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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number 811-5344

William Blair Funds

(Exact name of registrant as specified in charter)

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

Michelle R. Seitz

William Blair Funds

222 West Adams Street, Chicago, IL 60606

(Name and address of agent for service)

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

Date of fiscal year end: December 31

Date of reporting period: June 30, 2012

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. June 30, 2012 Annual Reports transmitted to shareholders.

William Blair Funds

Semiannual Report

June 30, 2012

Table of Contents

Growth Fund
An Overview from the Portfolio Managers	6
Portfolio of Investments	9
Large Cap Growth Fund
An Overview from the Portfolio Managers	10
Portfolio of Investments	13
Small Cap Growth Fund
An Overview from the Portfolio Managers	14
Portfolio of Investments	17
Mid Cap Growth Fund
An Overview from the Portfolio Managers	19
Portfolio of Investments	22
Small-Mid Cap Growth Fund
An Overview from the Portfolio Managers	23
Portfolio of Investments	26
Global Markets Overview	27
Global Growth Fund
An Overview from the Portfolio Managers	29
Portfolio of Investments	31
International Growth Fund
An Overview from the Portfolio Manager	33
Portfolio of Investments	35
International Equity Fund
An Overview from the Portfolio Manager	40
Portfolio of Investments	42
International Small Cap Growth Fund
An Overview from the Portfolio Manager	44
Portfolio of Investments	46
Emerging Markets Growth Fund
An Overview from the Portfolio Managers	49
Portfolio of Investments	51
Emerging Leaders Growth Fund
An Overview from the Portfolio Managers	54
Portfolio of Investments	56
Emerging Markets Small Cap Growth Fund
An Overview from the Portfolio Managers	58
Portfolio of Investments	60

June 30, 2012 William Blair Funds    1

Large Cap Value Fund
An Overview from the Portfolio Manager	63
Portfolio of Investments	66
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
Small-Mid Cap Value Fund
An Overview from the Portfolio Managers	76
Portfolio of Investments	79
Fixed-Income Markets Overview	81
Bond Fund
An Overview from the Portfolio Managers	82
Portfolio of Investments	84
Income Fund
An Overview from the Portfolio Manager	88
Portfolio of Investments	90
Low Duration Fund
An Overview from the Portfolio Managers	93
Portfolio of Investments	95
Ready Reserves Fund
An Overview from the Portfolio Managers	99
Portfolio of Investments	101
Financial Statements	103
Notes to Financial Statements	118
Financial Highlights	135
Board of Trustees and Officers	155
Fund Expenses	164

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.

2Semi-Annual Report June 30, 2012

PERFORMANCE AS OF JUNE 30, 2012—CLASS N SHARES (Unaudited)

	Year To Date		1 yr			3 yr		5 yr			10 yr (or since inception)			Inception Date	Overall Morningstar Rating
Growth Fund
Class N		8.95		1.11			12.88		2.07			5.51		3/20/1946	««« Among 1,510 Large Growth Funds
Morningstar Large Growth		9.23		0.81			14.83		0.96			5.19
Russell 3000® Growth		9.98		5.05			17.55		2.79			6.13
S&P’s 500		9.49		5.45			16.40		0.22			5.33
Large Cap Growth Fund
Class N		12.06		4.19			14.25		1.15			3.59		12/27/1999	««« Among 1,510 Large Growth Funds
Morningstar Large Growth		9.23		0.81			14.83		0.96			5.19
Russell 1000® Growth		10.08		5.76			17.50		2.87			6.03
Small Cap Growth Fund
Class N		9.19		(6.63	)		10.25		(2.31	)		7.15		12/27/1999	«« Among 662 Small Growth Funds
Morningstar Small Growth		7.67		(5.09	)		17.34		0.94			6.70
Russell 2000® Growth		8.81		(2.71	)		18.09		1.99			7.39
Mid Cap Growth Fund
Class N		7.03		(2.86	)		17.28		3.99			5.81		2/1/2006	«««« Among 678 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		7.55		(4.31	)		17.04		1.17			—
Russell MidCap® Growth		8.10		(2.99	)		19.01		1.90			3.82
Small-Mid Cap Growth Fund
Class N		5.00		(6.10	)		15.72		2.69			6.95		12/29/2003	«««« Among 678 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		7.55		(4.31	)		17.04		1.17			—
Russell 2500TM Growth		8.44		(3.19	)		19.38		2.35			6.65
Global Growth Fund
Class N		8.64		(1.24	)		15.15		—			(2.52	)	10/15/2007	«««« Among 706 World Stock Funds
Morningstar World Stock		5.38		(7.48	)		10.79		—			—
MSCI All Country World IMI (net)		5.76		(6.91	)		11.30		—			(3.70	)
International Growth Fund
Class N		7.66		(9.74	)		10.34		(4.53	)		6.50		10/1/1992	««« Among 210 Foreign Large Growth Funds
Morningstar Foreign Large Growth		4.86		(11.51	)		9.53		(3.38	)		6.03
MSCI All Country World Ex-U.S. IMI (net)		2.93		(14.79	)		7.36		(4.46	)		7.19
International Equity Fund
Class N		4.55		(11.75	)		6.80		(5.88	)		2.76		5/24/2004	«« Among 210 Foreign Large Growth Funds
Morningstar Foreign Large Growth		4.86		(11.51	)		9.53		(3.38	)		—
MSCI World Ex-U.S. (net)		2.43		(14.13	)		6.20		(5.67	)		4.69
International Small Cap Growth Fund
Class N		6.16		(11.55	)		13.91		(2.56	)		4.59		11/1/2005	««« Among 96 Foreign Small/Mid Growth Funds
Morningstar Foreign Small/Mid Growth		7.36		(11.25	)		12.80		(3.49	)		—
MSCI All Country World Small Cap Ex-U.S. (net)		4.09		(16.43	)		10.41		(3.74	)		4.41
Emerging Markets Growth Fund
Class N		7.08		(10.81	)		12.61		(2.96	)		10.07		6/6/2005	««« Among 353 Diversified Emerging Markets Funds
Morningstar Diversified Emerging Markets		4.15		(16.10	)		8.96		(2.02	)		—
MSCI Emerging Markets IMI (net)		4.31		(16.29	)		9.97		(0.01	)		10.34

Please see the next page for important disclosure information.

June 30, 2012 William Blair Funds    3

PERFORMANCE AS OF JUNE 30, 2012—CLASS N SHARES (Unaudited)—CONTINUED

	Year To Date		1 yr			3 yr		5 yr			10 yr (or since inception)			Inception Date	Overall Morningstar Rating
Emerging Leaders Growth Fund
Class N		6.90		(11.87	)		—		—			0.85		5/3/2010	Not rated.
Morningstar Diversified Emerging Markets		4.15		(16.10	)		—		—			—
MSCI Emerging Markets Large Cap (net)		3.60		(15.51	)		—		—			(0.63	)
Emerging Markets Small Cap Growth Fund
Class N		14.29		—			—		—			11.20		10/24/2011	Not rated.
Morningstar Diversified Emerging Markets		4.15		—			—		—			—
MSCI EM (Emerging Markets) Small Cap		7.27		—			—		—			0.49
Large Cap Value Fund
Class N		9.15		—			—		—			8.93		10/24/2011	Not rated.
Morningstar Large Value		7.01		—			—		—			—
Russell 1000® Value		8.68		—			—		—			10.48
Small Cap Value Fund
Class N		5.46		(3.97	)		17.74		1.31			5.62		12/23/1996	««« Among 284 Small Value Funds
Morningstar Small Value		6.53		(2.74	)		17.37		(0.20	)		7.34
Russell 2000® Value		8.23		(1.44	)		17.43		(1.05	)		6.50
Mid Cap Value Fund
Class N		4.68		(1.46	)		—		—			5.82		5/3/2010	Not rated.
Morningstar Mid-Cap Value		6.95		(3.42	)		—		—			—
Russell Midcap® Value		7.78		(0.37	)		—		—			6.21
Small-Mid Cap Value Fund
Class N		4.59		—			—		—			9.30		12/15/2011	Not rated.
Morningstar Mid-Cap Value		6.16		—			—		—			—
Russell 2500® Value		8.15		—			—		—			12.69
Bond Fund
Class N		3.93		8.49			8.42		7.30			6.81		5/1/2007	«««« Among 1,015 Intermediate-Term Bond Funds
Morningstar Intermediate-Term Bond		3.46		6.57			8.31		6.20			—
Barclays Capital U.S. Aggregate Bond		2.37		7.47			6.93		6.79			6.35
Income Fund
Class N		2.94		5.68			6.30		4.37			3.91		10/1/1990	«««« Among 352 Short-Term Bond Funds
Morningstar Short-term Bond		1.86		2.05			4.11		3.50			3.36
Barclays Capital Intermediate		2.10		5.42			5.81		6.01			5.08
Govt./Credit Bond
Low Duration Fund
Class N		1.59		2.19			—		—			1.77		12/1/2009	Not rated.
Morningstar Ultra Short Bond		1.05		0.79			—		—			—
Merrill Lynch 1-Year U.S. Treasury Note		0.04		0.26			—		—			0.50

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, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Investing in smaller companies involves special risks, including higher

4     Semi-Annual Report June 30, 2012

PERFORMANCE AS OF JUNE 30, 2012—CLASS N SHARES (Unaudited)—CONTINUED

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 6/30/2012 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 1,510/1,297/855 large growth funds; Small Cap Growth Fund «/««/«««, out of 662/574/378 small growth funds; Mid Cap Growth Fund «««/««««/NA and Small-Mid Cap Growth Fund «««/««««/NA out of 678/598/NA mid cap growth funds; Global Growth Fund ««««/NA/NA out of 706/NA/NA world stocks; International Growth Fund ««««/«««/««« and International Equity Fund ««/««/NA out of 210/171/96 foreign large growth funds; International Small Cap Growth Fund ««««/«««/NA out of 96/88/NA foreign small/mid growth funds; Emerging Markets Growth Fund ««««/««/NA and Emerging Leaders Growth Fund ««««/NA/NA, out of 353/243/NA diversified emerging markets growth funds; Small Cap Value Fund «««/««««/«« out of 284/253/150 small value funds; Income Fund «««««/««««/«««« out of 352/324/190 short-term bond funds; Bond Fund «««/««««/NA out of 1,015/880/NA intermediate-term bond fund.

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

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    5

David C. Fording

John F. Jostrand

GROWTH FUND

The Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Thus far in 2012, U.S. equity markets posted strong results; the Russell 3000^® Growth Index rose 9.98%. However, performance varied widely in each quarter. Like the past several years, the familiar pattern of risk-on occurred during periods of optimism while risk-off occurred during periods of pessimism due to rising macro and political concerns. The period began with robust upward momentum as investors gained confidence in the strengthening U.S. economy and were comforted by stabilization in Europe; the Russell 3000^® Growth Index climbed 14.58% in the first quarter. Notably, investors differentiated based on underlying company fundamentals, a sound environment for active managers. However, during the second quarter, markets reversed course due to worries over U.S. economic growth, the re-intensified European debt crisis and continued slowing growth in emerging markets; the Russell 3000^® Growth Index fell 4.02% in the second quarter. In the latter period, volatility and stock correlations picked up; investors preferred low risk, defensives and domestically focused companies.

Portfolio Results

The William Blair Growth Fund Class N rose 8.95% modestly trailing its benchmark, the Russell 3000^® Growth Index. The positive results occurred primarily in the first quarter. Importantly, most of our companies had good quarterly earnings reports, which assisted.

Our Health Care and Industrials stock selection was strong. In Health Care, we added HMS Holdings Corporation to the portfolio in April and it rallied sharply at the end of June when the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA), which potentially expands the Medicaid population by 10 million in 2014. HMS Holdings’ coordination of benefit business should benefit as it ensures Medicaid does not pay claims that should be covered by other parties. More broadly, we had a half dozen other outperforming Health Care stocks in the portfolio in the first half. In Industrials, TransDigm Group, Inc. – a designer, producer, and supplier of engineered aircraft components, and IHS, Inc. – the leading global provider of critical technical information, decision support tools, and related services, contributed nicely to results. TransDigm Group reported quarterly earnings that were above consensus due to strong growth in all end markets. In our view, it has a superior business model relative to peers focusing its design and acquisition efforts on complex, low volume, low dollar value parts within an aircraft. Once it has a design win, it is the sole source provider for the life of the aircraft (30 to 40 years per platform). IHS had healthy quarterly results with attractive organic revenue growth. We believe the firm should continue to benefit from strong subscription renewal trends, a robust new product pipeline, improved cross-selling initiatives, as well as cost and efficiency improvements projects. Lastly, in Information Technology, eBay, Inc. continued to be a standout as the best overall portfolio contributor. It continued to experience strong top line growth and margin expansion for the Paypal business as well as continued improvement for the Marketplace division. We believe Paypal should continue to benefit from market share gains and market growth online as well as in the fast growing mobile payments arena.

Our weakest sector was Consumer Discretionary due to positions in Gentex Corporation and McDonald’s Corporation. Gentex, a technology company serving the global automotive industry, came under pressure given another delay by the National Transportation Safety Board in providing guidance for how auto manufacturers are to comply with the government’s mandate for rear cameras in vehicles. This news disappointed investors as it

6     Semi-Annual Report June 30, 2012

continues the uncertainty in regard to an avenue of growth for Gentex. We believe the firm has attractive long term growth prospects from both current and upcoming products. For McDonald’s, it was a strong performer in 2011 and investors took profits in 2012. In our view, it is one of highest quality investments that did not perform as well as comparable peers especially in the second quarter. Notably, we had trimmed this large position early in 2012 on valuation and added back to it later in the first quarter period at a more attractive price; we believe it is a well positioned long term winner. Another sector that lagged was Consumer Staples due to a position in Green Mountain Coffee Roasters, Inc. It came under pressure on weaker than expected sales growth driven by a K-cup attachment rate that appears to be slowing faster than expected. The many moving parts of the model, notably the shifting channels of distribution and evolving consumer behavior as single-serve coffee goes mainstream, led to wide variability in company results versus Wall Street expectations, and investors lost confidence. This coincides with concerns around long-term K-cup profitability as select K-cup related patents expire. We believe current valuation implies substantial cuts to estimates based on various negative scenarios, which we do not consider probable; therefore, we maintained our relatively small position.

Outlook

While U.S. equity markets oscillate between optimism and pessimism from quarter to quarter, these moves seem more based on the latest macro or political news release than a change in the long-term trajectory for the U.S. economy. The Federal Reserve remains accommodative and stands ready to enact additional measures if necessary, which should be supportive of businesses and consumers. While in the second quarter unemployment ticked up and manufacturing modestly declined due to Europe’s recessionary environment, U.S. housing sales improved. Corporate balance sheets and operating margins in aggregate remain healthy. Falling commodity prices should provide some relief; the price of oil traded from $99 to $85 per barrel in the first half of 2012.

Typically, markets crave certainty; until clarity appears, volatility will likely remain elevated. Investors remain concerned over further deterioration in the European debt crisis and slowing emerging market growth, which in turn impacts U.S. exports. Also, in the U.S., stability of economic growth remains a primary focus, along with the November elections and the outcome for the fiscal cliff (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts.) Finally, with revenue growth broadly decelerating and operating margins at or near peak levels for the U.S. market as a whole, the ability of corporations to sustain high levels of earnings growth is of some concern.

As always, our concentration remains on our quality growth philosophy, disciplined investment process, and deep fundamental research. We believe strategically advantaged companies with unique products/services, strong business models and seasoned management teams can sustain growth over peers and the benchmark. In terms of valuation, quality growth stocks remain attractive if consensus earnings can be achieved, while perceived “safe” stocks are elevated relative to history. In general, we continue to find attractive investment opportunities and use volatility to our advantage to buy quality growth companies with strong risk/reward profiles.

June 30, 2012 William Blair Funds    7

Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			10 Year
Class N		8.95	%		1.11	%		12.88	%		2.07	%		5.51	%
Class I		9.12			1.41			13.24			2.40			5.82
Russell 3000® Growth Index		9.98			5.05			17.55			2.79			6.13
S&P 500 Index		9.49			5.45			16.40			0.22			5.33

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 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. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) or service fees.

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

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

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

This report identifies the Fund’s investments on June 30, 2012. 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)

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

8     Semi-Annual Report June 30, 2012

Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Information Technology—34.5%
*Apple, Inc.		85,285	$	49,806
*Cavium, Inc.		242,700		6,796
*eBay, Inc.		497,200		20,887
*Genpact, Ltd.†		805,418		13,394
*Google, Inc. Class “A”		44,905		26,048
Mastercard, Inc. Class “A”		39,200		16,860
*Monolithic Power Systems, Inc.		283,452		5,632
QUALCOMM, Inc.		402,740		22,425
*RealPage, Inc.		302,761		7,012
*Silicon Laboratories, Inc.		179,227		6,793
*SolarWinds, Inc.		184,500		8,037
Solera Holdings, Inc.		142,300		5,947
TE Connectivity, Ltd.†		383,500		12,238
*VeriSign, Inc.		220,000		9,585
				211,460
Industrials—16.4%
*BE Aerospace, Inc.		146,600		6,401
Fastenal Co.		223,458		9,008
*IHS, Inc. Class “A”		203,869		21,963
*Jacobs Engineering Group, Inc.		334,200		12,653
*Stericycle, Inc.		148,600		13,622
*TransDigm Group, Inc.		124,180		16,677
*Trimas Corporation		316,423		6,360
Union Pacific Corporation		116,900		13,947
				100,631
Health Care—15.2%
*Align Technology, Inc.		137,200		4,591
Allergan, Inc.		176,200		16,311
*Cerner Corporation		42,300		3,497
*DaVita, Inc.		80,300		7,886
*Gilead Sciences, Inc.		347,835		17,837
*Haemonetics Corporation		134,100		9,938
*HMS Holdings Corporation		302,100		10,063
*IDEXX Laboratories, Inc.		118,518		11,393
*Illumina, Inc.		115,900		4,681
*NxStage Medical, Inc.		442,090		7,409
				93,606
Consumer Discretionary—14.5%
*Amazon.com, Inc.		82,600		18,862
*Discovery Communications, Inc. Class “A”		176,600		9,536
Gentex Corporation		288,200		6,015
Harley-Davidson, Inc.		227,599		10,408
*K12, Inc.		212,299		4,947
Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Consumer Discretionary—(continued)
McDonald’s Corporation		267,764	$	23,705
*Pandora Media, Inc.		568,000		6,174
*Teavana Holdings, Inc.		357,280		4,834
*Vera Bradley, Inc.		219,300		4,623
				89,104
Energy—6.6%
*Cameron International Corporation		148,147		6,327
Occidental Petroleum Corporation		157,500		13,509
Schlumberger, Ltd.†		314,900		20,440
				40,276
Materials—4.8%
Airgas, Inc.		150,700		12,660
Ecolab, Inc.		243,720		16,702
				29,362
Financials—3.7%
*IntercontinentalExchange, Inc.		118,000		16,046
LPL Financial Holdings, Inc.		197,500		6,669
				22,715
Consumer Staples—2.8%
*Green Mountain Coffee Roasters, Inc.		254,700		5,548
Mead Johnson Nutrition Co.		141,700		11,408
				16,956
Total Common Stocks—98.5% (cost $502,304)				604,110
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $8,273, collateralized by FNMA, 5.00%, due 4/15/2015.	$	8,272		8,272
Total Repurchase Agreement—1.3% (cost $8,273)				8,272
Total Investments—99.8% (cost $510,576)				612,382
Cash and other assets, less liabilities—0.2%				1,181
Net assets—100.0%			$	613,563

* Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    9

James S. Golan

David P. Ricci

LARGE CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Thus far in 2012, U.S. equity markets posted strong results; the Russell 1000^® Growth Index rose 10.08%. However, performance varied widely in each quarter. Like the past several years, the familiar pattern of risk-on occurred during periods of optimism while risk-off occurred during periods of pessimism due to rising macro and political concerns. The period began with robust upward momentum as investors gained confidence in the strengthening U.S. economy and were comforted by stabilization in Europe; the Russell 1000^® Growth Index climbed 14.69% in the first quarter. Notably, investors differentiated based on underlying company fundamentals, a sound environment for active managers. However, during the second quarter, markets reversed course due to worries over U.S. economic growth, the re-intensified European debt crisis and continued slowing growth in emerging markets; the Russell 1000^® Growth Index fell 4.02% in the second quarter. In the latter period, volatility and stock correlations picked up; investors preferred low risk, defensives and domestically focused companies.

Portfolio Results

The William Blair Large Cap Growth Fund Class N rose 12.06% surpassing the benchmark, the Russell 1000^® Growth Index. Stock selection in the first quarter drove the positive relative results. Importantly, most of our companies had good quarterly earnings reports, which assisted.

Our Information Technology (IT) stock selection contributed most to the overall return; eBay, Inc., Apple, Inc. and Citrix Systems, Inc. ranked among the best performers. eBay continued to experience strong top line growth and margin expansion for the Paypal business as well as continued improvement for the Marketplace division. We believe Paypal should continue to benefit from market share gains and market growth online as well as in the fast growing mobile payments arena. Apple also continued to gain ground due to healthy iPhone, iPad, and Mac sales. Additionally, the company launched the newest iPad and announced it is initiating a dividend as well as a share repurchase program. Citrix Systems benefited from above expectations revenues driven by strong desktop virtualization license growth, increased traction with its networking product and momentum with its SaaS (software-as-a-service) business. We believe Citrix is well positioned to take advantage of attractive trends in desktop virtualization, which is primarily driven by Windows 7 upgrades, desktop refreshes, security, disaster recovery planning, and a move to support a variety of client access devices due to the continued proliferation of smartphones and the emerging iPad/tablet category. Outside of IT, Whole Foods Market, Inc. contributed nicely delivering strong sales and margin leverage. The management team continues to execute at a high level in a robust market for health conscious consumers – a long-term secular trend. Going forward, we believe Whole Foods Market has the potential to triple the number of stores in North America based on underpenetrated geographies and smaller stores in smaller cities.

The portfolio had only a couple of notable stock detractors across various sectors. In Consumer Staples, Green Mountain Coffee Roasters, Inc. came under pressure on slowing sales growth, driven primarily by a K-cup attachment rate that is deteriorating as the user base evolves from high coffee consuming early adopters to mass market. Given the broader uncertainty on the company (patent expiration, and hence the emergence of potential competition), this new information severely rattled investors. We believe the current valuation is unusually punishing and a dire view of the situation; therefore, we maintained our

10     Semi-Annual Report June 30, 2012

relatively small position. In IT, Google, Inc. trailed peers; it slightly missed revenues in its fourth quarter report, which disappointed investors. Also, with increased attention over the Facebook IPO, some investors had concerns over Google’s competitive position and a potential threat to its advertising revenues. In our view, Google should continue to be a beneficiary of advertisers shifting their spending to the internet and wireless applications. Lastly, in Consumer Discretionary, Nike, Inc.’s stock detracted in the second quarter. The company’s fiscal fourth quarter results disappointed due to lower than expected gross margin and a deceleration of futures orders in China. We believe these issues will not be secular in nature. Over the long-term, Nike should enjoy compelling global growth due to its strong brand, innovation and further expansion into emerging markets.

Outlook

While U.S. equity markets oscillate between optimism and pessimism from quarter to quarter, these moves seem more based on the latest macro or political news release than a change in the long-term trajectory for the U.S. economy. The Federal Reserve remains accommodative and stands ready to enact additional measures if necessary, which should be supportive of businesses and consumers. While in the second quarter unemployment ticked up and manufacturing modestly declined due to Europe’s recessionary environment, U.S. housing sales improved. Corporate balance sheets and operating margins in aggregate remain healthy. Falling commodity prices should provide some relief; the price of oil traded from $99 to $85 per barrel in the first half of 2012.

Typically, markets crave certainty; until clarity appears, volatility will likely remain elevated. Investors remain concerned over further deterioration in the European debt crisis and slowing emerging market growth, which in turn impacts U.S. exports. Also, in the U.S., stability of economic growth remains a primary focus, along with the November elections and the outcome for the fiscal cliff (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts.) Finally, with revenue growth broadly decelerating and operating margins at or near peak levels for the U.S. market as a whole, the ability of corporations to sustain high levels of earnings growth is of some concern.

As always, our concentration remains on our quality growth philosophy, disciplined investment process, and deep fundamental research. We believe strategically advantaged companies with unique products/services, strong business models and seasoned management teams can sustain growth over peers and the benchmark. In terms of valuation, quality growth stocks remain attractive if consensus earnings can be achieved, while perceived “safe” stocks are elevated relative to history. In general, we continue to find attractive investment opportunities and use volatility to our advantage to buy quality growth companies with strong risk/reward profiles.

June 30, 2012 William Blair Funds    11

Large Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			10 Year
Class N		12.06	%		4.19	%		14.25	%		1.15	%		3.59	%
Class I		12.38			4.40			14.52			1.43			3.83
Russell 1000® Growth Index		10.08			5.76			17.50			2.87			6.03

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

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

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

This report identifies the Fund’s investments on June 30, 2012. 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)

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

12     Semi-Annual Report June 30, 2012

Large Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Information Technology—29.7%
Accenture plc Class “A”†		13,030	$	783
*Apple, Inc.		4,680		2,733
*Broadcom Corporation Class “A”		7,730		261
*Citrix Systems, Inc.		10,170		854
*eBay, Inc.		24,410		1,026
*Google, Inc. Class “A”		1,483		860
Mastercard, Inc. Class “A”		940		404
QUALCOMM, Inc.		15,125		842
*Trimble Navigation, Ltd.		5,470		252
				8,015
Consumer Discretionary—15.5%
*Amazon.com, Inc.		2,680		612
*Discovery Communications, Inc. Class “A”		10,270		555
*Dollar General Corporation		7,350		400
Harley-Davidson, Inc.		14,860		679
NIKE, Inc. Class “B”		6,850		601
*priceline.com, Inc.		725		482
Starbucks Corporation		15,960		851
				4,180
Industrials—12.4%
Donaldson Co., Inc.		14,720		491
Precision Castparts Corporation		5,130		844
*Stericycle, Inc.		8,110		743
Union Pacific Corporation		5,110		610
W.W. Grainger, Inc.		3,450		660
				3,348
Consumer Staples—9.9%
Colgate-Palmolive Co.		8,930		929
*Green Mountain Coffee Roasters, Inc.		12,520		273
Mead Johnson Nutrition Co.		10,120		815
Whole Foods Market, Inc.		6,810		649
				2,666
Health Care—9.4%
Allergan, Inc.		8,155		755
*DaVita, Inc.		5,620		552
*Gilead Sciences, Inc.		18,380		942
*IDEXX Laboratories, Inc.		2,870		276
				2,525
Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Financials—9.3%
*Affiliated Managers Group, Inc.		4,290	$	470
American Express Co.		10,000		582
JPMorgan Chase & Co.		25,860		924
T Rowe Price Group, Inc.		8,350		526
				2,502
Energy—5.4%
National Oilwell Varco, Inc.		4,340		280
Occidental Petroleum Corporation		5,110		438
Schlumberger, Ltd.†		11,410		741
				1,459
Materials—4.4%
Praxair, Inc.		6,695		728
Syngenta AG—ADR		6,840		468
				1,196
Telecommunication Services—2.6%
*SBA Communications Corporation Class “A”		12,450		710
Total Common Stocks—98.6% (cost $20,696)				26,601
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $467, collateralized by FNMA, 5.00%, due 4/15/2015	$	467		467
Total Repurchase Agreement—1.7% (cost $467)				467
Total Investments—100.3% (cost $21,163)				27,068
Liabilities, plus cash and other assets—(0.3)%				(69	)
Net assets—100.0%			$	26,999

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    13

ADR = American Depository Receipt

† = U.S. listed foreign security

* Non-income producing securities

Michael P. Balkin

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 9.19% on a total return basis (Class N shares) for the six months ended June 30, 2012. By comparison the Fund’s benchmark, the Russell 2000^® Growth Index, increased 8.81%.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Robust first quarter returns primarily were driven by improving economic data points in the U.S. and continued strength in the corporate sector. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued, the elevated fear in the market revolved around more substantial European economies. Investors focused on Europe’s efforts to stabilize the Spanish banking system and the potential risks to the Spanish government’s borrowing capacity. Essentially, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. The U.S. was not immune to the slowdown; U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. A string of disappointing data points ensued: employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors’ risk appetite continued from last year during the first quarter, but they gravitated to stocks of companies with less economic sensitivity during the second quarter. From a sector perspective, the typically defensive Health Care and Consumer Staples sectors outperformed in both the second quarter and year-to-date period. Energy has been the standout underperformer in 2012 to date, in part due to the global slowdown’s impact on oil demand.

Year-to-date, the Fund gained 9.19%, surpassing its benchmark, the Russell 2000^® Growth Index, which rose 8.81%. The Fund’s outperformance during the first half of 2012 is attributable to stock selection. Notably absent in 2012 as compared to recent years are meaningful style dynamics (i.e., neither tailwinds nor headwinds). From a stock selection perspective, two of the biggest contributors to relative return during the first half of the year were Kensey Nash and Catamaran (formerly SXC Health Solutions). Kensey Nash was one of the Fund’s worst performers in 2011 given royalty disputes with a partner, St. Jude Medical. The resolution of that issue lifted the stock in the first quarter. Then, in the second quarter, the stock rallied further after the company announced it was being acquired by a European biomedical company. The Fund sold its position after this announcement and prior to closing of the acquisition. Catamaran, a pharmacy benefit manager, has seen strong business momentum and announced the acquisition of a competitor, enabling the company to better compete with some of the largest pharmacy benefit managers in the world. On the other hand, Gentherm and Polypore have been the largest detractors from relative return this year. Gentherm has underperformed given complications relating to a German acquisition made in 2011. Polypore underperformed as investors questioned the proprietary nature of its battery separation processes and as the outlook for the electric vehicle market, a big growth driver for the company, became increasingly clouded.

Regarding the second quarter specifically, the Fund’s underperformance was attributable to stock selection. Gentherm and Office Depot were the two leading reasons for the quarter’s

14     Semi-Annual Report June 30, 2012

underperformance. On the other hand, helping relative performance were Kensey Nash and Six Flags. While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, as indicated by encouraging data on home prices and sales trends. Gas prices have declined from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are displaying some encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive if estimated earnings growth materializes.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential “fiscal cliff” (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall pace of economic growth. While this quarter’s market pullback resembles the past two years’ mid-year slumps, the global easing cycle along with a strengthening housing market could serve as tailwinds unique to 2012.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. We continue to find good ideas across sectors, and are confident the Fund consists of well-managed companies with solid competitive positions whose stocks are at attractive valuations compared to the expected growth and consistency of their business.

June 30, 2012 William Blair Funds    15

Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			10 Year
Class N		9.19	%		(6.63	)%		10.25	%		(2.31	)%		7.15	%
Class I		9.33			(6.39	)		10.57			(2.03	)		7.44
Russell 2000® Growth Index		8.81			(2.71	)		18.09			1.99			7.39

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

This report identifies the Fund’s investments on June 30, 2012. 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)

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

16     Semi-Annual Report June 30, 2012

Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Information Technology—21.0%
*Bottomline Technologies, Inc.		413,073	$	7,456
*Cardtronics, Inc.		79,340		2,397
*Cavium, Inc.		215,316		6,029
*Inuvo, Inc.		2,171,739		1,477
*Liquidity Services, Inc.		102,140		5,229
*MaxLinear, Inc. Class “A”		795,912		3,948
*Monolithic Power Systems, Inc.		456,571		9,072
*RealPage, Inc.		308,553		7,146
*Silicon Laboratories, Inc.		152,674		5,786
*SolarWinds, Inc.		160,280		6,982
*Stamps.com, Inc.		251,620		6,208
Syntel, Inc.		116,992		7,101
*Tangoe, Inc.		240,729		5,130
*TeleTech Holdings, Inc.		474,520		7,592
*Ultimate Software Group, Inc.		78,556		7,001
*ValueClick, Inc.		241,733		3,962
*Volterra Semiconductor Corporation		231,017		5,417
*WNS Holdings, Ltd.—ADR		789,008		7,677
*Wright Express Corp.		42,630		2,631
				108,241
Industrials—20.5%
*Acacia Research Corporation		116,010		4,320
Acorn Energy, Inc.		496,520		4,131
*CAI International, Inc.		537,020		10,676
*Cenveo, Inc.		2,090,976		4,036
*Clean Harbors, Inc.		141,875		8,005
*Encore Capital Group, Inc.		156,137		4,625
*Franklin Covey Co.		715,830		7,330
*Furmanite Corporation		670,735		3,260
Healthcare Services Group, Inc.		361,656		7,009
*Heritage-Crystal Clean, Inc.		317,291		5,188
*Huron Consulting Group, Inc.		219,442		6,945
*ICF International, Inc.		288,353		6,874
*Mistras Group, Inc.		281,818		7,406
*Navigant Consulting, Inc.		407,260		5,148
*On Assignment, Inc.		589,800		9,413
*Trimas Corporation		554,755		11,150
				105,516
Health Care—17.5%
*ABIOMED, Inc.		157,999		3,606
*Air Methods Corporation		57,525		5,652
*Brookdale Senior Living, Inc.		389,250		6,905
*Conceptus, Inc.		161,658		3,204
*Cyberonics, Inc.		142,509		6,404
*ExamWorks Group, Inc.		584,638		7,735
*Haemonetics Corporation		107,455		7,964
*HealthSouth Corporation		344,370		8,010
*HMS Holdings Corporation		138,807		4,624
*Natus Medical, Inc.		441,770		5,133
*NxStage Medical, Inc.		602,217		10,093
*Quidel Corporation		413,256		6,480
*The Providence Service Corporation		416,053		5,704

Issuer	Shares		Value
Common Stocks—(continued)
Health Care—(continued)
Trinity Biotech plc—ADR		744,674	$	8,936
				90,450
Consumer Discretionary—16.6%
*Amerigon, Inc.		742,757		8,534
*Genesco, Inc.		91,257		5,489
*Grand Canyon Education, Inc.		375,834		7,870
Jarden Corporation		166,632		7,002
*K12, Inc.		247,544		5,768
*Mattress Firm Holding Corporation		85,731		2,599
*Office Depot, Inc.		2,066,151		4,463
*Pandora Media, Inc.		430,210		4,676
*Select Comfort Corporation		159,109		3,329
*Shuffle Master, Inc.		375,820		5,186
Six Flags Entertainment Corporation		232,950		12,621
*Steven Madden, Ltd.		121,545		3,859
Texas Roadhouse, Inc.		89,694		1,653
*U.S. Auto Parts Network, Inc.		1,116,362		4,666
*Vera Bradley, Inc.		237,022		4,997
*WMS Industries, Inc.		139,567		2,784
				85,496
Financials—11.3%
*Cowen Group, Inc.		2,741,550		7,293
*First Cash Financial Services, Inc.		297,050		11,932
*FirstService Corporation†		209,742		5,866
*FX Alliance, Inc.		142,455		2,238
GFI Group, Inc.		641,714		2,285
*ICG Group, Inc.		941,898		8,713
Manning & Napier, Inc.		437,183		6,221
Marlin Business Services Corporation		280,138		4,591
*National Financial Partners Corporation		695,076		9,314
				58,453
Energy—5.3%
*Atwood Oceanics, Inc.		155,090		5,868
*Hornbeck Offshore Services, Inc.		171,633		6,656
*Laredo Petroleum Holdings, Inc.		192,915		4,013
*Oil States International, Inc.		93,420		6,184
*PDC Energy, Inc.		178,253		4,371
				27,092
Materials—1.7%
*Horsehead Holding Corporation		426,220		4,245
*Stillwater Mining Co.		509,626		4,352
				8,597
Total Common Stocks—93.9% (cost $449,228)				483,845
Exchange-Traded Fund
iShares Russell 2000 Growth Index Fund		199,462		18,245
Total Exchange-Traded Fund—3.5% (cost $16,936)				18,245

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    17

Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $12,551, collateralized by U.S. Treasury Note, 4.250%, due 8/15/15;	$	12,551	$	12,551
Total Repurchase Agreement—2.4% (cost $12,551)				12,551
Total Investments—99.8% (cost $478,715)				514,641
Cash and other assets, less liabilities—0.2%				795
Net assets—100.0%			$	515,436

ADR = American Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012 with companies deemed affiliated during the period or at June 30, 2012.

		Share Activity								Period Ended June 30, 2012
										(in thousands)
Security Name		Balance 12/31/2011		Purchases		Sales		Balance 6/30/2012		Value		Dividends Included in Income
	Dreams, Inc.		2,671,926		119,643		2,791,569		—	$	—	$	—
	Inuvo, Inc.		861,747		1,309,992		—		2,171,739		1,477		—
	Kensey Nash Corporation		483,937		44,009		527,946		—		—		217
*	Vertro, Inc.		847,343		—		847,343		—		—		—
										$	1,477	$	217

* Vertro, Inc. was acquired by Inuvo, Inc. at a rate of 1.546 shares of Inuvo, Inc. for each share of Vertro, Inc. on March 2, 2012.

See accompanying Notes to Portfolio of Investments.

18     Semi-Annual Report June 30, 2012

Robert C. Lanphier, IV

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 7.03% increase on a total return basis (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the Russell Midcap^® Growth Index, increased 8.10% during the period.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Robust first quarter returns primarily were driven by improving economic data points in the U.S. and continued strength in the corporate sector. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued, the elevated fear in the market revolved around more substantial European economies. Investors focused on Europe’s efforts to stabilize the Spanish banking system and the potential risks to the Spanish government’s borrowing capacity. Essentially, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. The U.S. was not immune to the slowdown; U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. A string of disappointing data points ensued: employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors’ risk appetite continued from last year during the first quarter, but they gravitated to stocks of companies with less economic sensitivity during the second quarter. From a sector perspective, the typically defensive Health Care and Consumer Staples sectors outperformed in both the second quarter and year-to-date period. Energy has been the standout underperformer in 2012 to date, in part due to the global slowdown’s impact on oil demand and rising natural gas supplies.

Year-to-date, the Fund gained 7.03%, closely trailing its benchmark, the Russell Midcap^® Growth Index, which rose 8.10%. The Fund’s underperformance during the first half of 2012 is primarily attributable to style headwinds in the first quarter. Over 100% of our year-to-date underperformance occurred during the first quarter when the market was up nearly 15%, a robust environment not ideal for our style of investing. Detracting from performance were Green Mountain Coffee Roasters, Inc. and Gentex Corporation. While Green Mountain Coffee Roasters, Inc. continues to grow at a rapid pace, its rate of growth is slowing from the hyper levels of the past few years, in large part due to a greater-than-expected decrease in the amount of k-cups consumed per brewer as brewer sales expand beyond the early-adopters. Gentex Corporation has underperformed given uncertainty in its rear camera display division as governmental clarity on the issue is not expected until later this year. We continue to hold both of these detractors. From a stock-specific perspective, Illumina, Inc. has been the largest contributor to relative return in 2012 as the company announced it was being acquired by Roche Holdings (note: we liquidated our position on the announcement and the deal has since dissolved). TransDigm Group, Inc. has been the second largest contributor given continued business strength and its less-cyclical business model among aerospace-related companies.

For the second quarter specifically, the Fund’s outperformance was a result of style tailwinds and mixed stock selection. The Fund outpaced its benchmark during the second quarter declining 5.38% while the Russell Midcap^® Growth Index declined 5.60%. In general, the

June 30, 2012 William Blair Funds    19

market’s preference for stocks with less economic sensitivity benefitted our Fund’s performance. From a stock selection perspective, HMS Holdings Corporation and TransDigm Group, Inc. Group were two of the strongest contributors to relative return. On the other hand, Green Mountain Coffee Roasters, Inc. and NetApp detracted from relative performance.

While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, with encouraging data on home prices and sales trends. Gas prices have declined from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are displaying some encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive if estimated earnings growth materializes.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential “fiscal cliff” (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall pace of economic growth. On the other hand, the current global easing cycle and a strengthening U.S. housing market could serve as buffers.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. We continue to find good ideas across sectors, and are confident the Fund consists of well-managed companies with solid competitive positions whose stocks are at attractive valuations compared to the expected growth and consistency of their business.

20     Semi-Annual Report June 30, 2012

Mid Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Class N		7.03	%		(2.86)	%		17.28	%		3.99	%		5.81	%
Class I		7.25			(2.53)			17.58			4.26			6.11
Russell MidCap® Growth Index		8.10			(2.99)			19.01			1.90			3.82

(a) For the period from February 1, 2006 (Commencement of Operations)  to June 30, 2012.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    21

Mid Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Information Technology—20.4%
Amphenol Corporation		117,000	$	6,426
*Aruba Networks, Inc.		383,100		5,766
*Cavium, Inc.		246,519		6,902
*Citrix Systems, Inc.		134,700		11,307
*Concur Technologies, Inc.		73,130		4,980
*Genpact, Ltd.†		190,207		3,163
*Informatica Corporation		35,100		1,487
*Silicon Laboratories, Inc.		186,780		7,079
*SolarWinds, Inc.		152,000		6,621
TE Connectivity, Ltd.†		160,851		5,133
*Trimble Navigation, Ltd.		112,104		5,158
*VeriSign, Inc.		178,200		7,764
				71,786
Consumer Discretionary—16.2%
*Bed Bath & Beyond, Inc.		123,960		7,661
*Chipotle Mexican Grill, Inc.		4,840		1,839
Dick’s Sporting Goods, Inc.		229,329		11,008
Gentex Corporation		147,080		3,069
Harley-Davidson, Inc.		169,800		7,765
Harman International Industries, Inc.		123,006		4,871
*Lululemon Athletica, Inc.		136,400		8,133
*O’Reilly Automotive, Inc.		92,480		7,747
*Select Comfort Corporation		175,700		3,676
Tractor Supply Co.		18,200		1,512
				57,281
Industrials—14.7%
*Clean Harbors, Inc.		110,200		6,218
Donaldson Co., Inc.		186,300	��	6,217
Fastenal Co.		82,462		3,324
Gardner Denver, Inc.		60,800		3,217
J.B. Hunt Transport Services, Inc.		146,800		8,749
*Jacobs Engineering Group, Inc.		127,100		4,812
*Polypore International, Inc.		50,300		2,032
*Stericycle, Inc.		97,230		8,913
*TransDigm Group, Inc.		61,350		8,239
				51,721
Health Care—13.0%
*Cerner Corporation		72,600		6,001
*HealthSouth Corporation		328,024		7,630
*HMS Holdings Corporation		373,300		12,435
*IDEXX Laboratories, Inc.		119,072		11,446
Perrigo Co.		72,200		8,514
				46,026

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Financials—9.9%
*Affiliated Managers Group, Inc.		48,775	$	5,338
*First Republic Bank		172,700		5,803
LPL Financial Holdings, Inc.		311,700		10,526
*Signature Bank		102,600		6,256
T Rowe Price Group, Inc.		111,100		6,995
				34,918
Materials—6.2%
Airgas, Inc.		120,800		10,148
Ecolab, Inc.		168,600		11,554
				21,702
Consumer Staples—6.0%
*Green Mountain Coffee Roasters, Inc.		177,846		3,873
McCormick & Co., Inc.		139,000		8,430
Mead Johnson Nutrition Co.		109,000		8,776
				21,079
Energy—5.4%
*Cameron International Corporation		104,100		4,446
*Denbury Resources, Inc.		264,670		3,999
*FMC Technologies, Inc.		142,800		5,602
Range Resources Corporation		83,700		5,179
				19,226
Telecommunication Services—3.3%
*SBA Communications Corporation Class “A”		204,000		11,638
Total Common Stocks—95.1% (cost $317,572)				335,377
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $19,372, collateralized by FNMA, 5.000%, due 4/15/15	$	19,372		19,372
Total Repurchase Agreement—5.5% (cost $19,372)				19,372
Total Investments—100.6% (cost $336,944)				354,749
Liabilities, plus cash and other assets—(0.6)%				(2,182	)
Net assets—100.0%			$	352,567

See accompanying Notes to Portfolio of Investments.

22     Semi-Annual Report June 30, 2012

* Non-income producing securities

† = U.S. listed foreign security

Karl W. Brewer

Robert C. Lanphier, IV

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 5.00% on a total return basis (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the Russell 2500^TM Growth Index, increased 8.44% during the period.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Robust first quarter returns primarily were driven by improving economic data points in the U.S. and continued strength in the corporate sector. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued, the elevated fear in the market revolved around more substantial European economies. Investors focused on Europe’s efforts to stabilize the Spanish banking system and the potential risks to the Spanish government’s borrowing capacity. Essentially, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. The U.S. was not immune to the slowdown; U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. A string of disappointing data points ensued: employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors’ risk appetite continued from last year during the first quarter, but investors gravitated to stocks of companies with less economic sensitivity during the second quarter. From a sector perspective, the typically defensive Health Care and Consumer Staples sectors outperformed in both the second quarter and year-to-date period. Energy has been the standout underperformer in 2012 to date, in part due to the global slowdown’s impact on oil demand and rising natural gas supplies.

Year-to-date, the Fund gained 5.00%, trailing its benchmark, the Russell 2500^TM Growth Index, which rose 8.44%. The Fund’s underperformance during the first half of 2012 is attributable to both style headwinds (in the first quarter) and stock selection (primarily in the second quarter). The majority of our year-to-date underperformance occurred during the first quarter when the market was up nearly 15%, a robust environment not ideal for our style of investing. From a stock-specific perspective, Green Mountain Coffee Roasters, Inc. and Tempur-Pedic were responsible for a considerable amount of the underperformance. While Green Mountain continues to grow at a rapid pace, its rate of growth is slowing from the hyper levels of the past few years. Tempur-Pedic announced a slowdown in business as the competitive environment shifted substantially. Contributing positively to performance were Catamaran (formerly SXC Health Solutions) and athenahealth Inc. Catamaran, a pharmacy benefit manager, has seen strong business momentum and announced the acquisition of a competitor, enabling the company to better compete with some of the largest pharmacy benefit managers in the world. Athenahealth outperformed as physicians and hospitals continue to demand the company’s business management software solutions.

Regarding the second quarter specifically, the Fund’s underperformance was attributable to stock selection. While style tailwinds existed, one stock, Tempur-Pedic, was a significant contributor to underperformance. Tempur-Pedic and Green Mountain Coffee Roasters, Inc. were the two leading detractors from return during the second quarter, for the same reasons

June 30, 2012 William Blair Funds    23

discussed above in the year-to-date comments. Conversely, Catamaran (formerly SXC Health Solutions) benefitted relative performance during the quarter. Stericycle was another positive standout during the quarter as investors flocked to its more economically-insulated business model.

