William Blair Funds NCSR Certified 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: December 31, 2010

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.

December 31, 2010 Annual Reports transmitted to shareholders.

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ANNUAL REPORT

DECEMBER 31, 2010

Table of Contents



Growth Fund
An Overview from the Portfolio Managers			4
Portfolio of Investments			8

Large Cap Growth Fund
An Overview from the Portfolio Managers			9
Portfolio of Investments			12

Small Cap Growth Fund
An Overview from the Portfolio Managers			13
Portfolio of Investments			18

Mid Cap Growth Fund
An Overview from the Portfolio Managers			20
Portfolio of Investments			25

Small-Mid Cap Growth Fund
An Overview from the Portfolio Managers			26
Portfolio of Investments			31

Global Markets Overview			32

Global Growth Fund
An Overview from the Portfolio Managers			34
Portfolio of Investments			36

International Growth Fund
An Overview from the Portfolio Manager			39
Portfolio of Investments			42

International Equity Fund
An Overview from the Portfolio Manager			47
Portfolio of Investments			50

International Small Cap Growth Fund
An Overview from the Portfolio Manager			53
Portfolio of Investments			55

Emerging Markets Growth Fund
An Overview from the Portfolio Managers			58
Portfolio of Investments			60

Emerging Leaders Growth Fund
An Overview from the Portfolio Managers			63
Portfolio of Investments			65

Small Cap Value Fund
An Overview from the Portfolio Managers			67
Portfolio of Investments			70

Mid Cap Value Fund
An Overview from the Portfolio Managers			72
Portfolio of Investments			75

Fixed-Income Overview			76

Bond Fund
An Overview from the Portfolio Managers			78
Portfolio of Investments			81

Income Fund
An Overview from the Portfolio Manager			84
Portfolio of Investments			86

Low Duration Fund
An Overview from the Portfolio Managers			89
Portfolio of Investments			91

Ready Reserves Fund
An Overview from the Portfolio Managers			94
Portfolio of Investments			96

Financial Statements			98

Notes to Financial Statements			113

Financial Highlights			130

Report of Independent Registered Public Accounting Firm			147

Board of Trustees and Officers			148

Fund Expenses			153

The views expressed in the commentary for each Fund reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The portfolio management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Statements involving predictions, assessments, analyses, or outlook for individual securities, industries, market sectors, and/or markets involve risks and uncertainties, and there is no guarantee they will come to pass.

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.

December 31, 2010

William Blair Funds 1

PERFORMANCE AS OF DECEMBER 31, 2010—CLASS N SHARES (unaudited)


	1 Yr.		3 Yr.			5 Yr.		10 Yr (or since inception)			Inception Date		Overall Morningstar Rating
Growth Fund
Class N		14.05		(0.38	)		4.69		1.62			3/20/1946		«««« Among 1,504 Large Growth Funds
Morningstar Large Growth		15.53		(2.34	)		2.77		0.30
Russell 3000^® Growth		17.64		(0.26	)		3.88		0.30
Standard & Poor’s 500		15.06		(2.86	)		2.29		1.41

Large Cap Growth Fund
Class N		15.91		(1.71	)		1.99		(1.67	)		12/27/1999		««« Among 1,504 Large Growth Funds
Morningstar Large Growth		15.53		(2.34	)		2.77		0.30
Russell 1000^® Growth		16.71		(0.47	)		3.75		0.02

Small Cap Growth Fund
Class N		16.16		1.53			3.17		9.77			12/27/1999		««« Among 670 Small Growth Funds
Morningstar Small Growth		26.98		0.47			4.24		3.88
Russell 2000^® Growth		29.09		2.18			5.30		3.78
Russell 2000^®		26.85		2.22			4.47		6.33

Mid Cap Growth Fund
Class N		24.01		3.27			—		5.82			2/1/2006		«««« Among 677 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		24.61		(0.48	)		—		—
Russell MidCap^® Growth		26.38		0.97			—		3.70

Small-Mid Cap Growth Fund
Class N		22.76		3.21			6.26		7.79			12/29/2003		«««« Among 677 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		24.61		(0.48	)		4.58		—
Russell 2500™ Growth		28.86		2.21			5.63		7.10

Global Growth Fund
Class N		20.52		(5.09	)		—		(5.09	)		10/15/2007		«« Among 628 World Stock Funds
Morningstar World Stock		13.74		(3.94	)		—		—
MSCI All Country World IMI (net)		14.35		(3.48	)		—		(4.59	)

International Growth Fund
Class N		20.09		(6.61	)		3.44		5.92			10/1/1992		«««« Among 209 Foreign Large Growth Funds
Morningstar Foreign Large Growth		14.78		(5.38	)		4.14		4.05
MSCI All Country World Ex-U.S. IMI (net)		12.73		(4.38	)		5.14		6.24

International Equity Fund
Class N		10.92		(8.97	)		1.26		4.87			5/24/2004		«« Among 209 Foreign Large Growth Funds
Morningstar Foreign Large Growth		14.78		(5.38	)		4.14		—
MSCI All Country World Ex-U.S. IMI (net)		12.73		(4.38	)		5.14		9.72

International Small Cap Growth Fund
Class N		25.88		(1.60	)		5.33		7.41			11/1/2005		««« Among 118 Foreign Small/Mid Growth Funds
Morningstar Foreign Small/Mid Growth		23.04		(2.88	)		5.60		—
MSCI All Country World Ex-U.S. Small Cap (net)		25.21		0.50			7.36		9.11

Emerging Markets Growth Fund
Class N		23.44		(6.33	)		9.31		15.43			6/6/2005		«« Among 273 Diversified Emerging Markets Funds
Morningstar Diversified Emerging Markets		19.26		(2.11	)		11.01		—
MSCI Emerging Markets IMI (net)		19.90		0.35			13.23		16.84

Please see the next page for important disclosure information.

2 Annual Report

December 31, 2010

PERFORMANCE AS OF DECEMBER 31, 2010—CLASS N SHARES—CONTINUED (unaudited)


	1 Yr.		3 Yr.		5 Yr.		10 Yr (or since inception)		Inception Date		Overall Morningstar Rating
Emerging Leaders Growth Fund
Class N		—		—		—		18.43		5/3/2010		Not rated.
MSCI Emerging Markets Large Cap Index (net)		—		—		—		15.64				Not rated.

Small Cap Value Fund
Class N		30.94		7.02		7.11		8.77		12/23/1996		«««« Among 307 Small Value Funds
Morningstar Small Value		26.17		3.92		4.22		9.40
Russell 2000^® Value		24.50		2.19		3.52		8.42

Mid Cap Value Fund
Class N		—		—		—		8.36		5/3/2010		Not rated.
Russell Midcap^® Value		—		—		—		7.16				Not rated.

Bond Fund
Class N		7.86		6.80		—		6.48		5/1/2007		«««« Among 1,026 Intermediate-Term Bond Funds
Morningstar Intermediate-Term Bond		7.72		5.49		—		—
Barclays Capital U.S. Aggregate Bond Index		6.54		5.90		—		6.14

Income Fund
Class N		6.04		4.36		3.67		4.13		10/1/1990		«« Among 1,026 Intermediate-Term Bond Funds
Morningstar Short-term Bond		7.72		5.49		5.15		5.37
Barclays Capital Intermediate Govt./Credit Bond Index		5.89		5.40		5.53		5.51

Low Duration Fund
Class N		1.86		—		—		1.15		12/1/2009		Not rated.
Morningstar Short-term Bond		4.11		—		—		—
Merrill Lynch 1-Year U.S. Treasury Note Index		0.83		—		—		0.62

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 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, William Blair & Co. (the “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 may become more volatile. Class N shares are available to the general public without a sales load.

Morningstar Ratings^TM are as of 12/31/2010 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 ««««/««««/««««, and Large Cap Growth Fund «««/«««/««, out of 1,504/1,286/787 large growth funds; Small Cap Growth Fund «««/««/««««, out of 670/563/341 small growth funds; Mid Cap Growth Fund ««««/NA/NA and Small-Mid Cap Growth Fund ««««/««««/NA out of 677/594/NA mid cap growth funds; Small Cap Value Fund ««««/««««/««« out of 307/241/135 small value funds; International Growth Fund ««««/«««/«««« and International Equity Fund ««/««/NA out of 209/162/89 foreign large growth funds; International Small Cap Growth Fund «««/«««/NA out of 118/97/NA foreign small/mid growth funds; Emerging Markets Growth Fund ««/««/NA out of 273/207/NA diversified emerging markets growth funds; Income Fund ««/««/« and Bond Fund ««««/NA/NA out of 1,026/878/560 intermediate-term bond funds; Global Growth Fund ««/NA/NA out of 628/NA/NA world stocks.

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.

December 31, 2010

William Blair Funds 3

LOGO

David C. Fording

LOGO

John F. Jostrand

GROWTH FUND

The Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Growth Fund increased 14.05% on a total return basis (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Russell 3000^® Growth Index, gained 17.64%.

While the Fund’s absolute return was strong, it lagged its benchmark, the Russell 3000^® Growth Index, which returned 17.64%. While we are disappointed with these near-term results, the Fund has a strong performance record over the long-term; for the past five years, it returned 4.69% in comparison to the benchmark at 3.88%.

Several factors impacted the Fund’s performance in 2010. First, from a market perspective, macroeconomic forces dominated the psychology of the stock market throughout the year, leading to high stock correlations, making it more challenging for active managers. The pronounced shifts in sentiment, from macroeconomic forces, resulted in relatively high volatility, especially in the first half. More specifically through April, the equity market responded positively to continued signs of a U.S. economic recovery and stronger than expected corporate earnings reports on improved sales growth rather than expense control alone, which had been a big driver of 2009 earnings surprises. Beginning in late April, this trend reversed as equity markets sharply corrected given concerns over the sustainability of economic growth, European sovereign debt, and the possibility of a “double dip” recession. Since summer, while volatility has continued, the market’s direction was up on better-than-expected company earnings, positive economic reports, another round of quantitative easing, and extension of the Bush-era tax cuts. As a general theme, investors sought high confidence stocks with clear earnings visibility, and bid up past winners; this phenomenon was clearly displayed with select mid-cap Technology stocks, which had a powerful move. However, as we have discussed in the past, the Fund’s returns are primarily generated by stock selection. While there were headwinds due to macroeconomic drivers, volatility and momentum stocks, our main challenge was stock selection and cash drag (on average we held 3.0% cash).

The Fund’s weakest single stock was Baxter International Inc., a leading global diversified manufacturer of hospital supplies and medical equipment. We had a sizable position in this more defensive company, and it declined unexpectedly in the second quarter on a competitive pricing issue. As a result, it was sold from the portfolio. Also, in Health Care, CareFusion Corporation, a medical technology company, was challenged due to the unexpected departure announcements of senior executives as well a lower than expected revenues predominantly due to weakness in their respiratory franchise. We eliminated the stock due to management turnover which may cause a potential change in the strategy of the company. Lastly, our Consumer Discretionary positioning was a detractor. Strong results from Johnson Controls, Inc., P.F. Chang’s China Bistro, Inc., and Dick’s Sporting Goods, Inc. could not overcome losses from our positions in for-profit education stocks, DeVry, Inc. and Capella Education Co. These stocks did well in the first quarter, and we cut back our positions in the first half of the year. However, in the third quarter, there were unanticipated regulatory and legislative announcements; that caused uncertainty around future growth rates and profitability, causing both stocks to decline significantly. Heading into the fourth quarter, we believed that these issues were reflected in the stock prices. However, Capella Education’s stock price dropped further on lower enrollment growth that resulted from increased competition for its master’s programs, and some new pressure on education degrees given job prospects for teachers. As a result, we sold the stock in November. We continue to own DeVry, which we believe has attractive academic programs, provides a good value to students, and addresses significant education and training needs in the U.S. workforce. There should be clarity on the regulatory and legislative issues in the coming quarters.

4 Annual Report

December 31, 2010

The highest contributor to relative returns for the year was IHS, Inc., the leading global provider of critical technical information primarily to the energy industry; this Industrial firm benefited from accelerating subscription-based organic growth. In our view, the company should continue to see attractive earnings due to further cost rationalization, improved infrastructure with a common technology platform, as well as strategic acquisitions. Another strong performer in Industrials was TransDigm Group, Inc.—an aerospace and defense company. Its business benefited from the improving economy and increased airline miles flown; we expect this trend to continue. In Information Technology, we also had several stocks that stood out. McAfee, Inc., a provider of security software, rallied after it announced its acquisition by Intel. As a result of the acquisition, we sold this stock from the portfolio. Ultimate Software Group, Inc., the leading provider of on-demand payroll and human resources solutions, gained ground on continued momentum in both its Enterprise and Workplace divisions with new customer subscriptions, and add-on products. We expect this firm to continue to see attractive growth, high customer retention, and market share gains. Notably, we were underweight Information Technology for a good portion of the year due to rich earnings multiples, and high expectations for many stocks. Over the past several months, we have found several new opportunities in this sector. In order to fund these positions, in general, our Industrials exposure has come down; it remains an over-weighted sector as it has been all year, but to a lesser degree relative to the benchmark. We have reduced existing positions that have done well and eliminated others with less attractive risk/rewards, in our view.

Looking into 2011, we believe the U.S. economy will likely experience healthy growth as a result of a stabilized and improving macroeconomic environment. The Federal Reserve remains very accommodative with interest rates at all time lows and additional quantitative easing. This stance should assist asset prices, businesses, and ultimately, wages. Also, there is more certainty on high profile government-related issues; for example, the election results are complete with “balanced government” returning to Washington, tax cuts have been extended, and the health care and financial reform bills passed. All of these factors combined should give investors greater comfort with the sustainability of the U.S. economic recovery and the potential for continued economic expansion in 2011.

Despite the positive outlook for 2011, many risks to economic growth remain. The U.S. and other developed countries have significant (and growing) debt levels, European sovereign debt issues could resurface especially in Portugal, Ireland, Greece and Spain, and any plans for fiscal austerity may temper growth. Also, the U.S. consumer, while showing signs of life via increased spending in the second half of 2010, is likely to remain susceptible to swings in confidence until job growth returns in earnest or housing prices stabilize. With the potential for a large volume of foreclosed homes coming back onto the market in the first half of 2011, house prices in the U.S. could face further downward pressure. Any of these issues may flare up from time-to-time in 2011, and have the potential to create volatility, increase stock correlations (macroeconomic effects) in equity markets, and impact economic growth. However, as economic stability persists and the risks are better understood, the impact of any one issue should be less pronounced.

As we have discussed in the past, one of the bright spots remains the growth of emerging market countries especially China. Despite the effects of interest rate tightening to stem inflation, we believe China’s economic growth should continue to be attractive and a driving force along with other emerging countries behind the global economy. We will seek to take advantage of this growth through our investments in large, multinational companies in the portfolio. Another area of strength is U.S. corporations where strong, cash rich balance sheets remain. Capital spending cutbacks in recent years are unsustainable going forward in our view. We believe companies will increase their capital investments, dividend payouts, stock buybacks, and/or pursue acquisitions in 2011. We have begun to see corporations become more active recently (increasing employees and capital expenditures) due to improvements in order backlogs, increased consumer spending, and more clarity on the aforementioned legislative and regulatory issues.

December 31, 2010

William Blair Funds 5

Going forward, given the broadening recovery, we believe macroeconomic influences will subside at the margin though inflation and rising interest rates are clear wildcards. This possibility, in combination with our expectations for a more stable growth backdrop, should favor stock pickers and our quality growth philosophy. As always, our focus will be on deep fundamental investment research in order to identify durable business franchises that can leverage their competitive advantages to sustain growth leadership in their respective industries. We feel confident the Fund is well positioned in quality firms that, in our view, can deliver on earnings growth expectations in any market environment.

6 Annual Report

December 31, 2010

Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		14.05	%		(0.38	)%		4.69	%		1.62	%
Class I		14.36			(0.05	)		5.02			1.91
Russell 3000^® Growth Index		17.64			(0.26	)		3.88			0.30
S&P 500 Index		15.06			(2.86	)		2.29			1.41

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 December 31, 2010. 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)

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The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 7

Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares			Value

*Common Stocks*
Information Technology—28.7%
*Apple, Inc.		77,685		$	25,058
*Atheros Communications, Inc.		225,000			8,082
*Citrix Systems, Inc.		41,800			2,860
*Dolby Laboratories, Inc. Class “A”		78,800	��		5,256
*FLIR Systems, Inc.		426,353			12,684
*Genpact, Ltd.†		346,600			5,268
*Google, Inc. Class “A”		29,405			17,466
Microsoft Corporation		799,900			22,333
*Monolithic Power Systems, Inc.		406,400			6,714
QUALCOMM, Inc.		228,640			11,315
*Silicon Laboratories, Inc.		278,640			12,823
Solera Holdings, Inc.		136,000			6,979
*Trimble Navigation, Ltd.		258,300			10,314
*Ultimate Software Group, Inc.		191,650			9,320
VeriSign, Inc.		268,900			8,785

					165,257

Industrials—13.6%
Fastenal Co.		144,929			8,683
Flowserve Corporation		57,700			6,879
Goodrich Corporation		82,900			7,301
*IHS, Inc. Class “A”		132,420			10,645
*Jacobs Engineering Group, Inc.		258,400			11,847
Manpower, Inc.		140,000			8,786
The Corporate Executive Board Co.		280,639			10,538
*TransDigm Group, Inc.		127,980			9,216
*Trimas Corporation		207,709			4,250

					78,145

Consumer Discretionary—13.4%
DeVry, Inc.		141,048			6,768
*Dick’s Sporting Goods, Inc.		206,400			7,740
Johnson Controls, Inc.		290,000			11,078
*K12, Inc.		202,388			5,801
McDonald’s Corporation		266,964			20,492
*Tempur-Pedic International, Inc.		222,800			8,925
*Urban Outfitters, Inc.		123,700			4,430
*Valassis Communications, Inc.		375,500			12,148

					77,382

Health Care—12.9%
*Align Technology, Inc.		236,800			4,627
Allergan, Inc.		135,100			9,277
*Celgene Corporation		190,180			11,247
*Cerner Corporation		71,500			6,774
*Gilead Sciences, Inc.		185,335			6,717
*Haemonetics Corporation		102,300			6,463
*IDEXX Laboratories, Inc.		113,330			7,845
*Illumina, Inc.		129,600			8,209
*MedAssets, Inc.		348,682			7,040
*NxStage Medical, Inc.		236,172			5,876

					74,075

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Energy—8.7%
Apache Corporation		93,665	$	11,168
*Cameron International Corporation		163,547		8,297
Occidental Petroleum Corporation		117,900		11,566
Schlumberger, Ltd.†		144,900		12,099
*Weatherford International, Ltd.†		298,700		6,810

				49,940

Consumer Staples—5.1%
*Green Mountain Coffee Roasters, Inc.		218,700		7,187
PepsiCo, Inc.		340,400		22,238

				29,425

Materials—3.8%
Ecolab, Inc.		222,820		11,234
Praxair, Inc.		74,365		7,100
*Stillwater Mining Co.		170,200		3,634

				21,968

Financials—3.6%
Greenhill & Co., Inc.		91,600		7,482
*IntercontinentalExchange, Inc.		69,400		8,269
The Charles Schwab Corporation		292,175		4,999

				20,750

Total Common Stocks—89.8% (cost $415,427)				516,942


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/10, repurchase price $6,302, collateralized by FNMA, 1.050%, due 10/22/13	$	6,302		6,302

Total Repurchase Agreement—1.1% (cost $6,302)				6,302

Total Investments—90.9% (cost $421,729)				523,244
Cash and other assets, less liabilities—9.1%				52,369

Net assets—100.0%			$	575,613

See accompanying Notes to Financial Statements.

8 Annual Report

December 31, 2010

LOGO

James S. Golan

LOGO

Tracy McCormick

LARGE CAP GROWTH FUND

The Large Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Large Cap Growth Fund increased 15.91% on a total return basis (Class N Shares) for the year ended December 31, 2010. By comparison, the Fund’s benchmark, the Russell 1000^® Growth Index, increased 16.71%.

Our quality growth portfolio of stocks kept up well, but trailed the robust performing market.

Several headwinds impacted the Fund’s performance in 2010. First, from a market perspective, macroeconomic forces dominated the psychology of the stock market throughout the year, leading to high stock correlations, making it more challenging for active managers. The pronounced shifts in sentiment resulted in relatively high volatility, especially in the first half. More specifically through April, the equity market responded positively to continued signs of a U.S. economic recovery and stronger than expected corporate earnings reports on improved sales growth rather than expense control alone, which had been a big driver of 2009 earnings surprises. Beginning in late April, this trend reversed as equity markets sharply corrected given concerns over the sustainability of economic growth, European sovereign debt, and the possibility of a “double dip” recession. Since summer, while volatility has continued, the market’s direction was up on better-than-expected company earnings, positive economic reports, another round of quantitative easing, and extension of the Bush-era tax cuts. As a result of uncertainty throughout the year and as a general theme, investors sought high confidence stocks with clear earnings visibility, and bid up past winners; this phenomenon was clearly displayed with select mid-cap Technology stocks, which had a powerful move. Furthermore, smaller-cap stocks continued their dominance in 2010 much like the previous year; small-cap stocks rose 29.09% while mid-cap stocks gained 26.38% as measured by the Russell 2000^® Growth Index and Russell Mid Cap^® Growth Index, respectively. Importantly, stock correlations subsided in the fourth quarter, which assisted stock pickers as company fundamentals mattered more than macro events. As a result, the Fund had a powerful fourth quarter return, and many of the stocks we held throughout the year were rewarded. However, these results could not overcome the relative weakness from earlier in the year. The Fund’s fourth quarter results were 13.88%; the Russell 1000^® Growth returned 11.83%.

Our weakest single stock was Baxter International, Inc., where we had a sizable position in this more defensive company. It declined unexpectedly in the second quarter on a competitive pricing issue; we sold the position in May. Sectors that lagged for the year were Financials and Materials. Our Financial stock selection was weak due to CME Group, Inc., the largest futures exchange group in the U.S., as well as Invesco, Ltd., an investment manager. CME Group’s stock declined due to lower trading volumes in their interest rate futures business; we believe they should benefit from a pick-up in interest rate volatility and trading volume gains in other areas such as agriculture and energy. Invesco was sold from the portfolio in June on concerns about the Van Kampen acquisition and a weak net flow environment. In Materials, we had little exposure to more cyclical stocks such as those in Metals & Mining, which rallied in the second half of the year.

Our Industrials holdings were standouts in 2010. Our best overall portfolio contributor was Rockwell Automation, a leading global provider of industrial solutions. It benefited from a recovering economy and the original equipment manufacturers looking to reduce costs and enhance productivity. Another solid performer was W.W. Grainger, Inc., the largest wholesale supplier of facilities maintenance supplies and information in North America. It gained ground on strong revenues and operating margins. In our view, the company continues

December 31, 2010

William Blair Funds 9

to execute well and should benefit from further economic recovery, expansion of products offered and efficiency programs. In general, our Industrial exposure was overweight relative to the benchmark for the year, which assisted results as it was one of the better performing sectors. Secondarily, our exposure to select Information Technology stocks was helpful as well. McAfee, Inc., a provider of security software, rallied after it announced its acquisition by Intel Corporation. As a result of the acquisition, this stock was sold from the portfolio. Broadcom Corporation also positively impacted results. Its stock price climbed on continued strength in its mobile and wireless segment as well as modest growth in the broadband and networking segments. We believe its earnings growth should be driven by continued market share gains and fiscal discipline. Notably, during the year, we reduced Information Technology names to below benchmark weight taking profits in stocks that had done well and exiting those where we felt there were better opportunities elsewhere. More recently, we have added several new companies with strong business models and sustainable earnings growth in our view. A few examples are Citrix Systems, Inc., Dolby Laboratories, Inc., and Trimble Navigation, Ltd.

As we have discussed in the past, one of the bright spots in the global economy remains the growth of emerging market countries especially China. Despite the effects of interest rate tightening to stem inflation, we believe China’s economic growth should continue to be attractive and a driving force along with other emerging countries behind the global economy. We will seek to take advantage of this growth through our investments in large, multinational companies in the portfolio. Another area of strength is U.S. corporations where strong, cash rich balance sheets remain. Capital spending cutbacks in recent years are unsustainable going forward in our view. We believe companies will increase their capital investments, dividend payouts, stock buybacks, and/or pursue acquisitions in 2011. We have begun to see corporations become more active recently (increasing employees and capital expenditures) due to improvements in order backlogs, increased consumer spending, and more clarity on legislative and regulatory issues.

10 Annual Report

December 31, 2010

Large Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		15.91	%		(1.71	)%		1.99	%		(1.67	)%
Class I		16.03			(1.44	)		2.21			(1.45	)
Russell 1000^® Growth Index		16.71			(0.47	)		3.75			0.02

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 long-term securities.

December 31, 2010

William Blair Funds 11

Large Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Information Technology—27.7%
*Apple, Inc.		5,295	$	1,708
Broadcom Corporation Class “A”		12,550		547
*Citrix Systems, Inc.		8,850		606
*Dolby Laboratories, Inc. Class “A”		5,750		384
*eBay, Inc.		34,750		967
*EMC Corporation		23,500		538
*Google, Inc. Class “A”		2,238		1,329
Microsoft Corporation		46,935		1,310
QUALCOMM, Inc.		21,115		1,045
*Trimble Navigation, Ltd.		11,450		457

				8,891

Industrials—18.6%
CH Robinson Worldwide, Inc.		4,400		353
Danaher Corporation		12,744		601
Goodrich Corporation		7,400		652
*Jacobs Engineering Group, Inc.		7,400		339
Manpower, Inc.		9,900		621
Rockwell Automation, Inc.		11,050		792
Roper Industries, Inc.		4,500		344
*Stericycle, Inc.		8,100		656
United Parcel Service, Inc. Class “B”		12,470		905
W.W. Grainger, Inc.		4,980		688

				5,951

Consumer Discretionary—14.3%
*Discovery Communications, Inc.		15,500		647
Johnson Controls, Inc.		23,700		905
McDonald’s Corporation		8,335		640
NIKE, Inc. Class “B”		7,250		619
*O’Reilly Automotive, Inc.		8,980		543
Scripps Networks Interactive, Inc. Class “A”		9,085		470
Yum! Brands, Inc.		15,500		760

				4,584

Energy—12.2%
Apache Corporation		6,215		741
National Oilwell Varco, Inc.		10,150		683
Occidental Petroleum Corporation		10,850		1,064
Schlumberger, Ltd.†		16,930		1,414

				3,902

Health Care—10.6%
*Agilent Technologies, Inc.		27,000		1,119
Allergan, Inc.		6,865		471
*Celgene Corporation		11,240		665
Covidien plc†		12,250		559
*Illumina, Inc.		9,000		570

				3,384

Financials—7.2%
American Express Co.		18,300		785
Ameriprise Financial, Inc.		13,250		763

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Financials—(continued)
CME Group, Inc.		2,400	$	772

				2,320

Consumer Staples—5.1%
Mead Johnson Nutrition Co.		11,700		728
PepsiCo, Inc.		13,750		898

				1,626

Materials—2.6%
Praxair, Inc.		8,725		833

Total Common Stocks—98.3% (cost $23,564)				31,491


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $375, collateralized by FHLMC, 0.172%, due 6/20/11	$	375		375

Total Repurchase Agreement—1.2% (cost $375)				375

Total Investments—99.5% (cost $23,939)				31,866
Cash and other assets, less liabilities—0.5%				169

Net assets—100.0%			$	32,035

See accompanying Notes to Financial Statements.

12 Annual Report

December 31, 2010

LOGO

Michael P. Balkin

LOGO

Karl W. Brewer

SMALL CAP GROWTH FUND

The Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small Cap Growth Fund increased 16.16% on a total return basis (Class N shares) for the year ended December 31, 2010. By comparison the Fund’s benchmark, the Russell 2000^® Growth Index, gained 29.09%.

The year started off as a continuation of 2009 with better-than-expected corporate earnings propelling stocks higher. Then, during the second quarter, European sovereign debt concerns and fears of a double-dip recession in the U.S. caused a steep mid-year correction. The selloff was short lived, however, as in late August the Federal Reserve signaled a second round of quantitative easing to help keep interest rates low and promote a more sustainable economic recovery. Improved investor sentiment was supported in part by stronger-than-expected retail sales that persisted into the holiday shopping season, U.S. industrial production data that proved better than many had expected at mid-year, and a more pro-business environment in Washington D.C. that emerged after the November elections. Strong growth in the emerging markets economies also boosted confidence in the reality of a global economic recovery.

From a sector perspective within the Russell 2000^® Growth Index, Energy (+43.91%) and Information Technology (+36.54%) were the best performing sectors, with Consumer Discretionary (+32.22%), Industrials (+29.73%) and Materials (+33.47%) turning in impressive results for the year as well. Financials (+22.18%) and Consumer Staples (+23.50%) underperformed the broader small cap market, while Health Care (+16.78%) was the weakest sector during the year.

The Fund’s underperformance for 2010 was driven by style headwinds, industry factors and primarily stock selection. Although the Fund performed well in the first few months of the year and it stabilized in the last two months of the year, the five-month period from June through October witnessed dramatic underperformance. First of all, style headwinds—specifically both our contrarian bias and our smaller market cap bias—were most pronounced during this five-month period. The market favored momentum-oriented stocks and larger cap stocks during this period and our typical biases against these factors contributed to the underperformance. Second, although individual stock picks dictate our sector and industry weights, the Fund’s exposure to certain industries during 2010 detracted from performance. Real Estate Management & Development within Financials and Health Care Equipment & Supplies within Health Care were two such examples. Finally, negative stock selection was the primary contributor to the underperformance in 2010. The largest detractors from relative return came from the Consumer Discretionary and Information Technology sectors, while Telecommunication stock selection was a modest contributor.

During the fourth quarter specifically, the Fund’s underperformance can be explained by stock selection and industry factors. All of the quarter’s underperformance took place in October, with an improvement in November and December. Overweights to Health Care Equipment & Supplies and Diversified Consumer Services detracted during the quarter. From a stock selection perspective, certain holdings in Consumer Discretionary pulled down relative results while stock selection in Industrials, Information Technology and Materials partially offset the negative dynamics.

Detractors from return

Cenveo, Inc. (CVO) is a diversified printing company. The company’s portfolio of products include forms and labels manufacturing, packaging and publisher offerings, envelope

December 31, 2010

William Blair Funds 13

production and commercial printing. Reason for underperformance: Irrational pricing by a weakened competitor in the envelopes business greatly impacted industry pricing, thereby reducing Cenveo’s revenues and earnings in the intermediate term. In addition, despite more recent signs of a recovery in the commercial printing industry, the industry has been weaker than expected coming out of the recession. Action: We maintain our position in the stock for a few reasons. First, the company announced an acquisition of MeadWestvaco’s envelopes business which should strengthen Cenveo’s leadership position in the industry. Second, the company announced an acquisition of a higher growth, niche, specialty packaging company which should complement Cenveo’s other higher growth, niche, specialty printing businesses. Third, new ownership of the weakened competitor discussed above has instituted more rational pricing and is reducing industry capacity aggressively. Finally, the valuation on the stock remains unjustifiably low.

Healthways, Inc. (HWAY) is a healthcare services firm that provides disease management solutions. The company’s services are implemented by managed care companies, governments, employers and hospitals in order to reduce both short- and long-term healthcare costs within their patient populations. Reason for underperformance: Lackluster employment data hurt investor sentiment as Healthways’ business model benefits as the employed base increases. In addition, new business decisions at prospective corporate clients have been lengthened given the uncertain economic environment. Finally, the healthcare reform bill has instilled further uncertainty given its potential impact on managed care, Healthways’ primary customer base. Action: We sold our position given these multiple headwinds and the lack of visibility into the company’s earnings over the intermediate term.

Princeton Review, Inc. (REVU) provides test preparation courses, tutoring services and various career-focused degree and vocational programs. Reason for underperformance: The sluggish economy reduced demand for the company’s core test preparation business. In general, some consumers decided not to take a test preparation course while others traded down from a longer (and more expensive) course to a shorter, more affordable one. In addition, the company expanded its balance sheet in 2009 to make an acquisition. This additional debt combined with slowing business dynamics caused a reduction in earnings throughout the year. Action: We continue to own a position in the stock as we believe Princeton Review is a leader in test preparation and tutoring services and earnings growth will reaccelerate once the macroeconomic backdrop improves. As well, we believe there is a good growth opportunity in its nascent career education partnerships with the National Labor College and several community colleges.

SurModics, Inc. (SRDX) provides surface modification and drug delivery technologies to the healthcare industry. The company develops relationships with many of the large medical device and pharmaceutical companies in order to create additional uses for its proprietary technologies. Reason for underperformance: Lackluster revenues and earnings which exacerbated ongoing investor concern that the company has not signed up another major partner to utilize its intellectual property. Action: We liquidated our position given the deterioration in fundamentals and lack of catalysts for meaningful reacceleration in its businesses.

VistaPrint N.V. (VPRT) is a worldwide provider of marketing and printing services to small business and home office customers via the internet. The company’s products include business cards, brochures, invitations, websites, and various types of marketing material. Reason for underperformance: Disappointing revenues announced in July raised concern among investors regarding long-term growth opportunities, especially given sub-par results from a then-recent television advertising campaign. Action: We sold our position given the uncertainty around customer acquisition costs and therefore the volatility of the company’s return on marketing investments.

Contributors to return

Air Methods Corporation (AIRM) is a leader in medical air transport. The company contracts with both hospitals and communities for emergency and non-emergency transport. Reason for

14 Annual Report

December 31, 2010

outperformance: Company fundamentals accelerated throughout 2010 in part due to growth in flight volumes, strong pricing and lower maintenance expense for its aircraft. Management also announced multiple price increases during the year with plans to continue regular increases in 2011. Action: We have trimmed our position on strength over the second half of 2010. However, we continue to own the stock as we believe the company’s pricing power is underappreciated and that future outsourcing of medical air transport by hospitals will increase in part due to implications of the health care reform bill.

MDC Partners, Inc. (MDCA), through its subsidiaries, provides marketing communications and consulting services primarily in the U.S., Canada, and Europe. Reason for outperformance: The company has strong business momentum from existing clients and new business wins alike, in part due to a general rebound in the advertising environment. In addition, investors have cheered the company’s investments in two growth-oriented areas of the advertising industry, social media and analytics. Action: We maintain a position as we believe this diversified marketing services firm is well-positioned for growth and that its stock is trading at an attractive valuation.

National Financial Partners Corporation (NFP) is a financial services firm that offers high net worth individuals and corporations a variety of financial services such as life insurance and wealth transfer, corporate and executive benefits, and investment advisory. Reason for outperformance: As a financial services company, the stock benefitted from improved investor sentiment and the rebound in capital markets. Also, company fundamentals improved during 2010, and the company strengthened its balance sheet and sold certain underperforming partner firms. Action: We maintain a position in the stock as we believe growth will continue to improve and the stock remains attractively valued.

Trinity Biotech plc (TRIB) develops, acquires, manufactures and markets medical diagnostic products for the clinical laboratory and point-of-care segments of the diagnostic market. Reason for outperformance: The company divested a slower growth business during the year which allowed it to strengthen its balance sheet and focus on the higher growth areas of its business. In addition, investors are anticipating a strong product pipeline over the next couple of years. Action: We added to our position early in the year but maintained our position on the rally during the second half of the year.

ValueClick, Inc. (VCLK) is a leading online marketing services firm. Reason for outperformance: Growth appears to be reaccelerating in part due to a recovery in the advertising environment generally, and a new ValueClick product more specifically. Many of ValueClick’s business lines have seen growth reaccelerate. Action: We trimmed our position on strength late in the year, but continue to hold a position as we believe growth will continue accelerating and the stock remains attractively valued.

Outlook

Looking ahead, almost universally, market strategists believe 2011 will produce a solid, yet more modest, equity market return in the U.S. Broadly speaking, corporate cash flow generation and profit margins generally are attractive due to effective expense management by U.S. companies. If the past is any indication, these dynamics should eventually entice capital spending and increased hiring by corporations. This would help alleviate one of the main concerns with this recovery, unemployment.

Risks to a full economic recovery loom, yet are well documented. Government budgets at every level are stretched. The extension of the Bush-era federal income tax rates and new payroll tax break, along with the extension of unemployment benefits, help consumers and businesses in the short run, but the long-run impact is yet unknown. The same can be said for the Federal Reserve’s second round of quantitative easing and its impact on longer-term inflation. Rapid growth in emerging economies poses two distinct risks as well: higher commodity price inflation and potentially negative effects from emerging governments’ efforts to combat overheating of their economies.

December 31, 2010

William Blair Funds 15

In the end, however, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. As mentioned above, corporate fundamentals remain attractive. In combination with valuations that are broadly in line with long-term averages, the market outlook remains balanced. While macroeconomic data largely drove correlated stock prices again in 2010, we expect individual company fundamentals to be the leading determinant of forward stock price returns. In an environment where earnings growth will be less about cost cutting and more about organic revenue growth, investors are likely to seek companies which possess more internal growth drivers. Our philosophy of finding solid quality growth companies, which “control their own destiny” to a greater degree and are less dependent on overall economic growth, should benefit in such an environment. While we are disappointed with performance in 2010, we remain confident in our ability to create alpha over the long term. We continue to find good ideas across sectors, and are confident the Fund consists of great companies with solid competitive positions whose stocks are at attractive valuations compared to the growth, consistency and sustainability of their earnings.

16 Annual Report

December 31, 2010

Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		16.16	%		1.53	%		3.17	%		9.77	%
Class I		16.62			1.86			3.48			10.07
Russell 2000^® Growth Index		29.09			2.18			5.30			3.78
Russell 2000^® Index		26.85			2.22			4.47			6.33

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. Smaller Capitalization 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 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 long-term securities.

December 31, 2010

William Blair Funds 17

Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Information Technology—23.3%
*Atheros Communications, Inc.		287,200	$	10,316
*Cavium Networks, Inc.		266,200		10,030
iGate Corporation		446,300		8,797
*Inuvo, Inc.		861,747		4,447
*j2 Global Communications, Inc.		717,948		20,785
*KIT Digital, Inc.		664,700		10,662
*Lionbridge Technologies, Inc.		1,123,516		4,146
*MaxLinear, Inc. Class “A”		359,831		3,872
*Monolithic Power Systems, Inc.		721,300		11,916
*RightNow Technologies, Inc.		475,855		11,263
*Silicon Laboratories, Inc.		468,577		21,564
Syntel, Inc.		168,900		8,072
*TeleTech Holdings, Inc.		880,500		18,129
*Ultimate Software Group, Inc.		308,976		15,025
United Online, Inc.		1,618,575		10,683
*ValueClick, Inc.		1,559,040		24,991
*Vertro, Inc.		847,343		4,152
*Volterra Semiconductor Corporation		380,800		8,819

				207,669

Consumer Discretionary—21.1%
*Amerigon, Inc.		979,500		10,657
*Belo Corporation		1,491,843		10,562
*Career Education Corporation		862,926		17,888
*ChinaCast Education Corporation†		1,425,139		11,059
*Dreams, Inc.		3,285,457		8,674
*Duckwall-ALCO Stores, Inc.		429,693		5,414
Gaiam, Inc. Class “A”		1,050,272		8,087
*Grand Canyon Education, Inc.		450,151		8,818
Jarden Corporation		483,317		14,920
*Kona Grill, Inc.		1,019,792		4,181
MDC Partners, Inc. Class “A”†		858,030		14,818
*Office Depot, Inc.		2,383,400		12,870
*Princeton Review, Inc.		3,519,896		4,154
Strayer Education, Inc.		85,095		12,953
*U.S. Auto Parts Network, Inc.		1,448,391		12,167
*Valassis Communications, Inc.		479,900		15,525
Vitacost.com, Inc.§*		554,359		1,109
*WMS Industries, Inc.		317,200		14,350

				188,206

Health Care—18.0%
*Air Methods Corporation		318,723		17,935
*Align Technology, Inc.		399,500		7,806
*American Medical Systems Holdings, Inc.		112,164		2,115
*Brookdale Senior Living, Inc.		570,700		12,219
*Haemonetics Corporation		253,465		16,014
*Integra LifeSciences Holdings Corporation		338,700		16,021
*Kensey Nash Corporation		424,466		11,813
*MedAssets, Inc.		594,621		12,005
*Natus Medical, Inc.		726,900		10,307
*NxStage Medical, Inc.		382,807		9,524
*Quidel Corporation		856,346		12,374
*SXC Health Solutions Corporation†		206,800		8,864


Issuer	Shares		Value

*Common Stocks—(continued)*
Health Care—(continued)
*The Providence Service Corporation		439,811	$	7,068
*Trinity Biotech plc—ADR		1,903,563		16,751

				160,816

Industrials—16.7%
*Cenveo, Inc.		2,773,539		14,811
*Corrections Corporation of America		261,527		6,554
*Dolan Media Co.		1,199,958		16,704
*Franklin Covey Co.		758,841		6,518
*GrafTech International, Ltd.		826,600		16,400
Healthcare Services Group, Inc.		498,720		8,114
*Huron Consulting Group, Inc.		394,583		10,437
*ICF International, Inc.		569,800		14,655
*On Assignment, Inc.		2,248,382		18,324
*Polypore International, Inc.		177,800		7,242
*TransDigm Group, Inc.		184,414		13,279
*Trimas Corporation		750,089		15,347

				148,385

Financials—7.7%
*Cowen Group, Inc.		1,814,117		8,454
*FirstService Corporation†		570,071		17,262
*Grubb & Ellis Co.		225,000		286
*Internet Capital Group, Inc.		1,474,535		20,968
*Marlin Business Services Corporation		718,870		9,093
*National Financial Partners Corporation		906,856		12,152
*United Western Bancorp, Inc.		2,290,015		664

				68,879

Energy—4.8%
*Dresser-Rand Group, Inc.		213,099		9,076
*Dril-Quip, Inc.		111,300		8,650
*Goodrich Petroleum Corporation		448,415		7,910
*Oil States International, Inc.		263,400		16,882

				42,518

Materials—2.5%
*Horsehead Holding Corporation		1,026,860		13,390
*Stillwater Mining Co.		423,800		9,048

				22,438

Telecommunication Services—1.3%
*Cbeyond, Inc.		760,831		11,626

Total Common Stocks—95.4% (cost $718,251)				850,537


*Preferred Stock*
Grubb & Ellis Co.—144A, 12.00%§		83,121		7,779

Total Preferred Stock—0.9% (cost $8,312)				7,779

See accompanying Notes to Financial Statements.

18 Annual Report

December 31, 2010

Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Principal Amount		Value

*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $20,042, collateralized by FHLMC, 0.172%, due 6/20/11 and U.S. Treasury Notes, 2.500%-2.750%, due 4/30/15-12/31/17	$	20,042	$	20,042

Total Repurchase Agreement—2.2% (cost $20,042)				20,042

Total Investments—98.5% (cost $746,605)				878,358
Cash and other assets, less liabilities—1.5%				13,231

Net assets—100.0%			$	891,589

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 1.00% of the net assets at December 31, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.12% of the net assets at December 31, 2010.

If the Fund’s portfolio holdings represent 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 December 31, 2010 with companies deemed affiliated during the period or at December 31, 2010.


	Share Activity								Year Ended December 31, 2010
									(in thousands)
Security Name	Balance 12/31/2009		Purchases		Sales		Balance 12/31/2010		Value		Dividends Included in Income
CardioNet, Inc.		1,344,381		208,600		1,552,981		—	$	—	$	—
DJSP Enterprises		—		788,419		788,419		—		—		—
pDreams, Inc.		—		4,001,678		716,221		3,285,457		8,674		—
pDuckwall-ALCO Stores, Inc.		460,853		—		31,160		429,693		5,414		—
pGaiam, Inc. Class “A”		1,511,007		140,800		601,535		1,050,272		8,087		375
pInuvo, Inc.*		8,037,127		776,634		196,300		861,747		4,447		—
Kensey Nash Corporation		422,340		126,426		124,300		424,466		11,813		—
pKona Grill, Inc.		1,042,992		—		23,200		1,019,792		4,181		—
LCA-Vision Inc.		948,955		66,854		1,015,809		—		—		—
Lionbridge Technologies, Inc.		4,293,158		553,800		3,723,442		1,123,516		4,146		—
pMarlin Business Services Corporation		988,701		—		269,831		718,870		9,093		—
pOn Assignment Inc.		1,516,133		1,293,264		561,015		2,248,382		18,324		—
Overhill Farms, Inc.		1,184,052		53,900		1,237,952		—		—		—
pPrinceton Review, Inc.		—		3,600,096		80,200		3,519,896		4,154		—
pTrinity Biotech plc		1,501,163		486,500		84,100		1,903,563		16,751		—
pUnited Western Bancorp, Inc.		2,342,215		—		52,200		2,290,015		664		—
pVertro, Inc.**		4,333,215		—		19,300		847,343		4,152		—

									$	99,900	$	375

*1 per 10 stock split on 12/13/2010.

**1 per 5 stock split on 8/18/2010.

p Affiliated company at December 31, 2010. The Small Cap Growth Fund’s total value in companies deemed to be affiliated at December 31, 2010 was $83,941 (thousands).

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 19

LOGO

Robert C. Lanphier, IV

LOGO

David P. Ricci

MID CAP GROWTH FUND

The Mid Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Mid Cap Growth Fund posted a 24.01% increase on a total return basis (Class N Shares) for the year ended December 31, 2010. By comparison, the Fund’s benchmark, the Russell Midcap Growth^® Index, gained 26.38% during the period.

The U.S. equity market produced its third best calendar year return in the last decade after staging an impressive four-month rally to close out 2010.

The year started off as a continuation of 2009 with better-than-expected corporate earnings propelling stocks higher. Then, during the second quarter, European sovereign debt concerns and fears of a double-dip recession in the U.S. caused a steep mid-year correction. The selloff was short lived, however, as in late August the Federal Reserve signaled a second round of quantitative easing to help keep interest rates low and promote a more sustainable economic recovery. Improved investor sentiment was supported in part by stronger-than-expected retail sales that persisted into the holiday shopping season, U.S. industrial production data that proved better than many had expected at mid-year and what appears to be a more pro-business environment in Washington D.C. after the November elections. Strong growth in the emerging economies also boosted confidence in the reality of a global economic recovery.

A resilient consumer propelled the Consumer Discretionary sector up 37.18%, leading all sectors during 2010. Industrials also performed well up 34.35% on the heels of positive industrial production data. While Energy was the best performing sector during the fourth quarter, it was a relative underperformer during 2010 as a whole, up only 16.04%. Health Care underperformed as well up 20.38%, as the sector lived up to its defensive-natured stereotype.

The Fund’s performance for 2010 was characterized by a headwind from its more conservative investment style (i.e. typical lower portfolio beta) being mostly offset by positive effects from its smaller-than-benchmark weighted average market capitalization, higher growth profile and stock selection. The effect of stock selection was somewhat mixed by sector as certain stocks in Industrials, Information Technology and Materials boosted relative performance while others in Health Care and Financials detracted from return.

Many of the same dynamics were at play during the fourth quarter’s narrow underperformance as well. The Fund’s typical lower beta was the main detractor given the quarter’s swift market rally. Consumer Discretionary, Information Technology and Industrials stock selection contributed positively to relative performance while certain stocks in Materials and Consumer Staples mitigated that benefit.

Detractors from return

American Medical Systems Holdings, Inc. (AMMD) designs and manufactures pelvic health solutions, including incontinence, and markets them to urologists, gynecologists and urogynecologists. Reason for underperformance: The stock was a large detractor for the year and the fourth quarter as surgical procedures across the healthcare industry continue to be depressed, especially for elective procedures such as many of American Medical Systems’ solutions. Action: We continue to hold the stock in the Fund as the long-term growth of these types of procedures is likely to be strong given an aging population. While some of the company’s solutions are elective, they are often critical to the patient’s way of life and are

20 Annual Report

December 31, 2010

therefore usually just delayed rather than eliminated. In addition, the company increased its research and development spending over the past several years, contributing to an accelerated pace of new product introductions which should be most pronounced in 2011.

Athenahealth, Inc. (ATHN) is a provider of internet-based business services for physician practices. For example, the company’s solutions allow physician practices to improve accounts receivable days outstanding, bad debt expenses, and patient scheduling and follow-up. Reason for underperformance: The stock was one of the leading detractors from return during 2010. During the second quarter, Athenahealth announced disappointing contract wins with new physician practices, which brought into question whether the company has the appropriate infrastructure in place to compete with larger competitors. Action: The Fund liquidated our position on the news.

DeVry, Inc. (DV) operates in the post-secondary education industry. The company offers campus-based and online courses in areas including graduate level management courses, medical and nursing programs and professional exam preparation. Reason for underperformance: Legislative concerns regarding the for-profit post-secondary education industry have elevated investor concern about future earnings growth. Action: The Fund continues to hold a modest position in the stock. While adjustments to new regulations could significantly impact the profit pool of the entire industry, DeVry is one of the highest quality operators in the industry and should be a market share beneficiary of the industry turmoil.

Myriad Genetics, Inc. (MYGN) develops and markets therapeutic and molecular diagnostic products. Reason for underperformance: Although it was a detractor for the year overall, the stock was especially weak during the first half of the year based on deteriorating fundamentals and due to investor concern regarding the company’s patents. Action: The Fund sold its position in May given the non-recurring nature of the company’s diagnostic tests and the long-term earnings risk such a revenue stream poses in light of uncertainty in the company’s addressable market.

VistaPrint N.V. (VPRT) is a worldwide provider of marketing and printing services to small business and home office customers via the internet. The company’s products include business cards, brochures, invitations, websites, and various types of marketing material. Reason for underperformance: Disappointing revenues announced in July raised concern among investors regarding long-term growth opportunities, especially given sub-par results from its then-recent television advertising campaign. Action: The Fund sold its position given the uncertainty around customer acquisition costs and therefore the volatility of the company’s return on marketing investments.

Contributors to return

Chipotle Mexican Grill, Inc. (CMG) is a restaurant company that operates a chain of fast-casual, fresh Mexican food restaurants. Reason for outperformance: Accelerating revenue and margin growth resulted in a more than 30% increase in earnings expectations for 2010 over the course of the year. Sales growth at restaurants open at least one year will likely increase in the high single digits for 2010, suggesting fundamental consumer preference for Chipotle’s fresh, naturally-raised food. Action: While we continue to believe that this company has a long runway for growth, we have trimmed the Fund’s position on the strength due to an increased valuation and elevated growth expectations.

Illumina, Inc. (ILMN) develops and markets integrated systems used in the gene sequencing and genotyping markets. The company’s machines enable medical and academic institutions to understand the genetic make-up of individuals which allows for more productive research in disease treatment and prevention. Reason for outperformance: Illumina posted significantly better-than-expected revenue and earnings during the fourth quarter, and throughout the year, due to increasing demand for the company’s sequencing machines. Action: We maintain a position in the stock as we believe the company’s technological edge will continue to drive demand for its machines. In addition, as the installed base of the company’s machines grows,

December 31, 2010

William Blair Funds 21

there will likely be a further boost to earnings and the sustainability of earnings due to the expanded use of higher-margin consumable instruments.

Stericycle, Inc. (SRCL) is the leading medical waste management company. The company collects and disposes of medical waste as a service for smaller facilities such as outpatient clinics and dental offices, and larger facilities such as hospitals and blood banks. Reason for outperformance: The stock proved to be resilient throughout the year, during both the mid-year correction and the second half rally, as the company quietly produced solid and consistent earnings growth in 2010 in part due to cross selling of additional services, such as pharmaceutical waste management, to its customers. In addition, Stericycle announced the acquisition of its nearest competitor, thereby strengthening its already dominant competitive position in the industry. Action: Strericycle continues to be one of the largest positions in the Fund as we believe investors underestimate the durability of the company’s long term growth opportunity.

Trimble Navigation, Ltd. (TRMB) develops and markets products embedded with its global positioning systems (GPS) technology to commercial and governmental customers for use in the construction and agriculture industries. Reason for outperformance: Fundamental business strength driven in part by a better economic backdrop from a year ago, but mainly due to increasing demand for the company’s GPS-enabled products in the Engineering & Construction and Agriculture businesses both in the U.S. and abroad. In addition, a recent distribution agreement with Caterpillar seems to be ramping well. Action: We trimmed the Fund’s position on the strength, but continue to own shares in the company in part due to the secular growth in infrastructure projects in the U.S. and abroad, as well as our belief that the company’s broader rollout of distribution partnerships are just beginning.

Verisign, Inc. (VRSN) manages the “.com” and “.net” domains on the internet. Reasons for outperformance: Web site growth was strong during the year and renewal trends have been positive. VeriSign’s cash flow generation and the divestiture of its slower-growth security business during the year provided cash to buy back shares and issue a large one-time dividend, and it allows them to focus on the faster-growth domain management business. In addition, the company instituted price increases starting on July 1, 2010. Action: We have trimmed the Fund’s position given an increased valuation on the stock but continue to own given the positive secular internet growth and dominant industry position.

Outlook

Almost universally, market strategists believe 2011 will produce a solid, yet more modest, equity market return in the U.S. Broadly speaking, corporate cash flow generation remains robust and profit margins generally are attractive. Although the rate of improvement for both of these metrics may slow, if the past is any indication, these dynamics should eventually entice capital spending and increased hiring by corporations. This would help alleviate one of the main concerns with this recovery, unemployment. On the other hand, the risks are somewhat well documented. Government budgets at every level are stretched. The extension of the Bush-era federal income tax rates and new payroll tax break, along with the extension of unemployment benefits, help consumers and businesses in the short run, but the long-run impact is more questionable. The same can be said for the Federal Reserve’s second round of quantitative easing and its impact on longer-term inflation. Rapid growth in emerging economies poses two distinct risks as well: higher commodity price inflation and potentially negative effects from emerging governments’ efforts to combat overheating of their economies.

In the end, however, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. As we mentioned above, corporate fundamentals remain attractive. In combination with valuations that are broadly in line with long-term averages, the market outlook remains balanced. While macro factors largely drove stock prices again in 2010, we continue to expect individual company

22 Annual Report

December 31, 2010

fundamentals to be the leading determinant of forward stock price returns. In an environment where earnings growth will be less about cost cutting and more about organic revenue growth, investors are likely to seek companies which possess more internal growth drivers. Our philosophy of finding solid quality growth companies, which “control their own destiny” to a greater degree and are less dependent on overall economic growth, should be a benefit in such an environment. We continue to find good ideas across sectors, and are confident the Fund consists of great companies with solid competitive positions whose stocks are at attractive valuations compared to the growth, consistency and sustainability of their business.

December 31, 2010

William Blair Funds 23

Mid Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			Since Inception(a)
Class N		24.01	%		3.27	%		5.82	%
Class I		24.31			3.55			6.12
Russell MidCap^® Growth Index		26.38			0.97			3.70

(a)

For the period from February 1, 2006 (Commencement of Operations) to December 31, 2010.

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 medium capitalization companies involves special risks, including higher volatility and lower liquidity. Medium Capitalization 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 MidCap^® 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 long-term securities.

24 Annual Report

December 31, 2010

Mid Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Industrials—21.8%
CH Robinson Worldwide, Inc.		29,400	$	2,358
Expeditors International of Washington, Inc.		24,800		1,354
Fastenal Co.		35,875		2,149
Gardner Denver, Inc.		22,600		1,555
*Jacobs Engineering Group, Inc.		15,694		720
Manpower, Inc.		17,690		1,110
MSC Industrial Direct Co. Class “A”		32,500		2,102
Robert Half International, Inc.		29,300		897
Rockwell Automation, Inc.		27,600		1,979
Roper Industries, Inc.		22,160		1,694
*Stericycle, Inc.		43,330		3,506
*TransDigm Group, Inc.		36,950		2,661

				22,085

Information Technology—19.8%
Amphenol Corporation Class “A”		19,200		1,013
*Atheros Communications, Inc.		49,500		1,778
*Cavium Networks, Inc.		27,200		1,025
*Citrix Systems, Inc.		22,300		1,526
*Concur Technologies, Inc.		35,930		1,866
*Dolby Laboratories, Inc. Class “A”		23,770		1,585
*FLIR Systems, Inc.		53,800		1,601
*Informatica Corporation		23,000		1,013
*Silicon Laboratories, Inc.		57,310		2,637
Solera Holdings, Inc.		33,800		1,735
*Trimble Navigation, Ltd.		56,300		2,248
VeriSign, Inc.		59,700		1,950

				19,977

Consumer Discretionary—17.0%
*Bed Bath & Beyond, Inc.		31,060		1,527
*CarMax, Inc.		108,770		3,467
*Chipotle Mexican Grill, Inc.		2,100		446
DeVry, Inc.		21,110		1,013
*Dick’s Sporting Goods, Inc.		56,829		2,131
*Discovery Communications, Inc.		11,900		496
*Discovery Communications, Inc. Class “C”		13,700		503
Gentex Corporation		48,180		1,424
*Harman International Industries, Inc.		30,800		1,426
*O’Reilly Automotive, Inc.		44,880		2,712
Scripps Networks Interactive, Inc. Class “A”		18,900		978
*WMS Industries, Inc.		24,440		1,106

				17,229

Health Care—12.7%
*American Medical Systems Holdings, Inc.		54,872		1,035
*CareFusion Corporation		43,239		1,111
*Cerner Corporation		16,100		1,525
*HMS Holdings Corporation		30,300		1,963
*IDEXX Laboratories, Inc.		29,872		2,068
*Illumina, Inc.		45,920		2,909
Perrigo Co.		15,100		956

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Health Care—(continued)
*QIAGEN N.V.†		66,346	$	1,297

				12,864

Consumer Staples—10.8%
Church & Dwight Co., Inc.		13,100		904
Flowers Foods, Inc.		38,000		1,022
*Green Mountain Coffee Roasters, Inc.		132,156		4,343
McCormick & Co., Inc.		59,700		2,778
Mead Johnson Nutrition Co.		30,300		1,886

				10,933

Financials—6.2%
*Affiliated Managers Group, Inc.		15,075		1,496
Greenhill & Co., Inc.		21,420		1,750
*IntercontinentalExchange, Inc.		12,350		1,471
Invesco, Ltd.†		65,000		1,564

				6,281

Energy—5.4%
*Cameron International Corporation		22,200		1,126
*Denbury Resources, Inc.		77,270		1,475
*Newfield Exploration Co.		22,830		1,647
Range Resources Corporation		14,500		652
*Southwestern Energy Co.		15,870		594

				5,494

Materials—2.3%
Ecolab, Inc.		46,400		2,340

Telecommunication Services—1.8%
*SBA Communications Corporation Class “A”		44,100		1,805

Total Common Stocks—97.8% (cost $75,842)				99,008


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $2,020, collateralized by U. S. Treasury Note, 2.500%, due 4/30/15	$	2,020		2,020

Total Repurchase Agreement—2.0% (cost $2,020)				2,020

Total Investments—99.8% (cost $77,862)				101,028
Cash and other assets, less liabilities—0.2%				220

Net assets—100.0%			$	101,248

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 25

LOGO

Karl W. Brewer

LOGO

Robert C. Lanphier, IV

LOGO

Matthew A. Litfin

SMALL-MID CAP GROWTH FUND

The Small-Mid Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small-Mid Cap Growth Fund increased 22.76% on a total return basis (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Russell 2500 Growth^TM Index, gained 28.86% during the period.

The U.S. small and mid cap equity market produced its third best calendar year return in the last decade after staging an impressive four-month rally to close out 2010.

The year started off as a continuation of 2009 with better-than-expected corporate earnings propelling stocks higher. Then, during the second quarter, European sovereign debt concerns and fears of a double-dip recession in the U.S. caused a steep mid-year correction. The selloff was short lived, however, as in late August the Federal Reserve signaled a second round of quantitative easing to help keep interest rates low and promote a more sustainable economic recovery. Improved investor sentiment was supported in part by stronger-than-expected retail sales that persisted into the holiday shopping season, U.S. industrial production data that proved better than many had expected at mid-year, and a more pro-business environment in Washington D.C. that emerged after the November elections. Strong growth in the emerging economies also boosted confidence in the reality of a global economic recovery.

Within the Russell 2500^TM Growth Index, market leadership was relatively broad-based from a sector perspective. Consumer Discretionary, Information Technology, Industrials, Energy and Materials all returned between 31% and 33%. Financials and typically defensive sectors, Health Care and Consumer Staples, lagged the overall market with returns just over 20%.

The Fund’s underperformance for 2010 was driven by its more conservative investment style (typical lower beta) and industry (sub-sector) headwinds. Although individual stock picks dictate our sector and industry weights, the Fund’s exposure to certain industries detracted from performance during the year. Examples include the Fund’s overweights to Diversified Consumer Services (within Consumer Discretionary) and Health Care Technology (within Health Care).

Partially offsetting these 2010 headwinds was stock selection. Positive stock specific drivers were most pronounced in the Consumer Discretionary, Materials and Telecom sectors while stock selection in Information Technology, Industrials and Health Care detracted from relative results.

During the fourth quarter specifically, the Fund’s lower beta detracted from relative performance given the benchmark’s 16.00% advance. This negative beta headwind was partially mitigated by strong stock selection in Financials, Consumer Discretionary and Health Care. On the other hand, certain stocks in Industrials and Consumer Staples detracted from performance for the quarter.

Detractors from return

Cenveo, Inc. (CVO) is a diversified printing company. The company’s portfolio of products include forms and labels manufacturing, packaging and publisher offerings, envelope production and commercial printing. Reason for underperformance: Irrational pricing by a weakened competitor in the envelopes business greatly impacted industry pricing, thereby reducing Cenveo’s revenues and earnings in the intermediate term. In addition, despite more

26 Annual Report

December 31, 2010

recent signs of a recovery in the commercial printing industry, the industry has been weaker than expected coming out of the recession, despite recent industry consolidation. Action: We liquidated the Fund’s position in the stock.

Comstock Resources, Inc. (CRK) engages in the acquisition, exploration and development of oil and natural gas properties in the United States. It operates primarily in the south and southeast regions of the U.S., in addition to the Gulf of Mexico. Reason for underperformance: In contrast to crude oil which rallied during 2010, natural gas prices were down dramatically. Since over 90% of Comstock’s business is focused on natural gas production, investors became nervous about the company’s fundamental outlook, especially relative to the broader energy sector. Action: We liquidated the Fund’s position in July in part due to the potential earnings impact from a depressed commodity price but also due to various planning issues for future production.

