%
Consumer Staples		9.9%
Telecommunication Services		8.5%
Information Technology		8.3%
Materials		8.1%
Energy		2.9%
Health Care		0.6%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


U.S. Dollar		19.4%
Hong Kong Dollar		14.9%
Brazilian Real		13.7%
Indian Rupee		9.5%
Mexican Nuevo Peso		8.8%
South African Rand		6.6%
New Taiwan Dollar		4.1%
Malaysian Ringgit		4.1%
Egyptian Pounds		3.4%
South Korean Won		3.4%
British Pound Sterling		3.2%
Indonesian Rupiah		2.8%
Uae Dirham		1.8%
Turkish Lira		1.5%
Philippine Peso		1.2%
Chilean Peso		1.1%
Polish Zloty		0.5%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 55

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

David S. Mitchell

VALUE DISCOVERY FUND

The Value Discovery Fund invests in the equity securities of small companies that we believe offer a long-term investment value seeking to identify undervalued companies with sound business fundamentals.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Value Discovery Fund posted a 6.45% increase on a total return basis (Class N shares) during the six months ended June 30, 2007. By comparison, the Russell 2000^® Value Index, gained 3.80%, while the Russell 2000^® Index rose 6.45%.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

Strong stock selection in Financials, Health Care, and Energy comprised the majority of the Fund’s relative out performance. In the Financial sector, our holdings of Equity Inns, a real estate investment trust, was the major contributor to performance due to its acquisition by a real estate fund company. Our holdings in Consumer Finance and Insurance, however, slightly detracted from performance. Both industries’ are highly correlated with interest rates and have experienced weakness as a result of increased inflation concerns and deterioration in the subprime marketplace.

What were among the best performing sectors for the Fund? Were there any investment themes that produced the best results?

Energy Reserves has been one of the strongest performing sectors year to date as commodity and oil prices have continued their rally from late 2006. The Fund benefited from both our energy reserves security selection and an over weight position in the energy reserves sector.

What were among the weakest performing sectors for the Fund? Were there any investments that did not measure up to your expectations?

Consumer Staples and Information Technology (IT) sectors detracted from the total return. There were no specific stocks that significantly detracted from performance in Consumer Staples. In general, Consumer sectors have been weak in 2007 as increasing energy prices, hints of rising inflation, and slowing GDP growth led to an unfavorable environment for consumers. IT Services and Semiconductors names were the largest year to date detractors. Semitool is a Semiconductor stock that negatively impacted performance; the market sold off due to some short term events causing a decline in earnings and a subsequent downward revision of earnings guidance. We continue to see opportunity in Semitool and we anticipate a positive long term trend of earnings growth.

What is your current strategy? How is the Fund positioned?

As a bottom up fundamental manager, our portfolio construction is primarily based on identifying stocks with the best potential to add value to our overall returns. We do not make

56 Semi-Annual Report

June 30, 2007

sector decisions and then conduct stock selection or portfolio construction based on each sector’s weight in the index. Our portfolio construction has a relative sector neutrality approach that results in our sector weights remaining roughly proportional to those of the benchmark. An over weighted sector position therefore occurs due to finding attractive stocks in that sector.

Calendar year 2007 started with investor concerns that a US-led slowdown would stall growth, commodity price increases and high utilization rates might spill over into wage and price inflation, and either lower growth or higher interest rates could destabilize credit and liquidity and cause a “financial accident.” In May, US interest rates rose significantly on fears that inflation was accelerating and that the “financial accident” was happening as subprime mortgage defaults started to escalate. The highly publicized problems at certain hedge funds further fueled speculation that mortgage-related derivatives were increasing systemic financial risk. The market corrections associated with these events appear to have been orderly adjustments and interest rates have declined from their May levels. Investors however are demanding more compensation for risk as recent leveraged buy-out debt offerings have failed to attract investors and spreads have subsequently widened. While there are few if any signs of an asset bubble, in spite of widespread efforts to identify one, the global economy and financial markets continue to function in relatively stable equilibrium.

While earnings growth has slowed over the last several quarters, we anticipate it will ramp up in late 2007 and through 2008. We anticipate top line revenue and earnings to continue to grow due to indications that companies’ hiring plans are strengthening and many are experiencing bulging order books. Additionally, firms have regained pricing power and strong corporate cash balances are leading to increases in capital spending plans. From a long term perspective, interest rates and employment are still accommodative to economic growth.

June 30, 2007

William Blair Funds 57

Value Discovery Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		10 Year		Since Inception
Value Discovery Fund Class N	6.45	%	19.41	%	11.52	%	10.11	%	12.52	%	—
Value Discovery Fund Class I	6.54		19.64`		11.73		10.32		—		14.52	(a)
Russell 2000^® Index	6.45		16.43		13.45		13.88		9.06		10.34	(a)
Russell 2000^® Value Index	3.80		16.05		15.02		14.62		12.14		15.27

(a)

For the period from October 1, 1999 (Commencement of the Class) to June 30, 2007.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2000^® Index is the Fund’s primary benchmark. The Russell 2000^® Index is an unmanaged composite of the smallest 2000 stocks of the Russell 3000^® Index.

The Russell 2000^® Value Index consists of small-capitalization companies with below average price-to-book ratios and forecasted growth rates.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

58 Semi-Annual Report

June 30, 2007

Value Discovery Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks*
Financials—30.0%
Argonaut Group, Inc.	52,050	$	1,625
Boston Private Financial Holdings, Inc.	40,936		1,100
*Care Investment Trust, Inc.	48,790		671
Citizens Banking Corporation	43,924		804
Cogdell Spencer, Inc.	34,775		716
*Community Bancorp	31,480		881
*CRM Holdings, Ltd.	52,930		405
Employers Holdings, Inc.	41,290		877
Equity Inns, Inc.	30,009		672
Financial Federal Corporation	39,415		1,175
First Midwest Bancorp Incorporated	49,121		1,744
First Potimac Realty Trust	33,155		772
FirstMerit Corporation	45,755		958
Hanover Insurance Group, Inc.	16,160		788
Jones Lang LaSalle, Inc	7,175		814
Kite Realty Group Trust	70,495		1,341
Lasalle Hotel Properties	17,635		766
Mid-American Apartment Communities, Inc.	28,110		1,475
*PMA Capital Corporation, Class “A”	97,803		1,046
*RAM Holdings, Ltd.†	83,280		1,312
UCBH Holdings	52,345		956
Umpqua Holdings Corporation	32,020		753
*Western Alliance Bancorp	31,770		948

			22,599

Industrials—15.4%
Barrett Business Services, Inc.	30,895		798
CLARCOR, Inc.	37,260		1,395
*EMCOR Group, Inc.	11,055		806
*Esco Technologies, Inc.	14,705		533
Forward Air Corporation	35,870		1,223
G & K Services, Inc.	20,375		805
*Genlyte Group, Inc.	14,860		1,167
Interface Inc., Class “A”	69,310		1,307
Kaydon Corporation	18,885		984
Tal International Group, Inc.	48,460		1,440
Watsco, Inc.	20,790		1,131

			11,589

Information Technology—14.2%
Adtran Incorporated	30,085		781
*Anixter International, Inc.	15,520		1,167
*Avid Technology, Inc.	26,121		923
*Entegris, Inc.	96,853		1,151
*MICROS Systems, Inc.	18,450		1,004
*Parametric Technology Corporation	70,130		1,516
*Progress Software Corporation	23,570		749
*Semitool, Inc.	86,159		828
*SRA International, Inc.	14,860		375
*Sybase, Inc.	59,880		1,431
*Transaction Systems Architects, Inc.	22,110		744

			10,669

Consumer Discretionary—13.9%
*Aftermarket Technology Corp.	27,670		821
Ameristar Casinos, Inc.	27,670		961
*Cavco Industries, Inc.	20,790		780
Christopher & Banks Corporation	93,862		1,610
Entercom Communications Corporation	35,943		895
*Meritage Homes Corporation	14,290		382
*Papa John’s International, Inc.	24,245		697
*RC2 Corporation	17,715		709

*Non-income producing

† = U.S. listed foreign security

VRN = Variable Rate Note


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Discretionary—(continued)
Ruby Tuesday, Inc.		27,085	$	713
*Select Comfort Corporation		50,440		818
*Tractor Supply Company		20,057		1,044
Wolverine World Wide, Inc.		38,065		1,055

				10,485

Materials—7.2%
Arch Chemicals, Inc.		36,235		1,273
CF Industries Holdings, Inc.		13,390		803
Quanex Corporation		17,350		845
Silgan Holdings, Inc.		23,865		1,319
Texas Industries, Inc.		15,665		1,228

				5,468

Health Care—6.2%
*Magellan Health Services		27,450		1,276
*Matrixx Initiatives, Inc.		50,221		1,051
*Pediatrix Medical Group		22,255		1,227
*Varian, Inc.		20,939		1,148

				4,702

Energy—5.6%
*Forest Oil Corporation		32,283		1,364
*Goodrich Petroleum Corporation		19,400		672
*Horizon Offshore, Inc.		39,590		760
*Petrohawk Energy Corporation		88,508		1,404

				4,200

Utilities—3.7%
Avista Corpration		32,210		694
Cleco Corporation		28,845		707
Northwest Natural Gas Company		14,715		680
South Jersey Industries, Inc.		19,400		686

				2,767

Consumer Staples—3.7%
Flowers Foods, Inc.		22,180		740
J&J Snack Foods		18,742		707
*Playtex Products, Inc.		89,313		1,323

				2,770

Total Common Stock—99.9% (cost $66,926)				75,249


*Investment in Affiliate*
William Blair Ready Reserves Fund		30,226		30

Total Investment in Affiliate—0.0% (cost $30)				30


*Short-Term Investment*
Prudential Funding Demand Note, VRN 5.305%, due 7/2/07	$	81,000		81

Total Short-Term Investment—0.1% (cost $81)				81

Total Investments—100.0% (cost $67,037)				75,360
Liabilities, plus cash and other assets—(0.0)%				(27	)

Net assets—100.0%			$	75,333

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 59

LOGO

James S. Kaplan

LOGO

Christopher T. Vincent

LOGO

Benjamin J. Armstrong

BOND FUND

The Bond Fund Seeks to outperform the Lehman Aggregate Bond Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

We are pleased to have the Bond Fund become the newest addition to the William Blair Fund Family and would like to thank our shareholders for investing with us.

As the managers of the Bond Fund we are enthusiastic about the opportunities available to us. The broad sectors that are represented in the Fund’s portfolio include government securities, corporate debt securities issued by domestic and foreign companies, mortgage-backed securities and asset backed securities. The Fund invests at least 90% in securities rated in the highest four categories by at least one of the following three nationally recognized statistical rating organizations: Fitch Ratings, Moody’s Investors Service Inc. and Standard & Poor’s Corporation. The Fund may also invest no more than 10% of its net assets in below investment grade securities.

How did the Fund perform since its inception? How did the Fund’s performance compare to its benchmark?

The Bond Fund commenced operations on May 1, 2007. Through the two-month period ending June 30, 2007, the Fund posted a decrease of 1.15% (Class N Shares). By comparison, the Fund’s benchmark, the Lehman Aggregate Bond Index, declined 1.00%.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

Rising interest rates and risk aversion weighed on the fixed income markets during the second quarter of 2007.

Interest rates rose sharply during the period. For example, the yield on 2-year Treasury notes increased 0.28% during the second quarter, while the yield on 10-year Treasury securities increased 0.38%. The yield on 2-year Treasury notes was 4.86% on June 30, while the yield on 10-year Treasury securities finished the quarter at 5.02%.

Risk aversion dominated the corporate bond and mortgage markets. Wider spreads resulted in these sectors generally underperforming Treasury securities during the quarter. Concerns about rising subprime mortgage delinquencies and the bankruptcy of several subprime mortgage originators has negatively impacted the residential mortgage market. Mid-year marked the worst six months in the non-Agency Mortgage markets in many years. The highly publicized problems at certain hedge funds heightened fears about the possibility of write-downs of securities backed by subprime mortgages at other institutions.

Reports about the current lackluster housing market added to the negative psychology in the residential mortage-backed market.

Concerns about shareholder-friendly actions by corporate bond issuers contributed to risk aversion in the credit markets. These actions include rising equity dividends and stock repurchases. In addition, the record pace of M&A transactions has negatively impacted the bond market.

60 Semi-Annual Report

June 30, 2007

Assets in the Bond Fund reached $51.6 million as of June 30, 2007. We used the months of May and June to deploy these assets into new investments for the Fund.

How is the Fund positioned?

As of June 30, 2007, the three major sector weightings were U.S. Agency Mortgage-Backed securities (43%), Corporate bonds (25%) and U.S. Treasuries (24%). All three sectors represent modest overweights versus the Lehman Aggregate Bond Index.

As previously stated, we are carefully following current market conditions and potential Federal Reserve activity.

June 30, 2007

William Blair Funds 61

Bond Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Since Inception(a)
Bond Fund Class N	(1.15	)%
Bond Fund Class I	(1.15	)
Lehman Aggregate Bond Index	(1.00	)

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Lehman Aggregate Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on June 30, 2007. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

62 Semi-Annual Report

June 30, 2007

Bond Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	Principal Amount		Value
*U.S. Government and U.S. Government Agency—64.2%*
U.S. Treasury—22.9%
U.S. Treasury Note, 4.375%, due 12/31/07	$	5,000	$	4,987
U.S. Treasury Note, 4.750%, due 2/15/10		1,450		1,445
U.S. Treasury Note, 4.750%, due 5/15/14		1,300		1,284
U.S. Treasury Note, 5.125%, due 5/15/16		2,250		2,262
U.S. Treasury Note, 7.125%, due 2/15/23		325		390
U.S. Treasury Note, 4.500%, due 2/15/36		1,600		1,449

Total U.S. Treasury Obligations		11,925		11,817

Government National Mortgage Association (GNMA)—0.0%
#357752, 7.000%, due 4/15/09		4		4

Federal Home Loan Bank (FHLB)—0.6%
4.750%, due 12/16/16		325		308

Federal Home Loan Mortgage Corp. (FHLMC)—9.5%
#G10330, 7.000%, due 1/1/10		30		31
#G90024, 7.000%, due 1/20/13		100		103
#G30093, 7.000%, due 12/1/17		78		80
#G30254, 6.500%, due 5/1/19		124	��	127
#G30255, 7.000%, due 7/1/21		122		126
#G18137, 6.500%, due 8/1/21		541		551
#D95621, 6.500%, due 7/1/22		175		179
#D95897, 5.500%, due 3/1/23		481		471
#C01385, 6.500%, due 8/1/23		709		722
#C90896, 6.500%, due 2/1/25		1,226		1,250
6.750%, due 9/15/29		650		745
#G10728, 7.500%, due 7/1/32		500		522

Total FHLMC Mortgage Obligations		4,736		4,907

Federal National Mortgage Association (FNMA)—31.2%
#598453, 7.000%, due 6/1/15		37		38
#689612, 5.000%, due 5/1/18		968		939
#747903, 4.500%, due 6/1/19		800		761
#791393, 5.500%, due 10/1/19		823		813
#831430, 5.500%, due 3/1/21		987		973
#253847, 6.000%, due 5/1/21		577		579
#900725, 6.000%, due 8/1/21		511		514
#254797, 5.000%, due 6/1/23		528		504
#545437, 7.000%, due 2/1/32		390		405
#555522, 5.000%, due 6/1/33		917		864
#555880, 5.500%, due 11/1/33		978		948
#725027, 5.000%, due 11/1/33		1,295		1,219
#725205, 5.000%, due 3/1/34		1,006		948
#725238, 5.000%, due 3/1/34		1,014		955
#725424, 5.500%, due 4/1/34		1,048		1,015
#725611, 5.500%, due 6/1/34		829		803
#745092, 6.500%, due 7/1/35		1,131		1,150
#845188, 6.000%, due 12/1/35		992		983
#848782, 6.500%, due 1/1/36		1,653		1,671

Total FNMA Mortgage Obligations		16,484		16,082


Issuer	NRSRO Rating		Principal Amount		Value
*Non-Agency Mortgage-Backed Obligations—8.3%*
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, due 7/25/18	AA	+	$	318	$	307
Aames Mortgage Trust, 2001-1, Tranche M2, 7.588%, due 6/25/31	A			133		131
LSSCO, 2004-2, Tranche M2, 6.328%, due 2/28/33, VRN*	A			339		337
CWL, 2003-5, Tranche MF2 5.959%, due 11/25/33	AA	-		391		387
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5 6.455%, due 7/25/34	A			700		692
FHASI, 2004-AR4, Tranche 3A1, 4.588%, due 8/25/34, VRN	AAA			563		554
Security National Mortgage Loan Trust, 2004-2A, Tranche M2, 6.352%, due 11/25/34	A			50		50
GRP Real Estate Asset Trust, 2005-1 Tranche A, 4.850%, due 1/25/35*	A			393		391
Security National Mortgage Loan Trust, 2005-1A, Tranche M2, 6.530%, due 2/25/35*	A			25		24
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 5.635%, due 5/25/35	AA	+		118		117
Structured Asset Securities Corp., 2005-9XS, Tranche A2B, 6.500%, due 6/25/35	AAA			200		200
Security National Mortgage Loan Trust, 2005-2A, Tranche M2, 7.321%, due 2/25/36*	A			125		123
Chase Mortgage Finance Corporation, 2006-A1, Tranche A3, 6.000%, due 9/25/36	AAA			650		648
La Hipotecaria Panamanian Mortgage Trust, 2007-1GA, Tranche A, 5.750%, due 12/23/36*	AAA			80		79
Security National Mortgage Loan Trust, 2006-1A, Tranche M2, 7.500%, due 9/25/36*	A			80		78
Statewide Mortgage Loan Trust, 2006-1A, Tranche A2, 7.660%, due 9/25/37*	AAA			70		72
ACE, 2005-SN1, Tranche M2, 5.770%, due 11/25/39, VRN	A	+		50		48
ACE, 2005-SD3, Tranche M2, 7.070%, due 8/25/45, VRN	A	+		70		71

Total Non-Agency Mortgage-Backed Obligations				4,355		4,309


*Corporate Obligations—23.8%*
SLM Corporation, 5.565%, due 7/25/08, VRN	A	+		500		496
Consolidated Edison Company of New York, 7.150%, due 12/1/09	A	+		500		520
Household Finance Corporation, 8.000%, due 7/15/10	AA	-		500		534
Bank of America Corporation, 4.250%, due 10/1/10	AA			500		483

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 63

Bond Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	NRSRO Rating		Principal Amount		Value

*Corporate Obligations—(continued)*
National Rural Utilities Cooperative Finance Corporation, 7.250%, due 3/1/12	A		$	500	$	533
Citigroup, Inc. 5.625%, due 8/27/12	AA			400		400
Simon Property Group, Inc., 6.350%, due 8/28/12	A	-		500		515
Cox Communications, Inc., 7.125%, due 10/1/12	BBB	-		400		423
Boeing Capital Corporation, 5.800%, due 1/15/13	A	+		400		406
Residential Capital, LLC, 6.500%, due 4/17/13	BBB			350		338
SBC Communications, 5.100%, due 9/15/14	A			400		381
CODELCO, Inc.—144A, 4.750%, due 10/15/14	A			400		373
Johnson Controls, Inc. 5.500%, due 1/15/16	A	-		400		387
ProLogis, 5.750%, due 4/1/16	BBB	+		400		395
Omnicom Group, Inc., 5.900%, due 4/15/16	A	-		400		395
Yum!, Brands, Inc., 6.250%, due 4/15/16	BBB			400		399
SAB Miller plc, 6.500%, due 7/1/16	BBB	+		400		411
Petrobras International Finance Company, 6.125%, due 10/6/16	BBB	-		400		392
Marriott International, 6.375%, due 6/15/17	BBB	+		450		451
Ras Laffan Lng II, 5.298%, due 9/30/20	A	+		400		374
Kroger Company, 8.00%, due 9/15/29	BBB			400		431
Conoco Funding Company, 7.250%, due 10/15/31	A	-		400		452
Kohl’s Corporation, 6.00%, due 1/15/33	A			250		234
Goldman Sachs Group, Inc., 6.125%, due 2/15/33	AA	-		400		382
Pacific Gas and Electric Company, 6.050%, due 3/1/34	A	-		250		242
Teva Pharmaceutical Finance LLC, 6.150%, due 2/1/36	BBB			510		477
Wisconsin Electric Power Company, 5.700%, due 12/1/36	A	+		500		471
Comcast Corporation, 6.450%, due 3/15/37	BBB	+		500		482
Florida Power and Light Group Capital, Inc. 6.650%, due 6/15/67, VRN	A	-		500		496

Total Corporate Obligations				12,310		12,273

Total Fixed Income—96.3% (cost $50,322)				50,139		49,700


Issuer	NRSRO Rating		Principal Amount/ Shares		Value

*Preferred Stock—0.5%*
Public Storage, Inc.				10,000	$	239
Total Preferred Stock—0.5% (cost $245)				10,000		239

Total Long-Term Investments—96.8% (cost $50,567)						49,939


*Short-Term Investments*
American Express Corporation, VRN 5.170%, due 7/2/07	A	+	$	2,240		2,240
Prudential Funding LLC, VRN 5.305%, due 7/2/07	A	+		2,240		2,240

Total Short-Term Investments—8.7% (cost $4,480)				4,480		4,480


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/02/2007, repurchase price $1,778, collateralized by SBA #506044	A	+		1,777		1,777

Total Repurchase Agreement—3.4% (cost $1,777)				1,777		1,777

Total Investments—108.9% (cost $56,824)						56,196

Liabilities plus cash and other assets—(8.9)%						(4,573	)

Net Assets—100%					$	51,623

VRN = Variable Rate Note

NRSRO = Nationally Recognized Statistical Rating Organization, such as

S&P, Moody’s or Fitch (unaudited)

The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury

*Deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees. These holdings represent 2.14% of the net assets at June 30,2007.

See accompanying Notes to Financial Statements.

64 Semi-Annual Report

June 30, 2007

LOGO

James S. Kaplan

LOGO

Christopher T. Vincent

INCOME FUND

The Income Fund invests in intermediate-term debt securities.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Income Fund posted a 0.45% gain on a total return basis (Class N Shares) for the 6 months ended June 30, 2007. By comparison, the Fund’s benchmark, the Lehman Intermediate Government/Credit Bond Index, rose 1.45%, while the Fund’s peer group, the Morningstar Short-term Bond Category, increased 1.72%.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

During the first half of 2007, the Fund’s return underperformed versus the benchmark. Two non-prime mortgage bonds contributed significantly to the underperformance. The poor performance of these holdings has trimmed approximately 1.1% from the Fund’s return since the beginning of the year.

The Fund has been underweight Treasury securities and overweight the other spread sectors relative to the benchmark. The primary overweight has been in Mortgage and Asset-backed securities including non-agency residential mortgage-backed securities, which also detracted from performance. The Fund has been underweight the credit sector, which marginally benefited performance.

Rising interest rates and risk aversion weighed on the fixed income markets during the first half of 2007.

Interest rates posted slight to modest gains at mid-year. Rates were generally flat during the first quarter of 2007, but spiked during the second quarter. For example, the yield on 2-year Treasury notes increased 0.05% during the first half of the year, while the yield on 10-year Treasury securities increased 0.32%. The yield on 2-year Treasury notes was 4.86% on June 30, while the yield on 10-year Treasury securities finished the quarter at 5.02%.

Risk aversion dominated the corporate bond and mortgage markets. Wider spreads resulted in these sectors generally underperforming Treasury securities during the quarter.

Concerns about rising subprime mortgage delinquencies and the bankruptcy of several subprime mortgage originators has negatively impacted the residential mortgage market. Mid-year marked the worst six months in the non-Agency Mortgage markets in many years. The highly publicized problems at certain hedge funds heightened fears about the possibility of write-downs of securities backed by subprime mortgages at other institutions.

Reports about the current lackluster housing market added to the negative psychology in the residential Mortgage-backed market.

June 30, 2007

William Blair Funds 65

Which investment strategies enhanced the Fund’s return? Were there any investment strategies that produced the best results?

Although it was a very difficult first half of the year for the Mortgage-backed market, and the Fund, in general, the performance of the Fund benefited from its holdings of seasoned premium Agency pass-through mortgages, which have shorter maturities.

The Fund’s duration was shorter than the stated benchmark, the Lehman Intermediate Government Credit Index, which contributed to relative returns.

Within corporate bonds, the Fund has been underweight the finance sector, which has contributed to returns. This sector has been among the worst performers in the credit market due to subprime mortgage problems associated with several firms in this sector. In addition, the Fund has avoided large losses associated with corporate bonds threatened with leveraged buyout concerns. Avoiding these buyouts has also contributed to returns. Finally, the Fund has avoided direct exposure to the Homebuilder sector, which has also been a poor performer.

How is the Fund positioned?

As of June 30th, the three major sector weightings were U.S. Mortgage-backed securities (40%), Non-Agency Mortgage-backed securities (25%) and Corporate bonds (24%). The former two sectors represent overweights while the latter represents an underweight versus the Lehman Intermediate Government/Credit Index.

As previously stated, we are carefully following current market conditions and potential Federal Reserve activity.

66 Semi-Annual Report

June 30, 2007

Income Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		5 Year		10 Year		Since Inception
Income Fund Class N	0.45	%	4.48	%	3.16	%	3.46	%	4.96	%	—	%
Income Fund Class I	0.59		4.70		3.32		3.63		—		5.01	(a)
Lehman Intermediate Government Credit Bond Index	1.45		5.76		3.41		4.14		5.66		5.53	(a)

(a)

For the period from October 1, 1999 to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Lehman Intermediate Government/Credit Bond Index indicates broad intermediate government/corporate bond market performance.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 67

Income Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—49.6%*
U.S. Treasury—4.9%
U.S. Treasury Note, 6.500%, due 2/15/10	$	8,000	$	8,309
U.S. Treasury Note, 4.750%, due 5/15/14		2,000		1,975
U.S. Treasury Note, 5.125%, due 5/15/16		2,060		2,072

Total U.S. Treasury Obligations		12,060		12,356

Government National Mortgage Association (GNMA)—1.5%
#780405, 9.500%, due 11/15/17		469		500
#589335, 6.500%, due 10/15/22		1,877		1,904
#357322, 7.000%, due 9/15/23		142		148
#616250, 6.000%, due 2/15/24		1,286		1,284

Total Government National Mortgage Association		3,774		3,836

Small Business Administration—0.0%
Receipt for Multiple Originator Fees, #3, 0.821%, due 11/01/08 (Interest Only) WAC		1,475		12

Federal Home Loan Mortgage Corp. (FHLMC)—18.6%
#1417, Tranche SA, 11.219%, due 11/15/07, VRN		94		94
#G10067, 7.000%, due 1/1/08		58		58
#1601, Tranche PJ, 6.000%, due 10/15/08, VRN		265		269
#E80050, 6.000%, due 10/1/09		253		254
#G90028, 7.000%, due 5/17/09		147		147
#G90019, 7.500%, due 12/17/09 7.000%, due 3/15/10		213 4,000		215 4,179
#E65418, 7.000%, due 8/1/10		107		107
#G10457, 7.000%, due 2/1/11		284		290
#E00436, 7.000%, due 6/1/11		319		327
#G10708, 6.500%, due 8/1/12		189		193
#G11218, 7.000%, due 10/1/12		69		71
#G10839, 5.500%, due 10/1/13		1,011		1,004
#E72924, 7.000%, due 10/1/13		917		945
#J02572, 7.500%, due 6/1/14		1,511		1,554
#E81697, 8.000%, due 5/1/15		1,936		2,032
#E81703, 7.000%, due 5/1/15		829		853
#E81908, 8.500%, due 12/1/15		114		120
#G11688, 7.000%, due 2/1/16		615		635
#J02184, 8.000%, due 4/1/16		1,536		1,608
#G12258, 6.000%, due 8/1/16		2,339		2,352
#G90022, 8.000%, due 9/17/16		578		603
#G11702, 7.500%, due 12/1/16		582		601
#J04096, 6.500%, due 1/1/17		2,443		2,496
#G11486, 7.500%, due 4/1/17		673		694
#E90398, 7.000%, due 5/1/17		1,062		1,096
#M30028, 5.500%, due 5/1/17		262		263
#G11549, 7.000%, due 7/1/17		617		635
#G90027, 6.000%, due 11/17/17		1,152		1,153
#G11756, 7.000%, due 12/1/17		1,026		1,053
#G11725, 5.500%, due 11/1/18		1,904		1,882
#G30254, 6.500%, due 5/1/19		2,341		2,401
#G30255, 7.000%, due 7/1/21		785		815
#G30268, 7.000%, due 7/1/21		1,620		1,682


Issuer	Principal Amount		Value
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#J02986, 6.500%, due 7/1/21	$	2,380	$	2,424
#G30239, 7.000%, due 8/1/21		1,407		1,460
#C67537, 9.500%, due 8/1/21		180		193
#G18137, 6.500%, due 8/1/21		2,756		2,807
#G30243, 6.000%, due 12/1/21		1,599		1,609
#D95621, 6.500%, due 7/1/22		2,976		3,044
#G02183, 6.500%, due 3/1/30		1,822		1,855
#A45790, 7.500%, due 5/1/35		933		973

Total FHLMC Mortgage Obligations		45,904		47,046

Federal National Mortgage Association (FNMA)—24.6%
#1992-192, Tranche SC, 6.329%, due 11/25/07, VRN		42		42
#93-196, Tranche SA, 9.794%, due 10/25/08, VRN		175		174
#1993-221, Tranche SG, 3.624%, due 12/25/08, VRN		149		147
#765396, 5.500%, due 1/1/09		125		124
#2002-27, Tranche SW, 4.327%, due 5/25/2009 VRN		1,020		1,005
#695512, 8.000%, due 9/1/10		292		298
#725479, 8.500%, due 10/1/10		463		471
6.250%, due 2/1/11		6,000		6,201
#313816, 6.000%, due 4/1/11		367		370
#577393, 10.000%, due 6/1/11		169		180
#577395, 10.000%, due 8/1/11		675		720
#254705, 5.500%, due 3/1/13		1,372		1,368
#254788, 6.500%, due 4/1/13		469		477
#725315, 8.000%, due 5/1/13		463		481
#190539, 6.000%, due 1/1/14		370		370
#806463, 7.000%, due 3/1/14		557		574
#593561, 9.500%, due 8/1/14		360		385
#535560, 7.000%, due 8/1/14		888		912
#567027, 7.000%, due 9/1/14		1,452		1,496
#567026, 6.500%, due 10/1/14		1,363		1,394
#458124, 7.000%, due 12/15/14		313		322
#576554, 8.000%, due 1/1/16		1,497		1,566
#745459, 7.000%, due 2/1/15		781		806
#598453, 7.000%, due 6/1/15		270		274
#576553, 8.000%, due 2/1/16		2,261		2,387
#555747, 8.000%, due 5/1/16		422		439
#735569, 8.000%, due 10/1/16		2,025		2,109
#725410, 7.500%, due 4/1/17		1,309		1,352
#643217, 6.500%, due 6/1/17		365		373
#679247, 7.000%, due 8/1/17		1,568		1,631
#682075, 5.500%, due 11/1/17		1,029		1,018
#662925, 6.000%, due 12/1/17		1,413		1,424
#740847, 6.000%, due 10/1/18		1,253		1,260
#852864, 7.000%, due 7/1/20		3117		3220
#458147, 10.000%, due 8/15/20		886		984
#835563, 7.000%, due 10/1/20		1,252		1,297
#893325, 7.000%, due 9/1/21		2,962		3,041
#735367, 6.000%, due 3/1/22		2185		2194
#735574, 8.000%, due 3/1/22		852		902
#735104, 7.000%, due 5/1/22		2,172		2,259
#725927, 7.000%, due 8/1/22		1,781		1,854
#679253, 6.000%, 10/1/22		1754		1761
#735137, 6.500%, due 11/1/22		1,184		1,213
#254633, 6.000%, due 1/1/2023		635		637

See accompanying Notes to Financial Statements.