While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, with encouraging data on home prices and sales trends. Gas prices have declined from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are displaying some encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive if estimated earnings growth materializes.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential “fiscal cliff” (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall pace of economic growth. While this quarter’s market pullback resembles the past two years’ mid-year slumps, the global easing cycle along with a strengthening housing market could serve as tailwinds unique to 2012.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. We continue to find good ideas across sectors, and are confident the Fund consists of well-managed companies with solid competitive positions whose stocks are at attractive valuations compared to the expected growth and consistency of their business.

24     Semi-Annual Report June 30, 2012

Small-Mid Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Class N		5.00	%		(6.10	)%		15.72	%		2.69	%		6.95	%
Class I		5.11			(5.91	)		16.02			2.95			7.22
Russell 2500™ Growth Index		8.44			(3.19	)		19.38			2.35			6.65

(a) For the period from December 29, 2003 (Commencement of Operations) to June 30, 2012.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    25

Small-Mid Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Information Technology—23.1%
*ANSYS, Inc.		85,100	$	5,371
*Aruba Networks, Inc.		308,300		4,640
Booz Allen Hamilton Holding Corporation		185,218		2,830
*Cavium, Inc.		156,973		4,395
*Concur Technologies, Inc.		69,500		4,733
*Constant Contact, Inc.		199,500		3,567
*CoStar Group, Inc.		71,800		5,830
*Genpact, Ltd.†		331,100		5,506
*Guidewire Software, Inc.		110,100		3,096
*Informatica Corporation		114,200		4,838
*MICROS Systems, Inc.		71,363		3,654
NIC, Inc.		184,370		2,342
*RealPage, Inc.		237,000		5,489
*Riverbed Technology, Inc.		168,200		2,716
*SolarWinds, Inc.		101,300		4,413
*Trimble Navigation, Ltd.		63,700		2,931
*Ultimate Software Group, Inc.		58,825		5,242
*Wright Express Corp.		101,800		6,283
				77,876
Industrials—21.2%
*Allegiant Travel Co.		49,065		3,419
*BE Aerospace, Inc.		104,553		4,565
*Fortune Brands Home & Security, Inc.		292,800		6,521
Healthcare Services Group, Inc.		248,700		4,820
*Huron Consulting Group, Inc.		116,290		3,680
*ICF International, Inc.		189,838		4,526
Manpower, Inc.		83,750		3,069
*Portfolio Recovery Associates, Inc.		15,642		1,427
Robert Half International, Inc.		251,300		7,180
Roper Industries, Inc.		54,000		5,323
*Standard Parking Corporation		123,973		2,668
*Stericycle, Inc.		114,670		10,512
The Corporate Executive Board Co.		93,635		3,828
*TransDigm Group, Inc.		42,108		5,655
*Trimas Corporation		215,748		4,336
				71,529
Health Care—17.8%
*ABIOMED, Inc.		182,338		4,161
*athenahealth, Inc.		48,271		3,822
*BioMarin Pharmaceutical, Inc.		109,900		4,350
*Brookdale Senior Living, Inc.		155,976		2,767
*Cerner Corporation		19,636		1,623
*HealthSouth Corporation		261,100		6,073
*HMS Holdings Corporation		141,792		4,723
*Hologic, Inc.		394,800		7,122
*IDEXX Laboratories, Inc.		69,305		6,662
Perrigo Co.		72,800		8,585
*Sirona Dental Systems, Inc.		119,083		5,360
*SXC Health Solutions Corporation†		47,616		4,724
				59,972
Consumer Discretionary—15.2%
Dick’s Sporting Goods, Inc.		189,590		9,100
*Fossil, Inc.		53,300		4,079
Gentex Corporation		147,800		3,085

* Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares  or Principal Amount		Value
Common Stocks—(continued)
Consumer Discretionary—(continued)
*K12, Inc.		241,814	$	5,634
*LKQ Corporation		123,500		4,125
Polaris Industries, Inc.		56,500		4,039
*Sally Beauty Holdings, Inc.		138,800		3,573
Strayer Education, Inc.		59,100		6,443
Texas Roadhouse, Inc.		162,943		3,003
Tractor Supply Co.		45,800		3,804
*Under Armour, Inc.		47,660		4,503
				51,388
Financials—5.6%
*Affiliated Managers Group, Inc.		57,109		6,251
*First Republic Bank		124,200		4,173
*FirstService Corporation†		129,837		3,632
Invesco, Ltd.†		12,091		273
Jones Lang LaSalle, Inc.		62,600		4,405
				18,734
Energy—5.1%
Cabot Oil & Gas Corporation		68,800		2,711
Core Laboratories N.V.†		30,600		3,546
Helmerich & Payne, Inc.		69,300		3,013
*KiOR, Inc.		211,499		1,893
Oceaneering International, Inc.		64,200		3,073
*Oil States International, Inc.		47,100		3,118
				17,354
Materials—3.6%
Airgas, Inc.		70,062		5,886
Celanese Corporation		93,300		3,230
Rockwood Holdings, Inc.		69,100		3,065
				12,181
Telecommunication Services—2.9%
*SBA Communications Corporation Class “A”		173,600		9,904
Consumer Staples—1.0%
*Green Mountain Coffee Roasters, Inc.		157,623		3,433
Total Common Stocks—95.5% (cost $301,990)				322,371
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $13,237, collateralized by FNMA, 5.000%, due 4/15/15	$	13,237		13,237
Total Repurchase Agreement—3.9% (cost $13,237)				13,237
Total Investments—99.4% (cost $315,227)				335,608
Cash and other assets, less liabilities—0.6%				2,187
Net assets—100.0%			$	337,795

See accompanying Notes to Portfolio of Investments.

26     Semi-Annual Report June 30, 2012

GLOBAL MARKETS OVERVIEW

The global growth scare that began in March continued through the second quarter, leading equity markets into negative territory. In addition, increased concerns about the viability of the Eurozone and remedies for significant bank and sovereign debt, a volatile Greek election cycle, and doubts about the wherewithal and will of European governments to forge tighter fiscal and monetary integration, weighed on the equity markets. Following a significant decline in March through May, the markets rebounded in June on expectations of a broad agreement on the European Stability Mechanism (ESM) lending directly to banks without seniority, more discussions of a pan-European regulator and deposit insurance, and the prospects for growth-oriented measures through the EIB (European Investment Bank). Despite the nearly 5% rally in June, the MSCI ACWI IMI fell 5.68% during the second quarter, paring year to date gains to 5.76%. High quality companies outperformed during the second quarter, as did those with strong earnings trends, price momentum, and good growth prospects. Year to date companies with lower valuations performed well, due to a rally in these companies during the beginning of the year, along with those exhibiting higher quality and growth characteristics.

Most sectors retreated during the second quarter with the Resources sectors—Materials and Energy—leading the decline, falling 11.16% and 9.58%, respectively, on expectations of slower emerging markets infrastructure spending and resources demand, coupled with recessionary pressures in Europe. Telecom Services and Healthcare each had positive returns, rising 2.55% and 1.32%, respectively, while Utilities and Staples were each slightly negative. Despite negative second quarter results, most sectors remained in solid positive territory year to date, with Information Technology (IT), Health Care, and Discretionary up 9.91%, 9.88% and 9.67%, respectively, while Energy and Materials underperformed, falling 4.85% and 1.65%, respectively.

The MSCI World Index IMI fell 5.23% during the second quarter, resulting in a year to date return of 5.98%. The U.S. Dollar was strong relative to most other currencies during the period, as the U.S. was viewed as a relative safe haven. The U.S. led developed market regions during the quarter, falling 3.33%, per the MSCI developed markets national (IMI) indices. Europe Ex-U.K. was the worst performing developed region, falling 9.49%, as Greece and Portugal fell over 20% and 17%, respectively, and as core European markets also lagged. The natural-resource oriented Canadian market fell 8.48% during the period. Year to date, the U.S. rose 9.01%, significantly outpacing other developed market regions, although all regions except Canada had positive returns. While Europe Ex-U.K. rose 2.14% during the first half of the year, this result masked significantly different results by country, as Greece, Portugal and Spain all fell between 12-16%, while countries such as Denmark and Belgium were each up approximately the same amount. While the MSCI World Index Small Cap fell 6.31% during the second quarter, underperforming their larger cap counterparts across most regions, with the exception of Japan, they outpaced large cap stocks year to date, rising 6.34%, led by the UK and the US.

After outpacing developed markets during the first quarter, the MSCI Emerging Markets IMI lagged during the second, falling 8.79%, reducing year to date returns to 4.31%. Latin America fell over 13%, dragged down by Brazil, which fell 18.64%, on concerns about slowing growth amidst lower resource oriented demand, and a weakening Real. Conversely, Mexico performed relatively well, falling just over 1%. Emerging Europe, Mid-East, and Africa (EMEA) fell 8.14% during the second quarter, as Russia (14.67%) led the decline both on resource demand concerns and amidst USD appreciation, which more than offset the 0.71% Turkey return. Asia fell 7.43%, as weaker results in India and Taiwan were partially offset by a positive 4.71% Philippines return, and -5-6% returns for China and Thailand. Year to date all emerging markets regions posted positive results, with EMEA rising 6.81%, as Egypt rose nearly 34% despite ongoing political unrest and as Turkey rose over 29%. Emerging Asia was up just over 5%, as the Philippines and Thailand posted double digit returns and as India outperformed during the first quarter. Latin America eked out a slightly positive return, despite the -6.93% Brazilian market return, given strong market performance in Chile, Mexico and Peru.

June 30, 2012 William Blair Funds    27

As doubts about sovereign debt and banking solvency were alleviated in the first quarter, markets rallied. But apprehension quickly reasserted itself in the second quarter, with weakening growth replacing balance sheet woes as the focus of concern. Austerity and falling business confidence in Europe, combined with an industrial slowdown in China that seemed to spread out to the rest of the emerging world, lowered expectations for global growth and eroded belief in the effectiveness of policy.

The Eurozone is almost certainly in recession already, with the latest industrial production reading down by more than 2%. Weakness in the Euro periphery was already beginning to take a toll on growth in the core, and the more recent slowdown in emerging economies has only added to the problem. Deleveraging in the banking system and the overhang of prolonged uncertainty in the debt markets have exacerbated the problem, and ongoing weakness in Europe and China has become somewhat synergistic as trade flow growth decelerates.

In China, the landing is fairly soft at the reported real GDP level, but more pronounced in specific areas of output. Primary, extractive, and heavy industry generally are bearing the brunt of the economy’s slowdown. The pace of growth in new industrial capacity and infrastructure investment has slowed, and with it the demand for basic materials and commodities. In turn, softer commodity markets are impacting growth in areas that had been profiting from the resource boom, while India, Brazil, and Russia are all being restrained, ironically, by infrastructure shortfalls.

The picture that emerges is one of ‘Japanization’ in debt-burdened developed markets combined with a downshift and awkward growth transition in developing economies. Even if the narrative gets exaggerated in a downturn, there’s still a core of plausibility to the contention that the growth potential of the global economy may be subdued in the next several years.

In these circumstances, challenges to corporate performance multiply. The customer base—whether household, business or public sector—is squeezed, suppliers are under pressure, and the cost/quality/service equation is harder to solve than ever. It’s not a 2008-style collapse, but it looks like a competitive environment with fewer winners and more also-rans. We are finding increasing evidence of this phenomenon in instances of sharply differentiated growth and/or profitability between peer group companies previously considered to be fairly comparable in performance. Our strategy in the most basic sense is to invest in that differentiation—to select more rigorously for organic value creation at the company level.

28     Semi-Annual Report June 30, 2012

W. George Greig

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 8.64% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World IMI (net) index increased 5.76%.

Year-to-date, performance was strong amidst market turbulence. Exposure to high quality companies with sound growth prospects was additive to results. Stock selection was strong during the period, particularly in Staples and Healthcare as well as in the United States and Europe—the Fund’s two largest regional weightings.

Sector positioning did not change appreciably during the six month period, as changes resulted from company-specific characteristics or valuation concerns. The Fund maintained its focus in Consumer with approximately 29.0% invested in these sectors, well above the 21.2% Index weighting, due largely to significant U.S. Discretionary and Staples weightings. Resources remained significantly underweighted during the six month period on concerns about infrastructure spending and the resulting impact on commodity demand, while Industrials and Information Technology (IT) increased at the margin and were overweighed versus the market. Regionally, the Fund maintained its significant weighting in the U.K., given the large opportunity set for leading companies, while Developed Asia was de-emphasized. The U.S. increased from 43.1% as of year end to 45.3% as of June 30. Emerging markets approximated the Index at 14.1% of the Fund.

June 30, 2012 William Blair Funds    29

Global Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			Since Inception(a)
Class N		8.64	%		(1.24	)%		15.15	%		(2.52	)%
Class I		8.78			(1.01	)		15.43			(2.26	)
MSCI All Country World IMI Index (net)		5.76			(6.91	)		11.30			(3.70	)

(a) For the period from October 15, 2007 (Commencement of Operations) to June 30, 2012.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

30     Semi-Annual Report June 30, 2012

Global Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Western Hemisphere—47.9%
Canada—2.6%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		18,941	$	627
The Toronto-Dominion Bank (Commercial banks)		7,595		594
				1,221
United States—45.3%
*Affiliated Managers Group, Inc. (Capital markets)		4,813		527
*Align Technology, Inc. (Health care equipment & supplies)		8,880		297
American Express Co. (Consumer finance)		15,489		902
AMETEK, Inc. (Electrical equipment)		10,549		526
*Apple, Inc. (Computers & peripherals)		2,506		1,463
Church & Dwight Co., Inc. (Household products)		5,152		286
*Citrix Systems, Inc. (Software)		7,457		626
*Clean Harbors, Inc. (Commercial services & supplies)		3,104		175
Colgate-Palmolive Co. (Household products)		7,859		818
Costco Wholesale Corporation (Food & staples retailing)		7,598		722
*Discovery Communications, Inc. Class “A” (Media)		12,626		682
*Express Scripts Holding Co. (Health care providers & services)		14,684		820
Exxon Mobil Corporation (Oil, gas & consumable fuels)		10,691		915
*Fortune Brands Home & Security, Inc. (Building products)		10,349		230
Harley-Davidson, Inc. (Automobiles)		9,929		454
*IDEXX Laboratories, Inc. (Health care equipment & supplies)		5,655		544
International Business Machines Corporation (IT services)		4,848		948
JPMorgan Chase & Co. (Diversified financial services)		15,759		563
Mastercard, Inc. Class “A” (IT services)		1,881		809
McCormick & Co., Inc. (Food products)		9,337		566
*Monster Beverage Corporation (Beverages)		6,020		429
NIKE, Inc. Class “B” (Textiles, apparel & luxury goods)		6,493		570
*O’Reilly Automotive, Inc. (Specialty retail)		6,958		583
*priceline.com, Inc. (Internet & catalog retail)		1,196		795
QUALCOMM, Inc. (Communications equipment)		13,621		758
*SolarWinds, Inc. (Software)		7,871		343
Starbucks Corporation (Hotels, restaurants & leisure)		8,695		464
The Walt Disney Co. (Media)		13,502		655
Thermo Fisher Scientific, Inc. (Life sciences tools & services)		10,847		563
Union Pacific Corporation (Road & rail)		5,606		669
United Parcel Service, Inc. Class “B” (Air freight & logistics)		8,770		691
W.W. Grainger, Inc. (Trading companies & distributors)		1,927		368
Williams-Sonoma, Inc. (Specialty retail)		12,811		448

Issuer	Shares		Value
Common Stocks—Western Hemisphere—47.9%—(continued)
United States—(continued)
Yum! Brands, Inc. (Hotels, restaurants & leisure)		12,008	$	773
				20,982
United Kingdom—17.3%
Abcam plc (Biotechnology)		34,383		225
ARM Holdings plc (Semiconductors & semiconductor equipment)		58,231		461
Ashmore Group plc (Capital markets)		65,216		356
Babcock International Group plc (Commercial services & supplies)		26,458		354
BG Group plc (Oil, gas & consumable fuels)		31,350		638
BHP Billiton plc (Metals & mining)		16,302		461
Burberry Group plc (Textiles, apparel & luxury goods)		10,688		222
Compass Group plc (Hotels, restaurants & leisure)		74,839		784
Diageo plc (Beverages)		34,849		896
Experian plc (Professional services)		54,765		772
Hargreaves Lansdown plc (Capital markets)		27,548		229
Lancashire Holdings, Ltd. (Insurance)		14,211		177
Pearson plc (Media)		31,251		620
Petrofac, Ltd. (Energy equipment & services)		11,687		254
*Rolls-Royce Holdings plc (Aerospace & defense)		51,738		695
Standard Chartered plc (Commercial banks)		24,767		537
The Weir Group plc (Machinery)		14,120		338
				8,019
Europe, Mid-East—16.6%
Denmark—3.1%
CHR Hansen Holding A/S (Chemicals)		8,244		211
Coloplast A/S Class “B” (Health care equipment & supplies)		1,577		283
Novo Nordisk A/S (Pharmaceuticals)		6,450		932
				1,426
France—2.0%
Essilor International S.A. (Health care equipment & supplies)		3,967		368
Technip S.A. (Energy equipment & services)		5,420		562
				930
Germany—4.7%
Bayerische Motoren Werke AG (Automobiles)		9,604		692
Brenntag AG (Trading companies & distributors)		4,143		457
MTU Aero Engines Holding AG (Aerospace & defense)		3,207		235
SAP AG (Software)		13,356		787
				2,171
Israel—0.9%
*Check Point Software Technologies, Ltd. (Software)†		8,740		434

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    31

Global Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Europe, Mid-East—16.6%—(continued)
Italy—0.4%
Tod’s SpA (Textiles, apparel & luxury goods)		1,860	$	186
Sweden—1.4%
Atlas Copco AB Class “A” (Machinery)		30,081		645
Switzerland—4.1%
Nestle S.A. (Food products)		13,288		792
Partners Group Holding AG (Capital markets)		3,019		536
Syngenta AG (Chemicals)		1,642		559
				1,887
Emerging Asia—9.9%
China—4.5%
*Baidu, Inc.—ADR (Internet software & services)		7,670		882
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		1,411,185		780
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		29,674		419
				2,081
Indonesia—1.1%
PT Bank Rakyat Indonesia (Commercial banks)		746,000		505
South Korea—4.3%
Hyundai Motor Co. (Automobiles)		4,511		916
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,057		1,108
				2,024
Japan—3.5%
Fanuc Corporation (Machinery)		3,200		519
*Nexon Co., Ltd. (Software)		12,500		242
Softbank Corporation (Wireless telecommunication services)		22,900		846
				1,607
Emerging Latin America—2.1%
Argentina—0.5%
MercadoLibre, Inc. (Internet software & services)		3,055		232
Brazil—1.1%
BR Malls Participacoes S.A. (Real estate management & development)		43,400		497
Chile—0.5%
Banco Santander Chile—ADR (Commercial banks)		3,285		254
Emerging Europe, Mid-East, Africa—1.9%
South Africa—1.9%
Bidvest Group, Ltd. (Industrial conglomerates)		23,138		515
Sasol, Ltd. (Oil, gas & consumable fuels)		9,154		384
				899
Total Common Stocks—99.2% (cost $39,275)				46,000
Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $683, collateralized by U.S. Treasury Note, 5.000%, due 4/15/15	$	683	$	683
Total Repurchase Agreement—1.5% (cost $683)				683
Total Investments—100.7% (cost $39,958)				46,683
Liabilities, plus cash and other assets—(0.7)%				(310	)
Net assets—100.0%			$	46,373

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Information Technology	19.8%
Consumer Discretionary	19.2%
Industrials	15.6%
Financials	15.4%
Consumer Staples	9.8%
Health Care	9.7%
Energy	6.0%
Materials	2.7%
Telecommunication Services	1.8%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

U.S. Dollar	50.9%
British Pound Sterling	17.4%
Euro	7.1%
South Korean Won	4.4%
Swiss Franc	4.1%
Japanese Yen	3.5%
Danish Krone	3.1%
Hong Kong Dollar	2.6%
South African Rand	2.0%
Swedish Krona	1.4%
Canadian Dollar	1.3%
Indonesian Rupiah	1.1%
Brazilian Real	1.1%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

32     Semi-Annual Report June 30, 2012

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 7.66% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), increased 2.93%.

Performance was due to strong stock selection across sectors, coupled with a focus on high quality companies with good earnings and price trends. In addition, industry and country weightings also contributed to results. Stock selection was particularly strong in Consumer, Financials and Industrials. In particular, Media performance was strong within Discretionary, along with Luxury and Retail, while the Food/Staples weighting and stock selection augmented Staples results as did strong performance by Diageo, the global spirits company. Commercial Banks stock selection was strong, given the sale in Barclays in early February following its strong rally, along with Japanese and emerging markets performance. The Fund’s focus on core Europe at the expense of peripheral countries, overweighting in the strongly performing UK market, and underweighting in natural resource-oriented economies enhanced performance. Somewhat detracting from year to date results was the Fund’s underweighting in Utilities, along with Japanese stock selection, due to underperformance by internet-related holdings.

During the six month period we increased Discretionary from approximately 14% to 18%, due to higher Autos and Media exposure, which more than offset a decline in Auto Components. As a result, at quarter end, the portfolio was 7.6% overweighted in Discretionary. Staples, Healthcare, and Industrials also increased during the period. These increases were funded by a decrease in Financials from 22.5% to 22.1%, remaining below the 23.5% Index weighting, due to a reduction and underweighting in European Capital Markets and Commercial Banks in early February, following their strong performance run to start 2012. We also decreased the Resources sectors primarily in Energy E&P (Exploration and Production) companies as well as Metals/Mining on a slower growth outlook. Both were underweighted versus the Index at June 30, with Materials representing under 5% of the portfolio, well below the 11.2% Index weighting due to the lower Metals/Mining exposure. Regionally, we increased emerging markets from approximately 21% as of year-end to 24.7%, above the 23.8% Index weighting, on an improving growth outlook at the beginning of the year, bolstered by lower inflationary pressure and valuation support. This increase was funded by a reduction in the UK from 24.1% to 19.3%, although it remained well above the 14.0% Index weighting. Developed Asia remained significantly underweighted versus the Index at a combined 14%, well below the 24.9% Index weighting, due to lower exposure across the region.

June 30, 2012 William Blair Funds    33

International Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			10 Year
Class N		7.66	%		(9.74	)%		10.34	%		(4.53	)%		6.50	%
Class I		7.80			(9.45	)		10.66			(4.24	)		6.80
MSCI All Country World Ex-U.S. IMI (net)		2.93			(14.79	)		7.36			(4.46	)		7.19

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

34     Semi-Annual Report June 30, 2012

International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Europe, Mid-East—33.8%
Austria—0.6%
Andritz AG (Machinery)		377,093	$	19,337
Denmark—1.6%
CHR Hansen Holding A/S (Chemicals)		304,508		7,811
Coloplast A/S Class “B” (Health care equipment & supplies)		120,354		21,592
SimCorp A/S (Software)		28,353		4,870
*William Demant Holding A/S (Health care equipment & supplies)		203,231		18,213
				52,486
Finland—1.0%
Kone Oyj (Machinery)		317,525		19,139
Nokian Renkaat Oyj (Auto components)		332,026		12,547
				31,686
France—8.2%
Arkema S.A. (Chemicals)		239,808		15,644
AXA S.A. (Insurance)		4,018,080		53,290
BNP Paribas S.A. (Commercial banks)		1,836,474		70,500
Christian Dior S.A. (Textiles, apparel & luxury goods)		226,692		31,055
Essilor International S.A. (Health care equipment & supplies)		178,871		16,592
L’Oreal S.A. (Personal products)		120,036		14,012
Sanofi (Pharmaceuticals)		807,466		61,045
Zodiac Aerospace (Aerospace & defense)		105,068		10,649
				272,787
Germany—4.3%
Bayer AG (Pharmaceuticals)		745,134		53,542
Bayerische Motoren Werke AG (Automobiles)		547,992		39,480
Brenntag AG (Trading companies & distributors)		88,772		9,794
Deutsche Bank AG (Capital markets)		189,729		6,843
Gerry Weber International AG (Textiles, apparel & luxury goods)		221,214		9,108
Hugo Boss AG (Textiles, apparel & luxury goods)		45,538		4,486
MTU Aero Engines Holding AG (Aerospace & defense)		208,691		15,302
Pfeiffer Vacuum Technology AG (Machinery)		29,624		3,012
				141,567
Ireland—0.7%
Paddy Power plc (Hotels, restaurants & leisure)		155,915		10,171
Shire plc (Pharmaceuticals)		464,315		13,322
				23,493
Israel—0.3%
*Check Point Software Technologies, Ltd. (Software)†		213,858		10,605
Italy—0.3%
Pirelli & C. SpA (Auto components)		1,032,197		10,835
Common Stocks—Europe, Mid-East—33.8%—(continued)
Luxembourg—0.6%
Millicom International Cellular S.A. (Wireless telecommunication services)		227,660	$	21,425
Netherlands—4.6%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		612,335		31,047
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		1,701,540		59,293
Unilever N.V. (Food products)		1,831,428		61,152
				151,492
Norway—2.5%
*Norwegian Air Shuttle ASA (Airlines)		290,057		5,266
Schibsted ASA (Media)		249,083		8,065
Statoil ASA (Oil, gas & consumable fuels)		1,525,840		36,269
Telenor ASA (Diversified telecommunication services)		1,939,419		32,244
				81,844
Spain—1.8%
Inditex S.A. (Specialty retail)		499,140		51,499
Viscofan S.A. (Food products)		206,986		8,888
				60,387
Sweden—2.0%
Atlas Copco AB Class “A” (Machinery)		1,489,989		31,965
Axis Communications AB (Communications equipment)		180,144		3,906
Getinge AB (Health care equipment & supplies)		1,064,299		26,310
JM AB (Household durables)		276,947		4,874
NIBE Industrier AB (Building products)		50,113		683
				67,738
Switzerland—5.3%
*Geberit AG (Building products)		112,318		22,093
Glencore International plc (Metals & mining)		3,858,721		17,861
Nestle S.A. (Food products)		1,312,572		78,202
*Orascom Development Holding AG (Hotels, restaurants & leisure)		56,650		901
Partners Group Holding AG (Capital markets)		83,530		14,838
SGS S.A. (Professional services)		7,115		13,306
Sika AG (Chemicals)		2,854		5,497
Syngenta AG (Chemicals)		72,962		24,852
				177,550
United Kingdom—19.3%
Abcam plc (Biotechnology)		2,015,505		13,171
AMEC plc (Energy equipment & services)		1,219,101		19,131
Amlin plc (Insurance)		1,976,649		10,956
ARM Holdings plc (Semiconductors & semiconductor equipment)		1,350,981		10,696
Ashmore Group plc (Capital markets)		2,334,870		12,744
Babcock International Group plc (Commercial services & supplies)		1,964,060		26,254
Croda International plc (Chemicals)		335,709		11,898
Derwent London plc (Real estate investment trusts (REITs))		357,665		10,380
Diageo plc (Beverages)		2,623,033		67,454
Dunelm Group plc (Specialty retail)		1,067,286		8,684

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    35

International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—United Kingdom—19.3%—(continued)
Elementis plc (Chemicals)		2,100,728	$	6,531
Experian plc (Professional services)		1,279,661		18,047
Halma plc (Electronic equipment, instruments & components)		1,412,041		9,235
Hiscox, Ltd. (Insurance)		966,795		6,470
IG Group Holdings plc (Diversified financial services)		1,323,541		9,929
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		375,210		9,020
ITV plc (Media)		10,645,703		12,771
John Wood Group plc (Energy equipment & services)		1,210,708		12,998
Johnson Matthey plc (Chemicals)		814,382		28,162
Jupiter Fund Management plc (Capital markets)		1,584,911		5,342
Kingfisher plc (Specialty retail)		2,562,779		11,535
Lancashire Holdings, Ltd. (Insurance)		1,124,978		14,033
Meggitt plc (Aerospace & defense)		1,986,378		11,987
Moneysupermarket.com Group plc (Internet software & services)		1,806,421		3,542
Next plc (Multiline retail)		304,072		15,234
*Ocado Group plc (Internet & catalog retail)		3,469,118		4,222
Pearson plc (Media)		1,412,101		27,998
Petrofac, Ltd. (Energy equipment & services)		399,169		8,677
Prudential plc (Insurance)		2,306,221		26,656
Rightmove plc (Media)		431,507		10,759
*Rolls-Royce Holdings plc (Aerospace & defense)		3,668,796		49,300
Rotork plc (Machinery)		296,877		9,160
RPS Group plc (Commercial services & supplies)		1,085,160		3,543
Scottish & Southern Energy plc (Electric utilities)		2,067,018		45,030
Spirax-Sarco Engineering plc (Machinery)		207,996		6,469
*Sports Direct International plc (Specialty retail)		687,478		3,293
St James’s Place plc (Insurance)		939,343		4,918
Standard Chartered plc (Commercial banks)		1,052,115		22,813
*The Berkeley Group Holdings plc (Household durables)		912,211		20,130
The Weir Group plc (Machinery)		369,212		8,847
Tullow Oil plc (Oil, gas & consumable fuels)		744,614		17,143
Victrex plc (Chemicals)		388,993		7,743
				642,905
Emerging Asia—13.2%
China—3.1%
China BlueChemical, Ltd. (Chemicals)		9,808,000		5,563
China Overseas Land & Investment, Ltd. (Real estate management & development)		5,608,000		12,997
CNOOC, Ltd. (Oil, gas & consumable fuels)		15,649,000		31,064
Dongyue Group (Chemicals)		2,326,000		1,076
Great Wall Motor Co., Ltd. (Automobiles)		2,084,500		4,133
Haitian International Holdings, Ltd. (Machinery)		3,378,000		3,335
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		329,584		2,808
Common Stocks—Emerging Asia—13.2%—(continued)
China—(continued)
Lenovo Group, Ltd. (Computers & peripherals)		30,294,000	$	25,538
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		260,729		4,602
Sun Art Retail Group, Ltd. (Food & staples retailing)		3,786,171		4,144
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		245,177		3,462
Yingde Gases (Chemicals)		4,297,000		3,910
				102,632
India—3.3%
CRISIL, Ltd. (Diversified financial services)		89,413		1,719
HDFC Bank, Ltd. (Commercial banks)		1,700,615		17,164
IndusInd Bank, Ltd. (Commercial banks)		482,173		2,938
Ipca Laboratories, Ltd. (Pharmaceuticals)		532,906		3,423
Lupin, Ltd. (Pharmaceuticals)		769,284		7,401
Oberoi Realty, Ltd. (Real estate management & development)		681,897		2,973
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		1,230,211		14,009
Tata Consultancy Services, Ltd. (IT services)		1,481,612		33,898
Tata Motors, Ltd. (Automobiles)		4,721,228		20,501
Yes Bank, Ltd. (Commercial banks)		938,920		5,707
				109,733
Indonesia—1.0%
PT Alam Sutera Realty Tbk (Real estate management & development)		56,562,000		2,951
PT Kalbe Farma Tbk (Pharmaceuticals)		21,487,000		8,636
PT Media Nusantara Citra Tbk (Media)		22,802,500		4,831
PT United Tractors Tbk (Machinery)		7,258,106		16,498
				32,916
Philippines—0.3%
International Container Terminal Services, Inc. (Transportation infrastructure)		2,173,320		3,791
SM Prime Holdings, Inc. (Real estate management & development)		21,205,950		6,553
				10,344
South Korea—3.8%
Celltrion, Inc. (Pharmaceuticals)		469,275		12,415
Hyundai Motor Co. (Automobiles)		191,101		38,793
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		57,613		60,412
Samsung Heavy Industries Co., Ltd. (Machinery)		482,830		15,724
				127,344
Thailand—1.7%
Advanced Info Service PCL (Wireless telecommunication services)		3,378,900		19,629
BEC World PCL (Media)		3,215,100		5,112
CP ALL PCL (Food & staples retailing)		11,765,700		13,151
Kasikornbank PCL (Commercial banks)		3,271,300		16,995
				54,887

See accompanying Notes to Portfolio of Investments.

36     Semi-Annual Report June 30, 2012

International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Japan—10.2%
Ain Pharmaciez, Inc. (Food & staples retailing)		72,000	$	4,319
Cosmos Pharmaceutical Corporation (Food & staples retailing)		4,000		265
CyberAgent, Inc. (Media)		3,580		9,105
Daito Trust Construction Co., Ltd. (Real estate management & development)		197,100		18,616
Exedy Corporation (Auto components)		218,900		4,708
FamilyMart Co., Ltd. (Food & staples retailing)		290,200		13,251
Fast Retailing Co., Ltd. (Specialty retail)		120,900		24,018
*Gree, Inc. (Internet software & services)		651,300		12,882
Lawson, Inc. (Food & staples retailing)		221,900		15,490
Miraca Holdings, Inc. (Health care providers & services)		143,900		5,950
*Nexon Co., Ltd. (Software)		321,700		6,238
Nikon Corporation (Leisure equipment & products)		1,736,600		52,184
Nitori Co., Ltd. (Specialty retail)		263,620		24,866
ORIX Corporation (Diversified financial services)		493,290		45,481
Ship Healthcare Holdings, Inc. (Health care providers & services)		209,200		5,012
Softbank Corporation (Wireless telecommunication services)		449,300		16,598
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		2,111,500		68,997
Sundrug Co., Ltd. (Food & staples retailing)		89,500		2,901
Tsuruha Holdings, Inc. (Food & staples retailing)		45,500		2,821
United Arrows, Ltd. (Specialty retail)		159,000		3,942
				337,644
Emerging Latin America—6.5%
Brazil—3.2%
BR Malls Participacoes S.A. (Real estate management & development)		989,200		11,328
BR Properties S.A. (Real estate management & development)		841,100		9,925
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		493,701		6,170
Cia de Concessoes Rodoviarias (Transportation infrastructure)		1,890,800		15,373
Cia Hering (Specialty retail)		623,400		11,825
Cielo S.A. (IT services)		464,900		13,675
Iochpe-Maxion S.A. (Machinery)		156,800		1,827
OdontoPrev S.A. (Health care providers & services)		892,500		4,532
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,301,900		12,251
*Qualicorp S.A. (Professional services)		402,100		3,515
T4F Entretenimento S.A. (Media)		588,300		4,877
Tractebel Energia S.A. (Independent power producers & energy traders)		522,400		9,663
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A. (Commercial services & supplies)		233,400		3,486
				108,447
Common Stocks—Emerging Latin America—6.5%—(continued)
Chile—1.8%
Banco Santander Chile—ADR (Commercial banks)		179,691	$	13,924
CFR Pharmaceuticals S.A. (Pharmaceuticals)		25,172,657		5,656
ENTEL Chile S.A. (Wireless telecommunication services)		634,973		12,047
Parque Arauco S.A. (Real estate management & development)		5,427,330		9,646
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		231,639		12,895
Sonda S.A. (IT services)		1,603,692		4,506
				58,674
Colombia—0.5%
Ecopetrol S.A. (Oil, gas & consumable fuels)		5,594,559		15,642
Panama—0.3%
Copa Holdings S.A. (Airlines)†		123,757		10,207
Peru—0.7%
Credicorp, Ltd. (Commercial banks)†		176,178		22,179
Emerging Europe, Mid-East, Africa—5.0%
Nigeria—0.2%
Guaranty Trust Bank plc (Commercial banks)		62,738,334		5,782
South Africa—4.0%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		869,628		13,388
Bidvest Group, Ltd. (Industrial conglomerates)		742,830		16,538
FirstRand, Ltd. (Diversified financial services)		6,143,905		19,833
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		3,056,325		11,638
Mr Price Group, Ltd. (Specialty retail)		112,549		1,541
Naspers, Ltd. (Media)		329,239		17,519
Sasol, Ltd. (Oil, gas & consumable fuels)		368,270		15,425
Shoprite Holdings, Ltd. (Food & staples retailing)		787,116		14,507
The Foschini Group, Ltd. (Specialty retail)		831,747		13,024
Tiger Brands, Ltd. (Food products)		332,051		9,951
				133,364
Turkey—0.8%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		342,197		14,097
Turkiye Halk Bankasi A.S. (Commercial banks)		1,453,116		11,369
				25,466
Western Hemisphere—4.8%
Bermuda—0.2%
RenaissanceRe Holdings, Ltd. (Insurance)†		67,622		5,140
Canada—4.6%
Alimentation Couche Tard, Inc. (Food & staples retailing)		650,387		28,402

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    37

International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Western Hemisphere—4.8%—(continued)
Canada—(continued)
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		1,374,805	$	45,506
CI Financial Corporation (Capital markets)		646,493		14,021
Dollarama, Inc. (Multiline retail)		254,217		15,276
Metro, Inc. (Food & staples retailing)		328,018		16,796
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		871,720		16,474
*Precision Drilling Corporation (Energy equipment & services)		1,725,674		11,746
Tim Hortons, Inc. (Hotels, restaurants & leisure)		114,692		6,046
				154,267
Asia—3.8%
Australia—0.3%
Cochlear, Ltd. (Health care equipment & supplies)		150,957		10,173
Hong Kong—2.0%
AIA Group, Ltd. (Insurance)		12,289,400		41,979
China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§		2,624,000		695
Hutchison Telecommunications Hong Kong Holdings, Ltd. (Diversified telecommunication services)		20,058,000		9,282
Sa Sa International Holdings, Ltd. (Specialty retail)		7,000,000		4,376
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		4,181,500		8,031
Value Partners Group, Ltd. (Capital markets)		7,631,000		3,669
				68,032
Issuer	Shares or Principal Amount		Value
Common Stocks—Asia—3.8%—(continued)
Singapore—1.5%
*Global Logistic Properties, Ltd. (Real estate management & development)		11,235,000	$	18,536
Keppel Corporation, Ltd. (Industrial conglomerates)		3,750,300		30,435
				48,971
Total Common Stocks—96.6% (cost $2,993,411)				3,207,981
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	2,875		751
Total Convertible Bond—0.0% (cost $1,491)				751
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $104,375, collateralized by FNMA, 0.760%-5.000%, due 4/15/15-6/11/15 and U.S Treasury Notes, 4.250%, due 8/15/15	$	104,374		104,374
Total Repurchase Agreement—3.1% (cost $104,374)				104,374
Total Investments—99.7% (cost $3,099,276)				3,313,106
Cash and other assets, less liabilities—0.3%				10,549
Net assets—100.0%			$	3,323,655

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. These holdings represent 0.04% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.04% of the net assets at June 30, 2012.

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.

See accompanying Notes to Portfolio of Investments.

38     Semi-Annual Report June 30, 2012

International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

At June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	22.1%
Consumer Discretionary	17.9%
Industrials	12.6%
Consumer Staples	11.5%
Health Care	10.3%
Energy	8.0%
Information Technology	7.5%
Materials	4.7%
Telecommunication Services	3.7%
Utilities	1.7%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	22.9%
Euro	19.9%
Japanese Yen	10.5%
Hong Kong Dollar	5.2%
Swiss Franc	5.0%
South African Rand	4.2%
South Korean Won	4.0%
U.S. Dollar	3.8%
Indian Rupee	3.4%
Brazilian Real	3.4%
Canadian Dollar	3.4%
Swedish Krona	2.8%
Norwegian Krone	2.6%
Thai Baht	1.7%
Danish Krone	1.6%
Singapore Dollar	1.5%
Indonesian Rupiah	1.0%
All Other Currencies	3.1%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    39

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 4.55% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI World Ex-U.S. (net) Index rose 2.43%.

Year-to-date, performance was strong. This performance was enhanced by positive stock selection across a number of sectors, coupled with the underweighting in Metals/Mining. During the period, the Fund’s Information Technology (IT) stocks were up 12.7%, well ahead of -3% Index return, ASML Holding N.V.’s performance was enhanced by rumors of a corporate breakup, while SAP AG and Samsung Electronics Co. Ltd. performed well in the first quarter on strong results. European Healthcare holdings bolstered that sector’s return, while Aerospace/Defense holdings and Keppel Corporation, Ltd. boosted Industrials performance. Somewhat detracting from first half performance was the Fund’s Staples underweighting, along with Financials and Utilities performance.

During the six month period, Consumer decreased by 3.3% in favor of Healthcare and Materials. As of period end, the Fund remained the most overweighted in Industrials and IT, which totaled 16.2% and 8.8%, respectively. While Financials represented 20.6% of the portfolio, it was below the 23.9% Index weighting, due to limited Developed Asia and Europe Ex-U.K. exposure. Regionally, Europe represented 37.9% of the Fund, due to an over 12% Healthcare weighting. The U.K. totaled 21.8%, slightly ahead of the Index weighting, while emerging markets represented 10.8%, a reduction from year end, when it represented 14.2%.

40     Semi-Annual Report June 30, 2012

International Equity Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Class N		4.55	%		(11.75	)%		6.80	%		(5.88	)%		2.76	%
Class I		4.69			(11.56	)		7.03			(5.66	)		3.03
MSCI World Ex-U.S. (net)		2.43			(14.13	)		6.20			(5.67	)		4.69

(a) For the period from May 24, 2004 (Commencement of Operations) to June 30, 2012.

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

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

The Morgan Stanley Capital International (MSCI) World Ex-U.S. (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    41

International Equity Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Europe, Mid-East—38.0%
Denmark—2.1%
Novo Nordisk A/S (Pharmaceuticals)		9,789	$	1,414
France—10.9%
AXA S.A. (Insurance)		57,161		758
BNP Paribas S.A. (Commercial banks)		21,580		829
Christian Dior S.A. (Textiles, apparel & luxury goods)		5,654		775
Dassault Systemes S.A. (Software)		9,908		927
Essilor International S.A. (Health care equipment & supplies)		15,613		1,448
L’Oreal S.A. (Personal products)		7,191		839
Sanofi (Pharmaceuticals)		18,110		1,369
Technip S.A. (Energy equipment & services)		5,363		556
				7,501
Germany—6.9%
BASF SE (Chemicals)		15,792		1,093
Bayer AG (Pharmaceuticals)		14,464		1,039
Fresenius SE & Co. KGaA (Health care providers & services)		12,959		1,341
Infineon Technologies AG (Semiconductors & semiconductor equipment)		49,718		336
SAP AG (Software)		16,191		954
				4,763
Ireland—2.9%
*Ryanair Holdings plc—ADR (Airlines)		27,327		831
Shire plc (Pharmaceuticals)		41,244		1,183
				2,014
Israel—0.9%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		15,930		628
Italy—1.1%
Saipem SpA (Energy equipment & services)		17,113		758
Netherlands—4.1%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		17,446		885
Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		228		8
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		19,114		666
Unilever N.V. (Food products)		37,212		1,242
				2,801
Norway—1.4%
Telenor ASA (Diversified telecommunication services)		57,719		959
Spain—1.6%
Inditex S.A. (Specialty retail)		10,260		1,058
Sweden—1.3%
Atlas Copco AB Class “A” (Machinery)		41,515		891
Switzerland—4.8%
*Geberit AG (Building products)		3,916		770
Nestle S.A. (Food products)		17,485		1,042
Syngenta AG (Chemicals)		4,427		1,508
				3,320
Common Stocks—(continued)
United Kingdom—20.7%
Barclays plc (Commercial banks)		160,620	$	410
BG Group plc (Oil, gas & consumable fuels)		36,903		751
Burberry Group plc (Textiles, apparel & luxury goods)		45,740		949
Compass Group plc (Hotels, restaurants & leisure)		136,651		1,432
Diageo plc (Beverages)		52,680		1,355
Experian plc (Professional services)		64,349		908
HSBC Holdings plc (Commercial banks)		104,503		923
Johnson Matthey plc (Chemicals)		30,346		1,049
Pearson plc (Media)		60,164		1,193
Petrofac, Ltd. (Energy equipment & services)		46,430		1,009
Prudential plc (Insurance)		75,883		877
*Rolls-Royce Holdings plc (Aerospace & defense)		112,463		1,511
Standard Chartered plc (Commercial banks)		52,609		1,141
Tullow Oil plc (Oil, gas & consumable fuels)		30,438		701
				14,209
Japan—13.9%
Chiyoda Corporation (Construction & engineering)		42,000		509
Daito Trust Construction Co., Ltd. (Real estate management & development)		12,500		1,181
FamilyMart Co., Ltd. (Food & staples retailing)		20,800		950
Fanuc Corporation (Machinery)		7,400		1,199
Keyence Corporation (Electronic equipment, instruments & components)		3,500		859
Nikon Corporation (Leisure equipment & products)		33,700		1,013
Nitori Co., Ltd. (Specialty retail)		7,800		736
ORIX Corporation (Diversified financial services)		10,760		992
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		26,000		849
Suruga Bank, Ltd. (Commercial banks)		56,000		570
THK Co., Ltd. (Machinery)		39,500		737
				9,595
Canada—7.1%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		34,364		1,137
Canadian National Railway Co. (Road & rail)†		11,571		976
Goldcorp, Inc. (Metals & mining)†		16,963		637
The Toronto-Dominion Bank (Commercial banks)		18,155		1,421
Tim Hortons, Inc. (Hotels, restaurants & leisure)		13,383		706
				4,877
Emerging Asia—5.5%
China—2.2%
China Mobile, Ltd. (Wireless telecommunication services)		67,000		732
CNOOC, Ltd. (Oil, gas & consumable fuels)		384,000		762
				1,494
India—0.8%
Tata Consultancy Services, Ltd. (IT services)		24,344	$	557

See accompanying Notes to Portfolio of Investments.

42     Semi-Annual Report June 30, 2012

International Equity Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Asia—5.5%—(continued)
Papua New Guinea—0.7%
Oil Search, Ltd. (Oil, gas & consumable fuels)		75,718	$	510
South Korea—1.8%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,192		1,250
Asia—5.0%
Australia—1.6%
BHP Billiton, Ltd.—ADR (Metals & mining)		16,669		1,089
Hong Kong—2.1%
AIA Group, Ltd. (Insurance)		416,600		1,423
Singapore—1.3%
Keppel Corporation, Ltd. (Industrial conglomerates)		115,000		933
Emerging Latin America—3.4%
Brazil—1.0%
Embraer S.A.—ADR (Aerospace & defense)		24,740		656
Chile—1.5%
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		18,520		1,031
Panama—0.9%
Copa Holdings S.A. (Airlines)†		7,669		633
Emerging Europe, Mid-East, Africa—1.4%
South Africa—1.4%
FirstRand, Ltd. (Diversified financial services)		292,045		943
Total Common Stocks—95.0% (cost $60,111)				65,307
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $3,800, collateralized by FNMA, 5.000%, due 4/15/15	$	3,800		3,800
Total Repurchase Agreement—5.5% (cost $3,800)				3,800
Total Investments—100.5% (cost $63,911)				69,107
Liabilities, plus cash and other assets—(0.5)%				(344	)
Net assets—100.0%			$	68,763

ADR = American Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	20.6%
Industrials	16.2%
Health Care	12.9%
Consumer Discretionary	12.0%
Materials	9.8%
Information Technology	8.8%
Energy	8.8%
Consumer Staples	8.3%
Telecommunication Services	2.6%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Euro	24.8%
British Pound Sterling	23.2%
Japanese Yen	14.7%
U.S. Dollar	11.7%
Hong Kong Dollar	5.9%
Swiss Franc	5.1%
Canadian Dollar	3.2%
Danish Krone	2.2%
South Korean Won	1.9%
Norwegian Krone	1.5%
South African Rand	1.4%
Singapore Dollar	1.4%
Swedish Krona	1.4%
All Other Currencies	1.6%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    43

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 6.16% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI All Country Ex-U.S. Small Cap Index (net), rose 4.09%.