Heidrick & Struggles International, Inc. (HSII) is an executive search and leadership consulting firm. Reason for underperformance: While executive search activity has been recovering modestly, we believe consultant turnover has picked up, especially in Europe where the economic recovery has been weaker. Action: We liquidated the Fund’s position earlier in the year given lowered expectations for growth and unsettling employee turnover.

NuVasive, Inc. (NUVA) designs and markets products used in the surgical treatment of spine disorders. Reason for underperformance: Management reduced forward earnings guidance during the second half of the year in part due to a sluggish recovery in procedure growth following the recession, but primarily due to negative developments in the spine surgery market. Certain health insurance plans are changing their reimbursement policies for spine procedures which could meaningfully reduce demand for NuVasive’s products. Action: While we believe NuVasive can continue to gain market share based on its innovation, the industry headwinds may be too stiff. We therefore liquidated the Fund’s position.

VistaPrint N.V. (VPRT) is a worldwide provider of marketing and printing services to small business and home office customers via the internet. The company’s products include business cards, brochures, invitations, websites, and various types of marketing material. Reason for underperformance: Disappointing revenues announced in July raised concern among investors regarding long-term growth opportunities, especially given sub-par results from its then-recent television advertising campaign. Action: We trimmed the Fund’s position after the mid-year correction due to increased business risk, but continue to hold an investment in the company given our belief in management’s ability to make the necessary adjustments, as well as the stock’s improved valuation.

Contributors to return

Affiliated Managers Group, Inc. (AMG) is an asset management company with equity investments in various small- and mid-sized investment management firms. Reason for outperformance: As an asset manager, the stock was aided by the rally in the market given the rally’s impact on assets under management, and therefore the company’s expected revenues. In addition, during the fourth quarter the company announced better-than-expected asset flows with particular strength in the company’s global, emerging market and alternative strategies. Earlier in the year, the company raised equity capital to pay down debt and potentially make acquisitions, a historical and expected avenue of growth for the company. Action: We maintain a position in the stock as we believe the company is poised for further growth given it is a well-diversified and well-managed asset management company.

December 31, 2010

William Blair Funds 27

fresh, naturally-raised food. Action: While we continue to believe that this company has a long runway for growth, we sold the Fund’s position given what we believe are a stretched valuation and elevated growth expectations.

Concho Resources, Inc. (CXO) is an exploration and production company in the oil and natural gas industry. Reason for outperformance: The company exceeded earnings expectations in each quarter announced during 2010 and recently raised forward earnings guidance. Higher production volumes and lower costs were the primary reasons for the stock outperforming its energy peers and the market overall. Investors also cheered Concho Resources’ acquisition of oil and natural gas assets from another company during the year. Action: We trimmed the Fund’s position on the strength displayed this year.

SXC Health Solutions Corporation (SXCI) provides pharmacy benefit management (PBM) services and healthcare information technology solutions. Reason for the outperformance: Throughout 2010, the stock performed well primarily due to new contract wins and accretive acquisitions, but also due to continued growth in mail delivery and generic utilization of pharmaceuticals. SXC Health Solutions’ recent business strength is in part driven by leveraging its strong customer relationships in its legacy healthcare IT business to cross-sell the company’s PBM capabilities. During the first and fourth quarters, SXC Health Solutions announced contract wins with major health plans. In December, the company announced an acquisition of a specialty pharmacy which investors viewed favorably. Action: We continue to hold a position as we believe the company’s focused management team and differentiated customer solutions will drive further market share gains and earnings growth.

Under Armour, Inc. (UA) engages in the design, development, marketing and distribution of a range of performance apparel and accessories utilizing various synthetic microfiber fabrications. Reason for outperformance: The company exceeded earnings expectations in each of the four quarterly reports announced during 2010, and in October, it raised forward earnings guidance above then-consensus expectations. Under Armour’s fundamental momentum is coming from its Men’s, Women’s and Youth apparel businesses with particular strength in the company’s direct-to-consumer channel (especially online). Action: We trimmed the Fund’s position on strength during the second half of the year but continue to own a position in this unique and fast growing company.

Outlook

28 Annual Report

December 31, 2010

fundamentals to be the leading determinant of forward stock price returns. In an environment where earnings growth will be less about cost cutting and more about organic revenue growth, investors are likely to seek companies which possess more internal growth drivers. Our philosophy of finding solid quality growth companies, which “control their own destiny” to a greater degree and are less dependent on overall economic growth, should benefit in such an environment. We continue to find good ideas across sectors, and are confident the Fund consists of great companies with solid competitive positions whose stocks are at attractive valuations compared to the growth, consistency and sustainability of their earnings.

December 31, 2010

William Blair Funds 29

Small-Mid Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		22.76	%		3.21	%		6.26	%		7.79	%
Class I		23.05			3.50			6.53			8.06
Russell 2500^™ Growth Index		28.86			2.21			5.63			7.10

(a)

For the period from December 29, 2003 (Commencement of Operations) to December 31, 2010.

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. Smaller and medium capitalization 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 long-term securities.

30 Annual Report

December 31, 2010

Small-Mid Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Industrials—24.3%
Allegiant Travel Co.		54,065	$	2,662
*BE Aerospace, Inc.		52,653		1,950
*Corrections Corporation of America		141,755		3,552
*CoStar Group, Inc.		43,700		2,515
Fastenal Co.		66,460		3,982
Flowserve Corporation		19,600		2,337
*GrafTech International, Ltd.		181,400		3,599
Healthcare Services Group, Inc.		127,400		2,073
*Huron Consulting Group, Inc.		99,200		2,624
*ICF International, Inc.		99,556		2,561
Kaydon Corporation		59,859		2,437
Manpower, Inc.		73,350		4,603
Roper Industries, Inc.		41,600		3,180
*Stericycle, Inc.		69,420		5,617
The Corporate Executive Board Co.		70,277		2,639
*TransDigm Group, Inc.		22,908		1,650
*Trimas Corporation		125,288		2,563

				50,544

Consumer Discretionary—20.2%
*Career Education Corporation		112,025		2,322
*CarMax, Inc.		65,200		2,079
DeVry, Inc.		42,665		2,047
*Dick’s Sporting Goods, Inc.		133,390		5,002
*Education Management Corporation		145,472		2,633
Gentex Corporation		107,800		3,187
Jarden Corporation		106,400		3,285
*K12, Inc.		96,850		2,776
*O’Reilly Automotive, Inc.		53,250		3,217
P.F. Chang’s China Bistro, Inc.		53,222		2,579
*Steiner Leisure, Ltd.†		58,700		2,741
Strayer Education, Inc.		11,000		1,674
*Tempur-Pedic International, Inc.		53,800		2,155
*Under Armour, Inc. Class “A”		32,860		1,802
*Urban Outfitters, Inc.		82,200		2,944
*Valassis Communications, Inc.		50,500		1,634

				42,077

Information Technology—18.4%
Blackbaud, Inc.		98,800		2,559
*Booz Allen Hamilton Holding Corporation		100,465		1,952
*Cavium Networks, Inc.		111,700		4,209
*Concur Technologies, Inc.		51,700		2,685
*FLIR Systems, Inc.		83,500		2,484
*Informatica Corporation		55,800		2,457
*j2 Global Communications, Inc.		124,975		3,618
*MICROS Systems, Inc.		52,100		2,285
*RightNow Technologies, Inc.		74,900		1,773
*Silicon Laboratories, Inc.		92,060		4,237
*Trimble Navigation, Ltd.		68,000		2,715
*Ultimate Software Group, Inc.		44,925		2,185
VeriSign, Inc.		76,900		2,512
*VistaPrint N.V.†		59,157		2,721

				38,392

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Health Care—16.3%
*Align Technology, Inc.		92,300	$	1,804
*American Medical Systems Holdings, Inc.		53,618		1,011
*athenahealth, Inc.		55,740		2,284
*Brookdale Senior Living, Inc.		134,876		2,888
*Cerner Corporation		30,900		2,927
CR Bard, Inc.		25,100		2,303
*Haemonetics Corporation		31,100		1,965
*HMS Holdings Corporation		39,300		2,545
*IDEXX Laboratories, Inc.		29,905		2,070
*Illumina, Inc.		40,000		2,534
*Kensey Nash Corporation		56,327		1,568
*MedAssets, Inc.		101,591		2,051
*NxStage Medical, Inc.		45,261		1,126
Perrigo Co.		50,900		3,223
*SXC Health Solutions Corporation†		84,200		3,609

				33,908

Financials—8.3%
*Affiliated Managers Group, Inc.		56,780		5,634
*First Horizon National Corporation		281,589		3,317
*FirstService Corporation†		71,975		2,179
Invesco, Ltd.†		178,400		4,292
Jones Lang LaSalle, Inc.		21,300		1,788

				17,210

Energy—7.0%
*Concho Resources, Inc.		30,740		2,695
*Dresser-Rand Group, Inc.		46,900		1,997
*Forest Oil Corporation		76,100		2,890
*Oceaneering International, Inc.		33,100		2,437
*Oil States International, Inc.		40,400		2,589
*Petrohawk Energy Corporation		107,100		1,955

				14,563

Consumer Staples—2.5%
*Green Mountain Coffee Roasters, Inc.		156,726		5,150

Materials—1.0%
Celanese Corporation		51,200		2,108

Telecommunication Services—0.9%
*SBA Communications Corporation Class “A”		45,200		1,850

Total Common Stocks—98.9% (cost $161,809)				205,802


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $1,100, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	1,100		1,100

Total Repurchase Agreement—0.5% (cost $1,100)				1,100

Total Investments—99.4% (cost $162,909)				206,902
Cash and other assets, less liabilities—0.6%				1,163

Net assets—100.0%			$	208,065

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 31

GLOBAL MARKETS OVERVIEW

The year 2010 was marked by a mid-teens return in the global equity market with most markets and all global sectors in positive territory. This year seemed almost “normal,” as opposed to the wild swings of the last two years when the global equity market fell 42.34% in the midst of the 2008 financial crisis, then subsequently rebounded 36.41% during the initial stages of the recovery in 2009. The 2010 return, however, understates the market volatility that occurred during the year. Recovering corporate profits and economic activity bolstered the stock market generally as the recovery moved towards a more traditional expansion mode. These positives were somewhat offset by concerns about peripheral European debt that arose in the first quarter. In addition, rising emerging markets inflationary pressures and subsequent monetary policy tightening raised concerns about near term growth in the engine of the global recovery. The combination of these two issues and a rolling over of composite leading indicators gave rise to fears of a “double dip” in the second quarter and a resultant weak market. However, the Fed’s continued commitment to Quantitative Easing (QE) in the latter half of the year was viewed positively and was expected to support risk asset prices, while economic activity improved. These events supported the rally through year end and counteracted rising anxiety about governmental debt loads and persistently high unemployment rates in a number of developed countries.

While the broad market returned 14.35% during 2010, as reflected by the MSCI ACWI IMI, emerging markets outperformed their developed market counterparts, as these countries benefited from strong investment, industrial production and increasing domestic demand, despite concerns about monetary tightening and economic overheating. Within emerging markets, the Emerging Markets Europe, Mid-East, and Africa (EMEA) region was up approximately 25%, led by strength in South Africa and Turkey, which more than offset weaker returns in the Central and Eastern European region, affected by the debt concerns confronting its Western European neighbors. Emerging Asia returned approximately 19%, as Indonesia, Thailand and Malaysia had strong returns, but China lagged due to heightened concerns about the Chinese property market and overall economic overheating, and potential implications on overall growth rates. Latin America was the worst performing emerging markets region, rising just over 16% as strength in Chile and Mexico was more than offset by Brazil’s 9% return.

Developed market returns also varied significantly during the year as Europe lagged the rest of the world, rising just over 3%, due to double digit market declines in those countries most affected by debt concerns. Conversely, Canada and Pacific ex-Japan performed well, up 23% and 18%, respectively, while the U.K. rose just over 10%. The U.S. was up 16.52% during the 12 month period, benefiting from USD depreciation versus most currencies (with the notable exceptions of the Euro and Pound Sterling), and as economic activity improved. Developed non-U.S. small cap stocks significantly outpaced their larger cap counterparts with the MSCI World ex-U.S. Small Cap Index returning 24.51%, well ahead of the 10.66% MSCI World Ex-U.S. Index return. Small cap European markets were particularly strong during the year.

From a sector perspective Consumer Discretionary, Industrials and Materials each rose over 24%, leading global sectors as industrial production accelerated, commodity demand improved, and as consumer demand quickened in emerging markets and stabilized in most developed markets. Like 2009, Utilities and Healthcare were among the laggards, significantly trailing other global sectors and rising 1.26% and 5.04%, respectively.

Fourth quarter market performance was strong with the global equity market rising 9.35%. Emerging markets rose 7.42%, approximating developed non-U.S. returns, while the U.S. was up 11.52%. Japan and Canada led developed market performance during the period, rising 12.01% and 13.34%, respectively, while Europe and the U.K. lagged, rising 4.59% and 6.52%, respectively. Within emerging markets EMEA returned 10.42%, as South Africa and Russia performed well, far exceeding the approximately 7% Asia and Latin America returns. From a sector perspective, commodity-related stocks performed well as Energy and Materials each returned approximately 16.5%, while Consumer Discretionary, Industrials and

32 Annual Report

December 31, 2010

Information Technology (IT) were also strong, returning around 11%. Conversely, Telecom Services and Utilities trailed other global sectors, returning 3.53% and 2.18%, respectively.

Outlook

Markets are entering the new year with a favorable mix of promising growth prospects and conservative valuation metrics. Analysts are forecasting 17% earnings growth for 2011 for both developed markets and emerging markets. While over two thirds of developed market growth is expected to come from margin recovery, top line growth expectations for emerging markets are more closely aligned with GDP and inflation forecasts and expectations are less reliant on profitability improvements. While margin assumptions present a risk, the earnings outlook is stable and has moderated from a year ago. Multiples have recovered from the summer lows but ended the year below where they started and remain a source for potential returns should macro concerns subside.

Consumer Discretionary and Industrials have the strongest positive earnings trends among sectors. This has been the case throughout most of the year with very consistent increases to estimates among autos, capital goods, and transportation companies. These sectors currently demand a premium overall but with relatively attractive valuations in small and mid cap names. Materials are also seeing positive trends but prices have gotten ahead of earnings and the sector currently appears to be overvalued. The defensive sectors are seeing relatively weaker earnings trends.

Regionally there has been less of a distinction in earnings and price movement but there is some dispersion among valuations. Emerging markets continue to have superior quality and long-term growth profiles but became more expensive relative to developed markets throughout the year. India, for example, is the most expensive country while Japan is the least expensive. Emerging Markets Europe, Mid-East, and Africa (EMEA) and Asia ex-China and India are the least expensive among emerging markets and continue to offer relative value versus developed markets. Developed Europe, including the U.K., offers attractive valuations as well as stable earnings trends.

December 31, 2010

William Blair Funds 33

LOGO

W. George Greig

LOGO

Kenneth J. McAtamney

GLOBAL GROWTH FUND

The Global Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Global Growth Fund posted a 20.52% increase (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World IMI index (net) gained 14.35%.

Fund performance was led by strong performance across most sectors and regions. From a sector perspective, Staples, Financials, Healthcare and Telecom Services stock selection was the most additive to results, staples benefited from strong performance in Europe and the US. Positive Financials stock selection resulted from good performance by Partners Group Holding AG, the Swiss private equity firm and Brookfield Asset Management, the Canadian real estate and infrastructure firm, coupled with strong U.K. and Emerging Asia performance. Healthcare stock selection was bolstered by 24% outperformance by European holdings, in addition to strong performance in the U.K. and the U.S. The sole Telecom Services holding, Softbank Corporation, benefited from a move towards smartphones along with its tie up with Apple, Inc. Regionally, Europe Ex-U.K. stocks outpaced the Index by 24.58%, led by strength in Consumer Discretionary, Financials and Industrials, while U.S. stock selection was augmented by strength across most sectors. Somewhat detracting from results was lagging non-U.S. Information Technology (IT) stock selection, due largely to underperformance in Japan and in Taiwan.

Fourth quarter absolute and relative performance was also strong, led by Europe Ex-U.K. and U.S. stock selection, coupled with strong Japanese Industrials and Telecom Services and Latin American Materials performance. Bolstering performance in Continental Europe was the underweighting and stock selection in European Financials, coupled with strong Healthcare, Energy and Consumer Discretionary results, along with chemicals exposure. U.S. value add was spread across most sectors, with the exception of Industrials, which slightly lagged the Index return. Somewhat offsetting these positive results were Japanese IT and U.K. Materials performance.

As of year-end 2010, the portfolio maintained its focus on Consumer Discretionary stocks across regions, with 22% of the portfolio invested in these holdings, well above the 11% Index weighting, but below the 26% weighting as of September 30. Approximately 17% each was invested in Financials and Industrials, weightings that remained relatively stable during the year. Approximately 35% of Financials exposure was in emerging markets, in addition to asset management. Industrials exposure was largely developed-markets based, and was focused in machinery, aerospace and electrical equipment. Regionally, the Fund remained overweighted in the U.K. and Europe, similar to September 30, but increased from year-end 2009. Conversely, U.S. exposure decreased from approximately 38% as of year-end 2009 to 30% as of year-end 2010, due to reductions across most sectors, with the exception of Staples and Industrials. Emerging markets represented approximately 18% of the Fund as of year-end 2010, decreasing during the year, but remaining well ahead of the 13% Index weighting, due largely to Latin America and, to some extent, Emerging Asia exposure.

34 Annual Report

December 31, 2010

Global Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			Since Inception(a)
Class N		20.52	%		(5.09	)%		(5.09	)%
Class I		20.73			(4.88	)		(4.82	)
MSCI All Country World IMI (net)		14.35			(3.48	)		(4.59	)

(a)

For the period from October 15, 2007 (Commencement of Operations) to December 31, 2010.

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. Smaller and medium capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. 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 fees (12b-1).

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 Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market of developed and emerging markets. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 35

Global Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Western Hemisphere—33.4%*
Canada—3.1%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		17,508	$	583
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		10,800		308
Saputo, Inc. (Food products)		12,908		514

				1,405

United States—30.3%
*Affiliated Managers Group, Inc. (Capital markets)		4,882		484
American Express Co. (Consumer finance)		15,828		679
*Apple, Inc. (Computers & peripherals)		3,584		1,156
*Atheros Communications, Inc. (Semiconductors & semiconductor equipment)		8,803		316
*AutoZone, Inc. (Specialty retail)		2,056		560
*Bed Bath & Beyond, Inc. (Specialty retail)		9,264		455
* Cerner Corporation (Health care technology)		4,462		423
CH Robinson Worldwide, Inc. (Air freight & logistics)		7,229		580
*Chipotle Mexican Grill, Inc. (Hotels, restaurants & leisure)		1,734		369
*Citrix Systems, Inc. (Software)		8,575		587
Emerson Electric Co. (Electrical equipment)		15,761		901
*Google, Inc. Class “A” (Internet software & services)		1,313		780
*Hansen Natural Corporation (Beverages)		8,041		420
*IDEXX Laboratories, Inc. (Health care equipment & supplies)		6,890		477
*j2 Global Communications, Inc. (Internet software & services)		7,957		230
JPMorgan Chase & Co. (Diversified financial services)		18,949		804
*Kohl’s Corporation (Multiline retail)		6,938		377
McCormick & Co., Inc. (Food products)		9,466		440
*Medco Health Solutions, Inc. (Health care providers & services)		9,655		592
MSC Industrial Direct Co. Class “A” (Trading companies & distributors)		6,100		395
*Newfield Exploration Co. (Oil, gas & consumable fuels)		7,029		507
Starbucks Corporation (Hotels, restaurants & leisure)		20,376		655
*Tempur-Pedic International, Inc. (Household durables)		7,942		318
*Urban Outfitters, Inc. (Specialty retail)		12,022		431
Yum! Brands, Inc. (Hotels, restaurants & leisure)		13,420		658

				13,594


*Europe—20.4%*
Denmark—3.3%
Coloplast A/S (Health care equipment & supplies)		2,002		272
Novo Nordisk A/S (Pharmaceuticals)		7,050		795
Novozymes A/S (Chemicals)		2,999		418

				1,485

Finland—1.0%
Kone Oyj (Machinery)		7,810		434


Issuer	Shares		Value

*Common Stocks—(continued)*

*Europe—20.4%—(continued)*
Germany—5.9%
Aixtron AG (Semiconductors & semiconductor equipment)		6,073	$	224
BASF SE (Chemicals)		9,579		764
*Daimler AG (Automobiles)		10,699		725
SAP AG (Software)		14,001		713
Wincor Nixdorf AG (Computers & peripherals)		2,981		243

				2,669

Italy—2.5%
DiaSorin SpA (Health care equipment & supplies)		6,623		285
Saipem SpA (Energy equipment & services)		17,283		851

				1,136

Spain—0.5%
Tecnicas Reunidas S.A. (Energy equipment & services)		3,321		211

Sweden—2.5%
Atlas Copco AB (Machinery)		28,912		730
Elekta AB (Health care equipment & supplies)		10,136		390

				1,120

Switzerland—4.7%
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)		9,516		560
Kuehne + Nagel International AG (Marine)		4,244		590
*Mettler-Toledo International, Inc. (Life sciences tools & services)		2,358		357
Partners Group Holding AG (Capital markets)		3,080		584

				2,091


*United Kingdom—13.7%*
Abcam plc (Biotechnology)		44,755		223
Amlin plc (Insurance)		51,366		328
Ashmore Group plc (Capital markets)		65,496		342
Babcock International Group plc (Commercial services & supplies)		26,966		240
BG Group plc (Oil, gas & consumable fuels)		31,917		645
Compass Group plc (Hotels, restaurants & leisure)		56,371		511
Hargreaves Lansdown plc (Capital markets)		28,245		258
Intertek Group plc (Professional services)		8,459		234
Michael Page International plc (Professional services)		29,630		256
Petrofac, Ltd. (Energy equipment & services)		23,129		572
Reckitt Benckiser Group plc (Household products)		12,085		664
*Rolls-Royce Group plc (Aerospace & defense)		75,638		735
Standard Chartered plc (Commercial banks)		25,263		680
The Weir Group plc (Machinery)		15,962		443

				6,131


*Emerging Asia—9.7%*
China—4.6%
CNOOC, Ltd. (Oil, gas & consumable fuels)		250,000		593
Dongfeng Motor Group Co., Ltd. (Automobiles)		168,000		290

See accompanying Notes to Financial Statements.

36 Annual Report

December 31, 2010

Global Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Asia—9.7%—(continued)*
China—4.6%—(continued)
Haitian International Holdings, Ltd. (Machinery)		244,000	$	255
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		724,185		539
Shanghai Electric Group Co., Ltd. (Electrical equipment)		566,585		374

				2,051

India—0.8%
Shriram Transport Finance Co., Ltd. (Consumer finance)		21,501		375

Indonesia—1.7%
PT Astra International Tbk (Automobiles)		124,000		751

South Korea—2.1%
*Hyundai Motor Co. (Automobiles)		6,313		965

Taiwan—0.5%
Tripod Technology Corporation (Electronic equipment, instruments & components)		53,000		216


*Japan—6.9%*
Canon, Inc. (Office electronics)		14,400		747
Dena Co., Ltd. (Internet & catalog retail)		12,300		441
Exedy Corporation (Auto components)		5,900		192
Fanuc, Ltd. (Machinery)		5,000		768
Gree, Inc. (Internet software & services)		12,000		153
Miraca Holdings, Inc. (Health care providers & services)		5,500		221
Softbank Corporation (Wireless telecommunication services)		16,500		571

				3,093


*Emerging Latin America—5.3%*
Brazil—2.7%
Natura Cosmeticos S.A. (Personal products)		21,600		621
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		57,600		352
Tegma Gestao Logistica S.A. (Road & rail)		16,826		258

				1,231

Chile—0.7%
Banco Santander Chile—ADR (Commercial banks)		3,360		314

Mexico—1.9%
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		206,900		852


*Emerging Europe, Mid-East, Africa—2.7%*
South Africa—1.5%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		22,333		203
Clicks Group, Ltd. (Multiline retail)		23,528		155
Mr Price Group, Ltd. (Specialty retail)		33,942		343

				701


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Emerging Europe, Mid-East, Africa—2.7%—(continued)*
Turkey—1.2%
Turkiye Garanti Bankasi A.S. (Commercial banks)		103,499	$	524


*Asia—2.1%*
Australia—2.1%
BHP Billiton, Ltd. (Metals & mining)		20,171		933

Total Common Stocks—94.2% (cost $31,770)				42,282


*Preferred Stocks*

*Emerging Latin America*
Itau Unibanco Holding S.A. (Commercial banks)		32,200		772
Randon Participacoes S.A. (Machinery)		34,500		255

Total Preferred Stocks—2.3% (cost $803)				1,027


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $1,536, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	1,536		1,536

Total Repurchase Agreement—3.4% (cost $1,536)				1,536

Total Investments—99.9% (cost $34,109)				44,845
Cash and other assets, less liabilities—0.1%				32

Net assets—100.0%			$	44,877

ADR = American Depository Receipt

† = U.S. listed foreign security

* = Non-income producing securities

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

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Consumer Discretionary			21.7%
Industrials			17.2%
Financials			16.8%
Information Technology			12.4%
Health Care			9.8%
Energy			7.8%
Materials			6.9%
Consumer Staples			6.1%
Telecommunication Services			1.3%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 37

Global Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:
U.S. Dollar			34.3%
British Pound Sterling			14.2%
Euro			10.3%
Japanese Yen			7.1%
Brazilian Real			5.2%
Hong Kong Dollar			4.7%
Swiss Franc			4.0%
Danish Krone			3.4%
Swedish Krona			2.6%
South Korean Won			2.2%
Australian Dollar			2.2%
Mexican Peso			2.0%
Canadian Dollar			1.9%
Indonesian Rupiah			1.7%
South African Rand			1.6%
Turkish Lira			1.2%
All Other Currencies			1.4%

Total			100.0%

See accompanying Notes to Financial Statements.

38 Annual Report

December 31, 2010

LOGO

W. George Greig

INTERNATIONAL GROWTH FUND

The International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Growth Fund posted a 20.09% increase (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. (ACWI) IMI Index (net), gained 12.73%.

The Fund significantly outpaced the MSCI ACWI Ex-US IMI during 2010. Strong year to date performance was bolstered by stock selection across most sectors, coupled with overall sector positioning and tactical currency hedging during the year. Consumer stock selection added significant value during the year, with auto-related and luxury holdings performing well, in addition to emerging markets Staples holdings. The Fund’s Energy holdings outperformed the Index by 11%, augmented by strength within European energy services and Exploration and Production (E&P) companies, coupled with good performance by Latin American producers. Financials stock selection was also a significant contributor to return, due to the Fund’s underweighting in European Financials, coupled with strong stock selection in the U.K., Canada and emerging markets. The Fund’s Healthcare and Industrials stocks each outpaced the Index sector returns by 13%, as the Fund’s European Healthcare holdings performed well, driving the outperformance, while emerging markets stock selection was also additive. Industrials stock selection benefited from good performance within the Fund’s defense, engineering and transportation holdings, coupled with an overweighting and positive stock selection in machinery stocks. Regionally, the Fund added significant value in Japan, Europe and emerging markets. Somewhat detracting from relative results were Developed Asia ex-Japan Financials, Industrials and Materials stock selection, coupled with Canadian Energy stock selection and overall Utilities stock selection.

Fourth quarter performance slightly trailed the Index. Positive stock selection in Healthcare, Materials, Telecom Services and Utilities was offset by underperformance in Consumer Discretionary, Energy and Financials, areas which performed well for the full 12 month period. In particular, Consumer Discretionary performance was hampered by the Fund’s Asian auto and Brazilian real estate holdings, while Energy stock selection lagged due to underperformance in the Fund’s U.K. E&P companies. Financials stock selection was largely hurt by Developed Asian Real Estate and Indian Financials holdings. Conversely, Healthcare stock selection was additive in Europe and emerging markets, while Materials performance benefited from strength in European chemicals and general mining names.

Year end Fund sector positioning generally paralleled positioning at the end of 2009 with Consumer Discretionary and Industrials remaining two areas of focus, and the most significant underweighting in Materials; however, this understates the changes that occurred within Fund sector structure during the year. Consumer Discretionary totaled approximately 14% at year end, a reduction from our high teens weighting most of the year, as we reduced exposure in companies that had performed well with higher valuations. During the year we also tilted more of our Consumer Discretionary exposure towards luxury-related holdings, an area which had underperformed in the initial stages of the recovery, and maintained significant exposure in auto-related holdings. Financials was another area in which the Fund was significantly underweighted most of the year, with a tilt towards emerging markets Financials. However, during the third quarter, we increased exposure in European and Japanese Financials on improved transparency, abatement of capital concerns, and differentiated growth outlook following the initial European debt crisis. At year end, Financials represented approximately 20%, an increase of nearly 4% since year end 2009, but a decrease since September 30. Materials exposure remained relatively stable during the year,

December 31, 2010

William Blair Funds 39

with approximately 60% of the exposure in chemical-related holdings, and the remainder in mining companies. Regionally, we reduced exposure in emerging markets from over 29% as of year-end 2009 to just over 25% as of year-end 2010, although Fund exposure remained higher than the 24% Index weighting. This reduction was precipitated by concerns about higher valuations amidst monetary policy tightening, and better opportunities in the developed markets at the margin, which had underperformed. As a result, Europe increased from approximately 23% to 31%, while Japan increased from approximately 11% to 15% during the 12 month period.

40 Annual Report

December 31, 2010

International Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		20.09	%		(6.61	)%		3.44	%		5.92	%
Class I		20.47			(6.33	)		3.74			6.21
MSCI All Country World Ex-U.S. IMI (net)		12.73			(4.38	)		5.14			6.24

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-U.S. Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 41

International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—31.2%*
Belgium—0.5%
Colruyt S.A. (Food & staples retailing)		510,755	$	25,970

Denmark—1.7%
Coloplast A/S (Health care equipment & supplies)		171,991		23,372
FLSmidth & Co. A/S (Construction & engineering)		108,851		10,381
Novo Nordisk A/S (Pharmaceuticals)		292,150		32,944
Novozymes A/S (Chemicals)		100,591		14,012
SimCorp A/S (Software)		41,400		6,643

				87,352

Finland—1.2%
Kone Oyj (Machinery)		726,580		40,390
Nokian Renkaat Oyj (Auto components)		618,424		22,685

				63,075

France—7.8%
Air Liquide S.A. (Chemicals)		405,513		51,284
AXA S.A. (Insurance)		1,715,682		28,544
BNP Paribas (Commercial banks)		1,020,049		64,897
Cie Generale des Etablissements Michelin (Auto components)		451,035		32,366
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)		411,455		17,407
Essilor International S.A. (Health care equipment & supplies)		414,723		26,698
L’Oreal S.A. (Personal products)		550,864		61,157
Schneider Electric S.A. (Electrical equipment)		329,967		49,385
Vinci S.A. (Construction & engineering)		1,181,724		64,239

				395,977

Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)		356,822		13,163
BASF SE (Chemicals)		785,175		62,639
*Daimler AG (Automobiles)		391,134		26,515
Fielmann AG (Specialty retail)		127,141		12,086
Lanxess AG (Chemicals)		274,826		21,704
MTU Aero Engines Holding AG (Aerospace & defense)		26,847		1,816
SAP AG (Software)		912,573		46,462
Wincor Nixdorf AG (Computers & peripherals)		194,616		15,867

				200,252

Greece—0.3%
*National Bank of Greece S.A. (Commercial banks)		1,748,872		14,139

Ireland—0.2%
Paddy Power plc (Hotels, restaurants & leisure)		255,196		10,469

Israel—1.4%
Israel Chemicals, Ltd. (Chemicals)		1,932,028		33,120
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		717,227		37,389

				70,509


Issuer	Shares		Value

*Common Stocks—(continued)*

*Europe—31.2%—(continued)*
Italy—1.2%
Ansaldo STS SpA (Transportation infrastructure)		781,596	$	11,196
DiaSorin SpA (Health care equipment & supplies)		261,572		11,259
Saipem SpA (Energy equipment & services)		766,956		37,757

				60,212

Norway—0.2%
*Norwegian Air Shuttle ASA (Airlines)		423,000		8,518

Spain—2.5%
Banco Santander S.A. (Commercial banks)		6,847,921		72,548
Inditex S.A. (Specialty retail)		243,418		18,225
Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		318,338		17,922
Tecnicas Reunidas S.A. (Energy equipment & services)		296,912		18,892

				127,587

Sweden—2.0%
Atlas Copco AB (Machinery)		1,594,007		40,220
Elekta AB (Health care equipment & supplies)		387,491		14,910
Hexagon AB (Machinery)		623,165		13,361
*Hexagon AB Unregistered Shares (Machinery)		207,721		4,453
SKF AB (Machinery)		936,355		26,675

				99,619

Switzerland—8.3%
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)		536,086		31,534
Credit Suisse Group AG (Capital markets)		968,287		39,011
*Dufry Group (Specialty retail)		128,491		17,288
Geberit AG (Building products)		80,966		18,722
Julius Baer Group, Ltd. (Capital markets)		340,722		15,961
Kuehne + Nagel International AG (Marine)		132,676		18,447
Nestle S.A. (Food products)		855,456		50,092
Novartis AG (Pharmaceuticals)		917,632		53,929
*Orascom Development Holding AG (Hotels, restaurants & leisure)		212,871		12,738
Partners Group Holding AG (Capital markets)		138,781		26,331
SGS S.A. (Professional services)		20,804		34,911
Sika AG (Chemicals)		7,385		16,200
Xstrata plc (Metals & mining)		1,083,138		25,424
Zurich Financial Services AG (Insurance)		235,802		61,082

				421,670


*United Kingdom—19.4%*
Abcam plc (Biotechnology)		1,854,615		9,253
Admiral Group plc (Insurance)		795,949		18,800
Aggreko plc (Commercial services & supplies)		632,195		14,607
AMEC plc (Energy equipment & services)		1,396,300		25,035
Amlin plc (Insurance)		2,793,860		17,811
Antofagasta plc (Metals & mining)		630,558		15,848
Aveva Group plc (Software)		598,624		15,064

See accompanying Notes to Financial Statements.

42 Annual Report

December 31, 2010

International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*United Kingdom—19.4%—(continued)*
Babcock International Group plc (Commercial services & supplies)		3,523,075	$	31,364
BG Group plc (Oil, gas & consumable fuels)		1,221,869		24,689
BHP Billiton plc (Metals & mining)		2,250,423		89,505
Britvic plc (Beverages)		1,651,962		12,190
Burberry Group plc (Textiles, apparel & luxury goods)		837,334		14,674
*Carphone Warehouse Group plc (Specialty retail)		1,449,017		8,929
Centrica plc (Multi-utilities)		11,556,959		59,749
Chemring Group plc (Aerospace & defense)		349,383		15,819
Compass Group plc (Hotels, restaurants & leisure)		3,130,583		28,358
Dunelm Group plc (Specialty retail)		1,270,519		10,112
*EnQuest plc (Oil, gas & consumable fuels)		3,439,475		7,481
GlaxoSmithKline plc (Pharmaceuticals)		3,182,720		61,531
IG Group Holdings plc (Diversified financial services)		1,889,052		15,021
Intertek Group plc (Professional services)		545,470		15,095
Johnson Matthey plc (Chemicals)		880,686		27,983
Lancashire Holdings, Ltd. (Insurance)		1,385,320		11,944
Meggitt plc (Aerospace & defense)		1,767,111		10,194
Michael Page International plc (Professional services)		2,538,843		21,969
Next plc (Multiline retail)		817,989		25,188
*Ocado Group plc (Internet & catalog retail)		3,728,333		10,364
Petrofac, Ltd. (Energy equipment & services)		1,374,970		34,021
*Rolls-Royce Group plc (Aerospace & defense)		3,707,101		36,008
Rotork plc (Machinery)		599,584		17,088
RPS Group plc (Commercial services & supplies)		2,714,450		9,751
Serco Group plc (Commercial services & supplies)		2,102,925		18,213
Spirax-Sarco Engineering plc (Machinery)		505,624		15,246
Standard Chartered plc (Commercial banks)		2,255,604		60,681
*Telecity Group plc (Internet software & services)		1,181,288		8,663
*The Berkeley Group Holdings plc (Household durables)		1,096,418		15,214
The Weir Group plc (Machinery)		903,524		25,074
Tullow Oil plc (Oil, gas & consumable fuels)		553,384		10,880
Ultra Electronics Holdings plc (Aerospace & defense)		589,657		15,592
Victrex plc (Chemicals)		554,848		12,829
Vodafone Group plc (Wireless telecommunication services)		33,980,362		87,839

				985,676

*Japan—14.6%*
Canon, Inc. (Office electronics)		1,075,100		55,748
CyberAgent, Inc. (Media)		3,018		6,580
Dena Co., Ltd. (Internet & catalog retail)		737,500		26,452
Exedy Corporation (Auto components)		315,000		10,227


Issuer	Shares		Value

*Common Stocks—(continued)*
Japan—14.6%—(continued)
F.C.C. Co., Ltd. (Auto components)		344,903	$	8,037
Fanuc, Ltd. (Machinery)		452,500		69,500
Gree, Inc. (Internet software & services)		900,600		11,459
K’s Holdings Corporation (Specialty retail)		435,000		11,835
Kakaku.com, Inc. (Internet software & services)		1,950		11,601
Keyence Corporation (Electronic equipment, instruments & components)		132,000		38,239
Miraca Holdings, Inc. (Health care providers & services)		282,000		11,358
MISUMI Group, Inc. (Trading companies & distributors)		534,000		13,306
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)		456,000		31,958
Nabtesco Corporation (Machinery)		570,000		12,160
Nitori Co., Ltd. (Specialty retail)		261,320		22,852
Nitto Denko Corporation (Chemicals)		673,500		31,730
Osaka Securities Exchange Co., Ltd. (Diversified financial services)		1,770		8,927
Point, Inc. (Specialty retail)		219,050		9,618
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		103,800		8,489
Softbank Corporation (Wireless telecommunication services)		2,270,500		78,610
Sony Financial Holdings, Inc. (Insurance)		9,450		38,235
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		3,112,300		110,861
Terumo Corporation (Health care equipment & supplies)		181,200		10,199
USS Co., Ltd. (Specialty retail)		153,000		12,513
Yahoo! Japan Corporation (Internet software & services)		169,969		65,944
Yamada Denki Co., Ltd. (Specialty retail)		371,340		25,338

				741,776


*Emerging Asia—13.2%*
China—3.5%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		1,920,000		5,126
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		8,655,000		36,300
China Yurun Food Group, Ltd. (Food products)		2,710,000		8,908
CNOOC, Ltd. (Oil, gas & consumable fuels)		21,311,000		50,558
Dongfang Electric Corporation, Ltd. (Electrical equipment)		3,257,200		16,133
Dongfeng Motor Group Co., Ltd. (Automobiles)		8,002,000		13,795
Great Wall Motor Co., Ltd. (Automobiles)		3,059,000		9,445
Haitian International Holdings, Ltd. (Machinery)		2,254,000		2,352
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		117,167		1,776
Lonking Holdings, Ltd. (Machinery)		17,220,000		9,416
Minth Group, Ltd. (Auto components)		2,820,000		4,629
Shanghai Electric Group Co., Ltd. (Electrical equipment)		23,760,171		15,682

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 43

International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Asia—13.2%—(continued)*
China—3.5%—(continued)
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)		1,166,000	$	4,583

				178,703

India—2.4%
Asian Paints, Ltd. (Chemicals)		247,322		15,922
Axis Bank, Ltd. (Commercial banks)		709,692		21,428
Infosys Technologies, Ltd. (IT services)		429,695		33,084
Lupin, Ltd. (Pharmaceuticals)		1,318,509		14,226
Shriram Transport Finance Co., Ltd. (Consumer finance)		279,002		4,873
Tata Motors, Ltd. (Machinery)		881,490		25,792
Yes Bank, Ltd. (Commercial banks)		942,591		6,594

				121,919

Indonesia—3.1%
PT Astra International Tbk (Automobiles)		8,310,000		50,312
PT Bank Rakyat Indonesia (Commercial banks)		24,900,000		29,018
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		681,500		3,838
PT Indofood Sukses Makmur Tbk (Food products)		34,784,500		18,821
PT Kalbe Farma Tbk (Pharmaceuticals)		30,597,000		11,037
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		10,515,000		14,996
PT United Tractors Tbk (Machinery)		11,340,000		29,955

				157,977

Malaysia—0.5%
Genting Bhd (Hotels, restaurants & leisure)		804,600		2,918
Kuala Lumpur Kepong Bhd (Food products)		2,582,500		18,509
Top Glove Corporation Bhd (Health care equipment & supplies)		3,114,000		5,029

				26,456

South Korea—3.0%
*Halla Climate Control Corporation (Auto components)		289,382		5,100
*Hankook Tire Co., Ltd. (Auto components)		431,370		12,068
*Hyundai Mobis (Auto components)		73,088		18,322
*Hyundai Motor Co. (Automobiles)		248,809		38,037
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		93,505		78,188

				151,715

Thailand—0.7%
CP ALL PCL (Food & staples retailing)		11,439,100		14,894
Kasikornbank PCL (Commercial banks)		4,692,300		19,535

				34,429

Brazil—5.6%
Amil Participacoes S.A. (Health care providers & services)		23,804		255


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Latin America—9.5%*
Brazil—5.6%—(continued)
BM&F BOVESPA S.A. (Diversified financial services)		1,687,200	$	13,345
BR Malls Participacoes S.A. (Real estate management & development)		1,212,000		12,485
BR Properties S.A. (Real estate management & development)		1,242,159		13,589
Cia de Concessoes Rodoviarias (Transportation infrastructure)		526,000		14,861
Cia Hering (Textiles, apparel & luxury goods)		593,100		9,647
Diagnosticos da America S.A. (Health care providers & services)		888,000		12,036
Drogasil S.A. (Food & staples retailing)		584,100		4,750
Iochpe-Maxion S.A. (Machinery)		550,200		7,988
Localiza Rent a Car S.A. (Road & rail)		1,290,000		20,904
Lojas Renner S.A. (Multiline retail)		558,000		18,959
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		938,827		11,650
Natura Cosmeticos S.A. (Personal products)		1,419,000		40,766
OdontoPrev S.A. (Health care providers & services)		981,000		14,827
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		3,205,200		38,617
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		3,360,000		20,565
SLC Agricola S.A. (Food products)		502,800		6,664
Vale S.A.—ADR (Metals & mining)		718,991		24,856

				286,764

Chile—0.9%
Banco Santander Chile—ADR (Commercial banks)		282,452		26,401
Lan Airlines S.A. (Airlines)		630,155		19,658

				46,059

Colombia—0.6%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		881,856		29,933

Mexico—1.9%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		814,536		46,706
*Compartamos S.A.B. de C.V. (Consumer finance)		6,840,000		14,876
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		3,657,656		8,879
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,443,600		26,526

				96,987

Peru—0.5%
Credicorp, Ltd. (Commercial banks)†		203,697		24,222


*Canada—3.9%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		2,142,795		71,334
Canadian National Railway Co. (Road & rail)		376,100		25,097

See accompanying Notes to Financial Statements.

44 Annual Report

December 31, 2010

International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*
*Canada—3.9%—(continued)*
Canadian Western Bank (Commercial banks)		437,232	$	12,471
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		531,000		15,140
Home Capital Group, Inc. (Thrifts & mortgage finance)		101,101		5,266
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)		949,237		20,726
Petrominerales, Ltd. (Oil, gas & consumable fuels)		258,242		8,613
Saputo, Inc. (Food products)		477,612		19,012
Tim Hortons, Inc. (Hotels, restaurants & leisure)		425,416		17,585

				195,244


*Asia—2.9%*
Hong Kong—1.0%
Li & Fung, Ltd. (Distributors)		4,236,000		24,578
Noble Group, Ltd. (Trading companies & distributors)		15,284,000		25,844

				50,422

Singapore—1.9%
CapitaLand, Ltd. (Real estate management & development)		9,799,000		28,328
CapitaMalls Asia, Ltd. (Real estate management & development)		18,687,000		28,248
*Global Logistic Properties, Ltd. (Real estate management & development)		7,794,000		13,118
Midas Holdings, Ltd. (Metals & mining)		6,510,000		4,648
Olam International, Ltd. (Food & staples retailing)		8,244,000		20,171

				94,513


*Emerging Europe, Mid-East, Africa—2.6%*
Egypt—0.4%
Commercial International Bank Egypt S.A.E. (Commercial banks)		1,663,888		13,586
Egyptian Financial Group-Hermes Holding (Capital markets)		1,321,510		7,722

				21,308

South Africa—1.2%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		789,848		7,182
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		1,215,909		16,983
Clicks Group, Ltd. (Multiline retail)		1,987,096		13,074
Shoprite Holdings, Ltd. (Food & staples retailing)		858,252		12,983
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		536,674		11,324

				61,546


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Emerging Europe, Mid-East, Africa—2.6%—(continued)*
Turkey—1.0%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		1,938,600	$	9,994
Turkiye Garanti Bankasi A.S. (Commercial banks)		4,868,825		24,660
Turkiye Halk Bankasi A.S. (Commercial banks)		1,945,319		16,505

				51,159

Total Common Stocks—97.3% (cost $3,916,831)				4,942,157


*Convertible Bond*
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	2,875		1,876

Total Convertible Bond—0.0% (cost $1,491)				1,876


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $153,881 collateralized by FHLB, 4.625%, due 8/15/12, FHLMC, 1.250%, due 9/30/13, FNMA, 1.050%—5.250%, due 8/12/12—10/22/13, and U.S. Treasury Notes, 0.625%—1.375%, due 5/12/12—6/30/12		153,879		153,879

Total Repurchase Agreement—3.0% (cost $153,879)				153,879

Total Investments—100.3% (cost $4,072,201)				5,097,912
Liabilities, plus cash and other assets—(0.3)%				(15,733	)

Net assets—100.0%			$	5,082,179

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.04% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at December 31, 2010.

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 45

International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.5%
Industrials			19.1%
Consumer Discretionary			14.4%
Materials			9.6%
Information Technology			8.9%
Health Care			7.9%
Energy			7.0%
Consumer Staples			6.7%
Telecommunication Services			4.3%
Utilities			1.6%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling			20.5%
Euro			18.2%
Japanese Yen			15.0%
Swiss Franc			8.0%
Brazilian Real			5.3%
U.S. Dollar			4.7%
Hong Kong Dollar			4.2%
Indonesian Rupiah			3.2%
Canadian Dollar			3.1%
South Korean Won			3.1%
Indian Rupee			2.5%
Singapore Dollar			2.3%
Swedish Krona			2.0%
Danish Krone			1.8%
South African Rand			1.2%
Turkish Lira			1.0%
Mexican Peso			1.0%
All Other Currencies			2.9%

Total			100.0%

See accompanying Notes to Financial Statements.

46 Annual Report

December 31, 2010

LOGO

David Merjan

INTERNATIONAL EQUITY FUND

The International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Equity Fund posted a 10.92% increase (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net), gained 12.73%.

Calendar year performance for the Fund outpaced the Europe, Australia and Far East (EAFE) Index but trailed the MSCI ACWI Ex-US Index. Energy stock selection added significant value versus the ACWI Ex-US Index, with stock performance more than doubling the Index sector return. Service companies were the primary drivers of strong returns, coupled with good performance by CNOOC, Ltd. on the back of strong production growth during the year. Industrials, Healthcare and Telecom Services stock selection was also strong, as Healthcare stock selection was led by Europe, while Industrials stock selection benefited from demand for Komatsu, Ltd.’s heavy construction equipment in emerging markets, coupled with stabilizing developed market demand. In addition, the Fund’s airline, machinery and electrical equipment names also performed well. Telecom Services stock selection was bolstered by Softbank, which benefited from increased use of smartphones and its tie up with Apple, Inc. The key detractors from performance during the year included Materials holdings CRH plc and Vedanta Resources plc, along with E.on in Utilities. We sold CRH earlier in the year on concerns about worse than expected trading conditions in building materials and Vedanta during the fourth quarter, due to deteriorating government relations and concerns about the associated impact on the timing and composition of the project pipeline. We sold E.on as a result of expected continued weakness in power prices.

The Fund’s fourth quarter performance approximated the EAFE Index, but trailed the MSCI ACWI Ex-US Index. While the Fund was up 6.77%, for the quarter, and Developed Asian and Europe Ex-U.K. stock selection was strong, the Fund’s U.K., Canadian and EMEA stock selection more than offset these positive relative results. U.K. stock selection lagged across most sectors, with the exception of Financials, although the overweighting in U.K. Financials was negative. Canadian stock selection was hampered by the lack of Energy exposure, coupled with underperformance by Goldcorp. The Fund’s focus on EMEA Financials also detracted from performance, as these names underperformed the region as a whole. Developed Asian stock selection was bolstered by good performance by BHP Billiton on a stock buyback program and accelerating commodity prices. Japanese stock selection added value through Financials performance coupled with strong results from Komatsu, Ltd. and Fanuc, Ltd., along with good performance by Japanese IT companies. Within Europe Ex-U.K., Saipem SpA, the energy services company, performed well, while the underweighting and stock selection in Financials was also a key contributor. European Healthcare stocks were also additive to results.

As of year-end 2010 the Fund maintained its focus in Industrials with just under 22% invested in the sector. While decreasing since September 30 due to a reduction in European holdings, it remained significantly overweighted versus the 12% Index weighting, due largely to significant developed market exposure, particularly in Japanese machinery and European electrical equipment and outsourcing companies, along with trading companies. Financials, while underweighted at 20% versus the 24% Index weighting, was the second largest sector, with significant exposure in emerging markets-related holdings, as well as European insurance companies, and remained relatively stable during the year. Materials remained the most underweighted sector at approximately 8% of the Fund versus the 13% Index weighting, as we were underweighted in chemicals and mining, the two significant industries within the Index. Regionally, the Fund remained focused in Europe, with approximately 26% invested in Europe Ex-U.K. and 23% in the U.K. Europe Ex-U.K. exposure moderated during the twelve

December 31, 2010

William Blair Funds 47

month period from 32% as of year-end 2009 as an increase in European Staples was more than offset by a decrease in Financials and Healthcare. Conversely, U.K. exposure increased during the period from approximately 18% to nearly 23%, ahead of the Index weighting, as exposure broadened across a number of sectors. Japan represented approximately 14% of the Fund as of year end, below the Index weighting, but increased during the year, particularly in Financials and Industrials. Emerging markets were underweighted during the entire twelve month period and ended the year at 18% versus the 24% Index weighting, due to lower exposure in Emerging Asia and EMEA.

48 Annual Report

December 31, 2010

International Equity Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		10.92	%		(8.97	)%		1.26	%		4.87	%
Class I		11.19			(8.76	)		1.50			5.15
MSCI All Country World Ex-U.S. IMI (net)		12.73			(4.38	)		5.14			9.72

(a)

For the period from May 24, 2004 (Commencement of Operations) to December 31, 2010.

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.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 49

International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—26.2%*
Belgium—0.8%
Anheuser-Busch InBev N.V. (Beverages)		24,127	$	1,380

Denmark—1.6%
Novo Nordisk A/S (Pharmaceuticals)		25,689		2,897

Finland—1.4%
Kone Oyj (Machinery)		43,364		2,410

France—3.8%
AXA S.A. (Insurance)		68,096		1,133
Cie Generale des Etablissements Michelin (Auto components)		24,887		1,786
L’Oreal S.A. (Personal products)		19,500		2,165
Schneider Electric S.A. (Electrical equipment)		10,604		1,587

				6,671

Germany—2.8%
MAN SE (Machinery)		21,740		2,585
SAP AG (Software)		48,673		2,478

				5,063

Ireland—1.5%
Ryanair Holdings plc—ADR (Airlines)		88,536		2,723

Israel—1.4%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		47,137		2,457

Italy—1.9%
Saipem SpA (Energy equipment & services)		68,167		3,356

Spain—2.2%
Banco Santander S.A. (Commercial banks)		150,020		1,589
Inditex S.A. (Specialty retail)		31,500		2,359

				3,948

Sweden—0.9%
Atlas Copco AB (Machinery)		65,342		1,649

Switzerland—7.9%
*ABB, Ltd. (Electrical equipment)		104,662		2,332
*Actelion, Ltd. (Biotechnology)		19,836		1,086
Julius Baer Group, Ltd. (Capital markets)		35,895		1,682
Nestle S.A. (Food products)		59,982		3,512
Novartis AG (Pharmaceuticals)		37,033		2,177
Sonova Holding AG (Health care equipment & supplies)		8,609		1,111
Zurich Financial Services AG (Insurance)		8,239		2,134

				14,034


*United Kingdom—23.0%*
Amlin plc (Insurance)		136,783		872
Antofagasta plc (Metals & mining)		100,376		2,523
*Autonomy Corporation plc (Software)		66,027		1,549
Barclays plc (Commercial banks)		302,334		1,233
BG Group plc (Oil, gas & consumable fuels)		149,628		3,023
British Sky Broadcasting Group plc (Media)		219,085		2,514
Burberry Group plc (Textiles, apparel & luxury goods)		99,975		1,752
Centrica plc (Multi-utilities)		306,898		1,587
Compass Group plc (Hotels, restaurants & leisure)		286,086		2,592


Issuer	Shares		Value

*Common Stocks—(continued)*

*United Kingdom—(continued)*
Experian plc (Professional services)		140,648	$	1,750
HSBC Holdings plc (Commercial banks)		149,496		1,533
Johnson Matthey plc (Chemicals)		52,126		1,656
Petrofac, Ltd. (Energy equipment & services)		81,983		2,029
Prudential plc (Insurance)		229,510		2,390
Reckitt Benckiser Group plc (Household products)		56,950		3,130
*Rolls-Royce Group plc (Aerospace & defense)		245,454		2,384
Rotork plc (Machinery)		43,534		1,241
Standard Chartered plc (Commercial banks)		78,667		2,116
The Capita Group plc (Professional services)		131,467		1,428
Tullow Oil plc (Oil, gas & consumable fuels)		98,865		1,944
Vodafone Group plc (Wireless telecommunication services)		623,781		1,612

				40,858


*Japan—13.9%*
Canon, Inc. (Office electronics)		65,200		3,381
Fanuc, Ltd. (Machinery)		14,800		2,273
Keyence Corporation (Electronic equipment, instruments & components)		9,500		2,752
Komatsu, Ltd. (Machinery)		81,200		2,457
Mitsubishi Corporation (Trading companies & distributors)		125,600		3,400
Mitsubishi UFJ Financial Group, Inc. (Commercial banks)		344,800		1,864
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)		100,000		1,444
Nitori Co., Ltd. (Specialty retail)		10,000		874
Nitto Denko Corporation (Chemicals)		30,900		1,456
Softbank Corporation (Wireless telecommunication services)		75,400		2,611
Sony Financial Holdings, Inc. (Insurance)		266		1,076
Terumo Corporation (Health care equipment & supplies)		21,900		1,233

				24,821


*Canada—8.7%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		75,108		2,500
Canadian National Railway Co. (Road & rail)†		42,517		2,826
Goldcorp, Inc. (Metals & mining)†		45,513		2,093
Saputo, Inc. (Food products)		38,011		1,513
The Toronto-Dominion Bank (Commercial banks)		39,681		2,963
Thomson Reuters Corporation (Media)		33,956		1,272
Tim Hortons, Inc. (Hotels, restaurants & leisure)		55,176		2,281

				15,448


*Emerging Asia—9.1%*
China—4.2%
China Life Insurance Co., Ltd. (Insurance)		412,000		1,683
China Overseas Land & Investment, Ltd. (Real estate management & development)		626,000		1,158
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		366,000		1,535
CNOOC, Ltd. (Oil, gas & consumable fuels)		899,000		2,133
Weichai Power Co., Ltd. (Machinery)		170,000		1,046

				7,555

See accompanying Notes to Financial Statements.

50 Annual Report

December 31, 2010

International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Asia—(continued)*
India—3.1%
*Cairn India, Ltd. (Oil, gas & consumable fuels)		199,443	$	1,484
HDFC Bank, Ltd.—ADR (Commercial banks)		7,908		1,321
Infosys Technologies, Ltd. (IT services)		35,702		2,749

				5,554

Indonesia—0.6%
PT Bank Rakyat Indonesia (Commercial banks)		901,000		1,050

South Korea—1.2%
*Hyundai Motor Co. (Automobiles)		14,185		2,169


*Emerging Latin America—8.2%*
Brazil—5.3%
Banco Santander Brasil S.A.—ADR (Commercial banks)		49,003		666
BM&F BOVESPA S.A. (Diversified financial services)		207,671		1,643
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		167,000		1,022
Petroleo Brasileiro S.A.—ADR (Oil, gas & consumable fuels)		39,021		1,477
Vale S.A.—ADR (Metals & mining)		74,223		2,566
Weg S.A. (Machinery)		150,500		1,976

				9,350

Mexico—2.2%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		37,914		2,174
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		640,900		1,831

				4,005

Panama—0.7%
Copa Holdings S.A. Class “A” (Airlines)†		21,081		1,241


*Asia—5.2%*
Australia—1.7%
BHP Billiton, Ltd.—ADR (Metals & mining)		32,225		2,994

Hong Kong—2.6%
Li & Fung, Ltd. (Distributors)		458,000		2,658
Noble Group, Ltd. (Trading companies & distributors)		1,106,727		1,871

				4,529

Singapore—0.9%
CapitaLand, Ltd. (Real estate management & development)		571,000		1,651


*Emerging Europe, Mid-East, Africa—0.9%*
Turkey—0.9%
Turkiye Garanti Bankasi A.S. (Commercial banks)		330,320		1,673

Total Common Stocks—95.2% (cost $130,004)				169,486


Issuer	Shares or Principal Amount		Value

*Preferred Stock*
Brazil—1.1%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		125,793	$	2,068

Total Preferred Stock—1.1% (cost $1,550)				2,068


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $3,703, collateralized by U.S. Treasury Note, 1.375%, due 5/15/13	$	3,702		3,702

Total Repurchase Agreement—2.1% (cost $3,702)				3,702

Total Investments—98.4% (cost $135,256)				175,256
Cash and other assets, less liabilities—1.6%				2,799

Net assets—100.0%			$	178,055

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Industrials			21.7%
Financials			19.7%
Consumer Discretionary			12.4%
Energy			11.1%
Information Technology			8.4%
Consumer Staples			7.9%
Materials			7.8%
Health Care			6.4%
Telecommunication Services			3.7%
Utilities			0.9%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 51

International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling			22.9%
U.S. Dollar			14.6%
Japanese Yen			14.5%
Euro			13.3%
Swiss Franc			8.2%
Hong Kong Dollar			6.8%
Canadian Dollar			4.7%
Brazilian Real			3.9%
Indian Rupee			2.5%
Singapore Dollar			2.0%
Danish Krone			1.7%
South Korean Won			1.3%
Mexican Peso			1.1%
All Other Currencies			2.5%

Total			100.0%

See accompanying Notes to Financial Statements.

52 Annual Report

December 31, 2010

LOGO

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Small Cap Growth Fund posted a 25.88% increase (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. Small Cap Index (net), gained 25.21%.

The Fund outpaced the Index during the 12 month period, as stock selection was additive in virtually all sectors. Energy and Materials stock selection was particularly strong, with the Fund’s Energy stocks up approximately 57%, well ahead of the Index’s 31% Energy return. U.K. and Canadian stock selection augmented results on improving production growth, M&A activity and strength in services names, while Pacific Rubiales Energy Corporation, the Colombian Exploration and Production (E&P) company reported strong production growth. Materials stocks also enhanced performance, benefiting from M&A activity as Red Back Mining, Inc. was acquired during the year, and as other chemicals and mining holdings performed well. Healthcare was another sector where notable value was added, as Emerging Asian pharmaceuticals and Latin American healthcare names performed well, coupled with strong results in Europe and Japan. Finally, Staples stock selection was bolstered by M&A activity in Japan, coupled with strong results in agriculture-related and emerging markets grocery holdings. Somewhat detracting from results was performance by EDF Energies Nouvelles S.A., the Fund’s sole Utilities holding, which underperformed as investors were concerned about governmental policies surrounding alternative energy given recently announced austerity measures. Stock selection was strong across most regions as well, with the exception of Pacific Ex-Japan and Emerging Asia.

The Fund trailed the Index during the fourth quarter, due to underperformance in December. While stock selection was generally strong across most sectors, underperformance in Consumer Discretionary, Industrials and Information Technology (IT), coupled with overall sector positioning, detracted from fourth quarter results. Within Consumer Discretionary, Chinese sportswear and auto stocks detracted from performance, as did underperformance in Emerging Markets Europe, Mid-East, and Africa (EMEA) holdings. Industrials stock selection was hampered by lagging results in U.K. holdings, while IT stock selection was hurt by underperformance by Gree, Inc., the Japanese social networking company, on concerns about slowing revenues per user. Offsetting these results was strong value added in Materials, Energy and Financials.

While absolute weightings varied during the year, broad areas of sector emphasis did not change during the period. As of year end the Fund remains overweighted in Consumer Discretionary, Healthcare and IT at the expense of Financials and Materials. Consumer Discretionary increased during the year and represented approximately 24% of the Fund, albeit down from 26% as of September 30, as we reduced exposure on valuation concerns, but well above the 16% Index weighting. IT, on the other hand, has steadily increased during 2010 from approximately 16% as of year-end 2009 to approximately 18% as of year-end 2010, well ahead of the 10% Index weighting. IT exposure is centered in Europe with approximately half of the Fund’s IT weighting in that region, invested across several industries. Conversely, Materials is just shy of 5%, significantly underweighted versus the Index. Regionally, we reduced exposure in Europe ex-U.K. during the 12 month period in favor of emerging markets, which represented 24% of the Fund as of year end. Europe fell from over 30% to 26.8% by year end. Japan has remained at approximately 16.7% of the Fund during the entire period, with a focus in small cap consumer and, to some extent Healthcare companies. With this weighting, exposure has hovered around Index weight.

December 31, 2010

William Blair Funds 53

International Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		25.88	%		(1.60	)%		5.33	%		7.41	%
Class I		26.24			(1.24	)		5.67			7.74
MSCI AC World Ex-U.S. Small Cap Index (net)		25.21			0.50			7.36			9.11

(a)

For the period from November 1, 2005 (Commencement of Operations) to December 31, 2010.