68 Semi-Annual Report

June 30, 2007

Income Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	NRSRO Rating	Principal Amount		Value
Federal National Mortgage Association (FNMA)—(continued)
#1993-19, Tranche SH, 11.234%, due 4/25/23, VRN		$	11	$	15
#745633, 6.500%, due 7/1/24			1,573		1,610
#806458, 8.000%, due 6/1/28			1,164		1,230
#880155, 8.500%, due 7/1/29			1,445		1,551
#797846, 7.000%, due 3/1/32			1,624		1,679
#745519, 8.500%, due 5/1/32			933		1,002
#654674, 6.500%, due 9/1/32			288		293
#733897, 6.500%, due 12/1/32			539		550
#888305, 7.000, due 3/1/36			2,941		3,049

Total FNMA Mortgage Obligations			60,575		62,491


*Non-Agency Mortgage-Backed—24.5%*
ABFS, 2002-2, Tranche A6, 5.850%, due 3/15/19	AAA		114		114
RALI, 2004-QS16, Tranche 2M1, 5.000%, due 12/25/19	AA		1,629		1,557
RALI, 2004-QS16, Tranche 2M3, 5.000%, due 12/25/19	BBB		275		254
RALI, 2005-QS14, Tranche 1M1, 5.250%, due 9/25/20	AA		956		922
RALI, 2005-QS14, Tranche 1M2, 5.250%, due 9/25/20	A		301		287
RALI, 2006-QS2, Tranche IIM1, 5.500%, due 2/25/21	AA		1,057		1,027
RALI, 2006-QS2, Tranche IIM2, 5.500%, due 2/25/21	A		494		475
RALI, 2006-QS6, Tranche 2M1, 6.000%, due 6/25/21	AA		516		511
RALI, 2006-QS6, Tranche 2M2, 6.000%, due 6/25/21	A		408		400
First Plus, 1997-4, Tranche M1, 7.640%, due 9/11/23	AA		1,350		1,345
First Plus, 1997-4, Tranche M2, 7.830%, due 9/11/23	A		285		287
First Plus, 1997-4, Tranche A8, 7.810%, due 9/11/23	AAA		134		137
First Plus, 1998-2, Tranche M2, 8.010%, due 5/10/24	A		179		178
First Plus, 1998-3, Tranche M2, 7.920%, due 5/10/24, VRN	A		474		478
Bear Stearns ABS, 2001-A, Tranche M1, 7.540%, due 2/15/31	A		653		653
Delta Funding Home Equity Loan Trust, 2000-4, Tranche M1, 7.650%, due 2/15/31	AA		1,554		1,551
Structured Asset Securities Corp., 2005-SC1, Tranche 1A2, 10.245%, due 5/25/31, VRN*	AAA		1,921		2,075
Aames Mortgage Trust, 2001-1, Tranche M2, 7.588%, due 6/25/31	A		1,216		1,198
Security National Mortgage Loan Trust, 2004-1A, Tranche M2, 6.750%, due 06/25/32	A		1,600		1,566
Structured Assets Security Corporation, 2002-13, Tranche B1, 6.750%, due 7/25/32, VRN	AAA		2,021		2,014


Issuer	NRSRO Rating		Principal Amount		Value

*Non-Agency Mortgage-Backed Obligations—(continued)*
Structured Assets Security Corporation, 2002-17, Tranche B3, 6.089%, due 9/25/32, VRN	A		$	1,811	$	1,803
LSSCO, 2004-2, Tranche M1, 6.326%, due 2/28/33, VRN*	AA			884		885
LSSCO, 2004-2, Tranche M2, 6.326%, due 2/28/33, VRN*	A			678		675
ABFS, 2002-2, Tranche A-7, 5.215%, due 7/15/33, VRN	AAA			16		16
ABFS, 2002-3, Tranche M1, 5.402%, due 9/15/33, VRN	AA			1,128		1,109
Residential Asset Mortgage Prouducts, 2003-RS9, Tranche MI1, 5.800%, due 10/25/33	AA			198		194
Residential Asset Mortgage Prouducts, 2003-RS9, Tranche MI2, 6.300%, due 10/25/33	A			1,404		1,382
ACE, 2004-SD1, Tranche M3, 8.070%, due 11/25/33, VRN	BBB			2099		1760
Residential Asset Mortgage Products, 2003-RS11, Tranche MI1, 5.597%, due 12/25/33 VRN	AA			1,695		1,675
Deutsche Mortgage Securites, Inc., 2004-2, Tranche M1, 5.090%, due 1/25/34	AA			1,332		1,290
RAAC, 2005-SP1, Tranche M1, 5.505%, due 9/25/34, VRN	AA			2,571		2,430
Security National Mortgage Loan Trust, 2004-2A, Tranche M2, 6.352%, due 11/25/34	A			2,200		2,185
GRP Real Estate Asset Trust, 2005-1 Tranche A, 4.850%, due 1/25/35*	A			224		223
Security National Mortgage Loan Trust, 2005-1A, Tranche M2, 6.530%, due 2/25/35*	A			1,475		1,435
Security National Mortgage Loan Trust, 2005-1A, Tranche B1, 7.450%, due 2/25/35*	BBB			950		860
Soundview Home Equity Loat Trust, 2005-B, Tranche M1 5.635%, due 5/25/35	AA	+		1,578		1,573
Structured Asset Securities Corp., 2005-9XS, Tranche 1A2B, 6.500%, due 6/25/35	AAA			3,435		3,434
SACO, 2005-WM2, Tranche B2, 6.500%, due 7/25/35**	BBB			3,017		714
Security National Mortgage Loan Trust, 2005-2A, Tranche B1, 7.750%, due 2/25/36*	BBB			1,550		1,504
Security National Mortgage Loan Trust, 2005-2A, Tranche M2, 7.321%, due 2/25/36*	A			2,075		2,043
ACE, 2006-SL4, Tranche M6, 6.500%, due 9/25/36**	A			2,100		893
Security National Mortgage Loan Trust, 2006-1A, Tranche M2, 7.500%, due 9/25/36*	A			2,195		2,147
Security National Mortgage Loan Trust, 2006-2A, Tranche M2, 7.500%, due 10/25/36*	A			600		595

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 69

Income Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	NRSRO Rating		Principal Amount		Value

*Non-Agency Mortgage-Backed—(continued)*
La Hipotecaria Panamanian Mortgage Trust, 2007-1GA, Tranche A, 5.750%, due 12/23/36*	AAA		$	2,923	$	2,891
Security National Mortgage Loan Trust, 2006-3A, Tranche M2, 7.500%, due 1/25/37*	A			1,000		983
Blackrock Capital Finance, 1997-R1 WAC, 1.823%, due 3/25/37, VRN*	AAA			334		341
Mid-State Trust 2004-1, Tranche A, 6.005%, due 8/15/37	AAA			3,791		3,786
Statewide Mortgage Loan Trust, 2006-1A, Tranche A2, 7.660%, due 9/25/37*	AAA			2,638		2,714
ACE, 2005-SN1, Tranche M1, 5.520%, due 11/25/39, VRN	AA	+		1,075		1,048
ACE, 2005-SN1, Tranche M2, 5.770%, due 11/25/39, VRN	A	+		625		604
ACE, 2005-SD3, Tranche M2, 7.070%, due 8/25/45, VRN	A	+		1,895		1,914

Total Non-Agency Mortgage-backed Obligations				66,633		62,135


*Corporate Obligations—23.9%*
Philips Petroleum, 8.750%, due 5/25/10	A	-		2,500		2,722
HSBC Finance Corporation, 8.000%, due 7/15/10	AA	-		2,450		2,617
Boeing Capital Corporation, 7.375%, due 9/27/10	A	+		2,549		2,698
Goldman Sachs Group, Inc., 6.600%, due 1/15/12	AA	-		3,050		3,158
Lehman Brothers Holdings, Inc. 6.625%, due 1/18/12	A	+		2,650		2,749
National Rural Utility Cooperative, 7.250%, due 3/1/12	A			3,025		3,223
BHP Billiton Finance, 5.125%, due 3/29/12	A	+		1,195		1171
General Electric Capital Corporation, 6.000%, due 6/15/12	AAA			2,650		2,697
Citigroup, Inc., 5.625%, due 8/27/12	AA			2,675		2,676
Cox Communications,Inc., 7.125%, due 10/1/12	BBB-			2,425		2,562
Kroger Company, 5.500%, due 2/1/13	BBB			3,000		2,921
Ohio Power Company, 5.500%, due 2/15/13	A			1,900		1,872
American Movil SA, 5.500%, due 3/1/14	A			3,000		2,932
Bank of America Corporation, 5.375%, due 6/15/14	AA			2,325		2,289
AT&T, Inc. 5.100%, due 9/15/14	A			3,000		2,862
Codelco, Inc.—144A, 4.750%, due 10/15/14*	A			2,815		2,628
Pemex Master Trust, 5.750%, due 12/15/15	BBB			3,000		2,943


Issuer	NRSRO Rating		Principal Amount		Value

*Corporate Obligations—(continued)*
Johnson Controls, Inc., 5.500%, due 1/15/16	A	-	$	2,925	$	2,832
Omnicom Group, Inc., 5.900%, due 4/15/16	A	-		3,000		2,963
YUM! Brands, Inc., 6.250%, 4/15/16	BBB			1,939		1,935
Sabmiller PLC, 6.500%, due 7/1/16	BBB	+		3,100		3,185
Marriott International, 6.375%, due 6/15/17	BBB	+		2,250		2,256
Ras Laffan Lng II, 5.298%, due 9/30/20*	A			3,000		2,803

Total Corporate Obligations				60,423		60,694

Total Long Term Investments—98.0% (cost $256,687)				250,844		248,570


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/02/2007, repurchase price $2,537 collateralized by FH Pool #505523				2,536		2,536

Total Repurchase Agreement—1.0% (cost $2,536)				2,536		2,536

Total Investments—99.0% (cost $259,223)			$	253,380		251,106

Cash and other assets, less liabilities—1.0%						2,589

Net Assets—100%					$	253,695

WAC = Weighted Average Coupon

VRN = Variable Rate Note

NRSRO = Nationally Recognized Statistical Rating Organization, such as

S&P, Moody’s or Fitch (unaudited)

The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury

*Deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees. These holdings represent 10.41% of the net assets at June 30,2006.

**Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 0.63% of the Fund’s net assets at June 30, 2007. These securities were also deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees.

See accompanying Notes to Financial Statements.

70 Semi-Annual Report

June 30, 2007

LOGO

James S. Kaplan

LOGO

Christopher T. Vincent

READY RESERVES FUND

The Ready Reserves Fund invests primarily in short-term U.S. dollar-denominated money market instruments, and exclusively in high quality securities that are rated in the top two categories of credit quality.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Federal Reserve Board Monetary policy was the focus of the money markets during the first half of 2007.

Federal Reserve Board Chairman Ben Bernanke reached the one-year anniversary of his appointment during the first quarter, a job he has grown into and for which market participants have given him high marks.

At the most recent meeting of the Federal Open Market Committee on June 28, the Federal Reserve said that inflation remained its predominant policy concern. The Fed left its benchmark interest rate unchanged at 5.25% and signaled that it would keep it at that level for some time.

The Fed’s rate decision, which was widely anticipated by most market participants, meant that the Fed’s pause in rate increases was now one year old.

In its statement following the June meeting, the Federal Reserve acknowledged that consumer prices had risen more slowly in recent months. Rather than describing inflation as “elevated,” something it had done after its policy meeting in May, the central bank noted that readings on core inflation “have improved modestly in recent months.” “However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated,” the Fed statement said. The Fed repeated its concern that a tight labor market and a further reduction in available factory capacity had the potential to once again push inflation higher.

Although it is clear that the Fed has adopted a “wait-and-see” approach with regard to their next interest rate move, the biggest question for many investors was how the Fed might modify the nuances in their description of the economy and how they might react to recent signs of slowing inflation.

Unemployment, which has hovered around 4.5 percent for the last several months, remains lower than the Fed had expected—and is at levels that many economists equate with full employment, but the recent decline in housing prices remains a drag on economic growth.

For the last several years, Fed governors, including Chairman Bernanke, have set an unofficial goal of keeping the “core” (excluding food and energy costs) rate of inflation at 1 to 2 percent a year. The Fed’s preferred measure of core inflation, the Commerce Department’s price index for personal consumer expenditures, is just slightly above 2 percent and is down from approximately 2.4 percent in March. However, sustained energy prices and rising food costs could potentially pose a risk to Fed policy if higher prices spark inflationary pressures.

We nonetheless believe that the current Federal Funds rate above 5% will do much of the “heavy lifting” for the Fed with respect to keeping inflationary pressures in check.

We presently intend to maintain our strategy of using commercial paper in the short end of the market, barbelled with fixed-rate obligations with slightly longer maturities, and also will continue to emphasize floating-rate obligations, which price off of LIBOR. (LIBOR is the London Interbank Offered Rate, which is the rate the most credit worthy international banks dealing in Eurodollars—U.S. currency held in banks outside of the U.S.—charge each other for large loans.)

June 30, 2007

William Blair Funds 71

The current inverted shape of the money market yield curve has decreased investment opportunities in the secondary fixed-rate market, but we do not see this as a particularly troubling development. However, at present we do not see attractive investment opportunities in 6-month to 1-year commercial paper. Until the yield curve changes we will stay focused on 30- to 60-day end of the market.

At June 30, 2007, the Fund’s Average Maturity was approximately 53.3 days, compared to 47.0 days at March 31, 2007, and 52.2 days at December 31, 2006.

The return for the 6 months ended June 30, 2007, of the Fund’s Class N Shares was 2.37%, versus the 2.27% return of the Fund’s benchmark, the AAA-Rated Money Market Funds Average. Total assets were $1.18 billion, compared to $1.20 billion at December 31, 2006.

72 Semi-Annual Report

June 30, 2007

Ready Reserves Fund

Performance Highlights (unaudited)

The Fund’s 7 day yield on June 30, 2007 was 4.75%.

Average Annual Total Returns—Class N Shares year ending June 30, 2007.


	Year to Date		1 Year		3 Year		5 Year		10 Year
Ready Reserves Fund	2.37	%	4.81	%	3.34	%	2.30	%	3.38	%
AAA Rated Money Market Funds	2.27		4.54		3.19		2.18		3.36

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Class N Shares are available to the general public without a sales load. Total return includes reinvestment of income. Yields fluctuate and are not guaranteed. An investment in the Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corp. (FDIC) or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

The AAA Rated Money Market Funds Average represents the average annual composite performance of all AAA rated First Tier Retail Money Market Funds listed by IBC Financial data.

This report identifies the Fund’s investment’s on June 30, 2007. These holdings are subject to change. Not all fixed-income securities in the Fund performed the same, nor is there any guarantee that these fixed-income securities will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

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William Blair Funds 73

Ready Reserves Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	Principal Amount		Amortized Cost
U.S. Agency Fixed Rate—0.3%
Federal Home Loan Bank (FHLB), 4.500-4.625%, 10/12/07-10/24/07	$	3,777	$	3,783

Total Agency Backed Securities		3,777		3,783

Fixed Rate Notes—29.4%
Abbott Laboratories, 6.000% , 3/15/08		2,014		2,009
American General Finance Corp, 4.500%-5.470% , 8/16/07-11/15/07		19,047		19,055
American Honda Finance Corp, 5.310%-5.470% , 7/10/07-8/23/07		12,744		12,741
AT&T Corporation, 6.150%, 1/15/08		2,281		2,281
Berkshire Hathaway, 3.400%, 7/2/07		16,161		16,428
B.P. Canada Finance, 3.375%, 10/31/07		12,407		12,539
B.P. Company North America, 6.500%, 8/1/07		4,144		4,119
Caterpillar Financial Services, 3.625%-5.430%, 8/20/07-2/8/08		20,418		20,433
Chevron Corporation, 3.375%-3.500%, 9/17/07-2/15/08		29,737		30,005
Du Pont (E.I.) de Nemours, 3.375%-6.750% , 9/1/07-11/15/07		14,761		14,702
Eli Lilly & Company, 2.900%, 3/15/08		6,265		6,293
General Electric Capital Corporation, 3.500%-6.500%, 8/15/07-12/10/07		11,852		11,893
Gillette Company, 2.500%-4.125%, 8/30/07-6/1/08		27,203		27,451
IBM Canada Credit, 3.750%, 11/30/07		5,989		6,010
IBM Corporation, 6.450%, 8/1/07		2,128		2,117
John Deere Capital Corp, 3.900%-5.428%, 7/20/07-1/15/08		15,267		15,272
Kimberly-Clark Corp, 7.100%, 8/1/07		11,384		11,272
National Rural Utility Coop, 3.250%, 10/1/07		1,865		1,865
PACCAR Financial Corporation, 5.256%, 6/15/07		14,994		15,000
Southwestern Bell Telephone Company, 6.625%, 7/16/07		4,014		4,002
Toyota Motor Credit, 5.304%-5.327%, 7/2/07-8/10/07		16,001		16,000
U.S.A.A. Capital Corporation, 4.000%, 12/10/07		10,704		10,737
US Bancorp, 3.125%-6.500%, 7/15/07-7/15/08		29,166		29,256
Verizon Communications, 4.000%, 1/15/08		14,430		14,436
Wal-Mart Stores, 4.375%, 7/12/07		15,471		15,616
Wells Fargo Financial, 3.500%-5.420%, 9/28/07-4/4/08		25,921		25,936

Total Fixed Rate Notes		346,368		347,468

Variable Rate Notes—13.0%
American General Finance Corp, 5.479% , 1/18/08		5,605		5,604
American Honda Finance Corp, 5.465%, 10/22/07		10,750		10,745
Bellsouth Corporation, 5.485%, 11/15/07		17,568		17,565
Berkshire Hathaway, 5.400%-5.420%, 1/11/08-5/16/08		31,055		31,044
General Electric Capital Corporation, 5.406%-5.410%, 1/3/08-5/19/08		23,446		23,437


Issuer	Principal Amount		Amortized Cost
Variable Rate Notes—(continued)
Toyota Motor Credit, 5.326%-5.330%, 10/12/07-6/17/08	$	32,309	$	32,305
US Bank, 5.379%, 10/1/07		11,957		11,952
Wal-Mart Stores, 5.260%, 6/16/08		11,095		11,095
Wells Fargo Financial, 5.400%, 3/10/08		9,572		9,570

Total Variable Rate Notes		153,357		153,317

Asset-Backed Commercial Paper—56.1%
Alpine Securitization, 5.230%, 7/27/07		10,000		9,961
Amsterdam Funding Corporation, 5.250%-5.275%, 7/5/07-7/31/07		34,500		34,406
CAFCO, L.L.C., 5.270%-5.280%, 7/30/07-9/12/07		37,000		36,719
Chariot Funding, L.L.C., 5.240%-5.270%, 7/6/07-7/20/07		28,221		28,152
Ciesco, L.L.C., 5.250%-5.270%, 8/3/07-8/9/07		22,500		22,375
CRC Funding, L.L.C., 5.260%-5.280%, 8/16/07-9/5/07		40,000		39,663
Daimler Chrysler Revolving Auto, 5.240%-5.260%, 7/11/07-8/7/07		50,000		49,809
Fairway Finance Co. L.L.C., 5.270%, 8/23/07		5,500		5,456
FCAR Owner Trust, 5.250-5.270%, 7/9/07-8/21/07		50,000		49,839
Govco, Inc., 5.230%-5.260%, 7/10/07-9/25/07		40,000		39,796
Jupiter Securitization Co. L.L.C., 5.260%, 7/11/07		15,000		14,976
Kittyhawk Funding, 5.250%-5.260%, 8/20/07-9/20/07		17,257		17,096
Old Line Funding, 5.255%-5.270%, 7/25/07-8/15/07		50,000		49,754
Park Avenue Receivables, 5.250%-5.270%, 7/6/07-8/10/07		37,624		37,488
Ranger Funding, 5.240%-5.260%, 7/25/07-8/21/07		35,000		34,804
Sheffield Receivables, 5.280%-5.290%, 7/13/07-8/2/07		50,000		49,824
Thames Asset Global Securitization, 5.230%-5.300%, 7/12/07-9/5/07		45,210		44,979
Thunder Bay Funding, 5.250%-5.270%, 7/3/07-8/8/07		35,000		34,886
Variable Funding, 5.245%-5.250%, 7/19/07-9/4/07		24,130		23,972
Wal-Mart Funding, 5.240%, 8/22/07		10,000		9,923
Windmill Funding Corporation, 5.260%-5.310%, 7/5/07-8/3/07		30,000		29,934

Total Asset-Backed Commercial Paper		666,942		663,812

Demand Notes —1.4%
American Express Corporation, VRN, 5.170%, 7/2/07		11,367		11,367
Prudential Funding, VRN, 5.305%, 7/2/07		4,911		4,911

Total Demand Notes		16,278		16,278

Total Investments—100.2% (Cost $1,184,658)		1,186,722		1,184,658

See accompanying Notes to Financial Statements.

74 Semi-Annual Report

June 30, 2007

Ready Reserves Fund

Portfolio of Investments, June 30, 2007 (all amounts in thousands) (unaudited)


Issuer	Principal Amount	Amortized Cost
Liabilities plus cash and other assets—(0.2)%		$	(2,170	)

Net Assets—100.0%		$	1,182,488

Portfolio Weighted Average Maturity			53 Days

VRN = Variable Rate Note

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 75

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Growth Fund			Tax- Managed Growth Fund			Large Cap Growth Fund
*Assets*
Investments in securities, at cost	$	249,483		$	8,167		$	24,397
Investments in Affiliated Fund, at cost		2,635			6			239


Investments in securities, at value	$	317,963		$	10,448		$	28,130
Investments in Affiliated Fund, at value		2,635			6			239
Cash		—			—			—
Receivable for fund shares sold		663			—			74
Receivable from Advisor		—			2			—
Dividend and interest receivable		449			12			46

Total assets		321,710			10,468			28,489
*Liabilities*
Payable for investment securities purchased		1,404			—			583
Payable for fund shares redeemed		448			—			35
Management fee payable		206			7			9
Distribution fee payable		18			—			2
Other accrued expenses		87			19			21

Total liabilities		2,163			26			650

Net Assets	$	319,547		$	10,442		$	27,839

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	26		$	1		$	4
Capital paid in excess of par value		228,716			8,605			28,783
Accumulated net investment income (loss)		(6	)		7			5
Accumulated realized gain (loss)		22,331			(452	)		(4,686	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		68,480			2,281			3,733

Net Assets	$	319,547		$	10,442		$	27,839


Class N Shares
Net Assets	$	89,601		$	833		$	7,326
Shares Outstanding		7,270,456			70,911			1,006,885
Net Asset Value Per Share	$	12.32		$	11.75		$	7.28
Class I Shares
Net Assets	$	229,946		$	9,609		$	20,513
Shares Outstanding		18,240,562			801,609			2,774,162
Net Asset Value Per Share	$	12.61		$	11.99		$	7.39

See accompanying Notes to Financial Statements.

76 Semi-Annual Report

June 30, 2007

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Growth Fund			Tax- Managed Growth Fund			Large Cap Growth Fund
*Investment income*
Dividends	$	1,206		$	54		$	124
Less foreign tax withheld		(62	)		(1	)		(5	)
Dividend Income from Affiliated Fund		61			1			4
Interest		178			10			19

Total income		1,383			64			142
*Expenses*
Investment advisory fees		1,076			40			98
Distribution fees		96			1			15
Custodian fees		37			19			22
Transfer agent fees		113			3			5
Professional fees		14			13			13
Registration fees		15			14			14
Other expenses		38			5			13

Total expenses before waiver		1,389			95			180
Less expenses waived or absorbed by the Advisor		—			(38	)		(43	)

Net expenses		1,389			57			137

Net investment income (loss)		(6	)		7			5
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		16,516			579			461

Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		5,889			156			1,012

Net increase (decrease) in net assets resulting from operations	$	22,399		$	742		$	1,478

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 77

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 and the Year Ended December 31, 2006 (all amounts in thousands) (unaudited)


	Growth Fund						Tax- Managed Growth Fund						Large Cap Growth Fund
	2007			2006			2007			2006			2007			2006
	(unaudited)						(unaudited)						(unaudited)
*Operations*
Net investment income (loss)	$	(6	)	$	(652	)	$	7		$	(15	)	$	5		$	(30	)
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		16,516			31,916			579			765			461			223
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		5,889			(1,057	)		156			12			1,012			1,019

Net increase (decrease) in net assets resulting from operations		22,399			30,207			742			762			1,478			1,212
*Distributions to shareholders from*
Net investment income		—			—			—			—			—			—
Net realized gain		—			(27,315	)		—			—			—			—

		—			(27,315	)		—			—			—			—
*Capital stock transactions*
Net proceeds from sale of shares		57,513			33,215			590			1,445			16,375			4,950
Shares issued in reinvestment of income dividends and capital gain distributions		—			25,204			—			—			—			—
Less cost of shares redeemed		(24,890	)		(50,345	)		(534	)		(378	)		(10,205	)		(2,859	)

Net increase (decrease) in net assets resulting from capital share transactions		32,623			8,074			56			1,067			6,170			2,091

Increase (decrease) in net assets		55,022			10,966			798			1,829			7,648			3,303
Net assets
Beginning of period		264,525			253,559			9,644			7,815			20,191			16,888

End of period	$	319,547		$	264,525		$	10,442		$	9,644		$	27,839		$	20,191

Undistributed net investment income (loss) at the end of the period	$	(6	)	$	—		$	7		$	—		$	5		$	—

See accompanying Notes to Financial Statements.

78 Semi-Annual Report

June 30, 2007

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Small Cap Growth Fund			Mid Cap Growth Fund			Small-Mid Cap Growth Fund
*Assets*
Investments in securities, at cost	$	891,622		$	35,344		$	94,870
Investments in Affiliated Companies, at cost		292,335			—			—
Investments in Affiliated Fund, at cost		5,497			110			21


Investments in securities, at value	$	1,083,099		$	38,927		$	114,861
Investments in Affiliated Companies, at value		293,772			—			—
Investments in Affiliated Fund, at value		5,497			110			21
Receivable for fund shares sold		4,194			270			111
Receivable for investment securities sold		28,612			295			179
Dividend and interest receivable		235			8			17

Total assets		1,415,409			39,610			115,189
*Liabilities*
Payable for investment securities purchased		23,048			374			335
Payable for fund shares redeemed		2,747			80			1
Management fee payable		1,204			11			81
Distribution fee payable		90			2			3
Other accrued expenses		274			32			34

Total liabilities		27,363			499			454

Net Assets	$	1,388,046		$	39,111		$	114,735

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	50		$	3		$	8
Capital paid in excess of par value		1,094,936			34,626			88,990
Accumulated net investment income (loss)		(7,345	)		(63	)		(309	)
Accumulated realized gain (loss)		107,491			962			6,055
Net unrealized appreciation (depreciation) of investments and foreign currencies		192,914			3,583			19,991

Net Assets	$	1,388,046		$	39,111		$	114,735


Class N Shares
Net Assets	$	725,955		$	7,957		$	17,556
Shares Outstanding		26,213,089			673,633			1,195,881
Net Asset Value Per Share	$	27.69		$	11.81		$	14.68
Class I Shares
Net Assets	$	662,091		$	31,154		$	97,179
Shares Outstanding		23,390,271			2,625,249			6,563,549
Net Asset Value Per Share	$	28.31		$	11.87		$	14.81

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 79

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Small Cap Growth Fund			Mid Cap Growth Fund			Small-Mid Cap Growth Fund
*Investment income*
Dividends	$	570		$	80		$	210
Less foreign tax withheld		—			—			—
Dividends from Affiliated Companies		28			—			—
Dividend Income from Affiliated Fund		203			5			10
Interest		792			31			71

Total income		1,593			116			291
*Expenses*
Investment advisory fees		7,203			142			520
Distribution fees		883			9			20
Custodian fees		109			31			30
Transfer agent fees		588			7			22
Professional fees		27			11			14
Registration fees		24			19			15
Other expenses		104			11			17

Total expenses before waiver		8,938			230			638
Less expenses waived or absorbed by the Advisor		—			(51	)		(38	)

Net expenses		8,938			179			600

Net investment income (loss)		(7,345	)		(63	)		(309	)
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		71,053			1,149			5,221
Net realized gain (loss) on investments in Affiliated Companies		8,013			—			—

		79,066			1,149			5,221
Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		45,426			2,519			8,354

Net increase (decrease) in net assets resulting from operations	$	117,147		$	3,605		$	13,266

See accompanying Notes to Financial Statements.

80 Semi-Annual Report

June 30, 2007

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 and the Year Ended December 31, 2006 (all amounts in thousands) (unaudited)


	Small Cap Growth Fund						Mid Cap Growth Fund						Small-Mid Cap Growth Fund
	2007			2006			2007			2006(a)			2007			2006
	(unaudited)						(unaudited)						(unaudited)
*Operations*
Net investment income (loss)	$	(7,345	)	$	(11,401	)	$	(63	)	$	(62	)	$	(309	)	$	(538	)
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		79,066			116,807			1,149			(187	)		5,221			4,908
Change in net unrealized appreciation (depreciation) on investments, foreign currency transactions and other assets and liabilities		45,426			27,043			2,519			1,064			8,354			3,169

Net increase (decrease) in net assets resulting from operations		117,147			132,449			3,605			815			13,266			7,539
*Distributions to shareholders from*
Net investment income		—			—			—			—			—			—
Net realized gain		—			(78,266	)		—			—			—			(4,404	)

		—			(78,266	)		—			—			—			(4,404	)
*Capital stock transactions*
Net proceeds from sale of shares		184,164			590,073			16,638			21,378			16,400			24,304
Shares issued in reinvestment of income dividends and capital gain distributions		—			73,523			—			—			—			3,992
Less cost of shares redeemed		(174,439	)		(288,343	)		(771	)		(2,554	)		(7,697	)		(8,876	)

Net increase (decrease) in net assets resulting from capital stock transactions		9,725			375,253			15,867			18,824			8,703			19,420

Increase (decrease) in net assets		126,872			429,436			19,472			19,639			21,969			22,555
Net assets
Beginning of period		1,261,174			831,738			19,639			—			92,766			70,211

End of period	$	1,388,046		$	1,261,174		$	39,111		$	19,639		$	114,735		$	92,766

Undistributed net investment income (loss) at the end of the period	$	(7,345	)	$	—		$	(63	)	$	—		$	(309	)	$	—

(a)

For the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 81

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	International Growth Fund			International Equity Fund			International Small Cap Growth Fund		Emerging Markets Growth Fund
*Assets*
Investments in securities, at cost	$	5,127,266		$	277,394		$	294,743	$	806,484
Investments in Affiliated Fund, at cost		5,676			5,159			2,148		1,296


Investments in securities, at value	$	7,237,761		$	345,971		$	354,564	$	1,065,377
Investments in Affiliated Fund, at value		5,676			5,159			2,148		1,296
Foreign currency, at value (cost $15,064, $3,921, $99, and $103, respectively)		15,067			3,902			98		103
Receivable for fund shares sold		27,824			1,159			1,315		5,273
Receivable for investment securities sold		47,475			21,803			1,890		553
Dividend and interest receivable		12,703			683			420		645

Total assets		7,346,506			378,677			360,435		1,073,247
*Liabilities*
Payable for investment securities purchased		30,897			19,619			9,020		24,793
Payable for fund shares redeemed		22,524			139			10		3,994
Management fee payable		5,771			272			271		825
Distribution and shareholder administration fee payable		986			10			20		42
Other accrued expenses		1,927			41			343		1,242

Total liabilities		62,105			20,081			9,664		30,896

Net Assets	$	7,284,401		$	358,596		$	350,771	$	1,042,351

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	234		$	22		$	23	$	46
Capital paid in excess of par value		4,850,461			274,907			278,606		701,063
Accumulated net investment income (loss)		(94,012	)		(2,436	)		676		293
Accumulated realized gain (loss)		418,453			17,592			11,935		83,198
Net unrealized appreciation (depreciation) of investments and foreign currencies		2,109,265			68,511			59,531		257,751

Net Assets	$	7,284,401		$	358,596		$	350,771	$	1,042,351


Class N Shares
Net Assets	$	4,774,360		$	54,620		$	23,061	$	66,695
Shares Outstanding		154,369,024			3,280,995			1,508,448		2,946,595
Net Asset Value Per Share	$	30.93		$	16.65		$	15.29	$	22.63
Class I Shares
Net Assets	$	2,510,041		$	303,976		$	110,164	$	240,293
Shares Outstanding		79,855,952			18,117,575			7,175,790		10,573,177
Net Asset Value Per Share	$	31.43		$	16.78		$	15.35	$	22.73

See accompanying Notes to Financial Statements.

82 Semi-Annual Report

June 30, 2007

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	International Growth Fund			International Equity Fund			International Small Cap Growth Fund			Emerging Markets Growth Fund
*Investment income*
Dividends	$	73,915		$	4,210		$	2,437		$	6,061
Less foreign tax withheld		(4,752	)		(332	)		(150	)		(343	)
Income from Affiliated Fund		39			101			77			30
Interest		4,475			196			279			882

Total income		73,677			4,175			2,643			6,630
*Expenses*
Investment advisory fees		33,428			1,725			1,482			4,895
Distribution fees		5,564			57			25			74
Shareholder administration fees		—			—			85			207
Custodian fees		1,829			153			161			633
Transfer agent fees		1,867			149			15			46
Professional fees		81			23			21			27
Registration fees		49			29			30			24
Other expenses		503			50			11			19

Total expenses before waiver		43,321			2,186			1,830			5,925
Less expenses waived or absorbed by the Advisor		—			(202	)		—			(80	)

Net expenses		43,321			1,984			1,830			5,845

Net investment income (loss)		30,356			2,191			813			785
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		252,935			14,902			10,838			64,491
Net realized gain (loss) on foreign currency transactions and other assets and liabilities		(6,146	)		(428	)		(478	)		(477	)

Total net realized gain (loss)		246,789			14,474			10,360			64,014
Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		473,369			13,273			29,094			80,279

Net increase (decrease) in net assets resulting from operations	$	750,514		$	29,938		$	40,267		$	145,078

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 83

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 and the Year Ended December 31, 2006 (all amounts in thousands) (unaudited)


	International Growth Fund						International Equity Fund						International Small Cap Growth Fund						Emerging Markets Growth Fund
	2007			2006			2007			2006			2007			2006			2007			2006
	(unaudited)						(unaudited)						(unaudited)						(unaudited)
*Operations*
Net investment income (loss)	$	30,356		$	14,830		$	2,191		$	1,056		$	813		$	(221	)	$	785		$	211
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		246,789			713,203			14,474			4,871			10,360			2,299			64,014			22,993
Change in net unrealized appreciation (depreciation) on investments, foreign currency transactions and other assets and liabilities		473,369			398,415			13,273			38,016			29,094			26,158			80,279			147,786

Net increase (decrease) in net assets resulting from operations		750,514			1,126,448			29,938			43,943			40,267			28,236			145,078			170,990
*Distributions to shareholders from*
Net investment income		—			(81,288	)		—			(4,187	)		—			(106	)		—			(405	)
Net realized gain		—			(590,410	)		—			(456	)		—			(877	)		—			(4,544	)

		—			(671,698	)		—			(4,643	)		—			(983	)		—			(4,949	)
*Capital stock transactions*
Net proceeds from sale of shares		867,777			1,785,719			61,633			137,733			98,461			172,153			152,172			529,925
Shares issued in reinvestment of income dividends and capital gain distributions		—			633,412			—			4,390			—			868			—			4,687
Less cost of shares redeemed		(601,016	)		(1,157,832	)		(30,691	)		(61,417	)		(19,926	)		(18,839	)		(68,548	)		(136,352	)

Net increase (decrease) in net assets resulting from capital stock transactions		266,761			1,261,299			30,942			80,706			78,535			154,182			83,624			398,260

Increase (decrease) in net assets		1,017,275			1,716,049			60,880			120,006			118,802			181,435			228,702			564,301
Net assets
Beginning of period		6,267,126			4,551,077			297,716			177,710			231,969			50,534			813,649			249,348

End of period	$	7,284,401		$	6,267,126		$	358,596		$	297,716		$	350,771		$	231,969		$	1,042,351		$	813,649

Undistributed net investment income (loss) at the end of the period	$	(94,012	)	$	(124,368	)	$	(2,436	)	$	(4,627	)	$	676		$	(137	)	$	293		$	(492	)

See accompanying Notes to Financial Statements.

84 Semi-Annual Report

June 30, 2007

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Value Discovery Fund		Bond Fund			Income Fund			Ready Reserves Fund
*Assets*
Investments in securities, at cost	$	67,007	$	56,824		$	259,223		$	1,184,658
Investments in Affiliated Fund, at cost		30		—			—			—


Investments in securities, at value	$	75,330	$	56,196		$	251,106		$	1,184,658
Investments in Affiliated Fund, at value		30		—			—			—
Receivable for fund shares sold		138		438			463			—
Receivable for investment securities sold		—		—			—			—
Receivable from Advisor		68		1			12			—
Dividend and interest receivable		163		—			2,359			5,829

Total assets		75,729		56,635			253,940			1,190,487
*Liabilities*
Payable for investment securities purchased		6		4,989			—			7,038
Payable for fund shares redeemed		295		—			185			—
Management fee payable		17		—			40			206
Distribution fee payable		33		—			11			321
Shareholder services payable		—		5			—			—
Dividend payable		—		—			—			306
Other accrued expenses		45		18			9			128

Total liabilities		396		5,012			245			7,999

Net Assets	$	75,333	$	51,623		$	253,695		$	1,182,488

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	5	$	5		$	26		$	916
Capital paid in excess of par value		52,077		52,292			283,141			1,182,517
Accumulated net investment income (loss)		169		104			(303	)		84
Accumulated realized gain (loss)		14,759		(150	)		(21,052	)		(1,029	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		8,323		(628	)		(8,117	)		—

Net Assets	$	75,333	$	51,623		$	253,695		$	1,182,488


Class N Shares
Net Assets	$	22,195	$	690		$	93,997		$	1,182,488
Shares Outstanding		1,281,758		70,086			9,845,638			1,182,542,084
Net Asset Value Per Share	$	17.32	$	9.84		$	9.55		$	1.00
Class I Shares
Net Assets	$	53,138	$	42,140		$	159,698
Shares Outstanding		3,020,603		4,281,090			16,816,017
Net Asset Value Per Share	$	17.59	$	9.84		$	9.50

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 85

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Value Discovery Fund			Bond Fund(a)			Income Fund			Ready Reserves Fund
*Investment income*
Dividends	$	853		$	4		$	—		$	—
Income from Affiliated Fund		25			—			—			—
Interest		3			370			7,796			31,501

Total income		881			374			7,796			31,501
*Expenses*
Investment advisory fees		647			21			710			1,416
Distribution fees		83			—			69			—
Shareholder administration fees		—			8			—			2,059
Custodian fees		71			7			70			90
Transfer agent fees		72			2			52			11
Professional fees		14			7			18			29
Registration fees		22			5			18			13
Other expenses		9			4			7			92

Total expenses before waiver		918			54			944			3,710
Less expenses waived or absorbed by the Advisor		(195	)		(21	)		(12	)		—

Net expenses		723			33			932			3,710

Net investment income (loss)		158			341			6,864			27,791
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		12,488			(150	)		(935	)		(2	)

Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		(4,657	)		(628	)		(4,113	)		—

Net increase (decrease) in net assets resulting from operations	$	7,989		$	(437	)	$	1,816		$	27,789

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

See accompanying Notes to Financial Statements.