Performance was driven by strong stock selection across a number of sectors, along with a focus on high quality companies with good growth prospects. In addition, the Fund’s sector/industry exposures were positive given the significant Metals/Mining underweighting and Consumer overweighting. Within Discretionary, Nokian Renkaat (Tyres), the Finnish tire company, added to results on strong demand from its important Russian end market, while Salvatore Ferragamo Italia SpA, the Italian luxury goods company, rose on strong sales trends across most regions and distribution channels. Dollarama, Inc. also performed well over the period. Somewhat detracting from results was K’s Holdings Corporation, the Japanese electronics retailer, which had weak TV sales as incentives expired. Financials stock selection was bolstered by conservative Commercial Banks positioning coupled with strong results in Insurance and Real Estate. Defensive positioning within Industrials added value as well. Somewhat detracting from results was weak performance in Energy, as Legacy Oil & Gas, Inc. detracted from results on lower production growth and reserves than the market expected, and as Celtic Exploration Ltd. and Peyto Exploration & Development Corporation each underperformed on concerns of lower natural gas prices and slowing production growth.

The Fund maintained its significant Consumer focus, representing 34.8% as of June 30, approximately 10% above the Index weighting. At June 30, the Fund remained significantly overweighted in Health Care, which totaled 12.5%, well above the 5% Index weighting, although below the 15.8% weighting as of year end. Conversely, Resources, Industrials and Financials were significantly underweighted. Overall regional positioning did not change appreciably during the six month period, as the Fund maintained its significant weighting in the UK at the expense of Developed Asia and Canada. Emerging markets totaled 22.2% as of June 30, below the 23.1% Index weighting and a reduction from year end, due to lower exposure in Emerging Asia, given slowing growth in that region.

44     Semi-Annual Report June 30, 2012

International Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Class N		6.16	%		(11.55	)%		13.91	%		(2.56	)%		4.59	%
Class I		6.28			(11.35	)		14.22			(2.23	)		4.92
MSCI ACWI Ex-U.S. Small Cap (net)		4.09			(16.43	)		10.41			(3.74	)		4.41

(a) For the period from November 1, 2005 (Commencement of Operations) to June 30, 2012.

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. Smaller capitalization stock 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. 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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    45

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
United Kingdom—22.1%
Abcam plc (Biotechnology)		962,205	$	6,288
*ASOS plc (Internet & catalog retail)		118,426		3,292
Aveva Group plc (Software)		265,190		6,770
Babcock International Group plc (Commercial services & supplies)		1,107,282		14,801
Booker Group plc (Food & staples retailing)		8,352,829		11,904
Croda International plc (Chemicals)		398,298		14,116
Domino’s Pizza Group plc (Hotels, restaurants & leisure)		313,120		2,523
Dunelm Group plc (Specialty retail)		445,908		3,628
Elementis plc (Chemicals)		1,427,404		4,438
*EnQuest plc (Oil, gas & consumable fuels)		1,476,078		2,490
Fidessa Group plc (Software)		122,805		2,981
Halma plc (Electronic equipment, instruments & components)		878,060		5,743
Hiscox, Ltd. (Insurance)		488,558		3,269
IG Group Holdings plc (Diversified financial services)		1,272,904		9,549
*Imagination Technologies Group plc (Computers & peripherals)		903,107		6,600
Lancashire Holdings, Ltd. (Insurance)		927,090		11,565
Moneysupermarket.com Group plc (Internet software & services)		1,770,555		3,472
*Salamander Energy plc (Oil, gas & consumable fuels)		1,680,109		4,492
Spirax-Sarco Engineering plc (Machinery)		211,563		6,580
*Sports Direct International plc (Specialty retail)		1,338,244		6,409
St James’s Place plc (Insurance)		636,618		3,333
Synergy Health plc (Health care providers & services)		207,366		2,928
*Telecity Group plc (Internet software & services)		491,879		6,186
				143,357
Europe—20.7%
Denmark—0.9%
CHR Hansen Holding A/S (Chemicals)		225,500		5,785
Germany—7.0%
Aixtron AG (Semiconductors & semiconductor equipment)		306,454		4,367
Delticom AG (Specialty retail)		30,200		1,983
ElringKlinger AG (Auto components)		191,003		4,537
Gerry Weber International AG (Textiles, apparel & luxury goods)		145,938		6,009
MTU Aero Engines Holding AG (Aerospace & defense)		169,142		12,402
Pfeiffer Vacuum Technology AG (Machinery)		58,801		5,980
Wincor Nixdorf AG (Computers & peripherals)		197,352		6,988
Wirecard AG (IT services)		184,136		3,563
				45,829
Ireland—1.4%
Paddy Power plc (Hotels, restaurants & leisure)		143,495		9,361
Italy—3.2%
De’Longhi SpA (Household durables)		391,776		3,760
Recordati SpA (Pharmaceuticals)		397,789		2,829
Common Stocks—Europe—20.7%—(continued)
Italy—(continued)
Salvatore Ferragamo Italia SpA (Textiles, apparel & luxury goods)		299,415	$	6,214
Tod’s SpA (Textiles, apparel & luxury goods)		50,442		5,040
*Yoox SpA (Internet & catalog retail)		201,285		2,899
				20,742
Norway—1.9%
Opera Software ASA (Internet software & services)		533,186		3,756
Schibsted ASA (Media)		271,063		8,776
				12,532
Spain—2.3%
Viscofan S.A. (Food products)		341,795		14,676
Sweden—3.0%
Axis Communications AB (Communications equipment)		351,804		7,629
JM AB (Household durables)		280,780		4,942
Mekonomen AB (Specialty retail)		130,585		3,992
NIBE Industrier AB (Building products)		211,658		2,884
				19,447
Switzerland—1.0%
Partners Group Holding AG (Capital markets)		36,436		6,472
Japan—16.2%
Ain Pharmaciez, Inc. (Food & staples retailing)		112,400		6,742
Cosmos Pharmaceutical Corporation (Food & staples retailing)		60,600		4,010
CyberAgent, Inc. (Media)		3,535		8,991
F.C.C. Co., Ltd. (Auto components)		326,709		5,436
FamilyMart Co., Ltd. (Food & staples retailing)		320,900		14,653
Kakaku.com, Inc. (Internet software & services)		93,000		3,143
M3, Inc. (Health care technology)		812		3,870
Miraca Holdings, Inc. (Health care providers & services)		262,600		10,858
MISUMI Group, Inc. (Trading companies & distributors)		278,100		6,499
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		30,100		3,231
Ship Healthcare Holdings, Inc. (Health care providers & services)		209,000		5,007
Start Today Co., Ltd. (Internet & catalog retail)		284,300		3,951
Suruga Bank, Ltd. (Commercial banks)		1,017,000		10,356
THK Co., Ltd. (Machinery)		472,200		8,814
United Arrows, Ltd. (Specialty retail)		167,700		4,158
Xebio Co., Ltd. (Specialty retail)		257,300		5,849
				105,568
Emerging Asia—11.1%
China—4.9%
AAC Technologies Holdings, Inc. (Communications equipment)		2,111,559		6,070
Dongyue Group (Chemicals)		3,435,000		1,590
*Haier Electronics Group Co., Ltd. (Household durables)		8,292,000		9,876

See accompanying Notes to Portfolio of Investments.

46     Semi-Annual Report June 30, 2012

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Asia—11.1%—(continued)
China—(continued)
Haitian International Holdings, Ltd. (Machinery)		3,820,496	$	3,772
Minth Group, Ltd. (Auto components)		2,728,000		2,929
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)†		209,135		3,691
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)†		261,262		3,689
				31,617
India—2.0%
CRISIL, Ltd. (Diversified financial services)		181,617		3,492
eClerx Services, Ltd. (Professional services)		160,640		1,745
Ipca Laboratories, Ltd. (Pharmaceuticals)		300,246		1,929
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		112,272		2,351
Motherson Sumi Systems, Ltd. (Auto components)		715,247		2,094
Oberoi Realty, Ltd. (Real estate management & development)		344,191		1,500
				13,111
Indonesia—1.6%
PT Harum Energy Tbk (Oil, gas & consumable fuels)		2,587,500		1,570
PT Kalbe Farma Tbk (Pharmaceuticals)		6,134,500		2,466
PT Media Nusantara Citra Tbk (Media)		12,923,000		2,738
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		12,969,500		3,694
				10,468
South Korea—0.6%
Daum Communications Corporation (Internet software & services)		44,148		3,943
Taiwan—1.1%
Hiwin Technologies Corporation (Machinery)		370,000		3,739
Simplo Technology Co., Ltd. (Computers & peripherals)		524,500		3,571
				7,310
Thailand—0.9%
Bangkok Dusit Medical Services PCL (Health care providers & services)		831,500		2,552
Siam Makro PCL (Food & staples retailing)		267,900		3,003
				5,555
Asia—9.0%
Australia—3.0%
Cochlear, Ltd. (Health care equipment & supplies)		196,219		13,222
Seek, Ltd. (Professional services)		929,525		6,032
				19,254
Hong Kong—4.6%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)		1,249,300		15,854
Sa Sa International Holdings, Ltd. (Specialty retail)		5,746,000		3,592
Common Stocks—Asia—9.0%—(continued)
Hong Kong—(continued)
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		4,925,500	$	9,460
Value Partners Group, Ltd. (Capital markets)		1,968,000		946
				29,852
Singapore—1.4%
*Biosensors International Group, Ltd. (Health care equipment & supplies)		3,011,000		2,698
First Resources, Ltd. (Food products)		4,340,000		6,578
				9,276
Canada—6.5%
Canadian Energy Services & Technology Corporation (Energy equipment & services)		202,155		1,944
Canadian Western Bank (Commercial banks)		83,749		2,173
*Celtic Exploration, Ltd. (Oil, gas & consumable fuels)		510,250		6,901
Dollarama, Inc. (Multiline retail)		197,301		11,856
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		831,220		4,588
Major Drilling Group International, Inc. (Metals & mining)		195,191		2,257
Petrominerales, Ltd. (Oil, gas & consumable fuels)		158,581		1,791
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		327,812		6,195
*Precision Drilling Corporation (Energy equipment & services)		417,208		2,840
Total Energy Services, Inc. (Energy equipment & services)		128,308		1,814
				42,359
Emerging Europe, Mid-East, Africa—6.3%
Poland—1.0%
Eurocash S.A. (Food & staples retailing)		235,146		2,894
Lubelski Wegiel Bogdanka S.A. (Oil, gas & consumable fuels)		97,701		3,577
				6,471
Russia—0.4%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)†		419,810		2,288
South Africa—3.5%
Capitec Bank Holdings, Ltd. (Commercial banks)		271,332		7,053
Coronation Fund Managers, Ltd. (Capital markets)		1,036,290		3,508
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,264,242		8,622
Mr Price Group, Ltd. (Specialty retail)		256,068		3,506
				22,689
Turkey—1.4%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		945,477		4,047
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		5,205,656		5,296
				9,343

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    47

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Emerging Latin America—3.8%
Brazil—2.7%
Arezzo Industria e Comercio S.A. (Textiles, apparel & luxury goods)		268,796	$	4,002
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		148,542		1,856
Iochpe-Maxion S.A. (Machinery)		166,500		1,940
OdontoPrev S.A. (Health care providers & services)		837,700		4,254
Restoque Comercio e Confeccoes de Roupas S.A. (Textiles, apparel & luxury goods)		439,800		2,251
T4F Entretenimento S.A. (Media)		413,800		3,430
				17,733
Chile—0.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)		14,169,396		3,183
Panama—0.6%
Copa Holdings S.A. (Airlines)†		45,616		3,763
Total Common Stocks—95.7% (cost $580,931)				621,984
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		251
Total Convertible Bond—0.0% (cost $497)				251
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $26,085, collateralized by FNMA, 5.000%, due 4/15/15	$	26,085		26,085
Total Repurchase Agreement—4.0% (cost $26,085)				26,085
Total Investments—99.7% (cost $607,513)				648,320
Cash and other assets, less liabilities—0.3%				2,202
Net assets—100.0%			$	650,522

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 0.04% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2012.

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	24.8%
Information Technology	15.2%
Industrials	12.7%
Health Care	12.5%
Financials	11.7%
Consumer Staples	11.0%
Energy	6.1%
Materials	4.5%
Telecommunication Services	1.5%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	23.0%
Japanese Yen	17.0%
Euro	15.6%
Hong Kong Dollar	9.9%
Canadian Dollar	6.8%
South African Rand	3.7%
Swedish Krona	3.1%
Australian Dollar	3.1%
Brazilian Real	2.9%
Indian Rupee	2.1%
Norwegian Krone	2.0%
Indonesian Rupiah	1.7%
Turkish Lira	1.5%
Singapore Dollar	1.5%
New Taiwan Dollar	1.2%
Swiss Franc	1.0%
All Other Currencies	3.9%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

48     Semi-Annual Report June 30, 2012

Todd M. McClone

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 7.08% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net), rose 4.31%.

Year-to-date, performance was strong. The Fund’s significant outperformance was driven by stock selection, coupled with the its focus on high quality companies with good growth prospects. In addition, the Fund’s industry positioning augmented performance during the period. Staples stock selection was strong, with good performance in Food/Staples Retailing and Food Products. In particular Magnit OJSC, the Russian grocery store chain was additive to results on strong same store sales, while CP ALL Public Company Limited, the Thai convenience store operator, also reported better than expected results on strong same store sales growth. BIM Birlesik Magazalar A.S., the hard discounter in Turkey, reported strong sales growth during the period. Financials stock selection was strong, supported by Turkiye Garanti Bankasi A.S., the Turkish bank specializing in lending. Somewhat detracting from performance was Information Technology (IT) stock selection, given weakness in HTC Corporation, the Taiwan smartphone producer, and Infosys Technologies Limited, the Indian IT and software company.

Consumer was reduced during the six month period to approximately 26% of the portfolio, with a tilt towards Staples, yet remained significantly overweighted versus the 17.5% Index weighting, given higher Autos, Media Retailing and Food/Staples Retailing weightings. This decrease funded a slight increase in Resources, although it remained significantly underweighted versus the 23.8% Index weighting, due primarily to the significant underweighting in Mining, given concerns about slowing infrastructure spending growth and the impact on commodity prices prospectively. Regionally, the portfolio’s positioning did not change significantly during the six month period and remained relatively similar to the Index, despite significant country weighting variances. Within Emerging Asia, the 8.2% India weighting and 4.4% weighting in Indonesia, was offset by lower Korean and Taiwanese exposure, while in Emerging Europe, Mid East, and Africa (EMEA), limited Eastern Europe and Russian exposure was offset by higher weightings in South Africa and Turkey. Emerging Latin America totaled 23.7% as of quarter end, above the 24.5% Index weighting given larger weights in Chile, Colombia and Peru, which offset lower Mexican exposure.

June 30, 2012 William Blair Funds    49

Emerging Markets Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Class N		7.08	%		(10.81	)%		12.61	%		(2.96	)%		10.07	%
Class I		7.29			(10.45	)		12.97			(2.70	)		10.35
MSCI Emerging Markets IMI (net)		4.31			(16.29	)		9.97			(0.01	)		10.34

(a) For the period from June 6, 2005 (Commencement of Operations) to June 30, 2012.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

50     Semi-Annual Report June 30, 2012

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Emerging Asia—53.7%
China—19.4%
AAC Technologies Holdings, Inc. (Communications equipment)		1,157,959	$	3,329
*Baidu, Inc.—ADR (Internet software & services)		151,291		17,395
Belle International Holdings, Ltd. (Specialty retail)		2,638,610		4,462
China BlueChemical, Ltd. (Chemicals)		4,060,609		2,303
China Mobile, Ltd. (Wireless telecommunication services)		3,218,755		35,163
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		2,218,304		7,735
CNOOC, Ltd. (Oil, gas & consumable fuels)		12,063,601		23,947
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		4,121,361		1,711
Dongfeng Motor Group Co., Ltd. (Automobiles)		7,888,186		12,100
Dongyue Group (Chemicals)		2,825,287		1,307
Golden Eagle Retail Group, Ltd. (Multiline retail)		1,130,547		2,294
*Haier Electronics Group Co., Ltd. (Household durables)		5,423,000		6,459
Haitian International Holdings, Ltd. (Machinery)		2,617,870		2,585
Lenovo Group, Ltd. (Computers & peripherals)		15,137,014		12,761
*NetEase, Inc.—ADR (Internet software & services)		76,617		4,509
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		1,261,449		10,032
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		163,268		2,882
Sun Art Retail Group, Ltd. (Food & staples retailing)		8,773,245		9,601
Tencent Holdings, Ltd. (Internet software & services)		310,335		9,040
Want Want China Holdings, Ltd. (Food products)		7,076,217		8,665
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		162,514		2,295
Yingde Gases (Chemicals)		2,319,981		2,111
*Youku.com, Inc.—ADR (Internet software & services)		80,097		1,736
				184,422
India—8.2%
Asian Paints, Ltd. (Chemicals)		45,181		3,147
Bajaj Auto, Ltd. (Automobiles)		168,227		4,739
HDFC Bank, Ltd. (Commercial banks)		998,051		10,073
Housing Development Finance Corporation (Thrifts & mortgage finance)		803,261		9,397
IndusInd Bank, Ltd. (Commercial banks)		476,422		2,903
ITC, Ltd. (Tobacco)		3,557,037		16,494
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		120,928		2,532
Lupin, Ltd. (Pharmaceuticals)		234,955		2,260
Motherson Sumi Systems, Ltd. (Auto components)		640,080		1,874
Nestle India, Ltd. (Food products)		28,797		2,341
Common Stocks—Emerging Asia—53.7%—(continued)
India—(continued)
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		430,529	$	4,903
Tata Consultancy Services, Ltd. (IT services)		370,963		8,487
Tata Motors, Ltd. (Automobiles)		2,149,801		9,335
				78,485
Indonesia—4.4%
PT Astra International Tbk (Automobiles)		13,191,240		9,620
PT Bank Rakyat Indonesia (Commercial banks)		17,979,821		12,156
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		986,224		3,775
PT Jasa Marga Persero Tbk (Transportation infrastructure)		2,980,500		1,713
PT Kalbe Farma Tbk (Pharmaceuticals)		6,336,283		2,547
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		9,279,728		2,643
PT Unilever Indonesia Tbk (Household products)		2,696,997		6,576
PT United Tractors Tbk (Machinery)		1,036,273		2,355
				41,385
Malaysia—1.0%
CIMB Group Holdings Bhd (Commercial banks)		4,167,287		9,934
Papua New Guinea—1.0%
Oil Search, Ltd. (Oil, gas & consumable fuels)		1,471,402		9,910
Philippines—0.1%
Alliance Global Group, Inc. (Industrial conglomerates)		1,862,972		510
South Korea—8.2%
Celltrion, Inc. (Pharmaceuticals)		171,765		4,544
Hyundai Motor Co. (Automobiles)		82,330		16,713
LG Household & Health Care, Ltd. (Household products)		8,178		4,405
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		31,001		32,507
Samsung Engineering Co., Ltd. (Construction & engineering)		45,297		7,099
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		38,338		7,565
Samsung Heavy Industries Co., Ltd. (Machinery)		152,914		4,980
				77,813
Taiwan—6.4%
Asustek Computer, Inc. (Computers & peripherals)		1,218,000		11,065
Catcher Technology Co., Ltd. (Computers & peripherals)		609,064		4,046
Hiwin Technologies Corporation (Machinery)		260,742		2,635
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		6,635,994		19,851
HTC Corporation (Communications equipment)		499,800		6,514
MediaTek, Inc. (Semiconductors & semiconductor equipment)		754,064		6,888

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    51

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Asia—53.7%—(continued)
Taiwan—(continued)
Simplo Technology Co., Ltd. (Computers & peripherals)		618,122	$	4,209
TPK Holding Co., Ltd. (Electronic equipment, instruments & components)		442,979		5,544
TSRC Corporation (Chemicals)		111,708		274
				61,026
Thailand—5.0%
Advanced Info Service PCL (Wireless telecommunication services)		2,656,362		15,431
BEC World PCL (Media)		2,929,000		4,657
CP ALL PCL (Food & staples retailing)		8,589,718		9,601
Kasikornbank PCL (Commercial banks)		2,772,682		14,405
Siam Makro PCL (Food & staples retailing)		304,532		3,414
				47,508
Emerging Latin America—21.8%
Argentina—0.5%
MercadoLibre, Inc. (Internet software & services)		64,031		4,853
Brazil—10.2%
BR Malls Participacoes S.A. (Real estate management & development)		596,190		6,827
BR Properties S.A. (Real estate management & development)		309,597		3,653
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		153,548		1,919
Cia de Bebidas das Americas—ADR (Beverages)		498,098		19,092
Cia de Concessoes Rodoviarias (Transportation infrastructure)		652,489		5,305
Cia Hering (Specialty retail)		229,116		4,346
Cielo S.A. (IT services)		498,800		14,672
CPFL Energia S.A.—ADR (Electric utilities)		274,394		6,857
Embraer S.A.—ADR (Aerospace & defense)		358,522		9,512
Iochpe-Maxion S.A. (Machinery)		188,500		2,196
Lojas Renner S.A. (Multiline retail)		168,222		4,720
OdontoPrev S.A. (Health care providers & services)		504,566		2,562
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		811,289		2,222
Raia Drogasil S.A. (Food & staples retailing)		246,545		2,486
Totvs S.A. (Software)		124,732		2,403
Tractebel Energia S.A. (Independent power producers & energy traders)		435,038		8,047
				96,819
Chile—3.4%
Banco Santander Chile—ADR (Commercial banks)		119,420		9,254
CFR Pharmaceuticals S.A. (Pharmaceuticals)		10,378,475		2,332
ENTEL Chile S.A. (Wireless telecommunication services)		349,425		6,629
S.A.C.I. Falabella (Multiline retail)		768,693		7,023
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		82,591		4,598
Sonda S.A. (IT services)		902,990		2,537
				32,373
Common Stocks—Emerging Latin America—21.8%—(continued)
Colombia—2.3%
Ecopetrol S.A. (Oil, gas & consumable fuels)		5,554,705	$	15,530
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		285,240		6,041
				21,571
Mexico—4.5%
Coca-Cola Femsa S.A.B. de C.V.—ADR (Beverages)		37,395		4,894
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,239,169		2,448
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		3,187,010		16,471
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,411,812		19,058
				42,871
Peru—0.9%
Credicorp, Ltd. (Commercial banks)†		71,223		8,966
Emerging Europe, Mid-East, Africa—19.6%
Nigeria—0.3%
Guaranty Trust Bank plc (Commercial banks)		32,723,983		3,016
Poland—0.6%
Eurocash S.A. (Food & staples retailing)		466,227		5,738
Qatar—1.5%
Industries Qatar QSC (Industrial conglomerates)		412,537		14,161
Russia—2.7%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		473,600		2,581
Magnit OAO (Food & staples retailing)†		120,783		14,526
*Mail.ru Group, Ltd.—GDR (Internet software & services)		78,415		2,658
*Yandex N.V. Class “A” (Internet software & services)†		328,102		6,250
				26,015
South Africa—10.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		319,257		4,915
AVI, Ltd. (Food products)		771,245		4,717
Bidvest Group, Ltd. (Industrial conglomerates)		457,034		10,175
FirstRand, Ltd. (Diversified financial services)		4,552,014		14,694
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,323,740		8,849
Mr Price Group, Ltd. (Specialty retail)		188,991		2,587
MTN Group, Ltd. (Wireless telecommunication services)		584,575		10,077
Naspers, Ltd. (Media)		188,266		10,018
Sasol, Ltd. (Oil, gas & consumable fuels)		407,706		17,076
Shoprite Holdings, Ltd. (Food & staples retailing)		385,753		7,110
Tiger Brands, Ltd. (Food products)		137,081		4,108
Truworths International, Ltd. (Specialty retail)		472,654		5,176
				99,502

See accompanying Notes to Portfolio of Investments.

52     Semi-Annual Report June 30, 2012

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—19.6%—(continued)
Turkey—4.0%
Arcelik A.S. (Household durables)		576,339	$	2,913
BIM Birlesik Magazalar A.S. (Food & staples retailing)		220,658		9,090
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		718,901		3,076
Turkiye Halk Bankasi A.S. (Commercial banks)		2,920,553		22,851
				37,930
Total Common Stocks—95.1% (cost $858,643)				904,808
Preferred Stocks
Brazil—2.0%
Itau Unibanco Holding S.A. (Commercial banks)		983,041		13,846
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		539,525		4,902
				18,748
Total Preferred Stocks—2.0% (cost $19,749)				18,748
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		419
Total Convertible Bond—0.0% (cost $831)				419

Total Investments—97.1% (cost $879,223)		923,975
Cash and other assets, less liabilities—2.9%		27,724
Net assets—100.0%	$	951,699

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 0.04% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2012.

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Information Technology	20.1%
Financials	19.5%
Consumer Staples	14.7%
Consumer Discretionary	12.4%
Energy	9.9%
Telecommunication Services	7.3%
Industrials	6.9%
Health Care	4.1%
Materials	3.5%
Utilities	1.6%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.4%
U.S. Dollar	12.5%
South African Rand	10.8%
Brazilian Real	8.7%
Indian Rupee	8.5%
South Korean Won	8.4%
New Taiwan Dollar	6.6%
Thai Baht	5.1%
Indonesian Rupiah	4.5%
Mexican Peso	4.1%
Turkish Lira	4.1%
Chilean Peso	2.0%
Colombian Peso	1.7%
Qatari Rial	1.5%
Malaysian Ringgit	1.1%
Australian Dollar	1.1%
All Other Currencies	1.9%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    53

Todd M. McClone

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 posted a 6.90% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) rose 3.60% during the same period.

Year-to-date, performance was strong. The Fund’s significant outperformance was driven by stock selection, coupled with the Fund’s focus on high quality companies with good growth prospects. The overweighting in Staples along with good stock selection bolstered performance, as Magnit OJSC, the Russian grocery store chain, was additive to results on strong same store sales growth, while CP All, the Thai convenience store operator, also reported better than expected results on strong same store sales growth. Financials performance was bolstered by Banorte, which continued to generate strong results. Redecard, the Brazilian payment processing company, was up significantly on Itau Unibanco’s tender for outstanding shares. We sold the company as a result. Resources stock selection was also strong, driven by good performance in Oil/Gas and Metals/Mining holdings. Somewhat detracting from results was the Fund’s underperformance in IT and Industrials.

Consumer was reduced during the six month period to approximately 28% of the portfolio, with a tilt towards Staples, yet remained significantly overweighted versus the 14.7% Index weighting, given higher Autos, Retailing and Food/Staples Retailing weightings. This decrease funded a 2.5% increase in Resources, although it remained significantly underweighted versus the 26.7% Index weighting, due primarily to the significant underweighting in Mining, given concerns about slowing infrastructure spending growth and the impact on commodity prices prospectively. Regionally, the portfolio’s positioning did not change significantly during the three month period. EM Asia was slightly underweighted versus the Index as of June 30, due to lower Korean and Taiwanese exposure, which more than offset a 3% overweighting in India and slightly higher Chinese and Indonesian exposure. In EMEA, limited Eastern Europe and Russian exposure was offset by a 5% overweighting in South Africa. Latin America totaled 23.8% as of quarter end, above the 22.8% Index weighting given larger weights in Chile, Colombia and Peru, which offset lower Brazilian and Mexican exposure.

54     Semi-Annual Report June 30, 2012

Emerging Leaders Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year		Since Inception
Class N(a)		6.90	%		(11.87	)%		N/A		0.85	%
MSCI Emerging Markets Large Cap Index (net)(a)		3.60			(15.51	)		N/A		(0.63	)
Class I(b)		6.92			(11.63	)		11.93		(2.14	)
MSCI Emerging Markets Large Cap Index (net)(b)		3.60			(15.51	)		9.62		(1.53	)

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2012.

(b) For the period from March 26, 2008 (Commencement of Operations) to June 30, 2012.

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 (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 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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    55

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Emerging Asia—55.9%
China—20.0%
*Baidu, Inc.—ADR (Internet software & services)		8,786	$	1,010
Belle International Holdings, Ltd. (Specialty retail)		244,000		413
China Mobile, Ltd. (Wireless telecommunication services)		177,500		1,939
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		102,000		356
CNOOC, Ltd. (Oil, gas & consumable fuels)		750,000		1,489
Dongfeng Motor Group Co., Ltd. (Automobiles)		484,000		742
Lenovo Group, Ltd. (Computers & peripherals)		836,000		705
*NetEase, Inc.—ADR (Internet software & services)		3,908		230
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		73,000		581
Sun Art Retail Group, Ltd. (Food & staples retailing)		514,000		562
Tencent Holdings, Ltd. (Internet software & services)		18,700		545
Want Want China Holdings, Ltd. (Food products)		327,000		400
				8,972
India—10.1%
Bajaj Auto, Ltd. (Automobiles)		15,682		442
HDFC Bank, Ltd. (Commercial banks)		67,729		684
Housing Development Finance Corporation (Thrifts & mortgage finance)		42,550		498
ITC, Ltd. (Tobacco)		165,531		767
Nestle India, Ltd. (Food products)		2,736		222
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		63,475		723
Tata Consultancy Services, Ltd. (IT services)		22,902		524
Tata Motors, Ltd. (Automobiles)		161,854		703
				4,563
Indonesia—5.5%
PT Astra International Tbk (Automobiles)		1,225,500		894
PT Bank Rakyat Indonesia (Commercial banks)		1,153,000		779
PT Unilever Indonesia Tbk (Household products)		232,000		566
PT United Tractors Tbk (Machinery)		108,500		247
				2,486
Malaysia—1.8%
CIMB Group Holdings Bhd (Commercial banks)		330,200		787
South Korea—8.8%
Hyundai Motor Co. (Automobiles)		4,437		901
LG Household & Health Care, Ltd. (Household products)		1,063		572
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,769		1,855
Samsung Engineering Co., Ltd. (Construction & engineering)		4,091		641
				3,969
Common Stocks—Emerging Asia—55.9%—(continued)
Taiwan—3.4%
Asustek Computer, Inc. (Computers & peripherals)		41,000	$	372
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		380,700		1,139
				1,511
Thailand—6.3%
Advanced Info Service PCL (Wireless telecommunication services)		164,800		957
CP ALL PCL (Food & staples retailing)		965,700		1,080
Kasikornbank PCL (Commercial banks)		155,800		809
				2,846
Emerging Latin America—21.8%
Brazil—9.9%
BR Malls Participacoes S.A. (Real estate management & development)		63,300		725
Cia de Bebidas das Americas—ADR (Beverages)		28,876		1,107
Cia de Concessoes Rodoviarias (Transportation infrastructure)		63,100		513
Cielo S.A. (IT services)		23,300		685
CPFL Energia S.A.—ADR (Electric utilities)		16,614		415
Embraer S.A.—ADR (Aerospace & defense)		15,600		414
Tractebel Energia S.A. (Independent power producers & energy traders)		31,400		581
				4,440
Chile—3.7%
Banco Santander Chile—ADR (Commercial banks)		10,225		792
S.A.C.I. Falabella (Multiline retail)		52,314		478
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		7,336		409
				1,679
Colombia—2.5%
Ecopetrol S.A. (Oil, gas & consumable fuels)		394,565		1,103
Mexico—4.9%
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		184,600		954
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		420,200		1,249
				2,203
Peru—0.8%
Credicorp, Ltd. (Commercial banks)†		3,045		383
Emerging Europe, Mid-East, Africa—19.6%
Qatar—1.9%
Industries Qatar QSC (Industrial conglomerates)		24,491		841
Russia—3.6%
Magnit OAO (Food & staples retailing)†		924		111
* Magnit OJSC—144A—GDR (Food & staples retailing)†		21,877		658
Sberbank of Russian Federation (Commercial banks)†		316,195		844
				1,613

See accompanying Notes to Portfolio of Investments.

56     Semi-Annual Report June 30, 2012

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Europe, Mid-East, Africa—19.6%—(continued)
South Africa—12.3%
Bidvest Group, Ltd. (Industrial conglomerates)		31,864	$	709
FirstRand, Ltd. (Diversified financial services)		283,763		916
MTN Group, Ltd. (Wireless telecommunication services)		27,421		473
Naspers, Ltd. (Media)		9,621		512
Sasol, Ltd. (Oil, gas & consumable fuels)		25,709		1,077
Shoprite Holdings, Ltd. (Food & staples retailing)		48,720		898
Tiger Brands, Ltd. (Food products)		14,106		423
Truworths International, Ltd. (Specialty retail)		47,800		523
				5,531
Turkey—1.8%
Turkiye Garanti Bankasi A.S. (Commercial banks)		210,924		828
Total Common Stocks—97.3% (cost $41,454)				43,755
Preferred Stocks
Brazil—2.1%
Itau Unibanco Holding S.A. (Commercial banks)		45,600		642
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		32,055		291
				933
Total Preferred Stocks—2.1% (cost $986)				933
Total Investments—99.4% (cost $42,440)				44,688
Cash and other assets, less liabilities—0.6%				278
Net assets—100.0%			$	44,966

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	23.0%
Consumer Staples	16.5%
Information Technology	15.8%
Consumer Discretionary	12.5%
Energy	9.7%
Telecommunication Services	7.5%
Industrials	7.5%
Materials	3.7%
Utilities	2.2%
Health Care	1.6%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.3%
U.S. Dollar	14.2%
South African Rand	12.4%
Indian Rupee	10.2%
South Korean Won	8.9%
Brazilian Real	7.7%
Thai Baht	6.4%
Indonesian Rupiah	5.6%
Mexican Peso	4.9%
New Taiwan Dollar	3.4%
Colombian Peso	2.5%
Qatari Rial	1.9%
Turkish Lira	1.8%
Malaysian Ringgit	1.7%
Chilean Peso	1.1%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    57

Todd M. McClone

Jeffrey A. Urbina

EMERGING MARKETS SMALL CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Small Cap Growth Fund posted a 14.29% increase (Class N Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark the MSCI Emerging Markets Small Cap Index, rose 7.27% during the same period.

Year-to-date, performance was strong. Consumer and Industrials stock selection was strong. Within Discretionary, all industries performed well, with particular value added in Household Durables and Hotels/Restaurants/Leisure, more than offsetting weakness in Auto Components as demand slowed. Staples performance approximated 30% during the period, well ahead of the 9.78% Index return, as overweighed Food/Staples Retailing holdings performed well. In particular, the Turkish hard discount store, BIM Birlesik Magazalar, reported strong sales growth during the period. The Fund’s Industrials holdings surpassed the Index by 4x during the period, as Machinery and Transportation Infrastructure holdings performed well, and as the Fund lacked Construction/Engineering names, which underperformed the market as a whole. Somewhat mitigating these positive results was Financials, Information Technology (IT) and Materials stock selection. Financials was hampered by real estate performance, while underperformance in Internet Software/Services and Chemicals hurt IT and Materials results, respectively.

Overall sector positioning did not change substantially during the first half of 2012, with Consumer comprising a significant 42.1% of the portfolio, well ahead of the 26.1% Index weighting, with a significant tilt towards Retailing. Financials and Industrials increased 2% and 3%, respectively, which was funded by a decrease in the already underweighted IT and Resources sectors during the period. As of quarter end, IT represented 6.5% of the Fund, well below the 15.4% Index weighting, while Energy approximated 1% and Materials was just shy of 2%, compared to the 12.6% Index weighting. While overall regional positioning did not change substantially, Emerging Asia remained significantly underweighted at 57.7% of the portfolio, well below the 74.6% Index weighting. This underweighting was precipitated by limited exposure in Korea and Taiwan and 6% less invested in China, which more than offset higher Indonesian, Philippines and Thai weightings. Conversely, Latin America remained significantly overweighted versus the Index, given the Fund’s 15.9% Brazilian exposure, well ahead of the 6.3% Index weighting and larger weightings in Mexico, Panama, and Chile.

58     Semi-Annual Report June 30, 2012

Emerging Markets Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			Since Inception(a)
Class N		14.29	%		11.20	%
Class I		14.49			11.40
MSCI Emerging Markets Small Cap IMI (net)		7.27			0.49

(a) For the period from October 24, 2011 (Commencement of Operations) to June 30, 2012.

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 Small Cap 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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    59

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Emerging Asia—56.0%
Cambodia—0.8%
NagaCorp, Ltd. (Hotels, restaurants & leisure)		124,000	$	55
China—9.0%
*3SBio, Inc.—ADR (Biotechnology)		2,550		35
AAC Technologies Holdings, Inc. (Communications equipment)		36,000		104
China Overseas Grand Oceans Group, Ltd. (Real estate management & development)		52,000		46
Dongyue Group (Chemicals)		31,000		14
Golden Eagle Retail Group, Ltd. (Multiline retail)		34,000		69
*Haier Electronics Group Co., Ltd. (Household durables)		60,000		71
Haitian International Holdings, Ltd. (Machinery)		73,000		72
Hengdeli Holdings, Ltd. (Specialty retail)		116,000		37
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		3,643		31
Minth Group, Ltd. (Auto components)		66,000		71
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		2,413		34
Yingde Gases (Chemicals)		23,500		21
				605
India—8.3%
Bata India, Ltd. (Textiles, apparel & luxury goods)		2,849		44
CRISIL, Ltd. (Diversified financial services)		1,742		33
Eicher Motors, Ltd. (Machinery)		1,072		38
GlaxoSmithKline Consumer Healthcare, Ltd. (Food products)		1,252		62
Gruh Finance, Ltd. (Thrifts & mortgage finance)		2,556		33
Havells India, Ltd. (Electrical equipment)		2,755		29
IndusInd Bank, Ltd. (Commercial banks)		8,782		54
Ipca Laboratories, Ltd. (Pharmaceuticals)		3,876		25
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		2,236		47
Lupin, Ltd. (Pharmaceuticals)		6,137		59
Oberoi Realty, Ltd. (Real estate management & development)		4,473		19
Page Industries, Ltd. (Textiles, apparel & luxury goods)		757		39
Pidilite Industries, Ltd. (Chemicals)		10,383		31
Yes Bank, Ltd. (Commercial banks)		6,728		41
				554
Indonesia—10.1%
PT Ace Hardware Indonesia Tbk (Specialty retail)		158,500		85
PT Alam Sutera Realty Tbk (Real estate management & development)		807,500		42
*PT Bank Tabungan Pensiunan Nasional Tbk (Commercial banks)		108,000		46
PT Ciputra Development Tbk (Real estate management & development)		619,000		43
PT Hexindo Adiperkasa Tbk (Trading companies & distributors)		38,500		37
PT Indomobil Sukses Internasional Tbk (Specialty retail)		42,000		32
PT Jasa Marga (Transportation infrastructure)		147,500		85
PT Kalbe Farma Tbk (Pharmaceuticals)		184,500		74
PT Media Nusantara Citra Tbk (Media)		387,500		82
Issuer	Shares		Value
Common Stocks—Emerging Asia—56.0% (continued)
Indonesia—(continued)
PT Mitra Adiperkasa Tbk (Multiline retail)		114,000	$	87
*PT MNC Sky Vision Tbk (Media)		104,000		17
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		85,000		24
*PT Sumber Alfaria Trijaya Tbk (Food & staples retailing)		43,500		22
				676
Malaysia—4.6%
Aeon Co. M Bhd (Multiline retail)		13,500		39
AirAsia BHD (Airlines)		32,700		37
Dayang Enterprise Holdings Bhd (Energy equipment & services)		46,800		28
Guinness Anchor Bhd (Beverages)		18,300		77
KPJ Healthcare Bhd (Health care providers & services)		47,800		88
Nestle Malaysia Bhd (Food products)		2,300		42
				311
Philippines—8.6%
Alliance Global Group, Inc. (Industrial conglomerates)		290,100		79
International Container Terminal Services, Inc. (Transportation infrastructure)		51,970		91
Puregold Price Club, Inc. (Food & staples retailing)		178,700		115
Security Bank Corporation (Commercial banks)		36,240		122
SM Prime Holdings, Inc. (Real estate management & development)		269,175		83
Universal Robina Corporation (Food products)		56,600		85
				575
South Korea—1.0%
Halla Climate Control Corporation (Auto components)		1,890		40
Handsome Co., Ltd. (Textiles, apparel & luxury goods)		570		13
LG Fashion Corporation (Textiles, apparel & luxury goods)		480		12
				65
Taiwan—4.4%
Catcher Technology Co., Ltd. (Computers & peripherals)		8,000		53
Chroma ATE, Inc. (Electronic equipment, instruments & components)		10,000		23
Hiwin Technologies Corporation (Machinery)		9,000		91
PChome Online, Inc. (Internet software & services)		2,000		11
Simplo Technology Co., Ltd. (Computers & peripherals)		4,000		27
St Shine Optical Co., Ltd. (Health care equipment & supplies)		4,000		44
TSRC Corporation (Chemicals)		19,000		47
				296
Thailand—9.2%
Bangkok Dusit Medical Services PCL (Health care providers & services)		32,300		99
BEC World PCL (Media)		38,000		60
Dynasty Ceramic PCL (Building products)		16,700		27
Home Product Center PCL (Specialty retail)		211,400		84

See accompanying Notes to Portfolio of Investments.

60     Semi-Annual Report June 30, 2012

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Asia—56.0%—(continued)
Thailand—(continued)
LPN Development PCL (Real estate management & development)		81,100	$	44
Major Cineplex Group PCL (Media)		33,600		18
Minor International PCL (Hotels, restaurants & leisure)		165,710		73
Robinson Department Store PCL (Multiline retail)		50,100		98
Siam Makro PCL (Food & staples retailing)		6,750		76
Tisco Financial Group PCL (Commercial banks)		27,400		33
				612
Emerging Latin America—24.8%
Argentina—0.8%
MercadoLibre, Inc. (Internet software & services)		676		51
Brazil—15.9%
Amil Participacoes S.A. (Health care providers & services)		4,600		46
Arezzo Industria e Comercio S.A. (Textiles, apparel & luxury goods)		2,200		33
BR Properties S.A. (Real estate management & development)		7,800		92
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		3,503		44
Cia Hering (Specialty retail)		3,200		61
EcoRodovias Infraestrutura e Logistica S.A. (Transportation infrastructure)		6,700		54
Ez Tec Empreendimentos e Participacoes S.A. (Household durables)		4,600		47
Iochpe-Maxion S.A. (Machinery)		2,500		29
Localiza Rent a Car S.A. (Road & rail)		3,600		54
Lojas Renner S.A. (Multiline retail)		1,500		42
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		6,658		92
OdontoPrev S.A. (Health care providers & services)		14,800		75
*Qualicorp S.A. (Professional services)		6,400		56
Raia Drogasil S.A. (Food & staples retailing)		9,500		96
Restoque Comercio e Confeccoes de Roupas S.A. (Textiles, apparel & luxury goods)		11,300		58
T4F Entretenimento S.A. (Media)		1,500		12
Tegma Gestao Logistica S.A. (Road & rail)		3,300		50
Totvs S.A. (Software)		2,400		46
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A (Commercial services & supplies)		5,400		81
				1,068
Chile—2.0%
ENTEL Chile S.A. (Wireless telecommunication services)		1,074		20
Parque Arauco S.A. (Real estate management & development)		24,252		43
Sonda S.A. (IT services)		26,488		75
				138
Mexico—3.8%
*Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)		58,501		79
Banregio Grupo Financiero S.A.B. de C.V. (Commercial banks)		31,900		93
Issuer	Shares		Value
Common Stocks—Emerging Latin America—24.8%—(continued)
Mexico—(continued)
Fibra Uno Administracion S.A. de C.V. (Real estate investment trusts (REITs))		40,600	$	83
				255
Panama—1.5%
Copa Holdings S.A. (Airlines)†		1,228		101
Peru—0.8%
Intercorp Financial Services, Inc. (Diversified financial services)		1,695		52
Emerging Europe, Mid-East, Africa—15.3%
Nigeria—0.7%
Guaranty Trust Bank plc (Commercial banks)		487,393		45
Poland—2.3%
Eurocash S.A. (Food & staples retailing)		6,573		81
LPP S.A. (Textiles, apparel & luxury goods)		39		38
Lubelski Wegiel Bogdanka S.A. (Oil, gas & consumable fuels)		870		32
				151
Russia—0.9%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		6,890		38
M Video OJSC (Specialty retail)		3,410		23
				61
South Africa—8.4%
AVI, Ltd. (Food products)		13,793		84
Capitec Bank Holdings, Ltd. (Commercial banks)		2,773		72
Cipla Medpro South Africa, Ltd. (Pharmaceuticals)		41,060		37
Coronation Fund Managers, Ltd. (Capital markets)		12,747		43
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		26,707		102
Mr Price Group, Ltd. (Specialty retail)		7,584		104
The Foschini Group, Ltd. (Specialty retail)		4,657		73
Truworths International, Ltd. (Specialty retail)		4,688		51
				566
Turkey—3.0%
Arcelik A.S. (Household durables)		6,825		35
BIM Birlesik Magazalar A.S. (Food & staples retailing)		2,761		114
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		5,469		23
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		28,686		29
				201
Total Common Stocks—96.1% (cost $5,983)				6,438

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    61

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Preferred Stock
Brazil—0.8%
Marcopolo S.A. (Machinery)		12,400	$	56
Total Preferred Stock—0.8% (cost $58)				56
Total Investments—96.9% (cost $6,041)				6,494
Cash and other assets, less liabilities—3.1%				207
Net assets—100.0%			$	6,701

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	28.6%
Financials	19.6%
Industrials	17.8%
Consumer Staples	13.5%
Health Care	11.1%
Information Technology	6.5%
Materials	1.7%
Energy	0.9%
Telecommunication Services	0.3%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Brazilian Real	17.3%
Indonesian Rupiah	10.4%
Thai Baht	9.4%
Philippine Peso	8.9%
South African Rand	8.7%
Hong Kong Dollar	8.6%
Indian Rupee	8.6%
U.S. Dollar	5.6%
Malaysian Ringgit	4.8%
New Taiwan Dollar	4.6%
Mexican Peso	3.9%
Turkish Lira	3.1%
Euro	2.3%
Chilean Peso	2.1%
South Korean Won	1.0%
All Other Currencies	0.7%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

62     Semi-Annual Report June 30, 2012

David F. Hone

LARGE CAP VALUE FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Thus far in 2012, U.S. equity markets posted strong results; the Russell 1000^® Value Index rose 8.68%. However, performance varied widely in each quarter. Like the past several years, the familiar pattern of risk-on occurred during periods of optimism while risk-off occurred during periods of pessimism due to rising macro and political concerns. The period began with robust upward momentum as investors gained confidence in the strengthening U.S. economy and were comforted by stabilization in Europe; the Russell 1000^® Value Index climbed 11.12% in the first quarter. Notably, investors differentiated based on underlying company fundamentals, a sound environment for active managers. However, during the second quarter, markets reversed course due to worries over U.S. economic growth, the re-intensified European debt crisis and continued slowing growth in emerging markets; the Russell 1000^® Value Index fell 2.20% in the second quarter. In the latter period, volatility and stock correlations picked up; investors preferred low risk, defensives and domestically focused companies.