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) All Country World Ex-U.S. Small Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of small capitalization developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

54 Annual Report

December 31, 2010

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
*Europe—26.8%*
Denmark—1.9%
FLSmidth & Co. A/S (Construction & engineering)		126,535	$	12,068

Finland—1.0%
Nokian Renkaat Oyj (Auto components)		177,483		6,510

France—1.4%
Gemalto N.V. (Computers & peripherals)		217,146		9,241

Germany—7.5%
Aixtron AG (Semiconductors & semiconductor equipment)		353,519		13,041
Fielmann AG (Specialty retail)		36,250		3,446
Lanxess AG (Chemicals)		166,850		13,177
MTU Aero Engines Holding AG (Aerospace & defense)		8,416		569
Wincor Nixdorf AG (Computers & peripherals)		183,112		14,929
Wirecard AG (IT services)		255,453		3,499

				48,661

Ireland—1.5%
Paddy Power plc (Hotels, restaurants & leisure)		236,965		9,721

Italy—1.5%
DiaSorin SpA (Health care equipment & supplies)		149,025		6,414
Tod’s SpA (Textiles, apparel & luxury goods)		30,438		3,006

				9,420

Netherlands—0.3%
BinckBank N.V. (Capital markets)		125,245		1,942

Norway—0.1%
*Pronova BioPharma A/S (Pharmaceuticals)		619,646		998

Spain—3.7%
Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		106,091		5,973
Tecnicas Reunidas S.A. (Energy equipment & services)		171,750		10,928
Viscofan S.A. (Food products)		182,590		6,920

				23,821

Sweden—1.6%
Elekta AB (Health care equipment & supplies)		265,618		10,221

Switzerland—6.3%
*Dufry Group (Specialty retail)		80,122		10,780
*Orascom Development Holding AG (Hotels, restaurants & leisure)		55,352		3,312
Partners Group Holding AG (Capital markets)		74,649		14,163
*Temenos Group AG (Software)		296,213		12,324

				40,579


*United Kingdom—20.7%*
Abcam plc (Biotechnology)		886,958		4,425
Aggreko plc (Commercial services & supplies)		251,754		5,817
Amlin plc (Insurance)		1,198,156		7,638
Ashmore Group plc (Capital markets)		640,980		3,349


Issuer	Shares		Value

*Common Stocks—(continued)*
*United Kingdom—20.7%—(continued)*
*ASOS plc (Internet & catalog retail)		9,663	$	240
Aveva Group plc (Software)		240,979		6,064
Babcock International Group plc (Commercial services & supplies)		983,798		8,758
*Blinkx plc (Internet software & services)		1,212,606		1,574
Britvic plc (Beverages)		391,893		2,892
Chemring Group plc (Aerospace & defense)		61,137		2,768
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)		198,124		1,704
Dunelm Group plc (Specialty retail)		424,413		3,378
*EnQuest plc (Oil, gas & consumable fuels)		3,183,121		6,923
Fidessa Group plc (Software)		90,598		2,189
Hargreaves Lansdown plc (Capital markets)		430,045		3,929
IG Group Holdings plc (Diversified financial services)		375,671		2,987
*Imagination Technologies Group plc (Computers & peripherals)		489,931		2,754
Intertek Group plc (Professional services)		140,008		3,875
John Wood Group plc (Energy equipment & services)		817,247		7,123
Lancashire Holdings, Ltd. (Insurance)		528,696		4,558
Meggitt plc (Aerospace & defense)		957,881		5,526
Michael Page International plc (Professional services)		841,079		7,278
Serco Group plc (Commercial services & supplies)		700,185		6,064
Spirax-Sarco Engineering plc (Machinery)		294,024		8,866
*Telecity Group plc (Internet software & services)		231,115		1,695
The Weir Group plc (Machinery)		390,838		10,846
Ultra Electronics Holdings plc (Aerospace & defense)		221,798		5,865
Victrex plc (Chemicals)		209,237		4,838

				133,923


*Japan—16.7%*
Aeon Delight Co., Ltd. (Commercial services & supplies)		100,300		1,975
Ain Pharmaciez, Inc. (Food & staples retailing)		92,500		3,254
CyberAgent, Inc. (Media)		2,697		5,880
Dena Co., Ltd. (Internet & catalog retail)		310,100		11,122
EPS Co., Ltd. (Life sciences tools & services)		675		1,652
Exedy Corporation (Auto components)		397,400		12,902
F.C.C. Co., Ltd. (Auto components)		200,509		4,673
Gree, Inc. (Internet software & services)		599,330		7,625
Kakaku.com, Inc. (Internet software & services)		691		4,111
Miraca Holdings, Inc. (Health care providers & services)		354,400		14,274
Nabtesco Corporation (Machinery)		313,000		6,677
Nitori Co., Ltd. (Specialty retail)		54,100		4,731
Osaka Securities Exchange Co., Ltd. (Diversified financial services)		1,342		6,769
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		61,200		5,005
Start Today Co., Ltd. (Internet & catalog retail)		1,467		5,863
USS Co., Ltd. (Specialty retail)		140,100		11,458

				107,971

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 55

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Asia—15.4%*
China—6.8%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		2,945,559	$	7,863
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)		3,375,429		5,671
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		2,178,297		2,461
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)		127,213		939
*E-Commerce China Dangdang, Inc.—ADR (Internet & catalog retail)		39,664		1,074
Great Wall Motor Co., Ltd. (Automobiles)		1,205,500		3,722
Haitian International Holdings, Ltd. (Machinery)		5,540,496		5,781
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		106,925		1,621
Lonking Holdings, Ltd. (Machinery)		8,144,000		4,453
Minth Group, Ltd. (Auto components)		2,795,384		4,589
*Noah Holdings, Ltd.—ADR (Capital markets)		50,062		979
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)		2,163,000		1,419
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		134,953		2,178
*Youku.com, Inc.—ADR (Internet software & services)		29,956		1,049

				43,799

India—2.4%
eClerx Services, Ltd. (Professional services)		55,468		893
Ipca Laboratories, Ltd. (Pharmaceuticals)		419,452		3,241
Lupin, Ltd. (Pharmaceuticals)		637,966		6,883
*Oberoi Realty, Ltd. (Real estate management & development)		258,634		1,479
Shriram Transport Finance Co., Ltd. (Consumer finance)		173,183		3,025

				15,521

Indonesia—1.5%
*PT Ciputra Development Tbk (Real estate management & development)		16,680,000		648
*PT Indofood CBP Sukses Makmur Tbk (Food products)		2,388,500		1,239
PT Kalbe Farma Tbk (Pharmaceuticals)		11,518,500		4,155
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		2,528,000		3,605

				9,647

South Korea—1.5%
*Halla Climate Control Corporation (Auto components)		541,048		9,535

Taiwan—3.2%
Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		1,472,000		4,897
Tripod Technology Corporation (Electronic equipment, instruments & components)		1,433,000		5,849
Wistron Corporation (Computers & peripherals)		5,062,102		10,313

				21,059


Issuer	Shares		Value

*Common Stocks—(continued)*
*Canada—6.6%*
Canadian Western Bank (Commercial banks)		274,900	$	7,841
*Consolidated Thompson Iron Mines, Ltd. (Metals & mining)		678,190		9,610
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		162,900		4,645
Home Capital Group, Inc. (Thrifts & mortgage finance)		67,991		3,541
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		325,062		5,084
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)		223,778		4,886
Petrominerales, Ltd. (Oil, gas & consumable fuels)		211,244		7,045

				42,652


*Emerging Europe, Mid-East, Africa—4.6%*
Egypt—0.4%
Ghabbour Auto (Automobiles)		377,091		2,822

South Africa—2.7%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		327,381		2,977
Clicks Group, Ltd. (Multiline retail)		1,410,429		9,279
Mr Price Group, Ltd. (Specialty retail)		496,785		5,015

				17,271

Turkey—1.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		17,525		596
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		628,155		3,238
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		1,767,415		2,988

				6,822

United Arab Emirates—0.5%
*Aramex Co. (Air freight & logistics)		5,534,926		3,134


*Emerging Latin America—3.9%*
Brazil—2.3%
Brasil Brokers Participacoes S.A. (Real estate management & development)		381,800		2,197
CETIP S.A. - Balcao Organizado de Ativos e Derivativos (Capital markets)		362,200		5,149
Drogasil S.A. (Food & staples retailing)		177,000		1,439
OdontoPrev S.A. (Health care providers & services)		260,600		3,939
Tegma Gestao Logistica S.A. (Road & rail)		129,000		1,978

				14,702

Mexico—1.6%
*Compartamos S.A.B. de C.V. (Consumer finance)		1,688,700		3,673
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,606,720		3,900
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)		962,387		2,925

				10,498

See accompanying Notes to Financial Statements.

56 Annual Report

December 31, 2010

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Asia—2.7%*
Australia—1.2%
Cochlear, Ltd. (Health care equipment & supplies)		96,774	$	7,959

Hong Kong—0.5%
Value Partners Group, Ltd. (Capital markets)		3,453,000		3,465

Singapore—1.0%
Goodpack, Ltd. (Air freight & logistics)		2,163,000		3,455
Midas Holdings, Ltd. (Metals & mining)		3,531,000		2,600

				6,055

Total Common Stocks—97.4% (cost $495,830)				630,017


*Preferred Stock*
Brazil—0.6%
Marcopolo S.A. (Machinery)		905,600		3,813

Total Preferred Stock—0.6% (cost $2,840)				3,813


*Convertible Bond*
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		626

Total Convertible Bond—0.1% (cost $497)				626


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $16,170, collateralized by FNMA, 4.625%, due 10/15/13		16,170		16,170

Total Repurchase Agreement—2.5% (cost $16,170)				16,170

Total Investments—100.6% (cost $515,337)				650,626
Liabilities, plus cash and other assets—(0.6)%				(3,675	)

Net assets—100.0%			$	646,951

ADR = American Depository Receipt

* = Non-income producing securities

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.10% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.10% of the net assets at December 31, 2010.

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Consumer Discretionary	23.6	%
Industrials	18.4	%
Information Technology	17.8	%
Financials	12.7	%
Health Care	12.5	%
Energy	6.6	%
Materials	4.8	%
Consumer Staples	3.6	%

Total	100.0	%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling	21.1	%
Euro	17.2	%
Japanese Yen	17.0	%
Canadian Dollar	6.7	%
Swiss Franc	6.4	%
Hong Kong Dollar	6.2	%
New Taiwan Dollar	3.3	%
Brazilian Real	3.0	%
South African Rand	2.7	%
Indian Rupee	2.5	%
Danish Krone	1.9	%
Mexican Peso	1.7	%
Swedish Krona	1.6	%
Indonesian Rupiah	1.5	%
South Korean Won	1.5	%
Australian Dollar	1.3	%
U.S. Dollar	1.2	%
Turkish Lira	1.1	%
All Other Currencies	2.1	%

Total	100.0	%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 57

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Growth Fund posted a 23.44% increase (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net), gained 19.90%.

The Fund significantly outpaced the Index during the twelve month period, as stock selection was strong across most sectors and was supported by overall strategic positioning. Specifically, the Fund’s overweighting and stock selection in Consumer stocks added significant value during the 12 month period. Consumer Discretionary stock selection was bolstered by auto-related corporate performance and stock price movement, along with good returns in Brazilian real estate. Staples stock selection was augmented by Emerging Markets Europe, Mid-East, and Africa (EMEA) grocery holdings, as well as Asian consumer product and agriculture-related holdings. In addition, the overweighting in the strongly performing Latin American Staples sector, coupled with positive stock selection added value. The Healthcare and Industrials sectors each outperformed by approximately 12% versus the Index sector returns, as infrastructure and transportation holdings bolstered the Industrials return, while Healthcare stock selection was particularly strong in Emerging Asia and EMEA. The Fund also outperformed across the three emerging markets regions during the year. Somewhat detracting from results was Materials stock selection, as several of our Asian and EMEA holdings underperformed, due to stock specific issues.

Despite strong full year results, fourth quarter performance trailed the Index, due solely to December performance. Asian stock selection was the key detractor during the period, as the Fund’s Chinese sportswear and auto-related companies underperformed. In addition, Indian Financials also contributed to underperformance as investors were concerned about increasing interest rates and the impact of additional governmental oversight in the microfinance industry on the broader sector. Information Technology (IT) stock selection was the third primary contributor to underperformance as Baidu, Inc.’s stock price retreated after a strong run. Offsetting these relative results was strong performance in Healthcare, Materials, Telecom Services and Utilities, along with broad outperformance in Latin America. Within Healthcare, Latin American holdings added value, as did Asian pharmaceutical companies. Materials stock selection was augmented by good results in the Fund’s Latin American mining names and increasing commodity prices generally.

As of year-end 2010, the Fund maintained its Consumer focus with approximately 30% of the Fund invested between Consumer Discretionary and Staples holdings. We reduced exposure in Consumer Discretionary following September 30 on valuation concerns to approximately 15.5% of the Fund. Conversely, Financials, while representing nearly 20% of the Fund, remained underweighted during 2010, due to lower Asian exposure, particularly in real estate, given the increasing interest rate environment and governmental measures to cool the property market. While the Fund’s 10.5% IT exposure is similar to September 30, it decreased from year-end 2009 due to concerns about the current supply/demand tradeoff and inventory cycle. The Fund was underweighted in Materials throughout the year, but increased from approximately 5.5% to 9% as of year-end 2010. Regionally, approximately half of the Fund was focused in Emerging Asia, less than the 59.73% Index weighting, while the overweighting in Latin America increased throughout the year as the Fund’s exposure increased from approximately 22% to 27%, due to an increase in Financials, Healthcare and Materials, which more than offset a reduction in Consumer Discretionary.

58 Annual Report

December 31, 2010

Emerging Markets Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		23.44	%		(6.33	)%		9.31	%		15.43	%
Class I		23.77			(6.10	)		9.56			15.70
MSCI Emerging Markets IMI (net)		19.90			0.35			13.23			16.84

(a)

For the period from June 6, 2005 (Commencement of Operations) to December 31, 2010.

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 Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 59

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
*Emerging Asia—52.0%*
China—16.3%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		1,603,949	$	4,282
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)		1,921,078		3,228
Angang Steel Co., Ltd. (Metals & mining)		7,796,000		11,936
Anta Sports Products, Ltd. (Textiles, apparel & luxury goods)		2,618,000		4,156
* Baidu, Inc.—ADR (Internet software & services)		117,527		11,345
Belle International Holdings, Ltd. (Specialty retail)		6,341,000		10,720
China Vanke Co., Ltd. (Real estate management & development)		4,765,448		5,886
China Yurun Food Group, Ltd. (Food products)		1,646,000		5,411
CNOOC, Ltd. (Oil, gas & consumable fuels)		20,037,000		47,535
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		2,516,360		2,842
Dongfang Electric Corporation, Ltd. (Electrical equipment)		1,815,800		8,994
Dongfeng Motor Group Co., Ltd. (Automobiles)		6,782,000		11,692
* E-Commerce China Dangdang, Inc.—ADR (Internet & catalog retail)		50,514		1,367
Great Wall Motor Co., Ltd. (Automobiles)		1,130,000		3,489
Haitian International Holdings, Ltd. (Machinery)		1,727,185		1,802
Hengan International Group Co., Ltd. (Personal products)		569,500		4,913
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		33,974,580		25,308
Lonking Holdings, Ltd. (Machinery)		7,649,000		4,182
Minth Group, Ltd. (Auto components)		892,000		1,464
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)		2,309,400		6,551
Want Want China Holdings, Ltd. (Food products)		7,217,000		6,323
Weichai Power Co., Ltd. (Machinery)		2,028,088		12,485
* WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		129,898		2,097
* Youku.com, Inc.—ADR (Internet software & services)		37,965		1,329
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)		1,012,861		3,981

				203,318

India—10.2%
Asian Paints, Ltd. (Chemicals)		137,619		8,860
Axis Bank, Ltd. (Commercial banks)		210,124		6,344
Bajaj Auto, Ltd. (Automobiles)		299,206		10,311
Dabur India, Ltd. (Personal products)		2,593,480		5,815
Housing Development Finance Corporation (Thrifts & mortgage finance)		367,269		5,982
Infosys Technologies, Ltd. (IT services)		353,170		27,192
Jindal Steel & Power, Ltd. (Metals & mining)		408,895		6,511
Larsen & Toubro, Ltd. (Construction & engineering)		276,181		12,225
Lupin, Ltd. (Pharmaceuticals)		725,251		7,825


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Asia—52.0%—(continued)*
India—10.2%—(continued)
Mahindra & Mahindra, Ltd. (Automobiles)		29,426	$	512
Nestle India, Ltd. (Food products)		80,604		6,875
Shriram Transport Finance Co., Ltd. (Consumer finance)		183,116		3,199
Sun TV Network, Ltd. (Media)		299,774		3,526
Tata Motors, Ltd. (Machinery)		675,716		19,771
Yes Bank, Ltd. (Commercial banks)		418,587		2,928

				127,876

Indonesia—5.9%
PT Astra International Tbk (Automobiles)		2,341,500		14,176
PT Bank Rakyat Indonesia (Commercial banks)		10,924,000		12,730
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		1,111,500		6,261
PT Kalbe Farma Tbk (Pharmaceuticals)		10,919,000		3,939
PT Perusahaan Gas Negara (Gas utilities)		25,110,500		12,332
PT Unilever Indonesia Tbk (Household products)		8,022,500		14,692
PT United Tractors Tbk (Machinery)		3,756,500		9,923

				74,053

Malaysia—3.4%
CIMB Group Holdings Bhd (Commercial banks)		10,335,600		28,491
Genting Bhd (Hotels, restaurants & leisure)		1,960,300		7,107
Kuala Lumpur Kepong Bhd (Food products)		1,012,900		7,260

				42,858

Papua New Guinea—1.2%
Oil Search, Ltd. (Oil, gas & consumable fuels)		2,016,147		14,517

South Korea—8.3%
* Amorepacific Corporation (Personal products)		8,091		8,120
* Hankook Tire Co., Ltd. (Auto components)		355,120		9,935
* Hyundai Mobis (Auto components)		120,208		30,134
* Hyundai Motor Co. (Automobiles)		149,484		22,853
* LG Household & Health Care, Ltd. (Household products)		22,307		7,666
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		30,045		25,123

				103,831

Taiwan—4.6%
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		9,085,992		36,616
Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		1,439,000		4,788
Tripod Technology Corporation (Electronic equipment, instruments & components)		1,280,000		5,224
Wistron Corporation (Computers & peripherals)		5,373,676		10,948

				57,576

Thailand—2.1%
CP ALL PCL (Food & staples retailing)		9,892,000		12,880

See accompanying Notes to Financial Statements.

60 Annual Report

December 31, 2010

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Asia—52.0%—(continued)*
Thailand—2.1%—(continued)
Kasikornbank PCL (Commercial banks)		2,926,300	$	12,183
Minor International PCL (Hotels, restaurants & leisure)		2,223,900		870

				25,933


*Emerging Latin America—26.9%*
Brazil—13.6%
Amil Participacoes S.A. (Health care providers & services)		14,037		151
BR Malls Participacoes S.A. (Real estate management & development)		926,200		9,541
BR Properties S.A. (Real estate management & development)		348,545		3,813
Brasil Brokers Participacoes S.A. (Real estate management & development)		452,200		2,602
CETIP S.A. - Balcao Organizado de Ativos e Derivativos (Capital markets)		331,900		4,719
Cia de Bebidas das Americas—ADR (Beverages)		745,630		23,137
Cia de Concessoes Rodoviarias (Transportation infrastructure)		124,500		3,518
Cia Hering (Textiles, apparel & luxury goods)		186,300		3,030
Diagnosticos da America S.A. (Health care providers & services)		615,800		8,347
Drogasil S.A. (Food & staples retailing)		322,700		2,624
*Hypermarcas S.A. (Personal products)		309,528		4,201
Localiza Rent a Car S.A. (Road & rail)		424,900		6,885
Lojas Renner S.A. (Multiline retail)		190,600		6,476
Natura Cosmeticos S.A. (Personal products)		253,200		7,274
OdontoPrev S.A. (Health care providers & services)		247,400		3,739
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		1,117,600		13,465
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		1,534,400		9,391
Totvs S.A. (Software)		35,600		3,624
Tractebel Energia S.A. (Independent power producers & energy traders)		584,300		9,662
Vale S.A.—ADR (Metals & mining)		1,255,249		43,394

				169,593

Chile—2.0%
Banco Santander Chile—ADR (Commercial banks)		153,667		14,363
Lan Airlines S.A. (Airlines)		325,769		10,163

				24,526

Colombia—1.3%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		482,159		16,366

Mexico—9.0%
America Movil S.A.B. de C.V. (Wireless telecommunication services)		9,054,600		25,954
Coca-Cola Femsa S.A.B. de C.V.—ADR (Beverages)		86,999		7,171
*Compartamos S.A.B. de C.V. (Consumer finance)		3,717,600		8,085


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Latin America—26.9%—(continued)*
Mexico—9.0%—(continued)
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,680,734	$	4,080
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)		1,075,366		3,268
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		10,303,528		42,416
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		7,684,600		21,959

				112,933

Peru—1.0%
Credicorp, Ltd. (Commercial banks)†		107,487		12,781


*Emerging Europe, Mid-East, Africa—13.3%*
Egypt—0.6%
Commercial International Bank Egypt S.A.E. (Commercial banks)		921,018		7,521

Qatar—1.9%
Qatar National Bank S.A.Q. (Commercial banks)		468,047		23,778

Russia—1.7%
Magnit OAO (Food & staples retailing)†		105,337		14,006
*X5 Retail Group N.V.—GDR (Food & staples retailing)		168,181		7,778

				21,784

South Africa—7.1%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		352,834		3,208
Clicks Group, Ltd. (Multiline retail)		1,276,204		8,396
Mr Price Group, Ltd. (Specialty retail)		622,479		6,284
MTN Group, Ltd. (Wireless telecommunication services)		1,221,587		24,927
Naspers, Ltd. (Media)		250,682		14,763
Shoprite Holdings, Ltd. (Food & staples retailing)		465,702		7,045
Standard Bank Group, Ltd. (Commercial banks)		838,694		13,693
Truworths International, Ltd. (Specialty retail)		681,097		7,408
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		158,224		3,339

			$	89,063


Turkey—2.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		97,546		3,317
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		621,238		3,203
Turkiye Garanti Bankasi A.S. (Commercial banks)		2,454,713		12,432
Turkiye Halk Bankasi A.S. (Commercial banks)		685,270		5,814

				24,766

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 61

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
*Emerging Europe, Mid-East, Africa—13.3%—(continued)*
Turkey—2.0%—(continued)
Total Common Stocks—92.2% (cost $873,075)			$	1,153,073


*Preferred Stocks*
Brazil—4.1%
Itau Unibanco Holding S.A. (Commercial banks)		1,035,154		24,813
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,236,315		20,325
Randon Participacoes S.A. (Machinery)		768,399		5,689

				50,827

Total Preferred Stocks—4.1% (cost $46,291)				50,827


*Convertible Bond*
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		1,045

Total Convertible Bond—0.1% (cost $831)				1,045


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $42,655, collateralized by FHLMC, 1.250%, due 9/30/13		42,654		42,654

Total Repurchase Agreement—3.4% (cost $42,654)				42,654

Total Investments—99.8% (cost $962,851)				1,247,599
Cash and other assets, less liabilities—0.2%				2,944

Net assets—100.0%			$	1,250,543

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.08% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.08% of the net assets at December 31, 2010.

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.5%
Consumer Discretionary			16.2%
Consumer Staples			15.1%
Information Technology			11.1%
Energy			9.8%
Materials			9.4%
Industrials			8.6%
Telecommunication Services			4.2%
Health Care			3.3%
Utilities			1.8%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


Hong Kong Dollar			15.5%
Brazilian Real			12.9%
U.S. Dollar			11.5%
Indian Rupee			10.6%
Mexican Peso			8.8%
South Korean Won			8.6%
South African Rand			7.4%
Indonesian Rupiah			6.1%
New Taiwan Dollar			4.8%
Malaysian Ringgit			3.6%
Thai Baht			2.1%
Turkish Lira			2.0%
Qatari Rial			2.0%
Canadian Dollar			1.4%
Australian Dollar			1.2%
All Other Currencies			1.5%

Total			100.0%

See accompanying Notes to Financial Statements.

62 Annual Report

December 31, 2010

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING LEADERS GROWTH FUND

The Emerging Leaders Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Leaders Growth Fund—Class N Shares commenced operations on May 3, 2010. In the seven-month period since the Fund inception on that date, the Fund posted an increase of 18.43%. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) gained 15.64% during the same period. The Class I shares one year return was 23.70% while the MSCI Emerging Markets Large Cap Index (net) gained 18.34% for the year.

The Fund significantly outpaced the Index during the twelve month period, as stock selection was strong across regions and was supported by overall strategic sector positioning. Within Asia, the Fund’s overweighting and stock selection in Staples added value as did strong Asian Energy performance, led by good production growth at CNOOC, Ltd. The Fund’s overweighting and stock selection in EMEA Staples was also positive, as grocery-related holdings performed well. Within Latin America, Energy holdings added value, as the Fund had a positive return, while the Index was negative, due to the Fund’s limited exposure to Petroleo Brasileiro S.A., the Brazilian Exploration and Production (E&P) company, as the stock price was weak on an overhang related to the company’s proposed equity offering and pricing. Industrials stock selection was also strong, as LAN Airlines S.A., the pan-Latin American airline, performed well. The Fund’s significant focus on Consumer stocks at the expense of Financials and IT also added to results. Somewhat detracting from 2010 performance was residual cash drag in a strong market, coupled with underperformance in Asian IT and Materials stocks.

Despite strong full year results, the Fund trailed the Index during the fourth quarter, due primarily to Chinese and Taiwanese stock selection, which more than offset good results in Latin America. While CNOOC and Industrials holdings continued to perform well, Chinese consumer and auto-related holdings underperformed, due to rising concerns about valuation and broader inflationary pressures in the economy. Similarly, the Fund’s Taiwanese IT holdings trailed the country as a whole. Indian Financials also contributed to underperformance as investors were concerned about increasing interest rates and the impact of additional governmental oversight in the microfinance industry on the broader sector. Conversely, the Fund’s Latin American Energy, Industrials and Materials stocks outperformed.

As of year end, the Fund maintained its focus on Consumer stocks with approximately 27% of the Fund invested across Discretionary and Staples holdings, well above the 11% Index weighting, but down from year-end 2009 and September 30. Conversely, while Financials represented approximately 20% of the Fund, they remained significantly underweighted versus the 26% Index weighting, due largely to lower exposure in Asian Insurance and Commercial Banks. While IT exposure increased from 5% as of September 30 to 10%, it remained below the 13% Index weighting, and lower than the 13.5% year-end 2009 exposure. Materials, while underweighted versus the Index, increased from approximately 11% to 14% during the 12 month period, particularly in Latin America. Regionally, while approximately half of the Fund’s exposure was in Asia, it was below the 57% Index weighting due largely to lower exposure in Korea and Taiwan. Conversely Latin American exposure grew during the period from approximately 22% as of year-end 2009 to 32% as of year-end 2010, above the 24% Index weighting. EMEA remained underweighted at approximately 13% of the Fund, due to limited Russian and Central/Eastern European exposure.

December 31, 2010

William Blair Funds 63

Emerging Leaders Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			Since Inception
Class N		—			18.43	%(a)
MSCI Emerging Markets Large Cap Index (net)		—			15.64	(a)
Class I		23.70	%		2.03	(b)
MSCI Emerging Markets Large Cap Index (net)		18.34			3.41	(b)

(a)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period from March 26, 2008 (Commencement of Operations) to December 31, 2010.

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. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. 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 fees (12b-1).

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 Large Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure market performance of large capitalization stocks in emerging markets. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

64 Annual Report

December 31, 2010

Emerging Leaders Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—52.5%*
China—14.3%
Anta Sports Products, Ltd. (Textiles, apparel & luxury goods)		265,000	$	421
*Baidu, Inc.—ADR (Internet software & services)		8,899		859
Belle International Holdings, Ltd. (Specialty retail)		264,000		446
China Yurun Food Group, Ltd. (Food products)		239,000		786
CNOOC, Ltd. (Oil, gas & consumable fuels)		1,854,000		4,398
Dongfang Electric Corporation, Ltd. (Electrical equipment)		83,200		412
Dongfeng Motor Group Co., Ltd. (Automobiles)		274,000		472
Golden Eagle Retail Group, Ltd. (Multiline retail)		330,000		814
Hengan International Group Co., Ltd. (Personal products)		60,000		518
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		1,708,000		1,272
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		43,500		486
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)		252,000		715
Tencent Holdings, Ltd. (Internet software & services)		41,200		895
Want Want China Holdings, Ltd. (Food products)		465,000		408
Weichai Power Co., Ltd. (Machinery)		110,000		677

				13,579

India—14.3%
Asian Paints, Ltd. (Chemicals)		7,431		478
Bajaj Auto, Ltd. (Automobiles)		13,744		474
HDFC Bank, Ltd. (Commercial banks)		19,155		1,005
Housing Development Finance Corporation (Thrifts & mortgage finance)		30,383		495
Infosys Technologies, Ltd. (IT services)		29,989		2,309
ITC, Ltd. (Tobacco)		279,329		1,091
Jindal Steel & Power, Ltd. (Metals & mining)		32,915		524
Larsen & Toubro, Ltd. (Construction & engineering)		22,365		990
Lupin, Ltd. (Pharmaceuticals)		95,070		1,026
Mahindra & Mahindra, Ltd. (Automobiles)		67,775		1,179
Nestle India, Ltd. (Food products)		8,753		747
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		126,735		1,374
Tata Motors, Ltd. (Machinery)		62,508		1,829

				13,521

Indonesia—6.7%
PT Astra International Tbk (Automobiles)		231,000		1,398
PT Bank Rakyat Indonesia (Commercial banks)		1,231,500		1,435
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		235,000		1,324
PT Perusahaan Gas Negara (Gas utilities)		1,387,000		681
PT United Tractors Tbk (Machinery)		573,500		1,515

				6,353


Issuer	Shares		Value

*Common Stocks—Emerging Asia—52.5%—(continued)*
Malaysia—4.4%
CIMB Group Holdings Bhd (Commercial banks)		928,800	$	2,560
Genting Bhd (Hotels, restaurants & leisure)		208,900		758
Kuala Lumpur Kepong Bhd (Food products)		126,000		903

				4,221

Papua New Guinea—1.1%
Oil Search, Ltd. (Oil, gas & consumable fuels)		147,779		1,064

South Korea—6.4%
*Hyundai Mobis (Auto components)		9,175		2,300
*Hyundai Motor Co. (Automobiles)		8,621		1,318
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		2,936		2,455

				6,073

Taiwan—3.0%
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		374,000		1,507
HTC Corporation (Communications equipment)		42,000		1,297

				2,804

Thailand—2.3%
CP ALL PCL (Food & staples retailing)		510,700		665
Kasikornbank PCL (Commercial banks)		365,300		1,521

				2,186


*Emerging Latin America—26.0%*
Brazil—14.0%
Cia de Bebidas das Americas—ADR (Beverages)		75,559		2,345
Cia de Concessoes Rodoviarias (Transportation infrastructure)		22,900		647
Cyrela Brazil Realty S.A. (Household durables)		76,200		1,003
*Hypermarcas S.A. (Personal products)		93,600		1,270
Natura Cosmeticos S.A. (Personal products)		17,100		491
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		100,400		1,210
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		79,500		486
Tractebel Energia S.A. (Independent power producers & energy traders)		68,100		1,126
Vale S.A.—ADR (Metals & mining)		136,494		4,719

				13,297

Colombia—2.0%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		56,097		1,904

Mexico—8.8%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		22,999		1,319
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		1,206,626		4,967
Mexichem S.A.B. de C.V. (Chemicals)		297,200		1,064
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		350,700		1,002

				8,352

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 65

Emerging Leaders Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

Common Stocks—Emerging Latin America—26.0%—(continued)
Peru—1.2%
Credicorp, Ltd. (Commercial banks)†		9,578	$	1,139


*Emerging Europe, Mid-East, Africa—12.9%*
Egypt—1.0%
Commercial International Bank Egypt S.A.E. (Commercial banks)		111,675		912

Qatar—1.6%
Qatar National Bank S.A.Q. (Commercial banks)		30,381		1,544

Russia—3.9%
Magnit OJSC—144A—GDR (Food & staples retailing)		39,928		1,067
Sberbank of Russian Federation (Commercial banks)†		504,114		1,717
*X5 Retail Group N.V.—GDR (Food & staples retailing)		21,050		974

				3,758

South Africa—4.9%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		74,066		1,035
MTN Group, Ltd. (Wireless telecommunication services)		61,415		1,253
Naspers, Ltd. (Media)		23,100		1,360
Shoprite Holdings, Ltd. (Food & staples retailing)		66,898		1,012

				4,660

Turkey—1.5%
Turkiye Garanti Bankasi A.S. (Commercial banks)		190,923		967
Turkiye Halk Bankasi A.S. (Commercial banks)		51,348		436

				1,403

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—United Kingdom—1.7%*
Vedanta Resources plc (Metals & mining)		40,190	$	1,577

Total Common Stocks—93.1% (cost $71,144)				88,347


*Preferred Stocks*
Brazil—6.0%
Itau Unibanco Holding S.A. (Commercial banks)		138,585		3,322
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		143,255		2,355

				5,677

Total Preferred Stocks—6.0% (cost $5,253)				5,677


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $1,507, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	1,507		1,507

Total Repurchase Agreement—1.6% (cost $1,507)				1,507

Total Investments—100.7% (cost $77,904)				95,531
Liabilities, plus cash and other assets—(0.7)%				(630	)

Net assets—100.0%			$	94,901

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.0%
Materials			14.2%
Consumer Staples			14.1%
Consumer Discretionary			13.2%
Energy			13.0%
Information Technology			9.9%
Industrials			6.5%
Health Care			4.4%
Telecommunication Services			2.8%
Utilities			1.9%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


U.S. Dollar			15.0%
Indian Rupee			14.4%
Hong Kong Dollar			13.5%
Brazilian Real			12.7%
Mexican Peso			7.5%
Indonesian Rupiah			6.8%
South Korean Won			6.5%
South African Rand			4.9%
Malaysian Ringgit			4.5%
New Taiwan Dollar			3.0%
Thai Baht			2.3%
Canadian Dollar			2.0%
British Pound Sterling			1.7%
Qatari Rial			1.6%
Turkish Lira			1.5%
Australian Dollar			1.1%
All Other Currencies			1.0%

Total			100.0%

See accompanying Notes to Financial Statements.

66 Annual Report

December 31, 2010

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

David S. Mitchell

Small Cap Value Fund

The Small Cap Value Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small Cap Value Fund posted a 30.94% increase on a total return basis (Class N shares) during the 12 months ended December 31, 2010. By comparison, the Russell 2000^® Value Index gained 24.50%.

The U.S. small cap value equity market produced its second best calendar year return in the last decade after staging an impressive four-month rally to close out 2010.

The year started off as a continuation of 2009 with better-than-expected corporate earnings propelling stocks higher. Then, during the second quarter, European sovereign debt concerns and fears of a double-dip recession in the US caused a steep mid-year correction. The selloff was short lived, however, as in late August the Federal Reserve signaled a second round of quantitative easing to help keep interest rates low and promote a more sustainable economic recovery. Improved investor sentiment was supported in part by stronger-than-expected retail sales that persisted into the holiday shopping season, US industrial production data that proved better than many had at expected at mid-year, and a more pro-business environment in Washington D.C. that emerged after the November elections. Strong growth in the emerging economies also boosted confidence in the reality of a global economic recovery.

From a sector perspective within the Russell 2000 Value, Materials (+37%), Industrials (+32%), Consumer Discretionary (+31%), Energy (+27%) and Information Technology (+26%) all outperformed the broader small cap value market. Financials (+20%) and the typically defensive sectors, Health Care (+20%), Utilities (+17%) and Consumer Staples (+15%), held back the absolute return of the index during the year.

The Fund’s outperformance during 2010 was attributable to strong stock selection across most sectors. This was most pronounced in Information Technology, but the Fund’s stocks beat their benchmark peers in Energy, Industrials and Financials as well. Stock selection in Materials, primarily not owning some of the more commodity-levered stocks in the benchmark, detracted on the margin.

Two stocks benefitting return during the year were Atmel Corporation and TAL International. Atmel Corporation (ATML) designs, develops and manufactures a range of semiconductor integrated circuit products and touch solutions. The company saw strong business momentum during the year in part due to 1) benefits from Atmel’s restructuring translating into an improved margin structure, 2) continued market share gains in microcontrollers, and 3) dramatic acceleration in touchscreen microcontroller revenue driven by the proliferation of touchscreen enabled cell phones. We trimmed the Fund’s position on the significant outperformance but still hold a position.

TAL International Group (TAL) owns, leases and trades intermodal shipping containers. The stock was a top contributor for the year as the company benefitted from its investment in additional containers during the downturn and the secular trend of shipping companies leasing containers as opposed to owning them continued. We continue to own the name given its solid cash flow characteristics and high caliber management team.

On the other hand, two stocks detracting from performance during the year were ATC Technology and Goodrich Petroleum. ATC Technology (ATAC) provides outsourced engineering solutions to the automotive industry and supply chain logistics services to the consumer electronics industry. The stock sold off during the year in part due to a slowdown in

December 31, 2010

William Blair Funds 67

its logistics business with AT&T. Success and reliability of Apple’s iPhone, a big seller for AT&T, has decreased returns, repairs and overall turnover of cell phones, therefore impacting the services ATC Technology provides for AT&T. In addition, management implied an uptick in pricing pressure in the business. We liquidated the position due to these fundamental headwinds.

Goodrich Petroleum (GDP) engages in the exploration, exploitation, development and production of oil and natural gas properties primarily in East Texas and Northwest Louisiana. Since the company derives the majority of its earnings from natural gas production, the correction of natural gas prices during 2010 weighed on investor psychology. We liquidated the Fund’s position due to the depressed commodity price’s effect on the company’s intermediate-term earnings.

During the fourth quarter specifically, the Fund’s modest underperformance was the result of mixed stock selection across sectors. As mentioned above, the rally in commodities late in the year was a headwind for our Materials holdings on a relative basis. Consumer Discretionary stock selection was a mild detractor as well. On the other hand, positive stock selection in Industrials and Energy partially offset the negative effects.

68 Annual Report

December 31, 2010

Small Cap Value Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		30.94	%		7.02	%		7.11	%		8.77	%
Class I		31.16			7.21			7.33			9.01
Russell 2000^® Value		24.50			2.19			3.52			8.42

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^® 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 long-term securities.

December 31, 2010

William Blair Funds 69

Small Cap Value Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—34.6%
Associated Banc-Corp		139,710	$	2,117
BioMed Realty Trust, Inc.		101,150		1,886
Brandywine Realty Trust		190,810		2,223
*Eagle Bancorp, Inc.		110,027		1,588
Education Realty Trust, Inc.		275,375		2,140
Employers Holdings, Inc.		95,085		1,662
Excel Trust, Inc.		142,967		1,730
First Potomac Realty Trust		140,062		2,356
FirstMerit Corporation		113,752		2,251
Hancock Holding Co.		24,995		871
Highwoods Properties, Inc.		66,750		2,126
Iberiabank Corporation		35,285		2,086
LaSalle Hotel Properties		65,017		1,716
MarketAxess Holdings, Inc.		80,405		1,673
Meadowbrook Insurance Group, Inc.		201,855		2,069
Mid-America Apartment Communities, Inc.		36,305		2,305
*National Financial Partners Corporation		116,765		1,565
National Retail Properties, Inc.		70,675		1,873
Old National Bancorp		205,842		2,447
Platinum Underwriters Holdings, Ltd.†		41,960		1,887
*ProAssurance Corporation		28,860		1,749
Prosperity Bancshares, Inc.		63,025		2,476
*Safeguard Scientifics, Inc.		153,628		2,624
Sandy Spring Bancorp, Inc.		91,100		1,679
*SVB Financial Group		32,055		1,700
The Hanover Insurance Group, Inc.		53,505		2,500
Umpqua Holdings Corporation		164,843		2,008
Washington Federal, Inc.		85,560		1,448
WSFS Financial Corporation		44,633		2,117

				56,872

Industrials—17.2%
Alexander & Baldwin, Inc.		43,045		1,723
Ameron International Corporation		21,215		1,620
Belden, Inc.		43,045		1,585
Cubic Corporation		33,170		1,564
*EMCOR Group, Inc.		73,840		2,140
ESCO Technologies, Inc.		52,565		1,989
G&K Services, Inc. Class “A”		81,575		2,522
*Global Defense Technology & Systems, Inc.		96,231		1,622
*GrafTech International, Ltd.		88,225		1,750
*Hawaiian Holdings, Inc.		185,360		1,453
*Kadant, Inc.		78,982		1,862
Kaydon Corporation		41,430		1,687
*L.B. Foster Co. Class “A”		42,810		1,753
Quanex Building Products Corporation		77,295		1,466
Robbins & Myers, Inc.		55,585		1,989
TAL International Group, Inc.		53,770		1,660

				28,385

Consumer Discretionary—11.8%
*AFC Enterprises, Inc.		116,797		1,623
Ameristar Casinos, Inc.		122,975		1,922
*Carter’s, Inc.		56,580		1,670
Chico’s FAS, Inc.		135,900		1,635
*Gaylord Entertainment Co.		53,795		1,933
*Kirkland’s, Inc.		83,245		1,168
Meredith Corporation		43,395		1,504
*Pacific Sunwear of California, Inc.		385,370		2,089


Issuer	Shares		Value
*Common Stocks—(continued)*
Consumer Discretionary—11.8%—(continued)
*Pinnacle Entertainment, Inc.		149,380	$	2,094
Stage Stores, Inc.		121,600		2,108
The Jones Group, Inc.		102,875		1,599

				19,345

Information Technology—8.5%
ADTRAN, Inc.		48,025		1,739
*Atmel Corporation		102,965		1,268
*Avid Technology, Inc.		101,556		1,773
*Digital River, Inc.		42,250		1,454
Earthlink, Inc.		173,375		1,491
*Integrated Device Technology, Inc.		174,575		1,163
*j2 Global Communications, Inc.		73,955		2,141
*Parametric Technology Corporation		91,595		2,064
*Ultra Clean Holdings		103,843		967

				14,060

Energy—8.5%
Berry Petroleum Co. Class “A”		54,529		2,383
*Forest Oil Corporation		76,863		2,918
*Key Energy Services, Inc.		141,055		1,831
*Magnum Hunter Resources Corporation		153,346		1,104
*Newpark Resources, Inc.		188,760		1,163
*Northern Oil and Gas, Inc.		65,873		1,792
SM Energy Co.		46,880		2,763

				13,954

Utilities—5.9%
Chesapeake Utilities Corporation		43,895		1,823
Cleco Corporation		65,750		2,022
NorthWestern Corporation		64,550		1,861
Portland General Electric Co.		91,275		1,981
UIL Holdings Corporation		65,050		1,949

				9,636

Materials—5.0%
Minerals Technologies, Inc.		41,375		2,707
*PolyOne Corporation		181,875		2,272
*RTI International Metals, Inc.		56,755		1,531
Silgan Holdings, Inc.		47,145		1,688

				8,198

Health Care—4.4%
*CONMED Corporation		31,179		824
*Greatbatch, Inc.		33,960		820
Invacare Corporation		59,130		1,783
*Magellan Health Services, Inc.		46,415		2,195
*Mednax, Inc.		25,083	$	1,688

				7,310

Consumer Staples—3.0%
Flowers Foods, Inc.		45,065		1,213
J&J Snack Foods Corporation		28,217		1,361
Spartan Stores, Inc.		134,977		2,288

				4,862

Total Common Stocks—98.9% (cost $136,164)				162,622

See accompanying Notes to Financial Statements.

70 Annual Report

December 31, 2010

Small Cap Value Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $3,831, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	3,831	$	3,831

Total Repurchase Agreement—2.3% (cost $3,831)				3,831

Total Investments—101.2% (cost $139,995)				166,453
Liabilities, plus cash and other assets—(1.2)%				(1,954	)

Net assets—100.0%			$	164,499

* = Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 71

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

David S. Mitchell

MID CAP VALUE FUND

The Mid Cap Value Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Mid Cap Value Fund commenced operations on May 3, 2010. Through the seven-month period ending December 31, 2010, the Fund posted an 8.36% increase on a total return basis (Class N Shares). By comparison, the Fund’s benchmark the Russell Midcap^® Value Index, gained 7.16% during this period.

The U.S. mid cap value equity market produced its third best calendar year return in the last decade after staging an impressive four-month rally to close out 2010.

The year started off as a continuation of 2009 with better-than-expected corporate earnings propelling stocks higher. Then, during the second quarter, European sovereign debt concerns and fears of a double-dip recession in the U.S. caused a steep mid-year correction. The selloff was short lived, however, as in late August the Federal Reserve signaled a second round of quantitative easing to help keep interest rates low and promote a more sustainable economic recovery. Improved investor sentiment was supported in part by stronger-than-expected retail sales that persisted into the holiday shopping season, U.S. industrial production data that proved better than many had expected at mid-year, and a more pro-business environment in Washington D.C. that emerged after the November elections. Strong growth in the emerging economies also boosted confidence in the reality of a global economic recovery.

The Fund’s outperformance from inception through year end was attributable to strong stock selection. Most of the outperformance came from within Industrials and Information Technology, with Financials and Health Care contributing as well. Consumer Discretionary stock selection was the main area of weakness for the Fund, tempering relative returns.

Two stocks benefitting return during the period were Atmel Corporation and Forest Oil Corporation. Atmel Corporation (ATML) designs, develops and manufactures a range of semiconductor integrated circuit products and touch solutions. The company saw strong business momentum during the year in part due to 1) benefits from Atmel’s restructuring translating into an improved margin structure, 2) continued market share gains in microcontrollers, and 3) dramatic acceleration in touchscreen microcontroller revenue driven by the proliferation of touchscreen enabled mobile devices. We trimmed the Fund’s position on the significant outperformance but still hold a position.

Forest Oil Corporation (FST) is an independent oil and gas company engaged in the acquisition, exploration, development and production of oil, natural gas and natural gas liquids primarily in North America. The stock was a solid performer during the year as the company had solid production from its oil and gas properties. And while dry natural gas prices declined during the year, Forest Oil’s production of liquid natural gas, where prices were stronger, was a benefit to the company. The Fund continues to hold the stock given the company’s productive asset base and experienced management team.

On the other hand, two stocks detracting from performance during the period were Chico’s FAS, Inc. and Petrohawk Energy Corporation. Chico’s FAS (CHS) is a specialty retailer of private branded, casual-to-dressy clothing and accessories primarily for women. The stock underperformed during 2010 as sales came in weaker than elevated expectations and due to some merchandising issues that were company-specific. This caused a reduction in forward earnings guidance and the valuation compressed given the execution issues. The Fund continues to own the stock however, as we believe expectations are more reasonable and we believe the management team will repair the execution issues going forward. Petrohawk

72 Annual Report

December 31, 2010

Energy Corporation (HK) is an independent oil and natural gas company engaged in the exploration, development and production of predominantly onshore natural gas properties in the United States. The stock under-performed as did most dry natural gas companies due to lower natural gas prices (as opposed to most commodities, including crude oil, which rallied during 2010). We added to the Fund’s position on the weakness as the company has solid hedges against falling prices for 2011, and as we expect it to have meaningful future production coming from the more liquids-rich Eagle Ford Shale.

During the fourth quarter specifically, the Fund’s modest underperformance was the result of mixed stock selection across sectors. Stock selection in Consumer Discretionary and Materials pulled down relative results while stock selection in Industrials and Energy were a benefit to relative performance.

In the end, however, while we factor various economic scenarios into our stock picking, we focus our time on constructing the fund from a bottom-up perspective. As mentioned above, corporate fundamentals remain attractive. In combination with valuations that are broadly in line with long-term averages, the market outlook remains balanced. And while macroeconomic data largely drove correlated stock prices again in 2010, we expect individual company fundamentals to be the leading determinant of forward stock price returns. As always, we remain focused on finding quality companies at discount prices and corporate transformation opportunities. We believe building a fund with these types of companies should produce solid investment results over the long term.

December 31, 2010

William Blair Funds 73

Mid Cap Value Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	Since Inception(a)
Class N		8.36	%
Class I		8.66
Russell Midcap^® Value Index		7.16

(a)

For the period May 3, 2010 (Commencement of Operations) to December 31, 2010.

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. Medium Capitalization 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 Midcap^® Value Index consists of Midcap-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 long-term securities.

74 Annual Report

December 31, 2010

Mid Cap Value Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—29.7%
Alexandria Real Estate Equities, Inc.		565	$	41
Allied World Assurance Co. Holdings, Ltd.†		770		46
Ameriprise Financial, Inc.		1,140		66
Apartment Investment & Management Co.		1,800		46
Associated Banc-Corp		2,530		38
Brandywine Realty Trust		4,070		47
Comerica, Inc.		1,995		84
Corporate Office Properties Trust		970		34
Discover Financial Services		2,900		54
Fifth Third Bancorp		6,100		90
*Forest City Enterprises, Inc. Class “A”		2,800		47
Host Hotels & Resorts, Inc.		2,410		43
PartnerRe, Ltd.†		495		40
People’s United Financial, Inc.		4,180		59
Realty Income Corporation		1,040		36
SL Green Realty Corporation		550		37
The Hanover Insurance Group, Inc.		1,125		53
Unum Group		1,450		35
Validus Holdings, Ltd.†		1,320		40
Ventas, Inc.		650		34
Washington Federal, Inc.		2,210		37

				1,007

Energy—12.8%
Consol Energy, Inc.		1,035		50
*Forest Oil Corporation		1,895		72
Patterson-UTI Energy, Inc.		1,940		42
*Petrohawk Energy Corporation		2,510		46
Pioneer Natural Resources Co.		720		63
*Rowan Cos., Inc.		1,150		40
SM Energy Co.		1,040		61
*Whiting Petroleum Corporation		510		60

				434

Industrials—12.6%
Armstrong World Industries, Inc.		810		35
Cintas Corporation		1,220		34
Eaton Corporation		550		56
Ingersoll-Rand plc†		1,240		58
Manpower, Inc.		580		36
*Oshkosh Corporation		1,120		40
Parker Hannifin Corporation		640		55
Rockwell Collins, Inc.		750		44
Snap-On, Inc.		640		36
*URS Corporation		800		33

				427

Utilities—10.6%
DTE Energy Co.		1,285		58
Northeast Utilities		1,980		63
NSTAR		1,160		49
PPL Corporation		2,340		62
TECO Energy, Inc.		3,170		56
Xcel Energy, Inc.		3,080		73

				361

† = U.S. listed foreign security

* = Non-income producing securities


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Discretionary—10.4%
Chico’s FAS, Inc.		3,550	$	43
*DISH Network Corporation		1,360		27
Fortune Brands, Inc.		620		37
Genuine Parts Co.		690		36
Meredith Corporation		990		34
*Mohawk Industries, Inc.		600		34
Newell Rubbermaid, Inc.		1,940		35
VF Corporation		410		35
Whirlpool Corporation		420		37
Wyndham Worldwide Corporation		1,150		35

				353

Information Technology—6.4%
*Atmel Corporation		2,400		30
*Ingram Micro, Inc. Class “A”		1,600		31
Tellabs, Inc.		6,260		42
VeriSign, Inc.		1,760		57
Xerox Corporation		4,920		57

				217

Materials—6.0%
Airgas, Inc.		470		29
Carpenter Technology Corporation		1,040		42
Lubrizol Corporation		390		42
Sonoco Products Co.		1,450		49
Steel Dynamics, Inc.		2,360		43

				205

Health Care—5.4%
CIGNA Corporation		1,010		37
Hill-Rom Holdings, Inc.		1,215		48
*Laboratory Corporation of America Holdings		510		45
*Mettler-Toledo International, Inc.†		345		52

				182

Consumer Staples—5.3%
Bunge, Ltd.†		445		29
ConAgra Foods, Inc.		1,850		42
Flowers Foods, Inc.		990		27
HJ Heinz Co.		990		49
The Kroger Co.		1,410		31

				178

Total Common Stocks—99.2% (cost $3,174)			$	3,364


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $65, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	65	$	65

Total Repurchase Agreement—1.9% (cost $65)				65

Total Investments—101.1% (cost $3,239)				3,429
Liabilities, plus cash and other assets—(1.1)%				(36	)

Net assets—100.0%			$	3,393

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 75

Fixed Income Markets Overview

Fixed Income Funds

2010

After declining for most of the year, interest rates rose sharply during the month of December with the fixed income markets experiencing a bout of volatility reminiscent of one that occurred at about the same time a year ago. Longer-term interest rates spiked higher during the fourth quarter, with the 10-Year U.S. Treasury Note, which finished at 2.51% at the end of the third quarter, ending the fourth quarter at 3.29%.

At the time the Federal Reserve announced a second round of quantitative easing in early November, yields on long-term Treasuries were more or less unchanged from where they had ended the third quarter. The market, however, overestimated the scope and scale of the Fed’s quantitative easing program, and the subsequent decline in prices reflected investor disappointment. The fixed income markets treaded sideways through the second half of December, and moved higher late in the month, reflecting pessimism regarding the U.S. Federal budget deficit. Some market observers attributed the rise in rates and subsequent decline in bond prices to disappointment that the Federal Reserve did not increase the size of its purchases to offset the $858-billion tax cut package approved by Congress. While the tax cut deal is expected to help stimulate the economy, it will also increase the size of the deficit.

Prices of long-term Treasury securities rallied during the third quarter, prompted by expectations that the Federal Reserve would announce a second round of easing. In August, the Federal Reserve acknowledged that its confidence in the economic recovery had dimmed and announced that it would use the proceeds from the monthly amortization of its huge mortgage-bond portfolio to buy long-term Treasury securities.

The Fed’s actions throughout the year have been interpreted by investors as confirmation that the Fed remains concerned about the pace of the economic recovery.

In addition, Federal Reserve Governors, and Chairman Ben Bernanke in particular, have expressed longstanding concern about the danger of deflation, or falling prices, from a lack of demand stemming from slow economic growth, joblessness and weakness in the financial sector. And in one well-known major policy speech delivered in 2002, Bernanke identified asset purchases as a way to stimulate aggregate spending when short-term interest rates have reached zero.

Longer-term interest rates finished the year slightly lower than where they began, with the 10-Year U.S. Treasury Note at 3.29% at December 31, 2010, down from 3.84% at December 31, 2009.

Outlook

We believe the Fed will be successful in its efforts to keep interest rates at lower levels with its asset purchases of Treasury securities. Such moves would assist in helping to engineer further growth in the economy, spur capital expenditures by companies and bring inflation back into a range that the Federal Reserves considers acceptable. Consequently, we would expect TIPs (Treasury Inflation-Protected Securities) to outperform nominal Treasuries in such an environment, which would benefit our Bond and Income Funds.

Until fundamentals in the economy show significant signs of improvement—including gains in employment and strength in the housing market—and until inflation picks up, we believe the Fed will leave its Federal Funds target rate unchanged at 0.0% to 0.25%.

76 Annual Report

December 31, 2010

We believe interest rates will remain low and could very well remain so through the balance of 2011 and into 2012.

Finally, we are closely monitoring the Corporate Bond market for signs of leveraged buy-out (LBO) risk. As the economy strengthens and business conditions improve, companies become candidates for acquisition by private equity investors, who finance their purchases with debt, leveraging the companies’ balance sheets, and deteriorating the company’s credit profile. This can have a very adverse effect when this happens to companies whose debt had been rated investment grade. We research each credit and study the characteristics of the underlying market to avoid investing in bonds of companies we suspect could be LBO targets.

December 31, 2010

William Blair Funds 77

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

BOND FUND

The Bond Fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Bond Fund

The Bond Fund posted a 7.86% increase on a total return basis (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Bond Index, gained 6.54%.

Security selection within the Mortgage-backed and Corporate bond sectors was the main reason the Fund outperformed the Fund’s benchmark during 2010. The Fund’s underweight position in U.S. Treasury securities versus the Index also benefitted the Fund.

Within our Mortgage-backed securities holdings, we favor securities that we believe are less likely to be refinanced through emphasizing specified pools with either low loan balances or above-market coupon rates. Put simply, we are seeking pools least likely to be “called away,” or pre-paid as interest rates decline and refinancings increase. The Fund has benefitted from this strategy, especially given the fact that lenders have more stringent financial criteria in place for borrowers to refinance their existing mortgages. Higher coupon mortgages, in turn, provide a cushion through better convexity characteristics, because they typically do not decline as much when interest rates fall. Finally, this strategy enables the Fund to generate and maintain the Fund’s cash flow and current income.

The Fund’s holdings of high yield Corporate bonds performed strongly, as did its holdings of investment grade Corporate securities. In particular, Ford Motor Credit was a standout performer. Ford Motor Credit has been upgraded several times this year, and Ford’s Chairman has indicated the company’s Corporate bonds could be rated investment grade within a years’ time. We have confidence in Ford’s restructuring and the positive changes to their product line. Another strong performer was Georgia Pacific, which we believe has a strong management team, disciplined business process and strong cash flows.

With interest rates at historically low levels, the Fund has been defensively positioned against a rising rate environment. This did occur during the fourth quarter. The Fund’s underweight exposure to Treasuries—versus its benchmark Index—provided underlying support to the Fund, especially as Treasury rates rose and risk spreads narrowed.

The Fund’s modest holdings in REITs were slight detractors to performance. We prefer to invest in REITs as a surrogate for Commercial Mortgage-backed securities (to which we were underweight). This theme is a bias of our portfolio construction process, as we prefer to hold REITs, which are backed by a dynamic pool of properties, instead of Commercial Mortgage-backed securities, which are comprised of a static pool of properties. This theme had a small negative impact during the fourth quarter, as Commercial Mortgage-backed securities was the best-performing sector of the investment-grade market.

The Fund continues to maintain its overweight position versus its benchmark to “spread” products such as Corporate Bonds, Mortgage-backed and Asset-backed securities. The Fund maintains its exposure to Treasury Securities through its holdings of TIPs (Treasury Inflation-Protected Securities.).

In particular, the Fund maintains an overweight allocation to Corporate Bonds. In the current low growth, low inflation environment, corporate balance sheets have improved drastically,

78 Annual Report

December 31, 2010

which improves the quality profile of corporate bonds. Investment ratings on some securities have risen. We believe that U.S. GDP growth will likely remain subpar due to structural unemployment in the U.S. economy. We believe this current environment is one that should remain favorable for Corporate Bonds.

At year end, the Bond Fund’s average maturity stood at 6.8 years, while its duration was 4.7 years.

December 31, 2010

William Blair Funds 79

Bond Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			Since Inception(a)
Class N		7.86	%		6.80	%		6.48	%
Class I		7.89			6.93			6.62
Barclays Capital U.S. Aggregate Bond Index		6.54			5.90			6.14

(a)

For the period from May 1, 2007 (Commencement of Operations) to December 31, 2010.

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 Barclays Capital U.S. Aggregate Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on December 31, 2010. 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 investments.