86 Semi-Annual Report

June 30, 2007

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 and the Year Ended December 31, 2006 (all amounts in thousands) (unaudited)


	Value Discovery Fund						Bond Fund			Income Fund						Ready Reserves Fund
	2007			2006			2007(a)			2007			2006			2007			2006
	(unaudited)						(unaudited)			(unaudited)						(unaudited)
*Operations*
Net investment income (loss)	$	158		$	136		$	341		$	6,864		$	14,102		$	27,791		$	51,297
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		12,488			16,215			(150	)		(935	)		(1,052	)		(2	)		—
Change in net unrealized appreciation (depreciation) on investments, foreign currency transactions and other assets and liabilities		(4,657	)		760			(628	)		(4,113	)		(202	)		—			—

Net increase (decrease) in net assets resulting from operations		7,989			17,111			(437	)		1,816			12,848			27,789			51,297
*Distributions to shareholders from*
Net investment income		—			(129	)		(237	)		(7,167	)		(16,500	)		(27,788	)		(51,297	)
Net realized gain		—			(15,001	)		—			—			—			—			—

		—			(15,130	)		(237	)		(7,167	)		(16,500	)		(27,788	)		(51,297	)
*Capital stock transactions*
Net proceeds from sale of shares		26,873			100,537			52,111			36,605			61,832			483,787			1,030,633
Shares issued in reinvestment of income dividends and capital gain distributions		—			14,164			187			5,841			13,061			28,101			51,002
Less cost of shares redeemed		(106,306	)		(40,344	)		(1	)		(80,477	)		(84,660	)		(524,994	)		(977,896	)

Net increase (decrease) in net assets resulting from capital stock transactions		(79,433	)		74,357			52,297			(38,031	)		(9,767	)		(13,106	)		103,739

Increase (decrease) in net assets		(71,444	)		76,338			51,623			(43,382	)		(13,419	)		(13,105	)		103,739
Net assets
Beginning of period	$	146,777		$	70,439		$	—		$	297,077		$	310,496		$	1,195,593		$	1,091,854

End of period	$	75,333		$	146,777		$	51,623		$	253,695		$	297,077		$	1,182,488		$	1,195,593

Undistributed net investment income (loss) at the end of the period	$	169		$	11		$	104		$	(303	)	$	—		$	84		$	81

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 87

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of the Fund’s significant accounting policies in effect during the period covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles.

(a) Description of the Fund

William Blair Funds (the “Fund”) is a diversified mutual fund registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. For each portfolio, the number of shares authorized is unlimited. The Fund currently consists of the following sixteen portfolios (the “Portfolios”), each with its own investment objectives and policies.


Equity Portfolios		International Portfolios
Growth		International Growth
Tax-Managed Growth		International Equity
Large Cap Growth		International Small Cap Growth
Small Cap Growth		Institutional International Growth
Mid Cap Growth		Institutional International Equity
Small-Mid Cap Growth		Emerging Markets Growth
Value Discovery		Fixed Income Portfolios
		Bond
		Income
		Money Market Portfolio
		Ready Reserves

The investment objectives of the Portfolios are as follows:


Equity		Long-term capital appreciation.
International		Long-term capital appreciation.
Fixed Income		High level of current income with relative stability of principal.
Money Market		Current income, a stable share price and daily liquidity.

The Institutional International Growth Portfolio, the Institutional International Equity Portfolio and the Institutional Class of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio and the Bond Portfolio issue a separate report.

(b) Share Classes

Three different classes of shares currently exist: N, I and Institutional. This report includes financial highlight information for Classes N and I. The table below describes the Class N shares and the Class I shares covered by this report:


Class		Description
N		Class N shares are sold to the general public, either directly through the Fund’s distributor or through a select number of financial intermediaries. Class N shares are sold without any sales load, and carry an annual 12b-1 distribution fee (0.25% for the Equity and International Portfolios and 0.15% for the Fixed Income Portfolios) or a service fee (0.35% for the Money Market Portfolio), and an annual shareholder administration fee (0.15% for the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio and the Bond Portfolio).
I		Class I shares are sold to a limited group of investors. They do not carry any sales load or distribution fees and generally have lower ongoing expenses than the other classes. Class I shares of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio and the Bond Portfolio carry an annual shareholder administration fee of 0.15%.

Investment income, realized and unrealized gains and losses, and certain Portfolio level expenses and expense reductions, if any, are allocated based on the relative net assets of each class, except for certain class specific expenses which are charged directly to the appropriate class. Differences in class expenses may result in the payment of different per share dividends by class. All share classes of the Portfolios have equal rights with respect to voting subject to class specific arrangements.

88 Semi-Annual Report

June 30, 2007

(c) Investment Valuation

The market value of domestic equity securities and options is determined by valuing securities traded on national securities exchanges or markets or in the over-the-counter markets at the last sales price or, if applicable, the official closing price or, in the absence of a sale on the date of valuation, at the latest bid price.

For international securities, if the foreign exchange or market on which a security is primarily traded closes before the close of regular trading on the New York Stock Exchange (4:00 p.m. Eastern time), the Portfolios use an independent pricing service on a daily basis to estimate the fair value price as of the close of regular trading on the New York Stock Exchange. The Board of Trustees has determined that the passage of time between when foreign exchanges or markets close and when the Portfolios calculate their net asset values could cause the value of international securities to no longer be representative of their market price or accurate. In addition, quarterly the Board of Trustees receives a report which compares the fair value prices used to calculate the net asset value to the next day’s opening local prices. Otherwise, the value of foreign equity securities is determined based on the last sale price on the foreign exchange or market on which it is primarily traded or, if there have been no sales during that day, at the latest bid price. Foreign currency forward contracts and foreign currencies are valued at the forward and current exchange rates, respectively, prevailing on the date of valuation.

Long-term, fixed-income securities are valued based on market quotations, or by independent pricing services that use prices provided by market makers or by estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Other securities, and all other assets, including securities for which a market price is not available, or the value of which is affected by a significant valuation event, are valued at fair value as determined in good faith by the Pricing or Valuation Committee, in accordance with the Fund’s Valuation Procedures approved by the Board of Trustees. As of June 30, 2007, there were securities held in the Small Cap Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Income Portfolios requiring fair valuation pursuant to the Fund’s valuation procedures. Securities held in the Ready Reserves Fund are valued at amortized cost, which approximates market value.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities which are recorded as soon as the information is available. Foreign currency gains and losses associated with fluctuations in the foreign currency rate versus the United States dollar are recorded in the Statement of Operations as a component of the net realized gain (loss) on foreign currency translations and other assets and liabilities.

Premiums and discounts are accreted and amortized on a straight-line basis for short-term investments and on an effective interest method for long-term investments.

Interest income is determined on the basis of the interest accrued, adjusted for amortization of premium or discount. Variable rate bonds and floating rate notes earn interest at coupon rates that fluctuate at specific time intervals. The interest rates shown in the Portfolio of Investments for the Bond, Income, and Ready Reserves Portfolios were the rates in effect on June 30, 2007. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the period ended June 30, 2007, the Bond and Income Portfolios recognized an increase or reduction of interest income and an increase or reduction of net realized gain (loss) of -$1- and ($961) respectively (in thousands). This reclassification has no effect on the net asset value of the Portfolio.

Security and shareholder transactions are accounted for no later than one business day following the trade date. However, for financial reporting purposes, security and shareholder transactions are accounted for on the trade date of the last business day of the reporting period. Realized gains and losses from securities transactions are recognized on the basis of high cost lot sell selection.

Awards from class action litigation may be recorded as a reduction of cost. If the Funds no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Dividends to Shareholders

Shares are sold and redeemed on a continuous basis at net asset value. The net asset value per share is determined separately for each class by dividing the Portfolio’s net assets attributable to that class by the number of shares of the class outstanding

June 30, 2007

William Blair Funds 89

as of the close of regular trading on the New York Stock Exchange, which is generally 3:00 p.m. Central time (4:00 p.m. Eastern time), on each day the Exchange is open. Redemption fees may be applicable to redemptions or exchanges within 60 days of purchase. For both Class N and Class I shares, the William Blair domestic equity portfolios assess a 1% redemption fee on shares sold or exchanged that have been owned 60 days or less and the William Blair international portfolios assess a 2% redemption fee on shares sold or exchanged that have been owned 60 days or less as disclosed within the Fund’s Prospectus. The redemption fees collected by the Fund are netted against the amount of Redemptions for presentation on the Statement of Changes in Net Assets.

For the period ended June 30, 2007, the redemption fees collected by the Portfolios were as follows (in thousands):


	Redemption Fees
Growth	$	4
Tax-Managed Growth		—
Large Cap Growth		—
Small Cap Growth		31
Mid Cap Growth Fund		—
Small Mid-Cap Growth		—
International Growth		71
International Equity		13
International Small Cap Growth		—
Emerging Markets Growth		5
Value Discovery		15

Dividends from net investment income, if any, of the Growth, Tax-Managed Growth, Large Cap Growth, Small Cap Growth, Mid Cap Growth, Small-Mid Cap Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Value Discovery Portfolios are declared at least annually. Dividends from the Bond and Income and the Ready Reserves Portfolios are declared monthly and daily, respectively. Capital gain distributions, if any, are declared at least annually in December. Dividends payable to shareholders are recorded on the ex-dividend date.

(f) Foreign Currency Translation and Forward Foreign Currency Contracts

The International Growth, International Equity, International Small Cap Growth and Emerging Markets Growth Portfolios may invest in securities denominated in foreign currencies. As such, assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the current exchange rate on the date of valuation. The values of foreign investments, open foreign currency forward contracts, and cash denominated in foreign currencies are translated into U.S. dollars using a spot market rate of exchange as of the time of the determination of each Portfolio’s NAV, typically 4:00 p.m. Eastern time on days when there is regular trading on the New York Stock Exchange. Payables and receivables for securities transactions, dividends, interest income and tax reclaims are translated into U.S. dollars using a spot market rate of exchange as of 4:00 p.m. Eastern time. Settlement of purchases and sales and dividend and interest receipts are translated into U.S. dollars using a spot market rate of exchange as of 11:00 a.m. Eastern time.

The Portfolios may enter into foreign currency forward contracts (1) as a means of managing the risks associated with changes in the exchange rates for the purchase or sale of a specific amount of a particular foreign currency, and (2) to hedge the value, in U.S. dollars, of portfolio securities. Gains and losses from foreign currency transactions associated with purchases and sales of investments and foreign currency forward contracts are included with the net realized and unrealized gain or loss on investments. For tax purposes these foreign currency gains and losses are treated as ordinary income.

(g) Options

The Portfolios may engage in options transactions on security indices and other financial indices and in doing so achieve similar objectives to what they would achieve through the sale or purchase of options on individual securities or other instruments.

Option writing. When a Portfolio writes an option, an amount equal to the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Portfolio on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is

90 Semi-Annual Report

June 30, 2007

also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option. There were no open options at June 30, 2007.

(h) Income Taxes

Each Portfolio intends to comply with the special provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies and, therefore, no provision for Federal income taxes has been made in the accompanying financial statements since each Portfolio intends to distribute substantially all of its taxable income to its shareholders and be relieved of all Federal income taxes.

The International Growth, International Equity, International Small Cap Growth and Emerging Markets Growth Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for Federal income tax purposes. In accordance with this election, the Portfolios recognized net unrealized appreciation/(depreciation) of $83,007 and $3,835, $— and $—, respectively (in thousands) in 2006, all of which has been treated as an adjustment to the cost of investments for tax purposes. The Portfolios also treat the deferred loss associated with current and prior year wash sales as an adjustment to the cost of investments for tax purposes. The cost of investments for Federal income tax purposes and related gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) at June 30, 2007, were as follows (in thousands):


Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ (Depreciation)
Growth	$	252,247	$	71,676	$	3,325	$	68,351
Tax-Managed Growth		8,176		2,419		141		2,278
Large Cap Growth		24,664		4,100		395		3,705
Small Cap Growth		1,193,091		230,418		41,141		189,277
Mid Cap Growth		35,531		4,039		533		3,506
Small-Mid Cap Growth		95,165		20,712		995		19,717
International Growth		5,283,243		2,013,665		54,701		1,958,964
International Equity		288,908		63,836		1,680		62,156
International Small Cap Growth		297,811		67,122		8,511		58,611
Emerging Markets Growth		811,577		263,348		9,394		253,954
Value Discovery		67,580		9,140		1,360		7,780
Bond		56,824		84		712		(628	)
Income		259,223		688		8,805		(8,117	)
Ready Reserves		1,184,658		—		—		—

June 30, 2007

William Blair Funds 91

The timing and characterization of certain income and capital gain distributions are determined annually in accordance with Federal income tax regulations that may differ from U.S. generally accepted accounting principles. As a result, net investment income or loss and net realized gain or loss for a reporting period may differ from the amount distributed during such period. In addition, the Portfolios may periodically record reclassifications among certain capital accounts to reflect differences between financial reporting and income tax basis distributions. The reclassifications were reported in order to reflect the tax treatment for certain permanent differences that exist between income tax regulations and U.S. generally accepted accounting principles. The reclassifications generally relate to net operating losses, Section 988 currency gains and losses, recharacterization of dividends received from investments in REITs, expired capital loss carryforwards, and gain or loss on in-kind transactions. These reclassifications have no impact on the net asset values of the Portfolios. Accordingly, at December 31, 2006, the following reclassifications were recorded (in thousands):


Portfolio	Undistributed Net Investment Income/(Loss)			Accumulated Undistributed Net Realized Gain/(Loss)			Capital Paid In Excess of Par Value
Growth	$	653		$	(653	)	$	—
Tax-Managed Growth		15			—			(15	)
Large Cap Growth		30			—			(30	)
Small Cap Growth		11,401			(11,401	)		—
Mid Cap Growth		62			—			(62	)
Small-Mid Cap Growth		538			(538	)		—
International Growth		(17,389	)		17,389			—
International Equity		(896	)		896			—
International Small Cap Growth		289			(289	)		—
Emerging Markets Growth		24			(22	)		(2	)
Value Discovery		1			(1,934	)		1,933
Income		2,398			(2,315	)		(83	)
Ready Reserves		—			1			(1	)

Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during 2006 and 2005 was as follows (in thousands):


	Distributions Paid In 2006				Distributions Paid In 2005
Portfolio	Ordinary Income		Long-Term Capital Gains		Ordinary Income		Long-Term Capital Gains
Growth	$	4,799	$	22,516	$	—	$	8,977
Tax-Managed Growth		—		—		—		—
Large Cap Growth		—		—		—		—
Small Cap Growth		—		78,266		11,335		60,296
Mid Cap Growth		—		—
Small-Mid Cap Growth		506		3,898		—		495
International Growth		90,245		581,453		21,550		254,334
International Equity		4,187		456		—		—
International Small Cap Growth		983		—		6		—
Emerging Markets Growth		1,585		3,364		1,169		—
Value Discovery		2,395		12,735		—		24,647
Income		16,500		—		16,070		—
Ready Reserves		51,297		—		27,823		—

92 Semi-Annual Report

June 30, 2007

As of December 31, 2006, the components of distributable earnings on a tax basis were as follows (in thousands):


Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses		Undistributed Long-Term Gain		Net Unrealized Appreciation/ (Depreciation)
Growth	$	1,311	$	—	$	4,655	$	62,440
Tax-Managed Growth		—		1,031		—		2,125
Large Cap Growth		—		5,106		—		2,680
Small Cap Growth		1,774		—		19,164		143,574
Mid Cap Growth		—		155		—		1,032
Small-Mid Cap Growth		39		—		971		11,461
International Growth		27,392		—		170,573		1,485,227
International Equity		1,822		—		3,585		48,322
International Small Cap Growth		856		137		1,730		29,426
Emerging Markets Growth		5,520		503		19,303		171,844
Value Discovery		1,529		—		999		12,732
Income		—		20,117		—		(4,004	)
Ready Reserves		81		1,026		—		—

At December 31, 2006, the Portfolios have unused capital loss carryforwards available for Federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows (in thousands):


Portfolio	2007		2008		2009		2010		2011		2012		2013		2014		Total
Growth	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Tax-Managed Growth		—		—		—		554		468		—		—		—		1,022
Large Cap Growth		—		41		2,714		1,582		769		—		—		—		5,106
Small Cap Growth		—		—		—		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		—		—		—		155		155
Small-Mid Cap Growth		—		—		—		—		—		—		—		—		—
International Growth		—		—		—		—		—		—		—		—		—
International Equity		—		—		—		—		—		—		—		—		—
International Small Cap Growth		—		—		—		—		—		—		—		—		—
Emerging Markets Growth		—		—		—		—		—		—		—		—		—
Value Discovery		—		—		—		—		—		—		—		—		—
Income		1,249		3,292		—		1,692		1,582		4,431		3,398		4,138		19,782
Ready Reserves		51		24		—		930		—		21		—		—		1,026

For the period November 1, 2006 through December 31, 2006, the following Portfolios incurred net realized capital or foreign currency losses. Each Portfolio intends to treat this loss as having occurred in fiscal year 2007 for Federal income tax purposes (in thousands):


Portfolio	Capital Amount		Currency Amount
Growth	$	—	$	—
Tax-Managed Growth		9		—
Large Cap Growth		—		—
Small Cap Growth		—		—
Mid Cap Growth		—		—
Small-Mid Cap Growth		—		—
International Growth		—		—
International Equity		—		—
International Small Cap Growth		—		137
Emerging Markets Growth		—		503
Value Discovery		—		—
Income		335		—
Ready Reserves		—		—

June 30, 2007

William Blair Funds 93

(i) Repurchase Agreements

The Portfolios may enter into repurchase agreements with its custodian, Investors Bank & Trust Company, whereby the Portfolios acquire ownership of a debt security and the custodian agrees, at the time of sale, to repurchase the debt security from the Portfolios at a mutually agreed upon time and price. The Portfolios’ policy is to take possession of the debt security as collateral under the repurchase agreements. The Portfolios minimize credit risk by monitoring credit exposure to the custodian and by monitoring the collateral value on an ongoing basis.

(j) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates.

(2) New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006. Recent SEC guidance allows implementing FIN 48 in portfolio NAV calculations as late as the fund’s last NAV calculation in the first required financial statement reporting period. Management has evaluated the implications of FIN 48 and has determined it does not have an impact on the financial statements as of June 30, 2007.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact that FAS 157 will have on the Funds’ financial statements.

(3) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Portfolio has a management agreement with William Blair & Company L.L.C. (the “Company”) for investment advisory, clerical, bookkeeping and administrative services. Each Portfolio pays the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets. A summary of the annual rates expressed as a percentage of average daily net assets is as follows:


Equity Portfolios			International Portfolios
Growth	0.75	%	International Growth and International Equity
Tax-Managed Growth	0.80	%	First $250 million	1.10	%
Large Cap Growth	0.80	%	In excess of $250 million	1.00	%
Small Cap Growth	1.10	%	International Small Cap Growth	1.00	%
Mid Cap Growth	0.95	%	Emerging Markets Growth	1.10	%
Small-Mid Cap Growth	1.00	%
Value Discovery	1.10	%

Fixed Income Portfolios			Money Market Portfolio
Bond	0.30	%	Ready Reserves
Income*			First $250 million	0.275	%
First $250 million	0.25	%	Next $250 million	0.250	%
In excess of $250 million	0.20	%	Next $2 billion	0.225	%
			In excess of $2.5 billion	0.200	%
*Management fee also includes a charge of 5% of gross income.

94 Semi-Annual Report

June 30, 2007

Some of the Portfolios have also entered into Expense Limitation Agreements with the Company. Under the terms of these Agreements, the Company has agreed to waive its advisory fees and absorb other operating expenses through April 30, 2008, if total expenses for each class of the following Portfolios exceed the following rates (as a percentage of average daily net assets):


	Class N Shares				Class I Shares
	Through April 30, 2007		Effective May 1, 2007		Through April 30, 2007		Effective May 1, 2007
Tax-Managed Growth	1.40	%	1.32	%	1.15	%	1.07	%
Large Cap Growth	1.23	%	1.23	%	0.98	%	0.98	%
Small Cap Growth	1.50	%	1.50	%	1.25	%	1.25	%
Mid Cap Growth Fund	1.40	%	1.36	%	1.15	%	1.11	%
Small-Mid Cap Growth	1.37	%	1.36	%	1.12	%	1.11	%
International Growth	1.45	%	1.45	%	1.20	%	1.20	%
International Equity	1.45	%	1.45	%	1.20	%	1.20	%
International Small Cap Growth	1.65	%	1.65	%	1.40	%	1.40	%
Emerging Markets Growth	1.65	%	1.65	%	1.40	%	1.40	%
Value Discovery	1.34	%	1.29	%	1.09	%	1.09	%
Bond Fund	N/A		0.65	%	N/A		0.50	%
Income Fund	0.75	%	N/A		N/A		N/A

For a period of three years subsequent to the Commencement of Operations of the Mid Cap Growth, International Small Cap Growth, Emerging Markets Growth and Bond Portfolios, the Company is entitled to reimbursement for previously waived fees and reimbursed expenses to the extent the overall expense ratio remains below the percentages indicated. The total amount available for recapture at June 30, 2007 was $161 (in thousands) for the Mid Cap Growth Portfolio, $134 for the International Small Cap Growth Portfolio, $621 for the Emerging Markets Growth Portfolio and $21 for the Bond Portfolio.

For the period ended June 30, 2007, the investment advisory fees incurred by the Portfolios and related fee waivers were as follows (in thousands):


Portfolio	Gross Advisory Fee		Fee Waiver		Net Advisory Fee		Additional Expenses (Recovered) or Absorbed by Advisor
Growth	$	1,076	$	—	$	1,076	$	—
Tax-Managed Growth		40		38		2		—
Large Cap Growth		98		43		55		—
Small Cap Growth		7,203		—		7,203		—
Mid Cap Growth		142		51		91		—
Small-Mid Cap Growth		520		38		482		—
International Growth		33,428		—		33,428		—
International Equity		1,725		202		1,523		—
International Small Cap Growth		1,482		—		1,482		—
Emerging Markets Growth		4,895		80		4,815		—
Value Discovery		647		195		452		—
Bond		21		21		—		—
Income		710		—		710		—
Ready Reserves		1,416		—		1,416		—

(b) Underwriting, Distribution Services and Service Agreement

Each Portfolio except the Ready Reserves Portfolio has a Distribution Agreement with the Company for distribution services. Each Portfolio pays the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets of specified share classes. The annual rates expressed as a percentage of average daily net assets for Class N is 0.25% for all Portfolios except the Income and Bond Portfolios, which is 0.15%. Pursuant to the Distribution Agreement, the Company enters into related selling group agreements with various firms at various rates for sales of the Portfolios’ Class N shares.

June 30, 2007

William Blair Funds 95

Distribution fees incurred by the Portfolios to the Company, for the year ended June 30, 2007, were as follows (in thousands):


Portfolio	Gross Distribution Fees		Fee Waiver		Net Distribution Fee
Growth	$	96	$	—	$	96
Tax-Managed Growth		1		—		1
Large Cap Growth		15		—		15
Small Cap Growth		883		—		883
Mid Cap Growth		9		—		9
Small-Mid Cap Growth		20		—		20
International Growth		5,564		—		5,564
International Equity		57		—		57
International Small Cap Growth		25		—		25
Emerging Markets Growth		74		—		74
Value Discovery		83		—		83
Bond		—		—		—
Income		69		12		57

The Ready Reserves Portfolio has a Service Agreement with the Company to provide shareholder services and automatic sweep services. The Portfolio pays the Company an annual fee, payable monthly, based upon 0.35% of the average daily net assets of Class N. For the period ended June 30, 2007, the following fees were incurred (in thousands):


Ready Reserves		$	2,059

The International Small Cap Growth, Emerging Markets Growth and Bond Portfolios have a Shareholder Administration Agreement with the Company to provide shareholder administration services. Class N and Class I shares of the Portfolios pay the Company an annual fee, payable monthly, based upon 0.15% of average daily net assets attributable to each class, respectively. For the period ended June 30, 2007, the following fees were incurred (in thousands):


International Small Cap Growth	$	85
Emerging Markets Growth		207
Bond		8

(c) Trustees Fees

The Portfolios incurred fees of $167 (in thousands) to non-interested trustees of the Fund for the period ended June 30, 2007. Interested trustees are not compensated by the Fund.

(d) Investments in Affiliated Portfolio

Pursuant to the rules of the 1940 Act, each of the Portfolios of the Fund may invest in the William Blair Ready Reserves Portfolio (“Ready Reserves”), an open-end money market portfolio managed by the Advisor. Ready Reserves Portfolio is used as a cash management option to the other Portfolios in the Fund. The Advisor waives management fees and shareholder service fees earned from the other Portfolios’ investment in the Ready Reserves Fund. The fees waived with respect to each Portfolio for the period ended June 30, 2007 are listed below. Distributions received from Ready Reserves are reflected as “Dividend Income from Affiliated Fund” in each Portfolio’s statement of operations. Amounts relating to the Portfolios’ investments in Ready Reserves were as follows for the period ended June 30, 2007 (in thousands):


Portfolio	Purchases		Sales Proceeds		Fees Waived		Dividend Income		Value		Percent of Net Assets
Growth	$	61	$	—	$	7	$	61	$	2,635	0.8	%
Tax-Managed Growth		—		100		—		1		6	0.1
Large Cap Growth		1,085		900		1		4		239	0.9
Small Cap Growth		10,203		14,600		24		203		5,497	0.4
Mid Cap Growth		1,506		1,500		1		5		110	0.3
Small-Mid Cap Growth		1,010		2,300		1		10		21	—
International Growth		5,039		—		5		39		5,676	0.1
International Equity		6,101		6,100		12		101		5,159	1.4
International Small Cap Growth		1,078		4,158		9		77		2,148	0.6
Emerging Markets Growth		31		—		4		30		1,296	0.1
Value Discovery		3		475		—		3		30	—

96 Semi-Annual Report

June 30, 2007

(4) Investment Transactions

Investment transactions, excluding money market instruments, for the period ended June 30, 2007 were as follows (in thousands):


Portfolio	Purchases		Sales
Growth	$	105,378	$	78,968
Tax-Managed Growth		2,858		2,731
Large Cap Growth		12,193		6,768
Small Cap Growth		573,209		562,103
Mid Cap Growth		25,156		9,454
Small-Mid Cap Growth		42,969		33,859
International Growth		2,048,788		1,800,818
International Equity		159,296		137,310
International Small Cap Growth		211,356		123,259
Emerging Markets Growth		532,799		443,125
Value Discovery		72,323		149,132
Bond		57,134		6,417
Income		25,090		66,290

(5) Foreign Currency Forward Contracts

To protect itself against a decline in the value of foreign currency against the U.S. dollar, the International Growth, International Equity, International Small Cap Growth and Emerging Markets Growth Portfolios enter into foreign currency forward contracts with its custodian and others. The Portfolios bear the market risk that arises from changes in foreign currency rates and bears the credit risk if the counterparty fails to perform under the contract. The net realized and unrealized gains and losses associated with foreign currency forward contracts are reflected in the accompanying financial statements.

(6) Fund Share Transactions

The following table summarizes the activity in capital shares of each Portfolio (in thousands):


	Sales (Dollars)
	Period Ended June 30, 2007						Year Ended December 31, 2006
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	35,960	$	21,553	$	57,513	$	25,590	$	7,625	$	33,215
Tax-Managed Growth		—		590		590		735		710		1,445
Large Cap Growth		5,323		11,052		16,375		2,079		2,871		4,950
Small Cap Growth		77,213		106,951		184,164		327,203		262,870		590,073
Mid Cap Growth (a)		2,180		14,458		16,638		7,132		14,246		21,378
Small Mid-Cap Growth		2,871		13,529		16,400		3,522		20,782		24,304
International Growth		544,481		323,296		867,777		1,221,792		563,927		1,785,719
International Equity		17,200		44,433		61,633		23,189		114,544		137,733
International Small Cap Growth		5,944		40,588		46,532		17,783		51,330		69,113
Emerging Markets Growth		7,353		34,891		42,244		35,769		147,530		183,299
Value Discovery		16,987		9,886		26,873		88,879		11,658		100,537
Bond (b)		697		42,535		43,232		—		—		—
Income		21,521		15,084		36,605		32,007		29,825		61,832
Ready Reserves		483,787		—		483,787		1,030,633		—		1,030,633

(a)

The information for the year ended December 31, 2006 is for the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

(b)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

June 30, 2007

William Blair Funds 97


										Reinvested Distributions (Dollars)
	Period Ended June 30, 2007									Year Ended December 31, 2006
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	—		$	—		$	—		$	5,960		$	19,244		$	25,204
Tax-Managed Growth		—			—			—			—			—			—
Large Cap Growth		—			—			—			—			—			—
Small Cap Growth		—			—			—			43,585			29,938			73,523
Mid Cap Growth (a)		—			—			—			—			—			—
Small Mid-Cap Growth		—			—			—			645			3,347			3,992
International Growth		—			—			—			439,429			193,983			633,412
International Equity		—			—			—			504			3,886			4,390
International Small Cap Growth		—			—			—			71			204			275
Emerging Markets Growth		—			—			—			322			1,039			1,361
Value Discovery		—			—			—			9,410			4,754			14,164
Bond (b)		3			142			145			—			—			—
Income		2,087			3,754			5,841			4,314			8,747			13,061
Ready Reserves		28,101			—			28,101			51,002			—			51,002

										Redemptions (Dollars)
	Period Ended June 30, 2007									Year Ended December 31, 2006
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	10,970		$	13,920		$	24,890		$	24,102		$	26,243		$	50,345
Tax-Managed Growth		327			207			534			34			344			378
Large Cap Growth		9,299			906			10,205			516			2,343			2,859
Small Cap Growth		120,799			53,640			174,439			193,966			94,377			288,343
Mid Cap Growth (a)		541			230			771			1,913			641			2,554
Small Mid-Cap Growth		1,513			6,184			7,697			1,816			7,060			8,876
International Growth		456,162			144,854			601,016			927,830			230,002			1,157,832
International Equity		3,839			26,852			30,691			11,966			49,451			61,417
International Small Cap Growth		2,524			11,341			13,865			5,184			1,990			7,174
Emerging Markets Growth		7,790			32,184			39,974			11,956			14,058			26,014
Value Discovery		97,367			8,939			106,306			14,585			25,759			40,344
Bond (b)		1			—			1			—			—			—
Income		17,704			62,773			80,477			46,237			38,423			84,660
Ready Reserves		524,994			—			524,994			977,896			—			977,896

										Net Change in Net Assets relating to Fund Share Activity (Dollars)
	Period Ended June 30, 2007									Year Ended December 31, 2006
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	24,990		$	7,633		$	32,623		$	7,448		$	626		$	8,074
Tax-Managed Growth		(327	)		383			56			701			366			1,067
Large Cap Growth		(3,976	)		10,146			6,170			1,563			528			2,091
Small Cap Growth		(43,586	)		53,311			9,725			176,822			198,431			375,253
Mid Cap Growth (a)		1,639			14,228			15,867			5,219			13,605			18,824
Small Mid-Cap Growth		1,358			7,345			8,703			2,351			17,069			19,420
International Growth		88,319			178,442			266,761			733,391			527,908			1,261,299
International Equity		13,361			17,581			30,942			11,727			68,979			80,706
International Small Cap Growth		3,420			29,247			32,667			12,670			49,544			62,214
Emerging Markets Growth		(437	)		2,707			2,270			24,135			134,511			158,646
Value Discovery		(80,380	)		947			(79,433	)		83,704			(9,347	)		74,357
Bond (b)		699			42,675			43,376			—			—			—
Income		5,904			(43,935	)		(38,031	)		(9,916	)		149			(9,767	)
Ready Reserves		(13,106	)		—			(13,106	)		103,739			—			103,739

(a)

The information for the year ended December 31, 2006 is for the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

(b)

For the period from May 1, 2007 (Commencement of Operation) to June 30, 2007.