Portfolio Results

The William Blair Large Cap Value Fund Class N rose 9.15% surpassing the benchmark, the Russell 1000^® Value Index. Stock selection in the first quarter drove the positive relative results. Importantly, most of our companies had good quarterly earnings reports, which assisted.

Our Financials stock selection contributed most to the overall return; Discover Financial Services and SunTrust Banks, Inc. ranked among the best performers. Discover Financial Services benefited from improving credit card trends as both losses and delinquencies declined as well as rising demand for credit; we expect these drivers to continue. SunTrust Banks, one of the largest U.S. commercial banking institutions, benefited from continued improvement in overall credit and recovery in the housing market. We believe this company has solid fundamentals and is well positioned to take advantage of further improvement in the domestic economy. Outside of Financials, Textron, Inc. in Industrials and Time Warner Cable, Inc. in Consumer Discretionary were also strong contributors. Textron was a standout primarily in the first quarter on better than expected fourth quarter earnings results and an improving outlook in its Cessna and Bell business divisions. Time Warner Cable’s stock price rose on solid financial results driven by positive subscriber trends. Also, it announced an increase in its dividend by 17% and a replenishment of its share repurchase program to $4 billion. In our view, this stock should continue to benefit from strong free cash flows and attractive stock valuation.

The portfolio had only a couple of notable stock detractors across various sectors. Our weakest stocks were Hewlett-Packard Co., Bank of America Corporation and Hess Corporation. In Information Technology, Hewlett-Packard declined on concerns over softening demand in the PC and printer divisions. The company is working through a multi-year restructuring of its business and will likely experience bumps along the way. Over time, we believe the firm will benefit from its recurring sales, cost cutting levers, and strong balance sheet. In Financials, Bank of America rose significantly in the first quarter. We added this stock to the portfolio in June on its attractive risk/reward combination after its substantial decline beginning in April over concerns on the global economic slowdown and weakness in capital markets. For the year-to-date period, the portfolio’s underweight in this stock relative to the benchmark in the first quarter detracted. In Energy, Hess came under pressure as the price of oil significantly dropped from $99 to $85 in the first half of 2012, as well as concerns about production growth.

June 30, 2012 William Blair Funds    63

Outlook

While U.S. equity markets oscillate between optimism and pessimism from quarter to quarter, these moves seem more based on the latest macro or political news release than a change in the long-term trajectory for the U.S. economy. The Federal Reserve remains accommodative and stands ready to enact additional measures if necessary, which should be supportive of businesses and consumers. While in the second quarter unemployment ticked up and manufacturing modestly declined due to Europe’s recessionary environment, U.S. housing sales improved. Corporate balance sheets and operating margins in aggregate remain healthy. Falling commodity prices should provide some relief.

Typically, markets crave certainty; until clarity appears, volatility will likely remain elevated. Investors remain concerned over further deterioration in the European debt crisis and slowing emerging market growth, which in turn impacts U.S. exports. Also, in the U.S., stability of economic growth remains a primary focus, along with the November elections and the outcome for the fiscal cliff (i.e., expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts.)

As always, our concentration remains on our value philosophy, disciplined investment process, and deep fundamental research. We believe attractive returns with below-average risk are achieved by investing in undervalued, higher quality companies that are temporarily out-of-favor with the market. In terms of valuation, many stocks remain attractively priced while perceived “safe” stocks are elevated relative to history. In general, we continue to find attractive investment opportunities and use volatility to our advantage to invest in stocks with strong risk/reward profiles.

64     Semi-Annual Report June 30, 2012

Large Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			Since Inception(a)
Class N		9.15	%		8.93	%
Class I		9.35	%		9.13
Russell 1000® Value Index		8.68	%		10.48

(a) For the period from October 24, 2011 (Commencement of Operations) to June 30, 2012.

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

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

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

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    65

Large Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Financials—24.7%
American Tower Corporation		895	$	63
Bank of America Corporation		1,440		12
*CBRE Group, Inc.		1,519		25
Citigroup, Inc.		1,980		54
CNA Financial Corporation		992		27
Discover Financial Services		1,440		50
JPMorgan Chase & Co.		2,420		86
Lazard, Ltd. Class “A”†		2,087		54
Lincoln National Corporation		1,129		25
Prudential Financial, Inc.		657		32
Regions Financial Corporation		4,391		30
State Street Corporation		865		39
SunTrust Banks, Inc.		1,833		44
The Allstate Corporation		1,275		45
The Goldman Sachs Group, Inc.		282		27
US Bancorp		1,489		48
Wells Fargo & Co.		2,752		92
Zions BanCorp.		2,124		41
				794
Energy—15.2%
Anadarko Petroleum Corporation		642		43
Baker Hughes, Inc.		1,056		43
Chevron Corporation		620		65
ConocoPhillips		819		46
Devon Energy Corporation		617		36
Exxon Mobil Corporation		1,447		124
Hess Corporation		839		36
Occidental Petroleum Corporation		603		52
Schlumberger, Ltd.†		320		21
*Southwestern Energy Co.		735		23
				489
Health Care—13.4%
Amgen, Inc.		361		26
Baxter International, Inc.		880		47
Cardinal Health, Inc.		1,409		59
*Express Scripts Holding Co.		646		36
Merck & Co., Inc.		1,616		68
Pfizer, Inc.		4,210		97
UnitedHealth Group, Inc.		767		45
Zimmer Holdings, Inc.		813		52
				430
Information Technology—8.9%
*Adobe Systems, Inc.		1,497		49
*BMC Software, Inc.		852		36
*Broadcom Corporation Class “A”		789		27
Corning, Inc.		1,181		15
Hewlett-Packard Co.		2,407		48
Intel Corporation		783		21
Microsoft Corporation		1,285		39
*NetApp, Inc.		620		20
*Symantec Corporation		2,141		31
				286
Industrials—8.3%
Gardner Denver, Inc.		526		28
General Electric Co.		4,082		85
Honeywell International, Inc.		278		15
Common Stocks—(continued)
Industrials—(continued)
Kansas City Southern		631	$	44
Rockwell Automation, Inc.		103		7
SPX Corporation		376		25
Textron, Inc.		1,856		46
Union Pacific Corporation		137		16
				266
Consumer Discretionary—8.2%
*Big Lots, Inc.		910		37
Brunswick Corporation		1,036		23
*General Motors Co.		1,289		26
Lear Corporation		644		24
Marriott International, Inc. Class “A”		519		20
*MGM Resorts International		1,776		20
*Saks, Inc.		2,193		24
The Walt Disney Co.		767		37
Time Warner Cable, Inc.		660		54
				265
Consumer Staples—7.2%
General Mills, Inc.		1,282		49
Kimberly-Clark Corporation		466		39
Molson Coors Brewing Co. Class “B”		633		26
Philip Morris International, Inc.		637		56
The Procter & Gamble Co.		973		60
				230
Utilities—5.8%
CMS Energy Corporation		2,338		55
NextEra Energy, Inc.		875		60
Wisconsin Energy Corporation		1,811		72
				187
Materials—3.5%
Alcoa, Inc.		3,093		27
Freeport-McMoRan Copper & Gold, Inc.		1,398		48
Rockwood Holdings, Inc.		350		15
The Dow Chemical Co.		654		21
				111
Telecommunication Services—3.3%
AT&T, Inc.		1,305		47
CenturyLink, Inc.		1,152		45
Verizon Communications, Inc.		348		15
				107
Total Common Stocks—98.5% (cost $2,977)				3,165
Total Investments—98.5% (cost $2,977)				3,165
Cash and other assets, less liabilities—1.5%				47
Net assets—100.0%			$	3,212

* Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Portfolio of Investments.

66     Semi-Annual Report June 30, 2012

Chad M. Kilmer

Mark T. Leslie

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 5.46% increase on a total return basis (Class N shares) during the six months ended June 30, 2012. By comparison, the Russell 2000^® Value Index rose 8.23%.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Strong first quarter returns primarily were driven by improving economic data points on employment, housing and overall industrial production. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued in earnest, the elevated fear in the market revolved around more substantial European countries, with particular emphasis on stabilizing the Spanish banking system and its impact on Spanish government borrowing capacity. At the highest level, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth has notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. In the end, the U.S. was not immune. U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. There was a string of disappointing data points: Employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors gravitated to stocks of companies with less economic sensitivity. For the second quarter, defensive sectors held up better than cyclical sectors, with Utilities (+3.68%), Health Care (+1.34%), and Consumer Staples (-0.18%) outperforming the overall small cap value market. The only other sector to outperform was Financials (+0.92%), driven primarily by REITs (+3.5%), which make up roughly 15% of the benchmark and approximately 36% of the sector. Sectors that derive higher proportions of revenues from non-US markets were hit due to the uncertainty in Europe, with Information Technology and Materials being the sectors in the Russell 2000^® Value Index that have the highest percentage of foreign sales. Also, while quality rebounded somewhat relative to its first quarter performance, companies with the lowest Return on Invested Capital (ROIC) outperformed the market, while higher-ROIC companies lagged. Low quality outperformance is even more striking from a year-to-date perspective.

Year-to-date, the Fund gained 5.46%, trailing its benchmark, the Russell 2000^® Value Index, which rose 8.23%. The Fund’s underperformance year-to-date resulted from a style headwind coupled with negative stock selection. The Fund typically has a higher quality bias than the benchmark and tends to be more heavily weighted in companies with larger market capitalizations. Stock selection within Energy detracted from relative returns, dragged down by Key Energy Services Inc., Northern Oil & Gas Inc., and Bill Barrett Corporation. Partially offsetting these negatives, stock selection in Information Technology (Monolithic Power Systems Inc.) and Industrials (G&K Services, Inc. and ESCO Technologies Inc.) contributed to the Fund’s relative performance.

Relative performance for the quarter has a similar narrative. Style headwinds negatively impacted our excess returns, as did stock selection. Investments within Financials (Safeguard Scientifics, Hancock Holding Co.) and Energy (Key Energy Services, Inc., Magnum Hunter Resources Corporation) detracted from relative returns. The effect was moderated by investments in AFC Enterprises, Inc (Consumer Discretionary), Hawaiian Holdings, Inc. and G&K Services, Inc.(both Industrials).

June 30, 2012 William Blair Funds    67

While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, with positive data on home prices and sales trends. Gas prices have come in from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive, coming in below historical averages.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential fiscal cliff (expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall state of economic recovery. While this quarter’s market pullback resembles the past two years’ mid-year slumps, the global easing cycle along with a strengthening housing market will hopefully serve as tailwinds unique to 2012.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the fund from a bottom-up perspective. 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.

68     Semi-Annual Report June 30, 2012

Small Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			10 Year
Class N		5.46	%		(3.97	)%		17.74	%		1.31	%		5.62	%
Class I		5.53			(3.80	)		17.99			1.52			5.83
Russell 2000® Value Index		8.23			(1.44	)		17.43			(1.05	)		6.50

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

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    69

Small Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Financials—33.0%
Alterra Capital Holdings, Ltd.†		144,330	$	3,370
Bank of the Ozarks, Inc.		78,985		2,376
Berkshire Hills Bancorp, Inc.		109,035		2,399
BioMed Realty Trust, Inc.		127,310		2,378
CoBiz Financial, Inc.		294,020		1,841
Coresite Realty Corporation		59,100		1,526
CVB Financial Corporation		112,350		1,309
*Eagle Bancorp, Inc.		161,997		2,551
East West Bancorp, Inc.		137,150		3,217
EastGroup Properties, Inc.		46,830		2,496
Education Realty Trust, Inc.		288,880		3,201
*Forest City Enterprises, Inc. Class “A”		186,420		2,722
Hancock Holding Co.		84,719		2,579
Highwoods Properties, Inc.		92,080		3,098
LaSalle Hotel Properties		93,457		2,723
Mid-America Apartment Communities, Inc.		39,550		2,699
*National Financial Partners Corporation		175,205		2,348
National Retail Properties, Inc.		110,305		3,120
Old National Bancorp		270,506		3,249
PacWest Bancorp		118,728		2,810
Pebblebrook Hotel Trust		105,079		2,449
ProAssurance Corporation		27,250		2,428
Prosperity Bancshares, Inc.		71,640		3,011
*Safeguard Scientifics, Inc.		207,741		3,216
Sandy Spring Bancorp, Inc.		120,710		2,173
Susquehanna Bancshares, Inc.		270,875		2,790
The Hanover Insurance Group, Inc.		68,545		2,682
Webster Financial Corporation		150,570		3,261
*West Coast Bancorp		80,460		1,581
*Western Alliance Bancorp		356,325		3,335
				78,938
Industrials—16.6%
Belden, Inc.		93,600		3,122
Cubic Corporation		53,540		2,574
EMCOR Group, Inc.		116,166		3,232
ESCO Technologies, Inc.		90,082		3,283
G&K Services, Inc.		94,673		2,953
*Hawaiian Holdings, Inc.		248,836		1,620
Interface, Inc.		141,920		1,934
John Bean Technologies Corporation		97,787		1,327
*Kadant, Inc.		89,801		2,106
*Moog, Inc.		77,450		3,203
*Northwest Pipe Co.		73,955		1,794
*Polypore International, Inc.		63,805		2,577
Quanex Building Products Corporation		129,770		2,320
Robbins & Myers, Inc.		67,075		2,805
TAL International Group, Inc.		68,355		2,289
*Tetra Tech, Inc.		98,467		2,568
				39,707
Issuer	Shares		Value
Common Stocks—(continued)
Consumer Discretionary—12.5%
*AFC Enterprises, Inc.		107,126	$	2,479
Chico’s FAS, Inc.		169,905		2,521
Core-Mark Holding Co., Inc.		41,125		1,980
Matthews International Corporation		99,035		3,218
Meredith Corporation		95,280		3,043
PEP Boys-Manny, Moe & Jack		125,135		1,239
Pier 1 Imports, Inc.		181,780		2,986
*Pinnacle Entertainment, Inc.		269,330		2,591
Regis Corporation		165,775		2,977
*The Children’s Place Retail Stores, Inc.		48,000		2,392
The Men’s Wearhouse, Inc.		90,290		2,541
*WMS Industries, Inc.		101,300		2,021
				29,988
Information Technology—11.2%
ADTRAN, Inc.		101,315		3,059
*Cadence Design Systems, Inc.		163,595		1,798
*Digital River, Inc.		111,740		1,857
Earthlink, Inc.		461,330		3,432
*Integrated Device Technology, Inc.		467,542		2,628
j2 Global Communications, Inc.		91,645		2,421
*Monolithic Power Systems, Inc.		154,162		3,063
*Parametric Technology Corporation		119,200		2,498
*Progress Software Corporation		95,345		1,990
*Silicon Laboratories, Inc.		61,860		2,345
*Ultra Clean Holdings		249,612		1,605
				26,696
Utilities—6.7%
ALLETE, Inc.		64,880		2,712
Chesapeake Utilities Corporation		45,405		1,985
Cleco Corporation		80,065		3,349
Northwest Natural Gas Co.		50,925		2,424
Southwest Gas Corporation		66,060		2,884
WGL Holdings, Inc.		67,330		2,676
				16,030
Materials—5.8%
Minerals Technologies, Inc.		45,670		2,913
PolyOne Corporation		220,515		3,017
*RTI International Metals, Inc.		88,475		2,002
Sensient Technologies Corporation		82,420		3,027
Silgan Holdings, Inc.		70,465		3,008
				13,967
Energy—4.9%
Berry Petroleum Co.		39,793		1,578
*Key Energy Services, Inc.		228,790		1,739
*Magnum Hunter Resources Corporation		531,166		2,220
*Northern Oil and Gas, Inc.		108,133		1,724
*Swift Energy Co.		121,670		2,264

See accompanying Notes to Portfolio of Investments.

70     Semi-Annual Report

June 30, 2012

Small Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Energy—(continued)
*TETRA Technologies, Inc.		311,685	$	2,223
				11,748
Health Care—4.8%
CONMED Corporation		90,255		2,497
*Greatbatch, Inc.		104,065		2,363
*HealthSouth Corporation		88,430		2,057
*Magellan Health Services, Inc.		42,365		1,921
*Mednax, Inc.		40,048		2,745
				11,583
Consumer Staples—2.4%
J&J Snack Foods Corporation		43,967		2,598
Spartan Stores, Inc.		167,949		3,045
				5,643
Telecommunication Services—0.7%
*tw telecom, Inc.		69,005		1,771
Total Common Stocks—98.6% (cost $216,449)				236,071
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $4,569, collateralized by FNMA, 5.00%, due 4/15/2015	$	4,569		4,569
Total Repurchase Agreement—1.9% (cost $4,569)				4,569
Total Investments—100.5% (cost $221,018)				240,640
Liabilities, plus cash and other assets—(0.5)%				(1,134	)
Net assets—100.0%			$	239,506

† = U.S. listed foreign security

* Non-income producing securities

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    71

Chad M. Kilmer

Mark T. Leslie

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 posted a 4.68% increase on a total return basis (Class N Shares) during the six months ended June 30, 2012. By comparison, the Fund’s benchmark the Russell Midcap^® Value Index, rose 7.78%.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Strong first quarter returns primarily were driven by improving economic data points on employment, housing and overall industrial production. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued in earnest, the elevated fear in the market revolved around more substantial European countries, with particular emphasis on stabilizing the Spanish banking system and its impact on Spanish government borrowing capacity. At the highest level, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth has notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. In the end, the U.S. was not immune. U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. There was a string of disappointing data points: Employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors gravitated to stocks of companies with less economic sensitivity. For the second quarter, defensive sectors held up better than cyclical sectors, with Utilities (+6.36%) and Consumer Staples (+2.63%) outperforming the overall mid cap value market. The only other sector to outperform was Financials (-1.85%), driven primarily by REITs (+3%), which make up roughly 12% of the benchmark and approximately 35% of the sector. Sectors that derive higher proportions of revenues from non-US markets were hit due to the uncertainty in Europe, and Information Technology returns (-10.46%) reflected the sector’s dominant position in terms of foreign revenues. Also, while quality rebounded somewhat relative to its first quarter performance, companies with the lowest Return on Invested Capital (ROIC) outperformed the market, while higher-ROIC companies lagged. Low quality outperformance is even more striking from a year-to-date perspective.

Year-to-date, the Fund gained 4.68%, trailing its benchmark, the Russell Midcap^® Value Index, which rose 7.78%. The Fund’s underperformance year-to-date resulted from a style headwind coupled with negative stock selection. The Fund typically has a higher quality bias than the benchmark and tends to lag benchmark returns when low quality outperforms. Investments within Energy (SM Energy Co. and Superior Energy Services Inc.) and Consumer Staples (Ingredion Inc. and Kroger Co.) detracted from relative returns. The effect was moderated by investments in Financials (Discover Financial Services) and Consumer Discretionary (Wyndham Worldwide Corp.).

Relative performance for the second quarter has a similar narrative. Style headwinds negatively impacted our excess returns, as did stock selection. Stock selection within Energy detracted from relative returns, pulled down by SM Energy Co., Pioneer Natural Resources Co. and Whiting Petroleum Corp. Helping to partially offset these negatives, stock selection in Information Technology (VeriSign Inc.) and Telecommunication Services (tw telecom inc.) contributed to the Fund’s relative performance.

72     Semi-Annual Report June 30, 2012

While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, with positive data on home prices and sales trends. Gas prices have come in from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive, coming in below historical averages.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential fiscal cliff (expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall state of economic recovery. While this quarter’s market pullback resembles the past two years’ mid-year slumps, the global easing cycle along with a strengthening housing market will hopefully serve as tailwinds unique to 2012.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the Fund from a bottom-up perspective. 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.

June 30, 2012 William Blair Funds    73

Mid Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			Since Inception(a)
Class N		4.68	%		(1.46	)%		5.82	%
Class I		4.77	%		(1.27	)%		6.04
Russell Midcap® Value Index		7.78			(0.37	)		6.21

(a) For the period May 3, 2010 (Commencement of Operations) to June 30, 2012.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

74     Semi-Annual Report June 30, 2012

Mid Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Financials—29.6%
Alexandria Real Estate Equities, Inc.		940	$	68
Allied World Assurance Co. Holdings, Ltd.†		695		55
American Campus Communities, Inc.		1,170		53
Ameriprise Financial, Inc.		1,900		99
Comerica, Inc.		1,825		56
Discover Financial Services		2,950		102
Duke Realty Corporation		4,050		59
East West Bancorp, Inc.		3,340		78
Equity Residential		845		53
Fifth Third Bancorp		4,285		58
*Forest City Enterprises, Inc. Class “A”		4,525		66
Hancock Holding Co.		1,742		53
Host Hotels & Resorts, Inc.		4,010		64
Marsh & McLennan Cos., Inc.		2,360		76
People’s United Financial, Inc.		5,880		68
Realty Income Corporation		2,085		87
SL Green Realty Corporation		965		78
SunTrust Banks, Inc.		1,785		43
The Hanover Insurance Group, Inc.		1,385		54
Unum Group		3,470		67
Validus Holdings, Ltd.†		2,195		70
Ventas, Inc.		1,030		65
				1,472
Utilities—11.7%
American Water Works Co., Inc.		2,210		76
Cleco Corporation		1,190		50
DTE Energy Co.		1,255		74
Northeast Utilities		2,080		81
NV Energy, Inc.		4,215		74
Southwest Gas Corporation		1,665		72
Wisconsin Energy Corporation		1,920		76
Xcel Energy, Inc.		2,810		80
				583
Industrials—10.2%
Cintas Corporation		1,620		63
Eaton Corporation		1,410		56
Hubbell, Inc. Class “B”		975		76
Pall Corporation		995		54
Parker Hannifin Corporation		775		60
Robbins & Myers, Inc.		1,055		44
Rockwell Automation, Inc.		750		49
Rockwell Collins, Inc.		1,005		50
Snap-On, Inc.		925		58
				510
Consumer Discretionary—9.7%
Autoliv, Inc.		680		37
*Bed Bath & Beyond, Inc.		660		41
Chico’s FAS, Inc.		3,695		55
DISH Network Corporation		2,085		60
H&R Block, Inc.		3,130		50
Newell Rubbermaid, Inc.		3,370		61
Staples, Inc.		4,400		58
VF Corporation		340		45
Wyndham Worldwide Corporation		1,405		74
				481

† = U.S. listed foreign security

* Non-income producing securities

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Information Technology—9.6%
*Atmel Corporation		6,655	$	44
*Ingram Micro, Inc. Class “A”		3,615		63
*Juniper Networks, Inc.		2,930		48
Linear Technology Corporation		1,615		50
*Parametric Technology Corporation		2,415		51
TE Connectivity, Ltd.†		2,450		78
*VeriSign, Inc.		1,440		63
Xerox Corporation		10,375		82
				479
Health Care—7.1%
CIGNA Corporation		1,765		78
Hill-Rom Holdings, Inc.		1,950		60
*Laboratory Corporation of America Holdings		805		74
*Mettler-Toledo International, Inc.†		490		76
Zimmer Holdings, Inc.		1,035		67
				355
Energy—6.9%
Pioneer Natural Resources Co.		815		72
*Rowan Cos. plc Class “A”†		2,040		66
SM Energy Co.		1,115		55
*Superior Energy Services, Inc.		2,260		46
Valero Energy Corporation		2,045		49
*Whiting Petroleum Corporation		1,350		55
				343
Consumer Staples—5.4%
ConAgra Foods, Inc.		2,870		75
HJ Heinz Co.		1,270		69
Ingredion, Inc.		1,315		65
The Kroger Co.		2,545		59
				268
Materials—5.1%
Airgas, Inc.		830		70
Carpenter Technology Corporation		1,105		53
FMC Corporation		1,490		79
Steel Dynamics, Inc.		4,335		51
				253
Telecommunication Services—0.7%
*tw telecom, Inc.		1,435		37
Total Common Stocks—96.0% (cost $4,525)				4,781
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $271, collateralized by FNMA, 5.000%, due 4/15/15	$	271		271
Total Repurchase Agreement—5.4% (cost $271)				271
Total Investments—101.4% (cost $4,796)				5,052
Liabilities, plus cash and other assets—(1.4)%				(72	)
Net assets—100.0%			$	4,980

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    75

Chad M. Kilmer

Mark T. Leslie

David S. Mitchell

SMALL-MID CAP VALUE FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small-Mid Cap Fund posted a 4.59% increase on a total return basis (Class N Shares) during the six month period ended June 30, 2012. By comparison, the Fund’s benchmark the Russell 2500^® Value rose 8.15%.

After a nearly 30% advance over the previous two quarters, U.S. equities corrected in the second quarter. Strong first quarter returns primarily were driven by improving economic data points on employment, housing and overall industrial production. However, in the second quarter, investors refocused their attention on negative headline news from Europe. While news from Greece continued in earnest, the elevated fear in the market revolved around more substantial European countries, with particular emphasis on stabilizing the Spanish banking system and its impact on Spanish government borrowing capacity. At the highest level, investors grappled with the region’s ability to preserve the single-currency bloc.

The slowdown was felt worldwide; China’s growth has notably decelerated, joined by other emerging economies, due in part to developed nations’ decreased demand for exports. In the end, the U.S. was not immune. U.S. companies with direct business exposure to these regions, combined with declining U.S. business confidence due to the barrage of negative global headlines, translated into slowing business investment and worsening economic data at home. There was a string of disappointing data points: Employment growth slowed significantly from earlier this year, consumer confidence declined, and manufacturing activity slowed.

Broadly speaking, investors gravitated to stocks of companies with less economic sensitivity. For the second quarter, defensive sectors held up better than cyclical sectors, with Utilities (+4.74%) and Consumer Staples (+3.18%) outperforming the overall small-mid cap value market, and Health Care (-3.01%) performing in-line with the market. The only other sector to outperform was Financials (+0.08%), driven primarily by Real Estate Investment Trust (REITs) (+3.96%), which make up roughly 12% of the benchmark and approximately 35% of the sector. Sectors that derive higher proportions of revenues from non-U.S. markets were hit due to the uncertainty in Europe, with Information Technology and Materials being the sectors in the Russell 2500^® Value Index that have the highest percentage of foreign sales. Also, while quality rebounded somewhat relative to its first quarter performance, companies with the lowest ROIC (Return on Invested Capital) outperformed the market, while higher-ROIC companies lagged. Low quality outperformance is even more striking from a year-to-date perspective.

Year-to-date, the Fund gained 4.59%, trailing its benchmark, the Russell 2500^® Value Index, which rose 8.15%. The Fund’s underperformance year-to-date resulted from a style headwind coupled with negative stock selection. The Fund typically has a higher quality bias than the benchmark and tends to lag benchmark returns when low quality outperforms; this was definitely the case during the first half of the year. Looking at stock selection, investments within Energy (Key Energy Services Inc. and SM Energy Co.) and Financials (People’s United Financial Inc. and Meadowbrook Insurance Group Inc.) detracted from relative returns. The effect was moderated by investments in Consumer Discretionary (Pep Boys- Manny Moe & Jack and Wyndham Worldwide Corp.) and Industrials (G&K Services, Inc.).

Relative performance for the quarter has a similar narrative. Style headwinds negatively impacted our excess returns, as did stock selection. Stock selection within Energy detracted from relative returns, pulled down by Key Energy Services Inc., SM Energy Co., and

76     Semi-Annual Report June 30, 2012

Magnum Hunter Resources Co. Partially offsetting these negatives, stock selection in Industrials (G&K Services, Inc.) and Telecommunication Services (tw telecom inc.) contributed to the Fund’s relative performance.

While the recovery works to regain traction, there are a few positive developments to highlight: the stubborn housing market finally seems to be reversing course, with positive data on home prices and sales trends. Gas prices have come in from their April highs, although savings at the pump have yet to translate into higher confidence among consumers. Improving loan demand and banks’ willingness to lend are encouraging trends as well. Regarding the stock market specifically, while fundamentals are at a critical juncture given the current pause in business confidence, valuations appear attractive, coming in below historical averages.

Today’s unresolved issues make for a cloudy outlook as the world waits to see how the next chapter of the euro zone will read. Much attention will be focused on U.S. politics leading up to the November elections, the potential fiscal cliff (expiration of the Bush-era tax cuts, coupled with mandatory federal spending cuts), and the overall state of economic recovery. While this quarter’s market pullback resembles the past two years’ mid-year slumps, the global easing cycle along with a strengthening housing market will hopefully serve as tailwinds unique to 2012.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the fund from a bottom-up perspective. 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.

June 30, 2012

William Blair Funds    77

Small-Mid Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			Since Inception(a)
Class N		4.59	%		9.30	%
Class I		4.69			9.40
Russell 2500® Value Index		8.15			12.69

(a) For the period from December 15, 2011 (Commencement of Operations) to June 30, 2012.

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.

Russell 2500^® Value Index consists of Midcap-capitalization companies with below average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

78     Semi-Annual Report June 30, 2012

Small-Mid Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Financials—29.4%
Alexandria Real Estate Equities, Inc.		325	$	24
Allied World Assurance Co. Holdings, Ltd.†		225		18
Alterra Capital Holdings, Ltd.†		935		22
Bank of the Ozarks, Inc.		565		17
BioMed Realty Trust, Inc.		1,110		21
Comerica, Inc.		825		25
CVB Financial Corporation		1,060		12
East West Bancorp, Inc.		945		22
EastGroup Properties, Inc.		330		18
Education Realty Trust, Inc.		1,840		20
*Forest City Enterprises, Inc. Class “A”		1,315		19
Hancock Holding Co.		664		20
Highwoods Properties, Inc.		605		20
LaSalle Hotel Properties		705		21
Mid-America Apartment Communities, Inc.		320		22
*National Financial Partners Corporation		1,245		17
National Retail Properties, Inc.		910		26
Old National Bancorp		2,205		26
PacWest Bancorp		914		22
Pebblebrook Hotel Trust		743		17
People’s United Financial, Inc.		2,740		32
ProAssurance Corporation		260		23
Prosperity Bancshares, Inc.		555		23
Realty Income Corporation		530		22
SL Green Realty Corporation		430		35
Susquehanna Bancshares, Inc.		1,935		20
The Hanover Insurance Group, Inc.		390		15
Unum Group		775		15
Validus Holdings, Ltd.†		845		27
Webster Financial Corporation		1,210		26
*Western Alliance Bancorp		2,045		19
				666
Industrials—15.5%
Belden, Inc.		805		27
Cubic Corporation		375		18
EMCOR Group, Inc.		925		26
ESCO Technologies, Inc.		770		28
G&K Services, Inc.		650		20
Hubbell, Inc. Class “B”		385		30
Interface, Inc.		1,195		16
*Moog, Inc.		715		29
Pall Corporation		490		27
*Polypore International, Inc.		590		24
Quanex Building Products Corporation		1,070		19
Robbins & Myers, Inc.		625		26
Snap-On, Inc.		335		21
TAL International Group, Inc.		465		16
*Tetra Tech, Inc.		919		24
				351
Consumer Discretionary—13.3%
Autoliv, Inc.		365		20
Chico’s FAS, Inc.		1,425		21
Core-Mark Holding Co., Inc.		280		13
H&R Block, Inc.		1,145		18
Matthews International Corporation		750		24
Meredith Corporation		755		24
Newell Rubbermaid, Inc.		1,260		23
Pier 1 Imports, Inc.		1,565		26
Common Stocks—(continued)
Consumer Discretionary—(continued)
*Pinnacle Entertainment, Inc.		2,135	$	20
Regis Corporation		1,255		23
*The Children’s Place Retail Stores, Inc.		395		20
The Men’s Wearhouse, Inc.		730		21
*WMS Industries, Inc.		960		19
Wyndham Worldwide Corporation		530		28
				300
Information Technology—10.3%
ADTRAN, Inc.		768		23
*Atmel Corporation		2,290		15
*Cadence Design Systems, Inc.		1,030		11
*Digital River, Inc.		785		13
Earthlink, Inc.		3,360		25
*Ingram Micro, Inc. Class “A”		1,200		21
*Integrated Device Technology, Inc.		4,000		22
j2 Global Communications, Inc.		630		17
*Monolithic Power Systems, Inc.		1,233		25
*Parametric Technology Corporation		1,010		21
*Progress Software Corporation		900		19
*VeriSign, Inc.		500		22
				234
Utilities—8.2%
ALLETE, Inc.		525		22
American Water Works Co., Inc.		830		28
Cleco Corporation		640		27
Northwest Natural Gas Co.		435		21
NV Energy, Inc.		1,280		22
Southwest Gas Corporation		620		27
WGL Holdings, Inc.		480		19
Wisconsin Energy Corporation		500		20
				186
Materials—6.6%
Airgas, Inc.		250		21
Carpenter Technology Corporation		270		13
FMC Corporation		460		25
Minerals Technologies, Inc.		265		17
PolyOne Corporation		1,210		17
*RTI International Metals, Inc.		505		11
Sensient Technologies Corporation		420		15
Silgan Holdings, Inc.		485		21
Steel Dynamics, Inc.		770		9
				149
Energy—5.7%
Berry Petroleum Co.		175		7
*Key Energy Services, Inc.		1,825		14
*Magnum Hunter Resources Corporation		3,266		14
*Northern Oil and Gas, Inc.		760		12
*Rowan Cos. plc Class “A”†		715		23
SM Energy Co.		315		16
*Superior Energy Services, Inc.		800		16
*Swift Energy Co.		880		16
* TETRA Technologies, Inc.		1,575		11
				129
Health Care—5.3%
CONMED Corporation		480		13
*Greatbatch, Inc.		540		12

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    79

Small-Mid Cap Value Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—(continued)
Health Care—(continued)
*HealthSouth Corporation		730	$	17
Hill-Rom Holdings, Inc.		635		20
*Magellan Health Services, Inc.		295		14
*Mednax, Inc.		365		25
*Mettler-Toledo International, Inc.		130		20
				121
Consumer Staples—2.9%
Ingredion, Inc.		565		28
J&J Snack Foods Corporation		260		16
Spartan Stores, Inc.		1,225		22
				66
Telecommunication Services—0.8%
*tw telecom, Inc.		650		17
Total Common Stocks—98.0% (cost $2,067)				2,219
Total Investments—98.0% (cost $2,067)				2,219
Cash and other assets, less liabilities—2.0%				46
Net assets—100.0%			$	2,265

† = U.S. listed foreign security

* Non-income producing securities

See accompanying Notes to Portfolio of Investments.

80     Semi-Annual Report June 30, 2012

Fixed Income Markets Overview

Fixed Income Summary

The global capital markets continued to experience elevated levels of volatility during the first half of 2012 as investors focused on the ongoing European debt crisis. Despite the volatility, global equities have gained year-to-date, with U.S. stocks outperforming their non-U.S. counterparts. U.S. dollar-based, investment-grade fixed income instruments have also gained as interest rates declined to record-low levels as investors continue to flock to high-quality assets.

The European debt crisis took center stage during the second quarter and drove volatility as attention shifted to events in Greece and Spain. Greece held two elections to form a new government during the second quarter after a radical anti-austerity political bloc, the Syriza party, gained popularity and threatened to reverse the country’s austerity progress. Investors assigned an increased probability that Greece could exit the euro amid the uncertainty of the Greek elections. Ultimately, the pro-austerity New Democracy party emerged as the country’s preeminent political party. In Spain, the Spanish banking crisis added volatility as Spanish government officials sought financial aid packages to recapitalize its banks.

Within the U.S., it was revealed that the labor markets continued to show signs of weakness and hampered growth. The market is beginning to show signs of concern over the “fiscal cliff,” which refers to the automatic tax increases and spending cuts scheduled to start in the beginning of 2013 unless politicians agree to a compromise to extend the beginning of the tax increases and spending cuts. Another noteworthy event was the J.P. Morgan trading loss. The trading loss was not meaningful because of its size (initially reported at $2 billion), but it was meaningful because it highlighted the difficulties of monitoring activities at large banking institutions with regulations that seek to curb risk-taking at banks.

The Federal Open Market Committee (FOMC) remained accommodative and continued its unconventional easing programs. The FOMC continued to state that conditions “warrant exceptionally low levels for the federal funds rate at least through late-2014.” At its June 20 meeting, the FOMC announced plans to extend its “Operation Twist” program, which was scheduled to expire on June 30, through the end of the year. The FOMC also announced plans to continue to reinvest principal from its agency MBS portfolio.

Fixed income instruments have gained as investors continue to flock to safe haven assets amid the uncertainties in Europe and the U.S. High yield bonds and emerging market debt have been the strongest-performing segments of the bond market. Corporate bonds and Treasury Inflation-Protected Securities (TIPS) have been the best-performing segment of the investment-grade fixed-income market. The 10-year Treasury note yielded 1.65% at the end of June, 23 basis points lower year-to-date.

June 30, 2012 William Blair Funds    81

Christopher T. Vincent

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

Year-to-date the Fund gained 3.93%, outpacing its benchmark, the Barclay’s Capital U.S. Aggregate Bond Index, which rose 2.37%.

Security selection has been the primary driver of performance year-to-date. Results were particularly strong among the Fund’s corporate bond holdings. The Fund has maintained an overweight exposure to financials that has been additive as investment-grade financials have been strong performers year-to-date. Positioning within the Industrial sector was also additive. Within the Industrials sector, we had exposure to high-yield issuers, and that allocation contributed to results as high-yield issuers have outperformed investment-grade issuers year-to-date.

In addition, security selection within the Fund’s mortgage-backed securities added value year-to-date. The pools owned provided incremental yield over Treasuries and experienced manageable prepayment speeds.

Another factor that affected performance favorably was the Fund’s allocation to longer-dated U.S. TIPS (Treasury Inflation-Protected Securities). These positions benefitted as interest rates declined and Treasury instruments benefitted from a global flight to quality.

Sector positioning has impacted performance favorably year-to-date. The William Blair Bond Fund is structured to be underweight to Treasury instruments, which have been the weakest-performing segment of the market, and to be overweight in corporate and mortgage-backed securities, both of which have outperformed Treasuries year-to-date.

Outlook and Positioning

We are positioned neutral on interest rates with the portfolio’s duration in-line with that of the benchmark. We believe that interest rates will remain range-bound at lower levels over the next two years, as the FOMC (Federal Open Market Committee) continues to state that current conditions “warrant exceptionally low levels for the federal funds rate at least through late 2014.”

We are overweight agency mortgage-backed securities. We seek pools with better-than-market convexity characteristics through favoring pools with above-market coupon rates comprised of either low loan balances or seasoned pools and avoiding the generic, current-coupon pools that dominate the Mortgage Index. We view specified pool mortgage-backed securities as a cheap alternative to agency debentures (to which we are underweight).

We are overweight investment-grade corporate bonds, as we believe the sector continues to offer good relative value. Within the sector, we are overweight industrials and financials. We emphasize companies with positive free cash flow and strong and experienced management teams. We believe that certain names in the financial sector offer value, and we are encouraged by the improvement of balance sheets within the sector despite the regulatory issues facing the industry. We hold an allocation to high yield bonds near its 10% maximum. We emphasize higher quality (BB- and B-rated) industrial issuers.

We hold an allocation to TIPS, as we find its embedded option on unexpected inflation to be an appealing feature versus owning nominal Treasury notes.

82     Semi-Annual Report June 30, 2012

Bond Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 year			3 year			5 year			Since Inception(a)
Class N		3.93	%		8.49	%		8.42	%		7.30	%		6.81	%
Class I		4.03			8.60			8.59			7.46			6.97
Barclays Capital U.S. Aggregate Bond Index		2.37			7.47			6.93			6.79			6.35

(a) For the period from May 1, 2007 (Commencement of Operations) to June 30, 2012.

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

This report identifies the Fund’s investments on June 30, 2012. 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)

The sector diversification shown is based on the total investments.

June 30, 2012 William Blair Funds    83

Bond Fund

Portfolio of Investments, June 30, 2012 (all amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—42.2%
U.S. Treasury Inflation Indexed Notes/Bonds—7.7%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	5,881	$	6,788
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29		8,538		13,795
Total U.S. Treasury Inflation Indexed Notes/Bonds				20,583
U.S. Treasury—1.1%
U.S. Treasury Bond, 3.125%, due 2/15/42		525		564
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,575		2,319
Total U.S. Treasury Obligations				2,883
Government National Mortgage Association (GNMA)—3.3%
#344834, 6.250%, due 7/15/13		5		5
#344902, 6.250%, due 3/15/14		6		6
#623162, 6.500%, due 7/15/18		41		46
#616250, 6.000%, due 2/15/24		10		11
#422470, 7.500%, due 3/15/26		1		1
#509405, 7.500%, due 8/15/29		1		1
GNR 2004-2 M5, 4.891%, due 7/16/34		125		138
GNR 2006-67 GB, 4.741%, due 9/16/34, VRN		1,620		1,679
#699118, 6.000%, due 9/15/38		6,152		6,964
Total GNMA Mortgage Obligations				8,851
Federal Home Loan Mortgage Corp. (FHLMC)—8.2%
#G90024, 7.000%, due 1/20/13		3		3
#J14232, 3.500%, due 1/1/21		1,345		1,416
#J16051, 4.500%, due 7/1/26		1,338		1,457
#G01728, 7.500%, due 7/1/32		273		334
#C01385, 6.500%, due 8/1/32		278		316
#C01623, 5.500%, due 9/1/33		409		449
#A15039, 5.500%, due 10/1/33		7		8
#G01843, 6.000%, due 6/1/35		77		87
#G02141, 6.000%, due 3/1/36		1,573		1,756
#A62179, 6.000%, due 6/1/37		818		914
#A63539, 6.000%, due 7/1/37		1,035		1,156
#A62858, 6.500%, due 7/1/37		558		631
#G03170, 6.500%, due 8/1/37		1,275		1,441
#A66843, 6.500%, due 10/1/37		1,919		2,188
#A78138, 5.500%, due 6/1/38		1,147		1,279
#G04544, 6.000%, due 8/1/38		3,614		4,010
#A81799, 6.500%, due 9/1/38		2,334		2,661
#C03665, 9.000%, due 4/1/41		1,672		2,080
Total FHLMC Mortgage Obligations				22,186
Federal National Mortgage Association (FNMA)—21.9%
#124947, 7.000%, due 7/1/13		1		1
#576553, 8.000%, due 2/1/16		10		11
#580793, 6.000%, due 4/1/16		2		2
#624506, 6.000%, due 1/1/17		2		3
U.S. Government and U.S. Government Agency—42.2%—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#679247, 7.000%, due 8/1/17	$	9	$	10
#689612, 5.000%, due 5/1/18		263		287
#695910, 5.000%, due 5/1/18		551		602
#697593, 5.000%, due 5/1/18		479		523
#770395, 5.000%, due 4/1/19		9		10
#745735, 5.000%, due 3/1/21		600		653
#900725, 6.000%, due 8/1/21		137		151
#893325, 7.000%, due 9/1/21		9		10
#AA2924, 4.500%, due 4/1/24		920		1,010
#AD8164, 4.000%, due 8/1/25		63		69
#255956, 5.500%, due 10/1/25		62		68
#AB2256, 3.500%, due 2/1/26		1,294		1,394
#890329, 4.000%, due 4/1/26		518		562
#AI9811, 4.500%, due 8/1/26		550		604
#AH9564, 3.500%, due 9/1/26		1,126		1,213
#AJ8149, 3.500%, due 12/1/26		1,358		1,462
#AB4818, 4.000%, due 4/1/27		1,274		1,390
#252925, 7.500%, due 12/1/29		3		3
#535977, 6.500%, due 4/1/31		24		28
#253907, 7.000%, due 7/1/31		4		5
#587849, 6.500%, due 11/1/31		35		40
#545437, 7.000%, due 2/1/32		139		162
#545759, 6.500%, due 7/1/32		1,511		1,730
#678007, 6.000%, due 9/1/32		27		30
#254548, 5.500%, due 12/1/32		68		75
#684601, 6.000%, due 3/1/33		1,479		1,665
#708993, 5.000%, due 6/1/33		86		96
#190340, 5.000%, due 9/1/33		218		237
#254868, 5.000%, due 9/1/33		22		24
#739243, 6.000%, due 9/1/33		1,653		1,861
#739331, 6.000%, due 9/1/33		787		886
#555800, 5.500%, due 10/1/33		237		261
#555946, 5.500%, due 11/1/33		715		800
#756153, 5.500%, due 11/1/33		1,739		1,932
#725017, 5.500%, due 12/1/33		83		93
#725205, 5.000%, due 3/1/34		2,779		3,024
#725232, 5.000%, due 3/1/34		3,010		3,275
#725238, 5.000%, due 3/1/34		1,042		1,134
#763798, 5.500%, due 3/1/34		322		358
#725611, 5.500%, due 6/1/34		357		393
#783786, 5.500%, due 7/1/34		294		329
#786546, 6.000%, due 7/1/34		734		825
#787816, 6.000%, due 7/1/34		769		865
#190353, 5.000%, due 8/1/34		322		350
#794474, 6.000%, due 10/1/34		159		179
#745092, 6.500%, due 7/1/35		1,054		1,206
#357944, 6.000%, due 9/1/35		89		100
#829306, 6.000%, due 9/1/35		1,197		1,340
#836140, 5.500%, due 10/1/35		118		132
#843487, 6.000%, due 10/1/35		225		252
#849191, 6.000%, due 1/1/36		491		550
#848782, 6.500%, due 1/1/36		661		750
#745349, 6.500%, due 2/1/36		922		1,054
#888305, 7.000%, due 3/1/36		25		29
#895637, 6.500%, due 5/1/36		375		426
#831540, 6.000%, due 6/1/36		139		155
#745802, 6.000%, due 7/1/36		496		555

See accompanying Notes to Portfolio of Investments.