80 Annual Report

December 31, 2010

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—45.9%*
U.S. Treasury Inflation Indexed Notes/Bonds—7.8%
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29	$	7,982	$	10,705
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/13		625		667
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17		3,253		3,626

Total U.S. Treasury Inflation Indexed Notes/Bonds				14,998

U.S. Treasury—1.6%
U.S. Treasury Bond, 3.875%, due 8/15/40		500		460
U.S. Treasury Note, 2.625%, due 8/15/20		1,350		1,280
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,000		1,451

Total U.S. Treasury Obligations				3,191

Government National Mortgage Association (GNMA)—0.9%
GNR 2004-2 M5, 4.891%, due 7/16/34		125		134
GNR 2006-67 GB, 4.470%, due 9/16/34, VRN		1,540		1,667

Total GNMA Mortgage Obligations				1,801

Federal Home Loan Mortgage Corp. (FHLMC)—7.8%
#G90024, 7.000%, due 1/20/13		33		35
#G30093, 7.000%, due 12/1/17		38		42
#G30255, 7.000%, due 7/1/21		79		90
#G12792, 4.500%, due 12/1/21		467		493
#D95897, 5.500%, due 3/1/23		246		264
#G30372, 5.000%, due 9/1/27		578		613
#G01728, 7.500%, due 7/1/32		306		352
#C01385, 6.500%, due 8/1/32		392		441
#G02141, 6.000%, due 3/1/36		1,887		2,086
#A62179, 6.000%, due 6/1/37		1,013		1,120
#A63539, 6.000%, due 7/1/37		1,263		1,396
#G03170, 6.500%, due 8/1/37		1,901		2,124
#A66843, 6.500%, due 10/1/37		1,021		1,156
#A78138, 5.500%, due 6/1/38		1,396		1,514
#A81799, 6.500%, due 9/1/38		2,862		3,241

Total FHLMC Mortgage Obligations				14,967

Federal National Mortgage Association (FNMA)—27.8%
#535559, 7.500%, due 9/1/12		70		70
#598453, 7.000%, due 6/1/15		1		1
#689612, 5.000%, due 5/1/18		415		444
#695910, 5.000%, due 5/1/18		735		794
#747903, 4.500%, due 6/1/19		386		408
#745735, 5.000%, due 3/1/21		909		975
#253847, 6.000%, due 5/1/21		245		268
#900725, 6.000%, due 8/1/21		213		233
#AD8164, 4.000%, due 8/1/25		1,220		1,269
#545437, 7.000%, due 2/1/32		205		234
#545759, 6.500%, due 7/1/32		2,203		2,478
#254548, 5.500%, due 12/1/32		893		961
#684601, 6.000%, due 3/1/33		2,114		2,357
#190340, 5.000%, due 9/1/33		1,877		1,985
#254868, 5.000%, due 9/1/33		918		971
#555800, 5.500%, due 10/1/33		405		437


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#725027, 5.000%, due 11/1/33				$	730	$	772
#555880, 5.500%, due 11/1/33					482		520
#555946, 5.500%, due 11/1/33					827		897
#756153, 5.500%, due 11/1/33					2,305		2,499
#725231, 5.000%, due 2/1/34					760		803
#725205, 5.000%, due 3/1/34					1,619		1,712
#725220, 5.000%, due 3/1/34					703		743
#725232, 5.000%, due 3/1/34					3,511		3,714
#725238, 5.000%, due 3/1/34					1,609		1,701
#763798, 5.500%, due 3/1/34					491		532
#725424, 5.500%, due 4/1/34					517		557
#725611, 5.500%, due 6/1/34					488		526
#786546, 6.000%, due 7/1/34					922		1,019
#787816, 6.000%, due 7/1/34					928		1,029
#190353, 5.000%, due 8/1/34					539		570
#357883, 5.000%, due 5/1/35					1,146		1,212
#745092, 6.500%, due 7/1/35					601		676
#357944, 6.000%, due 9/1/35					118		130
#829306, 6.000%, due 9/1/35					326		361
#843487, 6.000%, due 10/1/35					274		304
#849191, 6.000%, due 1/1/36					177		195
#848782, 6.500%, due 1/1/36					829		930
#745349, 6.500%, due 2/1/36					1,139		1,287
#831540, 6.000%, due 6/1/36					218		240
#745802, 6.000%, due 7/1/36					654		726
#886220, 6.000%, due 7/1/36					1,128		1,251
#893318, 6.500%, due 8/1/36					252		282
#909480, 6.000%, due 2/1/37					1,408		1,557
#256859, 5.500%, due 8/1/37					968		1,027
#928561, 6.000%, due 8/1/37					814		903
#948689, 6.000%, due 8/1/37					2,073		2,271
#888967, 6.000%, due 12/1/37					1,795		1,991
#962058, 6.500%, due 3/1/38					3,222		3,659
#934006, 6.500%, due 9/1/38					1,646		1,868
#986856, 6.500%, due 9/1/38					1,095		1,228

Total FNMA Mortgage Obligations							53,577


*Non-Agency Mortgage-Backed Obligations—1.5%*
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, 7/25/18		CCC			228		163
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§**		C			199		170
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5, 6.455%, 7/25/34		A2			463		113
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 4.677%, 8/25/34, VRN		AAA			549		510
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35		AA	+		14		14
Chase Mortgage Finance Corporation, 2006-A1, Tranche 2A3, 6.000%, 9/25/36, VRN		Caa2			2,460		1,938

Total Non-Agency Mortgage-Backed Obligations							2,908

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 81

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Consumer Asset-Backed Securities—3.9%*
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		$	2,000	$	2,190
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14		Aaa			2,000		2,143
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa			2,230		2,333
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2			874		903

Total Consumer Asset-Backed Securities							7,569


*Corporate Obligations—46.1%*
Citigroup, Inc., 5.500%, due 4/11/13		A	+		1,500		1,597
General Electric Capital Corporation, 4.800%, due 5/1/13		AA	+		600		641
Kansas City Southern de Mexico S.A. de C.V., 7.625%, due 12/1/13		BB			1,200		1,242
CME Group, Inc., 5.750%, due 2/15/14		AA			700		775
PACCAR, Inc., 6.875%, due 2/15/14		A	+		800		918
General Electric Capital Corporation, 5.900%, due 5/13/14		AA	+		225		249
Bank of America Corporation, 7.375%, due 5/15/14		A	+		700		778
American Express Co., 7.250%, due 5/20/14		A	+		500		570
Capital One Financial Corporation, 7.375%, due 5/23/14		A-			1,235		1,405
Macquarie Group Ltd.—144A, 7.300%, due 8/1/14		A2			1,000		1,092
Petrohawk Energy Corporation, 10.500%, due 8/1/14		B	+		1,000		1,140
AT&T, Inc., 5.100%, due 9/15/14		A2			1,250		1,368
D.R. Horton, Inc., 5.625%, due 9/15/14		BB			1,500		1,530
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14		A1			1,350		1,442
Boeing Capital Corporation, 3.250%, due 10/27/14		A	+		1,400		1,459
Crown Castle International Corporation, 9.000%, due 1/15/15		BB-			1,000		1,105
EI du Pont de Nemours & Co., 3.250%, due 1/15/15		A			500		519
Georgia-Pacific LLC—144A, 7.000%, due 1/15/15		BBB			500		519
The Kroger Co., 4.950%, due 1/15/15		BBB			1,175		1,269
Simon Property Group L.P., 4.200%, due 2/1/15		A-			1,500		1,568


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Yum! Brands, Inc., 4.250%, due 9/15/15		BBB-		$	350	$	369
Fiserv, Inc., 3.125%, due 10/1/15		Baa2			1,825		1,807
Cisco Systems, Inc., 5.500%, due 2/22/16		A	+		2,000		2,282
Yum! Brands, Inc., 6.250%, due 4/15/16		BBB-			700		791
Owens-Brockway Glass Container, Inc., 7.375%, due 5/15/16		BB	+		1,250		1,328
SABMiller plc—144A, 6.500%, due 7/1/16		BBB	+		700		811
Petrobras International Finance Co., 6.125%, due 10/6/16		Baa1			1,350		1,485
EI du Pont de Nemours & Co., 5.250%, due 12/15/16		A			500		559
Comcast Corporation, 6.500%, due 1/15/17		BBB	+		350		403
Corrections Corporation of America, 7.750%, due 6/1/17		BB			1,250		1,327
ERP Operating L.P., 5.750%, due 6/15/17		BBB	+		1,100		1,205
JPMorgan Chase & Co., 6.125%, due 6/27/17		A1			600		658
American Express Co., 6.150%, due 8/28/17		A	+		1,000		1,127
Exelon Generation Co. LLC, 6.200%, due 10/1/17		A3			1,100		1,231
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-			950		1,121
Triumph Group, Inc., 8.000%, due 11/15/17		B	+		1,500		1,560
Union Pacific Corporation, 5.750%, due 11/15/17		BBB	+		800		898
Wells Fargo & Co., 5.625%, due 12/11/17		AA-			1,000		1,107
Kohl’s Corporation, 6.250%, due 12/15/17		BBB	+		350		404
American Tower Corporation, 4.500%, due 1/15/18		Baa3			1,150		1,140
Morgan Stanley, 6.625%, due 4/1/18		A			950		1,031
General Electric Capital Corporation, 5.625%, due 5/1/18		AA	+		350		382
Philip Morris International, Inc., 5.650%, due 5/16/18		A			1,000		1,127
Time Warner Cable, Inc., 6.750%, due 7/1/18		BBB			1,000		1,166
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A	+		1,075		1,158
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19		BBB	+		700		871
FedEx Corporation, 8.000%, due 1/15/19		BBB			750		925
CSX Corporation, 7.375%, due 2/1/19		BBB-			800		965
Honeywell International, Inc., 5.000%, due 2/15/19		A			925		1,013

See accompanying Notes to Financial Statements.

82 Annual Report

December 31, 2010

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Pfizer, Inc., 6.200%, due 3/15/19		AA		$	1,250	$	1,464
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A	+		1,300		1,546
Owens Corning, 9.000%, due 6/15/19		BBB-			950		1,115
Jefferies Group, Inc., 8.500%, due 7/15/19		BBB			1,300		1,486
Discovery Communications LLC, 5.625%, due 8/15/19		Baa2			500		549
Roper Industries, Inc., 6.250%, due 9/1/19		BBB-			1,225		1,356
Boston Properties L.P., 5.875%, due 10/15/19		A-			1,500		1,627
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-			500		525
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20		A2			250		251
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Ba2			1,515		1,763
Jarden Corporation, 7.500%, due 1/15/20		B			1,500		1,564
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20		A			1,500		1,683
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB	+		1,625		1,726
United Technologies Corporation, 4.500%, due 4/15/20		A	+		1,500		1,575
Iron Mountain, Inc., 8.000%, due 6/15/20		B	+		1,250		1,312
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A1			1,800		1,945
Commonwealth Edison Co., 4.000%, due 8/1/20		A-			1,000		984
Alcoa, Inc., 6.150%, due 8/15/20		BBB-			1,775		1,823
Omnicom Group, Inc., 4.450%, due 8/15/20		A-			1,975		1,933
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B	+		700		724
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20		Aa2			385		404
BE Aerospace, Inc., 6.875%, due 10/1/20		BB			650		671
Celgene Corporation, 3.950%, due 10/15/20		BBB	+		500		475

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. The obligations of certain U.S. Government-sponsored securities are neither issued nor guaranteed by the U.S. Treasury.

VRN = Variable Rate Note

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at December 31, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at December 31, 2010.


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		BBB		$	500	$	494
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22		A			664		730
The Kroger Co., 8.000%, due 9/15/29		BBB			325		408
Conoco Funding Co., 7.250%, due 10/15/31		A1			400		495
Kohl’s Corporation, 6.000%, due 1/15/33		BBB	+		1,000		1,020
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A	+		500		526
Comcast Corporation, 6.450%, due 3/15/37		BBB	+		650		695
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB-			600		681
JPMorgan Chase & Co., 6.400%, due 5/15/38		Aa3			900		1,021
COX Communications, Inc.—144A, 6.950%, due 6/1/38		Baa2			350		389
General Electric Capital Corporation, 6.875%, due 1/10/39		AA	+		750		867
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3			1,515		1,567

Total Corporate Obligations							88,831

Total Long-Term Investments—97.4% (cost $178,039)							187,842


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $3,285, collateralized by U.S. Treasury Note, 2.750%, due 12/31/17		AAA			3,285		3,285

Total Repurchase Agreement—1.7% (cost $3,285)							3,285

Total Investments—99.1% (cost $181,324)							191,127
Cash and other assets, less liabilities—0.9%							1,649

Net assets—100.0%						$	192,776

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 83

LOGO

Christopher T. Vincent

INCOME FUND

The Income Fund seeks a high level of current income with relative stability of principal.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Income Fund

The Income Fund posted a 6.04% increase on a total return basis (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Barclays Capital Intermediate Government/Credit Bond Index, gained 5.89%.

Security selection within the Mortgage-backed and Corporate bond sectors was the main reason the Fund outperformed the Fund’s benchmark in 2010. The Fund’s underweight position in U.S. Treasury securities versus the Index also benefitted the Fund.

Although high yield bonds were the best-performing sector of the Corporate bond market, the Fund’s lack of exposure to this sector (the Fund, has an investment policy restricting it from investing in high yield bonds) did not impact it negatively. It also should be noted that Fund has an upper limit with respect to holdings of BBB-rated securities, while the Index does not. Conversely, the Fund has the ability to invest in Mortgage-backed securities, which outperformed during the fourth quarter, while the benchmark Index does not include these securities.

In particular, the Fund maintains an overweight allocation to Corporate Bonds. In the current low growth, low inflation environment, corporate balance sheets have improved drastically, which improves the quality profile of corporate bonds. Investment ratings on some securities have risen. We believe that U.S. GDP growth will likely remain subpar due to structural unemployment in the U.S. economy. We believe this current environment is one that should remain favorable for Corporate bonds.

At year end, the Income Fund’s average maturity stood at 4.6 years, while its duration was 3.7 years.

84 Annual Report

December 31, 2010

Income Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			10 Year
Class N		6.04	%		4.36	%		3.67	%		4.13	%
Class I		6.33			4.53			3.85			4.29
Barclays Capital Intermediate Government/Credit Bond Index		5.89			5.40			5.53			5.51

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 Barclays Capital 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 investments.

December 31, 2010

William Blair Funds 85

Income Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—35.6%*
U.S. Treasury Inflation Indexed Notes/Bonds—3.7%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17 $	$	3,796	$	4,230

U.S. Treasury—5.2%
U.S. Treasury Note, 5.125%, due 5/15/16		1,000		1,152
U.S. Treasury Note, 3.125%, due 5/15/19		1,500		1,516
U.S. Treasury Note, 2.625%, due 8/15/20		2,500		2,370
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		1,185		860

Total U.S. Treasury Obligations				5,898

Government National Mortgage Association (GNMA)—0.3%
#780405, 9.500%, due 11/15/17		152		167
#357322, 7.000%, due 9/15/23		98		111

Total GNMA Mortgage Obligations				278

Federal Home Loan Mortgage Corp. (FHLMC)—9.2%
#M80925, 5.000%, due 6/1/11		286		292
#E00436, 7.000%, due 6/1/11		18		18
#G10708, 6.500%, due 8/1/12		25		26
#E72924, 7.000%, due 10/1/13		253		266
#E81703, 7.000%, due 5/1/15		276		295
#E81697, 8.000%, due 5/1/15		729		798
#E81908, 8.500%, due 12/1/15		39		44
#J02184, 8.000%, due 4/1/16		445		480
#G90022, 8.000%, due 9/17/16		227		245
#M30028, 5.500%, due 5/1/17		56		58
#E90398, 7.000%, due 5/1/17		635		693
#E96536, 5.000%, due 3/1/18		799		852
#E97112, 4.000%, due 5/1/18		336		350
#B13459, 4.500%, due 4/1/19		241		254
#C67537, 9.500%, due 8/1/21		11		11
#D95621, 6.500%, due 7/1/22		1,833		2,031
#A45790, 7.500%, due 5/1/35		354		407
#G02141, 6.000%, due 3/1/36		1,050		1,161
#A81799, 6.500%, due 9/1/38		1,829		2,071

Total FHLMC Mortgage Obligations				10,352

Federal National Mortgage Association (FNMA)—17.2%
#313816, 6.000%, due 4/1/11		3		3
#577395, 10.000%, due 8/1/11		5		5
#254788, 6.500%, due 4/1/13		69		71
#725315, 8.000%, due 5/1/13		78		82
#593561, 9.500%, due 8/1/14		133		146
#567027, 7.000%, due 9/1/14		545		583
#567026, 6.500%, due 10/1/14		437		477
#458124, 7.000%, due 12/15/14		72		78
#576554, 8.000%, due 1/1/16		609		671
#576553, 8.000%, due 2/1/16		944		1,062
#555747, 8.000%, due 5/1/16		89		94
#735569, 8.000%, due 10/1/16		565		622
#725410, 7.500%, due 4/1/17		337		356
#643217, 6.500%, due 6/1/17		179		195


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#679247, 7.000%, due 8/1/17				$	755	$	845
#685194, 4.500%, due 3/1/18					1,164		1,233
#689334, 5.000%, due 3/1/18					170		182
#695910, 5.000%, due 5/1/18					735		794
#740847, 6.000%, due 10/1/18					469		511
#323501, 6.500%, due 1/1/19					146		160
#255358, 5.000%, due 9/1/19					215		230
#852864, 7.000%, due 7/1/20					1,597		1,803
#458147, 10.000%, due 8/15/20					389		438
#835563, 7.000%, due 10/1/20					691		773
#735574, 8.000%, due 3/1/22					408		481
#679253, 6.000%, due 10/1/22					930		1,023
FNR G93-19 SH, 11.234%, due 4/25/23, VRN					11		14
#AD8164, 4.000%, due 8/1/25					975		1,015
#AE1176, 4.000%, due 8/1/25					977		1,016
#255956, 5.500%, due 10/1/25					188		202
#806458, 8.000%, due 6/1/28					392		452
#880155, 8.500%, due 7/1/29					782		907
#797846, 7.000%, due 3/1/32					988		1,106
#745519, 8.500%, due 5/1/32					232		269
#654674, 6.500%, due 9/1/32					238		268
#733897, 6.500%, due 12/1/32					280		318
#886220, 6.000%, due 7/1/36					937		1,039

Total FNMA Mortgage Obligations							19,524


*Non-Agency Mortgage-Backed Obligations—1.0%*
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23**§		C			676		578
First Plus Home Loan Trust, 1997-4, Tranche M2, 7.830%, 9/11/23**§		C			143		106
First Plus Home Loan Trust, 1998-3, Tranche M2, 7.920%, 5/10/24**§		Caa1			256		234
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M1, 2.783%, 2/28/33, VRN§		CCC			403		162
ABFS Mortgage Loan Trust, 2002-2, Tranche A7, 5.715%, 7/15/33		AAA			2		2
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35		AA	+		35		35

Total Non-Agency Mortgage-Backed Obligations							1,117


*Consumer Asset-Backed Securities—8.2%*
Ford Credit Auto Owner Trust, 2010-B, Tranche A2, 0.650%, 12/15/12		Aaa			500		500
Citibank Credit Card Issuance Trust, 2009-A3, Tranche A3, 2.700%, 6/24/13		AAA			965		976

See accompanying Notes to Financial Statements.

86 Annual Report

December 31, 2010

Income Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13		AAA		$	273	$	275
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1			1,000		1,095
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A3, 3.190%, 11/15/13		AAA			586		594
Mercedes-Benz Auto Receivables Trust, 2009-1, Tranche A3, 1.670%, 1/15/14		AAA			405		409
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14		Aaa			1,500		1,607
Volkswagen Auto Lease Trust, 2009-A, Tranche A4, 4.590%, 3/17/14		AAA			500		513
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa			1,500		1,570
Chase Issuance Trust, 2008-A10, Tranche A10, 1.010%, 8/17/15, VRN		AAA			1,500		1,518
Chase Issuance Trust, 2008-A3, Tranche A, 1.360%, 3/15/16, VRN		AAA			250		256

Total Consumer Asset-Backed Securities							9,313


*Corporate Obligations—52.4%*
Wisconsin Energy Corporation, 6.500%, due 4/1/11		A3			1,250		1,268
Eli Lilly & Co., 3.550%, due 3/6/12		AA	-		500		516
BHP Billiton Finance USA, Ltd., 5.125%, due 3/29/12		A	+		1,195		1,257
Morgan Stanley, 6.600%, due 4/1/12		A			1,600		1,705
PepsiCo, Inc., 4.650%, due 2/15/13		Aa3			540		582
Citigroup, Inc., 5.500%, due 4/11/13		A	+		1,000		1,065
General Electric Capital Corporation, 4.800%, due 5/1/13		AA	+		1,500		1,604
Novartis Capital Corporation, 4.125%, due 2/10/14		Aa2			1,000		1,067
CME Group, Inc., 5.750%, due 2/15/14		AA			1,000		1,107
PACCAR, Inc., 6.875%, due 2/15/14		A	+		1,000		1,147
PepsiAmericas, Inc., 4.375%, due 2/15/14		Aa3			500		541
Coca-Cola Enterprises, Inc., 7.375%, due 3/3/14		A	+		900		1,049
General Electric Capital Corporation, 5.900%, due 5/13/14		AA	+		225		249


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Bank of America Corporation, 7.375%, due 5/15/14		A	+	$	500	$	556
St. Jude Medical, Inc., 3.750%, due 7/15/14		A			500		529
AT&T, Inc., 5.100%, due 9/15/14		A2			1,750		1,915
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14		A1			1,000		1,068
Boeing Capital Corporation, 3.250%, due 10/27/14		A	+		1,000		1,042
EI du Pont de Nemours & Co., 3.250%, due 1/15/15		A			1,200		1,245
Simon Property Group L.P., 4.200%, due 2/1/15		A	-		1,125		1,176
United Technologies Corporation, 4.875%, due 5/1/15		A	+		1,000		1,107
Cisco Systems, Inc., 5.500%, due 2/22/16		A	+		1,250		1,426
Yum! Brands, Inc., 6.250%, due 4/15/16		BBB	-		750		848
Petrobras International Finance Co., 6.125%, due 10/6/16		Baa1			1,000		1,100
BHP Billiton Finance USA, Ltd., 5.400%, due 3/29/17		A	+		1,000		1,107
ERP Operating L.P., 5.750%, due 6/15/17		BBB	+		1,000		1,096
JPMorgan Chase & Co., 6.125%, due 6/27/17		A1			1,750		1,920
Kimberly-Clark Corporation, 6.125%, due 8/1/17		A			1,000		1,167
American Express Co., 6.150%, due 8/28/17		A	+		1,500		1,691
IBM Corporation, 5.700%, due 9/14/17		Aa3			1,750		2,009
Exelon Generation Co. LLC, 6.200%, due 10/1/17		A3			2,000		2,238
Tesco plc—144A, 5.500%, due 11/15/17		A	-		1,750		1,952
Abbott Laboratories, 5.600%, due 11/30/17		AA			500		572
Wells Fargo & Co., 5.625%, due 12/11/17		AA	-		750		830
American Tower Corporation, 4.500%, due 1/15/18		Baa3			500		496
Philip Morris International, Inc., 5.650%, due 5/16/18		A			1,250		1,409
Time Warner Cable, Inc., 6.750%, due 7/1/18		BBB			750		874
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19		BBB	+		800		996
FedEx Corporation, 8.000%, due 1/15/19		BBB			750		925
Honeywell International, Inc., 5.000%, due 2/15/19		A			1,225		1,341
The Procter & Gamble Co., 4.700%, due 2/15/19		AA	-		500		541
Unilever Capital Corporation, 4.800%, due 2/15/19		A	+		500		541

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 87

Income Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Pfizer, Inc., 6.200%, due 3/15/19		AA		$	1,000	$	1,171
Jefferies Group, Inc., 8.500%, due 7/15/19		BBB			700		800
Boston Properties L.P., 5.875%, due 10/15/19		A	-		1,350		1,464
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20		A2			1,000		1,004
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20		A			1,000		1,122
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB	+		1,000		1,062
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A1			1,000		1,081
Alcoa, Inc., 6.150%, due 8/15/20		BBB	-		750		770
Omnicom Group, Inc., 4.450%, due 8/15/20		A	-		750		734
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20		Aa2			1,202		1,261
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		BBB			450		445
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22		A			1,460		1,606

Total Corporate Obligations							59,394

Total Long-Term Investments—97.2% (cost $104,251)							110,106


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $1,676, collateralized by U.S. Treasury Bill, 2.750%, due 12/31/17		AAA			1,676		1,676

Total Repurchase Agreement—1.5% (cost $1,676)							1,676

Total Investments—98.7% (cost $105,927)							111,782
Cash and other assets, less liabilities—1.3%							1,495

Net assets—100.0%						$	113,277

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

VRN = Variable Rate Note

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 0.81% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.95% of the Fund’s net assets at December 31, 2010.

See accompanying Notes to Financial Statements.

88 Annual Report

December 31, 2010

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

LOW DURATION FUND

The Low Duration Fund seeks to maximize total return. Total return includes both income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Low Duration Fund posted a 1.86% increase on a total return basis (Class N Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Merrill Lynch 1-Year U.S. Treasury Note Index, gained 0.83%.

The Fund had a very positive first year, with the Fund meeting its objective of outperforming its Merrill Lynch 1-Year U.S. Treasury Note Index benchmark. We believe the Fund has been able to accomplish this objective without sacrificing credit quality. The Fund does not own securities with a rating below “A” from a Nationally Recognized Statistical Rating Organization.

The month of December, in particular, was reminiscent of the period one year ago when the Fund was launched, with interest rates rising sharply and market volatility high. Part of this was a function of the U.S. Government’s Treasury auction occurring during a period of very thinly traded markets at the end of the year.

The majority of the Fund’s portfolio is invested in seasoned U.S. Government-guaranteed short duration Mortgage-backed Fannie Mae and Freddie Mac securities. This is the Fund’s major sector emphasis. We favor such securities because they pay monthly principal and interest, which we then are able to reinvest. The benefits of this strategy are evident in a rising rate environment such as the one we experienced during December.

Assets in this new Fund continued to build since the Fund’s inception on December 1, 2009, with assets increasing to a new “high watermark” of approximately $142 million at December 31, 2010.

We continued to invest in new Consumer Asset-backed securities (such as “top tier” banks and auto receivables) as well as seasoned U.S. Agency Mortgage-backed securities and Corporate Bonds with a rating of single-A or higher.

We consider the Consumer Asset-backed securities that the Fund invests in to be highly liquid. Nearly a third of these investments are floating rate instruments that reset on a monthly basis.

The Fund kept its exposure to cash and cash equivalents extremely low, given the very low rates currently available from money market instruments.

We have increased the Fund’s holdings of Asset-backed securities whose coupons are reset monthly and are tied to LIBOR—the London Interbank Offered Rate. The income from these securities will rise with any increase in rates and will protect the Fund against falling prices.

December 31, 2010

William Blair Funds 89

Low Duration Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			Since Inception(a)
Class N		1.86	%		1.15	%
Class I		1.89			1.19
Merrill Lynch 1-Year U.S. Treasury Note Index		0.83			0.62

(a)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2010.

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 Merrill Lynch 1-Year U.S. Treasury Note Index is comprised of a single U.S. Treasury Note issue purchased at the beginning of the month and held for a full month. Each month the index is rebalanced and the issue selected is the outstanding U.S. Treasury Note that matures closest to, but not beyond one year from the rebalancing date.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investments.

90 Annual Report

December 31, 2010

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer		Principal Amount		Value

*U.S. Government and U.S. Government Agency—41.6%*
U.S. Treasury—2.1%
U.S. Treasury Note, 0.500%, due 11/15/13		$	3,000	$	2,961

Government National Mortgage Association (GNMA)—0.2%
#003438, 4.500%, due 9/20/18			323		342

Federal Home Loan Mortgage Corp. (FHLMC)—11.8%
#M80898, 4.500%, due 2/1/11			152		156
#M80903, 4.000%, due 3/1/11			268		270
#M80953, 4.000%, due 12/1/11			286		292
#E86134, 5.000%, due 11/1/16			264		280
#E96536, 5.000%, due 3/1/18	��		498		531
#E95355, 5.000%, due 4/1/18			587		626
#E01377, 4.500%, due 5/1/18			583		614
#G11618, 4.500%, due 5/1/18			2,754		2,909
#E99963, 4.500%, due 10/1/18			161		170
#E01488, 5.000%, due 10/1/18			618		659
#E99895, 5.000%, due 10/1/18			1,157		1,234
#G12093, 4.500%, due 12/1/18			722		763
#B11386, 5.000%, due 12/1/18			272		290
#E01545, 5.000%, due 1/1/19			348		371
#G11766, 5.000%, due 3/1/19			252		269
#G18001, 4.500%, due 7/1/19			320		338
#G11596, 5.500%, due 8/1/19			267		290
#B16291, 5.000%, due 9/1/19			1,666		1,778
#G18045, 5.000%, due 3/1/20			278		296
#G11892, 4.000%, due 4/1/20			281		292
#G18048, 5.000%, due 4/1/20			191		203
#J08152, 5.000%, due 5/1/20			235		251
#G12394, 5.000%, due 5/1/21			357		380
#G12113, 5.500%, due 5/1/21			441		479
#G12286, 5.000%, due 7/1/21			205		218
#J13022, 4.000%, due 9/1/25			2,814		2,918

Total FHLMC Mortgage Obligations					16,877

Federal National Mortgage Association (FNMA)—27.5%
#255325, 4.500%, due 7/1/11			1,012		1,020
#256224, 5.500%, due 4/1/16			55		60
#256559, 5.500%, due 1/1/17			29		30
#256606, 5.500%, due 2/1/17			39		42
#256646, 5.500%, due 3/1/17			29		32
#545898, 5.500%, due 9/1/17			810		873
#545899, 5.500%, due 9/1/17			919		991
#663692, 5.000%, due 1/1/18			373		400
#254591, 5.500%, due 1/1/18			568		613
#681310, 4.500%, due 2/1/18			555		588
#683100, 5.500%, due 2/1/18			711		774
#675717, 5.000%, due 3/1/18			610		654
#681361, 5.000%, due 3/1/18			157		168
#656564, 5.000%, due 4/1/18			2,713		2,905
#696677, 5.000%, due 4/1/18			221		237
#702888, 5.000%, due 4/1/18			190		204
#929388, 4.500%, due 5/1/18			770		811
#254721, 5.000%, due 5/1/18			444		476
#702332, 5.000%, due 5/1/18			101		108
#704049, 5.500%, due 5/1/18			1,363		1,488
#254785, 4.000%, due 6/1/18			373		390
#555622, 4.500%, due 6/1/18			611		647
#656573, 5.000%, due 6/1/18			377		404


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#709848, 5.000%, due 6/1/18				$	330	$	353
#713380, 4.000%, due 7/1/18					310		323
#254802, 4.500%, due 7/1/18					486		515
#713807, 4.500%, due 7/1/18					287		304
#735003, 5.500%, due 7/1/18					1,733		1,887
#711991, 5.000%, due 8/1/18					316		339
#740444, 4.500%, due 9/1/18					498		527
#743183, 5.000%, due 10/1/18					134		144
#747823, 4.000%, due 11/1/18					835		872
#749596, 5.000%, due 11/1/18					476		510
#745237, 5.000%, due 12/1/18					117		125
#MA0045, 4.000%, due 4/1/19					712		745
#255233, 4.000%, due 5/1/19					719		750
#725445, 4.500%, due 5/1/19					1,320		1,396
#785259, 5.000%, due 8/1/19					573		615
#725953, 5.000%, due 10/1/19					165		178
#745240, 4.500%, due 12/1/19					755		800
#735401, 5.500%, due 3/1/20					472		509
#735646, 4.500%, due 7/1/20					908		961
#MA0517, 4.000%, due 9/1/20					1,426		1,493
#836016, 4.500%, due 9/1/20					1,516		1,599
#MA0548, 3.500%, due 10/1/20					2,510		2,600
#881284, 4.500%, due 12/1/21					1,579		1,663
#932723, 4.000%, due 4/1/25					931		968
#935995, 4.000%, due 6/1/25					258		268
#AD4677, 4.000%, due 6/1/25					1,986		2,066
#AD8164, 4.000%, due 8/1/25					2,000		2,080
#AE1176, 4.000%, due 8/1/25					977		1,016

Total FNMA Mortgage Obligations							39,521


*Consumer Asset-Backed Securities—41.0%*
Mercedes-Benz Auto Receivables Trust, 2010-1, Tranche A1, 0.309%, 5/13/11		A-1	+		19		19
BMW Vehicle Lease Trust, 2009-1, Tranche A4, 3.660%, 9/15/11		AAA			500		509
Nissan Auto Lease Trust, 2009-B, Tranche A2, 1.220%, 9/15/11		AAA			366		366
Ford Credit Auto Owner Trust, 2009-D, Tranche A2, 1.210%, 1/15/12		AAA			168		168
Honda Auto Receivables Owner Trust, 2009-2, Tranche A3, 2.790%, 1/16/12		AAA			779		787
Honda Auto Receivables Owner Trust, 2008-1, Tranche A3, 4.470%, 1/18/12		AAA			139		139
Honda Auto Receivables Owner Trust, 2010-1, Tranche A2, 0.620%, 2/21/12		AAA			1,753		1,754
USAA Auto Owner Trust, 2009-2, Tranche A2, 0.740%, 3/15/12		AAA			14		14
Ally Auto Receivables Trust, 2010-1, Tranche A2, 0.750%, 4/15/12		AAA			848		849
Volkswagen Auto Lease Trust, 2009-A, Tranche A3, 3.410%, 4/16/12		AAA			1,319		1,333

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 91

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A2, 0.660%, 5/21/12		AAA	$	1,437	$	1,438
USAA Auto Owner Trust, 2010-1, Tranche A2, 0.630%, 6/15/12		AAA		716		717
Ford Credit Auto Owner Trust, 2007-B, Tranche A4A, 5.240%, 7/15/12		AAA		530		540
CNH Equipment Trust, 2008-B, Tranche A3A, 4.780%, 7/16/12		AAA		37		37
CNH Equipment Trust, 2009-C, Tranche A2, 0.950%, 8/15/12		AAA		91		91
CNH Equipment Trust, 2010-A, Tranche A2, 0.810%, 8/15/12		AAA		798		799
BMW Vehicle Lease Trust, 2010-1, Tranche A2, 0.580%, 9/17/12		Aaa		500		500
BMW Vehicle Owner Trust, 2010-A, Tranche A2, 0.680%, 9/25/12		AAA		1,237		1,238
Capital Auto Receivables Asset Trust, 2008-2, Tranche A3B, 1.710%, 10/15/12, VRN		AAA		499		501
USAA Auto Owner Trust, 2008-3, Tranche A3, 4.280%, 10/15/12		AAA		31		31
Ford Credit Auto Owner Trust, 2010-B, Tranche A2, 0.650%, 12/15/12		Aaa		1,200		1,201
Chrysler Financial Auto Securitization Trust, 2010-A, Tranche A2, 0.690%, 1/8/13		AAA		1,000		1,000
CarMax Auto Owner Trust, 2009-1, Tranche A3, 4.120%, 3/15/13		AAA		384		390
Nissan Auto Lease Trust, 2010-A, Tranche A2, 1.100%, 3/15/13		AAA		1,205		1,207
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/13		AAA		300		302
Ford Credit Auto Owner Trust, 2009-A, Tranche A3A, 3.960%, 5/15/13		AAA		414		421
Bank of America Credit Card Trust, 2007-A2, Tranche A2, 0.280%, 6/17/13, VRN		AAA		1,283		1,283
USAA Auto Owner Trust, 2009-1, Tranche A3, 3.020%, 6/17/13		AAA		899		910
Citibank Credit Card Issuance Trust, 2009-A3, Tranche A3, 2.700%, 6/24/13		AAA		100		101
American Express Issuance Trust, 2007-2, Tranche A, 0.510%, 7/15/13, VRN		AAA		373		373
American Express Credit Account Master Trust, 2008-1, Tranche A, 0.710%, 8/15/13, VRN		AAA		1,200		1,200
American Express Credit Account Master Trust—144A, 2006-B, Tranche A, 0.300%, 8/15/13, VRN		AAA		1,070		1,070
Discover Card Master Trust I, 2006-1, Tranche A2, 0.310%, 8/16/13, VRN		AAA		354		354


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
Ford Credit Auto Owner Trust, 2009-D, Tranche A3, 2.170%, 10/15/13		AAA	$	1,160	$	1,173
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13		AAA		1,344		1,357
John Deere Owner Trust, 2009-B, Tranche A3, 1.570%, 10/15/13		AAA		865		871
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		2,000		2,189
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A3, 3.190%, 11/15/13		AAA		2,411		2,444
Citibank Credit Card Issuance Trust, 2004-A7, Tranche A7, 0.374%, 11/25/13, VRN		AAA		1,043		1,041
CNH Equipment Trust, 2009-C, Tranche A3, 1.850%, 12/16/13		AAA		351		354
Capital One Multi-Asset Execution Trust, 2006-A6, Tranche A6, 5.300%, 2/18/14		AAA		652		661
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14		Aaa		1,500		1,607
Harley-Davidson Motorcycle Trust, 2009-2, Tranche A3, 2.620%, 3/15/14		AAA		825		834
Capital One Multi-Asset Execution Trust, 2006-A7, Tranche A7, 0.290%, 3/17/14, VRN		AAA		1,000		999
Capital One Multi-Asset Execution Trust, 2008-A6, Tranche A6, 1.360%, 3/17/14, VRN		AAA		1,610		1,615
Citibank Credit Card Issuance Trust, 2009-A1, Tranche A1, 2.010%, 3/17/14, VRN		AAA		200		204
Volkswagen Auto Lease Trust, 2009-A, Tranche A4, 4.590%, 3/17/14		AAA		2,000		2,052
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		1,765		1,847
Chase Issuance Trust, 2007-A9, Tranche A, 3.151%, 6/16/14, VRN		AAA		2,000		1,993
Nissan Auto Receivables Owner Trust, 2008-A, Tranche A4, 4.280%, 6/16/14		AAA		120		122
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14		AAA		1,175		1,184
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		AAA		500		499
Daimler Chrysler Auto Trust, 2008-A, Tranche A4, 4.480%, 8/8/14		AAA		1,500		1,538
Citibank Credit Card Issuance Trust, 2007-A7, Tranche A7, 0.611%, 8/20/14, VRN		AAA		200		200

See accompanying Notes to Financial Statements.

92 Annual Report

December 31, 2010

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
American Express Credit Account Master Trust, 2007-5, Tranche A, 0.290%, 12/15/14, VRN		AAA		$	1,000	$	998
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.410%, 1/15/15, VRN		AAA			2,000		2,023
Capital One Multi-Asset Execution Trust, 2007-A4, Tranche A4, 0.290%, 3/16/15, VRN		AAA			1,778		1,769
Discover Card Master Trust, 2007-A2, Tranche A2, 0.642%, 6/15/15, VRN		AAA			192		192
Chase Issuance Trust, 2008-A10, Tranche A10, 1.010%, 8/17/15, VRN		AAA			2,000		2,024
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.560%, 9/15/15, VRN		AAA			1,330		1,330
Discover Card Master Trust, 2010-A1, Tranche A1, 0.910%, 9/15/15, VRN		Aaa			347		349
Ford Credit Floorplan Master Owner Trust, 2010-A5, Tranche A2, 0.960%, 9/15/15, VRN		AAA			1,700		1,700
Chase Issuance Trust, 2008-A3, Tranche A, 1.360%, 3/15/16, VRN		AAA			2,000		2,051

Total Consumer Asset-Backed Securities							58,862


*Corporate Obligations—11.8%*
Teva Pharmaceutical Finance III LLC, 1.500%, due 6/15/12		A	-		1,000		1,009
General Electric Capital Corporation, 3.500%, due 8/13/12		AA	+		1,000		1,036
Johnson & Johnson, 5.150%, due 8/15/12		AAA			1,900		2,038

VRN = Variable Rate Note


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Bank of America Corporation, 5.375%, due 9/11/12		A	+	$	1,000	$	1,050
ConocoPhillips, 4.750%, due 10/15/12		A	1		1,000		1,071
Citigroup, Inc., 5.300%, due 10/17/12		A	+		1,000		1,059
Wells Fargo & Co., 5.250%, due 10/23/12		AA	-		1,000		1,072
Morgan Stanley, 5.250%, due 11/2/12		A			1,000		1,067
The Procter & Gamble Co., 0.324%, due 11/14/12, VRN		AA	-		700		701
The Walt Disney Co., 4.700%, due 12/1/12		A			1,500		1,608
Hewlett-Packard Co., 4.500%, due 3/1/13		A	+		1,000		1,070
American Honda Finance Corp.—144A, 2.375%, due 3/18/13		A	+		1,000		1,017
American Express Co., 4.875%, due 7/15/13		A	+		1,000		1,069
MetLife, Inc., 2.375%, due 2/6/14		A	-		475		477
The Boeing Co., 5.000%, due 3/15/14		A	+		375		411
Shell International Finance BV, 4.000%, due 3/21/14		Aa1			1,142		1,215

Total Corporate Obligations							16,970

Total Long-Term Investments—94.4% (cost $135,633)							135,533


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $5,994, collateralized by U.S. Treasury Note, 2.750%, due 12/31/17		AAA			5,994		5,994

Total Repurchase Agreement—4.2% (cost $5,994)							5,994

Total Investments—98.6% (cost $141,627)							141,527
Cash and other assets, less liabilities—1.4%							1,943

Net assets—100.0%						$	143,470

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 93

LOGO

Christopher T. Vincent

LOGO

Kathleen M. Lynch

READY RESERVES FUND

The Ready Reserves Fund seeks current income, a stable share price and daily liquidity.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The return for the 12 months ended December 31, 2010, of the Fund’s Class N Shares was 0.01%, versus the 0.03% return of the Fund’s benchmark, the AAA-Rated Money Market Funds Average. Total assets were $1.22 billion at December 31, 2010, compared to $1.27 billion at June 30, 2010 and $1.35 billion at December 31, 2009.

Federal Reserve Board Monetary policy continued to be the focus of the money markets during 2010.

In early November, the U.S. Federal Reserve Board announced a second round of asset purchases to provide further stimulus to the U.S. economy.

The Federal Reserve stated that it intended to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011—maintaining its existing policy of reinvesting principal payments from its securities holdings, a pace of about $75 billion per month. The Fed said that it considered the actions “necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.”

Federal Reserve Chairman Ben Bernanke in particular has expressed longstanding concern about the danger of deflation, or falling prices, from a lack of demand stemming from slow economic growth, joblessness and weakness in the financial sector. And in one well-known major policy speech delivered in 2002, Bernanke identified asset purchases as a way to stimulate aggregate spending when short-term interest rates have reached zero.

The Fed said that information received since the Federal Open Market Committee (FOMC) met in November confirmed that the economic recovery was continuing, though at a rate that has been insufficient to bring down unemployment.

The Fed said, “Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.”

The Fed did not take any new steps on interest rates. The FOMC said that it will maintain the target range for the federal funds rate at 0.0% to 0.25% and that it “continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”

We continue to favor overnight repurchase agreements, in an effort to maintain a high degree of overnight liquidity.

The Fund also continues to maintain a relatively short Average Maturity. On December 31, 2010, the Fund’s Average Maturity was approximately 40 days, compared to 37 days on September 30, 2010, 37 days on June 30, 2010, 48 days on March 31, 2010 and 50 days on December 31, 2009.

94 Annual Report

December 31, 2010

Ready Reserves Fund

Performance Highlights (unaudited)

The Fund’s 7 day yield on December 31, 2010 was 0.01%.

Average Annual Total Returns—Class N Shares period ended December 31, 2010.


	1 Year			3 Year			5 Year			10 Year
Ready Reserves Fund Class N		0.01	%		0.78	%		2.29	%		2.04	%
AAA Ready Money Market Funds		0.03			0.80			2.26			2.00

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 iMoneyNet data.

This report identifies the Fund’s investments on December 31, 2010. 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 Investments.

December 31, 2010

William Blair Funds 95

Ready Reserves Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Principal Amount		Amortized Cost
U.S. Government Agency Mortgage-Backed Notes—0.0%
Federal National Mortgage Association (FNMA), 4.000%, 2/1/11 $366			$	366

Total U.S. Government Agency Mortgage-Backed Notes				366

U.S. Government Agency Notes—6.8%
Federal Home Loan Bank (FHLB), 4.625%, 2/18/11	$	5,000		5,027
Federal Home Loan Mortgage Corporation (FHLMC), 1.625%-5.125%, 1/18/11-5/5/11		23,695		23,825
Federal National Mortgage Association (FNMA), 1.000%-5.500%, 2/15/11-11/23/11		54,246		54,591

Total U.S. Government Agency Notes				83,443

Corporate Notes—14.8%
Abbott Laboratories, 3.750%-5.600%, 3/15/11-5/15/11		14,204		14,451
Boeing Capital Corporation, 6.100%, 3/1/11		6,612		6,675
Citibank NA, 1.500%-1.625%, 3/30/11-7/12/11		10,010		10,061
Citigroup Funding, Inc., 1.250%, 6/3/11		15,000		15,064
Dover Corporation, 6.500%, 2/15/11		1,380		1,390
General Electric Capital Corporation, 5.200%-6.125%, 2/1/11-4/28/11		17,668		17,835
IBM Corporation, 4.950%, 3/22/11		14,000		14,144
Merck & Co., Inc., 1.875%, 6/30/11		10,860		10,943
Oracle Corporation, 5.000%, 1/15/11		13,153		13,176
Pfizer, Inc., 2.252%, 3/15/11, VRN		8,000		8,032
Procter & Gamble International Funding, 1.350%, 8/26/11		15,489		15,585
Shell International Finance BV, 1.300%, 9/22/11		10,000		10,070
U.S. Bank NA, 6.375%, 8/1/11		12,045		12,456
Wal-Mart Stores, Inc., 4.125%, 2/15/11		10,000		10,045
Wells Fargo & Co., 0.738%, 1/24/11, VRN		4,712		4,713
Wells Fargo & Co., 4.000%-4.875%, 1/12/11-6/2/11		7,619		7,640
Wyeth, 6.950%, 3/15/11		7,400		7,499

Total Corporate Notes				179,779

Foreign Government Notes—2.3%
Canadian Wheat Board, 0.170%-0.190%, 1/11/11-3/8/11		28,000		27,994

Total Foreign Government Notes				27,994

Commercial Paper—48.4%
Abbott Laboratories, 0.160%-0.200%, 1/4/11-2/28/11		20,900		20,896
American Honda Finance Corporation, 0.200%-0.250%, 1/5/11-2/17/11		36,500		36,495
Caterpillar Financial Services Corporation, 0.150%-0.210%, 1/5/11-2/23/11		38,000		37,996
Chevron Funding Corporation, 0.110%-0.160%, 1/10/11-1/18/11		39,000		39,000
Coca-Cola Co., 0.190%-0.230%, 1/10/11-4/4/11		36,000		35,990


Issuer	Principal Amount		Amortized Cost
Commercial Paper—(continued)
Colgate-Palmolive Co., 0.160%, 1/7/11	$	10,000	$	10,000
ConocoPhillips Qatar Funding, Ltd., 0.190%-0.260%, 1/4/11-2/25/11		34,000		33,996
General Electric Capital Corporation, 0.170%-0.230%, 1/31/11-3/1/11		22,000		21,994
Hewlett Packard Co., 0.150%-0.170%, 1/3/11-1/7/11		35,849		35,849
IBM Corporation, 0.110%-0.150%, 1/3/11-1/14/11		25,000		25,000
John Deere Credit, Inc., 0.220%-0.230%, 1/6/11-1/26/11		20,650		20,648
John Deere Credit, Ltd., 0.230%, 2/2/11		12,000		11,997
Johnson & Johnson, 0.190%-0.240%, 3/9/11-6/2/11		34,985		34,964
Nestle Capital Corporation, 0.170%-0.190%, 1/18/11-3/9/11		33,460		33,452
PACCAR Financial Corporation, 0.180%-0.200%, 1/7/11-1/19/11		39,150		39,148
Praxair, Inc., 0.170%, 1/4/11		20,000		20,000
Private Export Funding, 0.180%-0.280%, 1/4/11-3/7/11		38,600		38,594
Procter & Gamble Co. (The), 0.160%-0.230%, 1/5/11-4/12/11		18,000		17,996
Procter & Gamble International Funding, 0.170%, 1/28/11		5,000		4,999
Roche Holding, Inc., 0.160%, 1/5/11-1/6/11		10,000		10,000
Shell International Finance BV, 0.450%-0.500%, 1/3/11-2/1/11		10,000		9,998
Toyota Credit Corporation, 0.200%-0.250%, 1/7/11-1/21/11		42,000		41,994
Unilever Capital Corporation, 0.190%, 2/28/11		8,000		7,997

Total Commercial Paper3				589,003

Asset-Backed Commercial Paper—5.8%
Chariot Funding L.L.C., 0.230%-0.260%, 1/10/11-1/26/11		18,000		17,998
Govco L.L.C, 0.230%-0.270%, 1/4/11-1/24/11		44,000		43,996
Wal-Mart Funding Corporation, 0.250%, 1/11/11		8,000		7,999

Total Asset-Backed Commercial Paper				69,993

Repurchase Agreements—21.8%
Bank of America, 0.200% dated 12/31/10, due 1/3/11, repurchase price $57,001, collateralized by U.S. Government Agency securities, 1.375%-5.750%, due 4/28/11-12/1/40		57,000		57,000
Barclays Capital, 0.160% dated 12/28/10, due 1/4/11, repurchase price $30,001, collateralized by FDIC guaranteed securities, 0.000%-3.000%, due 2/23/11-12/28/12		30,000		30,000
Barclays Capital, 0.250% dated 12/31/10, due 1/3/11, repurchase price $25,001, collateralized by GNMA, 4.500%-5.000%, due 1/20/35-9/20/40		25,000		25,000

See accompanying Notes to Financial Statements.

96 Annual Report

December 31, 2010

Ready Reserves Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Principal Amount		Amortized Cost
Repurchase Agreements—(continued)
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $55,704, collateralized by FNMA, 3.420%, due 11/24/20	$	55,703	$	55,703
Goldman Sachs, 0.180% dated 12/31/10, due 1/3/11, repurchase price $57,001, collateralized by a FDIC guaranteed security, 2.250%, due 3/12/12		57,000		57,000
JPMorgan & Co., 0.200% dated 12/31/10, due 1/3/11, repurchase price $40,001, collateralized by FNMA, 0.020%-8.139%, due 12/25/16-9/25/40		40,000		40,000

Total Repurchase Agreements				264,703

Total Investments—99.9% (cost $1,215,281)				1,215,281

Cash and other assets, less liabilities—0.1%				1,262

Net assets—100.0%			$	1,216,543

Portfolio Weighted Average Maturity				40 days

VRN = Variable Rate Note

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 97

Statements of Assets and Liabilities

December 31, 2010 (dollar amounts in thousands)


	Growth Fund			Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
*Assets*
Investments in securities, at cost	$	421,729		$	23,939		$	632,055		$	77,862
Investments in Affiliated Companies, at cost		—			—			114,550			—


Investments in securities, at value	$	523,244		$	31,866		$	794,417		$	101,028
Investments in Affiliated Companies, at value		—			—			83,941			—
Receivable for securities sold		1,769			43			19,704			367
Receivable for fund shares sold		52,539			156			1,159			253
Receivable from Advisor		—			5			76			—
Dividend and interest receivable		361			23			50			44

Total assets		577,913			32,093			899,347			101,692
*Liabilities*
Payable for investment securities purchased		114			—			5,260			290
Payable for fund shares redeemed		1,751			—			1,374			40
Management fee payable		331			22			834			84
Distribution fee payable		42			1			84			3
Other accrued expenses		62			35			206			27

Total liabilities		2,300			58			7,758			444

Net Assets	$	575,613		$	32,035		$	891,589		$	101,248

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	50		$	4		$	37		$	8
Capital paid in excess of par value		482,224			30,945			856,238			81,063
Accumulated net investment income (loss)		329			—			—			—
Accumulated net realized gain (loss)		(8,505	)		(6,841	)		(96,439	)		(2,989	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		101,515			7,927			131,753			23,166

Net Assets	$	575,613		$	32,035		$	891,589		$	101,248


Class N Shares
Net Assets	$	198,622		$	7,135		$	396,767		$	13,802
Shares Outstanding		17,607,778			999,776			17,084,515			1,104,271
Net Asset Value Per Share	$	11.28		$	7.14		$	23.22		$	12.50
Class I Shares
Net Assets	$	376,991		$	24,900		$	494,822		$	87,446
Shares Outstanding		32,183,980			3,411,336			20,565,514			6,896,804
Net Asset Value Per Share	$	11.71		$	7.30		$	24.07		$	12.68

See accompanying Notes to Financial Statements.

98 Annual Report

December 31, 2010

Statements of Operations

for the Year Ended December 31, 2010 (all amounts in thousands)


	Growth Fund		Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
*Investment income*
Dividends	$	4,772	$	328		$	3,470		$	779
Less foreign tax withheld		—		—			(54	)		—
Dividend income from Affiliated Companies		—		—			375			—
Interest		16		1			31			3

Total income		4,788		329			3,822			782
*Expenses*
Investment advisory fees		3,461		235			8,796			774
Distribution fees		444		15			1,114			30
Custodian fees		29		35			38			37
Transfer agent fees		122		9			98			14
Sub-transfer agent fees
Class N		176		8			487			7
Class I		83		—			304			31
Professional fees		39		26			53			26
Registration fees		33		27			62			25
Shareholder reporting fees		34		3			193			15
Trustee fees		15		1			28			2
Other expenses		23		4			22			8

Total expenses before waiver		4,459		363			11,195			969
Expenses waived by the Advisor		—		(66	)		(90	)		(40	)

Net expenses		4,459		297			11,105			929

Net investment income (loss)		329		32			(7,283	)		(147	)
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments		29,431		1,167			98,413	(a)		9,349
Foreign currency transactions		—		—			6			—

Total net realized gain (loss)		29,431		1,167			98,419			9,349
Change in net unrealized appreciation (depreciation) of investments		35,328		3,134			32,801	(a)		10,074

Net increase (decrease) in net assets resulting from operations	$	65,088	$	4,333		$	123,937		$	19,276

(a)

Affiliated Companies accounted for $(2,866) of the net realized gain on investments and $17,126 of the change in unrealized (depreciation) on investments during the year.

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 99

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (all amounts in thousands)


	Growth Fund						Large Cap Growth Fund						Small Cap Growth Fund						Mid Cap Growth Fund
	2010			2009			2010			2009			2010			2009			2010			2009
*Operations*
Net investment income (loss)	$	329		$	56		$	32		$	17		$	(7,283	)	$	(4,618	)	$	(147	)	$	(147	)
Net realized gain (loss) on investments and foreign currency transactions		29,431			(19,046	)		1,167			(2,753	)		98,419			(34,140	)		9,349			(6,206	)
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		35,328			119,029			3,134			9,950			32,801			322,910			10,074			22,569

Net increase (decrease) in net assets resulting from operations		65,088			100,039			4,333			7,214			123,937			284,152			19,276			16,216
*Distributions to shareholders from*
Net investment income		(13	)		(43	)		(33	)		(16	)		—			—			—			—
Net realized gain		—			—			—			—			—			—			—			—

		(13	)		(43	)		(33	)		(16	)		—			—			—			—
*Capital stock transactions*
Net proceeds from sale of shares		176,362			131,594			3,077			6,234			364,595			317,852			24,389			21,823
Shares issued in reinvestment of income dividends and capital gain distributions		11			34			29			14			—			—			—			—
Less cost of shares redeemed		(85,355	)		(50,690	)		(5,682	)		(6,414	)		(359,741	)		(240,833	)		(13,251	)		(7,731	)

Net increase (decrease) in net assets resulting from capital share transactions		91,018			80,938			(2,576	)		(166	)		4,854			77,019			11,138			14,092

Increase (decrease) in net assets		156,093			180,934			1,724			7,032			128,791			361,171			30,414			30,308
Net assets
Beginning of year		419,520			238,586			30,311			23,279			762,798			401,627			70,834			40,526

End of year	$	575,613		$	419,520		$	32,035		$	30,311		$	891,589		$	762,798		$	101,248		$	70,834

Accumulated net investment income (loss) at the end of the year	$	329		$	13		$	—		$	1		$	—		$	—		$	—		$	—

See accompanying Notes to Financial Statements.

100 Annual Report

December 31, 2010

Statements of Assets and Liabilities

for the Year Ended December 31, 2010 (all amounts in thousands)


	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
*Assets*
Investments in securities, at cost	$	162,909		$	34,109		$	4,072,201		$	135,256


Investments in securities, at value	$	206,902		$	44,845		$	5,097,912		$	175,256
Cash		—			—			126			—
Foreign currency, at value (cost $—; $—; $818; $1,756)		—			—			830			1,879
Receivable for securities sold		1,131			7			2,956			25
Receivable for fund shares sold		328			75			9,746			942
Receivable from Advisor		—			11			—			—
Dividend and interest receivable		31			39			13,990			398

Total assets		208,392			44,977			5,125,560			178,500
*Liabilities*
Payable for investment securities purchased		14			—			32,637			—
Payable for fund shares redeemed		105			11			4,787			45
Unrealized depreciation on forward foreign currency contracts		—			—			—			135
Management fee payable		178			38			4,292			161
Distribution and shareholder services fee payable		6			7			564			3
Other accrued expenses		24			44			1,101			101

Total liabilities		327			100			43,381			445

Net Assets	$	208,065		$	44,877		$	5,082,179		$	178,055

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	14		$	5		$	230		$	15
Capital paid in excess of par value		165,888			56,524			5,517,584			255,766
Accumulated net investment income (loss)		—			(2	)		(14,016	)		(242	)
Accumulated net realized gain (loss)		(1,830	)		(22,388	)		(1,448,204	)		(117,494	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		43,993			10,738			1,026,585			40,010

Net Assets	$	208,065		$	44,877		$	5,082,179		$	178,055


Class N Shares
Net Assets	$	26,876		$	5,101		$	2,689,417		$	13,733
Shares Outstanding		1,866,337			607,398			123,062,605			1,133,180
Net Asset Value Per Share	$	14.40		$	8.40		$	21.85		$	12.12
Class I Shares
Net Assets	$	181,189		$	39,776		$	2,392,762		$	164,322
Shares Outstanding		12,342,787			4,735,861			107,093,147			13,447,397
Net Asset Value Per Share	$	14.68		$	8.40		$	22.34		$	12.22

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 101

Statements of Operations

for the Year Ended December 31, 2010 (all amounts in thousands)


	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
*Investment income*
Dividends	$	983		$	589		$	105,119		$	5,776
Less foreign tax withheld		—			(36	)		(7,831	)		(467	)
Dividend income from Affiliated Fund		—			—			1			—
Interest		6			1			316			10

Total income		989			554			97,605			5,319
*Expenses*
Investment advisory fees		1,631			388			45,848			2,784
Distribution fees		60			11			6,276			35
Shareholder services fees		—			58			—			—
Custodian fees		43			70			786			102
Transfer agent fees		34			18			423			16
Sub-transfer agent fees
Class N		28			3			2,543			32
Class I		21			1			1,328			254
Professional fees		32			38			194			48
Registration fees		22			44			107			36
Shareholder reporting fees		6			4			1,323			7
Trustee fees		5			1			157			10
Other expenses		9			6			124			11

Total expenses before waiver		1,891			642			59,109			3,335
Expenses waived by the Advisor		(31	)		(139	)		—			(218	)

Net expenses		1,860			503			59,109			3,117

Net investment income (loss)		(871	)		51			38,496			2,202
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments		22,299			4,053			670,020			30,851
Foreign currency transactions		—			(64	)		36,023			(320	)

Total net realized gain (loss)		22,299			3,989			706,043			30,531
Change in net unrealized appreciation (depreciation) of:
Investments		16,762			3,531			136,863			(21,776	)
Foreign currency translations		—			2			(14,340	)		(22	)

Total change in net unrealized appreciation (depreciation)		16,762			3,533			122,523			(21,798	)

Net increase (decrease) in net assets resulting from operations	$	38,190		$	7,573		$	867,062		$	10,935

See accompanying Notes to Financial Statements.

102 Annual Report

December 31, 2010

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (all amounts in thousands)


	Small-Mid Cap Growth Fund						Global Growth Fund						International Growth Fund						International Equity Fund
	2010			2009			2010			2009			2010			2009			2010			2009
*Operations*
Net investment income (loss)	$	(871	)	$	(382	)	$	51		$	7		$	38,496		$	21,404		$	2,202		$	2,131
Net realized gain (loss) on investments and foreign currency transactions		22,299			(7,046	)		3,989			(3,204	)		706,043			(397,479	)		30,531			(47,092	)
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		16,762			47,865			3,533			14,318			122,523			1,657,928			(21,798	)		112,766

Net increase (decrease) in net assets resulting from operations		38,190			40,437			7,573			11,121			867,062			1,281,853			10,935			67,805
*Distributions to shareholders from*
Net investment income		—			—			(12	)		(3	)		(101,433	)		(31,541	)		(2,578	)		(1,449	)
Net realized gain		—			—			—			—			—			—			—			—

		—			—			(12	)		(3	)		(101,433	)		(31,541	)		(2,578	)		(1,449	)
*Capital stock transactions*
Net proceeds from sale of shares		51,303			52,642			4,844			4,434			1,498,589			1,361,082			59,843			87,167
Shares issued in reinvestment of income dividends and capital gain distributions		—			—			11			3			92,533			28,646			2,452			1,387
Less cost of shares redeemed		(28,256	)		(29,730	)		(5,826	)		(5,273	)		(1,747,980	)		(1,297,570	)		(190,765	)		(85,228	)

Net increase (decrease) in net assets resulting from capital share transactions		23,047			22,912			(971	)		(836	)		(156,858	)		92,158			(128,470	)		3,326

Increase (decrease) in net assets		61,237			63,349			6,590			10,282			608,771			1,342,470			(120,113	)		69,682
Net assets
Beginning of year		146,828			83,479			38,287			28,005			4,473,408			3,130,938			298,168			228,486

End of year	$	208,065		$	146,828		$	44,877		$	38,287		$	5,082,179		$	4,473,408		$	178,055		$	298,168

Accumulated net investment income (loss) at the end of the year	$	—		$	—		$	(2	)	$	10		$	(14,016	)	$	(13,777	)	$	(242	)	$	(39	)

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 103

Statements of Assets and Liabilities

for the Year Ended December 31, 2010 (all amounts in thousands)


	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund
*Assets*
Investments in securities, at cost	$	515,337		$	962,851		$	77,904


Investments in securities, at value	$	650,626		$	1,247,599		$	95,531
Foreign currency, at value (cost $1,959; $1,558; $298)		2,010			1,610			300
Receivable for securities sold		2,226			4,731			1,391
Receivable for fund shares sold		1,952			360			595
Receivable from Advisor		—			—			20
Dividend and interest receivable		1,322			500			21

Total assets		658,136			1,254,800			97,858
*Liabilities*
Payable for investment securities purchased		10,331			2,868			2,830
Payable for fund shares redeemed		202			15			—
Management fee payable		531			1,142			86
Distribution and shareholder services fee payable		51			36			2
Other accrued expenses		70			196			39

Total liabilities		11,185			4,257			2,957

Net Assets	$	646,951		$	1,250,543		$	94,901

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	49		$	78		$	9
Capital paid in excess of par value		627,801			994,772			76,736
Accumulated net investment income (loss)		(586	)		(12,327	)		(131	)
Accumulated net realized gain (loss)		(115,660	)		(16,774	)		665
Net unrealized appreciation (depreciation) of investments and foreign currencies		135,347			284,794			17,622

Net Assets	$	646,951		$	1,250,543		$	94,901


Class N Shares
Net Assets	$	21,916		$	34,324		$	53	(a)
Shares Outstanding		1,677,391			2,178,512			5,119
Net Asset Value Per Share	$	13.07		$	15.76		$	10.34
Class I Shares
Net Assets	$	349,679		$	194,763		$	16,332
Shares Outstanding		26,517,436			12,271,314			1,577,871
Net Asset Value Per Share	$	13.19		$	15.87		$	10.35

(a)

The class commenced operations on May 3, 2010.

See accompanying Notes to Financial Statements.