98 Semi-Annual Report

June 30, 2007


				Sales (Shares)
	Period Ended June 30, 2007			Year Ended December 31, 2006
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	3,054	1,729	4,783	2,121	632	2,753
Tax-Managed Growth	—	52	52	73	67	140
Large Cap Growth	772	1,512	2,284	314	430	744
Small Cap Growth	2,968	4,048	7,016	12,763	10,023	22,786
Mid Cap Growth (a)	199	1,296	1,495	710	1,412	2,122
Small Mid-Cap Growth	209	985	1,194	267	1,562	1,829
International Growth	18,687	10,958	29,645	44,607	20,102	64,709
International Equity	1,094	2,802	3,896	1,691	8,196	9,887
International Small Cap Growth	414	2,831	3,245	1,449	4,109	5,558
Emerging Markets Growth	364	1,713	2,077	2,209	8,482	10,691
Value Discovery	1,037	584	1,621	5,250	689	5,939
Bond (b)	70	4,266	4,336	—	—	—
Income	2,216	1,559	3,775	3,289	3,073	6,362
Ready Reserves	483,788	—	483,788	1,030,633	—	1,030,633

				Reinvested Distributions (Shares)
	Period Ended June 30, 2007			Year Ended December 31, 2006
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	—	—	—	518	1,639	2,157
Tax-Managed Growth	—	—	—	—	—	—
Large Cap Growth	—	—	—	—	—	—
Small Cap Growth	—	—	—	1,713	1,152	2,865
Mid Cap Growth (a)	—	—	—	—	—	—
Small Mid-Cap Growth	—	—	—	49	253	302
International Growth	—	—	—	16,102	7,005	23,107
International Equity	—	—	—	34	257	291
International Small Cap Growth (b)	—	—	—	5	15	20
Emerging Markets Growth	—	—	—	17	55	72
Value Discovery	—	—	—	581	289	870
Bond (b)	—	15	15	—	—	—
Income	215	389	604	445	904	1,349
Ready Reserves	28,101	—	28,101	51,002	—	51,002

				Redemptions (Shares)
	Period Ended June 30, 2007			Year Ended December 31, 2006
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	916	1,143	2,059	2,024	2,182	4,206
Tax-Managed Growth	29	17	46	3	32	35
Large Cap Growth	1,290	125	1,415	76	349	425
Small Cap Growth	4,619	1,979	6,598	7,637	3,603	11,240
Mid Cap Growth (a)	49	21	70	186	62	248
Small Mid-Cap Growth	111	436	547	138	522	660
International Growth	15,672	4,939	20,611	34,003	8,346	42,349
International Equity	240	1,715	1,955	909	3,555	4,464
International Small Cap Growth (b)	178	761	939	417	161	578
Emerging Markets Growth	398	1,533	1,931	775	840	1,615
Value Discovery	5,767	531	6,298	900	1,600	2,500
Bond (b)	—	—	—	—	—	—
Income	1,824	6,504	8,328	4,755	3,959	8,714
Ready Reserves	524,994	—	524,994	977,896	—	977,896

(a)

The information for the year ended December 31, 2006 is for the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

(b)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

June 30, 2007

William Blair Funds 99


	Net Change in Shares Outstanding relating to Fund Share Activity (Shares)
	Period Ended June 30, 2007						Year Ended December 31, 2006
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	2,138		586		2,724		615		89		704
Tax-Managed Growth	(29	)	35		6		70		35		105
Large Cap Growth	(518	)	1,387		869		238		81		319
Small Cap Growth	(1,651	)	2,069		418		6,839		7,572		14,411
Mid Cap Growth (a)	150		1,275		1,425		524		1,350		1,874
Small Mid-Cap Growth	98		549		647		178		1,293		1,471
International Growth	3,015		6,019		9,034		26,706		18,761		45,467
International Equity	854		1,087		1,941		816		4,898		5,714
International Small Cap Growth	236		2,070		2,306		1,037		3,963		5,000
Emerging Markets Growth	(34	)	180		146		1,451		7,697		9,148
Value Discovery	(4,730	)	53		(4,677	)	4,931		(622	)	4,309
Bond (b)	70		4,281		4,351		—		—		—
Income	607		(4,556	)	(3,949	)	(1,021	)	18		(1,003	)
Ready Reserves	(13,105	)	—		(13,105	)	103,739		—		103,739

(a)

The information for the year ended December 31, 2006 is for the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

(b)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

100 Semi-Annual Report

June 30, 2007

Financial Highlights

Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	11.42		$	11.33		$	10.70		$	9.97		$	8.06		$	10.87
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.06	)		(0.06	)		(0.06	)		(0.06	)		(0.07	)
Net realized and unrealized gain (loss) on investments		0.91			1.48			1.11			0.79			1.97			(2.74	)

Total from investment operations		0.90			1.42			1.05			0.73			1.91			(2.81	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.33			0.42			—			—			—

Total distributions		—			1.33			0.42			—			—			—

Net asset value, end of year	$	12.32		$	11.42		$	11.33		$	10.70		$	9.97		$	8.06

Total return (%)		7.88			12.42			9.75			7.32			23.70			(25.85	)
Ratios to average daily net assets (%):
Expenses		1.21	(a)		1.17			1.15			1.17			1.19			1.19
Net investment income (loss)		(0.23	)(a)		(0.49	)		(0.60	)		(0.60	)		(0.67	)		(0.73	)

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	11.66		$	11.52		$	10.84		$	10.08		$	8.12		$	10.93
Income (loss) from investment operations:
Net investment income (loss)		—			(0.02	)		(0.04	)		(0.04	)		(0.04	)		(0.05	)
Net realized and unrealized gain (loss) on investments		0.95			1.49			1.14			0.80			2.00			(2.76	)

Total from investment operations		0.95			1.47			1.10			0.76			1.96			(2.81	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.33			0.42			—			—			—

Total distributions		—			1.33			0.42			—			—			—

Net asset value, end of year	$	12.61		$	11.66		$	11.52		$	10.84		$	10.08		$	8.12

Total return (%)		8.15			12.64			10.08			7.54			24.14			(25.71	)
Ratios to average daily net assets (%):
Expenses		0.87	(a)		0.89			0.90			0.92			0.94			0.94
Net investment income (loss)		0.08	(a)		(0.20	)		(0.35	)		(0.35	)		(0.42	)		(0.48	)




	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	319,547		$	264,525	$	253,599	$	275,506	$	281,654	$	255,625
Portfolio turnover rate (%)		56	(a)		61		54		35		45		29

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 101

Financial Highlights

Tax-Managed Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/07			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	10.94		$	10.11		$	8.99		$	8.41		$	6.86		$	9.07
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.04	)		(0.07	)		(0.08	)		(0.07	)		(0.06	)
Net realized and unrealized gain (loss) on investments		0.82			0.87			1.19			0.66			1.62			(2.15	)

Total from investment operations		0.81			0.83			1.12			0.58			1.55			(2.21	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			—			—

Total distributions		—			—			—			—			—			—

Net asset value, end of year	$	11.75		$	10.94		$	10.11		$	8.99		$	8.41		$	6.86

Total return (%)		7.40			8.21			12.46			6.90			22.59			(24.37	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.37	(a)		1.44			1.53			1.54			1.49			1.36
Expenses, before waivers and reimbursements		2.12	(a)		2.24			2.55			2.26			2.26			2.22
Net investment income (loss), net of waivers and reimbursements		(0.15	)(a)		(0.41	)		(0.76	)		(0.92	)		(0.91	)		(0.72	)
Net investment income (loss), before waivers and reimbursements		(0.90	)(a)		(1.21	)		(1.78	)		(1.64	)		(1.68	)		(1.58	)

	Class I
	Period Ended			Years Ended December 31,
	6/30/07			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	11.15		$	10.27		$	9.10		$	8.50		$	6.92		$	9.12
Income (loss) from investment operations:
Net investment income (loss)		0.01			(0.02	)		(0.05	)		(0.06	)		(0.05	)		(0.04	)
Net realized and unrealized gain (loss) on investments		0.83			0.90			1.22			0.66			1.63			(2.16	)

Total from investment operations		0.84			0.88			1.17			0.60			1.58			(2.20	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			—			—

Total distributions		—			—			—			—			—			—

Net asset value, end of year	$	11.99		$	11.15		$	10.27		$	9.10		$	8.50		$	6.92

Total return (%)		7.53			8.57			12.86			7.06			22.83			(24.12	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.12	(a)		1.19			1.28			1.29			1.24			1.11
Expenses, before waivers and reimbursements		1.88	(a)		1.99			2.30			2.01			2.01			1.97
Net investment income (loss), net of waivers and reimbursements		0.16	(a)		(0.16	)		(0.51	)		(0.67	)		(0.66	)		(0.47	)
Net investment income (loss), before waivers and reimbursements		0.60	(a)		(0.96	)		(1.53	)		(1.39	)		(1.43	)		(1.33	)




	Period Ended			Years Ended December 31,
	6/30/07			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	10,442		$	9,644	$	7,815	$	5,847	$	6,871	$	5,303
Portfolio turnover rate (%)		56	(a)		42		25		31		37		44

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

102 Semi-Annual Report

June 30, 2007

Financial Highlights

Large Cap Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	6.88		$	6.47		$	6.24		$	5.93		$	4.80		$	6.72
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.02	)		(0.02	)		(0.04	)		(0.04	)		(0.04	)
Net realized and unrealized gain (loss) on investments		0.41			0.43			0.25			0.35			1.17			(1.88	)

Total from investment operations		0.40			0.41			0.23			0.31			1.13			(1.92	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			—			—

Total distributions		—			—			—			—			—			—

Net asset value, end of year	$	7.28		$	6.88		$	6.47		$	6.24		$	5.93		$	4.80

Total return (%)		5.81			6.34			3.69			5.23			23.54			(28.57	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.23	(a)		1.24			1.28			1.38			1.42			1.36
Expenses, before waivers and reimbursements		1.60	(a)		1.63			2.08			2.29			2.39			2.45
Net investment income (loss), net of waivers and reimbursements		(0.18	)(a)		(0.29	)		(0.37	)		(0.63	)		(0.76	)		(0.71	)
Net investment income (loss), before waivers and reimbursements		(0.56	)(a)		(0.68	)		(1.17	)		(1.54	)		(1.73	)		(1.80	)

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	6.99		$	6.56		$	6.31		$	5.99		$	4.82		$	6.74
Income (loss) from investment operations:
Net investment income (loss)		0.01			—			(0.01	)		(0.02	)		(0.03	)		(0.03	)
Net realized and unrealized gain (loss) on investments		0.39			0.43			0.26			0.34			1.20			(1.89	)

Total from investment operations		0.40			0.43			0.25			0.32			1.17			(1.92	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			—			—

Total distributions		—			—			—			—			—			—

Net asset value, end of year	$	7.39		$	6.99		$	6.56		$	6.31		$	5.99		$	4.82

Total return (%)		5.72			6.55			3.96			5.34			24.27			(28.49	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.99	(a)		0.99			1.03			1.13			1.17			1.11
Expenses, before waivers and reimbursements		1.33	(a)		1.38			1.83			2.04			2.14			2.20
Net investment income (loss), net of waivers and reimbursements		0.28	(a)		(0.04	)		(0.12	)		(0.38	)		(0.51	)		(0.46	)
Net investment income (loss), before waivers and reimbursements		(0.07	)(a)		(0.43	)		(0.92	)		(1.29	)		(1.48	)		(1.55	)


	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	27,839		$	20,191	$	16,888	$	6,417	$	5,519	$	5,469
Portfolio turnover rate (%)		57	(a)		53		53		39		33		52

(a)

Rates are annualized for periods less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 103

Financial Highlights

Small Cap Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	25.41		$	23.76		$	25.72		$	21.83		$	13.72		$	16.58
Income (loss) from investment operations:
Net investment income (loss)		(0.16	)		(0.29	)		(0.30	)		(0.30	)		(0.21	)		(0.19	)
Net realized and unrealized gain (loss) on investments		2.44			3.65			0.64			6.20			8.68			(2.67	)

Total from investment operations		2.28			3.36			0.34			5.90			8.47			(2.86	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.71			2.30			2.01			0.36			—

Total distributions		—			1.71			2.30			2.01			0.36			—

Net asset value, end of year	$	27.69		$	25.41		$	23.76		$	25.72		$	21.83		$	13.72

Total return (%)		8.97			14.12			1.18			27.24			61.88			(17.25	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.49(a)			1.48			1.49			1.49			1.55			1.56
Expenses, before waivers and reimbursements		1.49(a)			1.48			1.49			1.46			1.52			1.62
Net investment income (loss), net of waivers and reimbursements		(1.25)(a)			(1.14	)		(1.23	)		(1.27	)		(1.22	)		(1.31	)
Net investment income (loss), before waivers and reimbursements		(1.25)(a)			(1.14	)		(1.23	)		(1.24	)		(1.19	)		(1.37	)

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	25.94		$	24.16		$	26.04		$	22.03		$	13.82		$	16.65
Income (loss) from investment operations:
Net investment income (loss)		(0.13	)		(0.22	)		(0.25	)		(0.24	)		(0.18	)		(0.16	)
Net realized and unrealized gain (loss) on investments		2.50			3.71			0.67			6.26			8.75			(2.67	)

Total from investment operations		2.37			3.49			0.42			6.02			8.57			(2.83	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.71			2.30			2.01			0.36			—

Total distributions		—			1.71			2.30			2.01			0.36			—

Net asset value, end of year	$	28.31		$	25.94		$	24.16		$	26.04		$	22.03		$	13.82

Total return (%)		9.14			14.42			1.48			27.54			62.15			(17.00	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20(a)			1.21			1.24			1.24			1.35			1.31
Expenses, before waivers and reimbursements		1.20(a)			1.21			1.24			1.21			1.28			1.37
Net investment income (loss), net of waivers and reimbursements		(0.96)(a)			(0.87	)		(0.98	)		(1.02	)		(1.02	)		(1.06	)
Net investment income (loss), before waivers and reimbursements		(0.96)(a)			(0.87	)		(0.98	)		(0.99	)		(0.95	)		(1.12	)




	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,388,046		$	1,261,174	$	831,738	$	771,209	$	518,824	$	78,581
Portfolio turnover rate (%)		87	(a)		105		80		109		103		133

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

104 Semi-Annual Report

June 30, 2007

Financial Highlights

Mid Cap Growth Fund


	Class N
	Periods Ended
	6/30/2007			12/31/2006(a)
	(unaudited)
Net asset value, beginning of period	$	10.46		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.07	)
Net realized and unrealized gain (loss) on investments		1.38			0.53

Total from investment operations		1.35			0.46
Less distributions from:
Net investment income		—			—
Net realized gain		—			—

Total distributions		—			—

Net asset value, end of period	$	11.81		$	10.46

Total return (%) (c)		12.91			4.60
Ratios to average daily net assets (%) (b):
Expenses, net of waivers and reimbursements		1.39			1.40
Expenses, before waivers and reimbursements		1.45			2.35
Net investment income (loss), net of waivers and reimbursements		(0.61	)		(0.70	)
Net investment income (loss), before waivers and reimbursements		(0.67	)		(1.65	)

	Class I
	Periods Ended
	6/30/2007			12/31/2006(a)
	(unaudited)
Net asset value, beginning of period	$	10.49		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		(0.04	)
Net realized and unrealized gain (loss) on investments		1.40			0.53

Total from investment operations		1.38			0.49
Less distributions from:
Net investment income		—			—
Net realized gain		—			—

Total distributions		—			—

Net asset value, end of period	$	11.87		$	10.49

Total return (%) (c)		13.16			4.90
Ratios to average daily net assets (%) (b):
Expenses, net of waivers and reimbursements		1.13			1.15
Expenses, before waivers and reimbursements		1.55			2.10
Net investment income (loss), net of waivers and reimbursements		(0.36	)		(0.43	)
Net investment income (loss), before waivers and reimbursements		(0.78	)		(1.38	)


	Periods Ended
	6/30/2007			12/31/2006(a)
	(unaudited)
Supplemental data for all classes:
Net assets at end of period (in thousands)	$	39,111		$	19,639
Portfolio turnover rate (%) (b)		65			56

(a)

For the period from February 1, 2006 (Commencement of Operations) to December 31, 2006.

(b)

Rates are annualized for periods that are less than a year.

(c)

Total return is not annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the period.

June 30, 2007

William Blair Funds 105

Financial Highlights

Small-Mid Cap Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003(a)
	(unaudited)
Net asset value, beginning of year	$	12.96		$	12.40		$	11.28		$	9.94		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.06	)		(0.11	)		(0.11	)		(0.13	)		—
Net realized and unrealized gain (loss) on investments		1.78			1.32			1.32			1.47			(0.06	)

Total from investment operations		1.72			1.21			1.21			1.34			(0.06	)
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			0.65			0.09			—			—

Total distributions		—			0.65			0.09			—			—

Net asset value, end of year	$	14.68		$	12.96		$	12.40		$	11.28		$	9.94

Total return (%)		13.27			9.68			10.72			13.48			(0.60	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.36	(b)		1.38			1.45			1.54			1.54	(b)
Expenses, before waivers and reimbursements		1.44	(b)		1.45			1.54			2.14			1.54	(b)
Net investment income (loss), net of waivers and reimbursements		(0.80	)(b)		(0.86	)		(0.97	)		(1.26	)		(1.54	)(b)
Net investment income (loss), before waivers and reimbursements		(0.88	)(b)		(0.93	)		(1.06	)		(1.86	)		(1.54	)(b)

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003(a)
	(unaudited)
Net asset value, beginning of year	$	13.06		$	12.46		$	11.30		$	9.94		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.04	)		(0.08	)		(0.08	)		(0.11	)		—
Net realized and unrealized gain (loss) on investments		1.79			1.33			1.33			1.47			(0.06	)

Total from investment operations		1.75			1.25			1.25			1.36			(0.06	)
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			0.65			0.09			—			—

Total distributions		—			0.65			0.09			—			—

Net asset value, end of year	$	14.81		$	13.06		$	12.46		$	11.30		$	9.94

Total return (%)		13.40			9.95			11.05			13.68			(0.60	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.11	(b)		1.13			1.20			1.29			1.29	(b)
Expenses, before waivers and reimbursements		1.19	(b)		1.20			1.29			1.89			1.29	(b)
Net investment income (loss), net of waivers and reimbursements		(0.57	)(b)		(0.61	)		(0.72	)		(1.01	)		(1.29	)(b)
Net investment income (loss), before waivers and reimbursements		(0.63	)(b)		(0.68	)		(0.81	)		(1.61	)		(1.29	)(b)




	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	114,735		$	92,766	$	70,211	$	25,974	$	3,673
Portfolio turnover rate (%)		66	(b)		68		62		55		—	(b)

(a)

For the period from December 29, 2003 (Commencement of Operations) to December 31, 2003.

(b)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

106 Semi-Annual Report

June 30, 2007

Financial Highlights

International Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004			2003		2002
	(unaudited)
Net asset value, beginning of year	$	27.70		$	25.22	$	22.09	$	18.65		$	13.13	$	15.48
Income (loss) from investment operations:
Net investment income (loss) (a)		0.12			0.05		0.15		(0.02	)		0.02		(0.05	)
Net realized and unrealized gain (loss) on investments		3.11			5.71		4.60		3.47			5.52		(2.30	)

Total from investment operations		3.23			5.76		4.75		3.45			5.54		(2.35	)
Less distributions from:
Net investment income		—			0.37		0.11		0.01			0.02		—
Net realized gain		—			2.91		1.51		—			—		—

Total distributions		—			3.28		1.62		0.01			0.02		—

Net asset value, end of year	$	30.93		$	27.70	$	25.22	$	22.09		$	18.65	$	13.13

Total return (%)		11.66			23.06		21.65		18.48			42.21		(15.18	)
Ratios to average daily net assets (%):
Expenses		1.40	(b)		1.42		1.42		1.47			1.50		1.51
Net investment income (loss)		0.81	(b)		0.19		0.16		(0.16	)		0.05		(0.36	)


	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Net asset value, beginning of year	$	28.10		$	25.55	$	22.34	$	18.85	$	13.27	$	15.60
Income (loss) from investment operations:
Net investment income (loss) (a)		0.16			0.13		0.27		0.01		0.09		(0.01	)
Net realized and unrealized gain (loss) on investments		3.17			5.78		4.61		3.53		5.54		(2.32	)

Total from investment operations		3.33			5.91		4.88		3.54		5.63		(2.33	)
Less distributions from:
Net investment income		—			0.45		0.16		0.05		0.05		—
Net realized gain		—			2.91		1.51		—		—		—

Total distributions		—			3.36		1.67		0.05		0.05		—

Net asset value, end of year	$	31.43		$	28.10	$	25.55	$	22.34	$	18.85	$	13.27

Total return (%)		11.85			23.35		22.00		18.79		42.42		(14.94	)
Ratios to average daily net assets (%):
Expenses		1.10	(b)		1.11		1.17		1.22		1.25		1.26
Net investment income (loss)		1.12	(b)		0.45		0.41		0.09		0.30		(0.11	)
	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	7,284,401		$	6,267,126	$	4,551,077	$	3,001,434	$	1,899,699	$	778,788
Portfolio turnover rate (%)		55	(b)		72		70		79		57		73

(a)

Excludes $0.42, $0.37, $0.12, $0.03, $0.00, and $0.00, of PFIC mark to market which are treated as ordinary income for Federal tax purposes for the years 2006, 2005, 2004, 2003 and 2002, respectively.

(b)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 107

Financial Highlights

International Equity Fund


	Class N
	Period Ending			Years Ended December 31,
	6/30/07			2006		2005			2004(a)
	(unaudited)
Net asset value, beginning of year	$	15.21		$	12.86	$	11.33		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.09			0.04		(0.01	)		(0.04	)
Net realized and unrealized gain (loss) on investments		1.35			2.52		1.54			1.37

Total from investment operations		1.44			2.56		1.53			1.33
Less distributions from:
Net investment income		—			0.19		—			—
Net realized gain		—			0.02		—			—

Total distributions		—			0.21		—			—

Net asset value, end of year	$	16.65		$	15.21	$	12.86		$	11.33

Total return (%)		9.47			19.96		13.50			13.30
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.45	(c)		1.46		1.48			1.50	(c)
Expenses, before waivers and reimbursements		1.51	(c)		1.56		1.81			2.96	(c)
Net investment income (loss), net of waivers and reimbursements		1.20	(c)		0.26		(0.33	)		(0.77	)(c)
Net investment income (loss), before waivers and reimbursements		1.14	(c)		0.16		(0.66	)		(2.23	)(c)


	Class I
	Period Ending			Years Ended December 31,
	6/30/07			2006		2005			2004(a)
	(unaudited)
Net asset value, beginning of year	$	15.31		$	12.94	$	11.37		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.11			0.06		(0.01	)		(0.01	)
Net realized and unrealized gain (loss) on investments		1.36			2.55		1.58			1.38

Total from investment operations		1.47			2.61		1.57			1.37
Less distributions from:
Net investment income		—			0.22		—			—
Net realized gain		—			0.02		—			—

Total distributions		—			0.24		—			—

Net asset value, end of year	$	16.78		$	15.31	$	12.94		$	11.37

Total return (%)		9.60			20.22		13.81			13.70
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20	(c)		1.21		1.23			1.25	(c)
Expenses, before waivers and reimbursements		1.33	(c)		1.35		1.56			2.71	(c)
Net investment income (loss), net of waivers and reimbursements		1.38	(c)		0.46		(0.08	)		(0.52	)(c)
Net investment income (loss), before waivers and reimbursements		1.25	(c)		0.32		(0.41	)		(1.98	)(c)


	Period Ending			Years Ended December 31,
	6/30/07			2006		2005		2004
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	358,596		$	297,716	$	177,710	$	9,689
Portfolio turnover rate (%)		87	(c)		83		127		108	(c)

(a)

For the period from May 24, 2004 (Commencement of Operations) to December 31, 2004.

(b)

Excludes $0.22, $0.33 and $0.02 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2006, 2005 and 2004, respectively.

(c)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

108 Semi-Annual Report

June 30, 2007

Financial Highlights

International Small Cap Growth Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007				2006			2005(a)
	(unaudited)
Net asset value, beginning of year	$	13.37			$	11.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.01				(0.05	)		(0.01	)
Net realized and unrealized gain (loss) on investments		1.91				2.32			1.17

Total from investment operations		1.92				2.27			1.16
Less distributions from:
Net investment income		—				0.01			—
Net realized gain		—				0.05			—

Total distributions		—				0.06			—

Net asset value, end of year	$	15.29			$	13.37		$	11.16

Total return (%)		14.36				20.32			11.60
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.61	(c)			1.65			1.65	(c)
Expenses, before waivers and reimbursements		1.61	(c)			1.71			2.57	(c)
Net investment income (loss), net of waivers and reimbursements		0.14	(c)			(0.40	)		(0.40	)(c)
Net investment income (loss), before waivers and reimbursements		0.14	(c)			(0.46	)		(1.32	)(c)

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007				2006			2005(a)
	(unaudited)
Net asset value, beginning of year	$	13.41			$	11.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.04				(0.03	)		—
Net realized and unrealized gain (loss) on investments		1.90				2.34			1.16

Total from investment operations		1.94				2.31			1.16
Less distributions from:
Net investment income		—				0.01			—
Net realized gain		—				0.05			—

Total distributions		—				0.06			—

Net asset value, end of year	$	15.35			$	13.41		$	11.16

Total return (%)		14.47				20.68			11.60
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30	(c)			1.40			1.40	(c)
Expenses, before waivers and reimbursements		1.30	(c)			1.46			2.32	(c)
Net investment income (loss), net of waivers and reimbursements		0.49	(c)			(0.25	)		(0.15	)(c)
Net investment income (loss), before waivers and reimbursements		0.49	(c)			(0.31	)		(1.07	)(c)




	Period Ended			Years Ended December 31,
	6/30/2007				2006		2005(a)
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	350,771			$	231,969	$	50,534
Portfolio turnover rate (%)		85	(c)			109		127	(c)

(a)

For the period from November 1, 2005 (Commencement of Operations) to December 31, 2005.

(b)

Excludes $0.00 and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years ended 2006 and 2005, respectively.

(c)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 109

Financial Highlights

Emerging Markets Growth Fund


	Class N
	Periods Ending			Years Ended December 31,
	6/30/07			2006			2005(a)
	(unaudited)
Net asset value, beginning of year	$	19.42		$	14.17		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		(0.02	)		(0.04	)		(0.01	)
Net realized and unrealized gain (loss) on investments		3.23			5.41			4.26

Total from investment operations		3.21			5.37			4.25
Less distributions from:
Net investment income		—			0.01			—
Net realized gain		—			0.11			0.08

Total distributions		—			0.12			0.08

Net asset value, end of year	$	22.63		$	19.42		$	14.17

Total return (%)		16.53			37.90			42.52
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.65	(c)		1.65			1.55	(c)
Expenses, before waivers and reimbursements		1.72	(c)		1.78			1.91	(c)
Net investment income (loss), net of waivers and reimbursements		(0.18	)(c)		(0.22	)		(0.11	)(c)
Net investment income (loss), before waivers and reimbursements		(0.25	)(c)		(0.35	)		(0.47	)(c)


	Class I
	Periods Ending			Years Ended December 31,
	6/30/07			2006			2005(a)
	(unaudited)
Net asset value, beginning of year		19.47		$	14.19		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.01			(0.01	)		0.01
Net realized and unrealized gain (loss) on investments		3.25			5.41			4.26

Total from investment operations		3.26			5.40			4.27
Less distributions from:
Net investment income		—			0.01			—
Net realized gain		—			0.11			0.08

Total distributions		—			0.12			0.08

Net asset value, end of year	$	22.73		$	19.47		$	14.19

Total return (%)		16.74			38.07			42.72
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.40	(c)		1.40			1.40	(c)
Expenses, before waivers and reimbursements		1.41	(c)		1.47			1.76	(c)
Net investment income (loss), net of waivers and reimbursements		0.09	(c)		(0.06	)		0.04	(c)
Net investment income (loss), before waivers and reimbursements		0.08	(c)		(0.13	)		(0.32	)(c)




	Periods Ending			Years Ended December 31,
	6/30/07			2006		2005(a)
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,042,351		$	813,649	$	249,348
Portfolio turnover rate (%)		102	(c)		113		77	(c)

(a)

For the period from June 6, 2005 (Commencement of Operations) to December 31, 2005.

(b)

Excludes $0.00 and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for years ended 2006 and 2005, respectively.

(c)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

110 Semi-Annual Report

June 30, 2007

Financial Highlights

Value Discovery Fund


	Class N
	Period Ending			Years Ended December 31,
	6/30/07			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	16.27		$	14.95		$	22.70		$	22.68		$	16.28		$	18.23
Income (loss) from investment operations:
Net investment income (loss)		0.01			0.03			(0.02	)		(0.01	)		(0.06	)		(0.03	)
Net realized and unrealized gain (loss) on investments		1.04			3.22			0.14			2.68			6.46			(1.92	)

Total from investment operations		1.05			3.25			0.12			2.67			6.40			(1.95	)
Less distributions from:
Net investment income		—			0.01			—			—			—			—
Net realized gain		—			1.92			7.87			2.65			—			—

Total distributions		—			1.93			7.87			2.65			—			—

Net asset value, end of year	$	17.32		$	16.27		$	14.95		$	22.70		$	22.68		$	16.28

Total return (%)		6.45			21.78			0.49			12.05			39.31			(10.70	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.34	(a)		1.34			1.34			1.34			1.49			1.53
Expenses, before waivers and reimbursements		1.69	(a)		1.75			1.64			1.48			1.58			1.53
Net investment income (loss), net of waivers and reimbursements		0.06	(a)		0.21			(0.22	)		(0.06	)		(0.30	)		(0.16	)
Net investment income (loss), before waivers and reimbursements		(0.29	)(a)		(0.20	)		(0.52	)		(0.20	)		(0.39	)		(0.16	)

	Class I
	Period Ending			Years Ended December 31,
	6/30/07			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	16.51		$	15.12		$	22.82		$	22.76		$	16.31		$	18.19
Income (loss) from investment operations:
Net investment income (loss)		0.05			0.03			—			0.01			(0.03	)		0.01
Net realized and unrealized gain (loss) on investments		1.03			3.30			0.17			2.70			6.48			(1.89	)

Total from investment operations		1.08			3.33			0.17			2.71			6.45			(1.88	)
Less distributions from:
Net investment income		—			0.02			—			—			—			—
Net realized gain		—			1.92			7.87			2.65			—			—

Total distributions		—			1.94			7.87			2.65			—			—

Net asset value, end of year	$	17.59		$	16.51		$	15.12		$	22.82		$	22.76		$	16.31

Total return (%)		6.54			22.10			0.70			12.18			39.55			(10.34	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.09	(a)		1.09			1.14			1.23			1.33			1.34
Expenses, before waivers and reimbursements		1.39	(a)		1.50			1.39			1.23			1.33			1.34
Net investment income (loss), net of waivers and reimbursements		0.54	(a)		0.16			(0.02	)		0.05			(0.14	)		0.03
Net investment income (loss), before waivers and reimbursements		0.24	(a)		(0.25	)		(0.27	)		0.05			(0.14	)		0.03


	Period Ending			Years Ended December 31,
	6/30/07			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	75,333		$	146,777	$	70,439	$	246,176	$	237,111	$	190,802
Portfolio turnover rate (%)		125	(a)		162		125		50		51		20

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 111

Financial Highlights

Bond Fund


	Class N
	Period Ended
	6/30/2007(a)
Net asset value, beginning of period	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.10
Net realized and unrealized gain (loss) on investments		(0.22	)

Total from investment operations		(0.12	)
Less distributions from:
Net investment income		(0.04	)
Net realized gain		—

Total distributions		(0.04	)

Net asset value, end of period	$	9.84

Total return (%) (c)		(1.15	)
Ratios to average daily net assets (%) (b):
Expenses, net of waivers and reimbursements		0.65
Expenses, before waivers and reimbursements		0.95
Net investment income (loss), net of waivers and reimbursements		4.69
Net investment income (loss), before waivers and reimbursements		4.39

	Class I
	Period Ended
	6/30/2007(a)
Net asset value, beginning of period	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.11
Net realized and unrealized gain (loss) on investments		(0.22	)

Total from investment operations		(0.11	)
Less distributions from:
Net investment income		(0.05	)
Net realized gain		—

Total distributions		—

Net asset value, end of period	$	9.84

Total return (%) (c)		(1.15	)
Ratios to average daily net assets (%) (b):
Expenses, net of waivers and reimbursements		0.50
Expenses, before waivers and reimbursements		0.80
Net investment income (loss), net of waivers and reimbursements		4.84
Net investment income (loss), before waivers and reimbursements		4.54

	Period Ended
	6/30/2007(a)
Supplemental data for all classes:
Net assets at end of period (in thousands)	$	51,623
Portfolio turnover rate (%) (b)		88

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

(b)

Rates are annualized for periods that are less than a year.

(c)

Total return is not annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the period.

112 Semi-Annual Report

June 30, 2007

Financial Highlights

Income Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)
Net asset value, beginning of year	$	9.74		$	9.83		$	10.19		$	10.43		$	10.62		$	10.34
Income (loss) from investment operations:
Net investment income (loss) (a)		0.26			0.44			0.47			0.52			0.40			0.55
Net realized and unrealized gain (loss) on investments		(0.21	)		(0.04	)		(0.30	)		(0.26	)		(0.02	)		0.25

Total from investment operations		0.05			0.40			0.17			0.26			0.38			0.80
Less distributions from:
Net investment income		0.24			0.49			0.53			0.50			0.57			0.52
Net realized gain		—			—			—			—			—			—

Total distributions		0.24			0.49			0.53			0.50			0.57			0.52

Net asset value, end of year	$	9.55		$	9.74		$	9.83		$	10.19		$	10.43		$	10.62

Total return (%)		0.45			4.25			1.71			2.61			3.68			7.91
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.77	(a)		0.74			0.73			0.78			0.77			0.81
Expenses, before waivers and reimbursements		0.80	(a)		0.80			0.73			0.78			0.77			0.81
Net investment income (loss), net of waivers and reimbursements		5.37	(a)		4.54			4.09			4.12			4.09			5.23
Net investment income (loss) before waivers and reimbursements		5.34	(a)		4.48			4.09			4.12			4.09			5.23

	Class I
	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005			2004			2003			2002
	(unaudited)

Net asset value, beginning of year	$	9.69		$	9.82		$	10.15		$	10.40		$	10.62		$	10.35
Income (loss) from investment operations:
Net investment income (loss) (a)		0.26			0.45			0.52			0.59			0.43			0.57
Net realized and unrealized gain (loss) on investments		(0.20	)		(0.04	)		(0.33	)		(0.31	)		(0.04	)		0.24

Total from investment operations		0.06			0.41			0.19			0.28			0.39			0.81
Less distributions from:
Net investment income		0.25			0.54			0.52			0.53			0.61			0.54
Net realized gain		—			—			—			—			—			—

Total distributions		0.25			0.54			0.52			0.53			0.61			0.54

Net asset value, end of year	$	9.50		$	9.69		$	9.82		$	10.15		$	10.40		$	10.62

Total return (%)		0.59			4.33			1.92			2.79			3.76			8.04
Ratios to average daily net assets (%):
Expenses		0.60	(a)		0.62			0.58			0.63			0.62			0.66
Net investment income (loss)		5.53	(a)		4.66			4.24			4.27			4.24			5.38




	Period Ended		Years Ended December 31,
	6/30/2007		2006	2005	2004	2003	2002
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$253,695		$297,077	$310,496	$294,084	$265,062	$196,136
Portfolio turnover rate (%)	18	(a)	33	41	43	36	66

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 113

Financial Highlights

Ready Reserves Fund


	Class N
	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Net asset value, beginning of year	$	1.00		$	1.00	$	1.00	$	1.00	$	1.00	$	1.00
Income (loss) from investment operations:
Net investment income (loss)		0.02			0.04		0.03		0.01		0.01		0.01

Total from investment operations		0.02			0.04		0.03		0.01		0.01		0.01
Less distributions from:
Net investment income		0.02			0.04		0.03		0.01		0.01		0.01

Total distributions		0.02			0.04		0.03		0.01		0.01		0.01

Net asset value, end of year	$	1.00		$	1.00	$	1.00	$	1.00	$	1.00	$	1.00

Total return (%)		2.37			4.47		2.62		0.80		0.66		1.28
Ratios to average daily net assets (%)
Expenses		0.63	(a)		0.63		0.64		0.65		0.66		0.67
Net investment income (loss)		4.72	(a)		4.38		2.57		0.80		0.66		1.28
Supplemental data:
Net assets at end of year (in thousands)	$	1,182,488		$	1,195,593	$	1,091,854	$	1,092,940	$	1,153,932	$	1,324,001

(a)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

114 Semi-Annual Report

June 30, 2007

Trustees and Officers (Unaudited). The trustees and officers of the William Blair Funds as of June 30, 2007, their year of birth, their principal occupations during the last five years, their affiliations, if any, with William Blair & Company, L.L.C., and other significant affiliations are set forth below. The address of each trustee and officer is 222 West Adams Street, Chicago, Illinois 60606.


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee/Officer
Interested Trustees
Frederick Conrad Fischer, 1934*	Chairman of the Board of Trustees	Since 1987	Principal, William Blair & Company, L.L.C.; Partner, APM Limited Partnership	16	Trustee Emeritus, Chicago Child Care Society, a non-profit organization; Trustee Emeritus Kalamazoo College

Michelle R. Seitz, 1965*	Trustee	Since 2002	Principal, William Blair & Company, L.L.C.	16	N/A
Non-Interested Trustees
Ann P. McDermott, 1939	Trustee	Since 1996	Board member and officer for various civic and charitable organizations over the past thirty years; professional experience prior thereto, registered representative for New York Stock Exchange firm	16	Northwestern University, Women’s Board; Rush Presbyterian St. Luke’s Medical Center, Women’s Board; University of Chicago, Women’s Board; Visiting Nurses Association, Honorary Director

Phillip O. Peterson, 1944	Trustee	Since 2007	Trustee of Strong Funds Liquidating Trusts since 2005 and President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	16	The Hartford Group of Mutual Funds (87 portfolios)

Donald J. Reaves, 1946	Trustee	Since 2004	Vice President for Administration and Chief Financial Officer, University of Chicago since 2002. Executive Vice President and Chief Financial Officer, Brown University from 1993 to 2002	16	American Student Assistance Corp.; Amica Mutual Insurance Company; guarantor of student loans

Donald L. Seeley, 1944	Trustee	Since 2003	Director, Applied Investment Management Program, University of Arizona Department of Finance, Formerly Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm	16	Warnaco Group, Inc. intimate apparel, sportswear, and swimwear manufacturer. Center for Furniture Craftmanship (not-for-profit)

Thomas J. Skelly, 1951	Trustee	Since 2007	Director and Investment Committee Chairman, U.S. Accenture Foundation Inc.; formerly Managing Partner of various divisions at Accenture	16	Clayton Holdings, Inc., provider of information-based analytics, consulting and outsourced services to various financial institutions and investors

Robert E. Wood II, 1938	Trustee	Since 1999	Retired Executive Vice President, Morgan Stanley Dean Witter	16	Chairman, Add-Vision, Inc. manufacturer of surface animation systems, and Micro-Combustion, LLC

June 30, 2007

William Blair Funds 115


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Other Directorships Held by Trustee/Officer
Officers

Marco Hanig, 1958	President	Since 1999	Principal, William Blair & Company, L.L.C.	Chicago Scores

Karl W. Brewer, 1966	Senior Vice President	Since 2000	Principal, William Blair & Company, L.L.C.	N/A

Harvey H. Bundy, III, 1944	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	N/A

Mark A. Fuller, III, 1957	Senior Vice President	Since 1993	Principal, William Blair & Company, L.L.C.	Partner, Fulsen Howney Partners

James S. Golan, 1961	Senior Vice President	Since 2005	Principal, William Blair & Company, L.L.C.	N/A

W. George Greig, 1952	Senior Vice President	Since 1996	Principal, William Blair & Company, L.L.C.	N/A

Michael A. Jancosek, 1959	Senior Vice President Vice President	Since 2004 2000-2004	Principal, William Blair & Company L.L.C. Associate, William Blair & Company, L.L.C.	N/A

John F. Jostrand, 1954	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A

James S. Kaplan, 1960	Senior Vice President Vice President	Since 2004 1995-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A

Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	Chairman, AG. Med, Inc.