84     Semi-Annual Report June 30, 2012

Bond Fund

Portfolio of Investments, June 30, 2012 (all amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
U.S. Government and U.S. Government Agency—42.2%—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#886220, 6.000%, due 7/1/36			$	1,071	$	1,199
#893318, 6.500%, due 8/1/36				182		207
#902974, 6.000%, due 12/1/36				1,078		1,202
#909480, 6.000%, due 2/1/37				1,061		1,188
#938440, 6.000%, due 7/1/37				504		562
#928561, 6.000%, due 8/1/37				595		666
#948689, 6.000%, due 8/1/37				1,084		1,206
#946646, 6.000%, due 9/1/37				302		338
#888967, 6.000%, due 12/1/37				2,010		2,250
#889385, 6.000%, due 2/1/38				637		713
#962058, 6.500%, due 3/1/38				4,014		4,598
#934006, 6.500%, due 9/1/38				1,367		1,566
#986856, 6.500%, due 9/1/38				1,075		1,221
#991911, 7.000%, due 11/1/38				801		916
#931492, 6.000%, due 7/1/39				341		382
#AA6898, 6.000%, due 7/1/39				1,769		1,980
#AL0913, 6.000%, due 7/1/41				1,250		1,393
Total FNMA Mortgage Obligations						58,831
Non-Agency Mortgage-Backed Obligations—0.2%
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§**		D		199		167
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 2.660%, 8/25/34, VRN		AA		400		368
Total Non-Agency Mortgage-Backed Obligations						535
Asset-Backed Securities—3.0%
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		1,500		1,522
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		2,280		2,321
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		600		659
Avis Budget Rental Car Funding AESOP LLC—144A, 2010-3A, Tranche A, 4.640%, 5/20/16		Aaa		100		108
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2		2,274		2,383
Sierra Receivables Funding Co. LLC—144A, 2011-1A, Tranche A, 3.350%, 4/20/26		A		1,129		1,141
Total Asset-Backed Securities						8,134
Corporate Obligations—52.9%
Yum! Brands, Inc., 6.250%, due 4/15/16		BBB		1,400		1,615
Corporate Obligations—(continued)
Supervalu, Inc., 8.000%, due 5/1/16		B	$	1,550	$	1,569
Ford Motor Credit Co. LLC—144A, 3.984%, due 6/15/16		Baa3		2,000		2,060
Petrobras International Finance Co., 6.125%, due 10/6/16		A3		1,400		1,566
Ally Financial, Inc., 5.500%, due 2/15/17		BB-		1,788		1,816
American International Group, Inc., 3.800%, due 3/22/17		A-		2,375		2,421
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB+		2,000		2,016
ERP Operating L.P., 5.750%, due 6/15/17		BBB+		2,075		2,394
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		600		668
American Express Co., 6.150%, due 8/28/17		A+		2,050		2,429
Capital One Financial Corporation, 6.750%, due 9/15/17		A-		1,900		2,254
Exelon Generation Co. LLC, 6.200%, due 10/1/17		Baa1		1,160		1,337
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-		1,050		1,291
Motorola Solutions, Inc., 6.000%, due 11/15/17		BBB		2,050		2,328
Triumph Group, Inc., 8.000%, due 11/15/17		B+		1,550		1,689
Kohl’s Corporation, 6.250%, due 12/15/17		BBB+		1,000		1,200
Cemex S.A.B. de C.V.—144A, 9.000%, due 1/11/18		B+		1,000		893
American Tower Corporation, 4.500%, due 1/15/18		Baa3		1,200		1,268
Morgan Stanley, 6.625%, due 4/1/18		A		2,575		2,692
General Electric Capital Corporation, 5.625%, due 5/1/18		AA+		1,275		1,466
Simon Property Group L.P., 6.125%, due 5/30/18		A-		1,800		2,130
Petrohawk Energy Corporation, 7.250%, due 8/15/18		A		1,050		1,181
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A		1,100		1,232
CSX Corporation, 7.375%, due 2/1/19		BBB		870		1,110
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A+		1,300		1,655
Owens Corning, 9.000%, due 6/15/19		BBB-		1,050		1,309
Discovery Communications LLC, 5.625%, due 8/15/19		BBB		550		644
Roper Industries, Inc., 6.250%, due 9/1/19		BBB		1,850		2,202
Republic Services, Inc., 5.500%, due 9/15/19		BBB		1,725		1,996
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,575		1,816
Crown Castle International Corporation, 7.125%, due 11/1/19		BB-		1,550		1,662

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    85

Bond Fund

Portfolio of Investments, June 30, 2012 (all amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Corporate Obligations—(continued)
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-	$	500	$	554
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Baa3		2,050		2,504
Jarden Corporation, 7.500%, due 1/15/20		B		1,550		1,693
JBS USA LLC—144A, 8.250%, due 2/1/20		BB		1,000		973
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB+		1,675		1,894
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		2,575		2,749
Commonwealth Edison Co., 4.000%, due 8/1/20		A-		1,000		1,112
Citigroup, Inc., 5.375%, due 8/9/20		A		2,050		2,215
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		2,050		2,158
Omnicom Group, Inc., 4.450%, due 8/15/20		BBB+		2,075		2,237
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B+		1,500		1,588
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A-		1,500		1,741
Progress Energy, Inc., 4.400%, due 1/15/21		BBB		1,675		1,862
Standard Pacific Corporation, 8.375%, due 1/15/21		B		1,750		1,899
Petrobras International Finance Co., 5.375%, due 1/27/21		A3		1,200		1,293
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-		2,430		2,628
Wyndham Worldwide Corporation, 5.625%, due 3/1/21		BBB-		1,000		1,089
Ball Corporation, 5.750%, due 5/15/21		BB+		1,550		1,666
Energizer Holdings, Inc., 4.700%, due 5/19/21		BBB-		2,050		2,161
Discovery Communications LLC, 4.375%, due 6/15/21		BBB		1,000		1,086
O’Reilly Automotive, Inc., 4.625%, due 9/15/21		BBB		2,275		2,378
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1		1,900		1,999
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2		2,500		2,600
SABMiller Holdings, Inc.—144A, 3.750%, due 1/15/22		BBB+		2,000		2,127
SLM Corporation, 7.250%, due 1/25/22		BBB-		2,075		2,194
Fresenius Medical Care US Finance II, Inc.—144A, 5.875%, due 1/31/22		BB+		1,000		1,041
Lamar Media Corp.—144A, 5.875%, due 2/1/22		BB-		1,000		1,025
Masco Corporation, 5.950%, due 3/15/22		BBB-	$	1,675	$	1,724
BE Aerospace, Inc., 5.250%, due 4/1/22		BB		1,550		1,596
Corporate Obligations—(continued)
FMG Resources August 2006 Pty Ltd.—144A, 6.875%, due 4/1/22		BB+	$	1,050	$	1,058
Pinnacle Entertainment, Inc., 7.750%, due 4/1/22		B		1,315		1,405
Kraft Foods Group, Inc.—144A, 3.500%, due 6/6/22		Baa2		1,900		1,950
Embraer S.A., 5.150%, due 6/15/22		BBB-		2,500		2,566
Comcast Corporation, 3.125%, due 7/15/22		BBB+		1,000		1,005
Continental Airlines 2012-1 Class A Pass Thru Trusts, 4.150%, due 10/11/25		A-		2,375		2,333
The Kroger Co., 8.000%, due 9/15/29		BBB		450		586
Conoco Funding Co., 7.250%, due 10/15/31		A1		450		650
Kohl’s Corporation, 6.000%, due 1/15/33		BBB+		1,065		1,195
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A+		525		667
Comcast Corporation, 6.450%, due 3/15/37		BBB+		650		790
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB		625		828
JPMorgan Chase & Co., 6.400%, due 5/15/38		A+		1,470		1,767
COX Communications, Inc.—144A, 6.950%, due 6/1/38		BBB		370		446
General Electric Capital Corporation, 6.875%, due 1/10/39		AA+		750		968
Abbott Laboratories, 6.000%, due 4/1/39		AA		2,250		2,982
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3		1,565		1,866
Illinois Tool Works, Inc., 4.875%, due 9/15/41		A1		900		1,025
Union Pacific Corporation, 4.750%, due 9/15/41		A-		1,450		1,573
Aristotle Holding, Inc.—144A, 6.125%, due 11/15/41		BBB+		2,500		3,038
Philip Morris International, Inc., 4.375%, due 11/15/41		A		2,075		2,140
Gilead Sciences, Inc., 5.650%, due 12/1/41		A-		1,775		2,069
Citigroup, Inc., 5.875%, due 1/30/42		A		750		819
Bank of America Corporation, 5.875%, due 2/7/42		A		2,375		2,602
CSX Corporation, 4.750%, due 5/30/42		BBB		1,225		1,263
Odebrecht Finance Ltd.—144A, 7.125%, due 6/26/42		BBB-	$	1,000	$	995
Total Corporate Obligations						142,281
Total Long-Term Investments—98.3% (cost $247,901)						264,284

See accompanying Notes to Portfolio of Investments.

86     Semi-Annual Report June 30, 2012

Bond Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
U.S. Government and U.S. Government Agency—42.2%—(continued)
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $3,157, collateralized by FHLB, 3.650%, due 2/24/32		Aaa	$	3,157	$	3,157
Total Repurchase Agreement—1.2% (cost $3,157)						3,157
Total Investments—99.5% (cost $251,058)						267,441
Cash and other assets, less liabilities—0.5%						1,398
Net assets—100.0%					$	268,839

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 0.06% of the net assets at June 30, 2012.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2012.

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    87

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

Year-to-date, the Fund gained 2.94%, outpacing its benchmark, the Barclay’s Capital U.S. Intermediate Government/Credit Bond Index, which rose 2.10%.

Security selection has been the primary driver of performance year-to-date. Results were particularly strong among the Fund’s corporate bond holdings. The Fund has maintained an overweight exposure to financials that has been additive as investment-grade financials have been strong performers year-to-date. Positioning within the industrial sector was also additive.

In addition, security selection within the Fund’s mortgage-backed securities added value year-to-date. The pools owned provided incremental yield over Treasuries and experienced manageable prepayment speeds.

Another factor that affected performance favorably was the Fund’s allocation to longer-dated U.S. TIPS (Treasury Inflation-Protected Security). These positions benefitted as interest rates declined and Treasury instruments benefitted from a global flight to quality.

Sector positioning has impacted performance favorably year-to-date. The William Blair Income Fund is structured to be underweight to Treasury instruments, which have been the weakest-performing segment of the market, and to be overweight to corporate and mortgage-backed securities, both of which have outperformed Treasuries year-to-date.

Outlook and Positioning

We are positioned underweight on interest rates with the portfolio’s duration shorter than that of its benchmark. We believe that interest rates will remain range-bound at lower levels over the next two years, as the FOMC (Federal Open Market Committee) continues to state that current conditions “warrant exceptionally low levels for the federal funds rate at least through late 2014.”

We are overweight agency mortgage-backed securities. We seek pools with better-than-market convexity characteristics through favoring pools with above-market coupon rates comprised of either low loan balances or seasoned pools and avoiding the generic, current-coupon pools that dominate the Mortgage Index. We view specified pool mortgage-backed securities as a cheap alternative to agency debentures (to which we are underweight).

We are overweight investment-grade corporate bonds, as we believe the sector continues to offer good relative value. Within the sector, we are overweight industrials and financials. We emphasize companies with positive free cash flow and strong and experienced management teams. We believe that certain names in the financial sector offer value, and we are encouraged by the improvement of balance sheets within the sector despite the regulatory issues facing the industry.

We hold an allocation to TIPS, as we find its embedded option on unexpected inflation to be an appealing feature versus owning nominal Treasury notes.

88     Semi-Annual Report June 30, 2012

Income Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 year			3 year			5 year			10 year
Class N		2.94	%		5.68	%		6.30	%		4.37	%		3.91	%
Class I		3.08			5.95			6.52			4.58			4.10
Barclays Capital Intermediate Government/Credit Bond Index		2.10			5.42			5.81			6.01			5.08

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

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

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

This report identifies the Fund’s investments on June 30, 2012. 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)

The sector diversification shown is based on the total investments.

June 30, 2012 William Blair Funds    89

Income Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—48.4%
U.S. Treasury Inflation Indexed Notes/Bonds—5.8%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	3,993	$	4,608
U.S. Treasury Inflation Indexed Note, 1.125%, due 1/15/21		2,630		3,026
Total U.S. Treasury Inflation Indexed Notes/Bonds				7,634
U.S. Treasury—0.8%
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		1,185		1,067
Government National Mortgage Association (GNMA)—0.1%
#780405, 9.500%, due 11/15/17		95		102
#357322, 7.000%, due 9/15/23		68		80
Total GNMA Mortgage Obligations				182
Federal Home Loan Mortgage Corp. (FHLMC)—10.2%
#E72924, 7.000%, due 10/1/13		95		95
#E81703, 7.000%, due 5/1/15		148		152
#E81697, 8.000%, due 5/1/15		382		409
#E81908, 8.500%, due 12/1/15		27		28
#J02184, 8.000%, due 4/1/16		233		247
#G90022, 8.000%, due 9/17/16		122		125
#M30028, 5.500%, due 5/1/17		19		20
#E90398, 7.000%, due 5/1/17		399		431
#E96536, 5.000%, due 3/1/18		403		433
#E97112, 4.000%, due 5/1/18		202		218
#B13459, 4.500%, due 4/1/19		131		140
#J14232, 3.500%, due 1/1/21		1,347		1,417
#C67537, 9.500%, due 8/1/21		2		2
#D95621, 6.500%, due 7/1/22		1,395		1,562
#E02913, 5.000%, due 6/1/26		716		770
#J16051, 4.500%, due 7/1/26		2,480		2,700
#A45790, 7.500%, due 5/1/35		241		296
#G02141, 6.000%, due 3/1/36		787		879
#A66843, 6.500%, due 10/1/37		868		990
#A81799, 6.500%, due 9/1/38		1,309		1,492
#C03665, 9.000%, due 4/1/41		811		1,009
Total FHLMC Mortgage Obligations				13,415
Federal National Mortgage Association (FNMA)—31.5%
#254788, 6.500%, due 4/1/13		1		1
#725315, 8.000%, due 5/1/13		11		11
#593561, 9.500%, due 8/1/14		54		57
#567027, 7.000%, due 9/1/14		229		235
#567026, 6.500%, due 10/1/14		156		160
#458124, 7.000%, due 12/15/14		38		40
#576554, 8.000%, due 1/1/16		424		459
#576553, 8.000%, due 2/1/16		606		656
#555747, 8.000%, due 5/1/16		46		49
#735569, 8.000%, due 10/1/16		302		326
#725410, 7.500%, due 4/1/17		130		138
#643217, 6.500%, due 6/1/17		140		152
#679247, 7.000%, due 8/1/17		551		609
#685194, 4.500%, due 3/1/18		707		761
#689334, 5.000%, due 3/1/18		93		101
#695910, 5.000%, due 5/1/18		473		516
#740847, 6.000%, due 10/1/18		329		362
#323501, 6.500%, due 1/1/19		104		117

Issuer	NRSRO Rating		Principal Amount		Value
U.S. Government and U.S. Government Agency—48.4%—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#751313, 5.000%, due 3/1/19			$	450	$	491
#255358, 5.000%, due 9/1/19				126		137
#852864, 7.000%, due 7/1/20				1,144		1,269
#458147, 10.000%, due 8/15/20				272		313
#835563, 7.000%, due 10/1/20				451		497
#735574, 8.000%, due 3/1/22				277		322
#679253, 6.000%, due 10/1/22				724		795
FNR G93-19 SH, 11.234%, due 4/25/23, VRN				11		15
#982878, 4.500%, due 5/1/23				855		939
#AC5124, 4.000%, due 11/1/24				685		747
#AC6257, 4.000%, due 12/1/24				1,463		1,595
#AD8164, 4.000%, due 8/1/25				839		915
#AE1176, 4.000%, due 8/1/25				864		942
#255956, 5.500%, due 10/1/25				185		203
#AB2256, 3.500%, due 2/1/26				1,294		1,394
#890329, 4.000%, due 4/1/26				1,726		1,875
#AI4872, 4.500%, due 6/1/26				2,052		2,252
#AI9811, 4.500%, due 8/1/26				825		906
#AJ2322, 3.500%, due 10/1/26				942		1,014
#AJ3203, 4.000%, due 10/1/26				1,913		2,086
#AJ8149, 3.500%, due 12/1/26				2,688		2,895
#AJ7724, 4.000%, due 12/1/26				952		1,038
#256639, 5.000%, due 2/1/27				53		58
#AB4818, 4.000%, due 4/1/27				986		1,075
#806458, 8.000%, due 6/1/28				216		265
#880155, 8.500%, due 7/1/29				652		814
#797846, 7.000%, due 3/1/32				734		816
#745519, 8.500%, due 5/1/32				217		272
#654674, 6.500%, due 9/1/32				140		160
#733897, 6.500%, due 12/1/32				269		314
#254693, 5.500%, due 4/1/33				32		35
#555531, 5.500%, due 6/1/33				89		98
#555591, 5.500%, due 7/1/33				54		59
#725231, 5.000%, due 2/1/34				667		726
#725220, 5.000%, due 3/1/34				654		711
#725232, 5.000%, due 3/1/34				649		707
#725238, 5.000%, due 3/1/34				359		390
#725424, 5.500%, due 4/1/34				347		381
#255630, 5.000%, due 3/1/35				40		43
#886220, 6.000%, due 7/1/36				763		854
#928658, 6.500%, due 9/1/37				117		133
#889385, 6.000%, due 2/1/38				1,486		1,664
#962058, 6.500%, due 3/1/38				1,406		1,611
#991911, 7.000%, due 11/1/38				512		585
#AL0913, 6.000%, due 7/1/41				2,084		2,322
Total FNMA Mortgage Obligations						41,483
Non-Agency Mortgage-Backed Obligations—0.8%
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23**§		D		676		566
First Plus Home Loan Trust, 1997-4, Tranche M2, 7.830%, 9/11/23**§		D		143		104

See accompanying Notes to Portfolio of Investments.

90     Semi-Annual Report June 30, 2012

Income Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Non-Agency Mortgage-Backed Obligations—0.8%—(continued)
First Plus Home Loan Trust, 1998-3, Tranche M2, 7.920%, 5/10/24**§		Caa1	$	256	$	247
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M1, 2.953%, 2/28/33, VRN§		CCC		331		151
Total Non-Agency Mortgage-Backed Obligations						1,068
Asset-Backed Securities—4.3%
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		833		846
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		1,500		1,526
Nissan Auto Receivables Owner Trust, 2012-A, Tranche A2, 0.540%, 10/15/14		Aaa		1,000		1,000
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2		1,164		1,220
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.992%, 8/15/18, VRN		Aaa		1,000		1,050
Total Asset-Backed Securities						5,642
Corporate Obligations—44.2%
Bank of America Corporation, 7.375%, due 5/15/14		A		715		769
St. Jude Medical, Inc., 3.750%, due 7/15/14		A		500		526
American International Group, Inc., 3.000%, due 3/20/15		A-		1,000		1,005
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A		600		600
General Electric Capital Corporation, 1.625%, due 7/2/15		A1		500		500
PepsiCo, Inc., 2.500%, due 5/10/16		Aa3		700		735
Petrobras International Finance Co., 6.125%, due 10/6/16		A3		1,000		1,118
PACCAR Financial Corporation, 1.600%, due 3/15/17		A+		1,000		1,010
BHP Billiton Finance USA, Ltd., 5.400%, due 3/29/17		A+		1,000		1,169
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB+		500		504
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		1,750		1,948
Kimberly-Clark Corporation, 6.125%, due 8/1/17		A		1,000		1,225
American Express Co., 6.150%, due 8/28/17		A+		1,500		1,777
IBM Corporation, 5.700%, due 9/14/17		AA-		1,750		2,104
Capital One Financial Corporation, 6.750%, due 9/15/17		A-		1,000		1,186
Corporate Obligations—44.2%—(continued)
Motorola Solutions, Inc., 6.000%, due 11/15/17		BBB	$	750	$	852
Abbott Laboratories, 5.600%, due 11/30/17		AA		500		605
Wells Fargo & Co., 5.625%, due 12/11/17		AA-		750		876
American Tower Corporation, 4.500%, due 1/15/18		Baa3		500		529
Morgan Stanley, 6.625%, due 4/1/18		A		1,250		1,307
General Electric Capital Corporation, 5.625%, due 5/1/18		AA+		1,725		1,983
Philip Morris International, Inc., 5.650%, due 5/16/18		A		1,250		1,510
Simon Property Group L.P., 6.125%, due 5/30/18		A-		1,000		1,183
John Deere Capital Corporation, 5.750%, due 9/10/18		A		900		1,092
Honeywell International, Inc., 5.000%, due 2/15/19		A		1,225		1,457
The Procter & Gamble Co., 4.700%, due 2/15/19		AA-		500		593
Unilever Capital Corporation, 4.800%, due 2/15/19		A+		665		779
Burlington Northern Santa Fe LLC, 4.700%, due 10/1/19		A3		1,000		1,123
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,350		1,556
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		1,250		1,334
Citigroup, Inc., 5.375%, due 8/9/20		A		1,000		1,081
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		1,000		1,053
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A-		450		522
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-		1,000		1,081
E.I. du Pont de Nemours & Co., 4.250%, due 4/1/21		A		1,000		1,142
Energizer Holdings, Inc., 4.700%, due 5/19/21		BBB-		750		791
Ford Motor Credit Co. LLC, 5.875%, due 8/2/21		Baa3		750		834
Praxair, Inc., 3.000%, due 9/1/21		A		1,000		1,030
The Coca-Cola Co., 3.300%, due 9/1/21		Aa3		1,000		1,073
O’Reilly Automotive, Inc., 4.625%, due 9/15/21		BBB		700		732
Verizon Communications, Inc., 3.500%, due 11/1/21		A		1,000		1,065
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1		1,000		1,052
Aristotle Holding, Inc.—144A, 4.750%, due 11/15/21		BBB+		650		719
Gilead Sciences, Inc., 4.400%, due 12/1/21		A-		1,425		1,573
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2		1,000		1,040
McDonald’s Corporation, 2.625%, due 1/15/22		A		1,250		1,273

See accompanying Notes to Portfolio of Investments

June 30, 2012 William Blair Funds    91

Income Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Corporate Obligations—44.2%—(continued)
SLM Corporation, 7.250%, due 1/25/22		BBB-	$	1,000	$	1,057
AT&T, Inc., 3.000%, due 2/15/22		A2		1,500		1,524
Masco Corporation, 5.950%, due 3/15/22		BBB-		1,000		1,029
Potomac Electric Power Co., 3.050%, due 4/1/22		A		1,000		1,033
Caterpillar Financial Services Corporation, 2.850%, due 6/1/22		A		1,000		1,004
United Technologies Corporation, 3.100%, due 6/1/22		A		1,000		1,048
BRF—Brasil Foods S.A.—144A, 5.875%, due 6/6/22		BBB-		500		515
Embraer S.A., 5.150%, due 6/15/22		BBB-		1,000		1,026
Union Pacific Corporation, 2.950%, due 1/15/23		A-		1,000		1,003
Total Corporate Obligations						58,255
Total Long-Term Investments—97.7% (cost $123,635)						128,746
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $4,056 collateralized by FHLB, 3.650%, due 2/24/32		Aaa		4,056		4,056
Total Repurchase Agreement—3.1% (cost $4,056)						4,056
Total Investments—100.8% (cost $127,691)						132,802
Liabilities, plus cash and other assets—(0.8)%						(991	)
Net assets—100.0%					$	131,811

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

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 0.70% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.81% of the net assets at June 30, 2012.

See accompanying Notes to Portfolio of Investments.

92     Semi-Annual Report June 30, 2012

Christopher T. Vincent

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

Year-to-date, the Fund gained 1.59%, outpacing its benchmark, the Merrill Lynch 1-Year U.S. Treasuries Index, which rose 0.04%.

Security selection results in the mortgage-backed sector had the largest positive impact on performance year-to-date. The majority of the Fund is invested in seasoned agency (Fannie Mae and Freddie Mac) mortgage-backed securities. The pools employed by the Fund experienced manageable prepayment speeds and earned positive returns during the first quarter.

The Fund’s asset-backed securities (ABS) and corporate bonds were also additive to performance. Within both sectors, we emphasize both fixed- and floating-rate securities, all of which were rated “A” or better from a Nationally Recognized Statistical Rating Organization. These securities benefitted from the incremental yield they offer despite an increase in risk spreads during the quarter.

Finally, the Low Duration Fund has benefitted from the reduction in interest rates that has been experienced year-to-date.

Outlook and Positioning

The Low Duration Fund is structured to earn a competitive yield by taking a little more interest rate risk than money market instruments. Duration is managed within a band of 0.5 – 2.0 years, and all securities must carry a credit rating of “A” or better. Most of the securities we employ are amortizing instruments, meaning they make monthly payments of principal and interest; such a cash flow pattern allows for quicker reinvestment if interest rates were to rise.

Our primary emphasis remains in agency mortgage-backed securities. In the Low Duration Fund, we favor both seasoned and newer-vintage higher-coupon, low loan balance, 15-year pools. We believe these securities will generate steady, predictable cash flows and experience slower prepayment speeds in the current lower interest rate environment.

Within the asset-backed sector, we are allocated to short-dated auto and credit card loan receivable pools originated by “Tier 1” issuers. Some of our asset-backed holdings are floating-rate instruments, which help protect principal in a rising interest rate environment.

In the corporate sector, we favor short-dated, high-quality bonds of large, systemically important financial institutions as well as blue-chip industrials.

June 30, 2012 William Blair Funds    93

Low Duration Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 year			Since Inception(a)
Class N		1.59	%		2.19	%		1.77	%
Class I		1.67			2.34			1.91
Merrill Lynch 1-Year U.S. Treasury Note Index		0.04			0.26			0.50

(a) For the period from December 1, 2009 (Commencement of Operations) to June 30, 2012.

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

This report identifies the Fund’s investments on June 30, 2012. 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)

The sector diversification shown is based on the total investments.

94     Semi-Annual Report June 30, 2012

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—66.2%
U.S. Treasury Inflation Indexed Notes/Bonds—1.0%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	1,711	$	1,975
Government National Mortgage Association (GNMA)—1.5%
#002584, 6.000%, due 4/20/13		14		15
#623159, 5.000%, due 11/15/13		50		54
#628400, 6.000%, due 11/15/13		74		76
#002682, 6.500%, due 11/20/13		26		28
#623182, 5.000%, due 12/15/13		66		72
#781010, 6.500%, due 4/15/14		46		48
#002761, 6.000%, due 5/20/14		32		35
#002787, 5.500%, due 7/20/14		5		5
#781275, 6.000%, due 10/15/14		123		128
GNR 2011-24 VA, 3.500%, due 2/20/16		1,427		1,513
#561031, 5.500%, due 9/15/16		227		248
#003180, 6.000%, due 1/20/17		33		36
#781567, 5.000%, due 2/15/18		86		92
#606406, 5.000%, due 4/15/18		118		129
#003438, 4.500%, due 9/20/18		209		227
#003465, 4.500%, due 11/20/18		70		75
Total GNMA Mortgage Obligations				2,781
Federal Home Loan Mortgage Corp. (FHLMC)—19.5%
#M80982, 5.000%, due 7/1/12		98		100
#B18053, 5.000%, due 3/1/15		46		48
#G11885, 5.000%, due 1/1/16		155		166
#E86134, 5.000%, due 11/1/16		175		187
#E96536, 5.000%, due 3/1/18		251		270
#E95355, 5.000%, due 4/1/18		338		363
#E01377, 4.500%, due 5/1/18		329		349
#G11618, 4.500%, due 5/1/18		1,508		1,614
#E96700, 5.000%, due 5/1/18		925		994
#E96962, 4.000%, due 6/1/18		161		174
#E01411, 5.000%, due 7/1/18		171		183
#G12024, 4.500%, due 8/1/18		431		461
#E99963, 4.500%, due 10/1/18		101		108
#E01488, 5.000%, due 10/1/18		375		401
#E99895, 5.000%, due 10/1/18		762		818
#G12093, 4.500%, due 12/1/18		465		497
#B11386, 5.000%, due 12/1/18		155		167
#B11362, 5.500%, due 12/1/18		24		26
#G13367, 5.500%, due 12/1/18		125		136
#E01545, 5.000%, due 1/1/19		211		225
#B12826, 4.500%, due 3/1/19		754		811
#G11766, 5.000%, due 3/1/19		151		162
#G18001, 4.500%, due 7/1/19		209		223
#G11596, 5.500%, due 8/1/19		186		203
#B16291, 5.000%, due 9/1/19		1,118		1,201
#G11605, 5.500%, due 9/1/19		94		103
#B17142, 4.500%, due 11/1/19		1,509		1,635
#G18045, 5.000%, due 3/1/20		165		177
#B19078, 5.000%, due 4/1/20		113		121
#G18048, 5.000%, due 4/1/20		110		118
#J08152, 5.000%, due 5/1/20		129		139
#G11720, 4.500%, due 8/1/20		35		37
#G12394, 5.000%, due 5/1/21		208		224
#G13296, 5.000%, due 5/1/21		564		606
#G12113, 5.500%, due 5/1/21		289		316
#G12286, 5.000%, due 7/1/21		113		121

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—66.2%—(continued)
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#E02322, 5.500%, due 5/1/22	$	77	$	84
#J06484, 5.500%, due 11/1/22		664		724
#C00351, 8.000%, due 7/1/24		120		144
#G13695, 4.000%, due 9/1/24		1,682		1,823
#G00363, 8.000%, due 6/1/25		155		187
#C80329, 8.000%, due 8/1/25		36		44
#J13022, 4.000%, due 9/1/25		3,141		3,406
#G14150, 4.500%, due 4/1/26		3,403		3,706
#E02912, 5.000%, due 6/1/26		1,541		1,664
#E02913, 5.000%, due 6/1/26		1,364		1,468
#J16051, 4.500%, due 7/1/26		4,595		5,003
#G04424, 6.000%, due 6/1/38		278		309
#G04778, 6.000%, due 7/1/38		256		286
#A81372, 6.000%, due 8/1/38		132		146
#G04544, 6.000%, due 8/1/38		1,807		2,005
#G04687, 6.000%, due 9/1/38		373		416
#G04745, 6.000%, due 9/1/38		207		230
#A81799, 6.500%, due 9/1/38		1,229		1,401
Total FHLMC Mortgage Obligations				36,530
Federal National Mortgage Association (FNMA)—44.2%
#256224, 5.500%, due 4/1/16		29		31
#256559, 5.500%, due 1/1/17		15		17
#256606, 5.500%, due 2/1/17		20		22
#256646, 5.500%, due 3/1/17		15		17
#545898, 5.500%, due 9/1/17		460		501
#545899, 5.500%, due 9/1/17		521		568
#555029, 5.000%, due 11/1/17		65		70
#257067, 5.000%, due 1/1/18		72		78
#663692, 5.000%, due 1/1/18		219		237
#674713, 5.000%, due 1/1/18		15		16
#679305, 5.000%, due 1/1/18		69		75
#254591, 5.500%, due 1/1/18		347		377
#678938, 5.500%, due 2/1/18		35		37
#683100, 5.500%, due 2/1/18		453		496
#254684, 5.000%, due 3/1/18		24		26
#675717, 5.000%, due 3/1/18		299		324
#681361, 5.000%, due 3/1/18		113		122
#656564, 5.000%, due 4/1/18		1,614		1,748
#696677, 5.000%, due 4/1/18		108		117
#702888, 5.000%, due 4/1/18		171		185
#695838, 5.500%, due 4/1/18		99		109
#254721, 5.000%, due 5/1/18		268		291
#697593, 5.000%, due 5/1/18		255		279
#702332, 5.000%, due 5/1/18		58		63
#704049, 5.500%, due 5/1/18		962		1,054
#735357, 5.500%, due 5/1/18		1,383		1,515
#656573, 5.000%, due 6/1/18		267		292
#709848, 5.000%, due 6/1/18		222		243
#735003, 5.500%, due 7/1/18		1,501		1,645
#711991, 5.000%, due 8/1/18		202		221
#743183, 5.000%, due 10/1/18		93		102
#749596, 5.000%, due 11/1/18		331		361
#745237, 5.000%, due 12/1/18		72		78
#761267, 4.500%, due 2/1/19		771		846
#255079, 5.000%, due 2/1/19		62		67
#766276, 5.000%, due 3/1/19		503		547
#779363, 5.000%, due 6/1/19		102		112

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    95

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
U.S. Government and U.S. Government Agency—66.2%—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#785259, 5.000%, due 8/1/19			$	392	$	427
#725953, 5.000%, due 10/1/19				116		127
#735401, 5.500%, due 3/1/20				274		299
#879607, 5.500%, due 4/1/21				138		151
#880993, 6.000%, due 1/1/22				41		45
#972934, 5.500%, due 2/1/23				432		473
#982878, 4.500%, due 5/1/23				710		779
#254908, 5.000%, due 9/1/23				84		91
#255165, 4.500%, due 3/1/24				109		119
#934808, 4.500%, due 3/1/24				134		147
#AA4519, 4.500%, due 3/1/24				2,474		2,715
#AA5028, 4.500%, due 4/1/24				583		639
#190988, 9.000%, due 6/1/24				181		212
#AC1520, 4.000%, due 9/1/24				189		205
#AC5124, 4.000%, due 11/1/24				1,370		1,494
#AC6600, 4.500%, due 11/1/24				101		111
#AC6257, 4.000%, due 12/1/24				1,414		1,541
#AC8857, 4.500%, due 12/1/24				93		101
#AC9560, 5.000%, due 1/1/25				4,259		4,652
#932449, 4.000%, due 2/1/25				582		635
#AD0855, 4.000%, due 3/1/25				300		325
#932723, 4.000%, due 4/1/25				693		756
#935995, 4.000%, due 6/1/25				214		233
#AD4677, 4.000%, due 6/1/25				2,287		2,494
#AD8164, 4.000%, due 8/1/25				2,601		2,836
#AE1176, 4.000%, due 8/1/25				972		1,060
#AB1459, 4.000%, due 9/1/25				389		424
#AH2671, 4.000%, due 1/1/26				1,745		1,903
#890329, 4.000%, due 4/1/26				1,726		1,875
#AI4856, 4.500%, due 6/1/26				2,111		2,317
#AI9811, 4.500%, due 8/1/26				3,082		3,382
#AH9564, 3.500%, due 9/1/26				4,233		4,558
#AB3497, 4.000%, due 9/1/26				2,065		2,243
#AB3608, 3.500%, due 10/1/26				3,703		3,988
#AI7363, 3.500%, due 10/1/26				1,260		1,356
#AJ2322, 3.500%, due 10/1/26				2,903		3,126
#AB3975, 3.500%, due 12/1/26				1,135		1,223
#AJ8149, 3.500%, due 12/1/26				3,301		3,555
#AJ7724, 4.000%, due 12/1/26				2,570		2,802
#AK2768, 3.500%, due 3/1/27				3,009		3,240
#AK7384, 4.000%, due 3/1/27				3,465		3,778
#AB4818, 4.000%, due 4/1/27				2,957		3,224
#829306, 6.000%, due 9/1/35				180		202
#889385, 6.000%, due 2/1/38				2,123		2,377
#975649, 6.000%, due 7/1/38				463		516
#935532, 4.500%, due 8/1/39				121		134
#AC6651, 4.500%, due 12/1/39				148		164
#AL0913, 6.000%, due 7/1/41				834		929
Total FNMA Mortgage Obligations						82,872
Asset-Backed Securities—19.1%
American Express Issuance Trust, 2007-2, Tranche A, 0.492%, 7/15/13, VRN		AAA		473		473
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		1,333		1,353
Asset-Backed Securities—19.1%—(continued)
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A3, 1.310%, 1/20/14		AAA	$	158	$	158
Honda Auto Receivables Owner Trust, 2010-2, Tranche A3, 1.340%, 3/18/14		Aaa		43		43
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		1,765		1,797
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/14		AAA		121		121
Ford Credit Auto Owner Trust, 2010-A, Tranche A3, 1.320%, 6/15/14		AAA		196		197
Capital Auto Receivables Asset Trust, 2008-1, Tranche A4B, 1.592%, 7/15/14, VRN		AAA		73		73
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14		AAA		70		70
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		Aaa		399		399
Mercedes-Benz Auto Lease Trust—144A, 2011-B, Tranche A3, 1.070%, 8/15/14		Aaa		1,500		1,508
Nissan Auto Receivables Owner Trust, 2009-1, Tranche A3, 5.000%, 9/15/14		AAA		50		50
Nissan Auto Receivables Owner Trust, 2012-A, Tranche A2, 0.540%, 10/15/14		Aaa		1,400		1,400
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.392%, 1/15/15, VRN		AAA		2,300		2,313
CarMax Auto Owner Trust, 2012-1, Tranche A2, 0.590%, 3/16/15		AAA		1,000		1,000
CNH Equipment Trust, 2010-C, Tranche A3, 1.170%, 5/15/15		AAA		484		486
Harley-Davidson Motorcycle Trust, 2011-2, Tranche A2, 0.710%, 5/15/15		Aaa		1,403		1,405
Discover Card Master Trust, 2007-A2, Tranche A2, 0.808%, 6/15/15, VRN		AAA		292		292
Discover Card Master Trust I, 2005-4, Tranche A2, 0.332%, 6/16/15, VRN		AAA		77		77
FPL Recovery Funding LLC, 2007-A, Tranche A2, 5.044%, 8/1/15		AAA		518		531
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.542%, 9/15/15, VRN		AAA		2,000		2,004
Chase Issuance Trust, 2008-A13, Tranche A13, 1.968%, 9/15/15, VRN		AAA		100		102

See accompanying Notes to Portfolio of Investments.

96     Semi-Annual Report June 30, 2012

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Asset-Backed Securities—19.1%—(continued)
Discover Card Master Trust, 2010-A1, Tranche A1, 0.892%, 9/15/15, VRN		Aaa	$	447	$	449
USAA Auto Owner Trust, 2010-1, Tranche A4, 2.140%, 9/15/15		AAA		685		693
American Express Credit Account Master Trust, 2010-1, Tranche A, 0.492%, 11/16/15, VRN		AAA		500		501
Honda Auto Receivables Owner Trust, 2012-1, Tranche A3, 0.770%, 1/15/16		AAA		1,000		1,001
Ford Credit Floorplan Master Owner Trust, 2011-1, Tranche A2, 0.842%, 2/15/16, VRN		AAA		1,000		1,005
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		2,350		2,580
Ally Master Owner Trust, 2011-3, Tranche A1, 0.872%, 5/15/16, VRN		Aaa		1,100		1,103
CNH Equipment Trust, 2010-C, Tranche A4, 1.750%, 5/16/16		AAA		60		61
Avis Budget Rental Car Funding AESOP LLC—144A, 2010-3A, Tranche A, 4.640%, 5/20/16		Aaa		1,400		1,514
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2		1,589		1,665
CNH Equipment Trust, 2011-B, Tranche A3, 0.910%, 8/15/16		AAA		500		501
Discover Card Master Trust, 2011-A1, Tranche A1, 0.592%, 8/15/16, VRN		Aaa		1,400		1,406
Enterprise Fleet Financing LLC—144A, 2011-2, Tranche A2, 1.430%, 10/20/16		AAA		1,780		1,785
GE Capital Credit Card Master Note Trust, 2011-1, Tranche A, 0.792%, 1/15/17, VRN		Aaa		500		503
GE Dealer Floorplan Master Note Trust, 2012-1, Tranche A, 0.814%, 2/20/17, VRN		Aaa		1,000		1,002
Discover Card Master Trust, 2010-A2, Tranche A2, 0.822%, 3/15/18, VRN		AAA		350		354
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.992%, 8/15/18, VRN		Aaa		2,000		2,100
Capital One Multi-Asset Execution Trust, 2007-A2, Tranche A2, 0.322%, 12/16/19, VRN		AAA		215		211
Asset-Backed Securities—19.1%—(continued)
MBNA Credit Card Master Note Trust, 2004-A3, Tranche A3, 0.502%, 8/16/21, VRN		AAA	$	475	$	468
Sierra Receivables Funding Co. LLC—144A, 2011-1A, Tranche A, 3.350%, 4/20/26		A		941		951
Total Asset-Backed Securities						35,705
Corporate Obligations—10.7%
JPMorgan Chase & Co., 1.266%, due 1/24/14, VRN		A+		1,000		1,003
Morgan Stanley, 2.066%, due 1/24/14, VRN		A		1,000		972
Bank of America Corporation, 1.886%, due 1/30/14, VRN		A		1,000		990
Citigroup, Inc., 1.391%, due 4/1/14, VRN		A		1,000		984
Morgan Stanley, 6.000%, due 5/13/14		A		1,000		1,036
The Goldman Sachs Group, Inc., 0.969%, due 1/12/15, VRN		A		1,000		943
General Dynamics Corporation, 1.375%, due 1/15/15		A		1,000		1,014
The Goldman Sachs Group, Inc., 5.125%, due 1/15/15		A		1,000		1,044
AT&T, Inc., 0.875%, due 2/13/15		A2		1,000		999
Wells Fargo & Co., 1.250%, due 2/13/15		AA-		2,250		2,247
Toyota Motor Credit Corporation, 1.000%, due 2/17/15		AA-		1,000		1,001
The Bank of New York Mellon Corporation, 1.200%, due 2/20/15		Aa3		1,000		1,005
American International Group, Inc., 3.000%, due 3/20/15		A-		1,150		1,156
JPMorgan Chase & Co., 1.875%, due 3/20/15		A+		1,300		1,299
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A		800		800
Citigroup, Inc., 4.700%, due 5/29/15		A		1,100		1,148
John Deere Capital Corporation, 0.950%, due 6/29/15		A		1,000		1,002
General Electric Capital Corporation, 1.625%, due 7/2/15		A1		1,425		1,424
Total Corporate Obligations						20,067
Total Long-Term Investments—96.0% (cost $178,646)						179,930

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    97

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $5,406, collateralized by FHLB, 3.650%, due 2/24/32		Aaa	$	5,406	$	5,406
Total Repurchase Agreement—2.9% (cost $5,406)						5,406
Total Investments—98.9% (cost $184,052)						185,336
Cash and other assets, less liabilities—1.1%						2,078
Net assets—100.0%					$	187,414

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

See accompanying Notes to Portfolio of Investments.

98     Semi-Annual Report June 30, 2012

Christopher T. Vincent

Kathleen M. Lynch

READY RESERVES FUND

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

We continue to favor overnight repurchase agreements in an effort to maintain a high degree of overnight liquidity. The Fund is also invested in commercial paper issued by high-quality industrial companies. The Fund continues to maintain a relatively short average maturity. On June 30, 2012, the Fund’s average maturity was 32 days, shorter than the maximum allowable average maturity of 60 days as specified by the SEC’s Rule 2a-7 for money market funds.

As reported in the media, the regulatory debate continues in the money market space regarding whether additional reform is needed for money market funds. The Financial Stability Oversight Council (FSOC), created under the authority of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), continues to put pressure on the SEC to enact more reform on 2a-7 funds beyond the 2010 reforms adopted by the SEC. The money market fund industry and mutual fund advocacy groups are proactively and aggressively arguing that the money market fund reforms implemented in 2010 have made money market funds safer and more liquid.

We understand that the SEC is likely to propose one or a combination of the following additional reforms: (1) floating net asset value, (2) holdback provision on redemptions and/or (3) capital buffers. Any further reform could drastically alter the money market fund industry landscape and could negatively impact the short-term funding markets. Participants are anxious for a resolution but the timing is unclear.

June 30, 2012 William Blair Funds    99

Ready Reserves Fund

Performance Highlights (Unaudited)

The Fund’s 7 day yield on June 30, 2012 was 0.01%.

Average Annual Total Returns—Class N Shares period ended June 30, 2012.

	Year To Date			1 year			3 year			5 year			10 year
Ready Reserves Fund Class N		0.00	%		0.01	%		0.01	%		0.93	%		1.61	%
AAA Ready Money Market Funds		0.01	%		0.01	%		0.02	%		0.94	%		1.57	%

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 June 30, 2012. 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)

The sector diversification shown is based on the total Investments.