104 Annual Report

December 31, 2010

Statements of Operations

for the Year Ended December 31, 2010 (all amounts in thousands)


	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund
*Investment income*
Dividends	$	9,506		$	19,206		$	1,889
Less foreign tax withheld		(564	)		(1,553	)		(167	)
Interest		91			125			1

Total income		9,033			17,778			1,723
*Expenses*
Investment advisory fees		4,866			12,197			1,090
Distribution fees		46			70			—
Shareholder services fees		418			302			17
Custodian fees		153			549			138
Transfer agent fees		31			51			11
Sub-transfer agent fees
Class N		12			15			—
Class I		57			68			—
Professional fees		52			75			36
Registration fees		75			57			44
Shareholder reporting fees		59			25			3
Trustee fees		15			37			4
Other expenses		14			27			10

Total expenses before waiver		5,798			13,473			1,353
Expenses waived by the Advisor		—			—			(98	)

Net expenses		5,798			13,473			1,255

Net investment income (loss)		3,235			4,305			468
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments		57,943			248,631			34,229
Foreign currency transactions		(849	)		(3,290	)		(573	)

Total net realized gain (loss)		57,094			245,341			33,656
Change in net unrealized appreciation (depreciation) of:
Investments		62,276			13,573			(16,310	)
Foreign currency translations		39			(17	)		(5	)

Total change in net unrealized appreciation (depreciation)		62,315			13,556			(16,315	)

Net increase (decrease) in net assets resulting from operations	$	122,644		$	263,202		$	17,809

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 105

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (all amounts in thousands)


	International Small Cap Growth Fund						Emerging Markets Growth Fund						Emerging Leaders Growth Fund
	2010			2009			2010			2009			2010			2009
*Operations*
Net investment income (loss)	$	3,235		$	1,001		$	4,305		$	3,476		$	468		$	507
Net realized gain (loss) on investments and foreign currency transactions		57,094			(30,308	)		245,341			(59,561	)		33,656			3,205
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		62,315			174,254			13,556			461,348			(16,315	)		51,098

Net increase (decrease) in net assets resulting from operations		122,644			144,947			263,202			405,263			17,809			54,810
*Distributions to shareholders from*
Net investment income		(2,781	)		(778	)		(13,461	)		(11,127	)		(255	)		(1,588	)
Net realized gain		—			—			—			—			(505	)		—

		(2,781	)		(778	)		(13,461	)		(11,127	)		(760	)		(1,588	)
*Capital stock transactions*
Net proceeds from sale of shares		222,392			139,125			357,761			422,203			14,224			42,409
Shares issued in reinvestment of income dividends and capital gain distributions		2,417			676			12,072			10,336			681			1,466
Less cost of shares redeemed		(88,572	)		(185,107	)		(407,291	)		(174,003	)		(52,189	)		(28,637	)

Net increase (decrease) in net assets resulting from capital share transactions		136,237			(45,306	)		(37,458	)		258,536			(37,284	)		15,238

Increase (decrease) in net assets		256,100			98,863			212,283			652,672			(20,235	)		68,460
Net assets
Beginning of year		390,851			291,988			1,038,260			385,588			115,136			46,676

End of year	$	646,951		$	390,851		$	1,250,543		$	1,038,260		$	94,901		$	115,136

Accumulated net investment income (loss) at the end of the year	$	(586	)	$	(191	)	$	(12,327	)	$	(7,584	)	$	(131	)	$	(297	)

See accompanying Notes to Financial Statements.

106 Annual Report

December 31, 2010

Statements of Assets and Liabilities

for the Year Ended December 31, 2010 (all amounts in thousands)


	Small Cap Value Fund		Mid Cap Value Fund
*Assets*
Investments in securities, at cost	$	139,995	$	3,239


Investments in securities, at value	$	166,453	$	3,429
Receivable for securities sold		25		—
Receivable for fund shares sold		2,400		—
Receivable from Advisor		27		23
Dividend and interest receivable		143		4

Total assets		169,048		3,456
*Liabilities*
Payable for investment securities purchased		4,096		—
Payable for fund shares redeemed		270		—
Management fee payable		146		2
Distribution and shareholder service fee payable		7		—
Other accrued expenses		30		61

Total liabilities		4,549		63

Net Assets	$	164,499	$	3,393

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	12	$	1
Capital paid in excess of par value		137,326		3,183
Accumulated net investment income (loss)		127		5
Accumulated net realized gain (loss)		576		14
Net unrealized appreciation (depreciation) of investments and foreign currencies		26,458		190

Net Assets	$	164,499	$	3,393


Class N Shares
Net Assets	$	34,285	$	4
Shares Outstanding		2,501,260		396
Net Asset Value Per Share	$	13.71	$	10.75
Class I Shares
Net Assets	$	130,214	$	3,389
Shares Outstanding		9,345,449		314,914
Net Asset Value Per Share	$	13.93	$	10.76

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 107

Statements of Operations

for the Year Ended December 31, 2010 (all amounts in thousands)


	Small Cap Value Fund			Mid Cap Value Fund(a)
*Investment income*
Dividends	$	1,553		$	43
Interest		2			—

Total income		1,555			43
*Expenses*
Investment advisory fees		1,117			15
Distribution fees		31			—
Custodian fees		50			25
Transfer agent fees		21			6
Sub-transfer agent fees
Class N		9			—
Class I		37			—
Professional fees		25			18
Registration fees		33			41
Shareholder reporting fees		16			—
Trustee fees		2			—
Other expenses		8			—

Total expenses before waiver		1,349			105
Expenses waived by the Advisor		(205	)		(88	)

Net expenses		1,144			17

Net investment income (loss)		411			26
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from investments		9,981			19

Change in net unrealized appreciation (depreciation) of investments		20,721			190

Net increase (decrease) in net assets resulting from operations	$	31,113		$	235

(a)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

See accompanying Notes to Financial Statements.

108 Annual Report

December 31, 2010

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (all amounts in thousands)


	Small Cap Value Fund						Mid Cap Value Fund
	2010			2009			2010(a)
*Operations*
Net investment income (loss)	$	411		$	347		$	26
Net realized gain (loss) on investments and foreign currency transactions		9,981			(3,891	)		19
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		20,721			14,493			190

Net increase (decrease) in net assets resulting from operations		31,113			10,949			235
*Distributions to shareholders from*
Net investment income		(404	)		(213	)		(21	)
Net realized gain		—			—			(5	)

		(404	)		(213	)		(26	)
*Capital stock transactions*
Net proceeds from sale of shares		92,468			14,901			3,163
Shares issued in reinvestment of income dividends and capital gain distributions		354			170			26
Less cost of shares redeemed		(13,891	)		(7,197	)		(5	)

Net increase (decrease) in net assets resulting from capital share transactions		78,931			7,874			3,184

Increase (decrease) in net assets		109,640			18,610			3,393
Net assets
Beginning of year		54,859			36,249			—

End of year	$	164,499		$	54,859		$	3,393

Accumulated net investment income (loss) at the end of the year	$	127		$	18		$	5

(a) For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 109

Statements of Assets and Liabilities

for the Year Ended December 31, 2010 (all amounts in thousands)


	Bond Fund		Income Fund			Low Duration Fund			Ready Reserves Fund
*Assets*
Investments in securities, at cost	$	181,324	$	105,927		$	141,627		$	1,215,281


Investments in securities, at value	$	191,127	$	111,782		$	141,527		$	1,215,281
Receivable for fund shares sold		36		527			1,840			—
Receivable from Advisor		7		—			36			465
Interest receivable		1,891		1,119			436			2,876

Total assets		193,061		113,428			143,839			1,218,622
*Liabilities*
Payable for investment securities purchased		—		—			—			1,424
Payable for fund shares redeemed		178		60			278			5
Management fee payable		49		46			35			249
Distribution fee payable		20		5			13			362
Other accrued expenses		38		40			43			39

Total liabilities		285		151			369			2,079

Net Assets	$	192,776	$	113,277		$	143,470		$	1,216,543

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	18	$	12		$	14		$	1,217
Capital paid in excess of par value		182,717		149,329			144,660			1,215,263
Accumulated net investment income (loss)		1		—			—			86
Accumulated net realized gain (loss) .		237		(41,919	)		(1,104	)		(23	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		9,803		5,855			(100	)		—

Net Assets	$	192,776	$	113,277		$	143,470		$	1,216,543


Class N Shares
Net Assets	$	4,479	$	35,755		$	6,937		$	1,216,543
Shares Outstanding		418,762		3,878,036			701,013			1,216,599,981
Net Asset Value Per Share	$	10.70	$	9.22		$	9.90		$	1.00
Class I Shares
Net Assets	$	147,807	$	77,522		$	88,568
Shares Outstanding		13,953,785		8,471,402			8,951,205
Net Asset Value Per Share	$	10.59	$	9.15		$	9.89

See accompanying Notes to Financial Statements.

110 Annual Report

December 31, 2010

Statements of Operations

for the Year Ended December 31, 2010 (all amounts in thousands)


	Bond Fund			Income Fund		Low Duration Fund			Ready Reserves Fund
*Investment income*
Interest	$	8,921		$	5,431	$	2,557		$	3,203

Total income		8,921			5,431		2,557			3,203
*Expenses*
Investment advisory fees		546			570		381			3,022
Distribution fees		6			56		7			—
Shareholder services fees		228			—		127			4,409
Custodian fees		53			51		52			24
Transfer agent fees		22			24		15			30
Sub-transfer agent fees
Class N		—			30		—			—
Class I		4			3		—			—
Professional fees		32			32		28			67
Registration fees		48			31		111			27
Shareholder reporting fees		3			12		5			29
Trustee fees		5			4		3			46
Other expenses		13			5		11			82

Total expenses before waiver		960			818		740			7,736
Expenses waived by the Advisor		(90	)		—		(98	)		(4,659	)

Net expenses		870			818		642			3,077

Net investment income (loss)		8,051			4,613		1,915			126
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from investments		2,212			2,316		(60	)		—

Change in net unrealized appreciation (depreciation) of investments		3,290			202		468			—

Net increase (decrease) in net assets resulting from operations	$	13,553		$	7,131	$	2,323		$	126

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 111

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (all amounts in thousands)


	Bond Fund						Income Fund						Low Duration Fund						Ready Reserves Fund
	2010			2009			2010			2009			2010			2009(a)			2010			2009
*Operations*
Net investment income (loss)	$	8,051		$	6,076		$	4,613		$	5,749		$	1,915		$	78		$	126		$	1,639
Net realized gain (loss) on investments and foreign currency transactions		2,212			284			2,316			(4,058	)		(60	)		—			—			—
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		3,290			7,229			202			9,909			468			(568	)		—			—

Net increase (decrease) in net assets resulting from operations		13,553			13,589			7,131			11,600			2,323			(490	)		126			1,639
*Distributions to shareholders from*
Net investment income		(8,566	)		(6,213	)		(5,134	)		(6,533	)		(2,958	)		(86	)		(126	)		(1,639	)
Net realized gain		(494	)		—			—			—			—			—			—			—

		(9,060	)		(6,213	)		(5,134	)		(6,533	)		(2,958	)		(86	)		(126	)		(1,639	)
*Capital stock transactions*
Net proceeds from sale of shares		90,709			77,912			15,385			16,970			149,882			97,472			670,783			638,552
Shares issued in reinvestment of income dividends and capital gain distributions		6,013			4,029			4,350			5,431			2,297			37			126			1,710
Less cost of shares redeemed		(55,783	)		(16,586	)		(26,063	)		(50,295	)		(103,208	)		(1,799	)		(807,267	)		(1,128,550	)

Net increase (decrease) in net assets resulting from capital share transactions		40,939			65,355			(6,328	)		(27,894	)		48,971			95,710			(136,358	)		(488,288	)

Increase (decrease) in net assets		45,432			72,731			(4,331	)		(22,827	)		48,336			95,134			(136,358	)		(488,288	)
Net assets
Beginning of year		147,344			74,613			117,608			140,435			95,134			—			1,352,901			1,841,189

End of year	$	192,776		$	147,344		$	113,277		$	117,608		$	143,470		$	95,134		$	1,216,543		$	1,352,901

Accumulated net investment income (loss) at the end of the year	$	1		$	—		$	—		$	—		$	—		$	—		$	86		$	84

(a)	For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

See accompanying Notes to Financial Statements.

112 Annual Report

December 31, 2010

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of William Blair Funds’ (the “Fund”) significant accounting policies in effect during the year covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles.

(a) Description of the Fund

William Blair Funds is a diversified mutual fund registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company. The Fund currently consists of the following nineteen portfolios (the “Portfolios”), each with its own investment objective and policies. For each portfolio, the number of shares authorized is unlimited.


Equity Portfolios Growth Large Cap Growth Small Cap Growth Mid Cap Growth Small-Mid Cap Growth Small Cap Value Mid Cap Value Global Equity Portfolio Global Growth		International Equity Portfolios International Growth International Equity Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Leaders Growth Fixed-Income Portfolios Bond Income Low Duration Money Market Portfolio Ready Reserves

The investment objectives of the Portfolios are as follows:


Equity		Long-term capital appreciation.
Global Equity		Long-term capital appreciation.
International Equity		Long-term capital appreciation.
Fixed-Income		High level of current income with relative stability of principal. (Maximize total return—Low Duration)
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, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration 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, Global Equity and International Equity Portfolios and 0.15% for the Fixed-Income Portfolios) or a service fee (0.35% for the Money Market Portfolio), a Sub-transfer agent expense which is not a fixed rate and may vary by Portfolio and class, and an annual shareholder administration fee (0.15% for the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration 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 Class N shares. Class I shares have a Sub-transfer agent expense which is not a fixed rate and may vary by Portfolio and class and the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration Portfolio carry an annual shareholder administration fee of 0.15%.

December 31, 2010

William Blair Funds 113

Sub-transfer: The Portfolios may reimburse the Advisor for fees paid to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-administration, sub-transfer agency and other services provided to investors whose shares are held of record in omnibus, other group accounts, retirement plans or accounts traded through registered securities clearing agents. These fees may vary based on, for example, the nature of services provided, but generally range up to 0.15% of the assets of the class serviced or maintained by the intermediary.

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

The market value of domestic equity securities is determined by valuing securities traded on national securities markets or in the over-the-counter markets at the last sale price or, if applicable, the official closing price or, in the absence of a recent sale on the date of determination, at the latest bid price.

The value of foreign equity securities is generally determined based upon the last sale price on the foreign exchange or market on which it is primarily traded and in the currency of that market as of the close of the appropriate exchange or, if there have been no sales during that day, at the latest bid price. The Board of Trustees has determined that the passage of time between when the foreign exchanges or markets close and when the Portfolios compute their net asset values could cause the value of foreign equity securities to no longer be representative or accurate and, as a result, may necessitate that such securities be fair valued. Accordingly, for foreign equity securities, the Portfolios may use an independent pricing service to fair value price the security as of the close of regular trading on the New York Stock Exchange. As a result, a Portfolio’s value for a security may be different from the last sale price (or the latest bid price).

Fixed-income securities are valued by using market quotations or independent pricing services that use either prices provided by market-makers or matrixes that produce estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Other securities, and all other assets, including securities for which a market price is not available or is deemed unreliable, (e.g., securities affected by unusual or extraordinary events, such as natural disasters or securities affected by market or economic events, such as bankruptcy filings), or the value of which is affected by a significant valuation event, are valued at a fair value as determined in good faith by, or under the direction of, the Board of Trustees and in accordance with the Fund’s Valuation Procedures. The value of fair valued securities may be different from the last sale price (or the latest bid price), and there is no guarantee that a fair valued security will be sold at the price at which a Portfolio is carrying the security.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Securities held in the Ready Reserves Portfolio are valued at amortized cost, which approximates market value.

As of December 31, 2010, there were securities held in the Small Cap Growth, International Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Portfolios requiring fair valuation pursuant to the Funds’ Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

Interest income is recorded on an accrual basis, 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, Low Duration and Ready Reserves Portfolios were the rates in effect on December 31, 2010. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

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.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the year ended December 31, 2010, the Bond, Income and Low Duration Portfolios recognized a reduction of interest income and a decrease of net realized loss of $(517), $(517) and $(1,043), respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Portfolios.

114 Annual Report

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The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign currency gains or losses arise from disposition of foreign currency, the difference in the foreign exchange rates between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the ex-date or accrual date and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies held at period end.

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 a specifically identified cost basis.

Awards from class action litigation may be recorded as a reduction of cost. If the Portfolios 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 as of the close of regular trading on the New York Stock Exchange, which is generally 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 global equity and international equity 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 Portfolio are netted against the amount of redemptions for presentation on the Statement of Changes in Net Assets.

The redemption fees collected by the Portfolios were as follows (in thousands):


	Year Ended December 31, 2010		Year Ended December 31, 2009
Growth	$	10	$	3
Large Cap Growth		1		—
Small Cap Growth		78		59
Mid Cap Growth		2		—
Small-Mid Cap Growth		—		1
Global Growth		—		—
International Growth		149		130
International Equity		7		7
International Small Cap Growth		3		8
Emerging Markets Growth		18		9
Emerging Leaders Growth		—		—
Small Cap Value		20		—
Mid Cap Value		—		N/A

Dividends from net investment income, if any, of the Growth, Large Cap Growth, Small Cap Growth, Mid Cap Growth, Small-Mid Cap Growth, Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, Small Cap Value and Mid Cap Value Portfolios are declared and paid at least annually. At December 31, 2010, dividends from the Income and Bond Portfolio are declared and paid monthly. Effective April 16, 2011, dividends from the Income and Bond Portfolio will be declared daily and paid monthly. Dividends from the Low Duration and Ready Reserves Portfolios are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid at least annually in December. Dividends payable to shareholders are recorded on the ex-dividend date.

December 31, 2010

William Blair Funds 115

(f) Foreign Currency Translation and Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders 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 forward foreign currency 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 Net Asset Value, 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.

(g) Income Taxes

Each Portfolio intends to comply with the provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies. Each portfolio intends to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all, or substantially all, federal income and excise taxes. No provision for federal income and excise taxes has been made.

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios may be subject to a tax imposed on net realized gains on securities of certain foreign countries.

Each Portfolio is subject to the provisions of Accounting Standards Codification (ASC) 740 Income Taxes. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management has evaluated the implications of ASC 740 and all of the uncertain tax positions of the Portfolios and has determined that no liability is required to be recorded in the financial statements.

The statute of limitations on the Funds’ tax returns for each of the tax years in the four year period ended December 31, 2010, remains open and the returns are subject to examination.

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for federal income 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 December 31, 2010, were as follows (in thousands):


Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ (Depreciation)
Growth	$	422,677	$	103,970	$	3,403	$	100,567
Large Cap Growth		24,457		7,409		—		7,409
Small Cap Growth		755,634		178,728		56,004		122,724
Mid Cap Growth		78,214		23,327		513		22,814
Small-Mid Cap Growth		165,140		42,653		891		41,762
Global Growth		34,140		10,824		119		10,705
International Growth		4,117,710		1,051,316		71,114		980,202
International Equity		136,922		40,081		1,747		38,334
International Small Cap Growth		524,436		131,722		5,532		126,190
Emerging Markets Growth		986,045		265,176		3,622		261,554
Emerging Leaders Growth		78,887		17,216		572		16,644
Small Cap Value		140,909		25,823		279		25,544
Mid Cap Value		3,241		246		58		188
Bond		181,324		10,728		925		9,803
Income		106,075		6,507		800		5,707
Low Duration		141,627		430		530		(100	)
Ready Reserves		1,215,281		—		—		—

116 Annual Report

December 31, 2010

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, PFICs gains and losses, recharacterization of dividends received from investments in REITs, expired capital loss carryforwards and redemptions in-kind. These reclassifications have no impact on the net asset values of the Portfolios. Accordingly, at December 31, 2010, the following reclassifications were recorded (in thousands):


Portfolio	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain/(Loss)			Capital Paid in Excess of Par Value
Growth	$	—		$	—		$	—
Large Cap Growth		—			472			(472	)
Small Cap Growth		7,283			(6,138	)		(1,145	)
Mid Cap Growth		147			—			(147	)
Small-Mid Cap Growth		871			—			(871	)
Global Growth		(51	)		60			(9	)
International Growth		62,698			(62,698	)		—
International Equity		173			(163	)		(10	)
International Small Cap Growth		(849	)		849			—
Emerging Markets Growth		4,413			(33,541	)		29,128
Emerging Leaders Growth		(47	)		51			(4	)
Small Cap Value		102			(30	)		(72	)
Mid Cap Value		—			—			—
Bond		516			(516	)		—
Income		521			(517	)		(4	)
Low Duration		1,043			(1,043	)		—
Ready Reserves		2			930			(932	)

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 2010 and 2009 was as follows (in thousands):


	Distributions Paid in 2010						Distributions Paid in 2009
Portfolio	Ordinary Income		Long-Term Capital Gains		Total Distributions		Ordinary Income		Long-Term Capital Gains		Total Distributions
Growth	$	13	$	—	$	13	$	43	$	—	$	43
Large Cap Growth		33		—		33		16		—		16
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		—		—
Small-Mid Cap Growth		—		—		—		—		—		—
Global Growth		12		—		12		3		—		3
International Growth		101,433		—		101,433		31,541		—		31,541
International Equity		2,578		—		2,578		1,449		—		1,449
International Small Cap Growth		2,781		—		2,781		778		—		778
Emerging Markets Growth		13,461		—		13,461		11,127		—		11,127
Emerging Leaders Growth		255		505		760		1,588		—		1,588
Small Cap Value		269		135		404		213		—		213
Mid Cap Value		26		—		26		—		N/A		N/A
Bond		8,566		494		9,060		6,213		—		6,213
Income		5,134		—		5,134		6,533		—		6,533
Low Duration		2,958		—		2,958		86		—		86
Ready Reserves		126		—		126		1,639		—		1,639

December 31, 2010

William Blair Funds 117

As of December 31, 2010, 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 Capital Gain		Net Unrealized Appreciation/ Depreciation
Growth	$	329	$	(7,557	)	$	—	$	100,567
Large Cap Growth		—		(6,323	)		—		7,409
Small Cap Growth		—		(87,410	)		—		122,724
Mid Cap Growth		—		(2,637	)		—		22,814
Small-Mid Cap Growth		—		—			401		41,762
Global Growth		—		(22,357	)		—		10,705
International Growth		6,047		(1,421,884	)		—		980,202
International Equity		—		(116,060	)		—		38,334
International Small Cap Growth		5,932		(113,021	)		—		126,190
Emerging Markets Growth		—		(5,861	)		—		261,554
Emerging Leaders Growth		987		(14	)		539		16,644
Small Cap Value		—		—			1,617		25,544
Mid Cap Value		21		—			—		188
Bond		2		—			236		9,803
Income		—		(41,771	)		—		5,707
Low Duration		—		(1,104	)		—		(100	)
Ready Reserves		86		(23	)		—		—

As of December 31, 2010, 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	2011		2012		2013		2014		2015		2016		2017		2018		Total
Growth	$	—	$	—	$	—	$	—	$	—	$	—	$	7,557	$	—	$	7,557
Large Cap Growth		769		—		—		—		—		1,709		3,845		—		6,323
Small Cap Growth		—		—		—		—		—		—		72,368		—		72,368
Mid Cap Growth		—		—		—		—		—		—		2,638		—		2,638
Small-Mid Cap Growth		—		—		—		—		—		—		—		—		—
Global Growth		—		—		—		—		—		9,230		13,127		—		22,357
International Growth		—		—		—		—		—		224,515		1,198,096		—		1,422,611
International Equity		—		—		—		—		—		34,279		81,926		—		116,205
International Small Cap Growth		—		—		—		—		—		26,723		86,330		—		113,053
Emerging Markets Growth		—		—		—		—		—		—		5,572		—		5,572
Emerging Leaders Growth		—		—		—		—		—		—		—		—		—
Small Cap Value		—		—		—		—		—		—		—		—		—
Mid Cap Value		—		—		—		—		—		—		—		—		—
Bond		—		—		—		—		—		—		—		—		—
Income		1,578		4,431		3,398		4,138		9,190		14,459		4,577		—		41,771
Low Duration		—		—		—		—		—		—		—		955		955
Ready Reserves		—		20		—		—		3		—		—		—		23

118 Annual Report

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For the period from November 1, 2010 through December 31, 2010, the following Portfolios incurred net realized capital losses or foreign currency losses. Each Portfolio intends to treat this loss as having occurred in fiscal year 2011 for federal income tax purposes (in thousands):


Portfolio	Capital Amount		Currency Amount
Growth	$	—	$	—
Large Cap Growth		—		—
Small Cap Growth		15,042		—
Mid Cap Growth		—		—
Small-Mid Cap Growth		—		—
Global Growth		—		2
International Growth		—		—
International Equity		—		—
International Small Cap Growth		—		—
Emerging Markets Growth		—		324
Emerging Leaders Growth		—		—
Small Cap Value		—		—
Mid Cap Value		—		—
Bond		—		—
Income		—		—
Low Duration		149		—
Ready Reserves		—		—

(h) Repurchase Agreements

In a repurchase agreement, a Portfolio buys a security at one price and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser’s holding period, while the seller’s obligation to repurchase is secured by the value of the underlying security. William Blair & Co. (the “Advisor”) will monitor, on an ongoing basis, the value of the underlying securities to ensure that the value always equals or exceeds the repurchase price plus accrued interest. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon a Portfolio’s ability to dispose of the underlying securities. The risk to a Portfolio is limited to the ability of the seller to pay the agreed upon sum on the delivery date. In the event of default, a repurchase agreement provides that a Portfolio is entitled to sell the underlying collateral. The loss, if any, to a Portfolio will be the difference between the proceeds from the sale and the repurchase price. However, if bankruptcy proceedings are commenced with respect to the seller of the security, disposition of the collateral by the Portfolio may be delayed or limited. Although no definitive creditworthiness criteria are used, the Advisor reviews the creditworthiness of the banks and non-bank dealers with which a Portfolio enters into repurchase agreements to evaluate those risks. A Portfolio may, under certain circumstances, deem repurchase agreements collateralized by U.S. Government securities to be investments in U.S. Government securities.

(i) 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.

(j) Fair Value Measurements

The Portfolios are subject to Fair Value measurement and Disclosures ASC 820. In accordance with ASC 820, “fair value” is defined as the price that a Portfolio would receive upon selling a security in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used in determining the value of a Portfolio’s investments. ASC 820 establishes a three-tier hierarchy of inputs to classify fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

•

Level 1—Quoted prices in active markets for an identical security.

•

December 31, 2010

William Blair Funds 119

benchmark securities indices and foreign futures contracts may be utilized in the valuation of certain foreign securities when significant events occur between the last sale on the foreign securities exchange and the time the net asset value of the Portfolio is calculated.

•

Level 3—Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment), unobservable inputs may be used. Unobservable inputs reflect the Portfolio’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.

The Fund adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2010-06 “Fair Value Measurements and Disclosures (ASU 820)” which requires the Fund to disclose details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers. Any transfers between Level 1 and Level 2 are disclosed, effective beginning of the period, in the tables below with the reasons for the transfers disclosed in a note to the financial statements.

At December 31, 2010, the Portfolios held no other financial instruments, such as options or futures, that required fair valuation.

As of December 31, 2010, the hierarchical input levels of securities in each Portfolio, segregated by security class, are as follows (in thousands):


	Growth		Large Cap Growth		Small Cap Growth		Mid Cap Growth		Small- Mid Cap Growth		Global Growth
Investments in securities
Level 1—Quoted prices
Common stock	$	516,942	$	31,491	$	849,428	$	99,008	$	205,802	$	42,282
Preferred stock		—		—		—		—		—		1,027
Level 2—Other significant observable inputs
Preferred stock		—		—		7,779		—		—		—
Short-term investments		6,302		375		20,042		2,020		1,100		1,536
Level 3—Significant unobservable inputs
Common stock		—		—		1,109		—		—		—

Total investments in securities	$	523,244	$	31,866	$	878,358	$	101,028	$	206,902	$	44,845

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2(a)		—		—		—		—		—		—
Transfers from Level 2 to Level 1(b)		—		—		—		—		—	$	4,961

120 Annual Report

December 31, 2010


	International Growth		International Equity			International Small Cap Growth		Emerging Markets Growth		Emerging Leaders Growth		Small Cap Value		Mid Cap Value
Investments in securities
Level 1—Quoted prices
Common stock	$	4,942,157	$	169,486		$	630,017	$	1,153,073	$	88,347	$	162,622	$	3,364
Preferred stock		—		2,068			3,813		50,827		5,677		—		—
Level 2—Other significant observable inputs
Convertible bonds		1,876		—			626		1,045		—		—		—
Short-term investments		153,879		3,702			16,170		42,654		1,507		3,831		65
Level 3—Significant unobservable inputs
None		—		—			—		—		—		—		—

Total investments in securities	$	5,097,912	$	175,256		$	650,626	$	1,247,599	$	95,531	$	166,453	$	3,429

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2 (a)		—		—			—		—		—		—		—
Transfers from Level 2 to Level 1 (b)	$	1,735,589	$	133,217		$	153,495	$	268,735	$	25,676		—		—
Other financial instruments
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	—	$	(135	)	$	—	$	—	$	—	$	—	$	—


	Bond		Income			Low Duration		Ready Reserves*
Investments in securities
Level 1—Quoted Prices
None	$	—	$	—		$	—	$	—
Level 2—Other significant observable inputs
US Government and Agency Bonds		88,534		40,282			59,701		83,809
Foreign Government Notes		—		—			—		27,994
Corporate Bonds		88,831		59,394			16,970		179,779
Asset Backed Bonds		10,307		9,512			58,862		—
Commercial Paper		—		—			—		658,996
Short-Term Investments		3,285		1,676			5,994		264,703
Level 3—Significant unobservable inputs
Asset Backed Bonds		170		918			—		—

Total investments in securities	$	191,127	$	111,782		$	141,527	$	1,215,281

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2		—		—			—		—
Transfers from Level 2 to Level 1		—		—			—		—

*	All of the investments held by Ready Reserves are short-term investments.

(a)	Fair valuation estimates were obtained from the Portfolios’ pricing vendor and applied to certain foreign securities at December 31, 2010 but not on December 31, 2009, resulting in a transfer from Level 1 to Level 2.

(b)	Fair valuation estimates were obtained from the Portfolios’ pricing vendor and applied to certain foreign securities at December 31, 2009 but not on December 31, 2010, resulting in a transfer from Level 2 to Level 1.

Level 1 Common Stocks are exchange-traded securities with a quoted price. Typically, Level 2 Common Stocks are non-U.S. exchange-traded securities with a quoted price that are fair valued by an independent pricing service approved by the Board of Trustees.

December 31, 2010

William Blair Funds 121

The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value:


	Balance January 1, 2010		Purchases		Sales			Transfers to Level 3		Transfers from Level 3		Change in Unrealized Gain (Loss)		Realized Gain (Loss)			Balance December 31, 2010
Small Cap Growth	$	3,017		—	$	(1,547	)	$	1,109		—	$	11,463	$	(12,933	)	$	1,109
Bond		—		—		—			119		—		51		—			170
Income		—		—		—			645		—		273		—			918

The fair value estimates for the Level 3 securities in the Small Cap Growth, Bond and Income Portfolios were determined in good faith by the Pricing Committee in consultation with the Valuation Committee, pursuant to the Valuation Procedures adopted by the Board of Trustees. There were various factors considered in reaching this fair value determination, including, but not limited to, the following: the type of security, the extent of public trading of the security, information obtained from a broker-dealer for the security, analysis of the company’s performance, market trends that influence its performance and the potential for adverse outcome in pending litigation. At December 31, 2010, these securities represented 0.12%, 0.09% and 0.81% of the net assets of the Small Cap Growth, Bond and Income Portfolios respectively. The change in unrealized gain (loss) related to those securities held at December 31, 2010 was $(85), in thousands, and is included in the change in net unrealized appreciation (depreciation) of investments on the Statement of Operations.

BancTec Inc, held in the Small Cap Growth Portfolio, was sold during the year. Vitacost.com held in the Small Cap Growth Portfolio moved from Level 1 to Level 3 due to a lack of observable inputs. The First Plus Home Loan Trust bonds held in the Bond and Income Portfolios transferred from Level 2 to Level 3 during the period due to the lack of significant other observable inputs.

(k) Redemptions In-Kind

In accordance with the Funds’ prospectus, the Portfolios may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). For financial reporting purposes, the Portfolio recognizes a gain or loss on the transfer of securities depending on the market value of those securities on the date of redemption. Gains and losses realized on in-kind redemptions are not recognized for tax purposes and are reclassified from undistributed realized gain (loss) to paid-in capital. During the year ended December 31, 2010, the Small Cap Growth Portfolio and Emerging Markets Growth Portfolio redeemed in-kind (in thousands) $18,923 and $74,711, respectively, with a realized gain of $6,457 and $32,340, respectively.

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Portfolio has a management agreement with the “Advisor” for investment advisory, clerical, bookkeeping and administrative services. Each Portfolio pays the Advisor 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:
Large Cap Growth	0.80	%	First $250 million	1.10	%
Small Cap Growth	1.10	%	Next $4.75 billion	1.00	%
Mid Cap Growth	0.95	%	Next $5 billion	0.95	%
Small-Mid Cap Growth	1.00	%	Next $5 billion	0.925	%
Small Cap Value	1.10	%	In excess of $15 billion	0.90	%
Mid Cap Value	0.95	%	International Equity
			First $250 million	1.10	%
Global Portfolio			In excess of $250 million	1.00	%
Global Growth	1.00	%	International Small Cap Growth	1.00	%
			Emerging Markets Growth	1.10	%
			Emerging Leaders Growth	1.10	%

Fixed-Income Portfolios			Money Market Portfolio
Bond	0.30	%	Ready Reserves
Low Duration	0.30	%	First $250 million	0.275	%
Income*			Next $250 million	0.250	%
First $250 million	0.25	%	Next $2 billion	0.225	%
In excess of $250 million	0.20	%	In excess of $2.5 billion	0.200	%

*Management fee also includes a charge of 5% of gross income.

122 Annual Report

December 31, 2010

Some of the Portfolios have also entered into an Expense Limitation Agreement with the Advisor. Under the terms of the Agreement, the Advisor will waive its management fee and/or reimburse the Portfolio for expenses in excess of the agreed upon rate. The amount the Advisor owes a Portfolio as of the reporting date is recorded as the Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Portfolios on a monthly basis. Under the terms of the Agreement, the Advisor has agreed to waive its advisory fees and/or absorb other operating expenses through April 30, 2011, if total expenses for each class of the following Portfolios exceed the following rates (as a percentage of average daily net assets):


	Class N						Class I
Portfolio	Effective May 1, 2010 through April 30, 2011			Effective May 1, 2009 through April 30, 2010			Effective May 1, 2010 through April 30, 2011			Effective May 1, 2009 through April 30, 2010
Large Cap Growth		1.20	%		1.23	%		0.95	%		0.98	%
Small Cap Growth		1.50	%		1.50	%		1.25	%		1.25	%
Mid Cap Growth		1.35	%		1.36	%		1.10	%		1.11	%
Small-Mid Cap Growth		1.35	%		1.36	%		1.10	%		1.11	%
Global Growth		1.50	%		1.55	%		1.25	%		1.30	%
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		1.70	%		1.70	%		1.45	%		1.45	%
Emerging Leaders Growth		1.65	%		N/A			1.40	%		1.40	%
Small Cap Value		1.35	%		1.29	%		1.10	%		1.09	%
Mid Cap Value (a)		1.35	%		N/A			1.10	%		N/A
Bond		0.65	%		0.65	%		0.50	%		0.50	%
Income		0.85	%		0.85	%		0.70	%		0.70	%
Low Duration (b)		0.70	%		0.70	%(a)		0.55	%		0.55	%(a)

(a) Effective May 3, 2011 through April 30, 2012.

(b) Effective December 1, 2009 through April 30, 2011.

For a period of three years subsequent to the commencement of operations of the Emerging Leaders Growth, Mid Cap Value and Low Duration Portfolios, the Advisor is entitled to reimbursement for previously waived fees and reimbursed expenses to the extent the overall expense ratio remains below the expense limitation in place at the time the fee was waived and/or the expense was reimbursed. The total amount available for recapture at December 31, 2010 was $278 (in thousands) for the Emerging Leaders Growth Portfolio, $88 for the Mid Cap Value Portfolio and $112 for the Low Duration Portfolio.

The Advisor has agreed to voluntarily waive fees and reimburse expenses incurred for the Ready Reserves Portfolio in order to maintain a minimum yield given the current rate environment.

For the year ended December 31, 2010, the fees incurred by the Portfolios and related fee waivers were as follows (in thousands):


Portfolio	Fund Level Waiver		Class I Specific Waiver		Class N Specific Waiver		Total Waiver
Growth	$	—	$	—	$	—	$	—
Large Cap Growth		58		—		8		66
Small Cap Growth		19		—		71		90
Mid Cap Growth		1		31		8		40
Small-Mid Cap Growth		—		6		25		31
Global Growth		135		1		3		139
International Growth		—		—		—		—
International Equity		—		189		29		218
International Small Cap Growth		—		—		—		—
Emerging Markets Growth		—		—		—		—
Emerging Leaders Growth		97		1		—		98
Small Cap Value		159		35		11		205
Mid Cap Value		88		—		—		88
Bond		86		4		—		90
Income		—		—		—		—
Low Duration		98		—		—		98
Ready Reserves		4,659		—		—		4,659

December 31, 2010

William Blair Funds 123

124 Annual Report

December 31, 2010

(b) Underwriting, Distribution Services and Service Agreement

Each Portfolio, except the Ready Reserves Portfolio, has a Distribution Agreement with the Advisor for distribution services to the Portfolios’ Class N shares. Each Portfolio pays the Advisor an annual fee, payable monthly, based on a specified percentage of its average daily net assets of Class N shares. The annual rate expressed as a percentage of average daily net assets for Class N is 0.25% for all Portfolios except the Income, Bond and Low Duration Portfolios, which is 0.15%. Pursuant to the Distribution Agreement, the Advisor enters into related selling group agreements with various firms at various rates for sales of the Portfolios’ Class N shares.

The Ready Reserves Portfolio has a Service Agreement with the Advisor 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 shares. The Board of Trustees has determined that the amount payable for “service fees” (as defined by FINRA (Financial Industry Regulatory Authority)) will not exceed 0.25% of the average annual net assets attributable to Class N shares.

The Global Growth, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, Bond and Low Duration Portfolios have a Shareholder Administration Agreement with the Advisor to provide shareholder administration services. Class N and Class I shares of the Portfolios pay the Advisor an annual fee, payable monthly, based upon 0.15% of average daily net assets attributable to each class, respectively. For the year ended December 31, 2010, the following fees were incurred (in thousands):


Portfolio	Class N		Class I		Total
Global Growth	$	7	$	51	$	58
International Small Cap Growth		28		390		418
Emerging Markets Growth		42		260		302
Emerging Leaders Growth		—		17		17
Bond		6		222		228
Low Duration		7		120		127

(c) Investments in Affiliated Portfolio

Pursuant to the rules of the 1940 Act, each of the Portfolios of the Fund may invest in the Ready Reserves Portfolio, an open-end money market portfolio managed by the Advisor. Ready Reserves Portfolio is used as a cash management option by the other Portfolios in the Fund. The Advisor waives management fees in an amount equal to the management fee and service fee that Ready Reserves receives based on the Portfolio’s net assets, less any waivers, if applicable. The fees waived with respect to each Portfolio for the year ended December 31, 2010 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 year ended December 31, 2010 (in thousands):


Portfolio	December 31, 2009 Value		Purchases		Sales		Fees Waived		Dividend Income		December 31, 2010 Value		Percent of Net Assets
Growth	$	1,262	$	—	$	1,262	$	2	$	—	$	—		0.0	%
Large Cap		—		—		—		—		—		—		0.0	%
Small Cap Growth		3,297		—		3,297		6		—		—		0.0	%
Mid Cap Growth		19		—		19		—		—		—		0.0	%
Small-Mid Cap Growth		23		—		23		—		—		—		0.0	%
Global Growth		29		—		29		—		1		—		0.0	%
International Growth		6,376		—		6,376		12		—		—		0.0	%
International Equity		5		—		5		—		—		—		0.0	%
International Small Cap Growth		489		—		489		1		—		—		0.0	%
Emerging Markets Growth		66		—		66		—		—		—		0.0	%
Emerging Leaders Growth		440		—		440		1		—		—		0.0	%
Small Cap Value		4		—		4		—		—		—		0.0	%

(3) Investment Transactions

Investment transactions, excluding money market instruments, repurchase agreements and demand notes for the year ended December 31, 2010, were as follows (in thousands):


Portfolio	Purchases		Sales
Growth	$	331,279	$	(294,795	)
Large Cap Growth		15,329		(18,218	)
Small Cap Growth		897,278		(911,440	)
Mid Cap Growth		68,243		(57,254	)
Small-Mid Cap Growth		170,215		(146,585	)
Global Growth		36,369		(38,642	)
International Growth		4,341,396		(4,518,981	)
International Equity		169,551		(298,166	)
International Small Cap Growth		530,131		(396,755	)
Emerging Markets Growth		1,284,378		(1,349,820	)
Emerging Leaders Growth		169,052		(205,980	)
Small Cap Value		148,854		(71,305	)
Mid Cap Value		3,972		(818	)
Bond		98,704		(60,843	)
Income		35,681		(44,561	)
Low Duration		159,270		(96,885	)

(4) Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios from time to time may enter into forward foreign currency contracts with the Fund’s custodian and other counterparties in an attempt to hedge against a decline in the value of foreign currency against the U.S. dollar. The Portfolios bear the market risk that arises from changes in foreign currency rates and bear the credit risk if the counterparty fails to perform under the contract.

For the year ended December 31, 2010, the International Growth, International Equity, and International Small Cap Growth Portfolios engaged in forward foreign currency contracts with notional volume (in thousands) of $4,088,138, $11,261 and $215,506, respectively.

The following tables present the value of forward foreign currency contracts as of December 31, 2010, and their respective location on the Statement of Assets and Liabilities (values in thousands):

Assets

Liabilities

Portfolio

Statement of Assets and
Liabilities Location

Value

Statement of Assets and
Liabilities Location

Value

International Equity

Unrealized appreciation on
foreign forward currency
contracts

—

Unrealized depreciation on
foreign forward currency
contracts

135

The effect of forward foreign currency contracts on the Statements of Operations for the year ended December 31, 2010 (values in thousands) were as follows:


Realized gain (loss) recognized in foreign currency transactions
Portfolio	Value
International Growth	$	49,389
International Equity		136
International Small Cap Growth		262


Change in unrealized gain (loss) recognized in foreign currency translations
Portfolio	Value
International Growth	$	(15,044	)
International Equity		(135	)

December 31, 2010

William Blair Funds 125

The following table presents open forward foreign currency contracts as of December 31, 2010 (values in thousands):

International Equity Fund

Counterparty

Short Contracts

Settlement
Date

Local
Currency

Current
Value

Unrealized
Gain/Loss

Northern Trust Corporation

Japanese Yen

1/11/2011

¥312,095

3,844

(135

)

(5) Fund Share Transactions


	Sales (Dollars)
	Year Ended December 31, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	68,365	$	107,997	$	176,362	$	67,911	$	63,683	$	131,594
Large Cap Growth		1,142		1,935		3,077		923		5,311		6,234
Small Cap Growth		108,310		256,285		364,595		225,583		92,269		317,852
Mid Cap Growth		2,798		21,591		24,389		4,936		16,887		21,823
Small Mid-Cap Growth		3,028		48,275		51,303		13,361		39,281		52,642
Global Growth		1,046		3,798		4,844		465		3,968		4,433
International Growth		876,749		621,840		1,498,589		645,844		715,238		1,361,082
International Equity		1,093		58,750		59,843		4,147		83,020		87,167
International Small Cap Growth		7,838		138,435		146,273		5,724		102,689		108,413
Emerging Markets Growth		6,588		51,960		58,548		5,532		68,836		74,368
Emerging Leaders Growth (a)		49		11,564		11,613		—		3,863		3,863
Small Cap Value		24,765		67,703		92,468		1,351		13,550		14,901
Mid Cap Value (b)		4		3,158		3,162		—		—		—
Bond		1,759		65,749		67,508		3,270		69,443		72,713
Income		8,860		6,525		15,385		5,949		11,021		16,970
Low Duration (c)		6,671		77,708		84,379		1,872		82,099		83,971
Ready Reserves		670,783		—		670,783		638,552		—		638,552

	Reinvested Distributions (Dollars)
	Year Ended December 31, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	—	$	11	$	11	$	—	$	34	$	34
Large Cap Growth		—		29		29		—		14		14
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		—		—
Small Mid-Cap Growth		—		—		—		—		—		—
Global Growth		—		11		11		—		3		3
International Growth		50,365		42,168		92,533		15,272		13,374		28,646
International Equity		174		2,278		2,452		13		1,374		1,387
International Small Cap Growth		38		1,078		1,116		—		249		249
Emerging Markets Growth		234		1,348		1,582		192		1,432		1,624
Emerging Leaders Growth (a)		—		79		79		—		100		100
Small Cap Value		58		296		354		19		151		170
Mid Cap Value (b)		—		27		27		—		—		—
Bond		126		4,728		4,854		86		3,171		3,257
Income		1,462		2,888		4,350		2,004		3,427		5,431
Low Duration (c)		54		1,211		1,265		1		36		37
Ready Reserves		126		—		126		1,710		—		1,710

(a)

For Class N shares for the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(c)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

126 Annual Report

December 31, 2010



	Redemptions (Dollars)
	Year Ended December 31, 2010									Year Ended December 31, 2009
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	47,695		$	37,660		$	85,355		$	33,393		$	17,297		$	50,690
Large Cap Growth		925			4,757			5,682			1,360			5,054			6,414
Small Cap Growth		235,001			124,740			359,741			152,457			88,376			240,833
Mid Cap Growth		2,034			11,217			13,251			1,417			6,314			7,731
Small Mid-Cap Growth		4,809			23,447			28,256			1,450			28,280			29,730
Global Growth		1,468			4,358			5,826			822			4,451			5,273
International Growth		1,196,684			551,296			1,747,980			839,084			458,486			1,297,570
International Equity		4,139			186,626			190,765			37,908			47,320			85,228
International Small Cap Growth		5,438			62,241			67,679			7,257			36,128			43,385
Emerging Markets Growth		5,661			70,448			76,109			6,566			29,337			35,903
Emerging Leaders Growth (a)		—			6,692			6,692			—			743			743
Small Cap Value		2,617			11,274			13,891			2,315			4,882			7,197
Mid Cap Value (b)		—			5			5			—			—			—
Bond		1,085			54,078			55,163			308			15,214			15,522
Income		12,781			13,282			26,063			19,152			31,143			50,295
Low Duration (c)		1,607			69,878			71,485			—			1,799			1,799
Ready Reserves		807,267			—			807,267			1,128,550			—			1,128,550

	Net Change in Net Assets relating to Fund Share Activity (Dollars)
	Year Ended December 31, 2010									Year Ended December 31, 2009
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	20,670		$	70,348		$	91,018		$	34,518		$	46,420		$	80,938
Large Cap Growth		217			(2,793	)		(2,576	)		(437	)		271			(166	)
Small Cap Growth		(126,691	)		131,545			4,854			73,126			3,893			77,019
Mid Cap Growth		764			10,374			11,138			3,519			10,573			14,092
Small Mid-Cap Growth		(1,781	)		24,828			23,047			11,911			11,001			22,912
Global Growth		(422	)		(549	)		(971	)		(357	)		(480	)		(837	)
International Growth		(269,570	)		112,712			(156,858	)		(177,968	)		270,126			92,158
International Equity		(2,872	)		(125,598	)		(128,470	)		(33,748	)		37,074			3,326
International Small Cap Growth		2,438			77,272			79,710			(1,533	)		66,810			65,277
Emerging Markets Growth		1,161			(17,140	)		(15,979	)		(842	)		40,931			40,089
Emerging Leaders Growth		49			4,951			5,000			—			3,220			3,220
Small Cap Value		22,206			56,725			78,931			(945	)		8,819			7,874
Mid Cap Value (b)		4			3,180			3,184			—			—			—
Bond		800			16,399			17,199			3,048			57,400			60,448
Income		(2,459	)		(3,869	)		(6,328	)		(11,199	)		(16,695	)		(27,894	)
Low Duration (c)		5,118			9,041			14,159			1,873			80,336			82,209
Ready Reserves		(136,358	)		—			(136,358	)		(488,288	)		—			(488,288	)

(a)

For Class N shares for the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(c)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

December 31, 2010

William Blair Funds 127


	Sales (Shares)
	Year Ended December 31, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth		6,808		9,829		16,637		7,884		7,054		14,938
Large Cap Growth		182		299		481		181		978		1,159
Small Cap Growth		5,035		12,133		17,168		14,719		5,427		20,146
Mid Cap Growth		261		1,998		2,259		551		1,894		2,445
Small Mid-Cap Growth		242		3,846		4,088		1,183		4,035		5,218
Global Growth		139		526		665		80		709		789
International Growth		45,601		31,294		76,895		43,158		45,616		88,774
International Equity		96		5,289		5,385		474		8,525		8,999
International Small Cap Growth		729		12,221		12,950		688		11,253		11,941
Emerging Markets Growth		467		3,722		4,189		571		7,574		8,145
Emerging Leaders Growth (a)		5		1,252		1,257		—		548		548
Small Cap Value		1,978		5,844		7,822		166		1,517		1,683
Mid Cap Value (b)		—		313		313		—		—		—
Bond		164		6,220		6,384		324		7,009		7,333
Income		957		713		1,670		666		1,244		1,910
Low Duration (c)		670		7,796		8,466		187		8,211		8,398
Ready Reserves		670,783		—		670,783		638,552		—		638,552

	Reinvested Distributions (Shares)
	Year Ended December 31, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth		—		1		1		—		3		3
Large Cap Growth		—		4		4		—		2		2
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		—		—
Small Mid-Cap Growth		—		—		—		—		—		—
Global Growth		—		1		1		—		—		—
International Growth		2,343		1,918		4,261		843		722		1,565
International Equity		15		189		204		2		126		128
International Small Cap Growth		3		83		86		—		24		24
Emerging Markets Growth		15		87		102		15		115		130
Emerging Leaders Growth (a)		—		8		8		—		12		12
Small Cap Value		4		22		26		2		15		17
Mid Cap Value (b)		—		3		3		—		—		—
Bond		12		447		459		9		313		322
Income		159		315		474		225		387		612
Low Duration (c)		5		122		127		—		4		4
Ready Reserves		126		—		126		1,710		—		1,710

(a)

For Class N shares for the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(c)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

128 Annual Report

December 31, 2010



	Redemptions (Shares)
	Year Ended December 31, 2010									Year Ended December 31, 2009
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth		4,775			3,591			8,366			4,263			1,994			6,257
Large Cap Growth		148			761			909			249			973			1,222
Small Cap Growth		11,449			5,763			17,212			10,272			5,811			16,083
Mid Cap Growth		187			1,030			1,217			169			744			913
Small Mid-Cap Growth		386			1,836			2,222			148			2,837			2,985
Global Growth		209			615			824			140			818			958
International Growth		61,789			28,153			89,942			58,042			30,142			88,184
International Equity		373			17,372			17,745			4,210			5,321			9,531
International Small Cap Growth		483			5,850			6,333			976			4,632			5,608
Emerging Markets Growth		422			5,459			5,881			678			3,007			3,685
Emerging Leaders Growth (a)		—			728			728			—			123			123
Small Cap Value		219			945			1,164			278			562			840
Mid Cap Value (b)		—			1			1			—			—			—
Bond		101			5,087			5,188			30			1,505			1,535
Income		1,382			1,449			2,831			2,155			3,558			5,713
Low Duration (c)		161			7,002			7,163			—			180			180
Ready Reserves		807,267			—			807,267			1,128,550			—			1,128,550

	Net Change in Shares Outstanding relating to Fund Share Activity (Shares)
	Year Ended December 31, 2010									Year Ended December 31, 2009
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth		2,033			6,239			8,272			3,621			5,063			8,684
Large Cap Growth		34			(458	)		(424	)		(68	)		7			(61	)
Small Cap Growth		(6,414	)		6,370			(44	)		4,447			(384	)		4,063
Mid Cap Growth		74			968			1,042			382			1,150			1,532
Small Mid-Cap Growth		(144	)		2,010			1,866			1,035			1,198			2,233
Global Growth		(70	)		(88	)		(158	)		(60	)		(109	)		(169	)
International Growth		(13,845	)		5,059			(8,786	)		(14,041	)		16,196			2,155
International Equity		(262	)		(11,894	)		(12,156	)		(3,734	)		3,330			(404	)
International Small Cap Growth		249			6,454			6,703			(288	)		6,645			6,357
Emerging Markets Growth		60			(1,650	)		(1,590	)		(92	)		4,682			4,590
Emerging Leaders Growth (a)		5			532			537			—			437			437
Small Cap Value		1,763			4,921			6,684			(110	)		970			860
Mid Cap Value (b)		—			315			315			—			—			—
Bond		75			1,580			1,655			303			5,817			6,120
Income		(266	)		(421	)		(687	)		(1,264	)		(1,927	)		(3,191	)
Low Duration (c)		514			916			1,430			187			8,035			8,222
Ready Reserves		(136,358	)		—			(136,358	)		(488,288	)		—			(488,288	)

(a)

For Class N shares for the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period from May 3, 2010 (Commencement of Operations) to December 31, 2010.

(c)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

December 31, 2010

William Blair Funds 129

Financial Highlights

Growth Fund


	Class N
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	9.89		$	7.12		$	11.70		$	11.42		$	11.33
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.02	)		(0.05	)		(0.04	)		(0.06	)
Net realized and unrealized gain (loss) on investments		1.40			2.79			(4.35	)		1.53			1.48

Total from investment operations		1.39			2.77			(4.40	)		1.49			1.42
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.18			1.21			1.33

Total distributions		—			—			0.18			1.21			1.33

Net asset value, end of year	$	11.28		$	9.89		$	7.12		$	11.70		$	11.42

Total Return (%)		14.05			38.90			(37.61	)		13.17			12.42
Ratios to average daily net assets (%):
Expenses		1.16			1.23			1.17			1.22			1.17
Net investment income (loss)		(0.13	)		(0.20	)		(0.54	)		(0.35	)		(0.49	)


	Class I
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	10.24		$	7.35		$	12.02		$	11.66		$	11.52
Income (loss) from investment operations:
Net investment income (loss)		0.02			0.01			(0.02	)		0.00	^		(0.02	)
Net realized and unrealized gain (loss) on investments		1.45			2.88			(4.47	)		1.57			1.49

Total from investment operations		1.47			2.89			(4.49	)		1.57			1.47
Less distributions from:
Net investment income		0.00	^		0.00	^		—			—			—
Net realized gain		—			—			0.18			1.21			1.33

Total distributions		—			0.00	^		0.18			1.21			1.33

Net asset value, end of year	$	11.71		$	10.24		$	7.35		$	12.02		$	11.66

Total Return (%)		14.36			39.34			(37.35	)		13.59			12.64
Ratios to average daily net assets (%):
Expenses		0.84			0.89			0.85			0.87			0.89
Net investment income (loss)		0.20			0.14			(0.22	)		0.00			(0.20	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	575,613	$	419,520	$	238,586	$	369,644	$	264,525
Portfolio turnover rate (%)		66		67		60		72		61

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

130 Annual Report

December 31, 2010

Financial Highlights

Large Cap Growth Fund


	Class N
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	6.16		$	4.68		$	7.52		$	6.88		$	6.47
Income (loss) from investment operations:
Net investment income (loss)		(0.00	)^{^}		(0.01	)		(0.02	)		(0.01	)		(0.02	)
Net realized and unrealized gain (loss) on investments		0.98			1.49			(2.82	)		0.65			0.43

Total from investment operations		0.98			1.48			(2.84	)		0.64			0.41
Less distributions from:
Net investment income		—			—			0.00	^{^}		—			—
Net realized gain		—			—			—			—			—

Total distributions		—			—			0.00	^{^}		—			—

Net asset value, end of year	$	7.14		$	6.16		$	4.68		$	7.52		$	6.88

Total Return (%)		15.91			31.62			(37.76	)		9.30			6.34
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.21			1.23			1.23			1.23			1.24
Expenses, before waivers and reimbursements		1.53			2.28			1.85			1.50			1.63
Net investment income (loss), net of waivers and reimbursements		(0.08	)		(0.13	)		(0.29	)		(0.16	)		(0.29	)
Net investment income (loss), before waivers and reimbursements		(0.40	)		(1.18	)		(0.91	)		(0.43	)		(0.68	)


	Class I
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	6.30		$	4.77		$	7.64		$	6.99		$	6.56
Income (loss) from investment operations:
Net investment income (loss)		0.01			0.01			0.00	^{^}		0.01			0.00
Net realized and unrealized gain (loss) on investments		1.00			1.52			(2.87	)		0.64			0.43

Total from investment operations		1.01			1.53			(2.87	)		0.65			0.43
Less distributions from:
Net investment income		0.01			0.00	^{^}		0.00	^{^}		0.00^{^}			—
Net realized gain		—			—			—			—			—

Total distributions		0.01			0.00	^{^}		0.00	^{^}		0.00	^{^}		—

Net asset value, end of year	$	7.30		$	6.30		$	4.77		$	7.64		$	6.99

Total Return (%)		16.03			32.17			(37.56	)		9.36			6.55
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.96			0.98			0.98			0.98			0.99
Expenses, before waivers and reimbursements		1.16			1.26			1.21			1.20			1.38
Net investment income (loss), net of waivers and reimbursements		0.16			0.12			(0.04	)		0.18			(0.04	)
Net investment income (loss), before waivers and reimbursements		(0.04	)		(0.16	)		(0.27	)		(0.04	)		(0.43	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	32,035	$	30,311	$	23,279	$	33,667	$	20,191
Portfolio turnover rate (%)		54		88		85		60		53

Amount is between $(0.005) and $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 131

Financial Highlights

Small Cap Growth Fund


	Class N
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	19.99		$	11.79		$	23.30		$	25.41		$	23.76
Income (loss) from investment operations:
Net investment income (loss)		(0.21	)		(0.15	)		(0.19	)		(0.33	)		(0.29	)
Net realized and unrealized gain (loss) on investments		3.44			8.35			(10.73	)		(0.25	)		3.65

Total from investment operations		3.23			8.20			(10.92	)		(0.58	)		3.36
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.59			1.53			1.71

Total distributions		—			—			0.59			1.53			1.71

Net asset value, end of year	$	23.22		$	19.99		$	11.79		$	23.30		$	25.41

Total Return (%)		16.16			69.55			(46.85	)		(2.15	)		14.12
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50			1.50			1.50			1.49			1.48
Expenses, before waivers and reimbursements		1.52			1.55			1.50			1.49			1.48
Net investment income (loss), net of waivers and reimbursements		(1.03	)		(0.93	)		(1.05	)		(1.24	)		(1.14	)
Net investment income (loss), before waivers and reimbursements		(1.05	)		(0.98	)		(1.05	)		(1.24	)		(1.14	)


	Class I
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	20.64		$	12.14		$	23.89		$	25.94		$	24.16
Income (loss) from investment operations:
Net investment income (loss)		(0.16	)		(0.11	)		(0.14	)		(0.25	)		(0.22	)
Net realized and unrealized gain (loss) on investments		3.59			8.61			(11.02	)		(0.27	)		3.71

Total from investment operations		3.43			8.50			(11.16	)		(0.52	)		3.49
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.59			1.53			1.71

Total distributions		—			—			0.59			1.53			1.71

Net asset value, end of year	$	24.07		$	20.64		$	12.14		$	23.89		$	25.94

Total Return (%)		16.62			70.02			(46.70	)		(1.88	)		14.42
Ratios to average daily net assets (%):
Expenses		1.25			1.20			1.20			1.20			1.21
Net investment income (loss)		(0.76	)		(0.63	)		(0.75	)		(0.94	)		(0.87	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	891,589	$	762,798	$	401,627	$	1,094,419	$	1,261,174
Portfolio turnover rate (%)		117		122		135		97		105

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

132 Annual Report

December 31, 2010

Financial Highlights

Mid Cap Growth Fund


	Class N
	Periods Ended December 31,
	2010			2009			2008			2007			2006(a)
Net asset value, beginning of year	$	10.08		$	7.41		$	11.35		$	10.46		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.05	)		(0.04	)		(0.07	)		(0.07	)		(0.07	)
Net realized and unrealized gain (loss) on investments		2.47			2.71			(3.87	)		1.59			0.53

Total from investment operations		2.42			2.67			(3.94	)		1.52			0.46
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.00	^		0.63			—

Total distributions		—			—			0.00	^		0.63			—

Net asset value, end of year	$	12.50		$	10.08		$	7.41		$	11.35		$	10.46

Total Return (%)*		24.01			36.03			(34.71	)		14.62			4.60
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.35			1.36			1.36			1.38			1.40
Expenses, before waivers and reimbursements		1.42			2.13			2.03			1.67			2.35
Net investment income (loss), net of waivers and reimbursements		(0.42	)		(0.51	)		(0.76	)		(0.58	)		(0.70	)
Net investment income (loss), before waivers and reimbursements		(0.49	)		(1.28	)		(1.43	)		(0.87	)		(1.65	)


	Class I
	Periods Ended December 31,
	2010			2009			2008			2007			2006(a)
Net asset value, beginning of year	$	10.20		$	7.48		$	11.42		$	10.49		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		(0.02	)		(0.05	)		(0.04	)		(0.04	)
Net realized and unrealized gain (loss) on investments		2.50			2.74			(3.89	)		1.60			0.53

Total from investment operations		2.48			2.72			(3.94	)		1.56			0.49
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.00	^		0.63			—

Total distributions		—			—			0.00	^		0.63			—

Net asset value, end of year	$	12.68		$	10.20		$	7.48		$	11.42		$	10.49

Total Return (%)*		24.31			36.36			(34.50	)		14.95			4.90
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.10			1.11			1.11			1.12			1.15
Expenses, before waivers and reimbursements		1.15			1.28			1.23			1.37			2.10
Net investment income (loss), net of waivers and reimbursements		(0.14	)		(0.26	)		(0.51	)		(0.32	)		(0.43	)
Net investment income (loss), before waivers and reimbursements		(0.19	)		(0.43	)		(0.63	)		(0.57	)		(1.38	)


	Periods Ended December 31,
	2010		2009		2008		2007		2006(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	101,248	$	70,834	$	40,526	$	45,393	$	19,639
Portfolio turnover rate (%)*		73		87		76		66		56

(a)

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

Rates not annualized for periods that are less than a year.

Rates are annualized for periods that are less than a year.