Todd M. McClone, 1968	Senior Vice President Vice President	Since 2006 2005-2006	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A N/A

David S. Mitchell, 1960	Senior Vice President Vice President	Since 2004 2003-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A

Gregory J. Pusinelli, 1958	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A

David P. Ricci, 1958	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A

Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Principal, William Blair & Company, L.L.C.	N/A

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June 30, 2007


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Other Directorships Held by Trustee/Officer
Christopher T. Vincent, 1956	Senior Vice President Vice President	Since 2004 2002-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Managing Director/Senior Portfolio Manager, Zurich Scudder Investments	Uhlich Children’s Home

Colin J. Williams, 1975	Senior Vice President Vice President	Since 2007 Since 2006	Principal, William Blair & Company, L.L.C. Associate William Blair & Company, L.L.C.; formerly, Andersen Consulting; Allegiance Healthcare	N/A

Richard W. Smirl, 1967	Chief Compliance Officer	Since 2004	Principal, William Blair & Company, L.L.C.; former Chief Legal Officer, Strong Capital Management	N/A

Benjamin J. Armstrong 1965	Vice President	Since 2007	Associate, William Blair & Company, LLC

David C. Fording, 1967	Vice President	Since 2006	Associate, William Blair & Company,; former Portfolio Manager, TIAA-CREF	N/A

Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company,; former analyst and Portfolio Manager U.S. Bancorp Asset Management and analyst Gabelli Woodland Partners.	N/A

Mark T. Leslie, 1967	Vice President	Since 2005	Associate, William Blair & Company, L.L.C. formerly, U.S. Bancorp Asset Management	N/A

Terence M. Sullivan, 1944	Vice President and Treasurer	Since 1997	Associate, William Blair & Company, L.L.C.	N/A

Colette M. Garavalia, 1961	Secretary	Since 2000	Associate, William Blair & Company, L.L.C.	N/A

Mr. Fischer and Ms. Seitz are interested persons of the William Blair Funds because each is a principal of William Blair & Company, L.L.C., the Funds’ investment advisor, principal underwriter and distributor.

(1)

Each Trustee serves until the election and qualification of a successor, or until death, resignation or retirement or removal as provided in the Fund’s Declaration of Trust. Retirement for non-interested Trustees occurs no later than at the conclusion of the first regularly scheduled Board meeting of the Fund’s fiscal year that occurs after the Trustee’s 72nd birthday. The Fund’s officers are elected annually by the Trustees.

The Statement of Additional Information for the William Blair Funds includes additional information about the trustees and is available without charge by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840) or by writing the Fund.

June 30, 2007

William Blair Funds 117

Board Approval of the Fund’s Management Agreement (All Portfolios except the Bond Portfolio)

During the six months ended June 30, 2007, the Board of Trustees (the “Board”) of the Fund approved the renewal for an additional one-year term of the Fund’s Management Agreement with William Blair & Company, L.L.C. (the “Advisor”), on behalf of each Portfolio of the Fund.

The information in this summary outlines the Board’s considerations associated with its renewal of the Management Agreement. In connection with its deliberations regarding the continuation of the Management Agreement, the Board considered such information and factors as it believed to be relevant. As described below, the Board considered the nature, extent and quality of the services performed by the Advisor under the existing Management Agreement; comparative management fees and expense ratios as prepared by an independent provider (Lipper Inc.); the estimated profits realized by the Advisor; the extent to which the Advisor realizes economies of scale as a Portfolio grows; and whether any fall-out benefits are being realized by the Advisor. In addition, the Trustees who are not “interested persons” of the Fund as defined in the Investment Company Act of 1940 (the “Independent Trustees”) discussed the renewal of the Management Agreement with Fund management and in private sessions with independent legal counsel at which no representatives of the Advisor were present.

As required by the Investment Company Act of 1940, the renewal was confirmed by the unanimous separate vote of the Independent Trustees. In deciding to approve the renewal of the Management Agreement, the Board did not identify a single factor as controlling and this summary does not describe all of the matters considered. However, the Board concluded that each of the various factors referred to below favored such approval.

Information Requested and Received

The Board, including all the Independent Trustees, considered the renewal of the Management Agreement pursuant to a process that concluded at the Board’s February 15, 2007 meeting, following an extensive process. In preparation for the review process, the Independent Trustees met with independent legal counsel and discussed the type and nature of information to be requested and directed independent legal counsel to send a formal request for information to Fund management. The Advisor provided extensive information in response to the request. After reviewing the information received, the Independent Trustees requested supplemental information that was provided by the Advisor. Among other information, the Independent Trustees considered: (i) materials describing the nature, quality and extent of services provided by the Advisor; (ii) information comparing the performance of each Portfolio to other mutual funds and relevant indices; (iii) information comparing the advisory fees and expense ratios of each Portfolio to other mutual funds; (iv) information comparing advisory fees of each Portfolio to fees charged by the Advisor to other funds and its similar client accounts; (v) the estimated costs of services provided and estimated profits realized by the Advisor for both the Fund as a whole and each Portfolio individually; (vi) information about potential economies of scale; and (vii) information describing other benefits to the Advisor resulting from its relationship with the Portfolios. The Independent Trustees reviewed comparative performance of peer groups of funds selected by Lipper, comparative advisory fees and expense ratios of peer groups of funds selected by Lipper and the average performance of an applicable Morningstar style category. The Independent Trustees also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Management Agreement.

On February 12, 14 and 15, 2007, the Independent Trustees met independently of Fund management and of the interested Trustees, to review and discuss with independent legal counsel the information provided by the Advisor, Lipper and independent legal counsel. The Independent Trustees noted that in evaluating the Management Agreement, they were taking into account their accumulated experience as Trustees in working with the Advisor on matters relating to the Portfolios. Based upon their review, the Independent Trustees concluded on February 15, 2007 that it was in the best interest of each Portfolio to renew the Management Agreement and recommended to the Board the renewal of the Management Agreement. At its meeting on February 15, 2007, the Board considered the recommendation of the Independent Trustees along with the other factors that the Board deemed relevant.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Portfolios, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people and has a long association with the Portfolios, in each case other than the Growth Portfolio, since the inception of the Portfolios. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Portfolios knowing that the Advisor managed the Portfolios and knowing the investment advisory fee. The Board considered biographical information about each Portfolio’s portfolio manager(s), the administrative services performed by the Advisor, financial information regarding the Advisor,

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June 30, 2007

brokerage allocation practices, soft dollars and execution, the compliance regime overseen by the Advisor, and the financial support the Advisor provides to certain Portfolios. The Board also noted that the Advisor voluntarily reduces the advisory fees of the Portfolios by an amount equal to the advisory fee charged by the Ready Reserves Portfolio on the cash of the Portfolios invested in the Ready Reserves Portfolio. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Portfolio were satisfactory.

The Board reviewed information on the performance of each Portfolio for one, three, five and ten year periods (or since inception), as applicable, along with performance information of a relevant securities index or indexes and a peer universe of funds from the Lipper database. For all Portfolios (except the Ready Reserves Portfolio which does not have an applicable Morningstar category and the Mid Cap Growth Portfolio for which it was not provided due to its limited operating history), the Board also reviewed performance information provided by the Advisor of the average of the applicable Morningstar style category for the applicable periods. The performance information showed that the Growth Portfolio, the Tax-Managed Growth Portfolio, the Small Cap Growth Portfolio, the Mid Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Income Portfolio and the Ready Reserves Portfolio performed satisfactorily relative to their Lipper peer universe, Morningstar style category average and benchmark indexes over the applicable periods. The Value Discovery Portfolio performed satisfactorily relative to its Lipper peer universe and Morningstar style category for the one and ten year periods, but underperformed relative to its Lipper peer universe and Morningstar style category for the three and five year periods and to its benchmark indexes over the applicable periods. The International Growth Portfolio and the Small-Mid Cap Growth Portfolio performed satisfactorily relative to their Lipper peer universe and Morningstar style category average, but underperformed relative to their benchmark indexes over the applicable periods. The International Small Cap Growth Portfolio performed satisfactorily relative to its benchmark index, but underperformed relative to its Lipper peer universe and Morningstar style category average. The Board noted the limited operating history of the International Small Cap Growth Portfolio. The International Equity Portfolio underperformed relative to its Lipper peer universe, Morningstar style category and benchmark index over the applicable periods, but the Board noted the positive absolute performance of the Portfolio and its limited operating history. The Large Cap Growth Portfolio underperformed relative to its Lipper peer universe, Morningstar style category and benchmark index over the applicable periods, but the Board noted that the relative performance of the Portfolio compared to the peer funds had improved over the one year period. Based upon the review of the performance information, the Board concluded that the performance of each Portfolio was acceptable and supported continuation of the Management Agreement for each Portfolio.

Fees and Expenses. The Board reviewed each Portfolio’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper peer group and a Lipper peer universe. The Lipper peer group for each Portfolio consists of a group of funds with a similar investment style and asset size as the Portfolio. The Lipper peer universe for each Portfolio includes all funds with a similar investment style regardless of asset size. The Board considered that the Advisor has proposed to limit total expenses, including waiving advisory fees, if necessary, for the Tax-Managed Growth Portfolio, the Large Cap Growth Portfolio, the Small Cap Growth Portfolio, the Mid Cap Growth Portfolio, the Small-Mid Cap Growth Portfolio, the International Growth Portfolio, the International Equity Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio and the Value Discovery Portfolio. For each Portfolio, the Board also reviewed amounts paid to the Advisor by other registered funds, including other Portfolios in the Fund and funds for which the Advisor acts as a subadvisor and the Advisor’s fee schedule for separate accounts. With respect to sub-advised funds and separate accounts, the Board noted that (i) both the mix of services provided and the level of responsibility required under the Management Agreement were greater as compared to the Advisor’s obligations for sub-advised funds and separate accounts; and (ii) management’s representation that the management fees of separate accounts are less relevant to the Board’s consideration of the advisory fee because they reflect significantly different competitive forces than those in the mutual fund marketplace.

In considering the information, the Board noted that the advisory fees for the Growth Portfolio, the Tax-Managed Growth Portfolio, the Large Cap Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Income Portfolio and the Ready Reserves Portfolio were below or within an acceptable range of the average of their peer group and median of their peer universe. The Board also noted that the advisory fees for the Mid Cap Growth Portfolio, the International Equity Portfolio and the Value Discovery Portfolio were below or within an acceptable range of the average of their peer group and median of their peer universe after giving effect to fee waivers. Finally, the Board noted that the advisory fees for the Small Cap Growth Portfolio, the Small-Mid Cap Growth Portfolio and the International Growth Portfolio were above the average of their peer group and median of their peer universe, but that such advisory fees were within an acceptable range of the peer group and peer universe and consistent with reasonable expectations in light of the nature, quality and extent of services provided by the Advisor. On the basis of the information provided, the Board concluded that each Portfolio’s advisory fee, coupled with any applicable existing or proposed advisory fee waiver and expense cap, was reasonable and appropriate in light of the nature, quality and extent of services provided by the Advisor.

June 30, 2007

William Blair Funds 119

Profitability. With respect to the profitability of the Management Agreement to the Advisor, the Board considered the overall fees paid under the Management Agreement, including the estimated costs of the services provided and profits realized by the Advisor from its relationship with the Fund as a whole and each Portfolio individually. The Board concluded that the estimated profits realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Portfolios grow and whether fee levels reflect these economies of scale for the benefit of investors. The Board noted the Advisor’s representation that certain Portfolio expenses are relatively fixed and unrelated to asset size and that the Advisor may enjoy some economies of scale as a Portfolio’s assets grow. The Board also noted the information provided by the Advisor that its costs rise when a Portfolio grows as a result of superior performance because of increased compensation to portfolio managers. In considering whether fee levels reflect economies of scale for the benefit of Portfolio investors, the Board reviewed each Portfolio’s asset size, breakpoints for those Portfolios with breakpoints in the advisory fee schedule, the Portfolio’s total and net expense ratios and the expense caps in place and/or proposed, and concluded that they reasonably reflect appropriate recognition of any economies of scale.

Other Benefits to the Advisor. The Board considered benefits derived by the Advisor from its relationship with the Portfolios, including soft dollars, which pertain primarily to the Portfolios investing in equity securities, and favorable media coverage. The Board concluded that, taking into account these benefits, each Portfolio’s advisory fee was reasonable.

Conclusion. Based upon all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement continue to be fair and reasonable and that the continuation of the Management Agreement is in the best interests of each Portfolio.

Board Approval of the Bond Portfolio’s Management Agreement

During the six months ended June 30, 2007, the Board approved the Fund’s Management Agreement with the Advisor, on behalf of the Bond Portfolio of the Fund. The Management Agreement with respect to the Portfolio was approved by the Board of Trustees, including all of the trustees who are not parties to such agreement or interested persons of any such party, on February 15, 2007. The Board, including a majority of the Independent Trustees, determined that approval of the Management Agreement was in the best interests of the Portfolio. The Independent Trustees met separately from the “interested” trustees of the Fund and officers and employees of the Advisor to consider approval of the Management Agreement and were assisted by independent legal counsel in making their determination. The Board, including the Independent Trustees, did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of services expected to be provided by the Advisor to the Portfolio, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people. The Board considered biographical information about the Portfolio’s portfolio managers, financial information regarding the Advisor, the compliance regime created by the Advisor and the proposed financial support of the Portfolio. The Board considered the Advisor’s past experience managing a core bond strategy and the Advisor’s experience in managing new funds. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Advisor to the Portfolio are expected to be satisfactory.

The Board reviewed performance information on the Advisor’s Core Fixed Income composite and the Lehman Brothers U.S. Aggregate Index, the Portfolio’s benchmark (the “Benchmark”), for the one, three, five and ten year periods. The performance information indicated that the Core Fixed Income composite performed satisfactorily relative to the Benchmark for all periods.

Fees and Expenses. The Board reviewed the Portfolio’s proposed advisory fee and estimated expense ratio and reviewed information comparing the advisory fee and expense ratio to a Lipper peer group. The Lipper peer group for the Portfolio consists of a group of funds with a similar investment style as the Portfolio. The Board considered that the Advisor has proposed to cap total expenses, including waiving advisory fees, if necessary, for the Portfolio. The Board also reviewed the Advisor’s fee schedule for separate accounts. With respect to separate accounts, the Board noted that (i) both the mix of services provided and the level of responsibility required under the Management Agreement will be greater as compared to the Advisor’s obligations for separate accounts; and (ii) management’s representation that the management fees of separate accounts are less relevant to the Board’ consideration of the advisory fee because they reflect significantly different competitive forces from those in the mutual fund marketplace.

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June 30, 2007

In considering the information, the Board noted that the proposed advisory fee for the Portfolio was below the median of the peer group. On the basis of the information provided, the Board concluded that the proposed advisory fee was reasonable and appropriate in light of the nature, quality and extent of services to be provided by the Advisor.

Profitability. With respect to the estimated profitability of the Management Agreement to the Advisor, the Board considered the overall fees expected to be paid under the Management Agreement, the expected size of the Portfolio and the Advisor’s expense limitation agreement. The Board concluded that the expected profits to be realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Portfolio grows and whether fee levels reflect these economies of scale. The Board considered whether the proposed advisory fee is reasonable in relation to the projected asset size of the Portfolio. In considering whether fee levels reflect economies of scale for the benefit of Portfolio investors, the Board reviewed the Portfolio’s advisory fee compared to peer funds, the Portfolio’s projected asset size, the Portfolio’s estimated expense ratio and the proposed expense cap, and concluded that the advisory fee was reasonable.

Other Benefits to the Advisor. The Board considered benefits to be derived by the Advisor from its relationship with the Portfolio. The Board concluded that, after taking into account these benefits, the proposed advisory fee was reasonable.

Conclusion. Based upon all of the information considered and the conclusions reached, the Board, determined that the terms of the Management Agreement are fair and reasonable and that the approval of the Management Agreement is in the best interests of the Portfolio.

June 30, 2007

William Blair Funds 121

(unaudited)

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840), at www.williamblairfunds.com and on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended March 31 and September 30) on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://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 SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are also available on the Fund’s website at www.williamblairfunds.com.

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June 30, 2007

Useful Information About Your Report (unaudited)

Please refer to this information when reviewing the Expense Example for each Portfolio.

Expense Example

As a shareholder of a Portfolio, you incur two types of costs: (1) transaction costs such as redemption fees and (2) ongoing costs, including management fees, distribution (12b-1) fees (for Class N shares except for Ready Reserves Portfolio), service fees (for Class N shares of Ready Reserves Portfolio), shareholder administration fees (for Class N and Class I shares of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio and the Bond Portfolio) and other Portfolio expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Portfolio’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2007 to June 30, 2007.

Actual Expenses

In each example, the first line for each share class in the table provides information about the actual account values and actual expenses. These expenses reflect the effect of any expense cap applicable to the share class during the period. Without this expense cap, the costs shown in the table would have been higher. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

In each example, the second line for each share class in the table provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses. This is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in both examples are meant to highlight your ongoing costs only and do not reflect any transactional costs or account type fees, such as redemption fees and IRA Fiduciary Administration fees, respectively. These fees are fully described in the prospectus. Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs or account fees were included, your costs would have been higher.

June 30, 2007

William Blair Funds 123

Fund Expenses (unaudited)

The examples below show you the ongoing costs (in dollars) of investing in your fund and allows you to compare these costs with those of other mutual funds. Please refer to the previous page for a detailed explanation of the information presented on this chart.


	Beginning Account Value 1/1/2007		Ending Account Value 6/30/2007		Expenses Paid during Period(a)		Annualized Expense Ratio
Growth Fund
Class N—actual return	$	1,000.00	$	1,078.80	$	6.24	1.21	%
Class N—hypothetical 5% return		1,000.00		1,018.79		6.06	1.21
Class I—actual return		1,000.00		1,081.50		4.49	0.87
Class I—hypothetical 5% return		1,000.00		1,020.48		4.36	0.87
Tax-Managed Growth Fund
Class N—actual return		1,000.00		1,074.00		7.05	1.37
Class N—hypothetical 5% return		1,000.00		1,018.00		6.85	1.37
Class I—actual return		1,000.00		1,075.30		5.76	1.12
Class I—hypothetical 5% return		1,000.00		1,019.34		5.61	1.12
Large Cap Growth Fund
Class N—actual return		1,000.00		1,058.10		6.28	1.23
Class N—hypothetical 5% return		1,000.00		1,018.60		6.16	1.23
Class I—actual return		1,000.00		1,057.20		5.05	0.99
Class I—hypothetical 5% return		1,000.00		1,019.89		4.96	0.99
Small Cap Growth Fund
Class N—actual return		1,000.00		1,089.70		7.72	1.49
Class N—hypothetical 5% return		1,000.00		1,017.41		7.45	1.49
Class I—actual return		1,000.00		1,091.40		6.22	1.20
Class I—hypothetical 5% return		1,000.00		1,018.84		6.01	1.20
Mid Cap Growth Fund
Class N—actual return		1,000.00		1,129.10		7.34	1.39
Class N—hypothetical 5% return		1,000.00		1,017.90		6.95	1.39
Class I—actual return		1,000.00		1,131.60		5.97	1.13
Class I—hypothetical 5% return		1,000.00		1,019.19		5.66	1.13
Small-Mid Cap Growth Fund
Class N—actual return		1,000.00		1,132.70		7.19	1.36
Class N—hypothetical 5% return		1,000.00		1,018.05		6.80	1.36
Class I—actual return		1,000.00		1,134.00		5.87	1.11
Class I—hypothetical 5% return		1,000.00		1,019.29		5.56	1.11
International Growth Fund
Class N—actual return		1,000.00		1,116.60		7.35	1.40
Class N—hypothetical 5% return		1,000.00		1,017.85		7.00	1.40
Class I—actual return		1,000.00		1,118.50		5.78	1.10
Class I—hypothetical 5% return		1,000.00		1,019.34		5.51	1.10
International Equity Fund
Class N—actual return		1,000.00		1,094.70		7.53	1.45
Class N—hypothetical 5% return		1,000.00		1,017.65		7.25	1.45
Class I—actual return		1,000.00		1,096.00		6.70	1.20
Class I—hypothetical 5% return		1,000.00		1,018.89		6.46	1.20
International Small Cap Growth Fund
Class N—actual return		1,000.00		1,143.60		8.56	1.61
Class N—hypothetical 5% return		1,000.00		1,016.81		8.05	1.61
Class I—actual return		1,000.00		1,144.70		6.91	1.30
Class I—hypothetical 5% return		1,000.00		1,018.35		6.51	1.30

124 Semi-Annual Report

June 30, 2007


	Beginning Account Value 1/1/2007	Ending Account Value 6/30/2007	Expenses Paid during Period(a)	Annualized Expense Ratio
Emerging Markets Growth Fund
Class N—actual return	1,000.00	1,165.30	8.86	1.65
Class N—hypothetical 5% return	1,000.00	1,016.61	8.25	1.65
Class I—actual return	1,000.00	1,167.40	7.52	1.40
Class I—hypothetical 5% return	1,000.00	1,017.85	7.00	1.40
Value Discovery Fund
Class N—actual return	1,000.00	1,064.50	6.86	1.34
Class N—hypothetical 5% return	1,000.00	1,018.15	6.71	1.34
Class I—actual return	1,000.00	1,065.40	5.58	1.09
Class I—hypothetical 5% return	1,000.00	1,019.39	5.46	1.09
Bond Fund
Class N—actual return (since inception period) (b)	1,000.00	988.50	1.08	0.65
Class N—hypothetical (6 month period)	1,000.00	1,021.57	3.26	0.65
Class I—actual return (since inception period) (b)	1,000.00	988.50	0.83	0.50
Class I—hypothetical (6 month period)	1,000.00	1,021.57	2.51	0.50
Income Fund
Class N—actual return	1,000.00	1,004.50	3.83	0.77
Class N—hypothetical 5% return	1,000.00	1,020.98	3.86	0.77
Class I—actual return	1,000.00	1,005.90	2.98	0.60
Class I—hypothetical 5% return	1,000.00	1,021.82	3.01	0.60
Ready Reserves Fund
Class N—actual return	1,000.00	1,023.70	3.16	0.63
Class N—hypothetical 5% return	1,000.00	1,021.67	3.16	0.63

(a)

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period 181, and divided by 365 (to reflect the one-half year period.)

(b)

For the period May 1, 2007 (Commencement of Operations) until June 30, 2007.

June 30, 2007

William Blair Funds 125

BOARD OF TRUSTEES

Frederick Conrad Fischer, Chairman

Principal, William Blair & Company, L.L.C.

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Vice President for Administration and Chief Financial Officer, University of Chicago

Donald L. Seeley

Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz

Principal, William Blair & Company, L.L.C.,

Thomas J. Skelly

Director and Investment Committee Chairman, U.S. Accenture Foundation Inc.

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Marco Hanig, Senior Vice President

Karl W. Brewer, Senior Vice President

Harvey H. Bundy III, Senior Vice President

Mark A. Fuller, III, Senior Vice President

James S. Golan, Senior Vice President

W. George Greig, Senior Vice President

Michael A. Jancosek, Senior Vice President

John F. Jostrand, Senior Vice President

James S. Kaplan, Senior Vice President

Robert C. Lanphier, IV, Senior Vice President

Todd M. McClone, Senior Vice President

David S. Mitchell, Senior Vice President

Gregory J. Pusinelli, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Colin J. Williams, Senior Vice President

Richard W. Smirl, Chief Compliance Officer

Benjamin J. Armstrong, Vice President

David C. Fording, Vice President

Chad M. Kilmer, Vice President

Mark T. Leslie, Vice President

Terence M. Sullivan, Vice President and Treasurer

Colette M. Garavalia, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Independent Registered Public Accounting Firm

Ernst & Young LLP

Legal Counsel

Vedder, Price, Kaufman & Kammholz, P.C.

Transfer Agent

State Street Bank and Trust Company

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

126 Semi-Annual Report

June 30, 2007

LOGO

WILLIAM BLAIR FUNDS

INSTITUTIONAL FUNDS

SEMI-ANNUAL REPORT

JUNE 30 , 2007

Table of Contents


International Markets Overview		2

Institutional International Growth Fund
An Overview from the Portfolio Manager		3
Portfolio of Investments		6

Institutional International Equity Fund
An Overview from the Portfolio Manager		10
Portfolio of Investments		13

International Small Cap Growth Fund
An Overview from the Portfolio Manager		16
Portfolio of Investments		19

Emerging Markets Growth Fund
An Overview from the Portfolio Managers		22
Portfolio of Investments		25

Bond Fund
An Overview from the Portfolio Managers		28
Portfolio of Investments		31

Financial Statements		33

Notes to Financial Statements		39

Fund Expense Information		59

Board of Trustees and Officers		60

This report is submitted for the general information of the shareholders of the William Blair Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by a prospectus of the William Blair Funds. Please consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money. William Blair & Company, LLC., distributor.

June 30, 2007

William Blair Funds 1

International Markets Overview

Outlook

2 Semi-Annual Report

June 30, 2007

LOGO

W. George Greig

INSTITUTIONAL INTERNATIONAL GROWTH FUND

The Institutional International Growth Fund invests primarily in common stocks of foreign growth companies of all sizes.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 2 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Institutional International Growth Fund posted an 11.86% gain for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World (ACWI) ex-US Index, rose 12.58%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI ACWI ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the MSCI Europe, Australia, and Far East (EAFE) Index, which rose 11.09% in US dollar terms. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

Within this environment, the Fund trailed the benchmark during the second quarter, and therefore year to date. The primary detractor to relative results was the Fund’s overall sector positioning during the second quarter despite strong stock selection across most sectors, as it was underweighted in Materials and Energy and overweighted in the Consumer sectors, which lagged. In addition, Materials and Industrials stock selection, while strong on an absolute basis, trailed comparable Index results. Within Materials, there were several Japanese and UK stocks that dragged on results, while relative Industrials performance was hampered by airline-related companies, coupled with underperformance in Japan. While stock selection was strong across most sectors during the first half of the year, the most significant value added was in Health Care, Energy, and Telecommunication Services. Within Health Care, the focus on diagnostics and medical technology at the expense of pharmaceuticals added value, while energy stock selection benefited from the focus on energy services, engineering, and high production growth exploration and production companies. Telecommunication Services stock selection was bolstered by alternative cable providers in Europe, coupled with emerging markets mobile phone companies, which benefited from strong subscriber growth during the period. The Fund’s higher weightings in Industrials added value, as did its underweighting in the underperforming Financials sector. Stock selection was strong across most regions, with the most significant

June 30, 2007

William Blair Funds 3

value added in Pacific ex-Japan, particularly in Australia and Singapore. At the margin, regional positioning also added value during the period.

How is the Fund positioned?

As of June 30, the Fund was overweighted in Pacific ex-Japan, emerging Asia and Latin America versus the Index, and significantly underweighted in Japan. These weightings were largely the result of relative growth opportunities available in these markets. The Fund maintained its focus on the Consumer area, particularly in European Consumer Staples and emerging markets Consumer Discretionary and Staples companies. In addition, Industrials remained a significant percentage of the Fund, with a concentration on companies exposed to the aircraft, commodity, and energy complexes, coupled with those exposed to additional infrastructure spend globally. Financials, although underweighted versus the Index, was the largest sector at approximately 26% of the Fund, and was focused in companies exposed to capital markets, real estate, and securities exchanges. While the weighting in Materials and Telecommunication Services remained underweighted versus the benchmark, these weightings increased as additional names were added in these sectors during the quarter.

4 Semi-Annual Report

June 30, 2007

Institutional International Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		3 Year		Since Inception(a)
Institutional International Growth Fund	11.86	%	30.26	%	24.81	%	22.55	%
MSCI All Country World Ex-US Index	12.58		30.15		25.03		23.62

(a)

For the period from July 26, 2002 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World ex-US Index is an unmanaged index that includes developed and emerging markets and reduced Japanese portion, making it more comparable to the Institutional International Growth Fund in terms of investment approach.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

June 30, 2007

William Blair Funds 5

Institutional International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value


*Common Stocks—Europe—33.5%*
Austria—1.5%
Erste Bank (Commercial banks)	138,404	$	10,787
Raiffeisen Interantional Bank (Commercial banks)	139,900		22,097

			32,884

Belgium—1.4%
InBev NV (Beverages)	366,000		28,989

Finland—0.5%
Nokian Renkaat OYJ (Auto components)	318,200		11,148

France—11.0%
April Group S.A. (Insurance)	56,300		2,958
AXA (Insurance)	797,900		34,298
Capgemini S.A. (IT services)	232,600		17,005
EDF Energies Nouvelles S.A. (Electric utilities)	140,100		9,171
Essilor International (Health care equipment & supplies)	141,300		16,830
Eurazeo (Diversified financial services)	101,741		14,702
Group Danone (Food products)	363,100		29,326
Iliad S.A. (Internet software & services)	78,800		7,937
Klepierre (Real estate investment trusts)	40,270		6,819
L’Oreal S.A. (Personal products)	260,500		30,791
LVMH Moet Hennessey Louis Vuitton SA (Textiles,apparel & luxury goods)	218,100		25,096
*Orpea (Health care providers & services)	54,533		5,731
*Seloger.com (Media)	81,200		4,508
Veolia Environnement (Multi-utilities)	397,125		31,191

			236,363

Germany—1.6%
*Colonia Real Estate AG (Real estate management & development)	68,200		2,863
CTS Eventim AG (Media)	72,700		3,583
*Q-Cells AG (Electrical equipment)	149,120		12,863
Solarworld AG (Electrical equipment)	192,800		8,900
*Wire Card AG (Commercial services & supplies)	467,200		6,284

			34,493

Greece—1.8%
Coca-Cola Hellenic Bottling S.A. (Beverages)	255,000		11,734
EFG Eurobank (Commercial banks)	243,912		7,947
Jumbo S.A. (Leisure equipment & products)	182,100		6,297
National Bank of Greece (Commercial banks)	222,426		12,665

			38,643

Ireland—1.7%
Anglo Irish Bank plc (Commercial banks)	918,600		18,853
Kingspan Group plc (Building products)	453,300		12,714
United Drug plc (Health care providers & services)	727,300		3,979

			35,546

Italy—3.0%
Azimut Holding SpA (Capital markets)	424,100		7,242
Credito Emiliano SpA (Commercial banks)	394,600		5,591
Luxottica Group SpA (Textiles, apparel & luxury goods)	306,900		11,922


Issuer	Shares	Value


*Common Stocks—Europe—33.5%—(continued)*
Italy (continued)
Saipem SpA (Energy equipment & services)	984,200	$	33,581
Tod’s SpA ( Textiles,apparel & luxury goods)	70,900		6,327

			64,663

Netherlands—1.2%
*Qiagen NV (Life science tools & services)	351,600		6,317
Royal Numico NV (Food products)	256,600		13,334
*Tomtom NV (Software)	125,500		6,400

			26,051

Norway—0.9%
Acergy S.A. (Energy equipment & services)	530,500		11,943
*Electromagnetic GeoServices AS (Energy equipment & services)	309,500		6,246

			18,189

Spain—1.7%
Grifols S.A. (Biotechnology)	617,500		13,378
Industria De Textile (Specialty retail)	252,900		14,885
Tecnicas Reunidas S.A. (Construction & engineering)	122,500		8,234

			36,497

Sweden—1.0%
Ericsson (LM) (Communications equipment)	3,479,000		13,877
Hemtex AB (Specialty retail)	95,900		1,837
Nobia AB (Specialty retail)	510,350		6,356

			22,070

Switzerland—6.2%
ABB Ltd. (Electrical equipment)	1,679,600		37,871
*Barry Callebaut AG (Food products)	10,600		8,024
EFG International (Capital markets)	236,700		10,884
Geberit AG (Building products)	59,100		10,070
Kuehne & Nagel International AG (Marine)	199,700		18,393
Nobel Biocare Holdings AG (Health care equipment & supplies)	33,250		10,854
Partners Group Global Opporunites, Ltd. (Capital markets)	63,850		8,568
Roche Holdings AG (Pharmaceuticals)	127,200		22,538
SGS S.A. (Commercial services & supplies)	5,368		6,347

			133,549


*United Kingdom—17.8%*
Amlin plc (Insurance)	1,443,900		8,095
Ashmore Group plc (Capital markets)	726,700		3,916
*Autonomy Corporation plc (Software)	646,300		9,270
BG Group plc (Oil, gas & consumable fuels)	1,847,720		30,289
*Blinkx plc (Internet software & services)	1,148,700		1,003
*BlueBay Asset Management plc (Capital markets)	512,000		5,060
*Cairn Energy plc (Oil, gas & consumable fuels)	254,437		8,968
Capita Group plc (Commercial services & supplies)	1,670,200		24,246
Carphone Warehouse Group plc (Specialty retail)	1,313,200		8,632
Carter & Carter Group plc (Commercial services & supplies)	150,500		1,447
Detica Group plc (IT services)	624,600		4,810

See accompanying Notes to Financial Statements.