100     Semi-Annual Report June 30, 2012

Ready Reserves Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands)

Issuer	Principal Amount		Amortized Cost
U.S. Government and U.S. Government Agency—7.0%
Federal Home Loan Mortgage Corp. (FHLMC)—2.7%
Federal Home Loan Mortgage Corporation, 1.125%-5.500%, 7/15/12-6/12/13	$	34,182	$	34,460
Total Federal Home Loan Mortgage Corp. (FHLMC)				34,460
Federal National Mortgage Association (FNMA)—4.3%
Federal National Mortgage Association, 1.125%-4.750%, 7/30/12-11/19/12		55,879		56,229
Total Federal National Mortgage Association (FNMA)				56,229
Corporate Notes—7.0%
Boeing Capital Corporation, 5.800%, 1/15/13		1,733		1,783
Boeing Co. (The), 1.875%, 11/20/12		10,019		10,078
Caterpillar Financial Services Corporation, 2.000%-4.850%, 12/7/12-4/5/13		10,799		10,949
Citigroup Funding, Inc., 2.125%-2.250%, 7/12/12-12/10/12		14,223		14,316
General Electric Capital Corporation, 0.596%, 11/1/12, VRN		2,000		2,001
General Electric Capital Corporation, 3.500%-5.250%, 8/13/12-10/19/12		17,173		17,399
International Business Machines Corporation, 2.100%-4.750%, 11/29/12-5/6/13		6,250		6,349
John Deere Capital Corporation, 4.950%-5.250%, 10/1/12-12/17/12		9,365		9,495
Johnson & Johnson, 5.150%, 8/15/12		1,510		1,519
Merck & Co., Inc., 4.375%, 2/15/13		2,000		2,051
Oracle Corporation, 4.950%, 4/15/13		300		311
PepsiCo, Inc., 4.650%, 2/15/13		1,646		1,690
Praxair, Inc., 1.750%, 11/15/12		250		251
Procter & Gamble Co. (The), 1.375%, 8/1/12		11,606		11,616
Wal-Mart Stores, Inc., 4.250%-4.550%, 4/15/13-5/1/13		1,006		1,040
Total Corporate Notes				90,848
Commercial Paper—68.1%
American Honda Finance Corporation, 0.130%-0.140%, 7/5/12-7/25/12		32,000		31,998
Brown-Forman Corporation, 0.140%-0.180%, 7/9/12-7/25/12		35,500		35,497
Caterpillar Financial Services Corporation, 0.150%-0.250%, 8/27/12-12/5/12		26,000		25,987
Chevron Funding Corporation, 0.070%-0.100%, 7/2/12-7/12/12		39,000		39,000
Coca-Cola Co., 0.100%-0.220%, 7/5/12-10/4/12		44,500		44,489
Colgate Palmolive Co., 0.080%-0.100%, 7/3/12-7/11/12		40,000		40,000
ConocoPhillips, 0.120%-0.140%, 7/9/12-7/13/12		17,000		17,000
Commercial Paper—(continued)
ConocoPhillips Qatar Funding, Ltd., 0.130%-0.140%, 7/23/12-7/30/12	$	18,400	$	18,397
Deere & Co., 0.140%, 7/3/12		10,000		10,000
EI DuPont, 0.150%-0.210%, 7/2/12-9/12/12		42,200		42,195
General Electric Capital Corporation, 0.050%-0.070%, 7/6/12-7/11/12		25,000		25,000
Illinois Tool Works, Inc., 0.130%-0.140%, 7/2/12-7/18/12		41,826		41,824
John Deere Capital Corporation, 0.140%-0.150%, 7/16/12-7/23/12		19,500		19,497
Kimberly-Clark Corporation, 0.090%-0.110%, 7/9/12-7/13/12		23,458		23,458
Merck & Co., Inc., 0.110%-0.120%, 7/3/12-7/17/12		24,000		24,000
Nestle Capital Corporation, 0.030%, 7/2/12-7/5/12		30,000		30,000
PACCAR Financial Corporation, 0.110%-0.150%, 7/18/12-8/3/12		34,300		34,296
PepsiCo, Inc., 0.100%, 7/9/12-7/26/12		45,000		45,000
Pfizer, Inc., 0.090%-0.110%, 7/17/12-7/25/12		28,000		27,998
Praxair, Inc., 0.110%, 7/10/12-7/16/12		27,000		27,000
Private Export Funding, 0.120%-0.170%, 7/9/12-9/21/12		37,500		37,491
Procter & Gamble Co. (The), 0.120%, 7/6/12		10,000		10,000
Roche Holdings, Inc., 0.120%-0.130%, 7/23/12-8/6/12		40,000		39,995
The Walt Disney Co., 0.120%-0.140%, 7/9/12-8/16/12		27,000		26,998
Toyota Credit de Puerto Rico Corporation, 0.100%, 7/2/12-7/6/12		32,000		32,000
Toyota Motor Credit Corporation, 0.150%, 7/9/12-7/23/12		12,000		11,999
Unilever Capital Corporation, 0.140%-0.330%, 7/31/12-1/17/13		44,750		44,730
United Parcel Service, Inc., 0.010%, 7/2/12-7/6/12		30,000		30,000
Wal-Mart Stores, Inc., 0.090%-0.110%, 7/2/12-7/17/12		44,400		44,400
Total Commercial Paper				880,249
Asset-Backed Commercial Paper—3.5%
Chariot Funding LLC, 0.080%-0.170%, 7/2/12-7/20/12		45,000		44,997
Total Asset-Backed Commercial Paper				44,997
Repurchase Agreements—14.3%
Bank of America, 0.130% dated 6/29/12, due 7/2/12, repurchase price $55,001, collateralized by FHLMC, 4.500%-6.000%, due 3/1/19-9/1/38 and FNMA, 3.500%-5.000%, due 6/1/31-5/1/42		55,000		55,000
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $74,457, collateralized by FHLMC, 6.750%, due 3/15/31 and FNMA, 2.700%-7.125%, due 3/28/22-1/15/30		74,456		74,456

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    101

Ready Reserves Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Amortized Cost
U.S. Government and U.S. Government Agency—7.0% —(continued)
Repurchase Agreements—(continued)
Goldman Sachs, 0.160% dated 6/29/12, due 7/2/12, repurchase price $55,001, Collateralized by FNMA, 4.500%-5.000%, due 4/1/38-12/1/41	$	55,000	$	55,000
Total Repurchase Agreements				184,456
Total Investments—99.9% (cost $1,291,239)				1,291,239
Cash and other assets, less liabilities—0.1%				1,350
Net assets—100.0%			$	1,292,589
Portfolio Weighted Average Maturity				32 days

VRN = Variable Rate Note

See accompanying Notes to Portfolio of Investments.

102     Semi-Annual Report June 30, 2012

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands) (unaudited)

	Growth Fund			Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
Assets
Investments in securities, at cost	$	510,576		$	21,163		$	455,548		$	336,944
Investments in affiliated companies, at cost		—			—			23,167			—
Investments in securities, at value	$	612,382		$	27,068		$	513,164		$	354,749
Investments in affiliated companies, at value		—			—			1,477			—
Receivable for securities sold		14,144			—			6,971			—
Receivable for fund shares sold		1,485			20			388			1,874
Receivable from Advisor		—			8			73			1
Dividend and interest receivable		295			16			46			74
Total assets		628,306			27,112			522,119			356,698
Liabilities
Payable for investment securities purchased		9,262			80			5,143			3,589
Payable for fund shares redeemed		4,889			—			804			268
Investment advisory fee payable		371			17			449			248
Distribution fee payable		41			1			32			8
Other accrued expenses		180			15			255			18
Total liabilities		14,743			113			6,683			4,131
Net Assets	$	613,563		$	26,999		$	515,436		$	352,567
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	51		$	3		$	23		$	28
Capital paid in excess of par value		495,781			23,568			511,890			331,926
Accumulated net investment income (loss)		(1,505	)		(12	)		(2,784	)		(318	)
Accumulated net realized gain (loss)		17,430			(2,465	)		(29,619	)		3,126
Net unrealized appreciation (depreciation) of investments and foreign currencies		101,806			5,905			35,926			17,805
Net Assets	$	613,563		$	26,999		$	515,436		$	352,567
Class N Shares
Net Assets	$	202,015		$	3,840		$	161,021		$	43,311
Shares Outstanding		17,286,758			497,979			7,324,533			3,470,971
Net Asset Value Per Share	$	11.69		$	7.71		$	21.98		$	12.48
Class I Shares
Net Assets	$	411,548		$	23,159		$	354,415		$	309,256
Shares Outstanding		33,730,874			2,931,938			15,502,377			24,293,980
Net Asset Value Per Share	$	12.20		$	7.90		$	22.86		$	12.73

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    103

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands) (unaudited)

	Growth Fund			Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
Investment income
Dividends . .	$	1,558		$	122		$	739		$	1,165
Less foreign tax withheld		—			(2	)		—			—
Dividend income from affiliated companies		—			—			217			—
Interest		4			—			4			3
Total income		1,562			120			960			1,168
Expenses
Investment advisory fees		2,342			108			3,094			1,289
Distribution fees		265			5			231			49
Custodian fees		12			17			19			23
Transfer agent fees		79			5			51			13
Sub-transfer agent fees
Class N		150			2			149			22
Class I		136			4			362			44
Professional fees		20			10			25			12
Registration fees		20			21			28			21
Shareholder reporting fees		17			1			148			12
Trustee fees		12			1			17			3
Other expenses		14			2			15			3
Total expenses before waiver		3,067			176			4,139			1,491
Expenses waived by the Advisor		—			(44	)		(395	)		(5	)
Net expenses		3,067			132			3,744			1,486
Net investment income (loss)		(1,505	)		(12	)		(2,784	)		(318	)
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from investments		14,474			1,024			39,596	(a)		3,715
Change in net unrealized appreciation (depreciation) of investments		38,293			2,016			14,880	(a)		6,699
Net increase (decrease) in net assets resulting from operations	$	51,262		$	3,028		$	51,692		$	10,096

(a) Affiliated companies accounted for $12,069 of the net realized gain on investments and $(7) of the change in net unrealized (depreciation) on investments during the year.

See accompanying Notes to Financial Statements.

104     Semi-Annual Report June 30, 2012

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands) (unaudited)

	Growth Fund						Large Cap Growth Fund						Small Cap Growth Fund						Mid Cap Growth Fund
	2012			2011			2012			2011			2012			2011			2012			2011
Operations
Net investment income (loss)	$	(1,505	)	$	(886	)	$	(12	)	$	21		$	(2,784	)	$	(7,875	)	$	(318	)	$	(573	)
Net realized gain (loss) on investments		14,474			27,540			1,024			3,351			39,596			27,224			3,715			13,458
Change in net unrealized appreciation (depreciation) on investments		38,293			(38,002	)		2,016			(4,038	)		14,880			(110,707	)		6,699			(12,060	)
Net increase (decrease) in net assets resulting from operations		51,262			(11,348	)		3,028			(666	)		51,692			(91,358	)		10,096			825
Distributions to shareholders from
Net investment income		—			(329	)		—			(37	)		—			—			—			—
Net realized gain		—			(16,081	)		—			—			—			—			—			(11,057	)
		—			(16,410	)		—			(37	)		—			—			—			(11,057	)
Capital stock transactions
Net proceeds from sale of shares		61,262			134,130			2,144			4,139			51,684			123,447			220,220			88,823
Shares issued in reinvestment of income dividends and capital gain distributions		—			14,916			—			32			—			—			—			10,898
Less cost of shares redeemed		(65,703	)		(130,159	)		(3,122	)		(10,554	)		(142,678	)		(368,940	)		(23,503	)		(44,983	)
Net increase (decrease) in net assets resulting from capital share transactions		(4,441	)		18,887			(978	)		(6,383	)		(90,994	)		(245,493	)		196,717			54,738
Increase (decrease) in net assets		46,821			(8,871	)		2,050			(7,086	)		(39,302	)		(336,851	)		206,813			44,506
Net assets
Beginning of period		566,742			575,613			24,949			32,035			554,738			891,589			145,754			101,248
End of period	$	613,563		$	566,742		$	26,999		$	24,949		$	515,436		$	554,738		$	352,567		$	145,754
Undistributed net investment income (loss) at the end of the period	$	(1,505	)	$	—		$	(12	)	$	—		$	(2,784	)	$	—		$	(318	)	$	—

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    105

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands) (unaudited)

	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
Assets
Investments in securities, at cost	$	315,227		$	39,958		$	3,099,276		$	63,911
Investments in securities, at value	$	335,608		$	46,683		$	3,313,106		$	69,107
Foreign currency, at value (cost $—; $5; $3,812; $28)		—			5			3,811			28
Receivable for securities sold		16,948			117			78,764			884
Receivable for fund shares sold		565			3			4,358			—
Receivable from Advisor		66			11			18			14
Dividend and interest receivable		34			91			8,418			130
Unrealized appreciation on forward foreign currency contracts		—			—			19			—
Total assets		353,221			46,910			3,408,494			70,163
Liabilities
Payable for investment securities purchased		14,883			431			77,053			1,259
Payable for fund shares redeemed		95			23			3,452			18
Unrealized depreciation on forward foreign currency contracts		—			—			—			7
Investment advisory fee payable		268			37			2,704			60
Distribution fee payable		9			7			239			1
Other accrued expenses		171			39			1,391			55
Total liabilities		15,426			537			84,839			1,400
Net Assets	$	337,795		$	46,373		$	3,323,655		$	68,763
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	24		$	5		$	163		$	6
Capital paid in excess of par value		311,316			56,053			4,202,800			154,367
Accumulated net investment income (loss)		(676	)		196			64,383			1,962
Accumulated net realized gain (loss)		6,750			(16,605	)		(1,157,795	)		(92,756	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		20,381			6,724			214,104			5,184
Net Assets	$	337,795		$	46,373		$	3,323,655		$	68,763
Class N Shares
Net Assets	$	46,690		$	4,892		$	1,185,288		$	6,228
Shares Outstanding		3,420,330			555,954			58,930,526			564,067
Net Asset Value Per Share	$	13.65		$	8.80		$	20.11		$	11.04
Class I Shares
Net Assets	$	291,105		$	41,481		$	2,138,367		$	62,535
Shares Outstanding		20,800,608			4,712,902			103,862,302			5,596,392
Net Asset Value Per Share	$	14.00		$	8.80		$	20.59		$	11.17

See accompanying Notes to Financial Statements.

106     Semi-Annual Report June 30, 2012

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands) (unaudited)

	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
Investment income
Dividends		$1,137		$	541		$	64,560			$1,117
Less foreign tax withheld		(3	)		(43	)		(6,283	)		(103	)
Interest		4			—			17			1
Total income		1,138			498			58,294			1,015
Expenses
Investment advisory fees		1,592			234			17,294			389
Distribution fees		56			6			1,614			8
Shareholder services fees		—			35			—			—
Custodian fees		20			32			284			46
Transfer agent fees		23			10			204			3
Sub-transfer agent fees
Class N		66			1			884			4
Class I		164			5			1,047			26
Professional fees		11			14			119			18
Registration fees		24			23			53			21
Shareholder reporting fees		8			—			243			—
Trustee fees		5			1			88			3
Other expenses		7			3			68			3
Total expenses before waiver		1,976			364			21,898			521
Expenses waived by the Advisor		(162	)		(65	)		(38	)		(89	)
Net expenses		1,814			299			21,860			432
Net investment income (loss)		(676	)		199			36,434			583
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		5,641			1,166			37,905			1,593
Foreign currency transactions		—			(6	)		11,330			30
Total net realized gain (loss)		5,641			1,160			49,235			1,623
Change in net unrealized appreciation (depreciation) of:
Investments		3,925			2,307			157,146			1,313
Foreign currency translations		—			(1	)		2,141			(5	)
Total change in net unrealized appreciation (depreciation)		3,925			2,306			159,287			1,308
Net increase (decrease) in net assets resulting from operations	$	8,890		$	3,665		$	244,956		$	3,514

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    107

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands) (unaudited)

	Small-Mid Cap Growth Fund						Global Growth Fund						International Growth Fund						International Equity Fund
	2012			2011			2012			2011			2012			2011			2012			2011
Operations
Net investment income (loss)	$	(676	)	$	(1,387	)	$	199		$	225		$	36,434		$	56,294		$	583		$	1,890
Net realized gain (loss) on investments and foreign currency transactions		5,641			27,339			1,160			4,570			49,235			347,948			1,623			22,846
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		3,925			(27,537	)		2,306			(6,320	)		159,287			(971,769	)		1,308			(36,134	)
Net increase (decrease) in net assets resulting from operations		8,890			(1,585	)		3,665			(1,525	)		244,956			(567,527	)		3,514			(11,398	)
Distributions to shareholders from
Net investment income		—			—			—			(174	)		—			(6,046	)		—			—
Net realized gain		—			(23,013	)		—			—			—			—			—			—
		—			(23,013	)		—			(174	)		—			(6,046	)		—			—
Capital stock transactions
Net proceeds from sale of shares		95,971			85,339			2,305			3,738			393,606			756,415			2,160			26,832
Shares issued in reinvestment of income dividends and capital gain distributions		—			20,564			—			166			—			5,030			—			—
Less cost of shares redeemed		(20,663	)		(35,773	)		(2,171	)		(4,508	)		(543,809	)		(2,041,149	)		(12,568	)		(117,832	)
Net increase (decrease) in net assets resulting from capital share transactions		75,308			70,130			134			(604	)		(150,203	)		(1,279,704	)		(10,408	)		(91,000	)
Increase (decrease) in net assets		84,198			45,532			3,799			(2,303	)		94,753			(1,853,277	)		(6,894	)		(102,398	)
Net assets
Beginning of period		253,597			208,065			42,574			44,877			3,228,902			5,082,179			75,657			178,055
End of period	$	337,795		$	253,597		$	46,373		$	42,574		$	3,323,655		$	3,228,902		$	68,763		$	75,657
Undistributed net investment income (loss) at the end of the period	$	(676	)	$	—		$	196		$	(3	)	$	64,383		$	27,949		$	1,962		$	1,379

See accompanying Notes to Financial Statements.

108     Semi-Annual Report June 30, 2012

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands) (unaudited)

	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Emerging Markets Small Cap Growth Fund
Assets
Investments in securities, at cost	$	607,513		$	879,223		$	42,440		$	6,041
Investments in securities, at value	$	648,320		$	923,975		$	44,688		$	6,494
Cash		—			—			—			80
Foreign currency, at value (cost $234; $5,846; $570; $3)		233			5,858			571			3
Receivable for securities sold		1,783			30,628			916			6
Receivable for fund shares sold		1,285			10			—			197
Receivable from Advisor		—			—			21			14
Dividend and interest receivable		1,071			2,228			89			16
Total assets		652,692			962,699			46,285			6,810
Liabilities
Payable for investment securities purchased		1,053			4,394			—			82
Payable for fund shares redeemed		379			258			—			—
Payable to custodian		—			4,277			—			—
Investment advisory fee payable		518			877			43			6
Distribution fee payable		45			21			3			1
Other accrued expenses		175			1,173			1,273			20
Total liabilities		2,170			11,000			1,319			109
Net Assets	$	650,522		$	951,699		$	44,966		$	6,701
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	53		$	78		$	5		$	1
Capital paid in excess of par value		677,939			944,952			46,607			6,431
Accumulated net investment income (loss)		9,353			5,647			378			27
Accumulated net realized gain (loss)		(77,620	)		(42,919	)		(4,271	)		(210	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		40,797			43,941			2,247			452
Net Assets	$	650,522		$	951,699		$	44,966		$	6,701
Class N Shares
Net Assets	$	14,814		$	16,542		$	154		$	2,293
Shares Outstanding		1,228,658			1,384,322			18,737			206,240
Net Asset Value Per Share	$	12.06		$	11.95		$	8.21		$	11.12
Class I Shares
Net Assets	$	337,714		$	133,655		$	23,769		$	4,408
Shares Outstanding		27,718,542			11,079,633			2,901,306			395,694
Net Asset Value Per Share	$	12.18		$	12.07		$	8.19		$	11.14

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    109

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands) (unaudited)

	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Emerging Markets Small Cap Growth Fund
Investment income
Dividends	$	9,998		$	14,885		$	816		$	90
Less foreign tax withheld		(933	)		(1,101	)		(59	)		(9	)
Interest		8			8			—			—
Total income		9,073			13,792			757			81
Expenses
Investment advisory fees		3,544			5,534			305			29
Distribution fees		20			23			—			2
Shareholder services fees		288			117			19			4
Custodian fees		115			273			64			32
Transfer agent fees		18			25			10			3
Sub-transfer agent fees
Class N		12			9			—			—
Class I		128			34			—			—
Professional fees		37			69			28			17
Registration fees		34			34			38			11
Shareholder reporting fees		39			34			—			1
Trustee fees		13			21			2			—
Other expenses		14			19			5			3
Total expenses before waiver		4,262			6,192			471			102
Expenses waived and reimbursed by the Advisor		—			—			(106	)		(61	)
Net expenses		4,262			6,192			365			41
Net investment income (loss)		4,811			7,600			392			40
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		(14,939	)		(13,238	)		(1,591	)		(150	)
Foreign currency transactions		1,539			(1,245	)		(30	)		(2	)
Total net realized gain (loss)		(13,400	)		(14,483	)		(1,621	)		(152	)
Change in net unrealized appreciation (depreciation) of:
Investments		60,489			63,746			4,762			470
Foreign currency translations		538			(494	)		44			—
Total change in net unrealized appreciation (depreciation)		61,027			63,252			4,806			470
Net increase (decrease) in net assets resulting from operations	$	52,438		$	56,369		$	3,577		$	358

See accompanying Notes to Financial Statements.

110     Semi-Annual Report June 30, 2012

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands) (unaudited)

	International Small Cap Growth Fund						Emerging Markets Growth Fund						Emerging Leaders Growth Fund						Emerging Markets Small Cap Growth Fund
	2012			2011			2012			2011			2012			2011			2012			2011(a)
Operations
Net investment income (loss)	$	4,811		$	6,857		$	7,600		$	8,885		$	392		$	701		$	40		$	2
Net realized gain (loss) on investments and foreign currency transactions		(13,400	)		60,435			(14,483	)		127,536			(1,621	)		112			(152	)		(75	)
Change in net unrealized appreciation (depreciation) on investments and foreign currency translation		61,027			(155,577	)		63,252			(304,105	)		4,806			(20,181	)		470			(17	)
Net increase (decrease) in net assets resulting from operations		52,438			(88,285	)		56,369			(167,684	)		3,577			(19,368	)		358			(90	)
Distributions to shareholders from
Net investment income		—			(10,724	)		—			(4,450	)		—			(307	)		—			—
Net realized gain		—			—			—			(115,030	)		—			(3,704	)		—			—
Return of Capital		—			—			—			—			—			(25	)		—			—
		—			(10,724	)		—			(119,480	)		—			(4,036	)		—			—
Capital stock transactions
Net proceeds from sale of shares		66,178			313,989			194,763			352,369			10,538			19,857			3,326			3,362
Shares issued in reinvestment of income dividends and capital gain distributions		—			8,514			—			100,061			—			3,491			—			—
Less cost of shares redeemed		(186,315	)		(152,224	)		(117,279	)		(597,963	)		(16,971	)		(47,023	)		(255	)		—
Net increase (decrease) in net assets resulting from capital share transactions		(120,137	)		170,279			77,484			(145,533	)		(6,433	)		(23,675	)		3,071			3,362
Increase (decrease) in net assets		(67,699	)		71,270			133,853			(432,697	)		(2,856	)		(47,079	)		3,429			3,272
Net assets
Beginning of period		718,221			646,951			817,846			1,250,543			47,822			94,901			3,272			—
End of period	$	650,522		$	718,221		$	951,699		$	817,846		$	44,966		$	47,822		$	6,701		$	3,272
Undistributed net investment income (loss) at the end of the period	$	9,353		$	4,542		$	5,647		$	(1,953	)	$	378		$	(14	)	$	27		$	(13	)

(a) For the period from October 24, 2011 (Commencement of Operations) to December 31,2011.

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    111

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands) (unaudited)

	Large Cap Value Fund		Small Cap Value Fund			Mid Cap Value Fund		Small-Mid Cap Value Fund
Assets
Investments in securities, at cost	$	2,977	$	221,018		$	4,796	$	2,067
Investments in securities, at value	$	3,165	$	240,640		$	5,052	$	2,219
Cash		25		—			—		84
Receivable for securities sold		52		1,166			—		—
Receivable for fund shares sold		—		360			—		—
Receivable from Advisor		7		22			8		9
Dividend and interest receivable		5		141			8		2
Total assets		3,254		242,329			5,068		2,314
Liabilities
Payable for investment securities purchased		38		2,381			84		35
Payable for fund shares redeemed		—		147			—		—
Investment advisory fee payable		2		209			4		2
Distribution fee payable		—		8			—		—
Other accrued expenses		2		78			—		12
Total liabilities		42		2,823			88		49
Net Assets	$	3,212	$	239,506		$	4,980	$	2,265
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	1	$	18		$	1	$	1
Capital paid in excess of par value		3,007		223,784			4,656		2,072
Accumulated net investment income (loss)		14		2,191			22		16
Accumulated net realized gain (loss)		2		(6,109	)		45		24
Net unrealized appreciation (depreciation) of investments and foreign currencies		188		19,622			256		152
Net Assets	$	3,212	$	239,506		$	4,980	$	2,265
Class N Shares
Net Assets	$	1,257	$	42,463		$	56	$	916
Shares Outstanding		115,746		3,285,075			5,150		83,807
Net Asset Value Per Share	$	10.86	$	12.93		$	10.97	$	10.93
Class I Shares
Net Assets	$	1,955	$	197,043		$	4,924	$	1,349
Shares Outstanding		179,695		14,968,538			448,257		123,292
Net Asset Value Per Share	$	10.88	$	13.16		$	10.98	$	10.94

See accompanying Notes to Financial Statements.

112     Semi-Annual Report June 30, 2012

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands) (unaudited)

	Large Cap Value Fund			Small Cap Value Fund			Mid Cap Value Fund			Small-Mid Cap Value Fund
Investment income
Dividends	$	30		$	3,637		$	49		$	30
Interest		—			1			—			—
Total income		30			3,638			49			30
Expenses
Investment advisory fees		12			1,339			23			11
Distribution fees		1			54			—			1
Custodian fees		16			27			19			19
Transfer agent fees		3			21			5			3
Sub-transfer agent fees
Class N		—			32			—			—
Class I		—			96			—			—
Professional fees		9			14			9			7
Registration fees		5			22			19			8
Shareholder reporting fees		1			18			—			—
Trustee fees		—			4			—			—
Other expenses		1			10			1			8
Total expenses before waiver		48			1,637			76			57
Expenses waived and reimbursed by the Advisor		(32	)		(165	)		(49	)		(42	)
Net expenses		16			1,472			27			15
Net investment income (loss)		14			2,166			22			15
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from investments		6			560			39			27
Change in net unrealized appreciation (depreciation) of investments		195			10,054			158			58
Net increase (decrease) in net assets resulting from operations	$	215		$	12,780		$	219		$	100

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    113

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands) (unaudited)

	Large Cap Value Fund					Small Cap Value Fund						Mid Cap Value Fund						Small-Mid Cap Value Fund
	2012		2011 (a)			2012			2011			2012			2011			2012			2011 (b)
Operations
Net investment income (loss)	$	14	$	7		$	2,166		$	440		$	22		$	46		$	15		$	1
Net realized gain (loss) on investments		6		(4	)		560			890			39			40			27			(3	)
Change in net unrealized appreciation (depreciation) on investments		195		(7	)		10,054			(16,890	)		158			(92	)		58			94
Net increase (decrease) in net assets resulting from operations		215		(4	)		12,780			(15,560	)		219			(6	)		100			92
Distributions to shareholders from
Net investment income		—		(7	)		—			(489	)		—			(48	)		—			—
Net realized gain		—		—			—			(8,188	)		—			(51	)		—			—
Return of Capital		—		—			—			(333	)		—			—			—			—
				(7	)					(9,010	)					(99	)					—
Capital stock transactions
Net proceeds from sale of shares		544		2,457			30,182			162,792			275			1,698			37			2,064
Shares issued in reinvestment of income dividends and capital gain distributions		—		7			—			8,075			—			85			—			—
Less cost of shares redeemed		—		—			(34,854	)		(79,398	)		(87	)		(498	)		(28	)		—
Net increase (decrease) in net assets resulting from capital share transactions		544		2,464			(4,672	)		91,469			188			1,285			9			2,064
Increase (decrease) in net assets		759		2,453			8,108			66,899			407			1,180			109			2,156
Net assets
Beginning of period	$	2,453	$	—		$	231,398		$	164,499		$	4,573		$	3,393		$	2,156		$	—
End of period	$	3,212	$	2,453		$	239,506		$	231,398		$	4,980		$	4,573		$	2,265		$	2,156
Undistributed net investment income (loss) at the end of the period	$	14	$	—		$	2,191		$	25		$	22		$	3		$	16		$	1

(a) For the period from October 24, 2011 (Commencement of Operations) to December 31, 2011.

(b) For the period from December 15, 2011 (Commencement of Operations) to December 31, 2011.

See accompanying Notes to Financial Statements.

114     Semi-Annual Report June 30, 2012

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands) (unaudited)

	Bond Fund			Income Fund			Low Duration Fund			Ready Reserves Fund
Assets
Investments in securities, at cost	$	251,058		$	127,691		$	184,052		$	1,291,239
Investments in securities, at value	$	267,441		$	132,802		$	185,336		$	1,291,239
Receivable for fund shares sold		297			472			3,340			—
Receivable from Advisor		14			—			2			491
Dividend and interest receivable		2,484			880			572			1,515
Total assets		270,236			134,154			189,250			1,293,245
Liabilities
Payable for investment securities purchased		999			1,989			1,711			—
Payable for fund shares redeemed		190			230			—			—
Investment advisory fee payable		65			44			45			263
Distribution fee payable		26			7			14			371
Other accrued expenses		117			73			66			22
Total liabilities		1,397			2,343			1,836			656
Net Assets	$	268,839		$	131,811		$	187,414		$	1,292,589
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	24		$	14		$	19		$	1,292
Capital paid in excess of par value		250,394			165,536			189,501			1,291,230
Accumulated net investment income (loss)		(780	)		(462	)		(984	)		108
Accumulated net realized gain (loss)		2,818			(38,388	)		(2,406	)		(41	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		16,383			5,111			1,284			—
Net Assets	$	268,839		$	131,811		$	187,414		$	1,292,589
Class N Shares
Net Assets	$	25,679		$	56,975		$	8,322		$	1,292,589
Shares Outstanding		2,313,797			6,047,933			845,908			1,292,646,032
Net Asset Value Per Share	$	11.10		$	9.42		$	9.84		$	1.00
Class I Shares
Net Assets	$	159,385		$	74,836		$	102,941
Shares Outstanding		14,502,673			8,004,388			10,463,006
Net Asset Value Per Share	$	10.99		$	9.35		$	9.84

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    115

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands) (unaudited)

	Bond Fund			Income Fund		Low Duration Fund			Ready Reserves Fund
Investment income
Interest	$	5,340		$	2,219	$	1,963		$	890
Total income		5,340			2,219		1,963			890
Expenses
Investment advisory fees		374			256		257			1,524
Distribution fees		14			38		5			—	��
Shareholder services fees		132			—		73			2,226
Custodian fees		27			25		34			19
Transfer agent fees		16			16		11			18
Sub-transfer agent fees
Class N		9			29		1			—
Class I		20			5		—			—
Professional fees		13			7		10			47
Registration fees		29			18		31			14
Shareholder reporting fees		2			5		—			15
Trustee fees		5			2		3			27
Other expenses		6			3		6			21
Total expenses before waiver		647			404		431			3,911
Expenses waived and reimbursed by the Advisor		(64	)		—		(10	)		(3,085	)
Net expenses		583			404		421			826
Net investment income (loss)		4,757			1,815		1,542			64
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from investments		1,969			1,499		155			—
Change in net unrealized appreciation (depreciation) of investments		2,990			153		1,025			—
Net increase (decrease) in net assets resulting from operations	$	9,716		$	3,467	$	2,722		$	64

See accompanying Notes to Financial Statements.

116     Semi-Annual Report June 30, 2012

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands) (unaudited)

	Bond Fund						Income Fund						Low Duration Fund						Ready Reserves Fund
	2012			2011			2012			2011			2012			2011			2012			2011
Operations
Net investment income (loss)	$	4,757		$	8,820		$	1,815		$	3,627		$	1,542		$	2,586		$	64		$	125
Net realized gain (loss) on investments		1,969			3,325			1,499			2,582			155			59			—			—
Change in net unrealized appreciation (depreciation) on investments		2,990			3,590			153			(897	)		1,025			360			—			—
Net increase (decrease) in net assets resulting from operations		9,716			15,735			3,467			5,312			2,722			3,005			64			125
Distributions to shareholders from
Net investment income		(5,539	)		(9,700	)		(2,277	)		(4,177	)		(2,526	)		(4,103	)		(64	)		(125	)
Net realized gain		—			(1,831	)		—			—			—			—			—			—
		(5,539	)		(11,531	)		(2,277	)		(4,177	)		(2,526	)		(4,103	)		(64	)		(125	)
Capital stock transactions
Net proceeds from sale of shares		47,896			100,839			38,088			34,055			55,396			121,427			363,966			838,997
Shares issued in reinvestment of income dividends and capital gain distributions		4,205			8,489			1,881			3,514			1,963			3,322			64			125
Less cost of shares redeemed		(19,455	)		(74,292	)		(21,333	)		(39,996	)		(27,288	)		(109,974	)		(343,187	)		(783,919	)
Net increase (decrease) in net assets resulting from capital share transactions		32,646			35,036			18,636			(2,427	)		30,071			14,775			20,843			55,203
Increase (decrease) in net assets		36,823			39,240			19,826			(1,292	)		30,267			13,677			20,843			55,203
Net assets
Beginning of period		232,016			192,776			111,985			113,277			157,147			143,470			1,271,746			1,216,543
End of period	$	268,839		$	232,016		$	131,811		$	111,985		$	187,414		$	157,147		$	1,292,589		$	1,271,746
Undistributed net investment income (loss) at the end of the period	$	(780	)	$	2		$	(462	)	$	—		$	(984	)	$	—		$	108		$	108

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    117

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of William Blair Funds’ (the “Trust”) significant accounting policies in effect during the period covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles.

(a) Description of the Trust

The Trust 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 Trust currently consists of the following twenty-four funds (the “Funds”), each with its own investment objective and policies. For each Fund, the number of shares authorized is unlimited.

Equity Funds Growth Large Cap Growth Small Cap Growth Mid Cap Growth Small-Mid Cap Growth Large Cap Value Small Cap Value Mid Cap Value Small-Mid Cap Value Global Equity Fund Global Growth Multi-Asset and Alternative Funds Macro Allocation Commodity Strategy Long/Short International Equity Funds International Growth International Equity Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Leaders Growth Emerging Markets Small Cap Growth Fixed-Income Funds Bond Income Low Duration Money Market Fund Ready Reserves

The investment objectives of the Funds 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 Fund, the Institutional International Equity Fund and the Institutional Class of each of the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Bond Fund and the Low Duration Fund issue a separate report.

The Macro Allocation Fund and the Commodity Strategy Long/Short Fund have a fiscal year end of October 31, and 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 Trust’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 Funds and 0.15% for the Fixed-Income Funds) or a service fee (0.35% for the Money Market Fund), a sub-transfer agent fee that is not a fixed rate and may vary by Fund and class, and an annual shareholder administration fee (0.15% for the Global Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund and the Low Duration Fund).

118     Semi-Annual Report June 30, 2012

Class

Description

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 fee that is not a fixed rate and may vary by Fund and class and the Global Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund and the Low Duration Fund carry an annual shareholder administration fee of 0.15%.

Sub-transfer agent fees: The Funds may reimburse the Advisor for fees paid to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-transfer agency, sub-administration 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 or up to $15 per sub-account maintained by the intermediary.

Investment income, realized and unrealized gains and losses, and certain Fund 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 Funds 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 Funds 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 Funds may use an independent pricing service to fair value the security as of the close of regular trading on the New York Stock Exchange. As a result, a Fund’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 matrices that produce estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Securities, and other assets, 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 Fund 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 Fund are valued at amortized cost, which approximates market value.

As of June 30, 2012, there were securities held in the International Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Funds 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.

June 30, 2012 William Blair Funds    119

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 Funds were the rates in effect on June 30, 2012. 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 period ended June 30, 2012, the Bond, Income and Low Duration Funds recognized a reduction of interest income and a decrease of net realized loss of $(462), $(786) and $(984), respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Funds.

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 year 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 year. 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 Funds no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Distributions 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 Fund’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 (the “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 Equity Funds assess a 1% redemption fee on shares sold or exchanged that have been owned 60 days or less and the Global Equity and International Equity Funds assess a 2% redemption fee on shares sold or exchanged that have been owned 60 days or less as disclosed within the Fund’s Prospectus. The redemption fees collected by the Fund are netted against the amount of redemptions for presentation on the Statements of Changes in Net Assets.

The redemption fees collected by the Funds were as follows (in thousands):

Fund	Period Ended June 30, 2012		Year Ended December 31, 2011
Growth	$	3	$	11
Large Cap Growth		—		—
Small Cap Growth		3		15
Mid Cap Growth		5		13
Small-Mid Cap Growth		5		8
Global Growth		—		1
International Growth		29		107
International Equity		—		4
International Small Cap Growth		13		18

120     Semi-Annual Report June 30, 2012

Fund	Period Ended June 30, 2012		Year Ended December 31, 2011
Emerging Markets Growth		—		4
Emerging Leaders Growth		1		1
Emerging Markets Small Cap Growth		—		—
Large Cap Value		—		—
Small Cap Value		6		48
Mid Cap Value		—		—
Small-Mid Cap Value		1		—

Distributions 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, Emerging Markets Small Cap Growth, Large Cap Value, Small Cap Value, Mid Cap Value, and Small-Mid Cap Value Funds are declared and paid at least annually. Distributions from the Bond, Income, Low Duration and Ready Reserves Funds are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid at least annually in December. Distributions payable to shareholders are recorded on the ex-dividend date.

(f) Foreign Currency Translation and Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, and Emerging Markets Small Cap Growth Funds 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 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

Each Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies. Each Fund 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, Emerging Leaders Growth and Emerging Market Small Cap Growth Funds may be subject to a tax imposed on net realized and unrealized gains on securities of certain foreign countries.

Management has evaluated all of the uncertain tax positions of the Funds 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, 2011, remains open and the returns are subject to examination.

The Funds have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for federal income tax purposes. The Funds also treat the deferred loss associated with current and prior year wash sales as an adjustment to the cost of investments for tax purposes. The cost of investments for federal income tax purposes and related gross unrealized appreciation/(depreciation) and net unrealized appreciation (depreciation) at June 30, 2012, were as follows (in thousands):

Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Growth	$	511,887	$	118,966	$	18,471	$	100,495
Large Cap Growth		21,386		6,063		381		5,682

June 30, 2012 William Blair Funds    121

Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Small Cap Growth	$	487,187	$	80,762	$	53,308	$	27,454
Mid Cap Growth		340,478		28,076		13,805		14,271
Small-Mid Cap Growth		317,632		35,989		18,013		17,976
Global Growth		39,999		7,942		1,259		6,683
International Growth		3,114,293		347,140		148,327		198,813
International Equity		64,587		6,506		1,986		4,520
International Small Cap Growth		613,406		69,552		34,638		34,914
Emerging Markets Growth		894,872		70,072		40,969		29,103
Emerging Leaders Growth		44,328		2,000		1,640		360
Emerging Markets Small Cap Growth		6,058		629		194		435
Large Cap Value		2,980		283		98		185
Small Cap Value		223,776		22,938		6,074		16,864
Mid Cap Value		4,816		427		192		235
Small-Mid Cap Value		2,067		197		45		152
Bond		251,058		16,751		368		16,383
Income		127,691		5,695		584		5,111
Low Duration		184,052		1,671		387		1,284
Ready Reserves		1,291,239		—		—		—

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 Funds 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 Real Estate Investment Trust, paydown gains and losses, expired capital loss carryforwards and redemptions in-kind. These reclassifications have no impact on the net asset values of the Funds. Accordingly, at December 31, 2011, the following reclassifications were recorded (in thousands):

Fund	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss)			Capital Paid in Excess of Par Value
Growth	$	886		$	2		$	(888	)
Large Cap Growth		16			—			(16	)
Small Cap Growth		7,875			—			(7,875	)
Mid Cap Growth		573			—			(573	)
Small-Mid Cap Growth		1,387			(1,387	)		—
Global Growth		(53	)		54			(1	)
International Growth		(8,284	)		(106,774	)		115,058
International Equity		(269	)		269			—
International Small Cap Growth		8,995			(8,995	)		—
Emerging Markets Growth		5,939			(24,168	)		18,229
Emerging Leaders Growth		(251	)		276			(25	)
Emerging Markets Small Cap Growth		(15	)		15			—
Large Cap Value		—			—			—
Small Cap Value		271			62			(333	)
Mid Cap Value		(2	)		2			—
Small-Mid Cap Value		—			—			—
Bond		879			(879	)		—
Income		550			(550	)		—
Low Duration		1,517			(1,517	)		—
Ready Reserves		22			(19	)		(3	)

122     Semi-Annual Report June 30, 2012

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 2011 and 2010 was as follows (in thousands):

	Distributions Paid in 2011												Distributions Paid in 2010
	Return of Capital				Ordinary Income				Long-Term Capital Gains				Ordinary Income				Long-Term Capital Gains
Fund	Class N		Class I		Class N		Class I		Class N		Class I		Class N		Class I		Class N		Class I
Growth	$	—	$	—	$	—	$	329	$	5,882	$	10,199	$	—	$	13	$	—	$	—
Large Cap Growth		—		—		—		37		—		—		—		33		—		—
Small Cap Growth		—		—		—		—		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		2,378		8,679		—		—		—		—
Small-Mid Cap Growth		—		—		595		3,772		2,542		16,104		—		—		—		—
Global Growth		—		—		4		170		—		—		—		12		—		—
International Growth		—		—		—		6,046		—		—		50,883		50,550		—		—
International Equity		—		—		—		—		—		—		174		2,404		—		—
International Small Cap Growth		—		—		193		5,147		—		—		37		1,356		—		—
Emerging Markets Growth		—		—		—		466		2,577		18,690		269		1,881		—		—
Emerging Leaders Growth		—		12		—		581		3		1,287		229		26		427		78
Emerging Markets Small Cap Growth		—		—		—		—		—		—		N/A		N/A		N/A		N/A
Large Cap Value		—		—		3		4		—		—		N/A		N/A		N/A		N/A
Small Cap Value		60		273		6		483		1,471		6,717		31		238		27		108
Mid Cap Value		—		—		1		61		1		36		—		26		—		—
Small-Mid Cap Value		—		—		—		—		—		—		N/A		N/A		N/A		N/A
Bond		—		—		229		6,707		66		1,188		179		6,904		11		384
Income		—		—		1,377		2,800		—		—		1,559		3,575		—		—
Low Duration		—		—		152		2,098		—		—		101		1,816		—		—
Ready Reserves		—		—		125		—		—		—		126		—		—		—

As of December 31, 2011, the components of distributable earnings on a tax basis were as follows (in thousands):

Fund	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation (Depreciation)
Growth	$	—	$	(1,538	)	$	6,611	$	61,396
Large Cap Growth		—		(3,232	)		—		3,632
Small Cap Growth		—		(59,562	)		—		11,393
Mid Cap Growth		—		(1,452	)		2,025		9,944
Small-Mid Cap Growth		18		(2,331	)		5,099		14,779
Global Growth		—		(17,732	)		—		4,382
International Growth		30,132		(1,188,527	)		—		34,131
International Equity		1,407		(93,637	)		—		3,106
International Small Cap Growth		5,874		(59,252	)		—		(26,530	)
Emerging Markets Growth		—		(13,506	)		—		(36,194	)
Emerging Leaders Growth		—		(931	)		—		(4,292	)

June 30, 2012 William Blair Funds    123

Fund	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation (Depreciation)
Emerging Market Small Cap Growth	$	—	$	(69	)	$	—	$	(20	)
Large Cap Value		—		(4	)		—		(7	)
Small Cap Value		—		(3,660	)		—		6,584
Mid Cap Value		—		—			22		82
Small-Mid Cap Value		1		(3	)		—		94
Bond		2		(79	)		928		13,393
Income		—		(39,887	)		—		4,958
Low Duration		—		(2,561	)		—		259
Ready Reserves		108		(41	)		—		—

As of December 31, 2011, the Funds 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):

Fund	2012		2013		2014		2015		2016		2017		2018		Total
Large Cap Growth	$	—	$	—	$	—	$	—	$	—	$	2,854	$	—	$	2,854
Small Cap Growth		—		—		—		—		—		55,317		—		55,317
Global Growth		—		—		—		—		4,371		13,127		—		17,498
International Growth		—		—		—		—		—		1,142,899		—		1,142,899
International Equity		—		—		—		—		10,691		81,926		—		92,617
International Small Cap Growth		—		—		—		—		—		55,999		—		55,999
Income		4,102		3,398		4,138		9,190		14,460		4,577		—		39,865
Low Duration		—		—		—		—		—		—		955		955
Ready Reserves		20		—		—		2		—		—		—		22

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. Under the Act each Fund is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred in periods after enactment will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. Each Fund has the following carry forward capital losses without expiration as of December 31, 2011 (in thousands):

Fund	Short- Term		Long- Term
Emerging Markets Small Cap Growth	$	1	$	—
Low Duration		951		406
Ready Reserves		17		—

For the period from November 1, 2011 through December 31, 2011, the following Funds incurred realized ordinary loss and capital losses. Ordinary Loss includes losses from currency transactions and PFICs. Each Fund intends to treat these losses as having occurred on the first day of fiscal year 2012 for federal income tax purposes (in thousands):

Fund	Ordinary Loss		Short-Term Capital		Long-Term Capital
Growth	$	—	$	1,539	$	—
Large Cap Growth		—		378		—
Small Cap Growth		—		6,244		—
Mid Cap Growth		—		1,452		—
Small-Mid Cap Growth		—		2,331		—
Global Growth		3		229		—
International Growth		—		45,561		—
International Equity		25		985		—
International Small Cap Growth		537		2,491		—
Emerging Markets Growth		783		9,852		2,610
Emerging Leaders Growth		16		791		81
Emerging Markets Small Cap Growth		13		55		—
Large Cap Value		—		4		—
Small Cap Value		—		2,504		1,154
Mid Cap Value		—		—		—

124     Semi-Annual Report June 30, 2012

Fund	Ordinary Loss		Short-Term Capital		Long-Term Capital
Small-Mid Cap Value	$	—	$	4	$	—
Bond		—		78		—
Income		—		23		—
Low Duration		—		118		132
Ready Reserves		—		2		—

(h) Repurchase Agreements

In a repurchase agreement, a Fund 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 & Company, L.L.C. (“William Blair” or 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 Fund’s ability to dispose of the underlying securities. The risk to a Fund 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 Fund is entitled to sell the underlying collateral. The loss, if any, to a Fund 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 Fund 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 Fund enters into repurchase agreements to evaluate those risks. A Fund may, for tax purposes, 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) Indemnification

In the normal course of business, the Funds have entered into contracts in which the Funds agree to indemnify the other party or parties against various potential costs or liabilities. The Funds’ maximum exposure under these arrangements is unknown. No claim has been made for indemnification pursuant to any such agreement of the Funds.

(k) Fair Value Measurements

Fair value is defined as the price that a Fund 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 Fund’s investments. A three-tier hierarchy of inputs is used 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 (unadjusted) 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 Fund 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 Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

June 30, 2012 William Blair Funds    125

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.

Any transfers between Level 1 and Level 2 are disclosed, effective as of the beginning of the period, in the tables below with the reasons for the transfers disclosed in a note to the tables, if applicable.

As of June 30, 2012, the hierarchical input levels of securities in each Fund, segregated by security class, are as follows (in thousands):

Investments in securities	Growth		Large Cap Growth		Small Cap Growth		Mid Cap Growth		Small-Mid Cap Growth		Global Growth
Level 1—Quoted prices
Common Stocks		604,110		26,601		483,845		335,377		322,371		46,000
Exchange Traded Funds		—		—		18,245		—		—		—
Level 2—Other significant observable inputs
Short-Term Investments		8,272		467		12,551		19,372		13,237		683
Level 3—Significant unobservable inputs
None		—		—		—		—		—		—
Total investments in securities	$	612,382	$	27,068	$	514,641	$	354,749	$	335,608	$	46,683

Investments in securities	International Growth		International Equity			International Small Cap Growth		Emerging Markets Growth		Emerging Leaders Growth		Emerging Small Cap Growth
Level 1—Quoted prices
Common Stocks		3,207,286		65,307			621,984		904,808		43,755		6,438
Preferred Stocks		—		—			—		18,748		933		56
Level 2—Other significant observable inputs
Short-Term Investments		104,374		3,800			26,085		—		—		—
Level 3—Significant unobservable inputs
Common stock		695		—			—		—		—		—
Convertible bonds		751		—			251		419		—		—
Total investments in securities	$	3,313,106	$	69,107		$	648,320	$	923,975	$	44,688	$	6,494
Other financial instruments
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	19	$	(7	)		—		—		—		—

Investments in securities	Large Cap Value		Small Cap Value		Mid Cap Value		Small-Mid Cap Value
Level 1—Quoted prices
Common Stocks		3,165		236,071		4,781		2,219
Level 2—Other significant observable inputs
Short-Term Investments		—		4,569		271		—
Level 3—Significant unobservable inputs
None		—		—		—		—
Total investments in securities	$	3,165	$	240,640	$	5,052	$	2,219

126     Semi-Annual Report June 30, 2012

Investments in securities	Bond		Income		Low Duration		Ready Reserves
Level 1—Quoted Prices
None		—		—		—		—
Level 2—Other significant observable inputs
US Government and Agency Bonds		113,334		63,781		124,158		90,689
Corporate Bonds		142,281		58,255		20,067		90,848
Asset Backed Bonds		8,502		5,793		35,705		44,997
Commercial Paper		—		—		—		880,249
Short-Term Investments		3,157		4,056		5,406		184,456
Level 3—Significant unobservable inputs
Asset Backed Bonds		167		917		—		—
Total investments in securities	$	267,441	$	132,802	$	185,336	$	1,291,239

There were no transfers between Level 1 and Level 2 during the period.