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 133

Financial Highlights

Small-Mid Cap Growth Fund


	Class N
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	11.73		$	8.16		$	13.10		$	12.96		$	12.40
Income (loss) from investment operations:
Net investment income (loss)		(0.09	)		(0.06	)		(0.03	)		(0.12	)		(0.11	)
Net realized and unrealized gain (loss) on investments		2.76			3.63			(4.91	)		1.71			1.32

Total from investment operations		2.67			3.57			(4.94	)		1.59			1.21
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.00	^		1.45			0.65

Total distributions		—			—			0.00	^		1.45			0.65

Net asset value, end of year	$	14.40		$	11.73		$	8.16		$	13.10		$	12.96

Total Return (%)		22.76			43.75			(37.71	)		12.34			9.68
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.35			1.36			1.36			1.36			1.38
Expenses, before waivers and reimbursements		1.46			1.49			1.41			1.42			1.45
Net investment income (loss), net of waivers and reimbursements		(0.76	)		(0.60	)		(0.26	)		(0.79	)		(0.86	)
Net investment income (loss), before waivers and reimbursements		(0.87	)		(0.73	)		(0.31	)		(0.85	)		(0.93	)


	Class I
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	11.93		$	8.27		$	13.24		$	13.06		$	12.46
Income (loss) from investment operations:
Net investment income (loss)		(0.06	)		(0.03	)		0.00	^		(0.08	)		(0.08	)
Net realized and unrealized gain (loss) on investments		2.81			3.69			(4.97	)		1.71			1.33

Total from investment operations		2.75			3.66			(4.97	)		1.63			1.25
Less distributions from:
Net investment income		—			0.00	^		—			—			—
Net realized gain		—			—			0.00	^		1.45			0.65

Total distributions		—			0.00	^		0.00	^		1.45			0.65

Net asset value, end of year	$	14.68		$	11.93		$	8.27		$	13.24		$	13.06

Total Return (%)		23.05			44.26			(37.54	)		12.54			9.95
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10			1.11			1.11			1.11			1.13
Expenses, before waivers and reimbursements		1.11			1.18			1.17			1.17			1.20
Net investment income (loss), net of waivers and reimbursements		(0.50	)		(0.33	)		0.03			(0.54	)		(0.61	)
Net investment income (loss), before waivers and reimbursements		(0.51	)		(0.40	)		(0.03	)		(0.60	)		(0.68	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	208,065	$	146,828	$	83,479	$	124,501	$	92,766
Portfolio turnover rate (%)		93		112		77		80		68

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

134 Annual Report

December 31, 2010

Financial Highlights

Global Growth Fund


	Class N
	Periods Ended December 31,
	2010			2009			2008			2007(a)
Net asset value, beginning of year	$	6.97		$	4.96		$	9.89		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		(0.01	)		(0.01	)		0.08			0.00	^{^}
Net realized and unrealized gain (loss) on investments		1.44			2.02			(4.98	)		(0.11	)

Total from investment operations		1.43			2.01			(4.90	)		(0.11	)
Less distributions from:
Net investment income		—			—			0.03			0.00	^{^}
Net realized gain		—			—			—			—

Total distributions		—			—			0.03			0.00	^{^}

Net asset value, end of year	$	8.40		$	6.97		$	4.96		$	9.89

Total Return (%)^*		20.52			40.52			(49.52	)		(1.10	)
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.52			1.55			1.55			1.55
Expenses, before waivers and reimbursements		1.93			2.61			2.17			2.14
Net investment income (loss), net of waivers and reimbursements		(0.09	)		(0.17	)		0.98			(0.08	)
Net investment income (loss), before waivers and reimbursements		(0.50	)		(1.23	)		0.36			(0.67	)


	Class I
	Periods Ended December 31,
	2010			2009			2008			2007(a)
Net asset value, beginning of year	$	6.96		$	4.94		$	9.91		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.01			0.00	^{^}		0.08			0.00	^{^}
Net realized and unrealized gain (loss) on investments		1.43			2.02			(4.98	)		(0.09	)

Total from investment operations		1.44			2.02			(4.90	)		(0.09	)
Less distributions from:
Net investment income		0.00	^{^}		0.00	^{^}		0.07			0.00	^{^}
Net realized gain		—			—			—			—

Total distributions		0.00	^{^}		0.00	^{^}		0.07			0.00	^{^}

Net asset value, end of year	$	8.40		$	6.96		$	4.94		$	9.91

Total Return (%)^*		20.73			40.90			(49.41	)		(0.85	)
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.27			1.30			1.30			1.30
Expenses, before waivers and reimbursements		1.62			1.62			1.74			1.89
Net investment income (loss), net of waivers and reimbursements		0.16			0.05			1.05			0.14
Net investment income (loss), before waivers and reimbursements		(0.19	)		(0.27	)		0.61			(0.45	)


	Periods Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	44,877	$	38,287	$	28,005	$	45,576
Portfolio turnover rate (%)^*		96		133		124		63

(a)

For the period October 15, 2007 (Commencement of Operations) to December 31, 2007.

(b)

Excludes $0.00, $0.00, $0.00 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008 and 2007, respectively.

Rates not annualized for periods that are less than a year.

Rates are annualized for periods that are less than a year.

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 135

Financial Highlights

International Growth Fund


	Class N
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	18.55	$	13.12	$	29.12		$	27.70	$	25.22
Income (loss) from investment operations:
Net investment income (loss) (a)		0.14		0.07		0.29			0.12		0.05
Net realized and unrealized gain (loss) on investments		3.58		5.47		(15.54	)		4.77		5.71

Total from investment operations		3.72		5.54		(15.25	)		4.89		5.76
Less distributions from:
Net investment income		0.42		0.11		—			0.34		0.37
Net realized gain		—		—		0.75			3.13		2.91

Total distributions		0.42		0.11		0.75			3.47		3.28

Net asset value, end of year	$	21.85	$	18.55	$	13.12		$	29.12	$	27.70

Total Return (%)		20.09		42.27		(52.33	)		18.13		23.06
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.43		1.45		1.39			1.40		1.42
Expenses, before waivers and reimbursements		1.43		1.46		1.39			1.40		1.42
Net investment income (loss), net of waivers and reimbursements		0.73		0.48		1.29			0.38		0.19
Net investment income (loss), before waivers and reimbursements		0.73		0.47		1.29			0.38		0.19


	Class I
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	18.95	$	13.40	$	29.61		$	28.10	$	25.55
Income (loss) from investment operations:
Net investment income (loss) (a)		0.20		0.12		0.37			0.21		0.13
Net realized and unrealized gain (loss) on investments		3.67		5.59		(15.83	)		4.86		5.78

Total from investment operations		3.87		5.71		(15.46	)		5.07		5.91
Less distributions from:
Net investment income		0.48		0.16		—			0.43		0.45
Net realized gain		—		—		0.75			3.13		2.91

Total distributions		0.48		0.16		0.75			3.56		3.36

Net asset value, end of year	$	22.34	$	18.95	$	13.40		$	29.61	$	28.10

Total Return (%)		20.47		42.63		(52.17	)		18.53		23.35
Ratios to average daily net assets (%):
Expenses		1.14		1.17		1.08			1.09		1.11
Net investment income (loss)		0.99		0.74		1.58			0.69		0.45


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	5,082,179	$	4,473,408	$	3,130,938	$	8,048,654	$	6,267,126
Portfolio turnover rate (%)		99		121		91		56		72

(a)

Excludes $0.13, $0.08, $(0.18), $0.09, and $0.42 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006, respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

136 Annual Report

December 31, 2010

Financial Highlights

International Equity Fund


	Class N
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	11.07	$	8.35	$	16.53		$	15.21	$	12.86
Income (loss) from investment operations:
Net investment income (loss) (a)		0.06		0.09		0.10			0.09		0.04
Net realized and unrealized gain (loss) on investments		1.15		2.64		(8.16	)		2.55		2.52

Total from investment operations		1.21		2.73		(8.06	)		2.64		2.56
Less distributions from:
Net investment income		0.16		0.01		—			0.14		0.19
Net realized gain		—		—		0.12			1.18		0.02

Total distributions		0.16		0.01		0.12			1.32		0.21

Net asset value, end of year	$	12.12	$	11.07	$	8.35		$	16.53	$	15.21

Total Return (%)		10.92		32.69		(48.75	)		17.68		19.96
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.45		1.45		1.45			1.45		1.46
Expenses, before waivers and reimbursements		1.66		1.59		1.45			1.47		1.56
Net investment income (loss), net of waivers and reimbursements		0.55		1.03		0.80			0.52		0.26
Net investment income (loss), before waivers and reimbursements		0.34		0.89		0.80			0.50		0.16

	Class I
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	11.16	$	8.44	$	16.66		$	15.31	$	12.94
Income (loss) from investment operations:
Net investment income (loss) (a)		0.10		0.08		0.15			0.13		0.06
Net realized and unrealized gain (loss) on investments		1.15		2.70		(8.25	)		2.57		2.55

Total from investment operations		1.25		2.78		(8.10	)		2.70		2.61
Less distributions from:
Net investment income		0.19		0.06		—			0.17		0.22
Net realized gain		—		—		0.12			1.18		0.02

Total distributions		0.19		0.06		0.12			1.35		0.24

Net asset value, end of year	$	12.22	$	11.16	$	8.44		$	16.66	$	15.31

Total Return (%)		11.19		32.93		(48.61	)		17.97		20.22
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20		1.20		1.20			1.20		1.21
Expenses, before waivers and reimbursements		1.28		1.39		1.22			1.25		1.35
Net investment income (loss), net of waivers and reimbursements		0.88		0.86		1.12			0.76		0.46
Net investment income (loss), before waivers and reimbursements		0.80		0.67		1.10			0.71		0.32


	Years Ended December 31,
	2010		2009		2008			2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	178,055	$	298,168	$	228,486		$	408,609	$	297,716
Portfolio turnover rate (%)		71		88		92			70		83

(a)

Excludes $0.04, $0.00, $0.00, $(0.07) and $0.01 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006, respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 137

Financial Highlights

International Small Cap Growth Fund


	Class N
	Years Ended December 31,
	2010		2009			2008			2007			2006
Net asset value, beginning of year	$	10.40	$	6.62		$	13.98		$	13.37		$	11.16
Income (loss) from investment operations:
Net investment income (loss) (a)		0.03		(0.01	)		(0.02	)		(0.02	)		(0.05	)
Net realized and unrealized gain (loss) on investments		2.66		3.79			(7.22	)		1.72			2.32

Total from investment operations		2.69		3.78			(7.24	)		1.70			2.27
Less distributions from:
Net investment income		0.02		—			—			0.05			0.01
Net realized gain		—		—			0.12			1.04			0.05

Total distributions		0.02		—			0.12			1.09			0.06

Net asset value, end of year	$	13.07	$	10.40		$	6.62		$	13.98		$	13.37

Total Return (%)^*		25.88		57.10			(51.82	)		13.06			20.32
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.55		1.65			1.65			1.60			1.65
Expenses, before waivers and reimbursements		1.55		1.83			1.62			1.60			1.71
Net investment income (loss), net of waivers and reimbursements		0.30		(0.16	)		(0.20	)		(0.16	)		(0.40	)
Net investment income (loss), before waivers and reimbursements		0.30		(0.34	)		(0.17	)		(0.16	)		(0.46	)


	Class I
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	10.49	$	6.67	$	14.01		$	13.41	$	11.16
Income (loss) from investment operations:
Net investment income (loss) (a)		0.07		0.01		0.01			0.03		(0.03	)
Net realized and unrealized gain (loss) on investments		2.68		3.83		(7.23	)		1.71		2.34

Total from investment operations		2.75		3.84		(7.22	)		1.74		2.31
Less distributions from:
Net investment income		0.05		0.02		—			0.10		0.01
Net realized gain		—		—		0.12			1.04		0.05

Total distributions		0.05		0.02		0.12			1.14		0.06

Net asset value, end of year	$	13.19	$	10.49	$	6.67		$	14.01	$	13.41

Total Return (%)^*		26.24		57.51		(51.56	)		13.34		20.68
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.25		1.31		1.31			1.29		1.40
Expenses, before waivers and reimbursements		1.25		1.31		1.28			1.29		1.46
Net investment income (loss), net of waivers and reimbursements		0.61		0.11		0.11			0.18		(0.25	)
Net investment income (loss), before waivers and reimbursements		0.61		0.11		0.14			0.18		(0.31	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	646,951	$	390,851	$	291,988	$	401,459	$	231,969
Portfolio turnover rate (%)^*		85		136		78		88		109

(a)

Excludes $0.15, $0.01, $(0.02), $0.05, and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006, respectively.

Rates not annualized for periods that are less than a year.

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.

138 Annual Report

December 31, 2010

Financial Highlights

Emerging Markets Growth Fund


	Class N
	Years Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of year	$	12.87		$	7.46		$	21.92		$	19.42		$	14.17
Income (loss) from investment operations:
Net investment income (loss) (a)		(0.01	)		0.00	^{^}		0.11			(0.10	)		(0.04	)
Net realized and unrealized gain (loss) on investments		3.02			5.51			(13.63	)		7.23			5.41

Total from investment operations		3.01			5.51			(13.52	)		7.13			5.37
Less distributions from:
Net investment income		0.12			0.10			—			0.09			0.01
Net realized gain		—			—			0.94			4.54			0.11

Total distributions		0.12			0.10			0.94			4.63			0.12

Net asset value, end of year	$	15.76		$	12.87		$	7.46		$	21.92		$	19.42

Total Return (%)		23.44			73.85			(61.71	)		37.75			37.90
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.63			1.70			1.67			1.65			1.65
Expenses, before waivers and reimbursements		1.63			1.81			1.65			1.69			1.78
Net investment income (loss), net of waivers and reimbursements		(0.05	)		0.04			0.65			(0.45	)		(0.22	)
Net investment income (loss), before waivers and reimbursements		(0.05	)		(0.07	)		0.67			(0.49	)		(0.35	)


	Class I
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	12.95	$	7.51	$	21.99		$	19.47		$	14.19
Income (loss) from investment operations:
Net investment income (loss) (a)		0.04		0.03		0.15			(0.04	)		(0.01	)
Net realized and unrealized gain (loss) on investments		3.03		5.54		(13.69	)		7.26			5.41

Total from investment operations		3.07		5.57		(13.54	)		7.22			5.40
Less distributions from:
Net investment income		0.15		0.13		—			0.16			0.01
Net realized gain		—		—		0.94			4.54			0.11

Total distributions		0.15		0.13		0.94			4.70			0.12

Net asset value, end of year	$	15.87	$	12.95	$	7.51		$	21.99		$	19.47

Total Return (%)		23.77		74.18		(61.60	)		38.13			38.07
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.36		1.41		1.41			1.40			1.40
Expenses, before waivers and reimbursements		1.36		1.41		1.39			1.40			1.47
Net investment income (loss), net of waivers and reimbursements		0.26		0.31		0.91			(0.20	)		(0.06	)
Net investment income (loss), before waivers and reimbursements		0.26		0.31		0.93			(0.20	)		(0.13	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,250,543	$	1,038,260	$	385,588	$	1,165,854	$	813,649
Portfolio turnover rate (%)		121		113		118		100		113

(a)

Excludes $0.11, $0.15, $(0.09), $0.21, and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006 respectively.

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 139

Financial Highlights

Emerging Leaders Growth Fund


	Class N
	Period Ended December 31, 2010(a)
	Period Ended December 31, 2010(a)
Net asset value, beginning of year	$	8.80
Income (loss) from investment operations:
Net investment income (loss) (c)		(0.02	)
Net realized and unrealized gain (loss) on investments		1.64

Total from investment operations		1.62
Less distributions from:
Net investment income		0.02
Net realized gain		0.06

Total distributions		0.08

Net asset value, end of year	$	10.34

Total Return (%)*		18.43
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.65
Expenses, before waivers and reimbursements		1.71
Net investment income (loss), net of waivers and reimbursements		(0.38	)
Net investment income (loss), before waivers and reimbursements		(0.44	)


	Class I
	Periods Ended December 31,
	2010		2009		2008(b)
Net asset value, beginning of year	$	8.43	$	4.79	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (c)		0.02		0.02		0.04
Net realized and unrealized gain (loss) on investments		1.98		3.73		(5.25	)

Total from investment operations		2.00		3.75		(5.21	)
Less distributions from:
Net investment income		0.02		0.11		0.00	^
Net realized gain		0.06		—		—

Total distributions		0.08		0.11		0.00	^

Net asset value, end of year	$	10.35	$	8.43	$	4.79

Total Return (%)*		23.70		78.38		(52.09	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40		1.40		1.40
Expenses, before waivers and reimbursements		1.52		1.54		1.56
Net investment income (loss), net of waivers and reimbursements		0.25		0.37		0.70
Net investment income (loss), before waivers and reimbursements		0.13		0.23		0.54


	Periods Ended December 31,
	2010		2009		2008
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	94,901	$	115,136	$	46,676
Portfolio turnover rate (%)*		176		176		151

(a)

For the period May 3, 2010 (Commencement of Operations) to December 31, 2010.

(b)

For the period March 26, 2008 (Commencement of Operations) to December 31, 2008.

(c)

Excludes $0.96, $1.29 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009 and 2008 respectively.

Rates not annualized for periods that are less than a year.

Rates are annualized for periods that are less than a year.

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

140 Annual Report

December 31, 2010

Financial Highlights

Small Cap Value Fund


	Class N
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	10.49	$	8.33	$	11.31		$	16.27		$	14.95
Income (loss) from investment operations:
Net investment income (loss)		0.03		0.06		0.09			0.02			0.03
Net realized and unrealized gain (loss) on investments		3.22		2.13		(3.02	)		(0.96	)		3.22

Total from investment operations		3.25		2.19		(2.93	)		(0.94	)		3.25
Less distributions from:
Net investment income		0.03		0.03		0.05			—			0.01
Net realized gain		—		—		—			4.02			1.92

Total distributions		0.03		0.03		0.05			4.02			1.93

Net asset value, end of year	$	13.71	$	10.49	$	8.33		$	11.31		$	16.27

Total Return (%)		30.94		26.24		(25.85	)		(5.54	)		21.78
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.33		1.29		1.29			1.33			1.34
Expenses, before waivers and reimbursements		1.57		1.78		1.82			1.66			1.75
Net investment income (loss), net of waivers and reimbursements		0.25		0.68		0.84			0.10			0.21
Net investment income (loss), before waivers and reimbursements		0.01		0.19		0.31			(0.23	)		(0.20	)


	Class I
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	10.65	$	8.45	$	11.50		$	16.51		$	15.12
Income (loss) from investment operations:
Net investment income (loss)		0.05		0.08		0.11			0.09			0.03
Net realized and unrealized gain (loss) on investments		3.27		2.16		(3.08	)		(1.01	)		3.30

Total from investment operations		3.32		2.24		(2.97	)		(0.92	)		3.33
Less distributions from:
Net investment income		0.04		0.04		0.08			0.07			0.02
Net realized gain		—		—		—			4.02			1.92

Total distributions		0.04		0.04		0.08			4.09			1.94

Net asset value, end of year	$	13.93	$	10.65	$	8.45		$	11.50		$	16.51

Total Return (%)		31.16		26.56		(25.77	)		(5.31	)		22.10
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10		1.09		1.09			1.09			1.09
Expenses, before waivers and reimbursements		1.29		1.50		1.57			1.37			1.50
Net investment income (loss), net of waivers and reimbursements		0.43		0.86		1.06			0.52			0.16
Net investment income (loss), before waivers and reimbursements		0.24		0.45		0.58			0.24			(0.25	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	164,499	$	54,859	$	36,249	$	47,118	$	146,777
Portfolio turnover rate (%)		71		62		87		102		162

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.

December 31, 2010

William Blair Funds 141

Financial Highlights

Mid Cap Value Fund


	Class N
	Period Ended December 31,
	2010(a)
Net asset value, beginning of period	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.09
Net realized and unrealized gain (loss) on investments		0.74

Total from investment operations		0.83
Less distributions from:
Net investment income		0.06
Net realized gain		0.02

Total distributions		0.08

Net asset value, end of period	$	10.75

Total Return (%)^*		8.36
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.35
Expenses, before waivers and reimbursements		5.09
Net investment income (loss), net of waivers and reimbursements		0.92
Net investment income (loss), before waivers and reimbursements		(2.82	)

	Class I
	Period Ended December 31,
	2010(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		0.75

Total from investment operations		0.86
Less distributions from:
Net investment income		0.08
Net realized gain		0.02

Total distributions		0.10

Net asset value, end of period	$	10.76

Total Return (%)^*		8.66
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		1.10
Expenses, before waivers and reimbursements		4.92
Net investment income (loss), net of waivers and reimbursements		1.10
Net investment income (loss), before waivers and reimbursements		(2.72	)

	Period Ended December 31,
	2010(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	3,393
Portfolio turnover rate (%)^*		35

(a)

For the period May 3, 2010 (Commencement of Operations) to Decmeber 31, 2010.

Rates not annualized for periods that are less than a year.

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.

142 Annual Report

December 31, 2010

Financial Highlights

Bond Fund


	Class N
	Periods Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.40	$	9.82	$	10.07		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.46		0.48		0.47			0.31
Net realized and unrealized gain (loss) on investments		0.35		0.59		(0.31	)		0.02

Total from investment operations		0.81		1.07		0.16			0.33
Less distributions from:
Net investment income		0.48		0.49		0.41			0.26
Net realized gain		0.03		—		—			—

Total distributions		0.51		0.49		0.41			0.26

Net asset value, end of year	$	10.70	$	10.40	$	9.82		$	10.07

Total Return (%)*		7.86		11.11		1.64			3.38
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.65		0.65		0.65			0.65
Expenses, before waivers and reimbursements		0.70		1.40		2.47			0.81
Net investment income (loss), net of waivers and reimbursements		4.25		4.76		4.69			4.80
Net investment income (loss), before waivers and reimbursements		4.20		4.01		2.87			4.64


	Class I
	Periods Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.31	$	9.72	$	10.04		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.47		0.49		0.48			0.32
Net realized and unrealized gain (loss) on investments		0.33		0.59		(0.31	)		0.02

Total from investment operations		0.80		1.08		0.17			0.34
Less distributions from:
Net investment income		0.49		0.49		0.49			0.30
Net realized gain		0.03		—		—			—

Total distributions		0.52		0.49		0.49			0.30

Net asset value, end of year	$	10.59	$	10.31	$	9.72		$	10.04

Total Return (%)*		7.89		11.40		1.72			3.50
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.50		0.50		0.50			0.50
Expenses, before waivers and reimbursements		0.55		0.58		0.71			0.67
Net investment income (loss), net of waivers and reimbursements		4.41		4.92		4.90			4.95
Net investment income (loss), before waivers and reimbursements		4.36		4.84		4.69			4.78


	Periods Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	192,776	$	147,344	$	74,613	$	68,483
Portfolio turnover rate (%)*		25		29		52		38

(a)

For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

Rates not annualized for periods that are less than a year.

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.

December 31, 2010

William Blair Funds 143

Financial Highlights

Income Fund


	Class N
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	9.07	$	8.69	$	9.29		$	9.74		$	9.83
Income (loss) from investment operations:
Net investment income (loss)		0.35		0.40		0.37			0.45			0.44
Net realized and unrealized gain (loss) on investments		0.19		0.44		(0.59	)		(0.35	)		(0.04	)

Total from investment operations		0.54		0.84		(0.22	)		0.10			0.40

Less distributions from:
Net investment income		0.39		0.46		0.38			0.55			0.49
Net realized gain		—		—		—			—			—

Total distributions		0.39		0.46		0.38			0.55			0.49

Net asset value, end of year	$	9.22	$	9.07	$	8.69		$	9.29		$	9.74

Total Return (%)		6.04		9.88		(2.46	)		1.08			4.25
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.85		0.85		0.90			0.79			0.74
Expenses, before waivers and reimbursements		0.85		0.93		0.93			0.81			0.80
Net investment income (loss), net of waivers and reimbursements		3.79		4.48		4.38			4.73			4.54
Net investment income (loss), before waivers and reimbursements		3.79		4.41		4.35			4.71			4.48


	Class I
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	9.00	$	8.64	$	9.30		$	9.69		$	9.82
Income (loss) from investment operations:
Net investment income (loss)		0.37		0.41		0.39			0.47			0.45
Net realized and unrealized gain (loss) on investments		0.19		0.43		(0.59	)		(0.34	)		(0.04	)

Total from investment operations		0.56		0.84		(0.20	)		0.13			0.41

Less distributions from:
Net investment income		0.41		0.48		0.46			0.52			0.54
Net realized gain		—		—		—			—			—

Total distributions		0.41		0.48		0.46			0.52			0.54

Net asset value, end of year	$	9.15	$	9.00	$	8.64		$	9.30		$	9.69

Total Return (%)		6.33		9.89		(2.26	)		1.36			4.33
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.63		0.66		0.72			0.60			0.62
Net investment income (loss), net of waivers and reimbursements		4.01		4.67		4.57			4.91			4.66


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	113,277	$	117,608	$	140,435	$	204,630	$	297,077
Portfolio turnover rate (%)		29		40		38		34		33

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

144 Annual Report

December 31, 2010

Financial Highlights

Low Duration Fund


	Class N
	Periods Ended December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.13		0.01
Net realized and unrealized gain (loss) on investments		0.05		(0.07	)

Total from investment operations		0.18		(0.06	)
Less distributions from:
Net investment income		0.21		0.01
Net realized gain		—		—

Total distributions		0.21		0.01

Net asset value, end of year	$	9.90	$	9.93

Total Return (%)^*		1.86		(0.60	)
Ratios to average daily net assets (%):^**
Expenses, net of waivers and reimbursements		0.70		0.70
Expenses, before waivers and reimbursements		0.78		0.94
Net investment income (loss), net of waivers and reimbursements		1.33		1.27
Net investment income (loss), before waivers and reimbursements		1.25		1.03

	Class I
	Periods Ended December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.15		0.01
Net realized and unrealized gain (loss) on investments		0.04		(0.07	)

Total from investment operations		0.19		(0.06	)
Less distributions from:
Net investment income		0.23		0.01
Net realized gain		—		—

Total distributions		0.23		0.01

Net asset value, end of year	$	9.89	$	9.93

Total Return (%)*		1.89		(0.59	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.55		0.55
Expenses, before waivers and reimbursements		0.63		0.79
Net investment income (loss), net of waivers and reimbursements		1.46		1.39
Net investment income (loss), before waivers and reimbursements		1.38		1.15


	Periods Ended December 31,
	2010		2009(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	143,470	$	95,134
Portfolio turnover rate (%)*		51		—

(a)

For the period December 1, 2009 (Commencement of Operations) to December 31, 2009.

Rates not annualized for periods that are less than a year.

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.

December 31, 2010

William Blair Funds 145

Financial Highlights

Ready Reserves Fund


	Class N
	Years Ended December 31,
	2010			2009			2008		2007		2006
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00	$	1.00	$	1.00
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.00	^		0.02		0.05		0.04
Net realized and unrealized gain (loss) on investments		—			—			—		—		—

Total from investment operations		0.00	^		0.00	^		0.02		0.05		0.04
Less distributions from:
Net investment income		0.00	^		0.00	^		0.02		0.05		0.04
Net realized gain		—			—			—		—		—

Total distributions		0.00	^		0.00	^		0.02		0.05		0.04

Net asset value, end of year	$	1.00		$	1.00		$	1.00	$	1.00	$	1.00

Total Return (%)		0.01			0.10			2.20		4.75		4.47
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.24			0.46			0.60		0.63		0.63
Expenses, before waivers and reimbursements		0.61			0.66			0.60		0.63		0.63
Net investment income (loss), net of waivers and reimbursements		0.01			0.11			2.12		4.63		4.38
Net investment income (loss), before waivers and reimbursements		(0.36	)		(0.09	)		2.12		4.63		4.38


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,216,543	$	1,352,901	$	1,841,189	$	1,399,537	$	1,195,593

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

146 Annual Report

December 31, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of

William Blair Funds

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund, Mid Cap Growth Fund, Small-Mid Cap Growth Fund, Global Growth Fund, International Growth Fund, International Equity Fund, International Small Cap Growth Fund, Emerging Markets Growth Fund, Emerging Leaders Growth Fund, Small Cap Value Fund, Mid Cap Value Fund, Bond Fund, Income Fund, Low Duration Fund and Ready Reserves Fund (collectively, the Portfolios) (seventeen of the Portfolios constituting William Blair Funds) as of December 31, 2010, and the related statements of operations, statements of changes in net assets and financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolios’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolios’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position for each of the above mentioned Portfolios of William Blair Funds at December 31, 2010, the results of their operations, the changes in their net assets and financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

LOGO

Chicago, Illinois

February 22, 2011

December 31, 2010

William Blair Funds 147

Trustees and Officers (Unaudited). The trustees and officers of the William Blair Funds, 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

Michelle R. Seitz,
1965*

Chairperson of the Board of Trustees and President

Since 2010

Since 2007

Principal, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)

N/A

Richard W. Smirl,
1967^*

Trustee and Senior Vice President

Trustee Since 2010 and Senior Vice President Since 2007

Principal, William Blair & Company, L.L.C., Vice President, Chief Compliance Officer 2004-2009

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

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

The Hartford Group of Mutual Funds (87 portfolios)

Donald J. Reaves,
1946

Trustee

Since 2004

Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002-2007.

American Student Assistance Corp., guarantor of student loans; Amica Mutual Insurance Company

Donald L. Seeley,
1944

Trustee

Since 2003

Retired; formerly, Director, Applied Investment Management Program, University of Arizona Department of Finance, prior thereto, Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm

Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)

Thomas J. Skelly,
1951

Trustee

Since 2007

Advisory Board Member for various U.S. Companies; Director and Investment Committee Chairman of the US Accenture Foundation, Inc.; prior to 2005, Managing Partner of various divisions at Accenture

First MetLife Investors Insurance Company

Robert E. Wood II,
1938

Trustee

Since 1999

Retired; formerly, Executive Vice President, Morgan Stanley Dean Witter

Chairman, Add-Vision, Inc., manufacturer of surface animation systems; Chairman Micro-Combustion, LLC

148 Annual Report

December 31, 2010


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(2)	Other Directorships Held by Trustee/Officer
Officers
Michael P. Balkin, 1959	Senior Vice President Vice President	Since 2009 2008-2009	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Chief Investment Officer, Magnetar Investment Management	N/A

Karl W. Brewer, 1966	Senior Vice President	Since 2000	Principal, William Blair & Company, L.L.C.	N/A

David C. Fording, 1967	Senior Vice President Vice President	Since 2009 2006-2009	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Portfolio Manager, TIAA-CREF.	N/A

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	Since 2004	Principal, 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

Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	Chairman, AG. Med, Inc.

Mark T. Leslie, 1967	Senior Vice President Vice President	Since 2008 2005-2008	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C. formerly, U.S. Bancorp Asset Management	N/A

Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

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

Tracy McCormick, 1954	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

David Merjan, 1960	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

December 31, 2010

William Blair Funds 149


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(2)	Other Directorships Held by Trustee/Officer
David S. Mitchell, 1960	Senior Vice President	Since 2004	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

Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A

Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.	N/A

Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A

Paul J. Sularz, 1967	Vice President	Since 2009	Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A

Walter R. Randall, Jr., 1960	Chief Compliance Officer	Since 2009	Associate, William Blair & Company, L.L.C.; Associate Counsel and Chief Compliance Officer, Calamos Investments; Assistant General Counsel, American Century Investments.	N/A

Colette M. Garavalia, 1961	Treasurer	Since 2009	Associate, William Blair & Company, L.L.C.	N/A

	Secretary	2000-2009	Associate, William Blair & Company, L.L.C.;	N/A

Andrew T. Pfau, 1970	Secretary	Since 2009	Associate, William Blair & Company, L.L.C.; Associate, Bell, Boyd & Lloyd, LLP; Associate, Sidley Austin LLP	N/A

Ms. Seitz and Mr. Smirl 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 except the Chief Compliance Officer, are elected annually by the Trustees. The Fund’s Chief Compliance Officer is designated by the Board of Trustees and may only be removed by action of the Board of Trustees, including a majority of the non-interested Trustees.

(2)

In November 2008, all current principals of William Blair & Company, L.L.C. also became limited partners in WB Holdings, L.P.

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.

150 Annual Report

December 31, 2010

(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

Each Portfolio 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.

Additional Federal Income Tax Information: (unaudited)

Under Section 852(b)(3)(C) of the Code, the Funds hereby designate the following amounts as capital gain dividends for the fiscal year ended December 31, 2010:


Emerging Leaders Growth	Small Cap Value	Bond
$505,181	$135,089	$493,757

The following table provides the percentage of the 2010 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:


Portfolio	Dividend Received Deduction%			Qualified Dividend Income%
Growth		100.00	%		100.00	%
Large Cap Growth		100.00	%		100.00	%
Small Cap Growth		0.00	%		0.00	%
Mid Cap Growth		0.00	%		0.00	%
Small-Mid Cap Growth		0.00	%		0.00	%
Global Growth		99.93	%		100.00	%
International Growth		0.00	%		85.61	%
International Equity		0.43	%		100.00	%
International Small Cap Growth		0.13	%		100.00	%
Emerging Markets Growth		0.16	%		83.93	%
Emerging Leaders Growth		0.00	%		100.00	%
Small Cap Value		100.00	%		100.00	%
Mid Cap Value		75.51	%		100.00	%
Bond		0.00	%		0.00	%
Income		0.00	%		0.00	%
Low Duration		0.00	%		0.00	%
Ready Reserves		0.00	%		0.00	%

In January 2011, you were notified on IRS Form 1099-Div or substitute 1099 DIV as to the Federal tax status of the distributions received by you in the calendar year 2010.

December 31, 2010

William Blair Funds 151

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 the Ready Reserves Portfolio), service fees (for Class N shares of the Ready Reserves Portfolio), shareholder administration fees (for Class N and Class I shares of the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration 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 July 1, 2010 to December 31, 2010.

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.

152 Annual Report

December 31, 2010

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.


Expense Example	Beginning Account Value 7/1/2010		Ending Account Value 12/31/2010		Expenses Paid During the Period(a)		Annualized Expense Ratio
Growth Fund
Class N—actual return	$	1,000.00	$	1,240.90	$	6.69		1.18	%
Class N—hypothetical 5% return		1,000.00		1,019.23		6.03		1.18
Class I—actual return		1,000.00		1,243.10		4.73		0.84
Class I—hypothetical 5% return		1,000.00		1,020.99		4.26		0.84
Large Cap Growth Fund
Class N—actual return		1,000.00		1,266.00		6.85		1.20
Class N—hypothetical 5% return		1,000.00		1,019.16		6.11		1.20
Class I—actual return		1,000.00		1,269.10		5.43		0.95
Class I—hypothetical 5% return		1,000.00		1,020.42		4.84		0.95
Small Cap Growth Fund
Class N—actual return		1,000.00		1,205.60		8.45		1.52
Class N—hypothetical 5% return		1,000.00		1,017.54		7.73		1.52
Class I—actual return		1,000.00		1,208.30		7.15		1.29
Class I—hypothetical 5% return		1,000.00		1,018.73		6.54		1.29
Mid Cap Growth Fund
Class N—actual return		1,000.00		1,272.90		7.73		1.35
Class N—hypothetical 5% return		1,000.00		1,018.40		6.87		1.35
Class I—actual return		1,000.00		1,274.40		6.31		1.10
Class I—hypothetical 5% return		1,000.00		1,019.66		5.60		1.10
Small—Mid Cap Growth Fund
Class N—actual return		1,000.00		1,266.50		7.71		1.35
Class N—hypothetical 5% return		1,000.00		1,018.40		6.87		1.35
Class I—actual return		1,000.00		1,267.70		6.29		1.10
Class I—hypothetical 5% return		1,000.00		1,019.66		5.60		1.10
Global Growth Fund
Class N—actual return		1,000.00		1,278.50		8.61		1.50
Class N—hypothetical 5% return		1,000.00		1,017.64		7.63		1.50
Class I—actual return		1,000.00		1,278.90		7.18		1.25
Class I—hypothetical 5% return		1,000.00		1,018.90		6.36		1.25
International Growth Fund
Class N—actual return		1,000.00		1,253.60		8.07		1.42
Class N—hypothetical 5% return		1,000.00		1,018.04		7.23		1.42
Class I—actual return		1,000.00		1,255.00		6.50		1.14
Class I—hypothetical 5% return		1,000.00		1,019.44		5.82		1.14
International Equity Fund
Class N—actual return		1,000.00		1,221.80		8.13		1.45
Class N—hypothetical 5% return		1,000.00		1,017.89		7.38		1.45
Class I—actual return		1,000.00		1,222.50		6.77		1.21
Class I—hypothetical 5% return		1,000.00		1,019.11		6.15		1.21
International Small Cap Growth Fund
Class N—actual return		1,000.00		1,288.50		8.87		1.54
Class N—hypothetical 5% return		1,000.00		1,017.46		7.82		1.54
Class I—actual return		1,000.00		1,290.70		7.21		1.25
Class I—hypothetical 5% return		1,000.00		1,018.91		6.35		1.25
Emerging Markets Growth Fund
Class N—actual return		1,000.00		1,289.50		9.19		1.59
Class N—hypothetical 5% return		1,000.00		1,017.17		8.10		1.59
Class I—actual return		1,000.00		1,290.50		7.84		1.36
Class I—hypothetical 5% return		1,000.00		1,018.36		6.91		1.36

December 31, 2010

William Blair Funds 153


Expense Example	Beginning Account Value 7/1/2010		Ending Account Value 12/31/2010		Expenses Paid During the Period(a)		Annualized Expense Ratio
Emerging Leaders Growth Fund
Class N—actual return	$	1,000.00	$	1,261.70	$	4.44		1.62	%
Class N—hypothetical 5% return		1,000.00		1,018.91		8.24		1.62
Class I—actual return		1,000.00		1,262.40		7.98		1.40
Class I—hypothetical 5% return		1,000.00		1,018.15		7.12		1.40
Small Cap Value Fund
Class N—actual return		1,000.00		1,304.40		7.80		1.34
Class N—hypothetical 5% return		1,000.00		1,018.43		6.83		1.34
Class I—actual return		1,000.00		1,305.40		6.39		1.10
Class I—hypothetical 5% return		1,000.00		1,019.66		5.60		1.10
Mid Cap Value Fund
Class N—actual return		1,000.00		1,248.30		7.66		1.35
Class N—hypothetical 5% return		1,000.00		1,018.09		6.77		1.35
Class I—actual return		1,000.00		1,250.40		6.24		1.10
Class N—hypothetical 5% return		1,000.00		1,019.34		5.51		1.10
Bond Fund
Class N—actual return		1,000.00		1,024.60		3.32		0.65
Class N—hypothetical 5% return		1,000.00		1,021.93		3.31		0.65
Class I—actual return		1,000.00		1,024.70		2.55		0.50
Class I—hypothetical 5% return		1,000.00		1,022.68		2.55		0.50
Income Fund
Class N—actual return		1,000.00		1,020.30		4.37		0.86
Class N—hypothetical 5% return		1,000.00		1,020.88		4.37		0.86
Class I—actual return		1,000.00		1,021.80		3.08		0.60
Class I—hypothetical 5% return		1,000.00		1,022.16		3.08		0.60
Low Duration Fund
Class N—actual return		1,000.00		1,004.30		3.57		0.71
Class N—hypothetical 5%		1,000.00		1,021.64		3.60		0.71
Class I—actual return		1,000.00		1,004.00		2.81		0.56
Class I—hypothetical 5%		1,000.00		1,022.40		2.83		0.56
Ready Reserves Fund
Class N—actual return		1,000.00		1,000.10		1.20		0.24
Class N—hypothetical 5% return		1,000.00		1,024.01		1.21		0.24

(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 184, and divided by 365 (to reflect the one-half year period).

154 Annual Report

December 31, 2010

BOARD OF TRUSTEES

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, Chairperson and President

Principal, William Blair & Company, L.L.C.,

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl, Senior Vice President

Principal, William Blair & Company L.L.C.

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Michael P. Balkin, Senior Vice President

Karl W. Brewer, Senior Vice President

David C. Fording, 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

Robert C. Lanphier, IV, Senior Vice President

Mark T. Leslie, Senior Vice President

Matthew A. Litfin, Senior Vice President

Kenneth J. McAtamney, Senior Vice President

Todd M. McClone, Senior Vice President

Tracy McCormick, Senior Vice President

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Chad M. Kilmer, Vice President

Kathleen M. Lynch, Vice President

Paul J. Sularz, Vice President

Walter R. Randall, Jr., Chief Compliance Officer

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Independent Registered Public Accounting Firm

Ernst & Young LLP

Legal Counsel

Vedder Price P.C.

Transfer Agent

Boston Financial Data Services, Inc.

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

December 31, 2010

William Blair Funds 155

LOGO


EQUITY	GLOBAL EQUITY	FIXED-INCOME
Growth Fund	Global Growth Fund	Bond Fund
Large Cap Growth Fund		Income Fund
Small Cap Growth Fund	INTERNATIONAL EQUITY	Low Duration Fund
Mid Cap Growth Fund	International Growth Fund
Small-Mid Cap Growth Fund	International Equity Fund	MONEY MARKET
Small Cap Value Fund	International Small Cap Growth Fund	Ready Reserves Fund
Mid Cap Value Fund	Emerging Markets Growth Fund
	Emerging Leaders Growth Fund

LOGO

222 West Adams Street

Chicago, IL 60606

800.742.7272 Ÿ www.williamblairfunds.com

^©William Blair & Company, L.L.C., distributor

LOGO

INSTITUTIONAL

ANNUAL REPORT

DECEMBER 31, 2010

Table of Contents


Global Markets Overview			2

Institutional International Growth Fund
An Overview from the Portfolio Manager			4
Portfolio of Investments			7

Institutional International Equity Fund
An Overview from the Portfolio Manager			12
Portfolio of Investments			15

International Small Cap Growth Fund
An Overview from the Portfolio Manager			18
Portfolio of Investments			20

Emerging Markets Growth Fund
An Overview from the Portfolio Managers			23
Portfolio of Investments			25

Emerging Leaders Growth Fund
An Overview from the Portfolio Managers			28
Portfolio of Investments			30

Fixed-Income Overview			32

Bond Fund
An Overview from the Portfolio Managers			33
Portfolio of Investments			36

Low Duration Fund
An Overview from the Portfolio Managers			39
Portfolio of Investments			41

Financial Statements			44

Notes to Financial Statements			50

Financial Highlights			60

Report of Independent Registered Public Accounting Firm			67

Board of Trustees and Officers			68

Fund Expense			74

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.

December 31, 2010

William Blair Funds 1

GLOBAL MARKETS OVERVIEW

Developed market returns also varied significantly during the year as Europe lagged the rest of the world, rising just over 3%, due to double digit market declines in those countries most affected by debt concerns. Conversely, Canada and Pacific ex-Japan performed well, up 23% and 18%, respectively, while the U.K. rose just over 10%. The U.S. was up 16.52% during the 12 month period, benefiting from USD depreciation versus most currencies (with the notable exception of the Euro and Pound Sterling), and as economic activity improved. Developed non-U.S. small cap stocks significantly outpaced their larger cap counterparts with the MSCI World Ex-U.S. Small Cap Index returning 24.51%, well ahead of the 10.66% MSCI World Ex-U.S. return Index. Small cap European markets were particularly strong during the year.

Fourth quarter market performance was strong with the global equity market rising 9.35%. Emerging markets rose 7.42%, approximating developed non-U.S. returns, while the U.S. was up 11.52%. Japan and Canada led developed market performance during the period, rising 12.01% and 13.34%, respectively, while Europe and the U.K. lagged, rising 4.59% and 6.52%, respectively. Within emerging markets, EMEA returned 10.42%, as South Africa and Russia performed well, far exceeding the approximately 7% Asia and Latin America returns. From a sector perspective, commodity-related stocks performed well as Energy and Materials

2 Annual Report

December 31, 2010

each returned approximately 16.5%, while Consumer Discretionary, Industrials and IT were also strong, returning around 11%. Conversely, Telecom Services and Utilities trailed other global sectors, returning 3.53% and 2.18%, respectively.

Outlook

December 31, 2010

William Blair Funds 3

LOGO

W. George Greig

INSTITUTIONAL INTERNATIONAL GROWTH FUND

The Institutional International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The Institutional International Growth Fund posted a 20.10% increase for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. (ACWI) IMI Index (net), gained 12.73%.

The Fund significantly outpaced the MSCI ACWI ex-US IMI during 2010. Strong year to date performance was bolstered by stock selection across most sectors, coupled with overall sector positioning and tactical currency hedging during the year. Consumer stock selection added significant value during the year, with auto-related and luxury holdings performing well, in addition to emerging markets Staples holdings. The Fund’s Energy holdings outperformed the Index by 11%, augmented by strength within European energy services and Exploration and Production (E&P) companies, coupled with good performance by Latin American producers. Financials stock selection was also a significant contributor to return, due to the Fund’s underweighting in European Financials, coupled with strong stock selection in the U.K., Canada and emerging markets. The Fund’s Healthcare and Industrials stocks each outpaced the Index sector returns by 13%, as the Fund’s European Healthcare holdings performed well, driving the outperformance, while emerging markets stock selection was also additive. Industrials stock selection benefited from good performance within the Fund’s defense, engineering and transportation holdings, coupled with an overweighting and positive stock selection in machinery stocks. Regionally, the Fund added significant value in Japan, Europe and emerging markets. Somewhat detracting from relative results were Developed Asia ex-Japan Financials, Industrials and Materials stock selection, coupled with Canadian Energy stock selection and overall Utilities stock selection.

4 Annual Report

December 31, 2010

with approximately 60% of the exposure in chemical-related holdings, and the remainder in mining companies. Regionally, we reduced exposure in emerging markets from over 29% as of year-end 2009 to just over 25% as of year-end 2010, although Fund exposure remained higher than the 24.06% Index weighting. This reduction was precipitated by concerns about higher valuations amidst monetary policy tightening, and better opportunities in the developed markets at the margin, which had underperformed. As a result, Europe increased from approximately 23% to 31%, while Japan increased from approximately 11% to 14% during the 12 month period.

December 31, 2010

William Blair Funds 5

Institutional International Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional International Growth Fund		20.10	%		(6.26	)%		3.80	%		10.84	%
MSCI All Country World Ex-U.S. IMI (net)		12.73			(4.38	)		5.14			11.93

(a)

For the period July 26, 2002 (Commencement of Operations) to December 31, 2010.

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 long-term securities.

6 Annual Report

December 31, 2010

Institutional International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—31.0%*
Belgium—0.5%
Colruyt S.A. (Food & staples retailing)		187,909	$	9,554

Denmark—1.7%
Coloplast A/S (Health care equipment & supplies)		63,277		8,599
FLSmidth & Co. A/S (Construction & engineering)		39,921		3,807
Novo Nordisk A/S (Pharmaceuticals)		107,050		12,071
Novozymes A/S (Chemicals)		37,987		5,291
SimCorp A/S (Software)		15,634		2,509

				32,277

Finland—1.2%
Kone Oyj (Machinery)		266,468		14,813
Nokian Renkaat Oyj (Auto components)		227,522		8,346

				23,159

France—7.7%
Air Liquide S.A. (Chemicals)		149,191		18,868
AXA S.A. (Insurance)		631,210		10,501
BNP Paribas (Commercial banks)		374,096		23,800
Cie Generale des Etablissements Michelin (Auto components)		165,428		11,871
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)		153,820		6,508
Essilor International S.A. (Health care equipment & supplies)		152,579		9,822
L’Oreal S.A. (Personal products)		202,666		22,500
Schneider Electric S.A. (Electrical equipment)		121,013		18,112
Vinci S.A. (Construction & engineering)		433,386		23,559

				145,541

Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)		133,059		4,908
BASF SE (Chemicals)		287,957		22,972
*Daimler AG (Automobiles)		143,446		9,724
Fielmann AG (Specialty retail)		48,014		4,565
Lanxess AG (Chemicals)		100,790		7,960
MTU Aero Engines Holding AG (Aerospace & defense)		9,851		666
SAP AG (Software)		336,504		17,133
Wincor Nixdorf AG (Computers & peripherals)		71,374		5,819

				73,747

Greece—0.3%
*National Bank of Greece S.A. (Commercial banks)		659,389		5,331

Ireland—0.2%
Paddy Power plc (Hotels, restaurants & leisure)		93,591		3,840

Israel—1.4%
Israel Chemicals, Ltd. (Chemicals)		711,824		12,203
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		263,038		13,712

				25,915


Issuer	Shares		Value

*Common Stocks—Europe—31.0%—(continued)*
Italy—1.2%
Ansaldo STS SpA (Transportation infrastructure)		295,163	$	4,228
DiaSorin SpA (Health care equipment & supplies)		98,780		4,252
Saipem SpA (Energy equipment & services)		282,168		13,891

				22,371

Norway—0.2%
*Norwegian Air Shuttle ASA (Airlines)		159,700		3,216

Spain—2.5%
Banco Santander S.A. (Commercial banks)		2,519,376		26,691
Inditex S.A. (Specialty retail)		89,413		6,694
Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		116,748		6,573
Tecnicas Reunidas S.A. (Energy equipment & services)		112,126		7,134

				47,092

Sweden—2.0%
Atlas Copco AB (Machinery)		584,591		14,750
Elekta AB (Health care equipment & supplies)		146,669		5,644
Hexagon AB (Machinery)		235,389		5,047
*Hexagon AB Unregistered Shares (Machinery)		76,136		1,632
SKF AB (Machinery)		343,401		9,783

				36,856

Switzerland—8.2%
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)		196,606		11,565
Credit Suisse Group AG (Capital markets)		356,239		14,353
*Dufry Group (Specialty retail)		48,524		6,529
Geberit AG (Building products)		29,694		6,866
Julius Baer Group, Ltd. (Capital markets)		124,957		5,854
Kuehne + Nagel International AG (Marine)		48,658		6,765
Nestle S.A. (Food products)		314,727		18,429
Novartis AG (Pharmaceuticals)		336,535		19,778
*Orascom Development Holding AG (Hotels, restaurants & leisure)		77,668		4,648
Partners Group Holding AG (Capital markets)		51,058		9,687
SGS S.A. (Professional services)		7,630		12,804
Sika AG (Chemicals)		2,709		5,942
Xstrata plc (Metals & mining)		397,059		9,320
Zurich Financial Services AG (Insurance)		86,753		22,472

				155,012


*United Kingdom—19.3%*
Abcam plc (Biotechnology)		700,379		3,494
Admiral Group plc (Insurance)		291,755		6,891
Aggreko plc (Commercial services & supplies)		231,853		5,357
AMEC plc (Energy equipment & services)		513,707		9,211
Amlin plc (Insurance)		1,055,078		6,726
Antofagasta plc (Metals & mining)		231,253		5,812
Aveva Group plc (Software)		226,065		5,689

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 7

Institutional International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer		Shares		Value

*United Kingdom—19.3%—(continued)*
Babcock International Group plc (Commercial services & supplies)			1,296,160	$	11,539
BG Group plc (Oil, gas & consumable fuels)			449,857		9,090
BHP Billiton plc (Metals & mining)			825,328		32,825
Britvic plc (Beverages)			623,849		4,603
Burberry Group plc (Textiles, apparel & luxury goods)			307,086		5,381
*Carphone Warehouse Group plc (Specialty retail)			531,280		3,274
Centrica plc (Multi-utilities)			4,244,559		21,944
Chemring Group plc (Aerospace & defense)			131,941		5,974
Compass Group plc (Hotels, restaurants & leisure)			1,151,760		10,433
Dunelm Group plc (Specialty retail)			446,845		3,557
*EnQuest plc (Oil, gas & consumable fuels)			1,296,755		2,820
GlaxoSmithKline plc (Pharmaceuticals)			1,167,240		22,566
IG Group Holdings plc (Diversified financial services)			692,795		5,509
Intertek Group plc (Professional services)			200,219		5,541
Johnson Matthey plc (Chemicals)			324,010		10,295
Lancashire Holdings, Ltd. (Insurance)			523,154		4,511
Meggitt plc (Aerospace & defense)			648,075		3,739
Michael Page International plc (Professional services)			931,103		8,057
Next plc (Multiline retail)			301,626		9,288
*Ocado Group plc (Internet & catalog retail)			1,405,731		3,908
Petrofac, Ltd. (Energy equipment & services)			505,860		12,516
*Rolls-Royce Group plc (Aerospace & defense)			1,359,553		13,206
Rotork plc (Machinery)			226,428		6,453
RPS Group plc (Commercial services & supplies)			1,025,089		3,682
Serco Group plc (Commercial services & supplies)			794,152		6,878
Spirax-Sarco Engineering plc (Machinery)			190,944		5,758
Standard Chartered plc (Commercial banks)			818,457		22,018
*Telecity Group plc (Internet software & services)			446,104		3,272
*The Berkeley Group Holdings plc (Household durables)			414,053		5,745
The Weir Group plc (Machinery)			331,361		9,196
Tullow Oil plc (Oil, gas & consumable fuels)			208,981		4,109
Ultra Electronics Holdings plc (Aerospace & defense)			222,179		5,875
Victrex plc (Chemicals)			203,487		4,705
Vodafone Group plc (Wireless telecommunication services)	��		12,455,518		32,197

					363,644


*Japan—14.5%*
Canon, Inc. (Office electronics)			396,200		20,544
CyberAgent, Inc. (Media)			1,144		2,494
Dena Co., Ltd. (Internet & catalog retail)			270,400		9,698
Exedy Corporation (Auto components)			119,000		3,864


Issuer	Shares		Value

*Japan—14.5%—(continued)*
F.C.C. Co., Ltd. (Auto components)		130,252	$	3,035
Fanuc, Ltd. (Machinery)		165,600		25,435
Gree, Inc. (Internet software & services)		339,900		4,325
K’s Holdings Corporation (Specialty retail)		164,300		4,470
Kakaku.com, Inc. (Internet software & services)		736		4,378
Keyence Corporation (Electronic equipment, instruments & components)		48,600		14,079
Miraca Holdings, Inc. (Health care providers & services)		106,500		4,289
MISUMI Group, Inc. (Trading companies & distributors)		201,700		5,026
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)		167,800		11,760
Nabtesco Corporation (Machinery)		215,000		4,587
Nitori Co., Ltd. (Specialty retail)		96,580		8,446
Nitto Denko Corporation (Chemicals)		246,900		11,632
Osaka Securities Exchange Co., Ltd. (Diversified financial services)		668		3,369
Point, Inc. (Specialty retail)		82,820		3,637
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		39,700		3,247
Softbank Corporation (Wireless telecommunication services)		837,700		29,003
Sony Financial Holdings, Inc. (Insurance)		3,477		14,068
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		1,141,400		40,657
Terumo Corporation (Health care equipment & supplies)		66,400		3,737
USS Co., Ltd. (Specialty retail)		57,780		4,725
Yahoo! Japan Corporation (Internet software & services)		62,670		24,315
Yamada Denki Co., Ltd. (Specialty retail)		136,190		9,293

				274,113


*Emerging Asia—13.2%*
China—3.5%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		702,000		1,874
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		3,184,000		13,354
China Yurun Food Group, Ltd. (Food products)		1,024,000		3,366
CNOOC, Ltd. (Oil, gas & consumable fuels)		7,814,000		18,538
Dongfang Electric Corporation, Ltd. (Electrical equipment)		1,216,800		6,027
Dongfeng Motor Group Co., Ltd. (Automobiles)		2,934,000		5,058
Great Wall Motor Co., Ltd. (Automobiles)		1,153,000		3,560
Haitian International Holdings, Ltd. (Machinery)		819,000		855
* Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		43,005		652
Lonking Holdings, Ltd. (Machinery)		6,503,000		3,556
Minth Group, Ltd. (Auto components)		1,064,000		1,747
Shanghai Electric Group Co., Ltd. (Electrical equipment)		8,972,000		5,921

See accompanying Notes to Financial Statements.

8 Annual Report

December 31, 2010

Institutional International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—13.2%—(continued)*
China—3.5%—(continued)
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)		428,000	$	1,682

				66,190

India—2.4%
Asian Paints, Ltd. (Chemicals)		93,399		6,013
Axis Bank, Ltd. (Commercial banks)		260,170		7,856
Infosys Technologies, Ltd. (IT services)		157,588		12,133
Lupin, Ltd. (Pharmaceuticals)		497,924		5,372
Shriram Transport Finance Co., Ltd. (Consumer finance)		105,363		1,841
Tata Motors, Ltd. (Machinery)		322,944		9,449
Yes Bank, Ltd. (Commercial banks)		345,543		2,417

				45,081

Indonesia—3.1%
PT Astra International Tbk (Automobiles)		3,057,500		18,511
PT Bank Rakyat Indonesia (Commercial banks)		9,161,000		10,676
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		250,000		1,408
PT Indofood Sukses Makmur Tbk (Food products)		13,125,000		7,102
PT Kalbe Farma Tbk (Pharmaceuticals)		11,246,000		4,057
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		3,971,000		5,663
PT United Tractors Tbk (Machinery)		4,172,000		11,020

				58,437

Malaysia—0.5%
Genting Bhd (Hotels, restaurants & leisure)		293,400		1,064
Kuala Lumpur Kepong Bhd (Food products)		974,300		6,983
Top Glove Corporation Bhd (Health care equipment & supplies)		1,176,000		1,899

				9,946

South Korea—3.0%
*Halla Climate Control Corporation (Auto components)		109,285		1,926
*Hankook Tire Co., Ltd. (Auto components)		158,200		4,426
*Hyundai Mobis (Auto components)		26,804		6,719
*Hyundai Motor Co. (Automobiles)		91,249		13,950
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		34,283		28,667

				55,688

Thailand—0.7%
CP ALL PCL (Food & staples retailing)		4,319,900		5,625
Kasikornbank PCL (Commercial banks)		1,720,000		7,161

				12,786


Issuer	Shares		Value

*Emerging Latin America—9.5%*
Brazil—5.6%
Amil Participacoes S.A. (Health care providers & services)		7,800	$	84
BM&F BOVESPA S.A. (Diversified financial services)		635,600		5,027
BR Malls Participacoes S.A. (Real estate management & development)		457,700		4,715
BR Properties S.A. (Real estate management & development)		469,106		5,132
Cia de Concessoes Rodoviarias (Transportation infrastructure)		192,900		5,450
Cia Hering (Textiles, apparel & luxury goods)		223,200		3,630
Diagnosticos da America S.A. (Health care providers & services)		335,300		4,545
Drogasil S.A. (Food & staples retailing)		220,800		1,796
Iochpe-Maxion S.A. (Machinery)		207,300		3,010
Localiza Rent a Car S.A. (Road & rail)		455,400		7,380
Lojas Renner S.A. (Multiline retail)		205,300		6,975
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		354,524		4,399
Natura Cosmeticos S.A. (Personal products)		522,100		14,999
OdontoPrev S.A. (Health care providers & services)		370,500		5,600
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		1,175,700		14,165
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		1,236,200		7,566
SLC Agricola S.A. (Food products)		188,100		2,493
Vale S.A.—ADR (Metals & mining)		264,960		9,160

				106,126

Chile—0.9%
Banco Santander Chile—ADR (Commercial banks)		103,916		9,713
Lan Airlines S.A. (Airlines)		231,838		7,232

				16,945

Colombia—0.6%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		324,440		11,013

Mexico—1.9%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		299,673		17,183
*Compartamos S.A.B. de C.V. (Consumer finance)		2,583,200		5,618
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,381,262		3,353
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		2,363,100		9,728

				35,882

Peru—0.5%
Credicorp, Ltd. (Commercial banks)†		74,745		8,888

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 9

Institutional International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Canada—3.8%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		788,347	$	26,244
Canadian National Railway Co. (Road & rail)		137,900		9,202
Canadian Western Bank (Commercial banks)		160,903		4,589
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		200,500		5,717
Home Capital Group, Inc. (Thrifts & mortgage finance)		38,180		1,989
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)		358,471		7,827
Petrominerales, Ltd. (Oil, gas & consumable fuels)		97,523		3,252
Saputo, Inc. (Food products)		172,594		6,871
Tim Hortons, Inc. (Hotels, restaurants & leisure)		156,018		6,449

				72,140


*Asia—2.8%*
Hong Kong—1.0%
Li & Fung, Ltd. (Distributors)		1,552,000		9,005
Noble Group, Ltd. (Trading companies & distributors)		5,629,000		9,518

				18,523

Singapore—1.8%
CapitaLand, Ltd. (Real estate management & development)		3,594,000		10,390
CapitaMalls Asia, Ltd. (Real estate management & development)		6,853,000		10,359
*Global Logistic Properties, Ltd. (Real estate management & development)		2,858,000		4,810
Midas Holdings, Ltd. (Metals & mining)		2,421,000		1,729
Olam International, Ltd. (Food & staples retailing)		3,035,000		7,426

				34,714


*Emerging Europe, Mid-East, Africa—2.6%*
Egypt—0.4%
Commercial International Bank Egypt S.A.E. (Commercial banks)		610,221		4,983
Egyptian Financial Group-Hermes Holding (Capital markets)		499,057		2,916

				7,899

South Africa—1.2%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		298,958		2,718
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		459,178		6,414
Clicks Group, Ltd. (Multiline retail)		728,753		4,795
Shoprite Holdings, Ltd. (Food & staples retailing)		324,846		4,914
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		202,670		4,276

				23,117


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—2.6%—(continued)*
Turkey—1.0%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		710,967	$	3,665
Turkiye Garanti Bankasi A.S. (Commercial banks)		1,791,270		9,072
Turkiye Halk Bankasi A.S. (Commercial banks)		713,247		6,052

				18,789

Total Common Stocks—96.7% (cost $1,479,411)				1,823,832



*Convertible Bond*
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	941	$	614

Total Convertible Bond—0.0% (cost $488)				614


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $69,717, collateralized by FNMA, 4.625%, due 10/15/13		69,716		69,716

Total Repurchase Agreement—3.7% (cost $69,716)				69,716

Total Investments—100.4% (cost $1,549,615)				1,894,162
Liabilities, plus cash and other assets—(0.4)%				(7,945	)

Net assets—100.0%			$	1,886,217

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.03% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.03% of the net assets at December 31, 2010.

See accompanying Notes to Financial Statements.