6 Semi-Annual Report

June 30, 2007

Institutional International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value


*Common Stocks—United Kingdom—17.8%—(continued)*
Domino’s Pizza UK & IRL plc (Hotels, restaurants, & leisure)	865,880	$	4,811
HBOS plc (Commercial banks)	942,500		18,538
Homeserve plc (Commercial services & supplies)	207,500		7,441
Man Group plc (Capital markets)	2,071,000		25,191
Michael Page International (Commercial services & supplies)	1,367,600		14,368
Northern Rock plc (Thrifts & mortgage finance)	139,200		2,409
Reckitt Benckiser plc (Household products)	718,250		39,321
Restaurant Group plc (Hotels, restaurants, & leisure)	674,200		4,447
Rightmove plc (Media)	465,600		5,838
*Rolls-Royce Group plc (Aerospace & defense)	155,317,120		312
*Rolls-Royce Group plc, Class “B” (Aerospace & defense)	2,679,000		28,846
Rotork plc (Electronic equipment & instruments)	472,700		8,636
RPS Group plc (Commercial services & supplies)	1,057,800		7,422
Serco Group (Commercial services & supplies)	1,449,100		13,063
Tesco plc (Food & staples retailing)	4,795,700		40,124
Tullow Oil plc (Oil, gas & consumable fuels)	832,680		8,129
Ultra Electronic Holdings plc (Aerospace & defense)	256,000		5,536
Victrex plc (Chemicals)	168,100		2,403
VT Group plc (Aerospace & defense)	740,400		8,707
Xstrata plc (Metals & mining)	496,800		29,576

			380,854


*Emerging Asia—10.9%*
China—3.8%
*Belle International Holdings Limited (Specialty retail)	7,277,000		8,032
China Infrastructure Machinery Holdings, Ltd. (Machinery)	2,942,000		6,433
China Mengniu Dairy Co. (Food products)	2,576,000		8,888
China Oilfield Services Limited (Energy equipment & services)	3,546,000		3,579
China Vanke Company Ltd. (Real estate management & development)	5,582,550		11,555
*Focus Media Holding Ltd.—ADR (Media)	108,100		5,459
*Foxconn International (Communications equipment)	3,470,800		9,944
Fu Ji Food & Catering (Hotels, restaurants & leisure)	1,852,000		6,376
Hopson Development Holdings Ltd. (Real estate management & development)	562,200		1,581
Lee and Man Paper Manufacturing Ltd. (Containers & packaging)	1,942,000		5,377
Li Ning Co. Ltd. (Leisure equipment & products)	2,772,000		6,722
Parkson Retail Group Ltd. (Multiline retail)	947,500		6,071
Wumart Stores, Inc., Class “H” (Food & staples retailing)**	4,200,000		1,343

			81,360


Issuer	Shares	Value


*Common Stocks—Emerging Asia—10.9%—(continued)*
India—2.5%
Bharat Heavy Electricals Ltd. (Electrical equipment)	144,800	$	5,477
*Bharti Airtel Ltd. (Wireless telecommunication services)	530,500		10,904
Dabur India Ltd. (Personal products)	2,369,750		5,988
Financial Technologies (India) LTD (Software)	118,700		8,802
Housing Development Finance Corp. (Thrifts & mortgage finance)	108,900		5,437
Infosys Technologies, Ltd. (IT services)	214,556		10,154
Unitech Limited (Construction & engineering)	470,300		5,817

			52,579

Indonesia—0.9%
PT Bank Rakyat Indonesia (Commercial banks)	10,548,500		6,718
PT Telekomunikasi Tbk (Diversified telecommunication services)	11,576,100		12,558

			19,276

Malaysia—1.0%
Bumiputra Commerce Holdings Bhd (Commercial banks)	4,293,400		14,548
Kuala Lumpur Kepong Bhd (Food products)	1,370,500		5,126
Zelan Bhd (Construction & engineering)	743,800		2,592

			22,266

South Korea—0.8%
*NHN Corp. (Internet software & services)	95,420		17,369

Taiwan—1.9%
Himax Technologies, Inc.—ADR (Semiconductors & semiconductor equipment)†	289,000		1,667
Hon Hai Precision Industry (Electronic equipment & instrument)	2,539,506		21,935
Mediatek Inc. (Semiconductors & semiconductor equipment)	1,031,120		16,043

			39,645


*Asia—10.3%*
Australia—5.3%
Allco Finance Group, Limited (Capital markets)	803,472		7,231
Macquarie Bank, Ltd. (Capital markets)	565,300		40,603
Seek Ltd. (Commercial services & supplies)	1,226,300		7,656
United Group Ltd. (Construction & engineering)	569,300		8,023
Woolworths Limited (Food & staples retailing)	1,533,600		35,047
WorleyParsons, Ltd. (Energy equipment & services)	502,333		14,450

			113,010

Hong Kong—1.6%
Esprit Holdings Ltd. (Specialty retail)	1,815,900		23,072
Li & Fung Ltd. (Distributors)	3,383,800		12,180

			35,252

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 7

Institutional International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value


*Common Stocks—Asia—10.3%—(continued)*
Singapore—3.4%
Capitaland, Ltd. (Real estate management & development)	8,023,800	$	42,511
Olam International, Ltd. (Food & staples retailing)	3,323,000		6,703
Osim International Ltd. (Specialty retail)	2,986,540		1,389
Raffles Education Corp. (Diversified consumer services)	3,438,000		5,126
Singapore Exchange, Ltd. (Diversified financial services)	2,703,000		17,342

			73,071


*Japan—9.6%*
Aeon Mall Co., Ltd. (Real estate management & development)	298,600		9,181
DeNA Co., Ltd. (Internet & catalog retail)	1,478		5,125
Denso Corporation (Auto components)	442,800		17,318
En-Japan Inc. (Commercial services & supplies)	1,348		5,023
*Fujimi, Inc. (Chemicals)	120,500		3,169
Fukuoka Financial Group, Inc. (Commercial banks)	2,158,000		14,267
Honeys Company, Ltd. (Specialty retail)	102,440		4,131
*Jupiter Telecommunications Co., Ltd. (Media)	14,015		11,579
*K.K. DaVinci Advisors (Real estate management & development)	5,320		4,644
Kenedix, Inc. (Real estate management & development)	1,754		3,264
Komatsu Ltd. (Machinery)	674,700		19,555
Miraial Company, Ltd. (Semiconductors & semiconductor equipment)	25,500		3,524
Nakanishi Inc. (Health care equipment & supplies)	30,100		3,764
Nintendo Co., Ltd. (Software)	68,900		25,138
Nitori Company Ltd. (Specialty retail)	118,780		5,930
Orix Corporation (Consumer finance)	122,800		32,368
Park 24 Co., Ltd. (Commercial services & supplies)	284,600		2,857
Suruga Bank (Commercial banks)	1,210,000		15,249
Yamada Denki Company (Specialty retail)	157,600		16,459
Zensho Company, Ltd. (Hotels, restaurants, & leisure)	334,100		3,176

			205,721


*Emerging Latin America—6.9%*
Brazil—3.3%
*Anhanguera Eduacional Participacoes S.A. (Diversified consumer services)	383,200		5,364
*BR Malls Participacoes S.A. (Real estate management & development)	583,200		7,588
Companhia Vale do Rio Doce.—ADR (Metals & mining)	577,600		25,732
Cyrela Brazil Realty S.A. (Household durables)	430,900		5,348
Iguatemi Empresa de Shopping Centers S.A. (Commercial services & supplies)	245,400		4,430
Localiza Rent a Car S.A. (Road & rail)	425,300		4,797
Lojas Renner S.A. (Multiline retail)	333,000		6,180
Submarino S.A. (Internet & catalog retail)	183,700		7,642
Totvs S.A. (Software)	102,200		3,327

			70,408


Issuer	Shares	Value


*Common Stocks—Emerging Latin America—6.9%—(continued)*
Chile—0.5%
*Cencosud S.A.—ADR 144A (Specialty retail)	182,300	$	11,343

Mexico —2.7%
America Movil S.A. (Wireless telecommunication services)	6,249,100		19,296
*Banco Compartamos S.A. de C.V. (Commercial banks)	654,600		4,090
*Desarrolladora Homex S.A.—ADR (Household durables)	94,900		5,750
Grupo Aeropuertario Del—ADR (Transportation infrastructure)	76,500		3,773
*Urbi Desarrollos Urbanos S.A. (Household durables)	2,479,000		11,416
Walmart de Mexico (Food & staples retailing)	3,758,200		14,263

			58,588

Panama—0.4%
Copa Holdings S.A., Class “A” (Airlines)†	110,800		7,450


*Emerging Europe, Mid-East, Africa—4.7%*
Czech Republic—0.2%
*Central European Media Enterprises Ltd. Class “A” (Media)†	52,500		5,123

Egypt—0.8%
Egyptian Financial Group—Hermes Holding SAE (Captial markets)	735,600		5,930
Orascom Construction Industries (Construction & engineering)	163,400		10,682

			16,612

Kazakhstan—0.5%
*Kazkommertsbank—GDR 144A (Commercial banks)	437,663		9,629

Russia—1.1%
*CTC Media, Inc. (Media)†	225,702		6,126
Sberbank—CLS (Commercial banks)	2,635		10,276
*X5 Retail Group N.V. (Food & staples retailing)	208,700		6,115

			22,517

South Africa—1.7%
MTN Group, Ltd. (Wireless telecommunication services)	1,025,500		13,939
Naspers Ltd. (Media)	260,500		6,693
The Spar Group Limited (Food & staples retailing)	576,200		4,311
Truworths International Ltd. (Specialty retail)	1,403,800		7,222
Wilson Bayly Holmes-Ovcon (Construction & engineering)	225,300		3,290

			35,455

United Arab Emirates—0.4%
Emaar Properties PJSC (Real estate management & development)	2,699,700		8,710

See accompanying Notes to Financial Statements.

8 Semi-Annual Report

June 30, 2007

Institutional International Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares or Principal Amount		Value


*Canada—3.8%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)		453,700	$	18,148
Canadian Western Bank (Commercial banks)		163,900		4,345
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		233,400		7,969
Rogers Communications, Inc. Class “B” (Wireless telecommunication services)		734,200		31,305
Shoppers Drug Mart Corp. (Food & staples retailing)		415,600		19,249

				81,016

Total Common Stock—97.5% (cost $1,468,148)				2,086,339


*Preferred Stock*
Brazil—1.3%
Banco Itau Holding (Commercial banks)		251,300		11,158
*Banco Sofisa S.A. (Commercial banks)		538,500		3,964
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		517,800		13,824

				28,946

Total Preferred Stock—1.3% (cost $15,216)				28,946


*Investment in Affiliate*
William Blair Ready Reserves Fund		53,271		53

Total Investment in Affiliate—0.0% (cost $53)				53


*Short-Term Investments*
American Express Demand Note, VRN 5.170% due 7/2/2007	$	12,755,000		12,755
Prudential Funding Demand Note, VRN 5.305% due 7/2/2007		7,255,000		7,255

Total Short-term Investments—0.9% (cost $20,010)				20,010


*Repurchase Agreement*
Investors Bank & Trust Company, 4.500% dated 06/29/2007, due 07/02/2007, repurchase price $1,593, collateralized by SBA Pool # 506097	$	1,592,034		1,592

Total Repurchase Agreement—0.1% (cost $1,592)				1,592

Total Investments—99.8% (cost $1,505,019)				2,136,940
Cash and other assets, less liabilities—0.2%				3,572

Net assets—100.0%			$	2,140,512

*Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed foreign security

**Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Financials		25.8%
Consumer Discretionary		15.8%
Consumer Staples		15.1%
Industrials		14.8%
Information Technology		8.2%
Energy		6.8%
Telecommunication Services		4.5%
Health Care		4.0%
Materials		3.1%
Utilities		1.9%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


Euro		25.7%
British Pound Sterling		18.0%
Japanese Yen		9.7%
Swiss Franc		6.3%
Australian Dollar		5.3%
Hong Kong Dollar		5.3%
United States Dollar		4.7%
Canadian Dollar		3.8%
Singapore Dollar		3.5%
Brazilian Real		3.5%
Indian Rupee		2.5%
Mexico Nuevo Peso		2.3%
Taiwan Dollar		1.8%
South African Rond		1.7%
Swedish Krona		1.1%
Malaysian Ringgit		1.1%
All other currencies		3.7%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 9

LOGO

W. George Greig

INSTITUTIONAL INTERNATIONAL EQUITY FUND

The Institutional International Equity Fund invests primarily in common stocks of companies included in the Morgan Stanley Capital International All Country World ex-U.S. Index.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 2 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Institutional International Equity Fund posted a 9.81% increase for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World (ACWI) ex-US Index, rose 12.58%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI ACWI ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as measured by the MSCI Emerging Markets Index compared to the MSCI Europe, Asia and Far-East (EAFE) Index, which rose 11.09% in US dollar terms. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

Within this environment, the Fund trailed the benchmark. The primary detractor to relative results was the Fund’s overall sector positioning during the second quarter despite strong stock selection across a number of sectors. The Fund underweighted in Materials and Energy which gained and overweighted in both the Consumer Discretionary and Consumer Staples sectors, which lagged. In addition, Materials and Consumer stock selection, while strong on an absolute basis, trailed comparable Index results. Within Materials, Japanese exposure dragged on results, as did the absence of exposure in Canada and Pacific ex-Japan. Within Consumer, Japanese Consumer Discretionary exposure and stock selection was a primary detractor, as was European stock selection in Consumer Discretionary. While stock selection was strong across a number of sectors during the first half of the year, the most significant value added was in Health Care, Energy, and Telecommunication Services. Within Health Care, the focus on diagnostics and medical technology at the expense of pharmaceuticals added value, while energy stock selection benefited from the focus on energy services and high production growth exploration and production companies. European alternative cable providers and emerging markets mobile phone companies, which have benefited from strong subscriber growth, augmented strong Telecommunication Services stock selection. The Fund’s higher weightings in Industrials added value, as did its underweighting in the underperforming Financials sector. At the margin, regional positioning also added value during the period.

10 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of June 30, the Fund was overweighted in Pacific ex-Japan, emerging Asia and Latin America versus the Index, and significantly underweighted in Japan. These weightings were largely the result of relative growth opportunities available in these markets. The Fund maintained its focus on the Consumer area, particularly in European and Pacific ex-Japan Consumer Staples companies. In addition, Industrials increased to a larger overweighting in the Fund, with a concentration on companies exposed to the aircraft, commodity, and energy complexes, coupled with those exposed to additional infrastructure spending globally. Financials, although underweighted versus the Index, was the largest sector at approximately 26% of the Fund, and was focused in companies exposed to capital markets, real estate, and securities exchanges. While the weighting in Materials remained underweighted versus the benchmark, this allocation increased as additional names were added in these sectors during the quarter.

June 30, 2007

William Blair Funds 11

Institutional International Equity Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		Since Inception(a)
Institutional International Equity Fund	9.81	%	26.14	%	19.72	%
MSCI All Country World Ex-US Index	12.58		30.15		23.86

(a)

For the period from December 1, 2004 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-US Index is an unmanaged index that includes developed and emerging markets and reduced Japanese portion, making it more comparable to the Institutional International Equity Fund in terms of investment approach.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

12 Semi-Annual Report

June 30, 2007

Institutional International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Europe—34.8%*
Austria—0.7%
Raiffeisen International Bank (Commercial banks)	26,600	$	4,201

Belguim—1.7%
InBev N.V. (Beverages)	126,700		10,035

France—9.8%
AXA (Insurance)	245,600		10,557
Essilor International (Health care equipment & supplies)	50,300		5,991
Eurazeo (Diversified financial services)	34,417		4,973
Iliad S.A. (Diversified telecommunication services)	33,000		3,324
L’Oreal S.A. (Personal products)	99,200		11,725
Schneider Electric SA (Electrical equipment)	85,400		11,965
Veolia Environnement (Multi-utilities)	143,300		11,255

			59,790

Germany—4.6%
DaimlerChrysler AG (Automobiles)	117,400		10,861
*Q-Cells AG (Electrical equipment)	24,000		2,070
Siemens AG (Industrial conglomerates)	104,100		14,980

			27,911

Greece—1.0%
National Bank of Greece (Commercial banks)	105,830		6,026

Ireland—1.0%
Anglo Irish Bank plc (Commercial banks)	303,100		6,221

Italy—1.9%
Saipem SpA (Energy equipment & services)	346,800		11,833

Netherlands—1.0%
Randstad N.V. (Commercial services & supplies)	75,700		5,992

Norway—0.5%
Acergy S.A. (Energy equipment & services)	130,300		2,933

Spain—1.4%
Industria De Textile (Specialty retail)	144,400		8,499

Switzerland—9.8%
ABB Ltd. (Electrical equipment)	723,900		16,322
EFG International (Capital markets)	82,300		3,784
Geberit AG (Building products)	17,100		2,914
Julius Baer Holding AG (Capital markets)	72,500		5,187
Kuehne & Nagel International AG (Marine)	57,400		5,287
Nestle S.A. (Food products)	24,930		9,473
Nobel Biocare Holding AG (Health care equipment & supplies)	9,750		3,183
Roche Holdings AG (Pharmaceuticals)	51,900		9,196
SGS S.A. (Commercial services & supplies)	3,716		4,394

			59,740


*United Kingdom—16.9%*
BG Group plc (Oil, gas & consumable fuels)	914,200		14,986
Capita Group plc (Commercial services & supplies)	486,100		7,057
Carphone Warehouse Group plc (Specialty retail)	399,800		2,628
HBOS plc (Commercial banks)	659,600		12,974
Man Group plc (Capital markets)	606,400		7,376
Reckitt Benckiser plc (Household products)	278,100		15,225


Issuer	Shares	Value

*Common Stocks—United Kingdom—16.9%—(continued)*
*Rolls-Royce Group plc (Aerospace & defense)	1,211,800	$	13,048
*Rolls-Royce Group plc, Class “B” (Aerospace & defense)	78,593,920		158
Rotork plc (Electronic equipment & instruments)	114,200		2,086
Serco Groupm plc (Commercial services & supplies)	362,000		3,263
Tesco plc (Food & staples retailing)	1,820,600		15,232
Xstrata plc (Metal & mining)	140,500		8,364

			102,397


*Japan—12.6%*
Aeon Mall Co., Ltd. (Real Estate management & development)	131,300		4,037
FANUC Ltd. (Machinery)	89,000		9,186
*Fukuoka Financial Group, Inc. (Commercial banks)	1,094,000		7,233
Honeys Company, Ltd. (Specialty retail)	36,100		1,456
*Jupiter Telecommunications Co., Ltd. (Media)	4,631		3,826
*K.K. DaVinci Advisors (Real Estate management & development)	1,507		1,316
Komatsu Ltd. (Machinery)	263,900		7,649
NGK Insulators Ltd (Machinery)	316,000		7,761
Nintendo Co., Ltd. (Software)	30,000		10,945
Orix Corporation (Consumer finance)	51,050		13,456
Shin-Etsu Chemical Co., Ltd. (Chemicals)	84,300		6,019
Suruga Bank Ltd. (Commercial banks)	280,000		3,529

			76,413


*Asia—11.3%*
Australia—6.8%
Allco Finance Group Limited (Capital markets)	248,300		2,235
Macquarie Bank Ltd. (Capital markets)	181,000		13,000
QBE Insurance Group Limited (Insurance)	277,800		7,330
Toll Holdings Limited (Air Freight & logistics)	403,300		4,942
Woolworths Limited (Food & staples retailing)	519,000		11,861
WorleyParsons, Ltd. (Energy equipment & services)	62,300		1,792

			41,160

Hong Kong—2.2%
Esprit Holdings Ltd. (Specialty retail)	536,000		6,810
Li & Fung Ltd. (Distributors)	1,895,100		6,821

			13,631

Singapore—2.3%
Capitaland, Ltd. (Real estate management & development)	2,630,900		13,939


*Emerging Asia—10.5%*
China—2.3%
China Communications Construction Co. Ltd. (Construction & engineering)	2,212,000		3,964
China Merchants Bank Co. Ltd (Commercial banks)	1,432,000		4,361

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 13

Institutional International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

Common Stocks—Emerging Asia—10.5%—(continued)
China—(continued)
*Focus Media Holding Ltd.—ADR (Media)	74,300	$	3,752
Hopson Development Holding Ltd. (Real estate management & development)	182,200		512
Nine Dragons Papers Hldgs Lt (Paper & forest product)	471,000		1,098
Shandong Weigao Gp Medical (Health care equipment & supplies)	43,800		99

			13,786

India—3.0%
*Bharti Airtel Limited (Wireless telecommunication services)	287,931		5,918
Infosys Technologies Ltd. (IT services)	126,700		5,996
Vedanta Resources Plc (Metals & mining)	201,900		6,508

			18,422

Indonesia—1.2%
PT Bank Rakyat Indonesia (Commercial banks)	4,598,500		2,929
PT Telekomunikasi Indonesia Tbk (Diversified telecommunication services)	3,990,000		4,328

			7,257

South Korea—0.6%
*NHN Corp (Internet software & services)	18,777		3,418

Malaysia—0.8%
Bumiputra Commerce Holdings Bhd (Commercial banks)	799,700		2,710
Kuala Lumpur Kepong Bhd (Food product)	534,100		1,998

			4,708

Taiwan—2.6%
Hon Hai Precision Industry Corp. (Electronic equipment & instruments)	983,880		8,498
Mediatek, Inc. (Semiconductors & semiconductor equipment)	290,000		4,512
Taiwan Semiconductor Manufacturing Co. Ltd. (Semiconductors & semiconductor equipment)	1,261,000		2,721

			15,731


*Emerging Latin America—5.5%*
Brazil—1.8%
Companhia Vale do Rio Doce.—ADR (Metals & mining)	249,200		11,102

Chile—0.6%
*Cencosud S.A.—ADR 144A (Specialty retail)	54,500		3,391

Mexico—3.1%
America Movil S.A. (Wireless telecommunications services)	3,496,500		10,797
Walmart de Mexico (Food & staples retailing)	2,174,400		8,252

			19,049


Issuer	Shares or Principal Amount		Value

*Canada—3.6%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)		192,200	$	7,688
Rogers Communications, Inc. Class “B” (Wireless telecommunication services)		209,900		8,950
Shoppers Drug Mart Corporation (Food & staples retailing)		117,900		5,461

				22,099


*Emerging Europe, Mid-East, Africa—2.5%*
Egypt—0.1%
Egyptian Financial Group—Hermes Holding (Capital markets)		51,894		418

South Africa—1.3%
MTN Group, Ltd. (Wireless telecommunication services)		376,000		5,111
Naspers Ltd. (Media)		115,290		2,962

				8,073

Russia—0.4%
PIK Group (Real Estate management & development)*		95,400		2,385

United Arab Emirates—0.7%
Emaar Properties PJSC (Real estate management & development)		1,371,300		4,424

Total Common Stock—96.3% (cost $467,049)				584,984


*Preferred Stocks*
Brazil—0.7%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		157,400		4,202

Total Preferred Stocks—0.7% (cost $2,693)				4,202


*Investment in Affiliate*
William Blair Ready Reserves Fund		3,276,172		3,276

Total Investment in Affiliate—0.5% (cost $3,276)				3,276


*Short-Term Investments*
American Express Demand Note, VRN, 5.170%, due 7/02/07	$	4,307,000		4,307
Prudential Funding Demand Note, VRN, 5.305%, due 7/02/07		4,241,000		4,241

Total Short-Term Investments—1.4% (cost $8,548)				8,548

Total Investments—98.9% (cost $481,566)				601,010
Cash and other assets, less liabilities—1.1%				6,435

Net assets—100.0%			$	607,445

* Non-income producing securities

ADR = American Depository Receipt

VRN = Variable Rate Note

See accompanying Notes to Financial Statements.

14 Semi-Annual Report

June 30, 2007

Institutional International Equity Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)

** Fair value pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.39% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

For securities, primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund uses an independent pricing service on a daily basis to fair value price the securities pursuant to Valuation Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Financials		26.0%
Industrials		20.2%
Consumer Staples		15.7%
Consumer Discretionary		8.1%
Telecommunication Services		6.5%
Information Technology		6.5%
Energy		6.4%
Materials		5.6%
Health Care		3.1%
Utilities		1.9%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


Euro		23.8%
British Pound Sterling		18.5%
Japanese Yen		13.0%
Swiss Franc		10.0%
Australian Dollar		7.0%
Hong Kong Dollar		4.0%
Canadian Dollar		3.8%
United States Dollar		3.5%
Mexico Nuevo Peso		3.2%
Taiwan Dollar		2.7%
Singapore Dollar		2.4%
Indian Rupee		2.0%
South African Rand		1.4%
Indonesian Rupiah		1.2%
Other Currencies		3.5%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 15

LOGO

Jeffery A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund primarily invests in a diversified portfolio of common stocks of small cap companies in developed and emerging markets.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

See page 2 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The International Small Cap Growth Fund posted a 14.59% increase (Institutional Class) for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) World Small Cap ex-U.S. Index, gained 13.06%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI All Country World Index ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the MSCI Europe, Asia and Far East (EAFE) Index, which rose 11.09% in US dollar terms, while developed non-US small cap stocks were also strong, up 13.09%. Within small cap stocks, Pacific ex-Japan and Canada were the strongest regions, up 25% and 24%, respectively, year to date, while the UK (7%) and Japan (1%) trailed. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Health Care lagged.

What factors were behind the Fund’s performance versus the benchmark?

The Fund outpaced the benchmark year to date, with significant value derived from stock selection in a number of sectors, with most value added in Discretionary, Energy, Financials and Health Care. In particular, Consumer Discretionary names were strong on a relative basis in Japan and Emerging Markets, while Energy stock selection benefited from a focus on European and Australian energy services and engineering companies. Financials stock selection was aided by strong relative stock selection in Japan, Europe and Emerging Markets, with a focus on real estate, asset management, and capital markets stocks. The European weighting and stock selection in Health Care added value in that sector. Regionally, the Fund’s underweighting in Japan and overweighting in Europe ex-UK and emerging markets added value, as did stock selection across most regions. Somewhat mitigating these strong results was general sector positioning, underweighting in Canada, and Materials stock selection.

16 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of period end, the portfolio was overweighted in Emerging Markets and Europe with corresponding underweightings in developed Asia. From a sector perspective, the portfolio remained focused in Consumer Discretionary, Financials and Industrials holdings, with corresponding underweightings in Information Technology (IT) and Materials. These weightings are largely the result of the team’s bottom up fundamental analysis, in addition to its strategic viewpoint.

June 30, 2007

William Blair Funds 17

International Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		Since Inception(a)
International Small Cap Growth Fund Institutional Class	14.59	%	27.32	%	29.90	%
MSCI WLD EX-US Small Cap Index	13.06		26.54		27.54

(a)

For the period from November 1, 2005 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

18 Semi-Annual Report

June 30, 2007

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value


*Common Stocks—Europe—44.2%*
Finland—6.1%
Konecranes OYJ (Machinery)	83,100	$	3,473
Nokian Renkaat OYJ (Auto Components)	213,000		7,462
Outotec OYJ (Construction & engineering)	83,500		4,583
Ramirent OYJ (Trading companies & distributors)	212,900		5,765

			21,283

France—5.5%
*Aufeminin.com SA (Media)	21,610		918
April Group S.A. (Insurance)	121,582		6,389
EDF Energies Nouvelles S.A. (Electric utilities)	60,100		3,934
*Orpea (Heath care providers & services)	37,363		3,927
*Seloger.com (Media)	73,900		4,103

			19,271

Germany—8.6%
*Colonia Real Estate AG (Real estate management & development)	89,960		3,776
CTS Eventim AG (Media)	88,800		4,376
MTU Aero Engines Holding AG (Aerospace & defense)	112,014		7,289
*Q-Cells AG (Electrical equipment)	74,280		6,408
Solarworld AG (Electrical equipment)	96,262		4,444
*Wire Card AG (Commercial services & supplies)	298,600		4,016

			30,309

Greece—2.1%
Jumbo S.A. (Leisure equipment & products)	216,700		7,494

Ireland—3.1%
Kingspan Group plc (Building products)	245,390		6,883
*Norkom Group plc (Software)	286,500		820
United Drug plc (Heath care providers & services)	610,780		3,341

			11,044

Italy—4.8%
Azimut Holdings SpA (Capital markets)	423,317		7,228
Credito Emiliano SpA (Commercial banks)	204,872		2,902
Tod’s SpA (Textiles, apparel & luxury goods)	35,600		3,177
Trevi Finanziaria SpA (Construction & engineering)	199,100		3,578

			16,885

Netherlands—1.3%
*Qiagen NV (Lifesciences tools & services)	258,073		4,637

Norway—2.9%
Acergy S.A. (Energy equipment & services)	319,800		7,200
*Electromagnetic GeoServices AS (Energy equipment & services)	154,200		3,112

			10,312

Spain—3.4%
Grifols S.A. (Biotechnology)	366,303		7,936
Tecnicas Reunidas S.A. (Construction & engineering)	56,800		3,818

			11,754


Issuer	Shares	Value


*Common Stocks—Europe—44.2%—(continued)*
Sweden—1.7%
Hemtex AB (Specialty retail)	71,900	$	1,377
Nobia AB (Specialty retail)	357,700		4,455

			5,832

Switzerland—4.7%
*Barry Callebaut Ag (Food products)	8,530		6,457
Partners Group Global Opportunities, Ltd (Capital markets)	74,400		9,983

			16,440


*United Kingdom—20.9%*
Amlin plc (Insurance)	1,057,000		5,926
Ashmore Group plc (Capital markets)	579,800		3,124
*Autonomy Corporation plc (Software)	348,700		5,002
*Blinkx plc (Internet software & services)	1,876,700		1,639
*BlueBay Asset Management plc (Capital markets)	365,900		3,616
Carter & Carter Group plc (Commercial services & supplies)	126,600		1,217
*Ceres Power Holdings plc (Electrical equipment)	684,900		3,965
*Climate Exchange plc (Diversified financial services)	64,700		2,381
Detica Group plc (IT services)	451,500		3,477
Domino’s Pizza UK & IRL plc (Hotels, restaurants, & leisure)	687,780		3,821
Homeserve plc (Commercial services & supplies)	137,380		4,927
Mears Group plc (Construction & engineering)	449,300		2,926
Michael Page International (Commercial services & supplies)	301,970		3,172
Restaurant Group plc (Hotels, restaurants, & leisure)	221,500		1,461
Rightmove plc (Media)	250,400		3,140
Rotork plc (Electronic equipment & instruments)	185,550		3,390
RPS Group plc (Commercial services & supplies)	487,000		3,417
Serco Group plc (Commercial services & supplies)	758,440		6,837
Ultra Electronic Holdings plc (Aerospace & defense)	133,850		2,894
Victrex plc (Chemicals)	204,850		2,929
VT Group plc (Aerospace & defense)	329,150		3,871

			73,132


*Japan—11.0%*
Aeon Mall Co., Ltd. (Real estate management & development)	190,900		5,869
DeNA Co., Ltd. (Internet & catalog retail)	1,607		5,572
En-Japan Inc. (Commercial services & supplies)	611		2,277
Fujimi Inc (Chemicals)	111,200		2,924
Honeys Company, Ltd. (Specialty retail)	93,630		3,776
*K.K. DaVinci Advisors (Real estate management & development)	1,491		1,302
Kenedix, Inc. (Real estate management & development)	646		1,202

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 19

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value


*Common Stocks—Japan—11.0%—(continued)*
Miraial Company, Ltd. (Semiconductors & semiconductor equipment)	28,700	$	3,966
Nitori Company Ltd. (Specialty retail)	63,300		3,160
Park 24 Co., Ltd. (Commercial services & supplies)	194,600		1,954
Suruga Bank (Commercial banks)	296,000		3,730
Zensho Company, Ltd. (Hotels, restaurants, & leisure)	285,800		2,717

			38,449


*Emerging Asia—8.2%*
China—3.8%
China High Speed Transmission (Independent power producers & energy traders)*	45,000		41
China Infrastructure Machinery Holdings, Ltd. (Machinery)	1,836,000		4,015
Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	20,520		1,613
*Focus Media Holdings—ADR (Media)	33,200		1,677
Li Ning Co. Ltd. (Leisure equipment & products)	836,873		2,029
Ports Design Limited (Textiles, apparel & luxury goods)	604,500		1,700
Shandong Weigao GP (Health care equipment & supplies)	976,000		2,200

			13,275

India—2.6%
ABB Ltd. India (Electrical equipment)	78,500		2,110
Financial Technologies, Ltd. (Diversified financial services)	73,900		5,480
*Inox Leisure, Ltd. (Media)	436,579		1,439

			9,029

Malaysia—1.1%
Kuala Lumpur Kepong Berhad (Food products)	1,046,350		3,913

Philippines—0.2%
*Paxys Inc. (Commercial services & supplies)	1,455,100		779

South Korea—0.5%
Hana Tour Service Inc. (Hotels, restaurants & leisure)	17,400		1,693


*Asia—6.1%*
Australia—3.7%
Allco Finance Group, Limited (Capital markets)	323,265		2,909
Seek Limited (Commercial services & supplies)	802,680		5,011
United Group, Ltd. (Construction & engineering)	368,470		5,193

			13,113


Issuer	Shares	Value


*Common Stocks—Asia—6.1%—(continued)*
Singapore—2.4%
Olam International, Ltd. (Food & staples retailing)	1,592,000	$	3,211
Osim International Ltd. (Specialty retail)	1,393,700		648
Petra Foods, Ltd. (Food products)	1,219,000		1,259
Raffles Education Corp. Ltd. (Diversified consumer services)	2,225,000		3,318

			8,436


*Emerging Latin America—4.5%*
Brazil—2.1%
*Anhanguera Educational Parti (Diversified consumer services)	162,100		2,269
Cyrela Brazil Realty S.A. (Household durables)	273,900		3,399
Submarino S.A.(Internet & catalog retail)	42,300		1,760

			7,428

Mexico—1.9%
*Banco Compartamos SA (Commercial banks)	491,700		3,072
*Urbi Desarrollos Urbanos S.A. (Household durables)	784,900		3,614

			6,686

Panama—0.5%
Copa Holdings S.A., Class “A” (Airlines)†	25,400		1,708


*Emerging Europe, Mid-East, Africa—2.1%*
Czech Republic—0.5%
*Central European Media Enterprises Ltd., Class “A” (Media)†	16,600		1,620

Eqypt—0.6%
*Orascom Hotels & Development (Hotels, restaurants & leisure)	193,100		2,026

Poland—0.5%
*Cinema City International N.V. (Media)	142,700		1,793

Russia—0.5%
*CTC Media, Inc. (Media)†	63,538		1,724


*Canada—1.7%*
Canadian Western Bank (Commercial banks)	102,200		2,709
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	98,600		3,367

			6,076

Total Common Stock—98.7% (cost $286,620)			346,141


*Preferred Stock*
Brazil—0.5%
*Banco Sofisa S.A. (Commercial banks)	248,900		1,832

Total Preferred Stock—0.5% (cost $1,532)			1,832

See accompanying Notes to Financial Statements.

20 Semi-Annual Report

June 30, 2007

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares or Principal Amount		Value

*Investment in Affiliate*
William Blair Ready Reserves Fund		2,147,561	$	2,148

Total Investment in Affiliate—0.6% (cost $2,148)				2,148


*Short-Term Investments*
American Express Demand Note, VRN 5.170%, due 7/02/07	$	2,004,000		2,004
Prudential Funding Demand Note, VRN 5.305%, due 7/02/2007		2,000,000		2,000

Total Short-term Investments—1.2% (cost $4,004)				4,004


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/07, due 7/02/07, repurchase price $2,588, collateralized by SBA Pool # 505984	$	2,586,723		2,587

Total Repurchase Agreement—0.7% (cost $2,587)				2,587

Total Investments—101.7% (cost $296,891)				356,712
Liabilities plus, cash and other assets—(1.7)%				(5,941	)

Net assets—100.0%			$	350,771

*Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed foreign security

**Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.01% of the Fund’s net assets at June 30, 2007. This security was also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Industrials		28.8%
Consumer Discretionary		26.6%
Financials		19.6%
Information Technology		6.8%
Health Care		6.3%
Energy		4.8%
Consumer Staples		4.3%
Materials		1.7%
Utilities		1.1%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


Euro		35.3%
British Pound Sterling		21.0%
Japanese Yen		11.0%
Swiss Franc		4.7%
Australian Dollar		3.8%
Norwegian Krone		3.0%
Hong Kong Dollar		2.9%
Brazilian Real		2.7%
Indian Rupee		2.6%
Singapore Dollar		2.4%
United States Dollar		2.4%
Mexican Neuvo Peso		1.9%
Canadian Dollar		1.7%
Swedish Krona		1.7%
Malaysian Ringgit		1.1%
All other currencies		1.8%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 21

LOGO

W. George Greig

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund primarily invests in a diversified portfolio of equity securities issued by growth companies in emerging economies worldwide.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

See page 2 for the International Markets Overview.

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Emerging Markets Growth Fund posted a 16.79% increase (Institutional Class) for the six months ended June 30, 2007. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index, gained 17.75%.

What were the most significant factors impacting international markets during the first six months of the year?

Non-US markets were strong during the first half of 2007, buoyed by strong results in emerging markets, Canada, Europe and the Pacific Rim. However, the first six months were punctuated by periods of volatility as investors were concerned in the first quarter about the US subprime mortgage market resulting in slowing US consumer demand and its impact on global growth. In the second quarter, investors became concerned about the prospects of a protracted global increasing interest rate environment as the US economy appeared to accelerate and demand for industrial and consumer goods and services remained strong globally. In addition, worries about the impact of US subprime mortgages on the financial industry, including hedge funds, caused apprehension regarding overall financial system risk. Despite these fears, the market returned 12.58% through June 30, as measured by the MSCI All Country World Index ex-US Index, with most of the performance coming during the second quarter. Emerging markets outpaced their developed counterparts, returning 17.75%, as compared to the MSCI Europe, Asia and Far-East Index, which rose 11.09% in US dollar terms. Latin America was the strongest emerging markets region, up 27.09%, while Asia returned 18.78%. Emerging Markets Europe, Middle East, and Africa (EMEA) Index was the relative laggard, returning 9.18% during the first half of the year. In particular, the Latin American markets of Brazil, Chile and Peru performed well as did the Asian markets of Korea, Malaysia and China. Materials, Industrials and Energy were the strongest sectors year to date, while Financials and Healthcare lagged.

What factors were behind the Fund’s performance versus the benchmark?