Level 1 Common Stocks are exchange-traded securities with a quoted price. See Portfolio of Investments for Sector Classification.

The fair value estimates for the Level 3 securities in the International Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Funds 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 an adverse outcome in pending litigation. Level 3 securities represented 0.04%, 0.04%, 0.04%, 0.60% and 0.70% as a percentage of Net Assets in the Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Funds, respectively. The change in net unrealized gain (loss) related to those securities held at June 30, 2012 is included in the change in net unrealized appreciation (depreciation) of investments on the Statement of Operations. There were no transfers from or to Level 3 during the period.

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Fund has a management agreement with the Advisor for investment advisory, clerical, bookkeeping and administrative services. Each Fund 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 Funds			International Equity Funds
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	%
Large Cap Value	0.80	%	In excess of $15 billion	0.90	%
Small Cap Value	1.10	%	International Equity:
Mid Cap Value	0.95	%	First $250 million	1.10	%
Small-Mid Cap Value	1.00	%	In excess of $250 million	1.00	%
			International Small Cap Growth	1.00	%
Global Equity Fund			Emerging Markets Growth	1.10	%
Global Growth	1.00	%	Emerging Leaders Growth	1.10	%
			Emerging Markets Small Cap Growth	1.10	%
Fixed-Income Funds			Money Market Fund
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.

June 30, 2012 William Blair Funds    127

Some of the Funds 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 Fund for expenses in excess of the agreed upon rate. The amount the Advisor owes a Fund as of the reporting date is recorded as the Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Funds 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, 2013, if total expenses for each class of the following Funds exceed the following rates (as a percentage of average daily net assets):

	Class N						Class I
Fund	Effective May 1, 2012 through April 30, 2013			Effective May 1, 2011 through April 30, 2012			Effective May 1, 2012 through April 30, 2013			Effective May 1, 2011 through April 30, 2012
Large Cap Growth		1.20	%		1.20	%		0.95	%		0.95	%
Small Cap Growth		1.50	%		1.50	%		1.25	%		1.25	%
Mid Cap Growth		1.35	%		1.35	%		1.10	%		1.10	%
Small-Mid Cap Growth		1.35	%		1.35	%		1.10	%		1.10	%
Global Growth		1.50	%		1.50	%		1.25	%		1.25	%
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	%		1.65	%		1.40	%		1.40	%
Emerging Markets Small Cap Growth		1.65	%		1.65	%		1.40	%		1.40	%
Large Cap Value		1.20	%		1.20	%		0.95	%		0.95	%
Small Cap Value		1.45	%		1.40	%		1.20	%		1.15	%
Mid Cap Value		1.35	%		1.35	%		1.10	%		1.10	%
Small-Mid Cap Value		1.40	%		1.40	%		1.15	%		1.15	%
Bond		0.65	%		0.65	%		0.50	%		0.50	%
Income		0.85	%		0.85	%		0.70	%		0.70	%
Low Duration		0.70	%		0.70	%		0.55	%		0.55	%

For a period of three years subsequent to the commencement of operations, 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 June 30, 2012 was (in thousands):

Fund	Available for Recapture
Emerging Markets Small Cap Growth	$	109
Large Cap Value		61
Mid Cap Value		230
Small-Mid Cap Value		58
Low Duration		163

The Advisor has agreed to voluntarily waive fees and reimburse expenses incurred for the Ready Reserves Fund in order to maintain a minimum yield given the current interest rate environment.

For the period ended June 30, 2012, the fee waivers and/or reimbursements for each Fund were as follows (in thousands):

Fund	Fund Level Waiver		Class I Specific Waiver		Class N Specific Waiver		Total Waiver
Growth	$	—	$	—	$	—	$	—
Large Cap Growth		37		4		3		44
Small Cap Growth		—		285		110		395
Mid Cap Growth		—		—		5		5
Small-Mid Cap Growth		—		105		57		162
Global Growth		59		5		1		65
International Growth		—		—		38		38
International Equity		59		26		4		89

128     Semi-Annual Report June 30, 2012

Fund	Fund Level Waiver		Class I Specific Waiver		Class N Specific Waiver		Total Waiver
International Small Cap Growth	$	—	$	—	$	—	$	—
Emerging Markets Growth		—		—		—		—
Emerging Leaders Growth		105		—		1		106
Emerging Markets Small Cap Growth		61		—		—		61
Large Cap Value		32		—		—		32
Small Cap Value		111		36		18		165
Mid Cap Value		49		—		—		49
Small-Mid Cap Value		42		—		—		42
Bond		35		21		8		64
Income		—		—		—		—
Low Duration		9		—		1		10
Ready Reserves		3,085		—		—		3,085

(b) Underwriting, Distribution Services and Service Agreements

Each Fund, except the Ready Reserves Fund, has a Distribution Agreement with William Blair for distribution services to the Funds’ Class N shares. Each Fund pays William Blair 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 Funds except the Income, Bond and Low Duration Funds, which is 0.15%. Pursuant to the Distribution Agreement, William Blair enters into related selling group agreements with various firms at various rates for sales of the Funds’ Class N shares.

The Ready Reserves Fund has a Service Agreement with William Blair to provide shareholder services and automatic sweep services. The Fund pays William Blair 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, Emerging Markets Small Cap Growth, Bond and Low Duration Funds have a Shareholder Administration Agreement with William Blair to provide shareholder administration services. Class N and Class I shares of the Funds pay William Blair an annual fee, payable monthly, based upon 0.15% of average daily net assets attributable to each class, respectively. For the period ended June 30, 2012, the following fees were incurred (in thousands):

Fund	Class N		Class I		Total
Global Growth	$	3	$	32	$	35
International Small Cap Growth		12		276		288
Emerging Markets Growth		14		103		117
Emerging Leaders Growth		—		19		19
Emerging Markets Small Cap Growth		1		3		4
Bond		14		118		132
Low Duration		5		68		73

(4) Investment Transactions

Investment transactions, excluding money market instruments, repurchase agreements and demand notes for the period ended June 30, 2012, were as follows (in thousands):

Fund	Purchases		Sales
Growth	$	219,218	$	(219,681	)
Large Cap Growth		6,136		(7,352	)
Small Cap Growth		266,797		(366,457	)
Mid Cap Growth		276,047		(94,348	)
Small-Mid Cap Growth		198,606		(127,550	)
Global Growth		11,082		(10,698	)

June 30, 2012 William Blair Funds    129

Fund	Purchases		Sales
International Growth	$	1,393,408		(1,582,097	)
International Equity		32,039		(43,833	)
International Small Cap Growth		247,693		(373,436	)
Emerging Markets Growth		550,693		(481,027	)
Emerging Leaders Growth		27,931		(34,782	)
Emerging Markets Small Cap Growth		4,351		(1,448	)
Large Cap Value		969		(419	)
Small Cap Value		68,496		(71,384	)
Mid Cap Value		1,513		(1,449	)
Small-Mid Cap Value		602		(590	)
Bond		76,529		(41,620	)
Income		42,362		(24,987	)
Low Duration		65,849		(38,607	)

(5) Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth, Emerging Markets Small Cap Growth and Emerging Leaders Growth Funds 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 Funds 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 period ended June 30, 2012, the International Growth, International Equity, and International Small Cap Growth Funds engaged in forward foreign currency contracts with average notional volume (in thousands) of:

Fund	Average Notional Value
International Growth	$	336,828
International Equity		2,299
International Small Cap Growth		13,189

The following tables present the value of forward foreign currency contracts as of June 30, 2012 and their respective location on the Statement of Assets and Liabilities (values in thousands):

	Assets			Liabilities
Fund	Statement of Assets and Liabilities Location	Value		Statement of Assets and Liabilities Location	Value
International Growth	Unrealized appreciation on foreign forward currency contracts	$	19	Unrealized depreciation on foreign forward currency contracts	$	—
International Equity	Unrealized appreciation on foreign forward currency contracts	$	—	Unrealized depreciation on foreign forward currency contracts	$	7

The effect of forward contracts on the Statements of Operations for the period ended June 30, 2012 (values in thousands):

Realized gain (loss) recognized in foreign currency transactions
Fund	Value
International Growth	$	14,549
International Equity		49
International Small Cap Growth		1,901
Change in unrealized gain (loss) recognized in foreign currency translations
Fund	Value
International Growth	$	1,818
International Equity		(7	)
International Small Cap Growth		311

130     Semi-Annual Report June 30, 2012

The following table presents open forward foreign currency contracts as of June 30, 2012 (values in thousands):

International Growth
Counterparty	Short Contracts	Settlement Date		Local Currency		Current Value		Unrealized Gain/(Loss)
State Street Bank and Trust	Japanese Yen		9/20/2012		¥2,790,319	$	34,945	$	19
International Equity
Counterparty	Short Contracts	Settlement Date		Local Currency		Current Value		Unrealized Gain/(Loss)
Morgan Stanley and Company	Euro Currency		9/18/2012		€2,280	$	2,887	$	(7	)

(6) Fund Share Transactions

The following table summarizes the activity in capital shares of each Fund (in thousands):

	Sales (Dollars)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth	$	18,168	$	43,093	$	61,261	$	71,261	$	62,869	$	134,130
Large Cap Growth		532		1,612		2,144		—		3,239		4,139
Small Cap Growth		7,359		44,325		51,684		30,204		93,243		123,447
Mid Cap Growth		17,805		202,415		220,220		21,824		66,999		88,823
Small Mid-Cap Growth		16,487		79,484		95,971		14,552		70,787		85,339
Global Growth		1,303		1,002		2,305		475		3,263		3,738
International Growth		110,209		283,397		393,606		280,122		476,293		756,415
International Equity		76		2,084		2,160		693		26,139		26,832
International Small Cap Growth		1,112		36,980		38,092		5,220		163,897		169,117
Emerging Markets Growth		199		7,972		8,171		1,576		24,982		26,558
Emerging Leaders Growth		106		4,495		4,601		34		19,823		19,857
Emerging Markets Small Cap Growth (a)		1,468		1,858		3,326		1,040		2,322		3,362
Large Cap Value (a)		171		373		544		1,000		1,457		2,457
Small Cap Value		7,973		22,209		30,182		42,726		120,066		162,792
Mid Cap Value		—		275		275		81		1,617		1,698
Small-Mid Cap Value (b)		17		20		37		823		1,241		2,064
Bond		19,821		13,111		32,932		4,585		41,430		46,015
Income		23,479		14,609		38,088		25,156		8,899		34,055
Low Duration		4,821		36,048		40,869		2,975		56,988		59,963
Ready Reserves		363,966		—		363,966		838,997		—		838,997

	Reinvested Distributions (Dollars)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth	$	—	$	—	$	—	$	5,705	$	9,211	$	14,916
Large Cap Growth		—		—		—		—		32		32
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		2,354		8,544		10,898
Small Mid-Cap Growth		—		—		—		3,020		17,544		20,564
Global Growth		—		—		—		4		162		166
International Growth		—		—		—		—		5,030		5,030
International Equity		—		—		—		—		—		—
International Small Cap Growth		—		—		—		182		3,176		3,358
Emerging Markets Growth		—		—		—		2,055		13,471		15,526
Emerging Leaders Growth		—		—		—		3		1,336		1,339
Emerging Markets Small Cap Growth (a)		—		—		—		—		—		—
Large Cap Value (a)		—		—		—		3		4		7

June 30, 2012 William Blair Funds    131

	Reinvested Distributions (Dollars)
	Period Ended June 30, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Small Cap Value	$	—		$	—		$	—		$	1,502		$	6,573		$	8,075
Mid Cap Value		—			—			—			1			84			85
Small-Mid Cap Value (b)		—			—			—			—			—			—
Bond		363			2,545			2,908			219			5,706			5,925
Income		829			1,052			1,881			1,249			2,265			3,514
Low Duration		44			844			888			80			1,426			1,506
Ready Reserves		64			—			64			125			—			125
	Redemptions (Dollars)
	Period Ended June 30, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Growth	$	39,293		$	26,410		$	65,703		$	61,036		$	69,123		$	130,159
Large Cap Growth		481			2,641			3,122			4,715			5,839			10,554
Small Cap Growth		68,293			74,385			142,678			188,253			180,687			368,940
Mid Cap Growth		6,426			17,077			23,503			6,014			38,969			44,983
Small Mid-Cap Growth		5,460			15,203			20,663			7,153			28,620			35,773
Global Growth		440			1,731			2,171			1,725			2,783			4,508
International Growth		300,268			243,541			543,809			1,472,224			568,925			2,041,149
International Equity		951			11,617			12,568			6,340			111,492			117,832
International Small Cap Growth		6,357			89,463			95,820			5,634			95,320			100,954
Emerging Markets Growth		2,436			7,895			10,331			12,534			59,984			72,518
Emerging Leaders Growth		4			3,844			3,848			30			8,683			8,713
Emerging Markets Small Cap Growth (a)		255			—			255			—			—			—
Large Cap Value (a)		—			—			—			—			—			—
Small Cap Value		8,530			26,324			34,854			33,678			45,720			79,398
Mid Cap Value		5			82			87			24			474			498
Small-Mid Cap Value (b)		—			28			28			—			—			—
Bond		3,098			13,180			16,278			1,033			43,605			44,638
Income		12,622			8,711			21,333			17,730			22,266			39,996
Low Duration		2,808			16,888			19,696			3,689			63,525			67,214
Ready Reserves		343,187			—			343,187			783,918			—			783,918
	Net Change in Net Assets relating to Fund Share Activity (Dollars)
	Period Ended June 30, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Growth	$	(21,125	)	$	16,683		$	(4,442	)	$	15,930		$	2,957		$	18,887
Large Cap Growth		51			(1,029	)		(978	)		(3,815	)		(2,568	)		(6,383	)
Small Cap Growth		(60,934	)		(30,060	)		(90,994	)		(158,049	)		(87,444	)		(245,493	)
Mid Cap Growth		11,379			185,338			196,717			18,164			36,574			54,738
Small Mid-Cap Growth		11,027			64,281			75,308			10,419			59,711			70,130
Global Growth		863			(729	)		134			(1,246	)		642			(604	)
International Growth		(190,059	)		39,856			(150,203	)		(1,192,102	)		(87,602	)		(1,279,704	)
International Equity		(875	)		(9,533	)		(10,408	)		(5,647	)		(85,353	)		(91,000	)
International Small Cap Growth		(5,245	)		(52,483	)		(57,728	)		(232	)		71,753			71,521
Emerging Markets Growth		(2,237	)		77			(2,160	)		(8,903	)		(21,531	)		(30,434	)
Emerging Leaders Growth		102			651			753			7			12,476			12,483
Emerging Markets Small Cap Growth (a)		1,213			1,858			3,071			1,040			2,322			3,362

132     Semi-Annual Report June 30, 2012

	Net Change in Net Assets relating to Fund Share Activity  (Dollars)
	Period Ended June 30, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Large Cap Value (a)	$	171		$	373		$	544		$	1,003		$	1,461		$	2,464
Small Cap Value		(557	)		(4,115	)		(4,672	)		10,550			80,919			91,469
Mid Cap Value		(5	)		193			188			58			1,227			1,285
Small-Mid Cap Value (b)		17			(8	)		9			823			1,241			2,064
Bond		17,086			2,476			19,562			3,771			3,531			7,302
Income		11,686			6,950			18,636			8,675			(11,102	)		(2,427	)
Low Duration		2,057			20,004			22,061			(634	)		(5,111	)		(5,745	)
Ready Reserves		20,843			—			20,843			55,204			—			55,204

(a) For the period from October 24, 2011 (Commencement of Operations) to December 31, 2011.

(b) For the period from December 15, 2011 (Commencement of Operations) to December 31, 2011.

	Sales (Shares)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		1,538		3,497		5,035		6,242		5,321		11,563
Large Cap Growth		70		206		276		125		451		576
Small Cap Growth		332		1,954		2,286		1,396		4,242		5,638
Mid Cap Growth		1,413		15,876		17,289		1,734		5,091		6,825
Small Mid-Cap Growth		1,184		5,375		6,559		997		4,690		5,687
Global Growth		144		111		255		59		378		437
International Growth		5,467		13,544		19,011		13,859		22,239		36,098
International Equity		7		185		192		58		2,177		2,235
International Small Cap Growth		89		2,982		3,071		409		12,634		13,043
Emerging Markets Growth		15		639		654		110		1,744		1,854
Emerging Leaders Growth		14		552		566		3		2,073		2,076
Emerging Markets Small Cap Growth (a)		125		164		289		104		232		336
Large Cap Value (a)		16		34		50		100		145		245
Small Cap Value		620		1,683		2,303		3,200		8,897		12,097
Mid Cap Value		—		25		25		8		151		159
Small-Mid Cap Value (b)		2		2		4		82		124		206
Bond		1,798		1,203		3,001		421		3,871		4,292
Income		2,496		1,565		4,061		2,705		967		3,672
Low Duration		489		3,658		4,147		301		5,769		6,070
Ready Reserves		363,966		—		363,966		838,996		—		838,996

	Reinvested Distributions (Shares)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		—		—		—		552		854		1,406
Large Cap Growth		—		—		—		—		5		5
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		208		742		950
Small Mid-Cap Growth		—		—		—		239		1,356		1,595
Global Growth		—		—		—		—		21		21
International Growth		—		—		—		—		271		271
International Equity		—		—		—		—		—		—
International Small Cap Growth		—		—		—		17		286		303
Emerging Markets Growth		—		—		—		188		1,225		1,413
Emerging Leaders Growth		—		—		—		1		178		179
Emerging Markets Small Cap Growth (a)		—		—		—		—		—		—
Large Cap Value (a)		—		—		—		—		1		1
Small Cap Value		—		—		—		128		550		678
Mid Cap Value		—		—		—		—		8		8
Small-Mid Cap Value (b)		—		—		—		—		—		—
Bond		32		233		265		20		533		553

June 30, 2012 William Blair Funds    133

	Reinvested Distributions (Shares)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Income		88		113		201		135		246		381
Low Duration		4		86		90		8		145		153
Ready Reserves		64		—		64		125		—		125
	Redemptions (Shares)
	Period Ended June 30, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		3,308		2,157		5,465		5,345		5,968		11,313
Large Cap Growth		64		339		403		633		802		1,435
Small Cap Growth		3,056		3,302		6,358		8,432		7,958		16,390
Mid Cap Growth		523		1,322		1,845		465		2,990		3,455
Small Mid-Cap Growth		388		1,055		1,443		478		1,908		2,386
Global Growth		50		199		249		204		334		538
International Growth		14,911		11,854		26,765		68,547		27,431		95,978
International Equity		85		1,045		1,130		549		9,168		9,717
International Small Cap Growth		532		7,073		7,605		431		7,627		8,058
Emerging Markets Growth		197		647		844		911		4,152		5,063
Emerging Leaders Growth		1		474		475		3		1,006		1,009
Emerging Markets Small Cap Growth (a)		23		—		23		—		—		—
Large Cap Value (a)		—		—		—		—		—		—
Small Cap Value		655		2,001		2,656		2,509		3,505		6,014
Mid Cap Value		1		8		9		2		43		45
Small-Mid Cap Value (b)		—		3		3		—		—		—
Bond		281		1,208		1,489		95		4,083		4,178
Income		1,341		935		2,276		1,913		2,423		4,336
Low Duration		284		1,714		1,998		373		6,432		6,805
Ready Reserves		343,187		—		343,187		783,918		—		783,918

	Net Change in Shares Outstanding relating to Fund Share Activity  (Shares)
	Period Ended June 30, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Growth		(1,770	)		1,340			(430	)		1,449			207			1,656
Large Cap Growth		6			(133	)		(127	)		(508	)		(346	)		(854	)
Small Cap Growth		(2,724	)		(1,348	)		(4,072	)		(7,036	)		(3,716	)		(10,752	)
Mid Cap Growth		890			14,554			15,444			1,477			2,843			4,320
Small Mid-Cap Growth		796			4,320			5,116			758			4,138			4,896
Global Growth		94			(88	)		6			(145	)		65			(80	)
International Growth		(9,444	)		1,690			(7,754	)		(54,688	)		(4,921	)		(59,609	)
International Equity		(78	)		(860	)		(938	)		(491	)		(6,991	)		(7,482	)
International Small Cap Growth		(443	)		(4,091	)		(4,534	)		(5	)		5,293			5,288
Emerging Markets Growth		(182	)		(8	)		(190	)		(613	)		(1,183	)		(1,796	)
Emerging Leaders Growth		13			78			91			1			1,245			1,246
Emerging Markets Small Cap Growth (a)		102			164			266			104			232			336
Large Cap Value (a)		16			34			50			100			146			246
Small Cap Value		(35	)		(318	)		(353	)		819			5,942			6,761
Mid Cap Value		(1	)		17			16			6			116			122
Small-Mid Cap Value (b)		2			(1	)		1			82			124			206
Bond		1,549			228			1,777			346			321			667
Income		1,243			743			1,986			927			(1,210	)		(283	)
Low Duration		209			2,030			2,239			(64	)		(518	)		(582	)
Ready Reserves		20,843			—			20,843			55,203			—			55,203

(a) For the period from October 24, 2011 (Commencement of Operations) to December 31, 2011.

(b) For the period from December 15, 2011 (Commencement of Operations) to December 31, 2011.

134     Semi-Annual Report June 30, 2012

Financial Highlights

Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	10.73		$	11.28		$	9.89		$	7.12		$	11.70		$	11.42
Income (loss) from investment operations:
Net investment income (loss)		(0.04	)		(0.04	)		(0.01	)		(0.02	)		(0.05	)		(0.04	)
Net realized and unrealized gain (loss) on investments		1.00			(0.19	)		1.40			2.79			(4.35	)		1.53
Total from investment operations		0.96			(0.23	)		1.39			2.77			(4.40	)		1.49
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			0.32			—			—			0.18			1.21
Total distributions		—			0.32			—			—			0.18			1.21
Net asset value, end of year	$	11.69		$	10.73		$	11.28		$	9.89		$	7.12		$	11.70
Total Return (%)*		8.95			(1.93	)		14.05			38.90			(37.61	)		13.17
Ratios to average daily net assets (%):**
Expenses		1.19			1.21			1.16			1.23			1.17			1.22
Net investment income (loss)		(0.69	)		(0.37	)		(0.13	)		(0.20	)		(0.54	)		(0.35	)
Net assets at end of year (in thousands)	$	202,015		$	204,476		$	198,622		$	153,987		$	85,142		$	125,601
Portfolio turnover rate (%)*		36			59			66			67			60			72
	Class I
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	11.18		$	11.71		$	10.24		$	7.35		$	12.02		$	11.66
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		0.00	^		0.02			0.01			(0.02	)		0.00	^
Net realized and unrealized gain (loss) on investments		1.04			(0.20	)		1.45			2.88			(4.47	)		1.57
Total from investment operations		1.02			(0.20	)		1.47			2.89			(4.49	)		1.57
Less distributions from:
Net investment income		—			0.01			0.00	^		0.00	^		—			—
Net realized gain		—			0.32			—			—			0.18			1.21
Total distributions		—			0.33			0.00	^		0.00	^		0.18			1.21
Net asset value, end of year	$	12.20		$	11.18		$	11.71		$	10.24		$	7.35		$	12.02
Total Return (%)*		9.12			(1.60	)		14.36			39.34			(37.35	)		13.59
Ratios to average daily net assets (%):**
Expenses		0.87			0.86			0.84			0.89			0.85			0.87
Net investment income (loss)		(0.37	)		(0.03	)		0.20			0.14			(0.22	)		0.00
Net assets at end of year (in thousands)	$	411,548		$	362,266		$	376,991		$	265,533		$	153,444		$	244,043
Portfolio turnover rate (%)*		36			59			66			67			60			72

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    135

Financial Highlights

Large Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	6.88		$	7.14		$	6.16		$	4.68		$	7.52		$	6.88
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.01	)		(0.00	)^		(0.01	)		(0.02	)		(0.01	)
Net realized and unrealized gain (loss) on investments		0.84			(0.25	)		0.98			1.49			(2.82	)		0.65
Total from investment operations		0.83			(0.26	)		0.98			1.48			(2.84	)		0.64
Less distributions from:
Net investment income		—			—			—			—			0.00	^		—
Net realized gain		—			—			—			—			—			—
Total distributions		—			—			—			—			0.00	^		—
Net asset value, end of year	$	7.71		$	6.88		$	7.14		$	6.16		$	4.68		$	7.52
Total Return (%)*		12.06			(3.64	)		15.91			31.62			(37.76	)		9.30
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.20			1.20			1.21			1.23			1.23			1.23
Expenses, before waivers and reimbursements		1.60			1.51			1.53			2.28			1.85			1.50
Net investment income (loss), net of waivers and reimbursements		(0.30	)		(0.13	)		(0.08	)		(0.13	)		(0.29	)		(0.16	)
Net investment income (loss), before waivers and reimbursements		(0.70	)		(0.44	)		(0.40	)		(1.18	)		(0.91	)		(0.43	)
Net assets at end of year (in thousands)	$	3,840		$	3,387		$	7,135		$	5,952		$	4,842		$	7,307
Portfolio turnover rate (%)*		23			67			54			88			85			60
	Class I
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	7.03		$	7.30		$	6.30		$	4.77		$	7.64		$	6.99
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.01			0.01			0.01			0.00	^		0.01
Net realized and unrealized gain (loss) on investments		0.87			(0.27	)		1.00			1.52			(2.87	)		0.64
Total from investment operations		0.87			(0.26	)		1.01			1.53			(2.87	)		0.65
Less distributions from:
Net investment income		—			0.01			0.01			0.00	^		0.00	^		0.00	^
Net realized gain		—			—			—			—			—			—
Total distributions		—			0.01			0.01			0.00	^		0.00	^		0.00	^
Net asset value, end of year	$	7.90		$	7.03		$	7.30		$	6.30		$	4.77		$	7.64
Total Return (%)*		12.38			(3.54	)		16.03			32.17			(37.56	)		9.36
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.95			0.95			0.96			0.98			0.98			0.98
Expenses, before waivers and reimbursements		1.26			1.16			1.16			1.26			1.21			1.20
Net investment income (loss), net of waivers and reimbursements		(0.05	)		0.11			0.16			0.12			(0.04	)		0.18
Net investment income (loss), before waivers and reimbursements		(0.36	)		(0.10	)		(0.04	)		(0.16	)		(0.27	)		(0.04	)
Net assets at end of year (in thousands)	$	23,159		$	21,562		$	24,900		$	24,359		$	18,437		$	26,360
Portfolio turnover rate (%)*		23			67			54			88			85			60

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

136     Semi-Annual Report June 30, 2012

Financial Highlights

Small Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	20.13		$	23.22		$	19.99		$	11.79		$	23.30		$	25.41
Income (loss) from investment operations:
Net investment income (loss)		(0.13	)		(0.28	)		(0.21	)		(0.15	)		(0.19	)		(0.33	)
Net realized and unrealized gain (loss) on investments		1.98			(2.81	)		3.44			8.35			(10.73	)		(0.25	)
Total from investment operations		1.85			(3.09	)		3.23			8.20			(10.92	)		(0.58	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			0.59			1.53
Total distributions		—			—			—			—			0.59			1.53
Net asset value, end of year	$	21.98		$	20.13		$	23.22		$	19.99		$	11.79		$	23.30
Total Return (%) *		9.19			(13.31	)		16.16			69.55			(46.85	)		(2.15	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.50			1.50			1.50			1.50			1.50			1.49
Expenses, before waivers and reimbursements		1.61			1.59			1.52			1.55			1.50			1.49
Net investment income (loss), net of waivers and reimbursements		(1.16	)		(1.25	)		(1.03	)		(0.93	)		(1.05	)		(1.24	)
Net investment income (loss), before waivers and reimbursements		(1.27	)		(1.34	)		(1.05	)		(0.98	)		(1.05	)		(1.24	)
Net assets at end of year (in thousands)	$	161,021		$	202,341		$	396,767		$	469,746		$	224,612		$	540,137
Portfolio turnover rate (%)*		49			97			117			122			135			97
	Class I
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	20.91		$	24.07		$	20.64		$	12.14		$	23.89		$	25.94
Income (loss) from investment operations:
Net investment income (loss)		(0.10	)		(0.23	)		(0.16	)		(0.11	)		(0.14	)		(0.25	)
Net realized and unrealized gain (loss) on investments		2.05			(2.93	)		3.59			8.61			(11.02	)		(0.27	)
Total from investment operations		1.95			(3.16	)		3.43			8.50			(11.16	)		(0.52	)
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			—			—			0.59			1.53
Total distributions		—			—			—			—			0.59			1.53
Net asset value, end of year	$	22.86		$	20.91		$	24.07		$	20.64		$	12.14		$	23.89
Total Return (%) *		9.33			(13.13	)		16.62			70.02			(46.70	)		(1.88	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.25			1.25			1.25			1.20			1.20			1.20
Expenses, before waivers and reimbursements		1.41			1.35			1.25			1.20			1.20			1.20
Net investment income (loss), net of waivers and reimbursements		(0.90	)		(1.00	)		(0.76	)		(0.63	)		(0.75	)		(0.94	)
Net investment income (loss), before waivers and reimbursements		(1.06	)		(1.10	)		(0.76	)		(0.63	)		(0.75	)		(0.94	)
Net assets at end of year (in thousands)	$	354,415		$	352,397		$	494,822		$	293,052		$	177,015		$	554,282
Portfolio turnover rate (%)*		49			97			117			122			135			97

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    137

Financial Highlights

Mid Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	11.66		$	12.50		$	10.08		$	7.41		$	11.35		$	10.46
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.08	)		(0.05	)		(0.04	)		(0.07	)		(0.07	)
Net realized and unrealized gain (loss) on investments		0.85			0.25			2.47			2.71			(3.87	)		1.59
Total from investment operations		0.82			0.17			2.42			2.67			(3.94	)		1.52
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.01			—			—			0.00	^		0.63
Total distributions		—			1.01			—			—			0.00	^		0.63
Net asset value, end of year	$	12.48		$	11.66		$	12.50		$	10.08		$	7.41		$	11.35
Total Return (%)*		7.03			1.65			24.01			36.03			(34.71	)		14.62
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.35			1.35			1.35			1.36			1.36			1.38
Expenses, before waivers and reimbursements		1.37			1.43			1.42			2.13			2.03			1.67
Net investment income (loss), net of waivers and reimbursements		(0.51	)		(0.65	)		(0.42	)		(0.51	)		(0.76	)		(0.58	)
Net investment income (loss), before waivers and reimbursements		(0.53	)		(0.73	)		(0.49	)		(1.28	)		(1.43	)		(0.87	)
Net assets at end of year (in thousands)	$	43,311		$	30,093		$	13,802		$	10,379		$	4,803		$	7,272
Portfolio turnover rate (%)*		35			70			73			87			76			66
	Class I
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	11.87		$	12.68		$	10.20		$	7.48		$	11.42		$	10.49
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.05	)		(0.02	)		(0.02	)		(0.05	)		(0.04	)
Net realized and unrealized gain (loss) on investments		0.87			0.25			2.50			2.74			(3.89	)		1.60
Total from investment operations		0.86			0.20			2.48			2.72			(3.94	)		1.56
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.01			—			—			0.00	^		0.63
Total distributions		—			1.01			—			—			0.00	^		0.63
Net asset value, end of year	$	12.73		$	11.87		$	12.68		$	10.20		$	7.48		$	11.42
Total Return (%)*		7.25			1.86			24.31			36.36			(34.50	)		14.95
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.05			1.10			1.10			1.11			1.11			1.12
Expenses, before waivers and reimbursements		1.05			1.13			1.15			1.28			1.23			1.37
Net investment income (loss), net of waivers and reimbursements		(0.19	)		(0.42	)		(0.14	)		(0.26	)		(0.51	)		(0.32	)
Net investment income (loss), before waivers and reimbursements		(0.19	)		(0.45	)		(0.19	)		(0.43	)		(0.63	)		(0.57	)
Net assets at end of year (in thousands)	$	309,256		$	115,661		$	87,446		$	60,455		$	35,723		$	38,121
Portfolio turnover rate (%)*		35			70			73			87			76			66

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

138     Semi-Annual Report June 30, 2012

Financial Highlights

Small-Mid Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	13.00		$	14.40		$	11.73		$	8.16		$	13.10		$	12.96
Income (loss) from investment operations:
Net investment income (loss)		(0.04	)		(0.11	)		(0.09	)		(0.06	)		(0.03	)		(0.12	)
Net realized and unrealized gain (loss) on investments		0.69			0.03			2.76			3.63			(4.91	)		1.71
Total from investment operations		0.65			(0.08	)		2.67			3.57			(4.94	)		1.59
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			1.32			—			—			0.00	^		1.45
Total distributions		—			1.32			—			—			0.00	^		1.45
Net asset value, end of year	$	13.65		$	13.00		$	14.40		$	11.73		$	8.16		$	13.10
Total Return (%)*		5.00			(0.27	)		22.76			43.75			(37.71	)		12.34
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.35			1.35			1.35			1.36			1.36			1.36
Expenses, before waivers and reimbursements		1.60			1.46			1.46			1.49			1.41			1.42
Net investment income (loss), net of waivers and reimbursements		(0.64	)		(0.77	)		(0.76	)		(0.60	)		(0.26	)		(0.79	)
Net investment income (loss), before waivers and reimbursements		(0.89	)		(0.88	)		(0.87	)		(0.73	)		(0.31	)		(0.85	)
Net assets at end of year (in thousands)	$	46,690		$	34,123		$	26,876		$	23,576		$	7,954		$	17,074
Portfolio turnover rate (%)*		42			76			93			112			77			80
	Class I
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008			2007
Net asset value, beginning of year	$	13.32		$	14.68		$	11.93		$	8.27		$	13.24		$	13.06
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.08	)		(0.06	)		(0.03	)		0.00	^		(0.08	)
Net realized and unrealized gain (loss) on investments		0.71			0.04			2.81			3.69			(4.97	)		1.71
Total from investment operations		0.68			(0.04	)		2.75			3.66			(4.97	)		1.63
Less distributions from:
Net investment income		—			—			—			0.00	^		—			—
Net realized gain		—			1.32			—			—			0.00	^		1.45
Total distributions		—			1.32			—			0.00	^		0.00	^		1.45
Net asset value, end of year	$	14.00		$	13.32		$	14.68		$	11.93		$	8.27		$	13.24
Total Return (%)*		5.11			0.01			23.05			44.26			(37.54	)		12.54
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.10			1.10			1.10			1.11			1.11			1.11
Expenses, before waivers and reimbursements		1.18			1.12			1.11			1.18			1.17			1.17
Net investment income (loss), net of waivers and reimbursements		(0.39	)		(0.54	)		(0.50	)		(0.33	)		0.03			(0.54	)
Net investment income (loss), before waivers and reimbursements		(0.47	)		(0.56	)		(0.51	)		(0.40	)		(0.03	)		(0.60	)
Net assets at end of year (in thousands)	$	291,105		$	219,474		$	181,189		$	123,252		$	75,525		$	107,427
Portfolio turnover rate (%)*		42			76			93			112			77			80

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    139

Financial Highlights

Global Growth Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010			2009			2008			2007(a)
Net asset value, beginning of year	$	8.10	$	8.40		$	6.97		$	4.96		$	9.89		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.03		0.02			(0.01	)		(0.01	)		0.08			0.00	^
Net realized and unrealized gain (loss) on investments		0.67		(0.31	)		1.44			2.02			(4.98	)		(0.11	)
Total from investment operations		0.70		(0.29	)		1.43			2.01			(4.90	)		(0.11	)
Less distributions from:
Net investment income		—		0.01			—			—			0.03			0.00	^
Net realized gain		—		—			—			—			—			—
Total distributions		—		0.01			—			—			0.03			0.00	^
Net asset value, end of year	$	8.80	$	8.10		$	8.40		$	6.97		$	4.96		$	9.89
Total Return (%) *		8.64		(3.47	)		20.52			40.52			(49.52	)		(1.10	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.50		1.50			1.52			1.55			1.55			1.55
Expenses, before waivers and reimbursements		1.79		1.82			1.93			2.61			2.17			2.14
Net investment income (loss), net of waivers and reimbursements		0.63		0.29			(0.09	)		(0.17	)		0.98			(0.08	)
Net investment income (loss), before waivers and reimbursements		0.34		(0.03	)		(0.50	)		(1.23	)		0.36			(0.67	)
Net assets at end of year (in thousands)	$	4,892	$	3,740		$	5,101		$	4,721		$	3,652		$	9,089
Portfolio turnover rate (%)*		23		75			96			133			124			63

	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010			2009			2008			2007(a)
Net asset value, beginning of year	$	8.09	$	8.40		$	6.96		$	4.94		$	9.91		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.04		0.04			0.01			0.00	^		0.08			0.00	^
Net realized and unrealized gain (loss) on investments		0.67		(0.31	)		1.43			2.02			(4.98	)		(0.09	)
Total from investment operations		0.71		(0.27	)		1.44			2.02			(4.90	)		(0.09	)
Less distributions from:
Net investment income		—		0.04			0.00	^		0.00	^		0.07			0.00	^
Net realized gain		—		—			—			—			—			—
Total distributions		—		0.04			0.00	^		0.00	^		0.07			0.00	^
Net asset value, end of year	$	8.80	$	8.09		$	8.40		$	6.96		$	4.94		$	9.91
Total Return (%) *		8.78		(3.26	)		20.73			40.90			(49.41	)		(0.85	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.25		1.25			1.27			1.30			1.30			1.30
Expenses, before waivers and reimbursements		1.52		1.55			1.62			1.62			1.74			1.89
Net investment income (loss), net of waivers and reimbursements		0.87		0.52			0.16			0.05			1.05			0.14
Net investment income (loss), before waivers and reimbursements		0.60		0.22			(0.19	)		(0.27	)		0.61			(0.45	)
Net assets at end of year (in thousands)	$	41,481	$	38,834		$	39,776		$	33,566		$	24,353		$	36,487
Portfolio turnover rate (%)*		23		75			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 $0.00 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

140     Semi-Annual Report June 30, 2012

Financial Highlights

International Growth Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	18.68	$	21.85		$	18.55	$	13.12	$	29.12		$	27.70
Income (loss) from investment operations:
Net investment income (loss) (a)		0.19		0.26			0.14		0.07		0.29			0.12
Net realized and unrealized gain (loss) on investments		1.24		(3.43	)		3.58		5.47		(15.54	)		4.77
Total from investment operations		1.43		(3.17	)		3.72		5.54		(15.25	)		4.89
Less distributions from:
Net investment income		—		—			0.42		0.11		—			0.34
Net realized gain		—		—			—		—		0.75			3.13
Total distributions		—		—			0.42		0.11		0.75			3.47
Net asset value, end of year	$	20.11	$	18.68		$	21.85	$	18.55	$	13.12		$	29.12
Total Return (%) *		7.66		(14.51	)		20.09		42.27		(52.33	)		18.13
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.45		1.45			1.43		1.45		1.39			1.40
Expenses, before waivers and reimbursements		1.45		1.46			1.43		1.46		1.39			1.40
Net investment income (loss), net of waivers and reimbursements		1.91		1.22			0.73		0.48		1.29			0.38
Net investment income (loss), before waivers and reimbursements		1.91		1.21			0.73		0.47		1.29			0.38
Net assets at end of year (in thousands)	$	1,185,288	$	1,277,534		$	2,689,417	$	2,539,596	$	1,980,750		$	5,161,753
Portfolio turnover rate (%)*		42		103			99		121		91			56
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	19.10	$	22.34		$	18.95	$	13.40	$	29.61		$	28.10
Income (loss) from investment operations:
Net investment income (loss) (a)		0.23		0.30			0.20		0.12		0.37			0.21
Net realized and unrealized gain (loss) on investments		1.26		(3.48	)		3.67		5.59		(15.83	)		4.86
Total from investment operations		1.49		(3.18	)		3.87		5.71		(15.46	)		5.07
Less distributions from:
Net investment income		—		0.06			0.48		0.16		—			0.43
Net realized gain		—		—			—		—		0.75			3.13
Total distributions		—		0.06			0.48		0.16		0.75			3.56
Net asset value, end of year	$	20.59	$	19.10		$	22.34	$	18.95	$	13.40		$	29.61
Total Return (%) *		7.80		(14.23	)		20.47		42.63		(52.17	)		18.53
Ratios to average daily net assets (%): **
Expenses		1.16		1.15			1.14		1.17		1.08			1.09
Net investment income (loss)		2.25		1.40			0.99		0.74		1.58			0.69
Net assets at end of year (in thousands)	$	2,138,367	$	1,951,368		$	2,392,762	$	1,933,812	$	1,150,188		$	2,886,901
Portfolio turnover rate (%)*		42		103			99		121		91			56

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    141

Financial Highlights

International Equity Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	10.56	$	12.12		$	11.07	$	8.35	$	16.53		$	15.21
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08		0.13			0.06		0.09		0.10			0.09
Net realized and unrealized gain (loss) on investments		0.40		(1.69	)		1.15		2.64		(8.16	)		2.55
Total from investment operations		0.48		(1.56	)		1.21		2.73		(8.06	)		2.64
Less distributions from:
Net investment income		—		—			0.16		0.01		—			0.14
Net realized gain		—		—			—		—		0.12			1.18
Total distributions		—		—			0.16		0.01		0.12			1.32
Net asset value, end of year	$	11.04	$	10.56		$	12.12	$	11.07	$	8.35		$	16.53
Total Return (%) *		4.55		(12.87	)		10.92		32.69		(48.75	)		17.68
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.45		1.45			1.45		1.45		1.45			1.45
Expenses, before waivers and reimbursements		1.74		1.60			1.66		1.59		1.45			1.47
Net investment income (loss), net of waivers and reimbursements		1.43		1.09			0.55		1.03		0.80			0.52
Net investment income (loss, before waivers and reimbursements)		1.14		0.94			0.34		0.89		0.80			0.50
Net assets at end of year (in thousands)	$	6,228	$	6,773		$	13,733	$	15,436	$	42,824		$	60,058
Portfolio turnover rate (%)*		46		99			71		88		92			70
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	10.67	$	12.22		$	11.16	$	8.44	$	16.66		$	15.31
Income (loss) from investment operations:
Net investment income (loss) (a)		0.09		0.17			0.10		0.08		0.15			0.13
Net realized and unrealized gain (loss) on investments		0.41		(1.72	)		1.15		2.70		(8.25	)		2.57
Total from investment operations		0.50		(1.55	)		1.25		2.78		(8.10	)		2.70
Less distributions from:
Net investment income		—		—			0.19		0.06		—			0.17
Net realized gain		—		—			—		—		0.12			1.18
Total distributions		—		—			0.19		0.06		0.12			1.35
Net asset value, end of year	$	11.17	$	10.67		$	12.22	$	11.16	$	8.44		$	16.66
Total Return (%) *		4.69		(12.68	)		11.19		32.93		(48.61	)		17.97
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.20		1.20			1.20		1.20		1.20			1.20
Expenses, before waivers and reimbursements		1.45		1.33			1.28		1.39		1.22			1.25
Net investment income (loss), net of waivers and reimbursements		1.67		1.43			0.88		0.86		1.12			0.76
Net investment income (loss), before waivers and reimbursements		1.42		1.30			0.80		0.67		1.10			0.71
Net assets at end of year (in thousands)	$	62,535	$	68,884		$	164,322	$	282,732	$	185,662		$	348,551
Portfolio turnover rate (%)*		46		99			71		88		92			70

(a) Excludes $0.00, $0.04, $0.00, $0.00, and $(0.07) of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

142     Semi-Annual Report June 30, 2012

Financial Highlights

International Small Cap Growth Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009			2008			2007
Net asset value, beginning of year	$	11.36	$	13.07		$	10.40	$	6.62		$	13.98		$	13.37
Income (loss) from investment operations:
Net investment income (loss) (a)		0.06		0.07			0.03		(0.01	)		(0.02	)		(0.02	)
Net realized and unrealized gain (loss) on investments		0.64		(1.66	)		2.66		3.79			(7.22	)		1.72
Total from investment operations		0.70		(1.59	)		2.69		3.78			(7.24	)		1.70
Less distributions from:
Net investment income		—		0.12			0.02		—			—			0.05
Net realized gain		—		—			—		—			0.12			1.04
Total distributions		—		0.12			0.02		—			0.12			1.09
Net asset value, end of year	$	12.06	$	11.36		$	13.07	$	10.40		$	6.62		$	13.98
Total Return (%) *		6.16		(12.16	)		25.88		57.10			(51.82	)		13.06
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.63		1.64			1.55		1.65			1.65			1.60
Expenses, before waivers and reimbursements		1.63		1.64			1.55		1.83			1.62			1.60
Net investment income (loss), net of waivers and reimbursements		0.95		0.55			0.30		(0.16	)		(0.20	)		(0.16	)
Net investment income (loss), before waivers and reimbursements		0.95		0.55			0.30		(0.34	)		(0.17	)		(0.16	)
Net assets at end of year (in thousands)	$	14,814	$	18,991		$	21,916	$	14,854		$	11,363		$	21,905
Portfolio turnover rate (%)*		36		85			85		136			78			88
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009			2008			2007
Net asset value, beginning of year	$	11.46	$	13.19		$	10.49	$	6.67		$	14.01		$	13.41
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08		0.12			0.07		0.01			0.01			0.03
Net realized and unrealized gain (loss) on investments		0.64		(1.69	)		2.68		3.83			(7.23	)		1.71
Total from investment operations		0.72		(1.57	)		2.75		3.84			(7.22	)		1.74
Less distributions from:
Net investment income		—		0.16			0.05		0.02			—			0.10
Net realized gain		—		—			—		—			0.12			1.04
Total distributions		—		0.16			0.05		0.02			0.12			1.14
Net asset value, end of year	$	12.18	$	11.46		$	13.19	$	10.49		$	6.67		$	14.01
Total Return (%) *		6.28		(11.84	)		26.24		57.51			(51.56	)		13.34
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.29		1.28			1.25		1.31			1.31			1.29
Expenses, before waivers and reimbursements		1.29		1.28			1.25		1.31			1.28			1.29
Net investment income (loss), net of waivers and reimbursements		1.29		0.92			0.61		0.11			0.11			0.18
Net investment income (loss), before waivers and reimbursements		1.29		0.92			0.61		0.11			0.14			0.18
Net assets at end of year (in thousands)	$	337,714	$	364,574		$	349,679	$	210,561		$	89,452		$	148,839
Portfolio turnover rate (%)*		36		85			85		136			78			88