10 Annual Report

December 31, 2010

Institutional International Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.4%
Industrials			19.1%
Consumer Discretionary			14.5%
Materials			9.6%
Information Technology			8.9%
Health Care			7.9%
Energy			7.0%
Consumer Staples			6.7%
Telecommunication Services			4.3%
Utilities			1.6%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling			20.4%
Euro			18.1%
Japanese Yen			15.0%
Swiss Franc			8.0%
Brazilian Real			5.4%
U.S. Dollar			4.7%
Hong Kong Dollar			4.2%
Indonesian Rupiah			3.2%
Canadian Dollar			3.1%
South Korean Won			3.1%
Indian Rupee			2.5%
Singapore Dollar			2.3%
Swedish Krona			2.0%
Danish Krone			1.8%
South African Rand			1.3%
Turkish Lira			1.0%
Mexican Peso			1.0%
All Other Currencies			2.9%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 11

LOGO

David Merjan

INSTITUTIONAL INTERNATIONAL EQUITY FUND

The Institutional International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The Institutional International Equity Fund posted a 11.12% increase for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net), gained 12.73%.

Calendar year performance for the Fund outpaced the Europe, Australia and Far East (EAFE) Index but trailed the MSCI ACWI Ex-US Index. Energy stock selection added significant value versus the MSCI ACWI Ex-US Index, with stock performance more than doubling the Index sector return. Service companies were the primary drivers of strong returns, coupled with good performance by CNOOC, Ltd. on the back of strong production growth during the year. Industrials, Healthcare and Telecom Services stock selection was also strong, as Healthcare stock selection was led by Europe, while Industrials stock selection benefited from demand for Komatsu, Ltd.’s heavy construction equipment in emerging markets, coupled with stabilizing developed market demand. In addition, the Fund’s airline, machinery and electrical equipment names also performed well. Telecom Services stock selection was bolstered by Softbank, which benefited from increased use of smartphones and its tie up with Apple, Inc. The key detractors from performance during the year included Materials holdings CRH plc and Vedanta Resources plc, along with E.on in Utilities. We sold CRH earlier in the year on concerns about worse than expected trading conditions in building materials and Vedanta during the fourth quarter, due to deteriorating government relations and concerns about the associated impact on the timing and composition of the project pipeline. We sold E.on as a result of expected continued weakness in power prices.

The Fund’s fourth quarter performance approximated the EAFE Index, but trailed the MSCI ACWI Ex-US Index. While the Fund was up over 7%, for the quarter, and Developed Asian and Europe Ex-U.K. stock selection was strong, the Fund’s U.K., Canadian and EMEA stock selection more than offset these positive relative results. U.K. stock selection lagged across most sectors, with the exception of Financials, although the overweighting in U.K. Financials was negative. Canadian stock selection was hampered by the lack of Energy exposure, coupled with underperformance by Goldcorp. The Fund’s focus on EMEA Financials also detracted from performance, as these names underperformed the region as a whole. Developed Asian stock selection was bolstered by good performance by BHP Billiton on a stock buyback program and accelerating commodity prices. Japanese stock selection added value through Financials performance coupled with strong results from Komatsu, Ltd. and Fanuc, Ltd., along with good performance by Japanese IT companies. Within Europe Ex-U.K., Saipem SpA, the energy services company, performed well, while the underweighting and stock selection in Financials was also a key contributor. European Healthcare stocks were also additive to results.

As of year-end 2010 the Fund maintained its focus in Industrials with just over 23% invested in the sector. While decreasing since September 30 due to a reduction in European holdings, it remained significantly overweighted versus the 12% Index weighting, due largely to significant developed market exposure, particularly in Japanese machinery and European electrical equipment and outsourcing companies, along with trading companies. Financials, while underweighted at 20% versus the 24% Index weighting, was the second largest sector, with significant exposure in emerging markets-related holdings, as well as European insurance companies, and remained relatively stable during the year. Materials remained the most underweighted sector at approximately 8% of the Fund versus the 13% Index weighting, as we were underweighted in chemicals and mining, the two significant industries within the Index. Regionally, the Fund remained focused in Europe, with approximately 27% invested in Europe Ex-U.K. and 24% in the U.K. Europe Ex-U.K. exposure moderated during the twelve

12 Annual Report

December 31, 2010

month period from 31% as of year-end 2009 as an increase in European Staples was more than offset by a decrease in Financials and Healthcare. Conversely, U.K. exposure increased during the period from approximately 19% to nearly 24%, ahead of the Index weighting, as exposure broadened across a number of sectors. Japan represented approximately 14% of the Fund as of year end, below the Index weighting, but increased during the year, particularly in Financials and Industrials. Emerging markets were underweighted during the entire twelve month period and ended the year at 19% versus the 24.06% Index weighting, due to lower exposure in Emerging Asia and EMEA.

December 31, 2010

William Blair Funds 13

Institutional International Equity Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional International Equity Fund		11.12	%		(9.27	)%		1.22	%		4.15	%
MSCI All Country World Ex-U.S. IMI (net)		12.73			(4.38	)		5.14			7.67

(a)

For the period December 1, 2004 (Commencement of Operations) to December 31, 2010.

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 long-term securities.

14 Annual Report

December 31, 2010

Institutional International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—27.0%*
Belgium—0.8%
Anheuser-Busch InBev N.V. (Beverages)		40,085	$	2,292

Denmark—1.7%
Novo Nordisk A/S (Pharmaceuticals)		43,257		4,878

Finland—1.4%
Kone Oyj (Machinery)		73,009		4,058

France—3.9%
AXA S.A. (Insurance)		114,649		1,907
Cie Generale des Etablissements Michelin (Auto components)		41,900		3,007
L’Oreal S.A. (Personal products)		32,831		3,645
Schneider Electric S.A. (Electrical equipment)		17,854		2,672

				11,231

Germany—2.9%
MAN SE (Machinery)		36,602		4,353
SAP AG (Software)		81,948		4,172

				8,525

Ireland—1.7%
Ryanair Holdings plc—ADR (Airlines)		157,773		4,853

Israel—1.4%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		79,362		4,137

Italy—1.9%
Saipem SpA (Energy equipment & services)		114,768		5,650

Spain—2.3%
Banco Santander S.A. (Commercial banks)		252,579		2,676
Inditex S.A. (Specialty retail)		53,034		3,971

				6,647

Sweden—0.9%
Atlas Copco AB (Machinery)		110,012		2,776

Switzerland—8.1%
*ABB, Ltd. (Electrical equipment)		176,213		3,926
*Actelion, Ltd. (Biotechnology)		33,397		1,829
Julius Baer Group, Ltd. (Capital markets)		60,434		2,831
Nestle S.A. (Food products)		100,988		5,914
Novartis AG (Pharmaceuticals)		62,351		3,664
Sonova Holding AG (Health care equipment & supplies)		14,495		1,871
Zurich Financial Services AG (Insurance)		13,872		3,593

				23,628


*United Kingdom—23.6%*
Amlin plc (Insurance)		225,789		1,439
Antofagasta plc (Metals & mining)		168,997		4,247
*Autonomy Corporation plc (Software)		111,165		2,608
Barclays plc (Commercial banks)		509,021		2,076
BG Group plc (Oil, gas & consumable fuels)		251,919		5,090
British Sky Broadcasting Group plc (Media)		368,860		4,233
Burberry Group plc (Textiles, apparel & luxury goods)		168,321		2,950
Centrica plc (Multi-utilities)		516,705		2,671
Compass Group plc (Hotels, restaurants & leisure)		481,665		4,363


Issuer	Shares		Value

*Common Stocks—United Kingdom—23.6%—(continued)*
Experian plc (Professional services)		236,801	$	2,946
HSBC Holdings plc (Commercial banks)		251,784		2,582
Johnson Matthey plc (Chemicals)		87,762		2,789
Petrofac, Ltd. (Energy equipment & services)		138,030		3,415
Prudential plc (Insurance)		385,616		4,016
Reckitt Benckiser Group plc (Household products)		95,883		5,270
*Rolls-Royce Group plc (Aerospace & defense)		413,256		4,014
Rotork plc (Machinery)		73,295		2,089
Standard Chartered plc (Commercial banks)		132,446		3,563
The Capita Group plc (Professional services)		221,343		2,404
Tullow Oil plc (Oil, gas & consumable fuels)		166,453		3,273
Vodafone Group plc (Wireless telecommunication services)		1,050,222		2,715

				68,753


*Japan—14.3%*
Canon, Inc. (Office electronics)		109,700		5,688
Fanuc, Ltd. (Machinery)		25,000		3,840
Keyence Corporation (Electronic equipment, instruments & components)		16,000		4,635
Komatsu, Ltd. (Machinery)		136,700		4,137
Mitsubishi Corporation (Trading companies & distributors)		211,500		5,726
Mitsubishi UFJ Financial Group, Inc. (Commercial banks)		580,600		3,139
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)		169,000		2,440
Nitori Co., Ltd. (Specialty retail)		16,850		1,473
Nitto Denko Corporation (Chemicals)		51,700		2,436
Softbank Corporation (Wireless telecommunication services)		127,000		4,397
Sony Financial Holdings, Inc. (Insurance)		448		1,813
Terumo Corporation (Health care equipment & supplies)		36,800		2,071

				41,795


*Canada—8.9%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		126,454		4,210
Canadian National Railway Co. (Road & rail)†		71,583		4,758
Goldcorp, Inc. (Metals & mining)†		76,627		3,523
Saputo, Inc. (Food products)		63,996		2,548
The Toronto-Dominion Bank (Commercial banks)		66,808		4,989
Thomson Reuters Corporation (Media)		57,169		2,141
Tim Hortons, Inc. (Hotels, restaurants & leisure)		92,897		3,840

				26,009


*Emerging Asia—9.5%*
China—4.4%
China Life Insurance Co., Ltd. (Insurance)		693,000		2,831
China Overseas Land & Investment, Ltd. (Real estate management & development)		1,054,000		1,950
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		616,000		2,583
CNOOC, Ltd. (Oil, gas & consumable fuels)		1,514,000		3,592
Weichai Power Co., Ltd. (Machinery)		287,000		1,767

				12,723

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 15

Institutional International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—9.5%—(continued)*
India—3.2%
*Cairn India, Ltd. (Oil, gas & consumable fuels)		335,790	$	2,499
HDFC Bank, Ltd.—ADR (Commercial banks)		13,315		2,225
Infosys Technologies, Ltd. (IT services)		60,109		4,628

				9,352

Indonesia—0.6%
PT Bank Rakyat Indonesia (Commercial banks)		1,517,000		1,768

South Korea—1.3%
*Hyundai Motor Co. (Automobiles)		23,882		3,651


*Emerging Latin America—8.4%*
Brazil—5.4%
Banco Santander Brasil S.A.—ADR (Commercial banks)		87,479		1,190
BM&F BOVESPA S.A. (Diversified financial services)		349,571		2,765
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		281,200		1,721
Petroleo Brasileiro S.A.—ADR (Oil, gas & consumable fuels)		65,697		2,486
Vale S.A.—ADR (Metals & mining)		124,878		4,317
Weg S.A. (Machinery)		253,300		3,326

				15,805

Mexico—2.3%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		63,833		3,660
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		1,079,000		3,084

				6,744

Panama—0.7%
Copa Holdings S.A. Class “A” (Airlines)†		35,492		2,088


*Asia—5.3%*
Australia—1.7%
BHP Billiton, Ltd.—ADR (Metals & mining)		54,255		5,041

Hong Kong—2.6%
Li & Fung, Ltd. (Distributors)		770,000		4,468
Noble Group, Ltd. (Trading companies & distributors)		1,863,090		3,150

				7,618

Singapore—1.0%
CapitaLand, Ltd. (Real estate management & development)		961,000		2,778


*Emerging Europe, Mid-East, Africa—1.0%*
Turkey—1.0%
Turkiye Garanti Bankasi A.S. (Commercial banks)		556,139		2,817

Total Common Stocks—98.0% (cost $216,715)				285,617


Issuer	Shares or Principal Amount		Value

*Preferred Stock*
Brazil—1.2%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		211,808	$	3,482

Total Preferred Stock—1.2% (cost $2,598)				3,482


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $797, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	797		797

Total Repurchase Agreement—0.3% (cost $797)				797

Total Investments—99.5% (cost $220,110)				289,896
Cash and other assets, less liabilities—0.5%				1,572

Net assets—100.0%			$	291,468

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

16 Annual Report

December 31, 2010

Institutional International Equity Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Industrials			21.8%
Financials			19.8%
Consumer Discretionary			12.4%
Energy			11.1%
Information Technology			8.3%
Consumer Staples			7.9%
Materials			7.7%
Health Care			6.4%
Telecommunication Services			3.7%
Utilities			0.9%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling			22.9%
U.S. Dollar			14.7%
Japanese Yen			14.4%
Euro			13.3%
Swiss Franc			8.2%
Hong Kong Dollar			6.8%
Canadian Dollar			4.7%
Brazilian Real			3.9%
Indian Rupee			2.5%
Singapore Dollar			2.0%
Danish Krone			1.7%
South Korean Won			1.3%
Mexican Peso			1.1%
All Other Currencies			2.5%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 17

LOGO

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Small Cap Growth Fund posted a 26.40% increase (Institutional Class Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. Small Cap Index (net), gained 25.21%.

The Fund trailed the Index during the fourth quarter, due to underperformance in December. While stock selection was generally strong across most sectors, underperformance in Consumer Discretionary, Industrials and Information Technology (IT), coupled with overall sector positioning, detracted from fourth quarter results. Within Consumer Discretionary, Chinese sportswear and auto stocks detracted from performance, as did underperformance in Emerging Markets Europe, Mid East, and Africa (EMEA) holdings. Industrials stock selection was hampered by lagging results in U.K. holdings, while IT stock selection was hurt by underperformance by Gree, Inc., the Japanese social networking company, on concerns about slowing revenues per user. Offsetting these results was strong value added in Materials, Energy and Financials.

18 Annual Report

December 31, 2010

International Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year		3 Year			5 Year			Since Inception(a)
Institutional Class		26.40%		(1.11	)%		5.82	%		7.90	%
MSCI All Country World Ex-U.S. Small Cap Index (net)		25.21		0.50			7.36			9.11

(a)

For the period November 1, 2005 (Commencement of Operations) to December 31, 2010.

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 long-term securities.

December 31, 2010

William Blair Funds 19

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
*Europe—26.8%*
Denmark—1.9%
FLSmidth & Co. A/S (Construction & engineering)		126,535	$	12,068

Finland—1.0%
Nokian Renkaat Oyj (Auto components)		177,483		6,510

France—1.4%
Gemalto N.V. (Computers & peripherals)		217,146		9,241

Germany—7.5%
Aixtron AG (Semiconductors & semiconductor equipment)		353,519		13,041
Fielmann AG (Specialty retail)		36,250		3,446
Lanxess AG (Chemicals)		166,850		13,177
MTU Aero Engines Holding AG (Aerospace & defense)		8,416		569
Wincor Nixdorf AG (Computers & peripherals)		183,112		14,929
Wirecard AG (IT services)		255,453		3,499

				48,661

Ireland—1.5%
Paddy Power plc (Hotels, restaurants & leisure)		236,965		9,721

Italy—1.5%
DiaSorin SpA (Health care equipment & supplies)		149,025		6,414
Tod’s SpA (Textiles, apparel & luxury goods)		30,438		3,006

				9,420

Netherlands—0.3%
BinckBank N.V. (Capital markets)		125,245		1,942

Norway—0.1%
*Pronova BioPharma A/S (Pharmaceuticals)		619,646		998

Spain—3.7%
Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		106,091		5,973
Tecnicas Reunidas S.A. (Energy equipment & services)		171,750		10,928
Viscofan S.A. (Food products)		182,590		6,920

				23,821

Sweden—1.6%
Elekta AB (Health care equipment & supplies)		265,618		10,221

Switzerland—6.3%
*Dufry Group (Specialty retail)		80,122		10,780
*Orascom Development Holding AG (Hotels, restaurants & leisure)		55,352		3,312
Partners Group Holding AG (Capital markets)		74,649		14,163
*Temenos Group AG (Software)		296,213		12,324

				40,579


*United Kingdom—20.7%*
Abcam plc (Biotechnology)		886,958		4,425
Aggreko plc (Commercial services & supplies)		251,754		5,817
Amlin plc (Insurance)		1,198,156		7,638
Ashmore Group plc (Capital markets)		640,980		3,349


Issuer	Shares		Value

*Common Stocks—(continued)*
*United Kingdom—20.7%—(continued)*
*ASOS plc (Internet & catalog retail)		9,663	$	240
Aveva Group plc (Software)		240,979		6,064
Babcock International Group plc (Commercial services & supplies)		983,798		8,758
*Blinkx plc (Internet software & services)		1,212,606		1,574
Britvic plc (Beverages)		391,893		2,892
Chemring Group plc (Aerospace & defense)		61,137		2,768
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)		198,124		1,704
Dunelm Group plc (Specialty retail)		424,413		3,378
*EnQuest plc (Oil, gas & consumable fuels)		3,183,121		6,923
Fidessa Group plc (Software)		90,598		2,189
Hargreaves Lansdown plc (Capital markets)		430,045		3,929
IG Group Holdings plc (Diversified financial services)		375,671		2,987
*Imagination Technologies Group plc (Computers & peripherals)		489,931		2,754
Intertek Group plc (Professional services)		140,008		3,875
John Wood Group plc (Energy equipment & services)		817,247		7,123
Lancashire Holdings, Ltd. (Insurance)		528,696		4,558
Meggitt plc (Aerospace & defense)		957,881		5,526
Michael Page International plc (Professional services)		841,079		7,278
Serco Group plc (Commercial services & supplies)		700,185		6,064
Spirax-Sarco Engineering plc (Machinery)		294,024		8,866
*Telecity Group plc (Internet software & services)		231,115		1,695
The Weir Group plc (Machinery)		390,838		10,846
Ultra Electronics Holdings plc (Aerospace & defense)		221,798		5,865
Victrex plc (Chemicals)		209,237		4,838

				133,923


*Japan—16.7%*
Aeon Delight Co., Ltd. (Commercial services & supplies)		100,300		1,975
Ain Pharmaciez, Inc. (Food & staples retailing)		92,500		3,254
CyberAgent, Inc. (Media)		2,697		5,880
Dena Co., Ltd. (Internet & catalog retail)		310,100		11,122
EPS Co., Ltd. (Life sciences tools & services)		675		1,652
Exedy Corporation (Auto components)		397,400		12,902
F.C.C. Co., Ltd. (Auto components)		200,509		4,673
Gree, Inc. (Internet software & services)		599,330		7,625
Kakaku.com, Inc. (Internet software & services)		691		4,111
Miraca Holdings, Inc. (Health care providers & services)		354,400		14,274
Nabtesco Corporation (Machinery)		313,000		6,677
Nitori Co., Ltd. (Specialty retail)		54,100		4,731
Osaka Securities Exchange Co., Ltd. (Diversified financial services)		1,342		6,769
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		61,200		5,005
Start Today Co., Ltd. (Internet & catalog retail)		1,467		5,863
USS Co., Ltd. (Specialty retail)		140,100		11,458

				107,971

See accompanying Notes to Financial Statements.

20 Annual Report

December 31, 2010

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Emerging Asia—15.4%*
China—6.8%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		2,945,559	$	7,863
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)		3,375,429		5,671
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		2,178,297		2,461
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)		127,213		939
*E-Commerce China Dangdang, Inc.—ADR (Internet & catalog retail)		39,664		1,074
Great Wall Motor Co., Ltd. (Automobiles)		1,205,500		3,722
Haitian International Holdings, Ltd. (Machinery)		5,540,496		5,781
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		106,925		1,621
Lonking Holdings, Ltd. (Machinery)		8,144,000		4,453
Minth Group, Ltd. (Auto components)		2,795,384		4,589
*Noah Holdings, Ltd.—ADR (Capital markets)		50,062		979
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)		2,163,000		1,419
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		134,953		2,178
*Youku.com, Inc.—ADR (Internet software & services)		29,956		1,049

				43,799

India—2.4%
eClerx Services, Ltd. (Professional services)		55,468		893
Ipca Laboratories, Ltd. (Pharmaceuticals)		419,452		3,241
Lupin, Ltd. (Pharmaceuticals)		637,966		6,883
*Oberoi Realty, Ltd. (Real estate management & development)		258,634		1,479
Shriram Transport Finance Co., Ltd. (Consumer finance)		173,183		3,025

				15,521

Indonesia—1.5%
*PT Ciputra Development Tbk (Real estate management & development)		16,680,000		648
*PT Indofood CBP Sukses Makmur Tbk (Food products)		2,388,500		1,239
PT Kalbe Farma Tbk (Pharmaceuticals)		11,518,500		4,155
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		2,528,000		3,605

				9,647

South Korea—1.5%
*Halla Climate Control Corporation (Auto components)		541,048		9,535

Taiwan—3.2%
Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		1,472,000		4,897
Tripod Technology Corporation (Electronic equipment, instruments & components)		1,433,000		5,849
Wistron Corporation (Computers & peripherals)		5,062,102		10,313

				21,059


Issuer	Shares		Value

*Common Stocks—(continued)*
*Canada—6.6%*
Canadian Western Bank (Commercial banks)		274,900	$	7,841
*Consolidated Thompson Iron Mines, Ltd. (Metals & mining)		678,190		9,610
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)		162,900		4,645
Home Capital Group, Inc. (Thrifts & mortgage finance)		67,991		3,541
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		325,062		5,084
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)		223,778		4,886
Petrominerales, Ltd. (Oil, gas & consumable fuels)		211,244		7,045

				42,652


*Emerging Europe, Mid-East, Africa—4.6%*
Egypt—0.4%
Ghabbour Auto (Automobiles)		377,091		2,822

South Africa—2.7%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		327,381		2,977
Clicks Group, Ltd. (Multiline retail)		1,410,429		9,279
Mr Price Group, Ltd. (Specialty retail)		496,785		5,015

				17,271

Turkey—1.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		17,525		596
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		628,155		3,238
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		1,767,415		2,988

				6,822

United Arab Emirates—0.5%
*Aramex Co. (Air freight & logistics)		5,534,926		3,134


*Emerging Latin America—3.9%*
Brazil—2.3%
Brasil Brokers Participacoes S.A. (Real estate management & development)		381,800		2,197
CETIP S.A. - Balcao Organizado de Ativos e Derivativos (Capital markets)		362,200		5,149
Drogasil S.A. (Food & staples retailing)		177,000		1,439
OdontoPrev S.A. (Health care providers & services)		260,600		3,939
Tegma Gestao Logistica S.A. (Road & rail)		129,000		1,978

				14,702

Mexico—1.6%
*Compartamos S.A.B. de C.V. (Consumer finance)		1,688,700		3,673
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,606,720		3,900
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)		962,387		2,925

				10,498

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 21

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Asia—2.7%*
Australia—1.2%
Cochlear, Ltd. (Health care equipment & supplies)		96,774	$	7,959

Hong Kong—0.5%
Value Partners Group, Ltd. (Capital markets)		3,453,000		3,465

Singapore—1.0%
Goodpack, Ltd. (Air freight & logistics)		2,163,000		3,455
Midas Holdings, Ltd. (Metals & mining)		3,531,000		2,600

				6,055

Total Common Stocks—97.4% (cost $495,830)				630,017


*Preferred Stock*
Brazil—0.6%
Marcopolo S.A. (Machinery)		905,600		3,813

Total Preferred Stock—0.6% (cost $2,840)				3,813


*Convertible Bond*
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		626

Total Convertible Bond—0.1% (cost $497)				626


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $16,170, collateralized by FNMA, 4.625%, due 10/15/13		16,170		16,170

Total Repurchase Agreement—2.5% (cost $16,170)				16,170

Total Investments—100.6% (cost $515,337)				650,626
Liabilities, plus cash and other assets—(0.6)%				(3,675	)

Net assets—100.0%			$	646,951

ADR = American Depository Receipt

* = Non-income producing securities

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.10% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.10% of the net assets at December 31, 2010.

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Consumer Discretionary	23.6	%
Industrials	18.4	%
Information Technology	17.8	%
Financials	12.7	%
Health Care	12.5	%
Energy	6.6	%
Materials	4.8	%
Consumer Staples	3.6	%

Total	100.0	%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


British Pound Sterling	21.1	%
Euro	17.2	%
Japanese Yen	17.0	%
Canadian Dollar	6.7	%
Swiss Franc	6.4	%
Hong Kong Dollar	6.2	%
New Taiwan Dollar	3.3	%
Brazilian Real	3.0	%
South African Rand	2.7	%
Indian Rupee	2.5	%
Danish Krone	1.9	%
Mexican Peso	1.7	%
Swedish Krona	1.6	%
Indonesian Rupiah	1.5	%
South Korean Won	1.5	%
Australian Dollar	1.3	%
U.S. Dollar	1.2	%
Turkish Lira	1.1	%
All Other Currencies	2.1	%

Total	100.0	%

See accompanying Notes to Financial Statements.

22 Annual Report

December 31, 2010

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Growth Fund posted a 23.91% increase (Institutional Class Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net), gained 19.90%.

December 31, 2010

William Blair Funds 23

Emerging Markets Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		23.91	%		(5.97	)%		9.74	%		15.81	%
MSCI Emerging Markets IMI (net)		19.90			0.35			13.23			16.84

(a)

For the period June 6, 2005 (Commencement of Operations) to December 31, 2010.

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 long-term securities.

24 Annual Report

December 31, 2010

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
*Emerging Asia—52.0%*
China—16.3%
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)		1,603,949	$	4,282
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)		1,921,078		3,228
Angang Steel Co., Ltd. (Metals & mining)		7,796,000		11,936
Anta Sports Products, Ltd. (Textiles, apparel & luxury goods)		2,618,000		4,156
* Baidu, Inc.—ADR (Internet software & services)		117,527		11,345
Belle International Holdings, Ltd. (Specialty retail)		6,341,000		10,720
China Vanke Co., Ltd. (Real estate management & development)		4,765,448		5,886
China Yurun Food Group, Ltd. (Food products)		1,646,000		5,411
CNOOC, Ltd. (Oil, gas & consumable fuels)		20,037,000		47,535
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		2,516,360		2,842
Dongfang Electric Corporation, Ltd. (Electrical equipment)		1,815,800		8,994
Dongfeng Motor Group Co., Ltd. (Automobiles)		6,782,000		11,692
* E-Commerce China Dangdang, Inc.—ADR (Internet & catalog retail)		50,514		1,367
Great Wall Motor Co., Ltd. (Automobiles)		1,130,000		3,489
Haitian International Holdings, Ltd. (Machinery)		1,727,185		1,802
Hengan International Group Co., Ltd. (Personal products)		569,500		4,913
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		33,974,580		25,308
Lonking Holdings, Ltd. (Machinery)		7,649,000		4,182
Minth Group, Ltd. (Auto components)		892,000		1,464
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)		2,309,400		6,551
Want Want China Holdings, Ltd. (Food products)		7,217,000		6,323
Weichai Power Co., Ltd. (Machinery)		2,028,088		12,485
* WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		129,898		2,097
* Youku.com, Inc.—ADR (Internet software & services)		37,965		1,329
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)		1,012,861		3,981

				203,318

India—10.2%
Asian Paints, Ltd. (Chemicals)		137,619		8,860
Axis Bank, Ltd. (Commercial banks)		210,124		6,344
Bajaj Auto, Ltd. (Automobiles)		299,206		10,311
Dabur India, Ltd. (Personal products)		2,593,480		5,815
Housing Development Finance Corporation (Thrifts & mortgage finance)		367,269		5,982
Infosys Technologies, Ltd. (IT services)		353,170		27,192
Jindal Steel & Power, Ltd. (Metals & mining)		408,895		6,511
Larsen & Toubro, Ltd. (Construction & engineering)		276,181		12,225
Lupin, Ltd. (Pharmaceuticals)		725,251		7,825


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Asia—52.0%—(continued)*
India—10.2%—(continued)
Mahindra & Mahindra, Ltd. (Automobiles)		29,426	$	512
Nestle India, Ltd. (Food products)		80,604		6,875
Shriram Transport Finance Co., Ltd. (Consumer finance)		183,116		3,199
Sun TV Network, Ltd. (Media)		299,774		3,526
Tata Motors, Ltd. (Machinery)		675,716		19,771
Yes Bank, Ltd. (Commercial banks)		418,587		2,928

				127,876

Indonesia—5.9%
PT Astra International Tbk (Automobiles)		2,341,500		14,176
PT Bank Rakyat Indonesia (Commercial banks)		10,924,000		12,730
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		1,111,500		6,261
PT Kalbe Farma Tbk (Pharmaceuticals)		10,919,000		3,939
PT Perusahaan Gas Negara (Gas utilities)		25,110,500		12,332
PT Unilever Indonesia Tbk (Household products)		8,022,500		14,692
PT United Tractors Tbk (Machinery)		3,756,500		9,923

				74,053

Malaysia—3.4%
CIMB Group Holdings Bhd (Commercial banks)		10,335,600		28,491
Genting Bhd (Hotels, restaurants & leisure)		1,960,300		7,107
Kuala Lumpur Kepong Bhd (Food products)		1,012,900		7,260

				42,858

Papua New Guinea—1.2%
Oil Search, Ltd. (Oil, gas & consumable fuels)		2,016,147		14,517

South Korea—8.3%
* Amorepacific Corporation (Personal products)		8,091		8,120
* Hankook Tire Co., Ltd. (Auto components)		355,120		9,935
* Hyundai Mobis (Auto components)		120,208		30,134
* Hyundai Motor Co. (Automobiles)		149,484		22,853
* LG Household & Health Care, Ltd. (Household products)		22,307		7,666
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		30,045		25,123

				103,831

Taiwan—4.6%
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		9,085,992		36,616
Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		1,439,000		4,788
Tripod Technology Corporation (Electronic equipment, instruments & components)		1,280,000		5,224
Wistron Corporation (Computers & peripherals)		5,373,676		10,948

				57,576

Thailand—2.1%
CP ALL PCL (Food & staples retailing)		9,892,000		12,880

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 25

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Asia—52.0%—(continued)*
Thailand—2.1%—(continued)
Kasikornbank PCL (Commercial banks)		2,926,300	$	12,183
Minor International PCL (Hotels, restaurants & leisure)		2,223,900		870

				25,933


*Emerging Latin America—26.9%*
Brazil—13.6%
Amil Participacoes S.A. (Health care providers & services)		14,037		151
BR Malls Participacoes S.A. (Real estate management & development)		926,200		9,541
BR Properties S.A. (Real estate management & development)		348,545		3,813
Brasil Brokers Participacoes S.A. (Real estate management & development)		452,200		2,602
CETIP S.A. - Balcao Organizado de Ativos e Derivativos (Capital markets)		331,900		4,719
Cia de Bebidas das Americas—ADR (Beverages)		745,630		23,137
Cia de Concessoes Rodoviarias (Transportation infrastructure)		124,500		3,518
Cia Hering (Textiles, apparel & luxury goods)		186,300		3,030
Diagnosticos da America S.A. (Health care providers & services)		615,800		8,347
Drogasil S.A. (Food & staples retailing)		322,700		2,624
*Hypermarcas S.A. (Personal products)		309,528		4,201
Localiza Rent a Car S.A. (Road & rail)		424,900		6,885
Lojas Renner S.A. (Multiline retail)		190,600		6,476
Natura Cosmeticos S.A. (Personal products)		253,200		7,274
OdontoPrev S.A. (Health care providers & services)		247,400		3,739
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		1,117,600		13,465
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		1,534,400		9,391
Totvs S.A. (Software)		35,600		3,624
Tractebel Energia S.A. (Independent power producers & energy traders)		584,300		9,662
Vale S.A.—ADR (Metals & mining)		1,255,249		43,394

				169,593

Chile—2.0%
Banco Santander Chile—ADR (Commercial banks)		153,667		14,363
Lan Airlines S.A. (Airlines)		325,769		10,163

				24,526

Colombia—1.3%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		482,159		16,366

Mexico—9.0%
America Movil S.A.B. de C.V. (Wireless telecommunication services)		9,054,600		25,954
Coca-Cola Femsa S.A.B. de C.V.—ADR (Beverages)		86,999		7,171
*Compartamos S.A.B. de C.V. (Consumer finance)		3,717,600		8,085


Issuer	Shares		Value

*Common Stocks—(continued)*
*Emerging Latin America—26.9%—(continued)*
Mexico—9.0%—(continued)
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,680,734	$	4,080
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)		1,075,366		3,268
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		10,303,528		42,416
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		7,684,600		21,959

				112,933

Peru—1.0%
Credicorp, Ltd. (Commercial banks)†		107,487		12,781


*Emerging Europe, Mid-East, Africa—13.3%*
Egypt—0.6%
Commercial International Bank Egypt S.A.E. (Commercial banks)		921,018		7,521

Qatar—1.9%
Qatar National Bank S.A.Q. (Commercial banks)		468,047		23,778

Russia—1.7%
Magnit OAO (Food & staples retailing)†		105,337		14,006
*X5 Retail Group N.V.—GDR (Food & staples retailing)		168,181		7,778

				21,784

South Africa—7.1%
Adcock Ingram Holdings, Ltd. (Pharmaceuticals)		352,834		3,208
Clicks Group, Ltd. (Multiline retail)		1,276,204		8,396
Mr Price Group, Ltd. (Specialty retail)		622,479		6,284
MTN Group, Ltd. (Wireless telecommunication services)		1,221,587		24,927
Naspers, Ltd. (Media)		250,682		14,763
Shoprite Holdings, Ltd. (Food & staples retailing)		465,702		7,045
Standard Bank Group, Ltd. (Commercial banks)		838,694		13,693
Truworths International, Ltd. (Specialty retail)		681,097		7,408
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		158,224		3,339

			$	89,063


Turkey—2.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		97,546		3,317
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		621,238		3,203
Turkiye Garanti Bankasi A.S. (Commercial banks)		2,454,713		12,432
Turkiye Halk Bankasi A.S. (Commercial banks)		685,270		5,814

				24,766

See accompanying Notes to Financial Statements.

26 Annual Report

December 31, 2010

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
*Emerging Europe, Mid-East, Africa—13.3%—(continued)*
Turkey—2.0%—(continued)
Total Common Stocks—92.2% (cost $873,075)			$	1,153,073


*Preferred Stocks*
Brazil—4.1%
Itau Unibanco Holding S.A. (Commercial banks)		1,035,154		24,813
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,236,315		20,325
Randon Participacoes S.A. (Machinery)		768,399		5,689

				50,827

Total Preferred Stocks—4.1% (cost $46,291)				50,827


*Convertible Bond*
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		1,045

Total Convertible Bond—0.1% (cost $831)				1,045


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.150% dated 12/31/10, due 1/3/11, repurchase price $42,655, collateralized by FHLMC, 1.250%, due 9/30/13		42,654		42,654

Total Repurchase Agreement—3.4% (cost $42,654)				42,654

Total Investments—99.8% (cost $962,851)				1,247,599
Cash and other assets, less liabilities—0.2%				2,944

Net assets—100.0%			$	1,250,543

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.08% of the Fund’s net assets at December 31, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.08% of the net assets at December 31, 2010.

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.5%
Consumer Discretionary			16.2%
Consumer Staples			15.1%
Information Technology			11.1%
Energy			9.8%
Materials			9.4%
Industrials			8.6%
Telecommunication Services			4.2%
Health Care			3.3%
Utilities			1.8%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


Hong Kong Dollar			15.5%
Brazilian Real			12.9%
U.S. Dollar			11.5%
Indian Rupee			10.6%
Mexican Peso			8.8%
South Korean Won			8.6%
South African Rand			7.4%
Indonesian Rupiah			6.1%
New Taiwan Dollar			4.8%
Malaysian Ringgit			3.6%
Thai Baht			2.1%
Turkish Lira			2.0%
Qatari Rial			2.0%
Canadian Dollar			1.4%
Australian Dollar			1.2%
All Other Currencies			1.5%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 27

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING LEADERS GROWTH FUND

The Emerging Leaders Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Leaders Growth Fund (Institutional Share Class) an increase of 23.84%. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) gained 18.34% during the same period.

28 Annual Report

December 31, 2010

Emerging Leaders Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			Since Inception(a)
Institutional Class		23.84	%		2.17	%
MSCI Emerging Markets Large Cap (net)		18.34			3.41

(a)

For the period March 26, 2008 (Commencement of Operations) to December 31, 2010.

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 Large Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure market performance of large capitalization on stocks in emerging markets. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total long-term securities.

December 31, 2010

William Blair Funds 29

Emerging Leaders Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—52.5%*
China—14.3%
Anta Sports Products, Ltd. (Textiles, apparel & luxury goods)		265,000	$	421
*Baidu, Inc.—ADR (Internet software & services)		8,899		859
Belle International Holdings, Ltd. (Specialty retail)		264,000		446
China Yurun Food Group, Ltd. (Food products)		239,000		786
CNOOC, Ltd. (Oil, gas & consumable fuels)		1,854,000		4,398
Dongfang Electric Corporation, Ltd. (Electrical equipment)		83,200		412
Dongfeng Motor Group Co., Ltd. (Automobiles)		274,000		472
Golden Eagle Retail Group, Ltd. (Multiline retail)		330,000		814
Hengan International Group Co., Ltd. (Personal products)		60,000		518
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		1,708,000		1,272
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		43,500		486
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)		252,000		715
Tencent Holdings, Ltd. (Internet software & services)		41,200		895
Want Want China Holdings, Ltd. (Food products)		465,000		408
Weichai Power Co., Ltd. (Machinery)		110,000		677

				13,579

India—14.3%
Asian Paints, Ltd. (Chemicals)		7,431		478
Bajaj Auto, Ltd. (Automobiles)		13,744		474
HDFC Bank, Ltd. (Commercial banks)		19,155		1,005
Housing Development Finance Corporation (Thrifts & mortgage finance)		30,383		495
Infosys Technologies, Ltd. (IT services)		29,989		2,309
ITC, Ltd. (Tobacco)		279,329		1,091
Jindal Steel & Power, Ltd. (Metals & mining)		32,915		524
Larsen & Toubro, Ltd. (Construction & engineering)		22,365		990
Lupin, Ltd. (Pharmaceuticals)		95,070		1,026
Mahindra & Mahindra, Ltd. (Automobiles)		67,775		1,179
Nestle India, Ltd. (Food products)		8,753		747
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		126,735		1,374
Tata Motors, Ltd. (Machinery)		62,508		1,829

				13,521

Indonesia—6.7%
PT Astra International Tbk (Automobiles)		231,000		1,398
PT Bank Rakyat Indonesia (Commercial banks)		1,231,500		1,435
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		235,000		1,324
PT Perusahaan Gas Negara (Gas utilities)		1,387,000		681
PT United Tractors Tbk (Machinery)		573,500		1,515

				6,353


Issuer	Shares		Value

*Common Stocks—Emerging Asia—52.5%—(continued)*
Malaysia—4.4%
CIMB Group Holdings Bhd (Commercial banks)		928,800	$	2,560
Genting Bhd (Hotels, restaurants & leisure)		208,900		758
Kuala Lumpur Kepong Bhd (Food products)		126,000		903

				4,221

Papua New Guinea—1.1%
Oil Search, Ltd. (Oil, gas & consumable fuels)		147,779		1,064

South Korea—6.4%
*Hyundai Mobis (Auto components)		9,175		2,300
*Hyundai Motor Co. (Automobiles)		8,621		1,318
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		2,936		2,455

				6,073

Taiwan—3.0%
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		374,000		1,507
HTC Corporation (Communications equipment)		42,000		1,297

				2,804

Thailand—2.3%
CP ALL PCL (Food & staples retailing)		510,700		665
Kasikornbank PCL (Commercial banks)		365,300		1,521

				2,186


*Emerging Latin America—26.0%*
Brazil—14.0%
Cia de Bebidas das Americas—ADR (Beverages)		75,559		2,345
Cia de Concessoes Rodoviarias (Transportation infrastructure)		22,900		647
Cyrela Brazil Realty S.A. (Household durables)		76,200		1,003
*Hypermarcas S.A. (Personal products)		93,600		1,270
Natura Cosmeticos S.A. (Personal products)		17,100		491
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		100,400		1,210
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)		79,500		486
Tractebel Energia S.A. (Independent power producers & energy traders)		68,100		1,126
Vale S.A.—ADR (Metals & mining)		136,494		4,719

				13,297

Colombia—2.0%
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		56,097		1,904

Mexico—8.8%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)		22,999		1,319
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		1,206,626		4,967
Mexichem S.A.B. de C.V. (Chemicals)		297,200		1,064
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		350,700		1,002

				8,352

See accompanying Notes to Financial Statements.

30 Annual Report

December 31, 2010

Emerging Leaders Growth Fund

Portfolio of Investments, December 31, 2010 (all dollar amounts in thousands)


Issuer	Shares		Value

Common Stocks—Emerging Latin America—26.0%—(continued)
Peru—1.2%
Credicorp, Ltd. (Commercial banks)†		9,578	$	1,139


*Emerging Europe, Mid-East, Africa—12.9%*
Egypt—1.0%
Commercial International Bank Egypt S.A.E. (Commercial banks)		111,675		912

Qatar—1.6%
Qatar National Bank S.A.Q. (Commercial banks)		30,381		1,544

Russia—3.9%
Magnit OJSC—144A—GDR (Food & staples retailing)		39,928		1,067
Sberbank of Russian Federation (Commercial banks)†		504,114		1,717
*X5 Retail Group N.V.—GDR (Food & staples retailing)		21,050		974

				3,758

South Africa—4.9%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		74,066		1,035
MTN Group, Ltd. (Wireless telecommunication services)		61,415		1,253
Naspers, Ltd. (Media)		23,100		1,360
Shoprite Holdings, Ltd. (Food & staples retailing)		66,898		1,012

				4,660

Turkey—1.5%
Turkiye Garanti Bankasi A.S. (Commercial banks)		190,923		967
Turkiye Halk Bankasi A.S. (Commercial banks)		51,348		436

				1,403

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value

*Common Stocks—United Kingdom—1.7%*
Vedanta Resources plc (Metals & mining)		40,190	$	1,577

Total Common Stocks—93.1% (cost $71,144)				88,347


*Preferred Stocks*
Brazil—6.0%
Itau Unibanco Holding S.A. (Commercial banks)		138,585		3,322
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		143,255		2,355

				5,677

Total Preferred Stocks—6.0% (cost $5,253)				5,677


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $1,507, collateralized by U.S. Treasury Note, 2.500%, due 4/30/15	$	1,507		1,507

Total Repurchase Agreement—1.6% (cost $1,507)				1,507

Total Investments—100.7% (cost $77,904)				95,531
Liabilities, plus cash and other assets—(0.7)%				(630	)

Net assets—100.0%			$	94,901

At December 31, 2010, the Fund’s Portfolio of Investments includes the following currency categories:


U.S. Dollar			15.0%
Indian Rupee			14.4%
Hong Kong Dollar			13.5%
Brazilian Real			12.7%
Mexican Peso			7.5%
Indonesian Rupiah			6.8%
South Korean Won			6.5%
South African Rand			4.9%
Malaysian Ringgit			4.5%
New Taiwan Dollar			3.0%
Thai Baht			2.3%
Canadian Dollar			2.0%
British Pound Sterling			1.7%
Qatari Rial			1.6%
Turkish Lira			1.5%
Australian Dollar			1.1%
All Other Currencies			1.0%

Total			100.0%

At December 31, 2010, the Fund’s Portfolio of Investments includes the following industry categories:


Financials			20.0%
Materials			14.2%
Consumer Staples			14.1%
Consumer Discretionary			13.2%
Energy			13.0%
Information Technology			9.9%
Industrials			6.5%
Health Care			4.4%
Telecommunication Services			2.8%
Utilities			1.9%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 31

FIXED-INCOME MARKET OVERVIEW

Fixed Income Funds

2010

The Fed’s actions throughout the year have been interpreted by investors as confirmation that the Fed remains concerned about the pace of the economic recovery.

Longer-term interest rates finished the year slightly lower than where they began, with the 10-Year U.S. Treasury Note at 3.29% at December 31, 2010, down from 3.84% at December 31, 2009.

Outlook

32 Annual Report

December 31, 2010

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

BOND FUND

The Bond Fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Bond Fund

The Bond Fund posted a 8.06% increase on a total return basis (Institutional Class Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Bond Index, gained 6.54%.

The Fund’s modest holdings in REIT’s were slight detractors to performance. We prefer to invest in REIT’s as a surrogate for Commercial Mortgage-backed securities (to which we were underweight). This theme is a bias of our portfolio construction process, as we prefer to hold REIT’s, which are backed by a dynamic pool of properties, instead of Commercial Mortgage-backed securities, which are comprised of a static pool of properties. This theme had a small negative impact during the fourth quarter, as Commercial Mortgage-backed securities was the best-performing sector of the investment-grade market.

In particular, the Fund maintains an overweight allocation to Corporate Bonds. In the current low growth, low inflation environment, corporate balance sheets have improved drastically,

December 31, 2010

William Blair Funds 33

At year end, the Bond Fund’s average maturity stood at 6.8 years, while its duration was 4.7 years.

34 Annual Report

December 31, 2010

Bond Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 Year			3 Year			Since Inception(a)
Institutional Class		8.06	%		7.09	%		6.77	%
Barclays Capital U.S. Aggregate Bond Index		6.54			5.90			6.14

(a)

For the period May 1, 2007 (Commencement of Operations) to December 31, 2010.

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 Barclays Capital U.S. Aggregate Bond Index indicates broad intermediate government/corporate bond market performance.

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investments.

December 31, 2010

William Blair Funds 35

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—45.9%*
U.S. Treasury Inflation Indexed Notes/Bonds—7.8%
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29	$	7,982	$	10,705
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/13		625		667
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17		3,253		3,626

Total U.S. Treasury Inflation Indexed Notes/Bonds				14,998

U.S. Treasury—1.6%
U.S. Treasury Bond, 3.875%, due 8/15/40		500		460
U.S. Treasury Note, 2.625%, due 8/15/20		1,350		1,280
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,000		1,451

Total U.S. Treasury Obligations				3,191

Government National Mortgage Association (GNMA)—0.9%
GNR 2004-2 M5, 4.891%, due 7/16/34		125		134
GNR 2006-67 GB, 4.470%, due 9/16/34, VRN		1,540		1,667

Total GNMA Mortgage Obligations				1,801

Federal Home Loan Mortgage Corp. (FHLMC)—7.8%
#G90024, 7.000%, due 1/20/13		33		35
#G30093, 7.000%, due 12/1/17		38		42
#G30255, 7.000%, due 7/1/21		79		90
#G12792, 4.500%, due 12/1/21		467		493
#D95897, 5.500%, due 3/1/23		246		264
#G30372, 5.000%, due 9/1/27		578		613
#G01728, 7.500%, due 7/1/32		306		352
#C01385, 6.500%, due 8/1/32		392		441
#G02141, 6.000%, due 3/1/36		1,887		2,086
#A62179, 6.000%, due 6/1/37		1,013		1,120
#A63539, 6.000%, due 7/1/37		1,263		1,396
#G03170, 6.500%, due 8/1/37		1,901		2,124
#A66843, 6.500%, due 10/1/37		1,021		1,156
#A78138, 5.500%, due 6/1/38		1,396		1,514
#A81799, 6.500%, due 9/1/38		2,862		3,241

Total FHLMC Mortgage Obligations				14,967

Federal National Mortgage Association (FNMA)—27.8%
#535559, 7.500%, due 9/1/12		70		70
#598453, 7.000%, due 6/1/15		1		1
#689612, 5.000%, due 5/1/18		415		444
#695910, 5.000%, due 5/1/18		735		794
#747903, 4.500%, due 6/1/19		386		408
#745735, 5.000%, due 3/1/21		909		975
#253847, 6.000%, due 5/1/21		245		268
#900725, 6.000%, due 8/1/21		213		233
#AD8164, 4.000%, due 8/1/25		1,220		1,269
#545437, 7.000%, due 2/1/32		205		234
#545759, 6.500%, due 7/1/32		2,203		2,478
#254548, 5.500%, due 12/1/32		893		961
#684601, 6.000%, due 3/1/33		2,114		2,357
#190340, 5.000%, due 9/1/33		1,877		1,985
#254868, 5.000%, due 9/1/33		918		971
#555800, 5.500%, due 10/1/33		405		437


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#725027, 5.000%, due 11/1/33				$	730	$	772
#555880, 5.500%, due 11/1/33					482		520
#555946, 5.500%, due 11/1/33					827		897
#756153, 5.500%, due 11/1/33					2,305		2,499
#725231, 5.000%, due 2/1/34					760		803
#725205, 5.000%, due 3/1/34					1,619		1,712
#725220, 5.000%, due 3/1/34					703		743
#725232, 5.000%, due 3/1/34					3,511		3,714
#725238, 5.000%, due 3/1/34					1,609		1,701
#763798, 5.500%, due 3/1/34					491		532
#725424, 5.500%, due 4/1/34					517		557
#725611, 5.500%, due 6/1/34					488		526
#786546, 6.000%, due 7/1/34					922		1,019
#787816, 6.000%, due 7/1/34					928		1,029
#190353, 5.000%, due 8/1/34					539		570
#357883, 5.000%, due 5/1/35					1,146		1,212
#745092, 6.500%, due 7/1/35					601		676
#357944, 6.000%, due 9/1/35					118		130
#829306, 6.000%, due 9/1/35					326		361
#843487, 6.000%, due 10/1/35					274		304
#849191, 6.000%, due 1/1/36					177		195
#848782, 6.500%, due 1/1/36					829		930
#745349, 6.500%, due 2/1/36					1,139		1,287
#831540, 6.000%, due 6/1/36					218		240
#745802, 6.000%, due 7/1/36					654		726
#886220, 6.000%, due 7/1/36					1,128		1,251
#893318, 6.500%, due 8/1/36					252		282
#909480, 6.000%, due 2/1/37					1,408		1,557
#256859, 5.500%, due 8/1/37					968		1,027
#928561, 6.000%, due 8/1/37					814		903
#948689, 6.000%, due 8/1/37					2,073		2,271
#888967, 6.000%, due 12/1/37					1,795		1,991
#962058, 6.500%, due 3/1/38					3,222		3,659
#934006, 6.500%, due 9/1/38					1,646		1,868
#986856, 6.500%, due 9/1/38					1,095		1,228

Total FNMA Mortgage Obligations							53,577


*Non-Agency Mortgage-Backed Obligations—1.5%*
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, 7/25/18		CCC			228		163
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§**		C			199		170
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5, 6.455%, 7/25/34		A2			463		113
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 4.677%, 8/25/34, VRN		AAA			549		510
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35		AA	+		14		14
Chase Mortgage Finance Corporation, 2006-A1, Tranche 2A3, 6.000%, 9/25/36, VRN		Caa2			2,460		1,938

Total Non-Agency Mortgage-Backed Obligations							2,908

See accompanying Notes to Financial Statements.

36 Annual Report

December 31, 2010

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Consumer Asset-Backed Securities—3.9%*
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		$	2,000	$	2,190
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14		Aaa			2,000		2,143
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa			2,230		2,333
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2			874		903

Total Consumer Asset-Backed Securities							7,569


*Corporate Obligations—46.1%*
Citigroup, Inc., 5.500%, due 4/11/13		A	+		1,500		1,597
General Electric Capital Corporation, 4.800%, due 5/1/13		AA	+		600		641
Kansas City Southern de Mexico S.A. de C.V., 7.625%, due 12/1/13		BB			1,200		1,242
CME Group, Inc., 5.750%, due 2/15/14		AA			700		775
PACCAR, Inc., 6.875%, due 2/15/14		A	+		800		918
General Electric Capital Corporation, 5.900%, due 5/13/14		AA	+		225		249
Bank of America Corporation, 7.375%, due 5/15/14		A	+		700		778
American Express Co., 7.250%, due 5/20/14		A	+		500		570
Capital One Financial Corporation, 7.375%, due 5/23/14		A-			1,235		1,405
Macquarie Group Ltd.—144A, 7.300%, due 8/1/14		A2			1,000		1,092
Petrohawk Energy Corporation, 10.500%, due 8/1/14		B	+		1,000		1,140
AT&T, Inc., 5.100%, due 9/15/14		A2			1,250		1,368
D.R. Horton, Inc., 5.625%, due 9/15/14		BB			1,500		1,530
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14		A1			1,350		1,442
Boeing Capital Corporation, 3.250%, due 10/27/14		A	+		1,400		1,459
Crown Castle International Corporation, 9.000%, due 1/15/15		BB-			1,000		1,105
EI du Pont de Nemours & Co., 3.250%, due 1/15/15		A			500		519
Georgia-Pacific LLC—144A, 7.000%, due 1/15/15		BBB			500		519
The Kroger Co., 4.950%, due 1/15/15		BBB			1,175		1,269
Simon Property Group L.P., 4.200%, due 2/1/15		A-			1,500		1,568


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Yum! Brands, Inc., 4.250%, due 9/15/15		BBB-		$	350	$	369
Fiserv, Inc., 3.125%, due 10/1/15		Baa2			1,825		1,807
Cisco Systems, Inc., 5.500%, due 2/22/16		A	+		2,000		2,282
Yum! Brands, Inc., 6.250%, due 4/15/16		BBB-			700		791
Owens-Brockway Glass Container, Inc., 7.375%, due 5/15/16		BB	+		1,250		1,328
SABMiller plc—144A, 6.500%, due 7/1/16		BBB	+		700		811
Petrobras International Finance Co., 6.125%, due 10/6/16		Baa1			1,350		1,485
EI du Pont de Nemours & Co., 5.250%, due 12/15/16		A			500		559
Comcast Corporation, 6.500%, due 1/15/17		BBB	+		350		403
Corrections Corporation of America, 7.750%, due 6/1/17		BB			1,250		1,327
ERP Operating L.P., 5.750%, due 6/15/17		BBB	+		1,100		1,205
JPMorgan Chase & Co., 6.125%, due 6/27/17		A1			600		658
American Express Co., 6.150%, due 8/28/17		A	+		1,000		1,127
Exelon Generation Co. LLC, 6.200%, due 10/1/17		A3			1,100		1,231
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-			950		1,121
Triumph Group, Inc., 8.000%, due 11/15/17		B	+		1,500		1,560
Union Pacific Corporation, 5.750%, due 11/15/17		BBB	+		800		898
Wells Fargo & Co., 5.625%, due 12/11/17		AA-			1,000		1,107
Kohl’s Corporation, 6.250%, due 12/15/17		BBB	+		350		404
American Tower Corporation, 4.500%, due 1/15/18		Baa3			1,150		1,140
Morgan Stanley, 6.625%, due 4/1/18		A			950		1,031
General Electric Capital Corporation, 5.625%, due 5/1/18		AA	+		350		382
Philip Morris International, Inc., 5.650%, due 5/16/18		A			1,000		1,127
Time Warner Cable, Inc., 6.750%, due 7/1/18		BBB			1,000		1,166
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A	+		1,075		1,158
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19		BBB	+		700		871
FedEx Corporation, 8.000%, due 1/15/19		BBB			750		925
CSX Corporation, 7.375%, due 2/1/19		BBB-			800		965
Honeywell International, Inc., 5.000%, due 2/15/19		A			925		1,013

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 37

Bond Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Pfizer, Inc., 6.200%, due 3/15/19		AA		$	1,250	$	1,464
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A	+		1,300		1,546
Owens Corning, 9.000%, due 6/15/19		BBB-			950		1,115
Jefferies Group, Inc., 8.500%, due 7/15/19		BBB			1,300		1,486
Discovery Communications LLC, 5.625%, due 8/15/19		Baa2			500		549
Roper Industries, Inc., 6.250%, due 9/1/19		BBB-			1,225		1,356
Boston Properties L.P., 5.875%, due 10/15/19		A-			1,500		1,627
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-			500		525
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20		A2			250		251
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Ba2			1,515		1,763
Jarden Corporation, 7.500%, due 1/15/20		B			1,500		1,564
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20		A			1,500		1,683
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB	+		1,625		1,726
United Technologies Corporation, 4.500%, due 4/15/20		A	+		1,500		1,575
Iron Mountain, Inc., 8.000%, due 6/15/20		B	+		1,250		1,312
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A1			1,800		1,945
Commonwealth Edison Co., 4.000%, due 8/1/20		A-			1,000		984
Alcoa, Inc., 6.150%, due 8/15/20		BBB-			1,775		1,823
Omnicom Group, Inc., 4.450%, due 8/15/20		A-			1,975		1,933
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B	+		700		724
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20		Aa2			385		404
BE Aerospace, Inc., 6.875%, due 10/1/20		BB			650		671

VRN = Variable Rate Note

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at December 31, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at December 31, 2010.


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Celgene Corporation, 3.950%, due 10/15/20		BBB	+	$	500	$	475
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		BBB			500		494
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22		A			664		730
The Kroger Co., 8.000%, due 9/15/29		BBB			325		408
Conoco Funding Co., 7.250%, due 10/15/31		A1			400		495
Kohl’s Corporation, 6.000%, due 1/15/33		BBB	+		1,000		1,020
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A	+		500		526
Comcast Corporation, 6.450%, due 3/15/37		BBB	+		650		695
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB-			600		681
JPMorgan Chase & Co., 6.400%, due 5/15/38		Aa3			900		1,021
COX Communications, Inc.—144A, 6.950%, due 6/1/38		Baa2			350		389
General Electric Capital Corporation, 6.875%, due 1/10/39		AA	+		750		867
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3			1,515		1,567

Total Corporate Obligations							88,831

Total Long-Term Investments—97.4% (cost $178,039)							187,842


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $3,285, collateralized by U.S. Treasury Note, 2.750%, due 12/31/17		AAA			3,285		3,285

Total Repurchase Agreement—1.7% (cost $3,285)							3,285

Total Investments—99.1% (cost $181,324)							191,127
Cash and other assets, less liabilities—0.9%							1,649

Net assets—100.0%						$	192,776

See accompanying Notes to Financial Statements.

38 Annual Report

December 31, 2010

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

LOW DURATION FUND

The Low Duration Fund seeks to maximize total return. Total return includes both income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Low Duration Fund posted a 2.15% increase on a total return basis (Institutional Class Shares) for the 12 months ended December 31, 2010. By comparison, the Fund’s benchmark, the Merrill Lynch 1-Year U.S. Treasury Note Index, gained 0.83%.

Assets in this new Fund continued to build since the Fund’s inception on December 1, 2009, with assets increasing to a new “high watermark” of approximately $142 million at December 31, 2010.

We consider the Consumer Asset-backed securities that the Fund invests in to be highly liquid. Nearly a third of these investments are floating rate instruments that reset on a monthly basis.

The Fund kept its exposure to cash and cash equivalents extremely low, given the very low rates currently available from money market instruments.

December 31, 2010

William Blair Funds 39

Low Duration Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2010


	1 year			Since Inception(a)
Institutional Class		2.15	%		1.43	%
Merrill Lynch 1-Year U.S. Treasury Note Index		0.83			0.62

(a)

For the period December 1, 2009 (Commencement of Operations to December 31, 2010.

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 investments.