The Fund’s year-to-date return, trailed the benchmark by approximately 1%, due to first quarter’s relative results. While stock selection across a number of sectors was strong, Energy, Consumer Staples and Industrials stock selection hampered relative results, particularly during the first quarter. Specifically, several of the Fund’s Consumer Staples names in Latin America underperformed, while Energy stock selection was hurt by Russian and South African stock selection. Within Industrials, the Fund’s Asian stocks trailed the Index. In addition, the Fund’s underweighting in the strong Materials sector hurt performance, as did stock selection within the sector. Conversely, the Fund’s strong absolute results were bolstered by Consumer Discretionary stock selection across regions, along with the weighting and stock selection in Chinese, Indian, and Malaysian Financials. Moreover, the Fund’s Chinese healthcare stock selection was strong, as was the focus on Asian Information Technology (IT) stocks. In addition, the Fund’s weighting in Latin America at compared to EMEA augmented performance.

22 Semi-Annual Report

June 30, 2007

How is the Fund positioned?

As of period end, the Fund remained overweighted in Latin America with corresponding underweightings in EMEA and Asia, due primarily to minimal exposure in Russia and Korea, respectively. From a sector perspective, the Fund remained focused on the emerging markets consumer through Consumer Discretionary, Consumer Staples and Financials, holdings. In addition, the Fund maintained a higher than Index weighting in Industrials, with corresponding underweightings in Energy, IT and Materials. These exposures are largely based upon the team’s bottom up fundamental analysis, in accordance with its strategic viewpoint.

June 30, 2007

William Blair Funds 23

Emerging Markets Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Year to Date		1 Year		Since Inception(a)
Emerging Markets Growth Fund Institutional Class	16.79	%	52.40	%	49.76	%
MSCI Emerging Markets Index	17.75		45.45		40.31

(a)

For the period from June 6, 2005 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Index is an index that is designed to measure equity performance in the global emerging markets.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

24 Semi-Annual Report

June 30, 2007

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Emerging Asia—45.4%*
China—16.4%
*Belle International Holdings Limited (Specialty retail)	8,546,000	$	9,432
China High Speed Transmission Equipment Group Co. (Independent power producers & energy traders)*	276,000		250
China Infrastructure Machinery Holdings, Ltd. (Machinery)	5,188,000		11,344
China Mengniu Dairy Co. Ltd. (Food products)	3,054,000		10,537
China Merchants Bank (Commercial banks)	3,398,000		10,348
China Mobile Ltd. (Wireless telecommunication services)	2,897,800		31,178
China Oilfield Services (Energy equipment & services)	2,132,000		2,152
China Vanke Company Ltd. (Real estate management & development)	10,707,347		22,163
*China Water Affairs Group (Household durables)	7,790,000		4,547
Ctrip.com International Ltd.—ADR (Hotels, restaurants & leisure)	67,600		5,315
*Focus Media Holding Ltd.—ADR (Media)	219,800		11,100
Fu Ji Food and Catering Services Holdings Ltd (Hotels, restaurants & leisure)	1,764,000		6,073
Hopson Development Holdings Ltd. (Real estate management & development)	848,800		2,387
Lee and Man Paper Manufacturing Ltd. (Paper & forest products)	3,834,000		10,616
Li Ning Co. Ltd (Leisure equipment & products)	3,094,000		7,503
Parkson Retail Group Ltd. (Multiline retail)	849,900		5,445
Ports Design Ltd. (Textiles, apparel & luxury goods)	2,260,000		6,357
Shangdong Weigao GP Medical (Health care equipment & supplies)	2,800,000		6,311
Wumart Stores, Inc., Class “H” (Food & staples retailing)**	8,680,000		2,775
Xinyu Hengdeli Holdings Ltd. (Distributors)	10,920,000		5,355

			171,188

India—12.6%
ABB Ltd. India (Electrical equipment)	264,000		7,097
Bharat Heavy Electricals, Ltd. (Electrical equipment)	327,800		12,398
*Bharti Airtel Ltd. (Wireless telecommunication services)	615,500		12,651
*Cairn India Ltd. (Oil, gas & consumable fuels)	1,471,300		5,273
Dabur India Ltd. (Personal products)	1,862,200		4,706
Financial Technologies, Ltd. (Software)	95,410		7,075
Housing Development Finance Corp. (Thrifts & mortgage finance)	123,700		6,176
Infosys Technologies, Ltd. (IT services)	195,500		9,252
*Inox Leisure Ltd. (Media)	1,208,500		3,983
Larsen & Toubro Ltd. (Construction & engineering)	315,700		17,058
Shopper’s Stop Ltd. (Multiline retail)	280,860		4,038
Unitech Limited (Real estate management & development)	715,500		8,850
Vedanta Resources Plc (Metals & mining)	1,032,500		33,281

			131,838


Issuer	Shares	Value

Common Stocks—Emerging Asia—45.4%—(continued)
Indonesia—2.7%
PT Bank Rakyat Indonesia (Commercial banks)	16,908,500	$	10,768
PT London Sumatra Indones (Food products)	12,863,500		9,246
PT Telekomunikasi Tbk (Diversified telecommunication services)	7,867,900		8,535

			28,549

Philippines—1.2%
Bank of Philippine Islands (Commercial banks)	6,818,900		10,095
*Paxys Inc. (Commercial services & supplies)	4,184,700		2,239

			12,334

Malaysia—4.1%
*Airasia Bhd (Airlines)	8,883,600		4,894
Bumiputra Commerce Holding Bhd (Commercial banking)	6,429,500		21,786
Kuala Lumpur Kepong Berhad Bhd (Food products)	2,845,650		10,643
Zelan Bhd (Construction & engineering)	1,424,300		4,964

			42,287

South Korea—3.4%
Hana Tour Service (Hotels, restaurants & leisure)	67,800		6,598
*NHN Corporation (Internet software & services)	65,500		11,923
Shinsegae Co. Ltd. (Food & staples retailing)	14,550		9,469
Taewoong Co Ltd (Machinery)	99,500		6,981

			34,971

Taiwan—5.0%
*Himax Technologies, Inc.—ADR (Semiconductors & semiconductor equipment)	1,693,315		9,770
Hon Hai Precision Industry (Electronic equipment & instruments)	3,527,528		30,469
Mediatek, Inc. (Semiconductors & semiconductor equipment)	765,040		11,903

			52,142


*Emerging Latin America—27.6%*
Argentina—0.8%
Banco Macro Sa—ADR (Commercial banks)	246,900		8,116

Brazil—11.9%
All America Latin Logistica (Road & rail)	709,600		9,660
*Anhanguera Eduacional Participacoes S.A. (Commercial services & supplies)	467,000		6,537
*BR Malls Participacoes SA (Real estate management & development)	1,177,100		15,316
CIA Vale Do Rio Doce—ADR (Metals & mining)	682,400		30,401
Cyrela Brazil Realty S.A. (Household durables)	905,200		11,234

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 25

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares	Value

*Common Stocks—Emerging Latin America—27.6%—(continued)*
Brazil—(continued)
Iguatemi Empresa de Shopping Centers S.A. (Commercial services & supplies)	581,600	$	10,499
Localiza Rent a Car S.A. (Road & rail)	946,600		10,678
Lojas Renner S.A. (Multiline retail)	348,600		6,470
Lupatech SA (Machinery)	240,300		5,793
Rodobens Negocioa Imobiliarios S.A. (Household durables)	444,800		6,051
Submarino S.A. (Internet & catalog retail)	122,400		5,092
Totvs S.A. (Software)	189,500		6,168

			123,899

Chile—2.0%
*Cencosud S.A.—ADR 144A (Specialty retail)	163,900		10,198
S.A.C.I. Falabella S.A. (Multiline retail)	2,107,954		10,888

			21,086

Mexico—10.7%
Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)	3,098,800		5,450
America Movil S.A. (Wireless telecommunication services)	7,188,200		22,196
*Banco Compartamos SA (Commercial banks)	1,520,700		9,501
*Desarrolladora Homex S.A. de C.V.—ADR (Household durables)	160,900		9,749
*Groupo Famsa S.A. (Multiline retail)	1,868,700		10,897
Grupo Financiero Banorte S.A. de C.V. (Commercial banks)	4,145,500		18,986
Grupo Aeropuertario Del—ADR (Transportation infrastructure)	208,200		10,268
*Promotora Ambiental Sab de C.V. (Commercial services & supplies)	1,291,350		3,586
*Urbi Desarrollos Urbanos S.A. (Household durables)	2,391,400		11,012
Walmart de Mexico (Food & staples retailing)	2,670,400		10,134

			111,779

Panama—1.3%
Copa Holdings S.A., Class “A” (Airlines)†	205,600		13,825

Peru—0.9%
Credicorp Ltd. (Commercial banks)	157,500		9,634


*Emerging Europe, Mid-East, Africa—21.9%*
Czech Republic—1.1%
*Central European Media Enterprises Ltd., Class “A” (Media)†	112,300		10,958

Egypt—3.4%
Egyptian Financial Group—Hermes Holding SAE (Capital markets)	1,415,700		11,413
Orascom Construction Industries (Construction & engineering)	274,200		17,925
*Orascom Hotels and Development (Hotels, restaurants & leisure)	567,500		5,954

			35,292

Kazakhstan—1.0%
*Kazkommertsbank—GDR 144A (Commercial banks)	482,226		10,609


Issuer	Shares	Value

*Common Stocks—Emerging Europe, Mid-East, Africa—21.9%—(continued)*
Poland—0.5%
*Cinema City International NV (Media)	401,500	$	5,045

Russia—5.9%
*CTC Media, Inc. (Media)†	376,645		10,222
*Magnit—CLS (Multiline retail)†	118,800		5,221
PIK Group—CLS (Real estate development & management)*	597,900		14,948
Sberbank—CLS (Commercial banks)†	5,838		22,768
*X5 Retail Group N.V.—GDR (Food & staples retailing)	295,300		8,652

			61,811

South Africa—6.6%
Anglo Platinum Ltd (Metals & mining)	61,500		10,100
MTN Group Ltd. (Wireless telecommunication services)	1,031,400		14,020
Naspers Ltd. (Media)	750,390		19,279
Spar Group Limited (Food & staples retailing)	1,444,300		10,806
Truworths International Ltd. (Specialty retail)	1,966,300		10,116
Wilson Bayly Holmes-Ovcon (Construction & engineering)	318,500		4,651

			68,972

Turkey—1.6%
Bim Birlesik Magazalar A.S. (Food & staples retailing)	186,800		12,382
Coca Cola Icecek A.S. (Beverages)	500,200		3,749

			16,131

United Arab Emirates—1.8%
Emaar Properties PJSC (Real estate development & management)	5,808,100		18,739

Total Common Stock—94.9% (cost $743,583)			989,205


*Preferred Stock*
Brazil—4.7%
Banco Itau Holding (Commercial banks)	221,700		9,844
*Banco Sofisa S.A. (Commercial banks)	686,200		5,051
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)	829,300		22,141
*Net Servicos De Counicacao S.A. (Media)	704,800		11,637

			48,673

Total Preferred Stock—4.7% (cost $35,402)			48,673


*Investment in Affiliate*
William Blair Ready Reserves Fund	1,295,575		1,296

Total Investment in Affiliate—0.1% (cost $1,296)			1,296

See accompanying Notes to Financial Statements.

26 Semi-Annual Report

June 30, 2007

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


Issuer	Shares or Principal Amount		Value

*Short-Term Investments*
American Express Demand Note, VRN 5.170% due 7/2/07	$	6,875,000	$	6,875
Prudential Funding Demand Note, VRN 5.305% due7/2/07		5,983,000		5,983

Total Short-Term Investments—1.2% (cost $12,858)				12,858


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/2/2007, repurchase price $14,646, collateralized by SBA, Pool# 507256	$	14,640,762		14,641

Total Repurchase Agreement—1.4% (cost $14,641)				14,641

Total Investments—102.3% (cost $807,780)				1,066,673
Liabilities plus cash and other assets—(2.3%)				(24,322	)

Net assets—100.0%			$	1,042,351

*Non-income producing securities

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

† = U.S. listed Foreign Security

**Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 1.72% of the Fund’s net assets at June 30, 2007. These securities were also deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees.

At June 30, 2007 the Fund’s Portfolio of Investments includes the following industry categories:


Finance		24.5%
Consumer Discretionary		22.3%
Industrials		14.9%
Consumer Staples		9.9%
Telecommunication Services		8.5%
Information Technology		8.3%
Materials		8.1%
Energy		2.9%
Health Care		0.6%

		100.0%

At June 30, 2007 the Fund’s Portfolio of Investments includes the following currency categories:


U.S. Dollar		19.4%
Hong Kong Dollar		14.9%
Brazilian Real		13.7%
Indian Rupee		9.5%
Mexican Nuevo Peso		8.8%
Rand		6.6%
New Taiwan Dollar		4.1%
Malaysian Ringgit		4.1%
Egyptian Pounds		3.4%
South Korean Won		3.4%
British Pound Sterling		3.2%
Indonesian Rupiah		2.8%
UAE Dirham Spot		1.8%
Turkish Lira Spot		1.5%
Philippine Peso		1.2%
Chilean Peso		1.1%
Polish Zloty		0.5%

		100.0%

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 27

LOGO

James S. Kaplan

LOGO

Christopher T. Vincent

LOGO

Benjamin J. Armstrong

BOND FUND

The Bond Fund seeks to outperform the Lehman Brothers U.S. Aggregate Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

We are pleased to have the Bond Fund become the newest addition to the William Blair Fund Family and would like to thank our shareholders for investing with us.

As the managers of the Bond Fund, we are enthusiastic about the opportunities available to us. The broad sectors that are represented in the Fund’s portfolio include government securities, corporate debt securities issued by domestic and foreign companies, mortgage-backed securities and asset backed securities. The Fund invests at least 90% in securities rated in the highest four categories by at least one of the following three nationally recognized statistical rating organizations: Fitch Ratings, Moody’s Investors Service Inc. and Standard & Poor’s Corporation. The Fund may also invest no more than 10% of its net assets in below investment grade securities.

How did the Fund perform since its inception? How did the Fund’s performance compare to its benchmark?

The Bond Fund commenced operations on May 1, 2007. Through the two-month period ending June 30, 2007, the Fund posted a decrease of 1.12% (Institutional Class). By comparison, the Fund’s benchmark, the Lehman Brothers U.S. Aggregate Index, declined 1.00%.

What were the most significant factors impacting Fund performance? What factors were behind the Fund’s performance versus the benchmark?

Rising interest rates and risk aversion weighed on the fixed income markets during the second quarter of 2007.

Reports about the current lackluster housing market added to the negative psychology in the residential Mortgage-backed market.

28 Semi-Annual Report

June 30, 2007

The Fund has been close to neutrally weighted in Treasury, mortgage and credit sectors and market volatility has had little impact on Fund returns.

Assets in the Bond Fund reached $51.6 million as of June 30, 2007. We used the months of May and June to deploy these assets into new investments for the Fund.

How is the Fund positioned?

As previously stated, we are carefully following current market conditions and potential Federal Reserve activity.

June 30, 2007

William Blair Funds 29

Bond Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 6/30/2007


	Since Inception(a)
Bond Fund Institutional Class	(1.12	)%
Lehman Brothers U.S. Aggregate Index	(1.00	)%

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Lehman Brothers U.S. Aggregate Index indicates broad intermediate government/corporate bond market performance.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investment portfolio.

30 Semi-Annual Report

June 30, 2007

Bond Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Principal Amount		Value

*U.S. Government and U.S. Government Agency—64.2%*
U.S. Treasury—22.9%
U.S. Treasury Note, 4.375%, due 12/31/07	$	5,000	$	4,987
U.S. Treasury Note, 4.750%, due 2/15/10		1,450		1,445
U.S. Treasury Note, 4.750%, due 5/15/14		1,300		1,284
U.S. Treasury Note, 5.125%, due 5/15/16		2,250		2,262
U.S. Treasury Note, 7.125%, due 2/15/23		325		390
U.S. Treasury Note, 4.500%, due 2/15/36		1,600		1,449

Total U.S. Treasury Obligations		11,925		11,817

Government National Mortgage Association (GNMA)—0.0%
#357752, 7.000%, due 4/15/09		4		4

Federal Home Loan Bank (FHLB)—0.6%
4.750%, due 12/16/16		325		308

Federal Home Loan Mortgage Corp. (FHLMC)—9.5%
#G10330, 7.000%, due 1/1/10		30		31
#G90024, 7.000%, due 1/20/13		100		103
#G30093, 7.000%, due 12/1/17		78		80
#G30254, 6.500%, due 5/1/19		124		127
#G30255, 7.000%, due 7/1/21		122		126
#G18137, 6.500%, due 8/1/21		541		551
#D95621, 6.500%, due 7/1/22		175		179
#D95897, 5.500%, due 3/1/23		481		471
#C01385, 6.500%, due 8/1/23		709		722
#C90896, 6.500%, due 2/1/25		1,226		1,250
6.750%, due 9/15/29		650		745
#G10728, 7.500%, due 7/1/32		500		522

Total FHLMC Mortgage Obligations		4,736		4,907

Federal National Mortgage Association (FNMA)—31.2%
#598453, 7.000%, due 6/1/15		37		38
#689612, 5.000%, due 5/1/18		968		939
#747903, 4.500%, due 6/1/19		800		761
#791393, 5.500%, due 10/1/19		823		813
#831430, 5.500%, due 3/1/21		987		973
#253847, 6.000%, due 5/1/21		577		579
#900725, 6.000%, due 8/1/21		511		514
#254797, 5.000%, due 6/1/23		528		504
#545437, 7.000%, due 2/1/32		390		405
#555522, 5.000%, due 6/1/33		917		864
#555880, 5.500%, due 11/1/33		978		948
#725027, 5.000%, due 11/1/33		1,295		1,219
#725205, 5.000%, due 3/1/34		1,006		948
#725238, 5.000%, due 3/1/34		1,014		955
#725424, 5.500%, due 4/1/34		1,048		1,015
#725611, 5.500%, due 6/1/34		829		803
#745092, 6.500%, due 7/1/35		1,131		1,150
#845188, 6.000%, due 12/1/35		992		983
#848782, 6.500%, due 1/1/36		1,653		1,671

Total FNMA Mortgage Obligations		16,484		16,082


	NRSRO Rating		Principal Amount		Value

*Non-Agency Mortgage-Backed Obligations—8.3%*
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, due 7/25/18	AA	+	$	318	$	307
Aames Mortgage Trust, 2001-1, Tranche M2, 7.588%, due 6/25/31	A			133		131
LSSCO, 2004-2, Tranche M2, 6.328%, due 2/28/33, VRN*	A			339		337
CWL, 2003-5, Tranche MF2 5.959%, due 11/25/33	AA-			391		387
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5 6.455%, due 7/25/34	A			700		692
FHASI, 2004-AR4, Tranche 3A1, 4.588%, due 8/25/34, VRN	AAA			563		554
Security National Mortgage Loan Trust, 2004-2A, Tranche M2, 6.352%, due 11/25/34	A			50		50
GRP Real Estate Asset Trust, 2005-1 Tranche A, 4.850%, due 1/25/35*	A			393		391
Security National Mortgage Loan Trust, 2005-1A, Tranche M2, 6.530%, due 2/25/35*	A			25		24
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 5.635%, due 5/25/35	AA	+		118		117
Structured Asset Securities Corp., 2005-9XS, Tranche A2B, 6.500%, due 6/25/35	AAA			200		200
Security National Mortgage Loan Trust, 2005-2A, Tranche M2, 7.321%, due 2/25/36*	A			125		123
Chase Mortgage Finance Corporation, 2006-A1, Tranche A3, 6.000%, due 9/25/36	AAA			650		648
La Hipotecaria Panamanian Mortgage Trust, 2007-1GA, Tranche A, 5.750%, due 12/23/36*	AAA			80		79
Security National Mortgage Loan Trust, 2006-1A, Tranche M2, 7.500%, due 9/25/36*	A			80		78
Statewide Mortgage Loan Trust, 2006-1A, Tranche A2, 7.660%, due 9/25/37*	AAA			70		72
ACE, 2005-SN1, Tranche M2, 5.770%, due 11/25/39, VRN	A	+		50		48
ACE, 2005-SD3, Tranche M2, 7.070%, due 8/25/45, VRN	A	+		70		71

Total Non-Agency Mortgage-Backed Obligations				4,355		4,309


*Corporate Obligations—23.8%*
SLM Corporation, 5.565%, due 7/25/08, VRN	A	+		500		496
Consolidated Edison Company of New York, 7.150%, due 12/1/09	A	+		500		520

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 31

Bond Fund

Portfolio of Investments, June 30, 2007 (all dollar amounts in thousands) (unaudited)


	NRSRO Rating		Principal Amount	Value

*Corporate Obligations—(continued)*
Household Finance Corporation, 8.000%, due 7/15/10	AA-		500	$	534
Bank of America Corporation, 4.250%, due 10/1/10	AA		500		483
National Rural Utilities Cooperative Finance Corporation, 7.250%, due 3/1/12	A		500		533
Citigroup, Inc. 5.625%, due 8/27/12	AA		400		400
Simon Property Group, Inc., 6.350%, due 8/28/12	A-		500		515
Cox Communications, Inc., 7.125%, due 10/1/12	BBB-		400		423
Boeing Capital Corporation, 5.800%, due 1/15/13	A	+	400		406
Residential Capital, LLC, 6.500%, due 4/17/13	BBB		350		338
SBC Communications, 5.100%, due 9/15/14	A		400		381
CODELCO, Inc.—144A, 4.750%, due 10/15/14	A		400		373
Johnson Controls, Inc. 5.500%, due 1/15/16	A-		400		387
ProLogis, 5.750%, due 4/1/16	BBB	+	400		395
Omnicom Group, Inc., 5.900%, due 4/15/16	A-		400		395
Yum!, Brands, Inc., 6.250%, due 4/15/16	BBB		400		399
SAB Miller plc, 6.500%, due 7/1/16	BBB	+	400		411
Petrobras International Finance Company, 6.125%, due 10/6/16	BBB-		400		392
Marriott International, 6.375%, due 6/15/17	BBB	+	450		451
Ras Laffan Lng II, 5.298%, due 9/30/20	A	+	400		374
Kroger Company, 8.00%, due 9/15/29	BBB		400		431
Conoco Funding Company, 7.250%, due 10/15/31	A-		400		452
Kohl’s Corporation, 6.00%, due 1/15/33	A		250		234
Goldman Sachs Group, Inc., 6.125%, due 2/15/33	AA-		400		382
Pacific Gas and Electric Company, 6.050%, due 3/1/34	A-		250		242
Teva Pharmaceutical Finance LLC, 6.150%, due 2/1/36	BBB		510		477
Wisconsin Electric Power Company, 5.700%, due 12/1/36	A	+	500		471
Comcast Corporation, 6.450%, due 3/15/37	BBB	+	500		482
Florida Power and Light Group Capital, Inc. 6.650%, due 6/15/67, VRN	A-		500		496

Total Corporate Obligations			12,310		12,273

Total Fixed Income—96.3% (Cost $50,322)			50,139		49,700


	NRSRO Rating		Shares or Principal Amount		Value

*Preferred Stock—0.5%*
Public Storage, Inc.				10,000	$	239

Total Preferred Stock—0.5% (Cost $245)				10,000		239

Total Long-Term Investments—96.8% (Cost $50,567)						49,939


*Short-Term Investments*
American Express Corporation, VRN 5.170%, due 7/2/07	A	+	$	2,240		2,240
Prudential Funding LLC, VRN 5.305%, due 7/2/07	A	+		2,240		2,240

Total Short-Term Investments—8.7% (Cost $4,480)				4,480		4,480


*Repurchase Agreement*
Investors Bank & Trust Company, 4.50% dated 6/29/2007, due 7/02/2007, repurchase price $1,778, collateralized by SBA #506044	A	+		1,777		1,777

Total Repurchase Agreement—3.4% (Cost $1,777)				1,777		1,777

Total Investments—108.9% (Cost $56,824)						56,196

Cash and other assets, less liabilities—(8.9)%						(4,573	)

Net Assets—100%					$	51,623

VRN = Variable Rate Note

NRSRO = Nationally Recognized Statistical Rating Organization, such as

S&P, Moody’s or Fitch (unaudited)

The obligations of certain U.S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury

* Deemed illiquid pursuant to Liquidity Procedures adopted by the Board of Trustees. These holdings represent 2.14% of the net assets at June 30,2007.

See accompanying Notes to Financial Statements.

32 Semi-Annual Report

June 30, 2007

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund		Emerging Markets Growth Fund
*Assets*
Investments in securities, at cost	$	1,504,966		$	478,290		$	294,743	$	806,484
Investments in Affiliated Fund, at cost		53			3,276			2,148		1,296


Investments in securities, at value	$	2,136,887		$	597,734		$	354,564	$	1,065,377
Investments in Affiliated Fund, at value		53			3,276			2,148		1,296
Foreign currency, at value (cost $4,841, $11,466, $99, and $103 respectively)		4,864			11,452			98		103
Receivable for fund shares sold		—			—			1,315		5,273
Receivable for investment securities sold		14,086			35,624			1,890		553
Dividend and interest receivable		3,779			1,252			420		645

Total assets		2,159,669			649,338			360,435		1,073,247
*Liabilities*
Payable for investment securities purchased		9,314			41,270			9,020		24,793
Payable for fund shares redeemed		7,696			—			10		3,994
Management fee payable		1,598			452			271		825
Distribution and shareholder administration fee payable		—			—			20		42
Other accrued expenses		549			171			343		1,242

Total liabilities		19,157			41,893			9,664		30,896

Net Assets	$	2,140,512		$	607,445		$	350,771	$	1,042,351

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	99		$	39		$	23	$	46
Capital paid in excess of par value		1,363,932			450,486			278,606		701,063
Accumulated net investment income (loss)		(29,196	)		(629	)		676		293
Accumulated realized gain (loss)		174,072			38,298			11,935		83,198
Net unrealized appreciation (depreciation) of investments and foreign currencies		631,605			119,251			59,531		257,751

Net Assets	$	2,140,512		$	607,445		$	350,771	$	1,042,351

Net Assets	$	2,140,512		$	607,445		$	—	$	—
Shares Outstanding		98,668,177			38,776,195			—		—
Net Asset Value Per Share	$	21.69		$	15.67		$	—	$	—
Institutional Share Class
Net Assets	$	—		$	—		$	217,546	$	735,363
Shares Outstanding		—			—			14,140,046		32,229,452
Net Asset Value Per Share	$	—		$	—		$	15.39	$	22.82

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 33

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund			Emerging Markets Growth Fund
*Investment income*
Dividends	$	22,208		$	7,985		$	2,437		$	6,061
Less foreign tax withheld		(1,434	)		(625	)		(150	)		(343	)
Income from Affiliated Fund		1			121			77			30
Interest		964			268			279			882

Total income		21,739			7,749			2,643			6,630
*Expenses*
Investment advisory fees		9,283			3,023			1,482			4,895
Distribution fees		—			—			25			74
Shareholder administration fees		—			—			85			207
Custodian fees		662			187			161			633
Transfer agent fees		18			8			15			46
Professional fees		40			22			21			27
Registration fees		21			5			30			24
Other expenses		97			30			11			19

Total expenses before waiver		10,121			3,327			1,830			5,925
Less expenses reimbursed to (waived or absorbed) by the Advisor		—			52			—			(80	)

Net expenses		10,121			3,327			1,830			5,845

Net investment income (loss)		11,618			4,422			813			785
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		111,150			34,371			10,838			64,491
Net realized gain (loss) on foreign currency transactions and other assets and liabilities		(2,368	)		(826	)		(478	)		(477	)

Total net realized gain (loss)		108,782			33,545			10,360			64,014
Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		108,408			20,799			29,094			80,279

Net increase (decrease) in net assets resulting from operations	$	228,808		$	58,766		$	40,267		$	145,078

See accompanying Notes to Financial Statements.

34 Semi-Annual Report

June 30, 2007

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 and the Year Ended December 31, 2006 (all amounts in thousands) (unaudited)


	Institutional International Growth Fund						Institutional International Equity Fund						International Small Cap Growth Fund						Emerging Markets Growth Fund
	2007			2006			2007			2006			2007			2006			2007			2006
	(unaudited)						(unaudited)						(unaudited)						(unaudited)
*Operations*
Net investment income (loss)	$	11,618		$	9,378		$	4,422		$	2,025		$	813		$	(221	)	$	785		$	211
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		108,782			267,920			33,545			7,823			10,360			2,299			64,014			22,993
Change in net unrealized appreciation (depreciation) on investments, foreign currency transactions and other assets and liabilities		108,408			91,778			20,799			72,424			29,094			26,158			80,279			147,786

Net increase (decrease) in net assets resulting from operations		228,808			369,076			58,766			82,272			40,267			28,236			145,078			170,990
*Distributions to shareholders from*
Net investment income		—			(32,267	)		—			(6,495	)		—			(106	)		—			(405	)
Net realized gain		—			(217,683	)		—			(1,892	)		—			(877	)		—			(4,544	)

		—			(249,950	)		—			(8,387	)		—			(983	)		—			(4,949	)
*Capital stock transactions*
Net proceeds from sale of shares		127,438			144,396			7,781			281,476			98,461			172,153			152,172			529,925
Shares issued in reinvestment of income dividends and capital gain distributions		—			244,472			—			7,436			—			868			—			4,687
Less cost of shares redeemed		(91,075	)		(188,067	)		(57,477	)		(15,351	)		(19,926	)		(18,839	)		(68,548	)		(136,352	)

Net increase (decrease) in net assets resulting from capital stock transactions		36,363			200,801			(49,696	)		273,561			78,535			154,182			83,624			398,260

Increase (decrease) in net assets		265,171			319,927			9,070			347,446			118,802			181,435			228,702			564,301
Net assets
Beginning of period		1,875,341			1,555,414			598,375			250,929			231,969			50,534			813,649			249,348

End of period	$	2,140,512		$	1,875,341		$	607,445		$	598,375		$	350,771		$	231,969		$	1,042,351		$	813,649

Undistributed net investment income (loss) at the end of the period	$	(29,196	)	$	(40,814	)	$	(629	)	$	(6,711	)	$	676		$	(137	)	$	293		$	(492	)

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 35

Statements of Assets and Liabilities

June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Bond Fund
*Assets*
Investments in securities, at cost	$	56,824
Investments in Affiliated Fund, at cost		—


Investments in securities, at value	$	56,196
Investments in Affiliated Fund, at value		—
Receivable for fund shares sold		438
Receivable for investment securities sold		—
Receivable from Advisor		1
Dividend and interest receivable		—

Total assets		56,635

*Liabilities*
Payable for investment securities purchased		4,989
Payable for fund shares redeemed		—
Management fee payable		—
Distribution and shareholder administration fee payable		5
Other accrued expenses		18

Total liabilities		5,012

Net Assets	$	51,623

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	5
Capital paid in excess of par value		52,292
Accumulated net investment income (loss)		104
Accumulated realized gain (loss)		(150	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		(628	)

Net Assets	$	51,623


Institutional Share Class
Net Assets	$	8,793
Shares Outstanding		893,446
Net Asset Value Per Share	$	9.84

See accompanying Notes to Financial Statements.

36 Semi-Annual Report

June 30, 2007

Statements of Operations

For the Period Ended June 30, 2007 (all dollar amounts in thousands) (unaudited)


	Bond Fund(a)
*Investment income*
Dividends	$	4
Interest		370

Total income		374
*Expenses*
Investment advisory fees		21
Distribution fees		—
Shareholder administration fees		8
Custodian fees		7
Transfer agent fees		2
Professional fees		7
Registration fees		5
Other expenses		4

Total expenses before waiver		54
Less expenses waived or absorbed by the Advisor		(21	)

Net expenses		33

Net investment income (loss)		341
Net realized and unrealized gain (loss) on investments, foreign currency transactions and other assets and liabilities
Net realized gain (loss) on investments		(150	)

Change in net unrealized appreciation (depreciation) on investments and other assets and liabilities		(628	)

Net increase (decrease) in net assets resulting from operations	$	(437	)

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

See accompanying Notes to Financial Statements.

June 30, 2007

William Blair Funds 37

Statements of Changes in Net Assets

For the Period Ended June 30, 2007 (all amounts in thousands)


	Bond Fund(a)
	2007
	(unaudited)
*Operations*
Net investment income (loss)	$	341
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		(150	)
Change in net unrealized appreciation (depreciation) on investments, foreign currency transactions and other assets and liabilities		(628	)

Net increase (decrease) in net assets resulting from operations		(437	)
*Distributions to shareholders from*
Net investment income		(237	)
Net realized gain		—

		(237	)
*Capital stock transactions*
Net proceeds from sale of shares		52,111
Shares issued in reinvestment of income dividends and capital gain distributions		187
Less cost of shares redeemed		(1	)

Net increase (decrease) in net assets resulting from capital stock transactions		52,297

Increase (decrease) in net assets		51,623
Net assets
Beginning of period	$	—

End of period	$	51,623

Undistributed net investment income (loss) at the end of the period	$	104

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

See accompanying Notes to Financial Statements.

38 Semi-Annual Report

June 30, 2007

Notes to Financial Statements

(1) Significant Accounting Policies

(a) Description of the Fund

William Blair Funds (the “Fund”) is a diversified mutual fund registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The number of shares authorized for this Fund is unlimited. The Fund currently consists of the following sixteen portfolios (the “Portfolios”), each with its own investment objectives and policies.


Equity Portfolios		International Portfolios
Growth		International Growth
Tax-Managed Growth		International Equity
Large Cap Growth		Institutional International Growth
Small Cap Growth		Institutional International Equity
Mid Cap Growth		International Small Cap Growth
Small-Mid Cap Growth		Emerging Markets Growth
Value Discovery		Fixed Income Portfolios
		Bond
		Income
		Money Market Portfolio
		Ready Reserves

The investment objectives of the Portfolios are as follows:


Equity		Long-term capital appreciation.
International		Long-term capital appreciation.
Fixed Income		High level of current income with relative stability of principal.
Money Market		Current income, a stable share price and daily liquidity.

The Institutional International Growth Portfolio, the Institutional International Equity Portfolio and the Institutional Share Classes of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, and the Bond Portfolio are the only Portfolios covered in this report.

(b) Share Classes

Three different classes of shares of the International Small Cap Growth Fund, Emerging Markets Growth Fund, and the Bond Fund currently exist: N, I and Institutional. This report includes financial information for only the Institutional Class. The Institutional share class is sold to institutional investors, including but not limited to employee benefit plans, endowments, foundations, trusts and corporations, who are able to meet the Fund’s high minimum investment requirement. The minimum initial investment required is $5 million ($2 million for the Bond Portfolio).

Investment income realized and unrealized gains and losses, and certain Portfolio level expenses and expense reductions, if any, are allocated based on the relative net assets of each class, except for certain class specific expenses which are charged directly to the appropriate class. Differences in class expenses may result in the payment of different per share dividends by class. All share classes of the Portfolios have equal rights with respect to voting subject to class specific arrangements.

(c) Investment Valuation

June 30, 2007

William Blair Funds 39

prices used to calculate the net asset value to the next day’s opening local prices. Otherwise, the value of foreign equity securities is determined based on the last sale price on the foreign exchange or market on which it is primarily traded or, if

there have been no sales during that day, at the latest bid price. Foreign currency forward contracts and foreign currencies are valued at the forward and current exchange rates, respectively, prevailing on the date of valuation.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Other securities, and all other assets, including securities for which a market price is not available, or the value of which is affected by a significant valuation event, are valued at fair value as determined in good faith by the Pricing Committee or Valuation Committee, in accordance with the Fund’s Valuation Procedures approved by the Board of Trustees. As of June 30, 2007, there were securities held in the Institutional International Growth, Institutional International Equity, International Small Cap Growth and Emerging Markets Growth Portfolios requiring fair valuation by the Board of Trustees pursuant to the Fund’s valuation procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities which are recorded as soon as the information is available. Foreign currency gains and losses associated with fluctuation in the foreign currency rate versus the United States dollar are recorded on the Statement of Operations as a component of net realized gains/(losses) on foreign currency translation and other assets and liabilities.