40 Annual Report

December 31, 2010

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—41.6%*
U.S. Treasury—2.1%
U.S. Treasury Note, 0.500%, due 11/15/13	$	3,000	$	2,961

Government National Mortgage Association (GNMA)—0.2%
#003438, 4.500%, due 9/20/18		323		342

Federal Home Loan Mortgage Corp. (FHLMC)—11.8%
#M80898, 4.500%, due 2/1/11		152		156
#M80903, 4.000%, due 3/1/11		268		270
#M80953, 4.000%, due 12/1/11		286		292
#E86134, 5.000%, due 11/1/16		264		280
#E96536, 5.000%, due 3/1/18		498		531
#E95355, 5.000%, due 4/1/18		587		626
#E01377, 4.500%, due 5/1/18		583		614
#G11618, 4.500%, due 5/1/18		2,754		2,909
#E99963, 4.500%, due 10/1/18		161		170
#E01488, 5.000%, due 10/1/18		618		659
#E99895, 5.000%, due 10/1/18		1,157		1,234
#G12093, 4.500%, due 12/1/18		722		763
#B11386, 5.000%, due 12/1/18		272		290
#E01545, 5.000%, due 1/1/19		348		371
#G11766, 5.000%, due 3/1/19		252		269
#G18001, 4.500%, due 7/1/19		320		338
#G11596, 5.500%, due 8/1/19		267		290
#B16291, 5.000%, due 9/1/19		1,666		1,778
#G18045, 5.000%, due 3/1/20		278		296
#G11892, 4.000%, due 4/1/20		281		292
#G18048, 5.000%, due 4/1/20		191		203
#J08152, 5.000%, due 5/1/20		235		251
#G12394, 5.000%, due 5/1/21		357		380
#G12113, 5.500%, due 5/1/21		441		479
#G12286, 5.000%, due 7/1/21		205		218
#J13022, 4.000%, due 9/1/25		2,814		2,918

Total FHLMC Mortgage Obligations				16,877

Federal National Mortgage Association (FNMA)—27.5%
#255325, 4.500%, due 7/1/11		1,012		1,020
#256224, 5.500%, due 4/1/16		55		60
#256559, 5.500%, due 1/1/17		29		30
#256606, 5.500%, due 2/1/17		39		42
#256646, 5.500%, due 3/1/17		29		32
#545898, 5.500%, due 9/1/17		810		873
#545899, 5.500%, due 9/1/17		919		991
#663692, 5.000%, due 1/1/18		373		400
#254591, 5.500%, due 1/1/18		568		613
#681310, 4.500%, due 2/1/18		555		588
#683100, 5.500%, due 2/1/18		711		774
#675717, 5.000%, due 3/1/18		610		654
#681361, 5.000%, due 3/1/18		157		168
#656564, 5.000%, due 4/1/18		2,713		2,905
#696677, 5.000%, due 4/1/18		221		237
#702888, 5.000%, due 4/1/18		190		204
#929388, 4.500%, due 5/1/18		770		811
#254721, 5.000%, due 5/1/18		444		476
#702332, 5.000%, due 5/1/18		101		108
#704049, 5.500%, due 5/1/18		1,363		1,488
#254785, 4.000%, due 6/1/18		373		390
#555622, 4.500%, due 6/1/18		611		647
#656573, 5.000%, due 6/1/18		377		404


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#709848, 5.000%, due 6/1/18				$	330	$	353
#713380, 4.000%, due 7/1/18					310		323
#254802, 4.500%, due 7/1/18					486		515
#713807, 4.500%, due 7/1/18					287		304
#735003, 5.500%, due 7/1/18					1,733		1,887
#711991, 5.000%, due 8/1/18					316		339
#740444, 4.500%, due 9/1/18					498		527
#743183, 5.000%, due 10/1/18					134		144
#747823, 4.000%, due 11/1/18					835		872
#749596, 5.000%, due 11/1/18					476		510
#745237, 5.000%, due 12/1/18					117		125
#MA0045, 4.000%, due 4/1/19					712		745
#255233, 4.000%, due 5/1/19					719		750
#725445, 4.500%, due 5/1/19					1,320		1,396
#785259, 5.000%, due 8/1/19					573		615
#725953, 5.000%, due 10/1/19					165		178
#745240, 4.500%, due 12/1/19					755		800
#735401, 5.500%, due 3/1/20					472		509
#735646, 4.500%, due 7/1/20					908		961
#MA0517, 4.000%, due 9/1/20					1,426		1,493
#836016, 4.500%, due 9/1/20					1,516		1,599
#MA0548, 3.500%, due 10/1/20					2,510		2,600
#881284, 4.500%, due 12/1/21					1,579		1,663
#932723, 4.000%, due 4/1/25					931		968
#935995, 4.000%, due 6/1/25					258		268
#AD4677, 4.000%, due 6/1/25					1,986		2,066
#AD8164, 4.000%, due 8/1/25					2,000		2,080
#AE1176, 4.000%, due 8/1/25					977		1,016

Total FNMA Mortgage Obligations							39,521


*Consumer Asset-Backed Securities—41.0%*
Mercedes-Benz Auto Receivables Trust, 2010-1, Tranche A1, 0.309%, 5/13/11		A-1	+		19		19
BMW Vehicle Lease Trust, 2009-1, Tranche A4, 3.660%, 9/15/11		AAA			500		509
Nissan Auto Lease Trust, 2009-B, Tranche A2, 1.220%, 9/15/11		AAA			366		366
Ford Credit Auto Owner Trust, 2009-D, Tranche A2, 1.210%, 1/15/12		AAA			168		168
Honda Auto Receivables Owner Trust, 2009-2, Tranche A3, 2.790%, 1/16/12		AAA			779		787
Honda Auto Receivables Owner Trust, 2008-1, Tranche A3, 4.470%, 1/18/12		AAA			139		139
Honda Auto Receivables Owner Trust, 2010-1, Tranche A2, 0.620%, 2/21/12		AAA			1,753		1,754
USAA Auto Owner Trust, 2009-2, Tranche A2, 0.740%, 3/15/12		AAA			14		14
Ally Auto Receivables Trust, 2010-1, Tranche A2, 0.750%, 4/15/12		AAA			848		849
Volkswagen Auto Lease Trust, 2009-A, Tranche A3, 3.410%, 4/16/12		AAA			1,319		1,333

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 41

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A2, 0.660%, 5/21/12		AAA	$	1,437	$	1,438
USAA Auto Owner Trust, 2010-1, Tranche A2, 0.630%, 6/15/12		AAA		716		717
Ford Credit Auto Owner Trust, 2007-B, Tranche A4A, 5.240%, 7/15/12		AAA		530		540
CNH Equipment Trust, 2008-B, Tranche A3A, 4.780%, 7/16/12		AAA		37		37
CNH Equipment Trust, 2009-C, Tranche A2, 0.950%, 8/15/12		AAA		91		91
CNH Equipment Trust, 2010-A, Tranche A2, 0.810%, 8/15/12		AAA		798		799
BMW Vehicle Lease Trust, 2010-1, Tranche A2, 0.580%, 9/17/12		Aaa		500		500
BMW Vehicle Owner Trust, 2010-A, Tranche A2, 0.680%, 9/25/12		AAA		1,237		1,238
Capital Auto Receivables Asset Trust, 2008-2, Tranche A3B, 1.710%, 10/15/12, VRN		AAA		499		501
USAA Auto Owner Trust, 2008-3, Tranche A3, 4.280%, 10/15/12		AAA		31		31
Ford Credit Auto Owner Trust, 2010-B, Tranche A2, 0.650%, 12/15/12		Aaa		1,200		1,201
Chrysler Financial Auto Securitization Trust, 2010-A, Tranche A2, 0.690%, 1/8/13		AAA		1,000		1,000
CarMax Auto Owner Trust, 2009-1, Tranche A3, 4.120%, 3/15/13		AAA		384		390
Nissan Auto Lease Trust, 2010-A, Tranche A2, 1.100%, 3/15/13		AAA		1,205		1,207
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/13		AAA		300		302
Ford Credit Auto Owner Trust, 2009-A, Tranche A3A, 3.960%, 5/15/13		AAA		414		421
Bank of America Credit Card Trust, 2007-A2, Tranche A2, 0.280%, 6/17/13, VRN		AAA		1,283		1,283
USAA Auto Owner Trust, 2009-1, Tranche A3, 3.020%, 6/17/13		AAA		899		910
Citibank Credit Card Issuance Trust, 2009-A3, Tranche A3, 2.700%, 6/24/13		AAA		100		101
American Express Issuance Trust, 2007-2, Tranche A, 0.510%, 7/15/13, VRN		AAA		373		373
American Express Credit Account Master Trust, 2008-1, Tranche A, 0.710%, 8/15/13, VRN		AAA		1,200		1,200
American Express Credit Account Master Trust—144A, 2006-B, Tranche A, 0.300%, 8/15/13, VRN		AAA		1,070		1,070
Discover Card Master Trust I, 2006-1, Tranche A2, 0.310%, 8/16/13, VRN		AAA		354		354


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
Ford Credit Auto Owner Trust, 2009-D, Tranche A3, 2.170%, 10/15/13		AAA	$	1,160	$	1,173
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13		AAA		1,344		1,357
John Deere Owner Trust, 2009-B, Tranche A3, 1.570%, 10/15/13		AAA		865		871
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		2,000		2,189
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A3, 3.190%, 11/15/13		AAA		2,411		2,444
Citibank Credit Card Issuance Trust, 2004-A7, Tranche A7, 0.374%, 11/25/13, VRN		AAA		1,043		1,041
CNH Equipment Trust, 2009-C, Tranche A3, 1.850%, 12/16/13		AAA		351		354
Capital One Multi-Asset Execution Trust, 2006-A6, Tranche A6, 5.300%, 2/18/14		AAA		652		661
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14		Aaa		1,500		1,607
Harley-Davidson Motorcycle Trust, 2009-2, Tranche A3, 2.620%, 3/15/14		AAA		825		834
Capital One Multi-Asset Execution Trust, 2006-A7, Tranche A7, 0.290%, 3/17/14, VRN		AAA		1,000		999
Capital One Multi-Asset Execution Trust, 2008-A6, Tranche A6, 1.360%, 3/17/14, VRN		AAA		1,610		1,615
Citibank Credit Card Issuance Trust, 2009-A1, Tranche A1, 2.010%, 3/17/14, VRN		AAA		200		204
Volkswagen Auto Lease Trust, 2009-A, Tranche A4, 4.590%, 3/17/14		AAA		2,000		2,052
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		1,765		1,847
Chase Issuance Trust, 2007-A9, Tranche A, 3.151%, 6/16/14, VRN		AAA		2,000		1,993
Nissan Auto Receivables Owner Trust, 2008-A, Tranche A4, 4.280%, 6/16/14		AAA		120		122
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14		AAA		1,175		1,184
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		AAA		500		499
Daimler Chrysler Auto Trust, 2008-A, Tranche A4, 4.480%, 8/8/14		AAA		1,500		1,538
Citibank Credit Card Issuance Trust, 2007-A7, Tranche A7, 0.611%, 8/20/14, VRN		AAA		200		200

See accompanying Notes to Financial Statements.

42 Annual Report

December 31, 2010

Low Duration Fund

Portfolio of Investments, December 31, 2010 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Consumer Asset-Backed Securities—(continued)*
American Express Credit Account Master Trust, 2007-5, Tranche A, 0.290%, 12/15/14, VRN		AAA		$	1,000	$	998
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.410%, 1/15/15, VRN		AAA			2,000		2,023
Capital One Multi-Asset Execution Trust, 2007-A4, Tranche A4, 0.290%, 3/16/15, VRN		AAA			1,778		1,769
Discover Card Master Trust, 2007-A2, Tranche A2, 0.642%, 6/15/15, VRN		AAA			192		192
Chase Issuance Trust, 2008-A10, Tranche A10, 1.010%, 8/17/15, VRN		AAA			2,000		2,024
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.560%, 9/15/15, VRN		AAA			1,330		1,330
Discover Card Master Trust, 2010-A1, Tranche A1, 0.910%, 9/15/15, VRN		Aaa			347		349
Ford Credit Floorplan Master Owner Trust, 2010-A5, Tranche A2, 0.960%, 9/15/15, VRN		AAA			1,700		1,700
Chase Issuance Trust, 2008-A3, Tranche A, 1.360%, 3/15/16, VRN		AAA			2,000		2,051

Total Consumer Asset-Backed Securities							58,862


*Corporate Obligations—11.8%*
Teva Pharmaceutical Finance III LLC, 1.500%, due 6/15/12		A	-		1,000		1,009
General Electric Capital Corporation, 3.500%, due 8/13/12		AA	+		1,000		1,036
Johnson & Johnson, 5.150%, due 8/15/12		AAA			1,900		2,038

VRN = Variable Rate Note


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Bank of America Corporation, 5.375%, due 9/11/12		A	+	$	1,000	$	1,050
ConocoPhillips, 4.750%, due 10/15/12		A	1		1,000		1,071
Citigroup, Inc., 5.300%, due 10/17/12		A	+		1,000		1,059
Wells Fargo & Co., 5.250%, due 10/23/12		AA	-		1,000		1,072
Morgan Stanley, 5.250%, due 11/2/12		A			1,000		1,067
The Procter & Gamble Co., 0.324%, due 11/14/12, VRN		AA	-		700		701
The Walt Disney Co., 4.700%, due 12/1/12		A			1,500		1,608
Hewlett-Packard Co., 4.500%, due 3/1/13		A	+		1,000		1,070
American Honda Finance Corp.—144A, 2.375%, due 3/18/13		A	+		1,000		1,017
American Express Co., 4.875%, due 7/15/13		A	+		1,000		1,069
MetLife, Inc., 2.375%, due 2/6/14		A	-		475		477
The Boeing Co., 5.000%, due 3/15/14		A	+		375		411
Shell International Finance BV, 4.000%, due 3/21/14		Aa1			1,142		1,215

Total Corporate Obligations							16,970

Total Long-Term Investments—94.4% (cost $135,633)							135,533


*Repurchase Agreement*
State Street Bank and Trust Company, 0.150% dated 12/31/10, due 1/3/11, repurchase price $5,994, collateralized by U.S. Treasury Note, 2.750%, due 12/31/17		AAA			5,994		5,994

Total Repurchase Agreement—4.2% (cost $5,994)							5,994

Total Investments—98.6% (cost $141,627)							141,527
Cash and other assets, less liabilities—1.4%							1,943

Net assets—100.0%						$	143,470

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 43

Statements of Assets and Liabilities

December 31, 2010 (dollar amounts in thousands)


	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
*Assets*
Investments in securities, at cost	$	1,549,615		$	220,110		$	515,337

Investments in securities, at value	$	1,894,162		$	289,896		$	650,626
Cash		46			—			—
Foreign currency, at value (cost $282, $1,959 and $1,756).		286			2,055			2,010
Receivable for securities sold		1,103			49			2,226
Receivable for fund shares sold		1,402			—			1,952
Dividend and interest receivable		3,147			569			1,322

Total assets		1,900,146			292,569			658,136
*Liabilities*
Payable for investment securities purchased		11,951			—			10,331
Payable for fund shares redeemed		338			575			202
Unrealized depreciation on forward foreign currency contracts		—			227			—
Management fee payable		1,479			244			531
Distribution and shareholder service fee payable		—			—			51
Other payables and accrued expenses		161			55			70

Total liabilities		13,929			1,101			11,185

Net Assets	$	1,886,217		$	291,468		$	646,951

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	131		$	27		$	49
Capital paid in excess of par value		1,824,503			382,156			627,801
Accumulated net investment income (loss)		(4,934	)		(357	)		(586	)
Accumulated net realized gain (loss)		(278,065	)		(160,037	)		(115,660	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		344,582			69,679			135,347

Net Assets	$	1,886,217		$	291,468		$	646,951


Net Assets	$	1,886,217		$	291,468
Shares Outstanding		131,218,332			27,039,965
Net Asset Value Per Share	$	14.37		$	10.78
Institutional Share Class
Net Assets							$	275,356
Shares Outstanding								20,792,208
Net Asset Value Per Share							$	13.24

See accompanying Notes to Financial Statements.

44 Annual Report

December 31, 2010

Statements of Operations

for the Year Ended December 31, 2010 (dollar amounts in thousands)


	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
*Investment income*
Dividends	$	34,646		$	7,339		$	9,506
Less foreign tax withheld		(2,567	)		(565	)		(564	)
Interest		107			9			91

Total income		32,186			6,783			9,033
*Expenses*
Investment advisory fees		14,477			3,311			4,866
Distribution fees		—			—			46
Shareholder services fees		—			—			418
Custodian fees		356			124			153
Transfer agent fees		30			8			31
Sub-transfer agent fees
Class N		—			—			12
Class I		—			—			57
Professional fees		88			50			52
Registration fees		33			22			75
Shareholder reporting fees		44			20			59
Trustee fees		49			13			15
Other expenses		32			9			14

Total expenses		15,109			3,557			5,798

Net investment income		17,077			3,226			3,235
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments		210,729			44,977			57,943
Foreign currency transactions		10,006			(187	)		(849	)

Total net realized gain		220,735			44,790			57,094
Change in net unrealized appreciation (depreciation) of:
Investments		73,046			(14,068	)		62,276
Foreign currency translations		(4,447	)		(152	)		39

Total change in net unrealized appreciation (depreciation)		68,599			(14,220	)		62,315

Net increase in net assets resulting from operations	$	306,411		$	33,796		$	122,644

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 45

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (dollar amounts in thousands)


	Institutional International Growth Fund						Institutional International Equity Fund						International Small Cap Growth Fund
	2010			2009			2010			2009			2010			2009
*Operations*
Net investment income	$	17,077		$	10,704		$	3,226		$	3,447		$	3,235		$	1,001
Net realized gain (loss) on investments and foreign currency transactions		220,735			(117,747	)		44,790			(66,506	)		57,094			(30,308	)
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		68,599			519,807			(14,220	)		151,206			62,315			174,254

Net increase in net assets resulting from operations		306,411			412,764			33,796			88,147			122,644			144,947
*Distributions to shareholders from*
Net investment income		(35,383	)		(18,261	)		(4,059	)		(2,719	)		(2,781	)		(778	)
Net realized gain		—			—			—			—			—			—

		(35,383	)		(18,261	)		(4,059	)		(2,719	)		(2,781	)		(778	)
*Capital stock transactions*
Net proceeds from sale of shares		585,127			165,765			31,823			20,848			222,392			139,125
Shares issued in reinvestment of income dividends and capital gain distributions		33,238			16,959			3,868			2,587			2,417			676
Less cost of shares redeemed		(379,024	)		(199,645	)		(139,231	)		(104,043	)		(88,572	)		(185,107	)

Net increase (decrease) in net assets resulting from capital share transactions		239,341			(16,921	)		(103,540	)		(80,608	)		136,237			(45,306	)

Increase (decrease) in net assets		510,369			377,582			(73,803	)		4,820			256,100			98,863
Net assets
Beginning of year		1,375,848			998,266			365,271			360,451			390,851			291,988

End of year	$	1,886,217		$	1,375,848		$	291,468		$	365,271		$	646,951		$	390,851

Accumulated net investment income (loss) at the end of the year	$	(4,934	)	$	(4,182	)	$	(357	)	$	1		$	(586	)	$	(191	)

See accompanying Notes to Financial Statements.

46 Annual Report

December 31, 2010

Statements of Assets and Liabilities

December 31, 2010 (dollar amounts in thousands)


	Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Bond Fund		Low Duration Fund
*Assets*
Investments in securities, at cost	$	962,851		$	77,904		$	181,324	$	141,627

Investments in securities, at value	$	1,247,599		$	95,531		$	191,127	$	141,527
Foreign currency, at value (cost $1,558 and $298)		1,610			300			—		—
Receivable for securities sold		4,731			1,391			—		—
Receivable for fund shares sold		360			595			36		1,840
Receivable from Advisor		—			20			7		36
Dividend and interest receivable		500			21			1,891		436

Total assets		1,254,800			97,858			193,061		143,839
*Liabilities*
Payable for investment securities purchased		2,868			2,830			—		—
Payable for fund shares redeemed		15			—			178		278
Management fee payable		1,142			86			49		35
Distribution and shareholder service fee payable		36			2			20		13
Other payables and accrued expenses		196			39			38		43

Total liabilities		4,257			2,957			285		369

Net Assets	$	1,250,543		$	94,901		$	192,776	$	143,470

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	78		$	9		$	18	$	14
Capital paid in excess of par value		994,772			76,736			182,717		144,660
Accumulated net investment income (loss)		(12,327	)		(131	)		1		—
Accumulated net realized gain (loss)		(16,774	)		665			237		(1,104	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		284,794			17,622			9,803		(100	)

Net Assets	$	1,250,543		$	94,901		$	192,776	$	143,470


Institutional Share Class
Net Assets	$	1,021,456		$	78,516		$	40,490	$	47,965
Shares Outstanding		63,996,622			7,584,820			3,826,077		4,845,665
Net Asset Value Per Share	$	15.96		$	10.35		$	10.58	$	9.90

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 47

Statements of Operations

for the Year Ended December 31, 2010 (dollar amounts in thousands)


	Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Bond Fund			Low Duration Fund
*Investment income*
Dividends	$	19,206		$	1,889		$	—		$	—
Less foreign tax withheld		(1,553	)		(167	)		—			—
Interest		125			1			8,921			2,557

Total income		17,778			1,723			8,921			2,557
*Expenses*
Investment advisory fees		12,197			1,090			546			381
Distribution fees		70			—			6			7
Shareholder services fees		302			17			228			127
Custodian fees		549			138			53			52
Transfer agent fees		51			11			22			15
Sub-transfer agent fees
Class N		15			—			—			—
Class I		68			—			4			—
Professional fees		75			36			32			28
Registration fees		57			44			48			111
Shareholder reporting fees		25			3			3			5
Trustee fees		37			4			5			3
Other expenses		27			10			13			11

Total expenses before waiver		13,473			1,353			960			740
Expenses waived by the Advisor		—			(98	)		(90	)		(98	)

Net expenses		13,473			1,255			870			642

Net investment income		4,305			468			8,051			1,915
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments		248,631			34,229			2,212			(60	)
Foreign currency transactions		(3,290	)		(573	)		—			—

Total net realized gain (loss)		245,341			33,656			2,212			(60	)
Change in net unrealized appreciation (depreciation) of:
Investments		13,573			(16,310	)		3,290			468
Foreign currency translations		(17	)		(5	)		—			—

Total change in net unrealized appreciation (depreciation)		13,556			(16,315	)		3,290			468

Net increase in net assets resulting from operations	$	263,202		$	17,809		$	13,553		$	2,323

See accompanying Notes to Financial Statements.

48 Annual Report

December 31, 2010

Statements of Changes in Net Assets

for the Years Ended December 31, 2010 and 2009 (dollar amounts in thousands)


	Emerging Markets Growth Fund						Emerging Leaders Growth Fund						Bond Fund						Low Duration Fund
	2010			2009			2010			2009			2010			2009			2010			2009(a)
*Operations*
Net investment income	$	4,305		$	3,476		$	468		$	507		$	8,051		$	6,076		$	1,915		$	78
Net realized gain (loss) on investments and foreign currency transactions		245,341			(59,561	)		33,656			3,205			2,212			284			(60	)		—
Change in net unrealized appreciation (depreciation) on investment and foreign currency transactions		13,556			461,348			(16,315	)		51,098			3,290			7,229			468			(568	)

Net increase (decrease) in net assets resulting from operations		263,202			405,263			17,809			54,810			13,553			13,589			2,323			(490	)
*Distributions to shareholders from*
Net investment income		(13,461	)		(11,127	)		(255	)		(1,588	)		(8,566	)		(6,213	)		(2,958	)		(86	)
Net realized gain		—			—			(505	)		—			(494	)		—			—			—

		(13,461	)		(11,127	)		(760	)		(1,588	)		(9,060	)		(6,213	)		(2,958	)		(86	)
*Capital stock transactions*
Net proceeds from sale of shares		357,761			422,203			14,224			42,409			90,709			77,912			149,882			97,472
Shares issued in reinvestment of income dividends and capital gain distributions		12,072			10,336			681			1,466			6,013			4,029			2,297			37
Less cost of shares redeemed		(407,291	)		(174,003	)		(52,189	)		(28,637	)		(55,783	)		(16,586	)		(103,208	)		(1,799	)

Net increase (decrease) in net assets resulting from capital share transactions		(37,458	)		258,536			(37,284	)		15,238			40,939			65,355			48,971			95,710

Increase (decrease) in net assets		212,283			652,672			(20,235	)		68,460			45,432			72,731			48,336			95,134
Net assets
Beginning of year		1,038,260			385,588			115,136			46,676			147,344			74,613			95,134			—

End of year	$	1,250,543		$	1,038,260		$	94,901		$	115,136		$	192,776		$	147,344		$	143,470		$	95,134

Accumulated net investment income (loss) at the end of the year	$	(12,327	)	$	(7,584	)	$	(131	)	$	(297	)	$	1		$	—		$	—		$	—

(a)

For the period December 1, 2009 (Commencement of Operations) to December 31, 2010.

See accompanying Notes to Financial Statements.

December 31, 2010

William Blair Funds 49

Notes to Financial Statements

(1) Significant Accounting Policies

(a) Description of the Fund

William Blair Funds is a diversified mutual fund registered under the Investment Company Act of 1940 (the “1940 Act”), 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 nineteen portfolios (the “Portfolios”), each with its own investment objective and policies.

Equity Portfolios

International Equity Portfolios

Growth

Large Cap Growth

Small Cap Growth

Mid Cap Growth

Small-Mid Cap Growth

Small Cap Value

Mid Cap Value

Global Equity Portfolio

Global Growth

International Growth

International Equity

Institutional International Growth

Institutional International Equity

International Small Cap Growth

Emerging Markets Growth

Emerging Leaders Growth

Fixed-Income Portfolios

Bond

Income

Low Duration

Money Market Portfolio

Ready Reserves

The investment objectives of the Portfolios are as follows:


Equity		Long-term capital appreciation.
Global Equity		Long-term capital appreciation.
International Equity		Long-term capital appreciation.
Fixed-Income		High level of current income with relative stability of principal. (Maximize total return—Low Duration)
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, the Emerging Leaders Growth Portfolio, Bond Portfolio, and the Low Duration 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, Emerging Leaders Growth Fund, Bond Fund and the Low Duration 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.

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.

50 Annual Report

December 31, 2010

(c) Investment Valuation

The value of foreign equity securities is generally determined based upon the last sale price on the foreign exchange or market on which it is primarily traded and in the currency of that market as of the close of the appropriate exchange or, if there have been no sales during that day, at the latest bid price. The Board of Trustees has determined that the passage of time between when the foreign exchanges or markets close and when the Portfolios compute their net asset values could cause the value of foreign equity securities to no longer be representative or accurate, and as a result, may necessitate that such securities be fair valued. Accordingly, for foreign equity securities, the Portfolios may use an independent pricing service to fair value price the security as of the close of regular trading on the New York Stock Exchange. As a result, a Portfolio’s value for a security may be different from the last sale price (or the latest bid price).

Other securities, and all other assets, including securities for which a market price is not available or is deemed unreliable, (e.g., securities affected by unusual or extraordinary events, such as natural disasters or securities affected by market or economic events, such as bankruptcy filings), or the value of which is affected by a significant valuation event, are valued at a fair value as determined in good faith by, or under the direction of, the Board of Trustees and in accordance with the Trust’s valuation procedures. The value of fair valued securities may be different from the last sale price (or the latest bid price), and there is no guarantee that a fair valued security will be sold at the price at which a Portfolio is carrying the security.

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 December 31, 2010, there were securities held in the Institutional International Growth, International Small Cap Growth, Emerging Markets Growth and Bond Portfolios requiring fair valuation pursuant to the Funds’ Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

Interest income is recorded on an accrual basis, 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 rate shown on the Portfolio of Investments for the Bond Fund and Low Duration Fund were the rates in effect on December 31, 2010. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

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.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the year ended December 31, 2010, the Bond and Low Duration Portfolios recognized an increase of interest income and a decrease of net realized loss of $(517) and $(1,043), respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Portfolios.

December 31, 2010

William Blair Funds �� 51

dividends, interest and foreign withholding taxes recorded on the ex-date or accrual date and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies held at year end.

Awards from class action litigation may be recorded as a reduction of cost. If the Portfolios 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 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 the Institutional International Growth, Institutional International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolio. At December 31, 2010, dividends from the Bond Portfolio are declared and paid monthly. Effective April 16, 2011 dividends from the Bond Portfolio will be declared daily and paid monthly. Dividends from the Low Duration Portfolio are declared daily and paid monthly. 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 and the Low Duration 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, forward open foreign currency 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 net asset value, 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.

(g) Income Taxes

The Institutional International Growth, Institutional International Equity, International Small Cap Growth, Emerging Markets Growth, and Emerging Leaders Growth Portfolios may be subject to a tax imposed on net realized gains on securities of certain foreign countries.

The statute of limitations on the Funds’ tax returns for each of the tax years in the four year period ended December 31, 2010 remains open and the returns are subject to examination.

The Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for federal income tax purposes. The Portfolios also treat the deferred loss associated with current and prior year wash sales as

52 Annual Report

December 31, 2010

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 December 31, 2010 were as follows (in thousands):


Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Institutional International Growth	$	1,563,677	$	355,017	$	24,532	$	330,485
Institutional International Equity		224,908		67,847		2,859		64,988
International Small Cap Growth		524,436		131,722		5,532		126,190
Emerging Markets Growth		986,045		265,176		3,622		261,554
Emerging Leaders Growth		78,887		17,216		572		16,644
Bond		181,324		10,728		925		9,803
Low Duration		141,627		430		530		(100	)

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, PFIC gains and losses and redemptions in-kind. These reclassifications have no impact on the net asset values of the Portfolios. Accordingly, at December 31, 2010, the following reclassifications were recorded (in thousands):


Portfolio	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain/(Loss)			Capital Paid in Excess of Par Value
Institutional International Growth	$	17,554		$	(17,554	)	$	-
Institutional International Equity		475			(475	)		-
International Small Cap Growth		(849	)		849			-
Emerging Markets Growth		4,413			(33,541	)		29,128
Emerging Leaders Growth		(47	)		51			(4	)
Bond		516			(516	)		-
Low Duration		1,043			(1,043	)		-


	Distributions Paid in 2010						Distributions Paid in 2009
Portfolio	Ordinary Income		Long-Term Capital Gains		Total Distributions		Ordinary Income		Long-Term Capital Gains		Total Distributions
Institutional International Growth		$35,383	$	-		$35,383		$18,261	$	-		$18,261
Institutional International Equity		4,059		-		4,059		2,719		-		2,719
International Small Cap Growth		2,781		-		2,781		778		-		778
Emerging Markets Growth		13,461		-		13,461		11,127		-		11,127
Emerging Leaders Growth		255		505		760		1,588		-		1,588
Bond		8,566		494		9,060		6,213		-		6,213
Low Duration		2,958		-		2,958		86		-		86

As of December 31, 2010, 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 Capital Gain		Net Unrealized Appreciation/ Depreciation
Institutional International Growth	$	1,998	$	(270,900	)	$	-	$	330,485
Institutional International Equity		23		(155,726	)		-		64,988
International Small Cap Growth		5,932		(113,021	)		-		126,190
Emerging Markets Growth		-		(5,861	)		-		261,554

December 31, 2010

William Blair Funds 53


Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation/ Depreciation
Emerging Leaders Growth		987		(14	)		539		16,644
Bond		2		-			236		9,803
Low Duration		-		(1,104	)		-		(100	)

As of December 31, 2010, the Portfolios have unused capital loss carry forwards available for federal income tax purposes to be applied against future gains, if any. If not applied, the carryforward will expire as follows (in thousands):


Portfolio	2011		2012		2013		2014		2015		2016		2017		2018		Total
Institutional International Growth	$	-	$	-	$	-	$	-	$	-	$	-	$	270,881	$	-	$	270,881
Institutional International Equity		-		-		-		-		-		42,759		113,087		-		155,846
International Small Cap Growth		-		-		-		-		-		26,723		86,330		-		113,053
Emerging Markets Growth		-		-		-		-		-		-		5,572		-		5,572
Emerging Leaders Growth		-		-		-		-		-		-		-		-		-
Bond		-		-		-		-		-		-		-		-		-
Low Duration		-		-		-		-		-		-		-		955		955


Portfolio	Capital Amount		Currency Amount
Institutional International Growth	$	-	$	-
Institutional International Equity		-		-
International Small Cap Growth		-		-
Emerging Markets Growth		-		324
Emerging Leaders Growth		-		-
Bond		-		-
Low Duration		149		-

(h) Repurchase Agreements

(i) Use of Estimates

54 Annual Report

December 31, 2010

(j) Fair Value Measurements

The Portfolios are subject to Fair Value measurement and Disclosures (ASC 820), formally known as SFAS (Statement of Financial Accounting Standards) No. 157, “Fair Value Measurements”. In accordance with ASC 820, “fair value” is defined as the price that a Portfolio would receive upon selling a security in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used in determining the value of a Portfolio’s investments. ASC 820 establishes a three-tier hierarchy of inputs to classify fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

•

Level 1—Quoted prices in active markets for an identical security.

•

Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. In addition, other observable inputs such as foreign exchange rates, benchmark securities indices and foreign futures contracts may be utilized in the valuation of certain foreign securities when significant events occur between the last sale on the foreign securities exchange and the time the net asset value of the Portfolio is calculated.

•

The Fund adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Update 2010-06 “Fair Value Measurements and Disclosures (ASU 820)” which requires the Fund to disclose details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers. Any transfers between Level 1 and Level 2 are disclosed, effective beginning of the period, in the tables below with the reasons for the transfers disclosed in a footnote.

At December 31, 2010, the Portfolios held no other financial instruments, such as options or futures, that required fair valuation.

As of December 31, 2010, the hierarchical input levels of securities in each Portfolio, segregated by security class, are as follows (in thousands):


	Institutional International Growth		Institutional International Equity			International Small Cap Growth		Emerging Markets Growth		Emerging Leaders Growth
Investments in securities
Level 1—Quoted prices
Common Stock	$	1,823,832	$	285,617		$	630,017	$	1,153,073	$	88,347
Preferred Stock		—		3,482			3,813		50,827		5,677
Level 2—Other significant observable inputs
Convertible Bonds		614		—			626		1,045		—
Short-Term Investments		69,716		797			16,170		42,654		1,507
Level 3—Significant unobservable inputs
None		—		—			—		—		—

Total investments in securities	$	1,894,162	$	289,896		$	650,626	$	1,247,599	$	95,531

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2 (a)		—		—			—		—		—
Transfers from Level 2 to Level 1 (b)	$	532,676	$	160,766		$	153,495	$	268,735	$	25,676
Other financial instruments
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	—	$	(227	)	$	—	$	—	$	—

December 31, 2010

William Blair Funds 55


	Bond		Low Duration
Investments in securities
Level 1—Quoted Prices
None	$	—	$	—
Level 2—Other significant observable inputs
US Government and Agency Bonds		88,534		59,701
Corporate Bonds		88,831		16,970
Asset Backed Bonds		10,307		58,862
Short-Term Investments		3,285		5,994
Level 3—Significant unobservable inputs
Asset Backed Bonds		170		—

Total investments in securities	$	191,127	$	141,527

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2 (a)		—		—
Transfers from Level 2 to Level 1 (b)		—		—

(a)

Fair valuation estimates were obtained from the Portfolio’s pricing vendor and applied to certain foreign securities at December 31, 2010 but not on December 31, 2009, resulting in a transfer from Level 1 to Level 2.

(b)

Fair valuation estimates were obtained from the Portfolio’s pricing vendor and applied to certain foreign securities at December 31, 2009 but not on December 31, 2010, resulting in a transfer from Level 2 to Level 1.

The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value:

Balance

January 1, 2010

(Sales)

Purchases

Transfers
to

Level 3

Transfers
(from)
Level 3

Change in
Unrealized

Gain (Loss)

Realized

Gain (Loss)

Balance

December 31, 2010

Bond

—

119

—

170

The fair value estimate for the Level 3 security in the Bond Portfolio was determined in good faith by the Pricing Committee in consultation with the Valuation Committee, pursuant to the Valuation Procedures adopted by the Board of Trustees. There were various factors considered in reaching this fair value determination, including, but not limited to, the following: the type of security, the extent of public trading of the security, information obtained from a broker-dealer for the security, analysis of the company’s performance, market trends that influence its performance and the potential for adverse outcome in pending litigation. At December 31, 2010, this security represented 0.09%, of the net assets of the Bond Portfolio. The change in unrealized gain (loss) related to the security held at December 31, 2010 was $(14), in thousands, and is included in the change in unrealized appreciation (depreciation) of investments on the Statement of Operations.

The First Plus Home Loan Trust bond held in the Bond Portfolio transferred from Level 2 to Level 3 during the period due to the lack of significant other observable inputs.

(k) Redemptions In- Kind

In accordance with the Funds’ prospectus, the Portfolios may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). For financial reporting purposes, the Portfolio recognizes a gain or loss on the transfer of securities depending on the market value of those securities on the date of redemption. Gains and losses realized on in-kind redemptions are not recognized for tax purposes and are reclassified from undistributed realized gain (loss) to paid-in capital. During the year ended December 31, 2010, the Emerging Markets Growth Fund transferred in-kind (in thousands) $74,711 for a realized gain of $32,340.

(2) 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 “Advisor”) for investment advisory, administrative, and other accounting services. The Portfolios pay the Advisor 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	%

56 Annual Report

December 31, 2010

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 and Emerging Leaders Growth Portfolio pay the Advisor a 1.10% annual fee, payable monthly, based on their average daily net assets. The Bond Portfolio and Low Duration Portfolio pay the Advisor a 0.30% annual fee, payable monthly, based on their average daily net assets.

All of the Portfolios, except Institutional International Growth Fund, have also entered into Expense Limitation Agreements with the Advisor. Under the terms of these agreements, the Advisor will waive its management fee and/or reimburse the Portfolio for expenses in excess of the agreed upon rate. The amount the Advisor owes a Portfolio as of the report date is recorded as the Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Portfolios on an annual basis. Under the terms of these Agreements, the Advisor has agreed to waive its advisory fees and/or absorb other operating expenses through April 30, 2011, if total expenses of the Portfolios exceed the following rates (as a percentage of average daily net assets):


Portfolio	Effective May 1, 2010 through April 30, 2011			Effective May 1, 2009 through April 30, 2010
Institutional International Equity		1.10	%		1.10	%
International Small Cap Growth		1.25	%		1.25	%
Emerging Markets Growth		1.30	%		1.25	%
Emerging Leaders Growth		1.25	%		1.25	%
Bond		0.35	%		0.35	%
Low Duration		0.40	%		0.40	%(a)

(a)

Effective December 1, 2009 through April 30, 2011.

For a period of three years subsequent to the Commencement of Operations of the Portfolio, the Advisor is entitled to reimbursement from the Emerging Leaders Growth and Low Duration 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 December 31, 2010 is $278 and $112 (in thousands) for the Emerging Leaders Growth and Low Duration Bond Portfolio 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 period ended December 31, 2010, the fees incurred by the Portfolio and related fee waivers were as follows (in thousands):


Portfolio	Fund Level Waiver		Class Specific Waiver		Total Waiver
Emerging Leaders Growth	$	97	$	1	$	98
Bond		86		4		90
Low Duration		98		—		98

(b) 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 by the other Portfolios in the Fund. The Advisor waives management fees in an amount equal to the management fee and service fee that Ready Reserves receives based on the Portfolio’s net assets, less any waivers if applicable. The fees waived with respect to each Portfolio for the period ended December 31, 2010 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 December 31, 2010 (in thousands):


Portfolio	December 31, 2009 Value		Purchases		Sales		Fees Waived		Dividend Income		December 31, 2010 Value		Percent of Net Assets
Institutional International Growth	$	4,535		—	$	4,535	$	9		—		—		0.0	%
Institutional International Equity		953		—		953		2		—		—		0.0	%
International Small Cap Growth		489		—		489		1		—		—		0.0	%
Emerging Markets Growth		66		—		66		—		—		—		0.0	%
Emerging Leaders Growth		440		—		440		1		—		—		0.0	%

December 31, 2010

William Blair Funds 57

(3) Investment Transactions

Investment transactions, excluding money market instruments, for the year ended December 31, 2010 were as follows (in thousands):


Portfolio	Purchases		Sales
Institutional International Growth	$	1,666,746	$	(1,451,625	)
Institutional International Equity		233,367		(330,685	)
International Small Cap Growth		530,131		(396,755	)
Emerging Markets Growth		1,284,378		(1,349,820	)
Emerging Leaders Growth		169,052		(205,980	)
Bond		98,704		(60,843	)
Low Duration		159,270		(96,885	)

(4) Forward Foreign Currency Contracts

The Portfolios (excluding the Bond and Low Duration Portfolios) from time to time may enter into forward foreign currency contracts with the Fund’s custodian and other counterparties in an attempt to hedge against a decline in the value of foreign currency against the U.S. dollar. The Portfolios bear the market risk that arises from changes in foreign currency rates and bear the credit risk if the counterparty fails to perform under the contract.

For the year ended December 31, 2010, the Institutional International Growth, Institutional International Equity, and International Small Cap Growth Portfolios engaged in forward foreign currency contracts with notional volume (in thousands) of $1,292,889, $19,645 and $215,506 respectively.

The following table presents the value of open forward foreign currency contracts as of December 31, 2010 and their respective location on the Statement of Assets and Liabilities (values in thousands):

Assets

Liabilities

Portfolio

Statement of Assets and
Liabilities Location

Value

Statement of Assets and
Liabilities Location

Value

Institutional International Equity

Unrealized appreciation on foreign
forward currency contracts

—

Unrealized depreciation on foreign
forward currency contracts

227

The effect of forward contracts on the Statements of Operations for the year ended December 31, 2010 (values in thousands):


Realized gain (loss) recognized in foreign currency transactions
Portfolio	Value
Institutional International Growth		15,163
Institutional International Equity		242
International Small Cap Growth		262

Change in unrealized gain (loss) recognized in foreign currency translations
Portfolio	Value
Institutional International Growth		(4,511	)
Institutional International Equity		(227	)

The following table presents open forward foreign currency contracts as of December 31, 2010 (values in thousands):


Institutional International Equity Fund
Counter Party	Short Contracts	Settlement Date		Local Currency		Current Value		Unrealized Gain/(loss)
Northern Trust Corporation	Japanese Yen		1/11/2011	¥	524,473	$	6,460	$	(227	)

58 Annual Report

December 31, 2010

(5) Fund Share Transactions

The following table summarizes the activity in capital shares of each Portfolio (in thousands):


	Dollars
	For the year ended December 31, 2010
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	585,127	$	33,238	$	379,024	$	239,341
Institutional International Equity		31,823		3,868		139,231		(103,540	)
International Small Cap Growth		76,119		1,301		20,893		56,527
Emerging Markets Growth		299,213		10,490		331,182		(21,479	)
Emerging Leaders Growth		2,611		602		45,497		(42,284	)
Bond		23,201		1,159		620		23,740
Low Duration		65,503		1,032		31,723		34,812

	Dollars
	For the year ended December 31, 2009
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	165,765	$	16,959	$	199,645	$	(16,921	)
Institutional International Equity		20,848		2,587		104,043		(80,608	)
International Small Cap Growth		30,712		427		141,722		(110,583	)
Emerging Markets Growth		347,835		8,712		138,100		218,447
Emerging Leaders Growth		38,546		1,366		27,894		12,018
Bond		5,199		772		1,064		4,907
Low Duration (a)		13,501		—		—		13,501

	Shares
	For the year ended December 31, 2010
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		45,848		2,351		29,748		18,451
Institutional International Equity		3,407		365		13,836		(10,064	)
International Small Cap Growth		6,879		100		1,893		5,086
Emerging Markets Growth		22,585		677		23,038		224
Emerging Leaders Growth		271		60		5,354		(5,023	)
Bond		2,199		109		58		2,250
Low Duration		6,561		104		3,179		3,486

	Shares
	For the year ended December 31, 2009
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		16,035		1,423		20,023		(2,565	)
Institutional International Equity		2,541		270		14,163		(11,352	)
International Small Cap Growth		3,235		41		16,155		(12,879	)
Emerging Markets Growth		36,231		690		12,815		24,106
Emerging Leaders Growth		6,962		167		3,666		3,463
Bond		532		77		108		501
Low Duration (a)		1,360		—		—		1,360

(a)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

December 31, 2010

William Blair Funds 59

Financial Highlights

Institutional International Growth Fund


	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	12.20	$	8.66	$	19.20		$	19.39	$	18.11
Income (loss) from investment operations:
Net investment income (loss)(a)		0.14		0.10		0.25			0.15		0.11
Net realized and unrealized gain (loss) on investments		2.31		3.61		(10.24	)		3.30		4.09

Total from investment operations		2.45		3.71		(9.99	)		3.45		4.20
Less distributions from:
Net investment income		0.28		0.17		—			0.35		0.38
Net realized gain		—		—		0.55			3.29		2.54

Total distributions		0.28		0.17		0.55			3.64		2.92

Net asset value, end of year	$	14.37	$	12.20	$	8.66		$	19.20	$	19.39

Total Return (%)		20.10		42.83		(51.99	)		18.49		23.45
Ratios to average daily net assets (%):
Expenses		0.99		1.01		0.98			1.02		1.03
Net investment income (loss)		1.12		0.95		1.68			0.74		0.54


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,886,217	$	1,375,848	$	998,266	$	2,145,312	$	1,875,341
Portfolio turnover rate (%)		99		125		86		61		74

(a)

Excludes $0.09, $0.05, $(0.10), $0.06, and $0.29 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007, and 2006, respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

60 Annual Report

December 31, 2010

Financial Highlights

Institutional International Equity Fund


	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	9.84	$	7.44	$	15.03		$	14.27	$	12.04
Income (loss) from investment operations:
Net investment income (loss)(a)		0.10		0.09		0.15			0.13		0.07
Net realized and unrealized gain (loss) on investments		0.99		2.38		(7.60	)		2.42		2.37

Total from investment operations		1.09		2.47		(7.45	)		2.55		2.44
Less distributions from:
Net investment income		0.15		0.07		—			0.22		0.16
Net realized gain		—		—		0.14			1.57		0.05

Total distributions		0.15		0.07		0.14			1.79		0.21

Net asset value, end of year	$	10.78	$	9.84	$	7.44		$	15.03	$	14.27

Total Return (%)		11.12		33.27		(49.57	)		18.36		20.22
Ratios to average daily net assets (%):
Expenses		1.07		1.09		1.05			1.09		1.10
Expenses, before waivers and reimbursements		1.07		1.09		1.05			1.06		1.12
Net investment income (loss)		0.97		1.04		1.26			0.86		0.50
Net investment income (loss), before waivers and reimbursements		0.97		1.04		1.26			0.89		0.48


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	291,468	$	365,271	$	360,451	$	618,179	$	598,375
Portfolio turnover rate (%)		73		78		91		66		79

(a)

Excludes $0.04, $0.00, $0.00, $(0.07), and $0.01 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006 respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 61

Financial Highlights

International Small Cap Growth Fund


	Institutional Class Shares
	Years Ended December 31,
	2010		2009		2008			2007		2006
Net asset value, beginning of year	$	10.53	$	6.69	$	14.04		$	13.43	$	11.16
Income (loss) from investment operations:
Net investment income (loss)(a)		0.09		0.04		0.03			0.05		(0.01	)
Net realized and unrealized gain (loss) on investments		2.69		3.83		(7.26	)		1.72		2.34

Total from investment operations		2.78		3.87		(7.23	)		1.77		2.33
Less distributions from:
Net investment income		0.07		0.03		—			0.12		0.01
Net realized gain		—		—		0.12			1.04		0.05

Total distributions		0.07		0.03		0.12			1.16		0.06

Net asset value, end of year	$	13.24	$	10.53	$	6.69		$	14.04	$	13.43

Total Return (%)		26.40		57.84		(51.53	)		13.53		20.86
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.08		1.13		1.14			1.14		1.25
Expenses, before waivers and reimbursements		1.08		1.13		1.11			1.14		1.31
Net investment income (loss), net of waivers and reimbursements		0.77		0.48		0.28			0.32		(0.12	)
Net investment income (loss), before waivers and reimbursements		0.77		0.48		0.32			0.32		(0.18	)


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	646,951	$	390,851	$	291,988	$	401,459	$	231,969
Portfolio turnover rate (%)		85		136		78		88		109

(a)

Excludes $0.15, $0.01, $(0.02), $0.05, and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007, and 2006, respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

62 Annual Report

December 31, 2010

Financial Highlights

Emerging Markets Growth Fund


	Institutional Class Shares
	Years Ended December 31,
	2010		2009		2008			2007			2006
Net asset value, beginning of year	$	13.03	$	7.56	$	22.07		$	19.54		$	14.20
Income (loss) from investment operations:
Net investment income (loss) (a)		0.06		0.06		0.17			(0.01	)		0.02
Net realized and unrealized gain (loss) on investments		3.05		5.55		(13.74	)		7.27			5.44

Total from investment operations		3.11		5.61		(13.57	)		7.26			5.46
Less distributions from:
Net investment income		0.18		0.14		—			0.19			0.01
Net realized gain		—		—		0.94			4.54			0.11

Total distributions		0.18		0.14		0.94			4.73			0.12

Net asset value, end of year	$	15.96	$	13.03	$	7.56		$	22.07		$	19.54

Total Return (%)		23.91		74.33		(61.51	)		38.21			38.49
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.17		1.22		1.22			1.25			1.25
Expenses, before waivers and reimbursements		1.17		1.22		1.20			1.25			1.32
Net investment income (loss), net of waivers and reimbursements		0.43		0.54		1.08			(0.05	)		0.09
Net investment income (loss), before waivers and reimbursements		0.43		0.54		1.10			(0.05	)		0.02


	Years Ended December 31,
	2010		2009		2008		2007		2006
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,250,543	$	1,038,260	$	385,588	$	1,165,854	$	813,649
Portfolio turnover rate (%)		121		113		118		100		113

(a)

Excludes $0.11,$0.15, $(0.09), $0.21 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009, 2008, 2007 and 2006 respectively.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

December 31, 2010

William Blair Funds 63

Financial Highlights

Emerging Leaders Growth Fund


	Institutional Class Shares
	Periods Ended December 31,
	2010		2009		2008(a)
Net asset value, beginning of year	$	8.43	$	4.78	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (c)		0.04		0.04		0.04
Net realized and unrealized gain (loss) on investments		1.97		3.73		(5.26	)

Total from investment operations		2.01		3.77		(5.22	)
Less distributions from:
Net investment income		0.03		0.12		0.00	^
Net realized gain		0.06		—		—

Total distributions		0.09		0.12		0.00	^

Net asset value, end of year	$	10.35	$	8.43	$	4.78

Total Return (%)*		23.84		78.93		(52.11	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.26		1.25		1.25
Expenses, before waivers and reimbursements		1.35		1.36		1.41
Net investment income (loss), net of waivers and reimbursements		0.50		0.58		0.70
Net investment income (loss), before waivers and reimbursements		0.41		0.47		0.54


	Periods Ended December 31,
	2010		2009		2008(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	94,901	$	115,136	$	46,676
Portfolio turnover rate (%)*		176		176		151

(a)

For the period May 3, 2010 (Commencement of Operations) to December 31, 2010.

(c)

Excludes $0.96, $1.29 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2010, 2009 and 2008 respectively.

Rates not annualized for periods that are less than a year.

Rates are annualized for periods that are less than a year.

Amount is less than $0.005 per share.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

64 Annual Report

December 31, 2010

Financial Highlights

Bond Fund


	Institutional Class Shares
	Periods Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.30	$	9.72	$	10.00		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.48		0.51		0.50			0.32
Net realized and unrealized gain (loss) on investments		0.34		0.58		(0.31	)		0.03

Total from investment operations		0.82		1.09		0.19			0.35
Less distributions from:
Net investment income		0.51		0.51		0.47			0.35
Net realized gain		0.03		—		—			0.00

Total distributions		0.54		0.51		0.47			0.35

Net asset value, end of year	$	10.58	$	10.30	$	9.72		$	10.00

Total Return (%)*		8.06		11.47		1.95			3.57
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.35		0.34		0.35			0.35
Expenses, before waivers and reimbursements		0.40		0.43		0.56			0.52
Net investment income (loss), net of waivers and reimbursements		4.54		5.07		5.04			5.09
Net investment income (loss), before waivers and reimbursements		4.49		4.98		4.83			4.92


	Periods Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	192,776	$	147,344	$	74,613	$	68,483
Portfolio turnover rate (%)*		25		29		52		38

(a)

For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

Rates not annualized for periods that are less than a year.

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.

December 31, 2010

William Blair Funds 65

Financial Highlights

Low Duration Fund


	Institutional Class Shares
	Periods Ended December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.16		0.01
Net realized and unrealized gain (loss) on investments		0.05		(0.07	)

Total from investment operations		0.21		(0.06	)
Less distributions from:
Net investment income		0.24		0.01
Net realized gain		—		—

Total distributions		0.24		0.01

Net asset value, end of year	$	9.90	$	9.93

Total Return (%)*		2.15		(0.58	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.40		0.40
Expenses, before waivers and reimbursements		0.48		0.64
Net investment income (loss), net of waivers and reimbursements		1.61		1.54
Net investment income (loss), before waivers and reimbursements		1.53		1.30


	Periods Ended December 31,
	2010		2009(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	143,470	$	95,134
Portfolio turnover rate (%)*		51		—

(a)

For the period December 1, 2009 (Commencement of Operations) to December 31, 2009.

Rates not annualized for periods that are less than a year.

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.

66 Annual Report

December 31, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of

William Blair Funds

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Institutional International Growth Fund, Institutional International Equity Fund, International Small Cap Growth Fund, Emerging Markets Growth Fund, Emerging Leaders Growth Fund, Bond Fund, and Low Duration Fund (collectively, the Portfolios) (seven of the Portfolios constituting William Blair Funds) as of December 31, 2010, and the related statements of operations, the statements of changes in net assets and financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the above mentioned Portfolios of William Blair Funds at December 31, 2010, the results of their operations, changes in their net assets and financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

LOGO

Chicago, Illinois

February 22, 2011

December 31, 2010

William Blair Funds 67

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

Michelle R. Seitz,
1965*

Chairperson of the Board of Trustees and President

Since 2010

Since 2007

Principal, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)

N/A

Richard W. Smirl,
1967

Trustee and Senior Vice President

Trustee since 2010 and Senior Vice President since 2007

Principal, William Blair & Company, L.L.C., Vice President, Chief Compliance Officer 2004-2009

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

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

The Hartford Group of Mutual Funds (87 portfolios)

Donald J. Reaves,
1946

Trustee

Since 2004

Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002-2007.

American Student Assistance Corp., guarantor of student loans; Amica Mutual Insurance Company

Donald L. Seeley,
1944

Trustee

Since 2003

Retired; formerly, Director, Applied Investment Management Program, University of Arizona Department of Finance, prior there to, Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm

Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)

68 Annual Report

December 31, 2010

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

Thomas J. Skelly,
1951

Trustee

Since 2007

Advisory Board member for various U.S. companies; Director and Investment Committee Chairman of the US Accenture Foundation, Inc.; prior to 2005, Managing Partner of various divisions at Accenture

First MetLife Investors Insurance Company

Robert E. Wood II,
1938

Trustee

Since 1999

Retired; formerly, Executive Vice President, Morgan Stanley Dean Witter

Chairman, Add-Vision, Inc., manufacturer of surface animation systems; Chairman Micro-Combustion, LLC

Officers

Michael P. Balkin,
1959

Senior Vice President

Since 2009

Principal, William Blair & Company, L.L.C.

N/A

Vice President

2008-2009

Associate, William Blair & Company, L.L.C.; former Chief Investment Officer, Magnetar Investment Management

Karl W. Brewer,
1966

Senior Vice President

Since 2000

Principal, William Blair & Company, L.L.C.

N/A

David C. Fording,
1967

Senior Vice President

Since 2009

Principal, William Blair & Company, L.L.C.

N/A

Vice President

2006-2009

Associate, William Blair & Company, L.L.C.; former Portfolio Manager, TIAA-CREF.

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

Since 2004

Principal, 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

Robert C. Lanphier, IV,
1956

Senior Vice President

Since 2003

Principal, William Blair & Company, L.L.C.

Chairman, AG. Med, Inc.

Mark T. Leslie,
1967

Senior Vice President

Since 2008

Principal, William Blair & Company, L.L.C.

N/A

Vice President

2005-2008

Associate, William Blair & Company, L.L.C. formerly, U.S. Bancorp Asset Management

December 31, 2010

William Blair Funds 69


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(2)	Other Directorships Held by Trustee/Officer
Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

Todd M. McClone, 1968	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A

	Vice President	2005-2006	Associate, William Blair & Company, L.L.C.	N/A

Tracy McCormick, 1954	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

David Merjan, 1960	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

David S. Mitchell, 1960	Senior Vice President	Since 2004	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

Richard W. Smirl, 1967	Senior Vice President	Since 2004	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

Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A

Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.	N/A

Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A

Paul J. Sularz, 1967	Vice President	Since 2009	Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A

Walter R. Randall, Jr., 1960	Chief Compliance Officer	Since 2009	Associate, William Blair & Company, L.L.C.; Associate Counsel and Chief Compliance Officer, Calamos Investments; Assistant General Counsel, American Century Investments.	N/A

Colette M. Garavalia, 1961	Treasurer	Since 2009	Associate, William Blair & Company, L.L.C.	N/A

	Secretary	2000-2009	Associate, William Blair & Company, L.L.C.;	N/A

70 Annual Report

December 31, 2010

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(2)

Other Directorships

Held by Trustee/Officer

Andrew T. Pfau,
1970

Secretary

Since 2009

Associate, William Blair & Company, L.L.C.; Associate, Bell, Boyd & Lloyd, LLP; Associate, Sidley Austin LLP

N/A

(1)

(2)

In November 2008, all current principals of William Blair & Company, L.L.C. also became limited partners in WB Holdings, L.P.

December 31, 2010

William Blair Funds 71

(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 December 31 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

Additional Federal Income Tax Information: (unaudited)

Under Section 852(b)(3)(C) of the Code, the Funds hereby designate the following amounts as capital gain dividends for the fiscal year ended December 31, 2010:


Emerging Leaders Growth		Bond
$505,181		$493,757

The following table provides the percentage of the 2010 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:


Portfolio	Dividend Received Deduction%			Qualified Dividend Income%
Institutional International Growth		0.00	%		80.38	%
Institutional International Equity		0.31	%		100.00	%
International Small Cap Growth		0.13	%		100.00	%
Emerging Markets Growth		0.16	%		83.93	%
Emerging Leaders Growth		0.00	%		100.00	%
Bond		0.00	%		0.00	%
Low Duration		0.00	%		0.00	%

In January 2011, you were notified on IRS Form 1099-Div or substitute 1099 DIV as to the Federal tax status of the distributions received by you in the calendar year 2010.

72 Annual Report

December 31, 2010

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 July 1, 2010 to December 31, 2010.

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.

December 31, 2010

William Blair Funds 73

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 7/1/2010		Ending Account Value 12/31/2010		Expenses Paid During the Period (a)		Annualized Expense Ratio
Institutional International Growth Fund
Institutional Class—actual return	$	1,000.00	$	1,255.60	$	5.60		0.98	%
Institutional Class—hypothetical 5% return		1,000.00		1,020.24		5.01		0.98
Institutional International Equity Fund
Class I—actual return		1,000.00		1,224.40		6.02		1.07
Institutional Class—hypothetical 5% return		1,000.00		1,019.79		5.47		1.07
International Small Cap Growth Fund
Institutional Class—actual return		1,000.00		1,291.00		6.22		1.08
Institutional Class—hypothetical 5% return		1,000.00		1,019.78		5.48		1.08
Emerging Markets Growth Fund
Institutional Class—actual return		1,000.00		1,291.70		6.75		1.17
Institutional Class—hypothetical 5% return		1,000.00		1,019.31		5.95		1.17
Emerging Leaders Growth Fund
Institutional Class—actual return		1,000.00		1,263.90		9.25		1.62
Institutional Class—hypothetical 5% return		1,000.00		1,017.03		8.24		1.62
Bond Fund
Institutional Class—actual return		1,000.00		1,025.60		1.79		0.35
Institutional Class—hypothetical 5% return		1,000.00		1,023.44		1.79		0.35
Low Duration Fund
Institutional Class—actual return		1,000.00		1,004.80		2.04		0.40
Institutional Class—hypothetical 5% return		1,000.00		1,023.17		2.06		0.40

(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 184, and divided by 365 (to reflect the one-half year period).

74 Annual Report

December 31, 2010

BOARD OF TRUSTEES

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, Chairperson and President

Principal, William Blair & Company, L.L.C.

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl, Senior Vice President

Principal, William Blair & Company, L.L.C.

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Michael P. Balkin, Senior Vice President

Karl W. Brewer, Senior Vice President

David C. Fording, 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

Robert C. Lanphier, IV, Senior Vice President

Mark T. Leslie, Senior Vice President

Matthew A. Litfin, Senior Vice President

Kenneth J. McAtamney, Senior Vice President

Todd M. McClone, Senior Vice President

Tracy McCormick, Senior Vice President

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Chad M. Kilmer, Vice President

Kathleen M. Lynch, Vice President

Paul J. Sularz, Vice President

Walter R. Randall, Jr., Chief Compliance Officer

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Independent Registered Public Accounting Firm

Ernst & Young LLP

Legal Counsel

Vedder Price P.C.

Transfer Agent

Boston Financial Data Services, Inc.

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

December 31, 2010

William Blair Funds 75

LOGO

INSTITUTIONALFUNDS

Institutional International Growth Fund

Institutional International Equity Fund

International Small Cap Growth Fund - Institutional Class Shares

Emerging Markets Growth Fund - Institutional Class Shares

Emerging Leaders Growth Fund - Institutional Class Shares

Bond Fund - Institutional Class Shares

Low Duration Fund - Institutional Class Shares

LOGO

222 West Adams Street

Chicago, IL 60606

800.742.7272 Ÿ www.williamblairfunds.com

Item 2.

Code of Ethics

As of the end of the period covered by this Form N-CSR, the Registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. Such code of ethics is posted on the Registrant’s website: www.williamblairfunds.com. There were no amendments to or waivers of the code of ethics during the period covered by this report.

Item 3.

Audit Committee Financial Expert

The Registrant’s Board of Trustees has determined that the Registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. Mr. Donald L. Seeley, the Registrant’s audit committee financial expert, is “independent” for purposes of Item 3 to Form N-CSR.

An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an “audit committee financial expert.” Further, the designation of a person as an “audit committee financial expert” does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the “audit committee financial expert” designation. Similarly, the designation of a person as an “audit committee financial expert” does not affect the duties, obligations, or liability of any other member of the audit committee or Board of Trustees.

Item 4.

Principal Accountant Fees and Services

Audit Fees

For the fiscal years ended December 31, 2009 and 2010, Ernst & Young, LLP, the Registrant’s principal accountant (“E&Y”), billed the Registrant $484,000 and $501,000, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

Audit-Related Fees

For the fiscal years ended December 31, 2009 and 2010, E&Y billed the Registrant $0 and $0, respectively, for assurance and related services that are reasonably related to the performance of the audit of the Registrant’s financial statements and that are not reported above, such as reviewing prospectuses and SEC filings. For the fiscal years ended December 31, 2009 and 2010, E&Y provided no audit-related services to William Blair & Company L.L.C., the Registrant’s investment advisor (“William Blair”) or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Tax Fees

For the fiscal years ended December 31, 2009 and 2010, E&Y billed the Registrant $92,475 and $117,850, respectively, for professional services rendered for tax compliance, tax advice and tax planning. Such services consisted of preparation of tax returns, year-end distribution review, qualifying dividend income analysis and computation of foreign tax credit pass-through. For the fiscal years ended December 31, 2009 and 2010, E&Y did not bill William Blair and its control affiliates for any services that were for engagements directly related to the Registrant’s operations and financial reporting.

All Other Fees

For the fiscal years ended December 31, 2009 and 2010, E&Y did not bill the Registrant for products and services other than the services reported above. For the fiscal years ended December 31, 2009 and 2010, E&Y provided no other services to William Blair or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Audit Committee Pre-Approval Policies and Procedures

Pursuant to Registrant’s Audit Committee Charter (the “Charter”), the Audit Committee is responsible for pre-approving any engagement of the principal accountant to provide non-prohibited services to the Registrant, including the fees and other compensation to be paid to the principal accountant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. Pursuant to the Charter, the Audit Committee is also responsible for pre-approving any engagement of the principal accountant, including the fees and other compensation to be paid to the principal accountant, to provide non-audit services to the Registrant’s investment advisor (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant), if the engagement relates directly to the operations and financial reporting of the Registrant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. The Chair of the Audit Committee may grant the pre-approval referenced above for non-prohibited and non-audit services. All such delegated pre-approvals will be presented to the Audit Committee no later than the next Audit Committee meeting.

Non-Audit Fees

For the fiscal years ended December 31, 2009 and 2010, E&Y billed the Registrant $92,475 and $117,850, respectively, in non-audit fees (tax services). For the same periods, E&Y billed William Blair and its control affiliates $0 and $97,000 (Custodian SAS 70 Report), respectively, in non-audit fees. The Registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to William Blair or any of its control affiliates that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining E&Y’s independence.

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 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 final 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 on 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. Seitz
By:		Michelle R. Seitz
		President (Chief Executive Officer)

Date: February 17, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated


		/s/ Michelle R. Seitz

By:

Michelle R. Seitz

President

(Chief Executive Officer)

Date: February 17, 2011


		/s/ Colette M. Garavalia

By:

Colette M. Garavalia

Treasurer

(Chief Financial Officer)

Date: February 17, 2011

William Blair Funds N-CSRCertified annual shareholder report (management investment company)