Premiums and discounts are accreted and amortized on a straight-line basis for short-term investments and on an effective interest method for long-term investments. The interest rate shown on the Portfolio of Investments for the Bond Fund were the rates in effect on June 30, 2007. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the period ended June 30, 2007, the Bond Portfolio recognized an increase of interest income and an increase of net realized (loss) of -$1- (in thousands). This reclassification has no effect on the net asset value of the Portfolio.

Awards from class action litigation may be recorded as a reduction of cost. If the Funds no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Dividends to Shareholders

Shares are sold and redeemed on a continuous basis at net asset value. The net asset value per share is determined by dividing the Portfolio’s net assets by the number of shares outstanding as of the close of regular trading on the New York Stock Exchange, which is generally 3:00 p.m. Central time (4:00 p.m. Eastern time), on each day the Exchange is open.

Dividends from net investment income, if any, are declared at least annually for all Portfolio’s covered by this report except the Bond Portfolio which is declared monthly. Capital gain distributions, if any, are declared at least annually in December. Dividends payable to shareholders are recorded on the ex-dividend date.

(f) Foreign Currency Translation and Foreign Currency Forward Contracts

The Portfolios (excluding the Bond Portfolio) may invest in securities denominated in foreign currencies. As such, assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the current exchange rate on the date of valuation. The values of foreign investments, open foreign currency forward contracts, and cash denominated in foreign currencies are translated into U.S. dollars using a spot market rate of exchange as of the time of the determination of each Fund’s NAV typically 4:00 p.m. Eastern time on days when there is regular trading on the New York Stock Exchange. Payables and receivables for securities transactions, dividends, interest income and tax reclaims are translated into U.S. dollars using a spot market rate of exchange as of 4:00 p.m. Eastern time. Settlement of purchases and sales and dividend and interest receipts are translated into U.S. dollars using a spot market rate of exchange as of 11:00 a.m. Eastern time.

40 Semi-Annual Report

June 30, 2007

These Portfolios (excluding the Bond Portfolio) may enter into foreign currency forward contracts (1) as a means of managing the risks associated with changes in the exchange rates for the purchase or sale of a specific amount of a particular foreign currency, and (2) to hedge the value, in U.S. dollars, of portfolio securities. Gains and losses from foreign currency transactions associated with purchases and sales of investments and foreign currency forward contracts are included with the net realized and unrealized gain or loss on investments. For tax purposes, the foreign currency gains and losses are treated as ordinary income.

(g) Income Taxes

The Portfolios intend to comply with the special provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies and, therefore, no provision for Federal income taxes has been made in the accompanying financial statements since each Portfolio intends to distribute substantially all of its taxable income to its shareholders and be relieved of all Federal income taxes.

The Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for Federal income tax purposes. In accordance with this election, the Institutional International Growth, Institutional International Equity, International Small Cap Growth and Emerging Markets Growth Portfolios recognized net unrealized appreciation (depreciation) of $25,722, $7,000, $— and $—, respectively (in thousands) in 2006, all of which has been treated as an adjustment to the cost of investments for tax purposes. The Portfolios also treat the deferred loss associated with current and prior year wash sales as an adjustment to the cost of investments for tax purposes. The cost of investments for Federal income tax purposes and related gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) at June 30, 2007 were as follows (in thousands):


Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation / (Depreciation)
Institutional International Growth	$	1,554,078	$	598,376	$	15,830	$	582,546
Institutional International Equity		491,114		112,794		3,091		109,703
International Small Cap Growth		297,811		67,122		8,511		58,611
Emerging Markets Growth		811,577		263,348		9,394		253,954
Bond Fund		56,824		84		712		(628	)

The timing and characterization of certain income and capital gain distributions are determined annually in accordance with Federal income tax regulations that may differ from U.S. generally accepted accounting principles. As a result, net investment income or loss and net realized gain or loss for a reporting period may differ from the amount distributed during such period. In addition, the Portfolios may periodically record reclassifications among certain capital accounts to reflect differences between financial reporting and income tax basis distributions. The reclassifications were reported in order to reflect the tax treatment for certain permanent differences that exist between income tax regulations and U.S. generally accepted accounting principles. The reclassifications generally relate to section 988 currency gains and losses, and recharacterization of unrealized appreciation on PFICs (Passive Foreign Investment Corporations). These reclassifications have no impact on the net asset values of the Portfolio. Accordingly, at December 31, 2006, the following reclassifications were recorded (in thousands):


Portfolio	Undistributed Net Investment Income/(Loss)			Accumulated Undistributed Net Realized Gain/ (Loss)			Capital Paid In Excess of Par Value
Institutional International Growth	$	(3,376	)	$	3,376		$	—
Institutional International Equity		(1,660	)		1,660			—
International Small Cap Growth		289			(289	)		—
Emerging Markets Growth		24			(22	)		(2	)


	Distributions Paid In 2006				Distributions Paid In 2005
Portfolio	Ordinary Income		Long-Term Capital Gains		Ordinary Income		Long-Term Capital Gains
Institutional International Growth	$	48,076	$	201,874	$	14,610	$	109,190
Institutional International Equity		6,495		1,892		445		—
International Small Cap Growth		983		—		6		—
Emerging Markets Growth		1,585		3,364		1,169		—

June 30, 2007

William Blair Funds 41

As of December 31, 2006, the components of distributable earnings on a tax basis were as follows (in thousands):


Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses		Undistributed Long-Term Gain		Net Unrealized Appreciation / (Depreciation)
Institutional International Growth	$	8,636	$	—	$	64,789	$	474,248
Institutional International Equity		4,100		—		5,519		88,535
International Small Cap Growth		856		137		1,730		29,426
Emerging Markets Growth		5,520		503		19,303		171,844

At December 31, 2006, the Portfolios, have no unused capital loss carryforwards available for Federal income tax purposes to be applied against future capital gains, if any.


Portfolio	Currency Loss
Institutional International Growth	$	—
Institutional International Equity		—
International Small Cap Growth		137
Emerging Markets Growth		503

(h) Repurchase Agreements

(i) Use of Estimates

(2) New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006. Recent SEC guidance allows implementing FIN 48 in Portfolio’s NAV calculations as late as the fund’s last NAV calculation in the first required financial statement reporting period. Management has evaluated the implications of FIN 48 and has determined it does not have an impact on the financial statements as of June 30, 2007.

(3) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

The Institutional International Growth and Institutional International Equity Portfolios have a management agreement with William Blair & Company L.L.C. (the “Company”) for investment advisory, administrative, and other accounting services.

42 Semi-Annual Report

June 30, 2007

The Portfolios pay the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets. A summary of the annual rates expressed as a percentage of average daily net assets is as follows:


First $500 million	1.00	%
Next $500 million	0.95	%
In excess of $1 billion	0.90	%

The International Small Cap Growth Portfolio pays the Company a 1.00% annual fee payable monthly, based on its average daily net assets. The Emerging Markets Growth Portfolio pays the Company a 1.10% annual fee payable monthly, based on its average daily net assets. The Bond Portfolio pays the Company a 0.30% annual fee payable monthly, based on its average daily net assets.

All of the Portfolios, except Institutional International Growth Fund, have also entered into Expense Limitation Agreements with the Company. Under the terms of these Agreements, the Company has agreed to waive its advisory fees and absorb other operating expenses through April 30, 2007, if total expenses of the Institutional International Equity Portfolios exceed 1.10% of average daily net assets, 1.25% of average daily net assets for the Institutional Share Classes of the International Small Cap Growth and Emerging Markets Growth Portfolios or 0.35% of average daily net assets for the Institutional Share Class of the Bond Portfolio.

For a period of three years subsequent to the Commencement of Operations of the Portfolio, the Company is entitled to reimbursement from the Institutional International Equity, International Small Cap Growth, Emerging Markets Growth and Bond Portfolios for previously waived fees and expenses to the extent the overall expense ratio remains below the percentages indicated. The total amount available for recapture at June 30, 2007 is $271, $134, $621 and $21 (in thousands) for Institutional International Equity, International Small Cap Growth, Emerging Markets Growth and Bond Portfolios, respectively. As a result, the total expense ratio for a Portfolio during the period the agreement is in effect, will not fall below the percentage indicated.

For the year ended June 30, 2007, the investment advisory fees incurred by the Portfolio and related fee waivers were as follows (in thousands) :


Portfolio	Gross Advisory Fee		Fee Waiver		Net Advisory Fee		Expenses Recovered or (Absorbed) by Advisor
Institutional International Growth	$	9,283	$	—	$	9,283	$	—
Institutional International Equity		3,023		—		3,023		52
International Small Cap Growth		1,482		—		1,482		—
Emerging Markets Growth		4,895		80		4,815		—
Bond		21		21		—		—

(b) Trustees Fees

The Portfolios incurred fees of $54 (in thousands) to non-interested trustees of the Fund for the year ended June 30, 2007. Interested trustees are not compensated by the Fund.

(c) Investments in Affiliated Portfolio

Pursuant to the rules of the 1940 Act, each of the Portfolios of the Fund may invest in the William Blair Ready Reserves Portfolio (“Ready Reserves”), an open-end money market portfolio managed by the Company. Ready Reserves Portfolio is used as a cash management option to the other Portfolios in the Fund. The Company waives management fees and shareholder service fees earned from the other Portfolios investment in the Ready Reserves Fund. The fees waived with respect to the Portfolio for the period ended June 30, 2007 are listed below. Distributions received from Ready Reserves are reflected as “Dividend income from affiliated Fund” in the Portfolio’s statement of operations. Amounts relating to the Portfolio’s investments in Ready Reserves were as follows for the period ended June 30, 2007 (in thousands):


Portfolio	Purchases		Sales Proceeds		Fees Waived		Dividend Income		Value		Percent of Net Assets
Institutional International Growth	$	1	$	—	$	—	$	1	$	53	—	%
Institutional International Equity		8,620		9,350		15		121		3,276	0.5
International Small Cap Growth		1,078		4,158		9		77		2,148	0.6
Emerging Markets Growth		31		—		4		30		1,926	0.1

June 30, 2007

William Blair Funds 43

(4) Investment Transactions

Investment transactions, excluding money market instruments, for the period ended June 30, 2007, were as follows (in thousands):


Portfolio	Purchases		Sales
Institutional International Growth	$	698,178	$	668,283
Institutional International Equity		242,723		291,367
International Small Cap Growth		211,356		123,259
Emerging Markets Growth		532,799		443,125
Bond		57,134		6,417

(5) Foreign Currency Forward Contracts

To protect itself against a decline in the value of foreign currency against the U.S. dollar, each Portfolio enters into foreign currency forward contracts with its custodian and others. The Portfolio bears the market risk that arises from changes in foreign currency rates and bears the credit risk if the counterparty fails to perform under the contract. The net realized and unrealized gains and losses associated with foreign currency forward contracts are reflected in the accompanying financial statements.

(6) Fund Share Transactions

The following table summarizes the activity in capital shares of each Portfolio (in thousands):


	Dollars
	For the Period Ended June 30, 2007
Portfolio	Institutional International Growth		Institutional International Equity			��	International Small Cap Growth		Emerging Markets Growth		Bond(a)
Sales	$	127,438	$	7,781			$	51,929	$	109,929	$	8,879
Reinvested Distributions		—		—				—		—		42
Redemptions		91,075		57,477				6,061		28,575		—

Net change in net assets relating to fund share activity		36,363		(49,696	)			45,868		81,354		8,921


	Dollars
	For the Year Ended December 30, 2006
Portfolio	Institutional International Growth		Institutional International Equity				International Small Cap Growth		Emerging Markets Growth
Sales	$	144,396	$	281,476			$	103,040	$	346,626
Reinvested Distributions		244,472		7,436				593		3,326
Redemptions		188,067		15,351				11,665		110,338

Net change in net assets relating to fund share activity		200,801		273,561				91,968		239,614

	Shares
	For the Period Ended June 30, 2007
Portfolio	Institutional International Growth		Institutional International Equity				International Small Cap Growth		Emerging Markets Growth		Bond(a)
Sales		6,324		560				3,644		5,297		889
Reinvested Distributions		—		—				—		—		4
Redemptions		4,390		3,709				414		1,393		—

Net change in shares outstanding		1,934		(3,149	)			3,230		3,904		893


	Shares
	For the Year Ended December 30, 2006
Portfolio	Institutional International Growth		Institutional International Equity				International Small Cap Growth		Emerging Markets Growth
Sales		7,491		21,737				8,638		13,777
Reinvested Distributions		12,799		527				45		62
Redemptions		9,426		1,172				923		500

Net change in shares outstanding		10,864		21,092				7,760		13,339

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

44 Semi-Annual Report

June 30, 2007

Financial Highlights

Institutional International Growth Fund



	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002(a)
	(unaudited)
Net asset value, beginning of year	$	19.39		$	18.11	$	16.06	$	13.60	$	9.57	$	10.00
Income from investment operations:
Net investment income (b)		0.12			0.11		0.09		0.03		0.07		—
Net realized and unrealized gain (loss) on investments		2.18			4.09		3.53		2.44		3.99		(0.43	)

Total from investment operations		2.30			4.20		3.62		2.47		4.06		(0.43	)
Less distributions from:
Net investment income		—			0.38		0.15		0.01		0.03		—
Net realized gain		—			2.54		1.42		—		—		—

Total distributions		—			2.92		1.57		0.01		0.03		—

Net asset value, end of year	$	21.69		$	19.39	$	18.11	$	16.06	$	13.60	$	9.57

Total return (%)		11.86			23.45		22.76		18.15		42.47		(4.27	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.02	(c)		1.03		1.05		1.10		1.10		1.10	(c)
Expenses, before waivers and reimbursements		1.02	(c)		1.03		1.05		1.11		1.16		1.29	(c)
Net investment income (loss), net of waivers and reimbursements		1.17	(c)		0.54		0.52		0.18		0.37		(0.05	)(c)
Net investment income (loss), before waivers and reimbursements		1.17	(c)		0.54		0.52		0.17		0.31		(0.24	)(c)


	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004		2003		2002
	(unaudited)
Supplemental data:
Net assets at end of year (in thousands)	$	2,140,512		$	1,875,341	$	1,555,414	$	1,223,436	$	477,511	$	149,848
Portfolio turnover rate (%)		68	(c)		74		74		72		56		59	(c)

(a)

For the period from July 26, 2002 (Commencement of Operations) to December 31, 2002.

(b)

Excludes $0.29, $0.25, $0.10, $0.06, and $0.02 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2006, 2005, 2004, 2003 and 2002, respectively.

(c)

Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher that the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds. com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 45

Financial Highlights

Institutional International Equity Fund



	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004(a)
	(unaudited)
Net asset value, beginning of year	$	14.27		$	12.04	$	10.20	$	10.00
Income from investment operations:
Net investment income (b)		0.11			0.07		—		—
Net realized and unrealized gain (loss) on investments		1.29			2.37		1.86		0.20

Total from investment operations		1.40			2.44		1.86		0.20
Less distributions from:
Net investment income		—			0.16		0.02		—
Net realized gain		—			0.05		—		—

Total distributions		—			0.21		0.02		—

Net asset value, end of year	$	15.67		$	14.27	$	12.04	$	10.20

Total return (%)		9.81			20.22		18.26		2.00
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.08	(c)		1.10		1.10		1.10	(c)
Expenses, before waivers and reimbursements		1.08	(c)		1.12		1.35		2.46	(c)
Net investment income (loss), net of waivers and reimbursements		1.44	(c)		0.50		0.31		(0.21	)(c)
Net investment income (loss), before waivers and reimbursements		1.44	(c)		0.48		0.06		(1.57	)(c)


	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005		2004
	(unaudited)
Supplemental data:
Net assets at end of year (in thousands)	$	607,445		$	598,375	$	250,929	$	27,384
Portfolio turnover rate (%)		81	(c)		79		84		45	(c)

(a)

For the period from December 1, 2004 (Commencement of Operations) to December 31, 2004.

(b)

Excludes $0.23, $0.27 and $0.01 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2006, 2005 and 2004, respectively.

(c)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

46 Semi-Annual Report

June 30, 2007

Financial Highlights

International Small Cap Growth Fund

Institutional Share Class



	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005(a)
	(unaudited)
Net asset value, beginning of year	$	13.43		$	11.16		$	10.00
Income from investment operations:
Net investment income (b)		0.04			(0.01	)		—
Net realized and unrealized gain on investments		1.92			2.34			1.16

Total from investment operations		1.96			2.33			1.16
Less distributions from:
Net investment income		—			0.01			—	(c)
Net realized gain		—			0.05			—

Total distributions		—			0.06			—

Net asset value, end of year	$	15.39		$	13.43		$	11.16

Total return (%)		14.59			20.86			11.62
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.15	(d)		1.25			1.25	(d)
Expenses, before waivers and reimbursements		1.15	(d)		1.31			2.17	(d)
Net investment income (loss), net of waivers and reimbursements		0.62	(d)		(0.12	)		0.00	(d)
Net investment income (loss), before waivers and reimbursements		0.62	(d)		(0.18	)		(0.92	)(d)


	Period Ended			Years Ended December 31,
	6/30/2007			2006			2005(a)
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	350,771		$	231,969		$	50,534
Portfolio turnover rate (%)		85	(d)		109			127	(d)

(a)

For the period from November 1, 2005 (Commencement of Operations) to December 31, 2005.

(b)

Excludes $0.00, $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes, for the years ended 2006 and 2005, respectively.

(c)

Distribution less than $0.01 per share.

(d)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 47

Financial Highlights

Emerging Markets Growth Fund

Institutional Share Class



	Period Ended			Years Ended December 31,
	6/30/2007			2006		2005(a)
	(unaudited)
Net asset value, beginning of year	$	19.54		$	14.20	$	10.00
Income from investment operations:
Net investment income (b)		0.02			0.02		0.01
Net realized and unrealized gain on investments		3.26			5.44		4.27

Total from investment operations		3.28			5.46		4.28
Less distributions from:
Net investment income		—			0.01		—
Net realized gain		—			0.11		0.08

Total distributions		—			0.12		0.08

Net asset value, end of year	$	22.82		$	19.54	$	14.20

Total return (%)		16.79			38.49		42.82
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25	(c)		1.25		1.25	(c)
Expenses, before waivers and reimbursements		1.26	(c)		1.32		1.61	(c)
Net investment income (loss), net of waivers and reimbursements		0.24	(c)		0.09		0.19	(c)
Net investment income (loss), before waivers and reimbursements		0.23	(c)		0.02		(0.17	)(c)


	Period Ended			Year Ended December 31,
	6/30/2007			2006		2005(a)
	(unaudited)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,042,351		$	813,649	$	249,348
Portfolio turnover rate (%)		102	(c)		113		77	(c)

(a)

For the period from June 6, 2005 (Commencement of Operations) to December 31, 2005.

(b)

Excludes $0.00 and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes, for the years ended 2006 and 2005, respectively.

(c)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

48 Semi-Annual Report

June 30, 2007

Financial Highlights

Bond Fund

Institutional Share Class



	Period Ended June 30,
		2007(a)

Net asset value, beginning of year		$	10.00
Income from investment operations:
Net investment income (b)			0.10
Net realized and unrealized gain on investments			(0.21	)

Total from investment operations			(0.11	)
Less distributions from:
Net investment income			0.05
Net realized gain			—

Total distributions			0.05

Net asset value, end of year		$	9.84

Total return (%)			(1.12	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements			0.35	(b)
Expenses, before waivers and reimbursements			0.65	(b)
Net investment income (loss), net of waivers and reimbursements			4.96	(b)
Net investment income (loss), before waivers and reimbursements			4.66	(b)


	Year Ended December 31,
		2005(a)

Supplemental data for all classes:
Net assets at end of year (in thousands)		$	51,623
Portfolio turnover rate (%)			88	(b)

(a)

For the period from May 1, 2007 (Commencement of Operations) to June 30, 2007.

(b)

Rates are annualized for periods that are less than a year.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2007

William Blair Funds 49

Trustees and Officers. (Unaudited) The trustees and officers of the William Blair Funds as of June 30, 2007, their year of birth, their principal occupations during the last five years, their affiliations, if any, with William Blair & Company, L.L.C., and other significant affiliations are set forth below. The address of each trustee and officer is 222 West Adams Street, Chicago, Illinois 60606.


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee/Officer
Interested Trustees
Frederick Conrad Fischer, 1934*	Chairman of the Board of Trustees	Since 1987	Principal, William Blair & Company, L.L.C.; Partner, APM Limited Partnership	16	Trustee Emeritus, Chicago Child Care Society, a non-profit organization; Trustee Emeritus, Kalamazoo College

Michelle R. Seitz, 1965*	Trustee	Since 2002	Principal, William Blair & Company, L.L.C.	16	N/A
Non-Interested Trustees

Ann P. McDermott, 1939	Trustee	Since 1996	Board member and officer for various civic and charitable organizations over the past thirty years; professional experience prior thereto, registered representative for New York Stock Exchange firm	16	Northwestern University, Women’s Board; Rush Presbyterian St. Luke’s Medical Center, Women’s Board; University of Chicago, Women’s Board; Visiting Nurses Association, Honorary Director

Phillip O. Peterson, 1944	Trustee	Since 2007	Trustee of Strong Funds Liquidating Trusts since 2005 and President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	16	The Hartford Group of Mutual Funds (87 portfolios)

Donald J. Reaves, 1946	Trustee	Since 2004	Vice President for Administration and Chief Financial Officer, University of Chicago since 2002. Executive Vice President and Chief Financial Officer, Brown University from 1993 to 2002	16	American Student Assistance Corp.; Amica Mutual Insurance Company;, guarantor of student loans

Donald L. Seeley, 1944	Trustee	Since 2003	Director, Applied Investment Management Program, University of Arizona Department of Finance, Formerly Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm	16	Warnaco, Group Inc., intimate apparel, sportswear and swimwear manufacturer; Center for Furniture Craftmanship (not-for-profit)

Thomas J. Skelly, 1951	Trustee	Since 2007	Director and Investment Committee Chairman of the U.S. Accenture Foundation Inc.; formerly Managing Partner of various divisions at Accenture	16	Clayton Holdings, Inc., provider of information-based analytics, consulting and outsourced services to various financial institutions and investors

Robert E. Wood II, 1938	Trustee	Since 1999	Retired Executive Vice President, Morgan Stanley Dean Witter	16	Chairman, Add-Vision, Inc. manufacturer of surface animation systems, and Micro-Combustion, LLC

50 Semi-Annual Report

June 30, 2007


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Other Directorships Held by Trustee/Officer
Officers
Marco Hanig, 1958	President	Since 1999	Principal, William Blair & Company, L.L.C.	Chicago Scores

Karl W. Brewer, 1966	Senior Vice President	Since 2000	Principal, William Blair & Company, L.L.C.	N/A

Harvey H. Bundy, III, 1944	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	N/A

Mark A. Fuller, III, 1957	Senior Vice President	Since 1993	Principal, William Blair & Company, L.L.C.	Partner, Fulsen Howney Partners

James S. Golan, 1961	Senior Vice President	Since 2005	Principal, William Blair & Company, L.L.C.	N/A

W. George Greig, 1952	Senior Vice President	Since 1996	Principal, William Blair & Company, L.L.C.	N/A

Michael A. Jancosek, 1959	Senior Vice President Vice President	Since 2004 2000-2004	Principal, William Blair & Company L.L.C. Associate, William Blair & Company, L.L.C.	N/A

John F. Jostrand, 1954	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A

James S. Kaplan, 1960	Senior Vice President Vice President	Since 2004 1995-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A

Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	Chairman, AG. Med, Inc.

Todd M. McClone, 1968	Senior Vice President Vice President	Since 2006 2005-2006	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A

David S. Mitchell, 1960	Senior Vice President Vice President	Since 2004 2003-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A

Gregory J. Pusinelli, 1958	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A

David P. Ricci, 1958	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A

Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Principal, William Blair & Company, L.L.C.	N/A

June 30, 2007

William Blair Funds 51


Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Other Directorships Held by Trustee/Officer

Christopher T. Vincent, 1956	Senior Vice President Vice President	Since 2004 2002-2004	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Managing Director/Senior Portfolio Manager, Zurich Scudder Investments	Uhlich Children’s Home

Colin J. Williams, 1975	Senior Vice President	Since 2007	Principal, William Blair & Company, L.L.C.; formerly Andersen Consulting and Allegiance Healthcare	N/A

Richard W. Smirl, 1967	Chief Compliance Officer	Since 2004	Principal, William Blair & Company, L.L.C.; former Chief Legal Officer, Strong Capital Management	N/A

Benjamin J. Armstrong, 1965	Vice President	Since 2007	Associate, William Blair & Company, LLC.

David C. Fording, 1967	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former Portfolio Manager, TIAA-CREF	N/A

Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager, US Bancorp Asset Management, and analyst Gabelli Woodland Partners.	N/A

Mark T. Leslie, 1967	Vice President	Since 2005	Associate, William Blair & Company, L.L.C.; former Portfolio Manager, U.S. Bancorp Asset Management	N/A

Terence M. Sullivan, 1944	Vice President and Treasurer	Since 1997	Associate, William Blair & Company, L.L.C.	N/A

Colette M. Garavalia, 1961	Secretary	Since 2000	Associate, William Blair & Company, L.L.C.	N/A

(1)

52 Semi-Annual Report

June 30, 2007

Board Approval of the Fund’s Management Agreement (All Portfolios except the Bond Portfolio)

Information Requested and Received

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Portfolios, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people and has been associated with the Portfolios since their inception. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Portfolios knowing that the Advisor managed the Portfolios and knowing the investment advisory fee. The Board

June 30, 2007

William Blair Funds 53

considered biographical information about each Portfolio’s portfolio manager(s), the administrative services performed by the Advisor, financial information regarding the Advisor, brokerage allocation practices, soft dollars and execution, the compliance regime overseen by the Advisor, and the financial support the Advisor provides to certain Portfolios. The Board also noted that the Advisor voluntarily reduces the advisory fees of the Portfolios by an amount equal to the advisory fee charged by the Ready Reserves Portfolio on the cash of the Portfolios invested in the Ready Reserves Portfolio. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Portfolio were satisfactory.

The Board reviewed information on the performance of each Portfolio for one-year, three-year and since inception periods, as applicable, along with performance information of a relevant securities index or indexes and a peer universe of funds from the Lipper database. For all Portfolios, the Board also reviewed performance information provided by the Advisor of the average of the applicable Morningstar style category for the applicable periods. The performance information showed that the Emerging Markets Growth Portfolio performed satisfactorily relative to its Lipper peer universe, Morningstar style category average and benchmark index over the applicable periods. The Institutional International Growth Portfolio performed satisfactorily relative to its Lipper peer universe and Morningstar style category average, but underperformed relative to its benchmark index over the applicable periods. The International Small Cap Growth Portfolio performed satisfactorily relative to its benchmark index, but underperformed relative to its Lipper peer universe and Morningstar style category average. The Board noted the limited operating history of the International Small Cap Growth Portfolio. The Institutional International Equity Portfolio underperformed relative to its Lipper peer universe, Morningstar style category and benchmark index over the applicable periods, but the Board noted the positive absolute performance of the Portfolio and its limited operating history. Based upon the review of the performance information, the Board concluded that the performance of each Portfolio was acceptable and supported continuation of the Management Agreement for each Portfolio.

Fees and Expenses. The Board reviewed each Portfolio’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper peer group and a Lipper peer universe. The Lipper peer group for each Portfolio consists of a group of funds with a similar investment style and asset size as the Portfolio. The Lipper peer universe for each Portfolio includes all funds with a similar investment style regardless of asset size. The Board considered that the Advisor has proposed to limit total expenses, including waiving advisory fees, if necessary, for the Institutional International Equity Portfolio, the International Small Cap Growth Portfolio and the Emerging Markets Growth Portfolio. For each Portfolio, the Board also reviewed amounts paid to the Advisor by other registered funds, including other Portfolios in the Fund and funds for which the Advisor acts as a subadvisor and the Advisor’s fee schedule for separate accounts. With respect to sub-advised funds and separate accounts, the Board noted that (i) both the mix of services provided and the level of responsibility required under the Management Agreement were greater as compared to the Advisor’s obligations for sub-advised funds and separate accounts; and (ii) management’s representation that the management fees of separate accounts are less relevant to the Board’s consideration of the advisory fee because they reflect significantly different competitive forces than those in the mutual fund marketplace.

In considering the information, the Board noted that the advisory fees for the International Small Cap Growth Portfolio and the Emerging Markets Growth Portfolio were below or within an acceptable range of the average of their peer group and median of their peer universe. The Board noted that the advisory fees for the Institutional International Growth Portfolio and the Institutional International Equity Portfolio were above the average of their peer group and median of their peer universe, but that such advisory fees were within an acceptable range of the peer group and peer universe and consistent with reasonable expectations in light of the nature, quality and extent of services provided by the Advisor. On the basis of the information provided, the Board concluded that each Portfolio’s advisory fee, coupled with any applicable existing or proposed advisory fee waiver and expense cap, was reasonable and appropriate in light of the nature, quality and extent of services provided by the Advisor.

54 Semi-Annual Report

June 30, 2007

managers. In considering whether fee levels reflect economies of scale for the benefit of Portfolio investors, the Board reviewed each Portfolio’s asset size, breakpoints for those Portfolios with breakpoints in the advisory fee schedule, the Portfolio’s total and net expense ratios and the expense caps in place and/or proposed, and concluded that they reasonably reflect appropriate recognition of any economies of scale.

Board Approval of the Bond Portfolio’s Management Agreement

June 30, 2007

William Blair Funds 55

56 Semi-Annual Report

June 30, 2007

Additional Information (unaudited)

Proxy Voting

A description of the policies and procedures that the William Blair Institutional International Growth Fund, the William Blair Institutional International Equity Fund, the William Blair International Small Cap Growth Fund and the William Blair Emerging Markets Growth Fund and the William Blair Bond Fund use to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840), at www.williamblairfunds.com and on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules

June 30, 2007

William Blair Funds 57

Useful Information About Your Report (unaudited)

Please refer to this information when reviewing the Expense Example for each Portfolio.

Expense Example

As a shareholder of a Portfolio, you incur ongoing costs, including management fees and other Portfolio expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Portfolio’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2007 to June 30, 2007.

Actual Expenses

Hypothetical Example for Comparison Purposes

Please note that the expenses shown in both examples are meant to highlight your ongoing costs only and do not reflect any transactional costs or account type fees. These fees are fully described in the prospectus. Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds.

58 Semi-Annual Report

June 30, 2007

Fund Expenses (Unaudited)

The examples below show you the ongoing costs (in dollars) of investing in your fund and allows you to compare these costs with those of other mutual funds. Please refer to previous page for a detailed explanation of the information presented on this chart.


	Beginning Account Value 1/1/2007		Ending Account Value 6/30/2007		Expenses Paid during Period(a)		Annualized Expense Ratio

Institutional International Growth Fund
Actual return	$	1,000.00	$	1,118.60	$	5.36	1.02	%
Hypothetical 5% return		1,000.00		1,019.74		5.11	1.02


Institutional International Equity Fund
Actual return		1,000.00		1,098.10		5.62	1.08
Hypothetical 5% return		1,000.00		1,019.44		5.41	1.08


International Small Cap Growth Fund Institutional Share Class
Actual return		1,000.00		1,145.90		6.12	1.15
Hypothetical 5% return		1,000.00		1,019.09		5.76	1.15


Emerging Markets Growth Fund Institutional Share Class
Actual return		1,000.00		1,167.90		6.72	1.25
Hypothetical 5% return		1,000.00		1,018.60		6.26	1.25


Bond Fund Institutional Share Class
Actual return (since inception period)(b)		1,000.00		988.80		0.58	0.35
Hypothetical 5% return (6 month period)		1,000.00		1,023.06		0.59	0.35

(a)

(b)

For the period May 1, 2007 (Commencement of Operations) until June 30, 2007.

June 30, 2007

William Blair Funds 59

BOARD OF TRUSTEES

Frederick Conrad Fischer, Chairman

Principal, William Blair & Company, L.L.C.

Phillip O. Peterson

Retired Partner, KPMG LLP

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Donald J. Reaves

Vice President for Administration and Chief Financial Officer, University of Chicago

Donald L. Seeley

Adjunct Lecturer and Director, University of Arizona Department of Finance

Thomas J. Skelly

Director and Investment Committee Chairman, U.S. Accenture Foundation Inc.

Michelle R. Seitz

Principal, William Blair & Company, L.L.C.

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Marco Hanig, President

Karl W. Brewer, Senior Vice President

Harvey H. Bundy III, Senior Vice President

Mark A. Fuller, III, Senior Vice President

James S. Golan, Senior Vice President

W. George Greig, Senior Vice President

Michael A. Jancosek, Senior Vice President

John F. Jostrand, Senior Vice President

James S. Kaplan, Senior Vice President

Robert C. Lanphier, IV, Senior Vice President

Todd M. McClone, Senior Vice President

David S. Mitchell, Senior Vice President

Gregory J. Pusinelli, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Colin J. Williams, Senior Vice President

Richard W. Smirl, Chief Compliance Officer

Benjamin J. Armstrong, Vice President

David C. Fording, Vice President

Chad M. Kilmer, Vice President

Mark T. Leslie, Vice President

Terence M. Sullivan, Vice President and Treasurer

Colette M. Garavalia, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Legal Counsel

Vedder, Price, Kaufman & Kammholz, P.C.

Transfer Agent

State Street Bank and Trust Company

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

60 Semi-Annual Report

June 30, 2007

LOGO

WILLIAM BLAIR FUNDS

Institutional International Growth Fund

Institutional International Equity Fund

International Small Cap Growth Fund Institutional Share Class

Emerging Markets Growth Fund Institutional Share Class

Bond Fund

Institutional Share Class

222 West Adams Street Chi cago, Illinois 60606 800. 74 2. 7 272 www. wi l liamblairfunds.com

Wil iam Blair & Company, L.L.C., Distributors

Item 2.

Code of Ethics

Not applicable to this filing.

Item 3.

Audit Committee Financial Expert

Not applicable to this filing.

Item 4.

Principal Accountant Fees and Services

Not applicable to this filing.

Item 5.

Audit Committee of Listed Registrants

Not Applicable to this Registrant, insofar as the Registrant is not a listed company.

Item 6.

Schedule of Investments

See Schedule of Investments in Item 1

Item 7.

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 8.

Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 9.

Purchase of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

Not applicable to this Registrant, insofar as 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 Trustees since the Registrant last provided disclosure in response to this item.

Item 11.

Controls and Procedures

(a) The Registrant’s principal executive and principal financial officer, or persons performing similar functions, have concluded that the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3 (b) under the 1940 Act (17 CFR 270.30a-3(b) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12.

Exhibits

12. (a) (1) Code of Ethics

Not applicable because it is posted in the Registrant’s website.

12. (a) (2) (1)

Certification of Principal Executive Officer Required by Rule 30a-2(a) of the Investment Company Act

12. (a) (2) (2)

Certification of Principal Financial Officer Required by Rule 30a-2(a) of the Investment Company Act.

12. (a) (3)

Not applicable to this Registrant.

12. (b)

Certification of Chief Executive Officer and Certification of Chief Financial Officer Required by Rule 30a-2(b) of the Investment Company Act

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.


		William Blair Funds

		/s/ Michelle R. Steitz
By:		Michelle R. Steitz
		President (Chief Executive Officer)

Date: August 24, 2007

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


		/s/ Michelle R. Steitz

By:

Michelle R. Steitz

President

(Chief Executive Officer)

Date: August 24, 2007


		/s/ Terence M. Sullivan

By:

Terence M. Sullivan

Treasurer

(Chief Financial Officer)

Date: August 24, 2007

William Blair Growth N (WBGSX) N-CSRSCertified semi-annual shareholder report (management investment company)