(a) Excludes $0.00, $0.15, $0.01, $(0.02), and $0.05 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    143

Financial Highlights

Emerging Markets Growth Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010			2009			2008			2007
Net asset value, beginning of year	$	11.16	$	15.76		$	12.87		$	7.46		$	21.92		$	19.42
Income (loss) from investment operations:
Net investment income (loss) (a)		0.06		0.07			(0.01	)		0.00	^		0.11			(0.10	)
Net realized and unrealized gain (loss) on investments		0.73		(2.84	)		3.02			5.51			(13.63	)		7.23
Total from investment operations		0.79		(2.77	)		3.01			5.51			(13.52	)		7.13
Less distributions from:
Net investment income		—		—			0.12			0.10			—			0.09
Net realized gain		—		1.83			—			—			0.94			4.54
Total distributions		—		1.83			0.12		��	0.10			0.94			4.63
Net asset value, end of year	$	11.95	$	11.16		$	15.76		$	12.87		$	7.46		$	21.92
Total Return (%) *		7.08		(17.29	)		23.44			73.85			(61.71	)		37.75
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.69		1.68			1.63			1.70			1.67			1.65
Expenses, before waivers and reimbursements		1.69		1.68			1.63			1.81			1.65			1.69
Net investment income (loss), net of waivers and reimbursements		0.98		0.48			(0.05	)		0.04			0.65			(0.45	)
Net investment income (loss), before waivers and reimbursements		0.98		0.48			(0.05	)		(0.07	)		0.67			(0.49	)
Net assets at end of year (in thousands)	$	16,542	$	17,474		$	34,324		$	27,271		$	16,486		$	76,413
Portfolio turnover rate (%)*		50		104			121			113			118			100
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010			2009			2008			2007
Net asset value, beginning of year	$	11.25	$	15.87		$	12.95		$	7.51		$	21.99		$	19.47
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08		0.11			0.04			0.03			0.15			(0.04	)
Net realized and unrealized gain (loss) on investments		0.74		(2.85	)		3.03			5.54			(13.69	)		7.26
Total from investment operations		0.82		(2.74	)		3.07			5.57			(13.54	)		7.22
Less distributions from:
Net investment income		—		0.05			0.15			0.13			—			0.16
Net realized gain		—		1.83			—			—			0.94			4.54
Total distributions		—		1.88			0.15			0.13			0.94			4.70
Net asset value, end of year	$	12.07	$	11.25		$	15.87		$	12.95		$	7.51		$	21.99
Total Return (%) *		7.29		(17.00	)		23.77			74.18			(61.60	)		38.13
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.39		1.38			1.36			1.41			1.41			1.40
Expenses, before waivers and reimbursements		1.39		1.38			1.36			1.41			1.39			1.40
Net investment income (loss), net of waivers and reimbursements		1.31		0.77			0.26			0.31			0.91			(0.20	)
Net investment income (loss), before waivers and reimbursements		1.31		0.77			0.26			0.31			0.93			(0.20	)
Net assets at end of year (in thousands)	$	133,655	$	124,739		$	194,763		$	180,329		$	69,363		$	280,370
Portfolio turnover rate (%)*		50		104			121			113			118			100

(a) Excludes $0.00, $0.11, $0.15, $(0.09), and $0.21 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

144     Semi-Annual Report June 30, 2012

Financial Highlights

Emerging Leaders Growth Fund

	Class N
	Period Ended June 30,		Periods Ended December 31,
	2012		2011			2010(a)
Net asset value, beginning of period	$	7.68	$	10.34		$	8.80
Income (loss) from investment operations:
Net investment income (loss) (c)		0.04		0.04			(0.02	)
Net realized and unrealized gain (loss) on investments		0.49		(2.08	)		1.64
Total from investment operations		0.53		(2.04	)		1.62
Less distributions from:
Net investment income		—		—			0.02
Net realized gain		—		0.62			0.06
Total distributions		—		0.62			0.08
Net asset value, end of period	$	8.21	$	7.68		$	10.34
Total Return (%)*		6.90		(19.55	)		18.43
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.65		1.65			1.65
Expenses, before waivers and reimbursements		2.10		1.83			1.71
Net investment income (loss), net of waivers and reimbursements		1.02		0.44			(0.38	)
Net investment income (loss), before waivers and reimbursements		0.57		0.26			(0.44	)
Net assets at end of year (in thousands)	$	154	$	46		$	53
Portfolio turnover rate (%)*		52		142			176

	Class I
	Period Ended June 30,		Periods Ended December 31,
	2012		2011			2010		2009		2008(b)
Net asset value, beginning of period	$	7.66	$	10.35		$	8.43	$	4.79	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (c)		0.06		0.06			0.02		0.02		0.04
Net realized and unrealized gain (loss) on investments		0.47		(2.08	)		1.98		3.73		(5.25	)
Total from investment operations		0.53		(2.02	)		2.00		3.75		(5.21	)
Less distributions from:
Net investment income		—		0.05			0.02		0.11		0.00	^
Net realized gain		—		0.62			0.06		—		—
Return of capital		—		0.00	^		—		—		—
Total distributions		—		0.67			0.08		0.11		0.00^
Net asset value, end of period	$	8.19	$	7.66		$	10.35	$	8.43	$	4.79
Total Return (%)*		6.92		(19.34	)		23.70		78.38		(52.09	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40		1.40			1.40		1.40		1.40
Expenses, before waivers and reimbursements		1.78		1.58			1.52		1.54		1.56
Net investment income (loss), net of waivers and reimbursements		1.36		0.69			0.25		0.37		0.70
Net investment income (loss), before waivers and reimbursements		0.98		0.51			0.13		0.23		0.54
Net assets at end of year (in thousands)	$	23,769	$	21,610		$	16,332	$	8,823	$	2,914
Portfolio turnover rate (%)*		52		142			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 $0.00, $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 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    145

Financial Highlights

Emerging Markets Small Cap Growth Fund

	Class N
	Period Ended June 30,			Period Ended December 31,
	2012			2011(a)
Net asset value, beginning of period	$	9.73		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.08			0.00	^
Net realized and unrealized gain (loss) on investments		1.31			(0.27	)
Total from investment operations		1.39			(0.27	)
Less distributions from:
Net investment income		—			—
Net realized gain		—			—
Total distributions		—			—
Net asset value, end of period	$	11.12		$	9.73
Total Return (%)*		14.29			(2.70	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.65			1.65
Expenses, before waivers and reimbursements		3.92			9.53
Net investment income (loss), net of waivers and reimbursements		1.47			0.08
Net investment income (loss), before waivers and reimbursements		(0.80	)		(7.80	)
Net assets at end of year (in thousands)	$	2,293		$	1,012
Portfolio turnover rate (%)*		27			17
	Class I
	Period Ended June 30,			Period Ended December 31,
	2012			2011(a)
Net asset value, beginning of period	$	9.73		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.08			0.01
Net realized and unrealized gain (loss) on investments		1.33			(0.28	)
Total from investment operations		1.41			(0.27	)
Less distributions from:
Net investment income		—			—
Net realized gain		—			—
Total distributions		—			—
Net asset value, end of period	$	11.14		$	9.73
Total Return (%)*		14.49			(2.70	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40			1.40
Expenses, before waivers and reimbursements		3.65			9.28
Net investment income (loss), net of waivers and reimbursements		1.49			0.33
Net investment income (loss), before waivers and reimbursements		(0.76	)		(7.55	)
Net assets at end of year (in thousands)	$	4,408		$	2,260
Portfolio turnover rate (%)*		27			17

(a) For the period October 24, 2011 (Commencement of Operations) to December 31, 2011.

(b) Excludes $0.00, of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the year 2011

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

146     Semi-Annual Report June 30, 2012

Financial Highlights

Large Cap Value Fund

	Class N
	Period Ended June 30,			Period Ended December 31,
	2012			2011(a)
Net asset value, beginning of period	$	9.95		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.05			0.03
Net realized and unrealized gain (loss) on investments		0.86			(0.05	)
Total from investment operations		0.91			(0.02	)
Less distributions from:
Net investment income		—			0.03
Net realized gain		—			0.00	^
Total distributions		—			0.03
Net asset value, end of period	$	10.86		$	9.95
Total Return (%)*		9.15			(0.19	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.20			1.20
Expenses, before waivers and reimbursements		3.38			7.83
Net investment income (loss), net of waivers and reimbursements		0.89			1.41
Net investment income (loss), before waivers and reimbursements		(1.29	)		(5.22	)
Net assets at end of year (in thousands)	$	1,257		$	998
Portfolio turnover rate (%)*		15			5
	Class I
	Period Ended June 30,			Period Ended December 31,
	2012			2011(a)
Net asset value, beginning of period	$	9.95		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.06			0.03
Net realized and unrealized gain (loss) on investments		0.87			(0.05	)
Total from investment operations		0.93			(0.02	)
Less distributions from:
Net investment income		—			0.03
Net realized gain		—			0.00	^
Total distributions		—			0.03
Net asset value, end of period	$	10.88		$	9.95
Total Return (%)*		9.35			(0.19	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.95			0.95
Expenses, before waivers and reimbursements		3.14			7.58
Net investment income (loss), net of waivers and reimbursements		1.15			1.66
Net investment income (loss), before waivers and reimbursements		(1.04	)		(4.97	)
Net assets at end of year (in thousands)	$	1,955		$	1,455
Portfolio turnover rate (%)*		15			5

(a) For the period October 24, 2011 (Commencement of Operations) to December 31, 2011.

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    147

Financial Highlights

Small Cap Value Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	12.26	$	13.71		$	10.49	$	8.33	$	11.31		$	16.27
Income (loss) from investment operations:
Net investment income (loss)		0.10		0.00	^		0.03		0.06		0.09			0.02
Net realized and unrealized gain (loss) on investments		0.57		(0.97	)		3.22		2.13		(3.02	)		(0.96	)
Total from investment operations		0.67		(0.97	)		3.25		2.19		(2.93	)		(0.94	)
Less distributions from:
Net investment income		—		0.02			0.03		0.03		0.05			—
Net realized gain		—		0.46			—		—		—			4.02
Return of capital		—		0.00	^		—		—		—			—
Total distributions		—		0.48			0.03		0.03		0.05			4.02
Net asset value, end of year	$	12.93	$	12.26		$	13.71	$	10.49	$	8.33		$	11.31
Total Return (%)*		5.46		(6.95	)		30.94		26.24		(25.85	)		(5.54	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.41		1.38			1.33		1.29		1.29			1.33
Expenses, before waivers and reimbursements		1.59		1.60			1.57		1.78		1.82			1.66
Net investment income (loss), net of waivers and reimbursements		1.59		(0.01	)		0.25		0.68		0.84			0.10
Net investment income (loss), before waivers and reimbursements		1.41		(0.23	)		0.01		0.19		0.31			(0.23	)
Net assets at end of year (in thousands)	$	42,463	$	40,712		$	34,285	$	7,745	$	7,061		$	11,791
Portfolio turnover rate (%)*		28		65			71		62		87			102
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	12.47	$	13.93		$	10.65	$	8.45	$	11.50		$	16.51
Income (loss) from investment operations:
Net investment income (loss)		0.12		0.03			0.05		0.08		0.11			0.09
Net realized and unrealized gain (loss) on investments		0.57		(0.98	)		3.27		2.16		(3.08	)		(1.01	)
Total from investment operations		0.69		(0.95	)		3.32		2.24		(2.97	)		(0.92	)
Less distributions from:
Net investment income		—		0.03			0.04		0.04		0.08			0.07
Net realized gain		—		0.46			—		—		—			4.02
Return of capital		—		0.02			—		—		—			—
Total distributions		—		0.51			0.04		0.04		0.08			4.09
Net asset value, end of year	$	13.16	$	12.47		$	13.93	$	10.65	$	8.45		$	11.50
Total Return (%)*		5.53		(6.68	)		31.16		26.56		(25.77	)		(5.31	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.16		1.14			1.10		1.09		1.09			1.09
Expenses, before waivers and reimbursements		1.29		1.30			1.29		1.50		1.57			1.37
Net investment income (loss), net of waivers and reimbursements		1.82		0.26			0.43		0.86		1.06			0.52
Net investment income (loss), before waivers and reimbursements		1.69		0.10			0.24		0.45		0.58			0.24
Net assets at end of year (in thousands)	$	197,043	$	190,686		$	130,214	$	47,114	$	29,188		$	35,327
Portfolio turnover rate (%)*		28		65			71		62		87			102

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

148     Semi-Annual Report June 30, 2012

Financial Highlights

Mid Cap Value Fund

	Class N
	Period Ended June 30,			Periods Ended December 31,
	2012			2011			2010(a)
Net asset value, beginning of period	$	10.48		$	10.75		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.04			0.12			0.09
Net realized and unrealized gain (loss) on investments		0.45			(0.17	)		0.74
Total from investment operations		0.49			(0.05	)		0.83
Less distributions from:
Net investment income		—			0.09			0.06
Net realized gain		—			0.13			0.02
Total distributions		—			0.22			0.08
Net asset value, end of period	$	10.97		$	10.48		$	10.75
Total Return (%)*		4.68			(0.34	)		8.36
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.35			1.35			1.35
Expenses, before waivers and reimbursements		3.32			3.85			5.09
Net investment income (loss), net of waivers and reimbursements		0.65			1.15			0.92
Net investment income (loss), before waivers and reimbursements		(1.32	)		(1.35	)		(2.82	)
Net assets at end of year (in thousands)	$	56		$	58		$	4
Portfolio turnover rate (%)*		30			69			35
	Class I
	Period Ended June 30,			Periods Ended December 31,
	2012			2011			2010(a)
Net asset value, beginning of period	$	10.48		$	10.76		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.05			0.13			0.11
Net realized and unrealized gain (loss) on investments		0.45			(0.17	)		0.75
Total from investment operations		0.50			(0.04	)		0.86
Less distributions from:
Net investment income		—			0.11			0.08
Net realized gain		—			0.13			0.02
Total distributions		—			0.24			0.10
Net asset value, end of period	$	10.98		$	10.48		$	10.76
Total Return (%)*		4.77			(0.25	)		8.66
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.10			1.10			1.10
Expenses, before waivers and reimbursements		3.08			3.60			4.92
Net investment income (loss), net of waivers and reimbursements		0.90			1.20			1.10
Net investment income (loss), before waivers and reimbursements		(1.08	)		(1.30	)		(2.72	)
Net assets at end of year (in thousands)	$	4,924		$	4,515		$	3,389
Portfolio turnover rate (%)*		30			69			35

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

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

June 30, 2012 William Blair Funds    149

Financial Highlights

Small-Mid Cap Value Fund

	Class N
	Period Ended June 30,			Period Ended December 31,
	2012			2011 (a)
Net asset value, beginning of period	$	10.45		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.06			0.00	^
Net realized and unrealized gain (loss) on investments		0.42			0.45
Total from investment operations		0.48			0.45
Less distributions from:
Net investment income		—			—
Net realized gain		—			—
Total distributions		—			—
Net asset value, end of period	$	10.93		$	10.45
Total Return (%) *		4.59			4.50
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.40			1.40
Expenses, before waivers and reimbursements		5.13			18.68
Net investment income (loss), net of waivers and reimbursements		1.05			0.53
Net investment income (loss), before waivers and reimbursements		(2.68	)		(16.75	)
Net assets at end of year (in thousands)	$	916		$	860
Portfolio turnover rate (%)*		26			1
	Class I
	Period Ended June 30,			Period Ended December 31,
	2012			2011(a)
Net asset value, beginning of period	$	10.45		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.07			0.00	^
Net realized and unrealized gain (loss) on investments		0.42			0.45
Total from investment operations		0.49			0.45
Less distributions from:
Net investment income		—			—
Net realized gain		—			—
Total distributions		—			—
Net asset value, end of period	$	10.94		$	10.45
Total Return (%) *		4.69			4.50
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.15			1.15
Expenses, before waivers and reimbursements		4.89			18.43
Net investment income (loss), net of waivers and reimbursements		1.30			0.79
Net investment income (loss), before waivers and reimbursements		(2.44	)		(16.49	)
Net assets at end of year (in thousands)	$	1,349		$	1,296
Portfolio turnover rate (%)*		216			1

(a) For the period December 15, 2011 (Commencement of Operations) to December 31, 2011.

* 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.

Redemption fees represent less than $0.005 per share for all periods.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

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 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.

150     Semi-Annual Report June 30, 2012

Financial Highlights

Bond Fund

	Class N
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009		2008			2007 (a)
Net asset value, beginning of period	$	10.91	$	10.70	$	10.40	$	9.82	$	10.07		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.20		0.43		0.46		0.48		0.47			0.31
Net realized and unrealized gain (loss) on investments		0.22		0.34		0.35		0.59		(0.31	)		0.02
Total from investment operations		0.42		0.77		0.81		1.07		0.16			0.33
Less distributions from:
Net investment income		0.23		0.47		0.48		0.49		0.41			0.26
Net realized gain		—		0.09		0.03		—		—			—
Total distributions		0.23		0.56		0.51		0.49		0.41			0.26
Net asset value, end of period	$	11.10	$	10.91	$	10.70	$	10.40	$	9.82		$	10.07
Total Return (%) *		3.93		7.41		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		0.65			0.65
Expenses, before waivers and reimbursements		0.77		0.76		0.70		1.40		2.47			0.81
Net investment income (loss), net of waivers and reimbursements		3.63		3.97		4.25		4.76		4.69			4.80
Net investment income (loss), before waivers and reimbursements		3.51		3.86		4.20		4.01		2.87			4.64
Net assets at end of year (in thousands)	$	25,679	$	8,345	$	4,479	$	3,580	$	407		$	736
Portfolio turnover rate (%)*		12		28		25		29		52			38
	Class I
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009		2008			2007 (a)
Net asset value, beginning of period	$	10.80	$	10.59	$	10.31	$	9.72	$	10.04		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.21		0.45		0.47		0.49		0.48			0.32
Net realized and unrealized gain (loss) on investments		0.22		0.33		0.33		0.59		(0.31	)		0.02
Total from investment operations		0.43		0.78		0.80		1.08		0.17			0.34
Less distributions from:
Net investment income		0.24		0.48		0.49		0.49		0.49			0.30
Net realized gain		—		0.09		0.03		—		—			—
Total distributions		0.24		0.57		0.52		0.49		0.49			0.30
Net asset value, end of period	$	10.99	$	10.80	$	10.59	$	10.31	$	9.72		$	10.04
Total Return (%) *		4.03		7.62		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		0.50			0.50
Expenses, before waivers and reimbursements		0.56		0.55		0.55		0.58		0.71			0.67
Net investment income (loss), net of waivers and reimbursements		3.78		4.17		4.41		4.92		4.90			4.95
Net investment income (loss), before waivers and reimbursements		3.72		4.12		4.36		4.84		4.69			4.78
Net assets at end of year (in thousands)	$	159,385	$	154,224	$	147,807	$	127,538	$	63,763		$	55,873
Portfolio turnover rate (%)*		12		28		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.

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 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.

June 30, 2012 William Blair Funds    151

Financial Highlights

Income Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2012		2011		2010		2009		2008			2007
Net asset value, beginning of year	$	9.32	$	9.22	$	9.07	$	8.69	$	9.29		$	9.74
Income (loss) from investment operations:
Net investment income (loss)		0.13		0.32		0.35		0.40		0.37			0.45
Net realized and unrealized gain (loss) on investments		0.14		0.15		0.19		0.44		(0.59	)		(0.35	)
Total from investment operations		0.27		0.47		0.54		0.84		(0.22	)		0.10
Less distributions from:
Net investment income		0.17		0.37		0.39		0.46		0.38			0.55
Net realized gain		—		—		—		—		—			—
Total distributions		0.17		0.37		0.39		0.46		0.38			0.55
Net asset value, end of year	$	9.42	$	9.32	$	9.22	$	9.07	$	8.69		$	9.29
Total Return (%) *		2.94		5.21		6.04		9.88		(2.46	)		1.08
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		0.82		0.85		0.85		0.85		0.90			0.79
Expenses, before waivers and reimbursements		0.82		0.91		0.85		0.93		0.93			0.81
Net investment income (loss), net of waivers and reimbursements		2.88		3.40		3.79		4.48		4.38			4.73
Net investment income (loss), before waivers and reimbursements		2.88		3.34		3.79		4.41		4.35			4.71
Net assets at end of year (in thousands)	$	56,975	$	44,802	$	35,755	$	37,567	$	47,009		$	75,188
Portfolio turnover rate (%)*		16		39		29		40		38			34
	Class I
	Period Ended June 30,		Years Ended December 31,
	2012		2011		2010		2009		2008			2007
Net asset value, beginning of year	$	9.25	$	9.15	$	9.00	$	8.64	$	9.30		$	9.69
Income (loss) from investment operations:
Net investment income (loss)		0.15		0.34		0.37		0.41		0.39			0.47
Net realized and unrealized gain (loss) on investments		0.13		0.15		0.19		0.43		(0.59	)		(0.34	)
Total from investment operations		0.28		0.49		0.56		0.84		(0.20	)		0.13
Less distributions from:
Net investment income		0.18		0.39		0.41		0.48		0.46			0.52
Net realized gain		—		—		—		—		—			—
Total distributions		0.18		0.39		0.41		0.48		0.46			0.52
Net asset value, end of year	$	9.35	$	9.25	$	9.15	$	9.00	$	8.64		$	9.30
Total Return (%) *		3.08		5.46		6.33		9.89		(2.26	)		1.36
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		0.57		0.64		0.63		0.66		0.72			0.60
Net investment income (loss), net of waivers and reimbursements		3.13		3.66		4.01		4.67		4.57			4.91
Net assets at end of year (in thousands)	$	74,836	$	67,183	$	77,522	$	80,041	$	93,426		$	129,442
Portfolio turnover rate (%)*		16		39		29		40		38			34

* 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.

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 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.

152     Semi-Annual Report June 30, 2012

Financial Highlights

Low Duration Fund

	Class N
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009(a)
Net asset value, beginning of period	$	9.82	$	9.90	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08		0.15		0.13		0.01
Net realized and unrealized gain (loss) on investments		0.08		0.02		0.05		(0.07	)
Total from investment operations		0.16		0.17		0.18		(0.06	)
Less distributions from:
Net investment income		0.14		0.25		0.21		0.01
Net realized gain		—		—		—		—
Total distributions		0.14		0.25		0.21		0.01
Net asset value, end of period	$	9.84	$	9.82	$	9.90	$	9.93
Total Return (%) *		1.59		1.73		1.86		(0.60	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		0.70		0.70		0.70		0.70
Expenses, before waivers and reimbursements		0.73		0.73		0.78		0.94
Net investment income (loss), net of waivers and reimbursements		1.58		1.52		1.33		1.27
Net investment income (loss), before waivers and reimbursements		1.55		1.49		1.25		1.03
Net assets at end of year (in thousands)	$	8,322	$	6,260	$	6,937	$	1,861
Portfolio turnover rate (%)*		12		43		51		—
	Class I
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009(a)
Net asset value, beginning of period	$	9.82	$	9.89	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08		0.17		0.15		0.01
Net realized and unrealized gain (loss) on investments		0.08		0.02		0.04		(0.07	)
Total from investment operations		0.16		0.19		0.19		(0.06	)
Less distributions from:
Net investment income		0.14		0.26		0.23		0.01
Net realized gain		—		—		—		—
Total distributions		0.14		0.26		0.23		0.01
Net asset value, end of period	$	9.84	$	9.82	$	9.89	$	9.93
Total Return (%) *		1.67		1.99		1.89		(0.59	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		0.55		0.55		0.55		0.55
Expenses, before waivers and reimbursements		0.56		0.58		0.63		0.79
Net investment income (loss), net of waivers and reimbursements		1.73		1.67		1.46		1.39
Net investment income (loss), before waivers and reimbursements		1.72		1.64		1.38		1.15
Net assets at end of year (in thousands)	$	102,941	$	82,828	$	88,568	$	79,773
Portfolio turnover rate (%)*		12		43		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.

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 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.

June 30, 2012 William Blair Funds    153

Financial Highlights

Ready Reserve Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2012			2011			2010			2009			2008		2007
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00	$	1.00
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.00	^		0.00	^		0.00	^		0.02		0.05
Net realized and unrealized gain (loss) on investments		—			—			—			—			—		—
Total from investment operations		0.00	^		0.00	^		0.00	^		0.00	^		0.02		0.05
Less distributions from:
Net investment income		0.00	^		0.00	^		0.00	^		0.00	^		0.02		0.05
Net realized gain		—			—			—			—			—		—
Total distributions		0.00	^		0.00	^		0.00	^		0.00	^		0.02		0.05
Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00	$	1.00
Total Return (%) *		0.00			0.01			0.01			0.10			2.20		4.75
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		0.13			0.14			0.24			0.46			0.60		0.63
Expenses, before waivers and reimbursements		0.62			0.62			0.61			0.66			0.60		0.63
Net investment income (loss), net of waivers and reimbursements		0.01			0.01			0.01			0.11			2.12		4.63
Net investment income (loss), before waivers and reimbursements		(0.48	)		(0.47	)		(0.36	)		(0.09	)		2.12		4.63
Net assets at end of year (in thousands)	$	1,292,589		$	1,271,746		$	1,216,543		$	1,352,901		$	1,841,189	$	1,399,537

* 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.

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 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.

154     Semi-Annual Report June 30, 2012

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(2)	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	Trustee since 2002; Chairperson since 2010 Since 2007	Partner, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)	25	Director, William Blair SICAV; Financial Accounting Foundation (FAF)
Richard W. Smirl, 1967*	Trustee and Senior Vice President	Trustee since 2010 and Senior Vice President Since 2007	Partner, William Blair & Company, L.L.C.	25	Director, William Blair SICAV
Non-Interested Trustees
Phillip O. Peterson, 1944	Trustee	Since 2007	Retired; formerly, President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	25	The Hartford Group of Mutual Funds (87 portfolios); Symetra Mutual Funds Trust (variable annuity funds) (14 portfolios)
Lisa A. Pollina, 1965	Trustee	Since 2011	Senior Advisor to head of RBC Financial Group’s International Banking and Insurance division since 2010; formerly, Bank of America Corporation, Global Financial Institutions Executive from 2006-2008 and multiple Advisory from 2008-2010; prior thereto roles, Managing Partner, Bordeaux Capital from 2002-2006.	25	Darkstrand, high-speed fiber optic network provider (2009 to 2010); Jane Addams Hull House Association, Board of Trustees (2003 to 2009)
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.	25	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	25	Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)

June 30, 2012 William Blair Funds    155

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)	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	25	Mutual Trust Financial Group, provider of insurance and investment products; Board Member First MetLife Investors Insurance Company, NY Chartered Company for Metropolitan Life Insurance
Officers
Michael P. Balkin, 1959	Senior Vice President Vice President	Since 2009 2008-2009	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Partner, Magnetar Capital		N/A
Karl W. Brewer, 1966	Senior Vice President	Since 2000	Partner, William Blair & Company, L.L.C.		N/A
David C. Fording, 1967	Senior Vice President Vice President	Since 2009 2006-2009	Partner, 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	Partner, William Blair & Company, L.L.C.		N/A
W. George Greig, 1952	Senior Vice President	Since 1996	Partner, William Blair & Company, L.L.C.		N/A
Michael A. Jancosek, 1959	Senior Vice President	Since 2004	Partner, William Blair & Company L.L.C.		N/A
John F. Jostrand, 1954	Senior Vice President	Since 1999	Partner, William Blair & Company, L.L.C.		N/A
Chad M. Kilmer, 1975	Senior Vice President Vice President	Since 2011 2006-2011	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.		N/A
Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Partner, William Blair & Company, L.L.C.		Chairman, AG. Med, Inc.
Mark T. Leslie, 1967	Senior Vice President Vice President	Since 2008 2005-2008	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.		N/A
Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.		N/A
Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.		N/A

156     Semi-Annual Report June 30, 2012

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
Todd M. McClone, 1968	Senior Vice President Vice President	Since 2006 2005-2006	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A N/A
David Merjan, 1960	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.	N/A
David S. Mitchell, 1960	Senior Vice President	Since 2004	Partner, William Blair & Company, L.L.C.	N/A
David P. Ricci, 1958	Senior Vice President	Since 2006	Partner, William Blair & Company, L.L.C.	N/A
Brian D. Singer, 1960	Senior Vice President Vice President	Since 2012 2011-2012	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2003-2007)	N/A
Paul J. Sularz, 1967	Senior Vice President Vice President	Since 2012 2009-2012	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A
Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Partner, William Blair & Company, L.L.C.	N/A
Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Partner, William Blair & Company, L.L.C.	N/A
Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A
David F. Hone, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Portfolio Manager Large Cap Value, Deutsche Asset Management (2002-2010)	N/A
John Abunassar, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2009-2011); prior thereto. President and CEO of Allegiant Asset	N/A
Peter Carl, 1967	Vice President	Since 2011	Associate, William Blair & Company L.L.C. (since 2011); prior thereto, Portfolio Manager, Guidance Capital LLC (2006-2011)	N/A
D. Trowbridge Elliman III, 1957	Vice President	Since 2011	Associate, William Blair & Company L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2001-2011)	N/A

June 30, 2012 William Blair Funds    157

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
Christopher Walvoord, 1966	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2002-2011)	N/A
Brian Ziv, 1957	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2001-2011)	N/A
Edwin Denson, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2001-2009)	N/A
Thomas Clarke, 1968	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2000-2009)	N/A
Walter R. Randall, Jr., 1960	Chief Compliance Officer and Assistant Secretary	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
John M. Raczek, 1970	Assistant Treasurer	Since 2010	Associate, William Blair & Company, L.L.C.; Manager, Calamos Investments	N/A

* Ms. Seitz and Mr. Smirl are interested persons of the William Blair Funds because each is a partner of William Blair & Company, L.L.C., the Fund’s 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 earlier of (a) the non-interested Trustee’s 72nd birthday or (b) the 15th anniversary of the date that the non-interested Trustee was first elected or appointed as a member of the Board of Trustees. 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 partners 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.

158     Semi-Annual Report June 30, 2012

Renewal of the Trust’s Management Agreement

On April 24, 2012, the Board of Trustees (the “Board”) of the William Blair Funds (the “Trust”), including the Trustees who are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the renewal for an additional one-year term of the Trust’s Management Agreement with William Blair & Company, L.L.C. (the “Advisor”), on behalf of each of the William Blair Growth Fund, the William Blair Large Cap Growth Fund, the William Blair Small Cap Growth Fund, the William Blair Mid Cap Growth Fund, the William Blair Small-Mid Cap Growth Fund, the William Blair Global Growth Fund, the William Blair International Growth Fund, the William Blair International Equity Fund, the William Blair International Small Cap Growth Fund, the William Blair Emerging Markets Growth Fund, the William Blair Emerging Leaders Growth Fund, the William Blair Small Cap Value Fund, the William Blair Mid Cap Value Fund, the William Blair Bond Fund, the William Blair Income Fund, the William Blair Low Duration Fund and the William Blair Ready Reserves Fund (each, a “Fund” and collectively, the “Funds”). In deciding to approve the renewal of the Management Agreement, the Board did not identify any single factor or group of factors as all important or controlling and considered all factors together.

The information in this summary outlines the Board’s considerations associated with its renewal of the Management Agreement. In connection with its deliberations regarding the continuation of the Management Agreement, the Board considered such information and factors as it believed to be relevant. As described below, the Board considered the nature, extent and quality of the services performed by the Advisor under the existing Management Agreement; comparative management fees and expense ratios as prepared by an independent provider (Lipper Inc.); the estimated profits realized by the Advisor; the extent to which the Advisor realizes economies of scale as a Fund grows; and whether any fall-out benefits are being realized by the Advisor. In addition, the Independent Trustees discussed the renewal of the Management Agreement with Fund management and in private sessions with independent legal counsel at which no representatives of the Advisor were present.

The Board, including the Independent Trustees, considered the renewal of the Management Agreement pursuant to a process that concluded at the Board’s April 24, 2012 meeting. In preparation for the review process, the Independent Trustees met with independent legal counsel and discussed the type and nature of information to be requested and independent legal counsel sent a formal request for information to Trust management. The Advisor provided extensive information in response to the request. After reviewing the information received, the Independent Trustees requested supplemental information, which the Advisor provided in writing and/or orally. The Independent Trustees reviewed comparative performance and comparative advisory fees and expense ratios for a peer group and a peer universe of funds provided by Lipper for each Fund. In addition, the Independent Trustees considered: (i) materials describing the nature, quality and extent of services provided by the Advisor; (ii) information comparing the performance of each Fund to one or more relevant securities indexes; (iii) information comparing advisory fees of each Fund to fees charged by the Advisor to other funds and client accounts with similar investment strategies; (iv) the estimated allocated direct or indirect costs of services provided and estimated profits realized by the Advisor for both the Trust as a whole and each Fund individually; and (v) information describing other benefits to the Advisor resulting from its relationship with the Funds. The Independent Trustees also noted that they receive information from the Advisor regarding the Funds throughout the year in connection with regular Board meetings, including presentations from portfolio managers. The Independent Trustees also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Management Agreement. Finally, the Advisor made an in-person presentation to the Independent Trustees regarding the contract review information, including addressing the supplemental information requests, and answered questions from the Independent Trustees.

On April 16, 23 and 24, 2012, the Independent Trustees met independently of Trust management and of the interested Trustees to review and discuss with independent legal counsel the information provided by the Advisor, Lipper and independent legal counsel. The Independent Trustees noted that in evaluating the Management Agreement, they were taking into account their accumulated experience as Board members in working with the Advisor on matters relating to the Funds. Based on their review, the Independent Trustees concluded that it was in the best interest of each Fund to renew the Management Agreement and recommended to the Board the renewal of the Management Agreement. The Board considered the recommendation of the Independent Trustees along with the other factors that the Board deemed relevant.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Funds, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people and has a long association with the Funds, in each case other than the Growth Fund, since the inception of the Funds. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Funds knowing that the Advisor managed the Funds and knowing the

June 30, 2012 William Blair Funds    159

investment advisory fee. The Board considered biographical information about the Trust’s officers and the Funds’ portfolio managers, including information on the portfolio managers’ investments in the Funds. The Board also considered the administrative services performed by the Advisor, financial information regarding the Advisor, the Advisor’s execution quality and use of soft dollars, the compliance regime overseen by the Advisor, and the Advisor’s expense limitations in place for certain Funds. The Board was also provided with information pertaining to the Advisor’s organizational structure and senior management. The Board noted that the Advisor pays the compensation of all of the officers and the interested Trustees of the Trust.

The Board reviewed information on the annualized total returns of each Fund for the one, three, five and ten year periods ended December 31, 2011, as applicable, along with annualized total return information for the Lipper performance peer universe of funds and one or more relevant securities indexes. The Lipper performance peer universe for each Fund included all funds with a similar investment style as classified by Lipper regardless of asset size or primary channel of distribution. With respect to the comparative performance information generally, the Board considered the Advisor’s statement that it is committed to managing each Fund consistently with the Fund’s stated investment strategies through all market environments and that, as a result, the Funds’ relative performance compared to the Lipper performance peer universe and relevant securities indexes from year to year will be affected by whether the market environment favors or disfavors certain of the Advisor’s investment strategies, but that the Advisor seeks to provide superior performance over the long term. The Trustees reviewed each Fund’s ranking in its Lipper performance peer universe during the applicable periods, and based on that review, requested and discussed with the Advisor additional information regarding the performance of the International Equity Fund, the Large Cap Growth Fund, the Small Cap Growth Fund and the Small Cap Value Fund. With respect to the International Equity Fund, the Board considered the Advisor’s statement that the Fund’s lower allocations to emerging markets and small-cap securities relative to its peer funds had contributed to relative underperformance in recent periods. With respect to the Large Cap Growth Fund, the Board considered the changes made by the Advisor in the Fund’s portfolio management team and the recent improved performance of the Fund. With respect to the Small Cap Growth Fund, the Board noted the Fund’s recent underperformance relative to its Lipper performance peer universe and discussed the Fund’s performance with the Advisor. The Board also considered the Fund’s longer-term performance, noting that the Fund’s annualized total returns over the three- and ten-year periods ended December 31, 2011 were above the average of its Lipper performance peer universe, but that the Fund’s annualized total return over the five-year period ended December 31, 2011 was below the average of its Lipper performance peer universe. With respect to the Small Cap Value Fund, the Board noted the Fund’s recent underperformance relative to its Lipper performance peer universe and discussed the Fund’s performance with the Advisor. The Board also considered the Fund’s longer-term performance, noting that, while the Fund’s annualized total return over the three-year period ended December 31, 2011 was slightly below the average of its Lipper performance peer universe, its annualized total returns over the five- and ten-year periods ended December 31, 2011 were above the average of its Lipper performance peer universe.

Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Fund were satisfactory.

Fees and Expenses. The Board reviewed each Fund’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper expense peer group and Lipper expense peer universe for each Fund. The Lipper expense peer group for each Fund consisted of a group of funds with a similar investment style as classified by Lipper, distribution channel and asset size as the Fund. The Lipper expense peer universe for each Fund consisted of all funds with a similar investment style as classified by Lipper and distribution channel as the Fund. For each Fund, the Board also reviewed amounts charged by the Advisor to other pooled investment vehicles, including other registered funds for which the Advisor acts as a subadvisor, and the Advisor’s fee schedule for institutional separate accounts. With respect to other pooled investment vehicles and institutional separate accounts, the Board considered the Advisor’s statement that both the mix of services provided to the Funds and the additional regulatory responsibilities associated with sponsoring registered investment companies were greater as compared to the work involved for other pooled investment vehicles and separate accounts. In addition, the Board considered the Advisor’s statement that institutional separate accounts are distributed differently, operate under different investment and regulatory structures and have different business risks as compared to the Funds.

In considering the Lipper information, the Board noted that the contractual advisory fees for the Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Bond Fund, the Income Fund, the Low Duration Fund and the Ready Reserves Fund were at or below the average advisory fees of their Lipper expense peer group. The Board also noted that the contractual advisory fees for the Large Cap Growth Fund, the Small Cap Growth Fund, the Mid Cap Growth Fund, the Small-Mid Cap Growth Fund, the Global Growth Fund, the International Growth Fund, the International Equity Fund, the Emerging Leaders Growth Fund, the Small Cap Value Fund and the Mid Cap Value Fund

160     Semi-Annual Report June 30, 2012

were above the average advisory fees of their Lipper expense peer group, but that each Fund’s advisory fee was within range of the average advisory fees of its Lipper expense peer group. The Board also considered that the Advisor had proposed to contractually limit total expenses for the Large Cap Growth Fund, the Small Cap Growth Fund, the Mid Cap Growth Fund, the Small-Mid Cap Growth Fund, the Global Growth Fund, the International Growth Fund, the International Equity Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Small Cap Value Fund, the Mid Cap Value Fund, the Bond Fund, the Income Fund and the Low Duration Fund. The Board also considered that the Advisor intended to continue to voluntarily waive or reimburse certain operating expenses of the Ready Reserves Fund to maintain a positive yield for the Fund. On the basis of the information provided, the Board concluded that each Fund’s advisory fee, coupled with applicable expense limitations, was reasonable.

Profitability. With respect to the profitability of the Management Agreement to the Advisor, the Board considered the overall fees paid under the Management Agreement, including the estimated allocated costs of the services provided and profits realized by the Advisor from its relationship with the Trust as a whole and each Fund individually. The Board concluded that the estimated profits realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of investors. The Board noted the Advisor’s representation that certain Fund expenses are relatively fixed and unrelated to asset size and that the Advisor may enjoy some economies of scale as a Fund’s assets grow. The Board also noted that the Advisor increased the number of personnel working on Fund matters during 2011. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board reviewed each Fund’s asset size, breakpoints for those Funds with breakpoints in the advisory fee schedule, the Fund’s total and net expense ratios and the expense limitations in place and/or proposed, and concluded that in the aggregate they reasonably reflect appropriate recognition of any economies of scale.

Other Benefits to the Advisor. The Board considered benefits derived by the Advisor from its relationship with the Funds, including (i) non-advisory fee revenue from the Funds in the form of shareholder administration fees, service fees and/or distribution fees and the payment of some or all of those revenues to affiliates or third parties, (ii) soft dollars, which pertain primarily to the Funds investing in equity securities, and (iii) favorable media coverage. The Board concluded that, taking into account these benefits, each Fund’s advisory fee was reasonable.

Conclusion. Based upon all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement continue to be fair and reasonable and that the continuation of the Management Agreement is in the best interests of each Fund.

June 30, 2012 William Blair Funds    161

(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, 2011:

Growth	Mid Cap Growth	Small-Mid Cap Growth	Emerging Markets Growth
$16,081,067	$11,056,640	$18,645,732	$115,030,166
Bond	Emerging Leaders Growth	Small Cap Value	Mid Cap Value
$1,831,187	$2,732,548	$8,247,756	$36,445

The following table provides the percentage of the 2011 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		29.37	%		31.29	%
Global Growth		100.00	%		100.00	%
International Growth		0.00	%		100.00	%
International Equity		0.00	%		0.00	%
International Small Cap Growth		0.00	%		100.00	%
Emerging Markets Growth		0.10	%		100.00	%
Emerging Leaders Growth		0.00	%		100.00	%
Emerging Markets Small Cap Growth		0.00	%		0.00	%
Large Cap Value		100.00	%		100.00	%
Small Cap Value		100.00	%		100.00	%
Mid Cap Value		92.41	%		100.00	%
Small-Mid Cap Value		0.00	%		0.00	%
Bond		0.00	%		0.00	%
Income		0.00	%		0.00	%
Low Duration		0.00	%		0.00	%
Ready Reserves		0.00	%		0.00	%

In January 2012, 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 2011.

162     Semi-Annual Report June 30, 2012

Useful Information About Your Report (unaudited)

Please refer to this information when reviewing the Expense Example for each Fund.

Expense Example

As a shareholder of a Fund, 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 Fund), service fees (for Class N shares of the Ready Reserves Fund), shareholder administration fees (for Class N and Class I shares of the Global Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund and the Low Duration Fund) and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Fund’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2012 to June 30, 2012.

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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. This is not the Fund’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 Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in both examples are meant to highlight your ongoing costs only and do not reflect any transactional costs or account type fees, such as redemption fees and IRA Fiduciary Administration fees, respectively. These fees are fully described in the prospectus. Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs or account fees were included, your costs would have been higher.

June 30, 2012 William Blair Funds    163

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 1/1/2012		Ending Account Value 6/30/2012		Expenses Paid During the Period(a)		Annualized Expense Ratio
Growth Fund
Class N—actual return	$	1,000.00	$	1,089.50	$	6.20		1.19	%
Class N—hypothetical 5% return		1,000.00		1,018.93		5.99		1.19
Class I—actual return		1,000.00		1,091.20		4.52		0.87
Class I—hypothetical 5% return		1,000.00		1,020.54		4.37		0.87
Large Cap Growth Fund
Class N—actual return		1,000.00		1,120.60		6.33		1.20
Class N—hypothetical 5% return		1,000.00		1,018.90		6.02		1.20
Class I—actual return		1,000.00		1,123.80		5.02		0.95
Class I—hypothetical 5% return		1,000.00		1,020.14		4.77		0.95
Small Cap Growth Fund
Class N—actual return		1,000.00		1,091.90		7.80		1.50
Class N—hypothetical 5% return		1,000.00		1,017.40		7.52		1.50
Class I—actual return		1,000.00		1,093.30		6.51		1.25
Class I—hypothetical 5% return		1,000.00		1,018.65		6.27		1.25
Mid Cap Growth Fund
Class N—actual return		1,000.00		1,070.30		6.95		1.35
Class N—hypothetical 5% return		1,000.00		1,018.15		6.77		1.35
Class I—actual return		1,000.00		1,072.50		5.41		1.05
Class I—hypothetical 5% return		1,000.00		1,019.64		5.27		1.05
Small-Mid Cap Growth Fund
Class N—actual return		1,000.00		1,050.00		6.88		1.35
Class N—hypothetical 5% return		1,000.00		1,018.15		6.77		1.35
Class I—actual return		1,000.00		1,051.10		5.61		1.10
Class I—hypothetical 5% return		1,000.00		1,019.39		5.52		1.10
Global Growth Fund
Class N—actual return		1,000.00		1,086.40		7.78		1.50
Class N—hypothetical 5% return		1,000.00		1,017.40		7.52		1.50
Class I—actual return		1,000.00		1,087.80		6.49		1.25
Class I—hypothetical 5% return		1,000.00		1,018.65		6.27		1.25
International Growth Fund
Class N—actual return		1,000.00		1,076.60		7.49		1.45
Class N—hypothetical 5% return		1,000.00		1,017.65		7.27		1.45
Class I—actual return		1,000.00		1,078.00		6.01		1.16
Class I—hypothetical 5% return		1,000.00		1,019.08		5.84		1.16
International Equity Fund
Class N—actual return		1,000.00		1,045.50		7.37		1.45
Class N—hypothetical 5% return		1,000.00		1,017.65		7.27		1.45
Class I—actual return		1,000.00		1,046.90		6.11		1.20
Class I—hypothetical 5% return		1,000.00		1,018.90		6.02		1.20
International Small Cap Growth Fund
Class N—actual return		1,000.00		1,061.60		8.33		1.63
Class N—hypothetical 5% return		1,000.00		1,016.78		8.15		1.63
Class I—actual return		1,000.00		1,062.80		6.63		1.29
Class I—hypothetical 5% return		1,000.00		1,018.44		6.48		1.29

(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 182, and divided by 366 (to reflect the one-half year period).

164     Semi-Annual Report June 30, 2012

Expense Example	Beginning Account Value 1/1/2012		Ending Account Value 6/30/2012		Expenses Paid During the Period(a)		Annualized Expense Ratio
Emerging Markets Growth Fund
Class N—actual return	$	1,000.00	$	1,070.80	$	8.68		1.69	%
Class N—hypothetical 5% return		1,000.00		1,016.48		8.45		1.69
Class I—actual return		1,000.00		1,072.90		7.17		1.39
Class I—hypothetical 5% return		1,000.00		1,017.94		6.98		1.39
Emerging Leaders Growth Fund
Class N—actual return		1,000.00		1,069.00		8.49		1.65
Class N—hypothetical 5% return		1,000.00		1,016.66		8.27		1.65
Class I—actual return		1,000.00		1,069.20		7.20		1.40
Class I—hypothetical 5% return		1,000.00		1,017.90		7.02		1.40
Emerging Markets Small Cap Growth Fund
Class N—actual return		1,000.00		1,142.90		8.79		1.65
Class N—hypothetical 5% return		1,000.00		1,016.66		8.27		1.65
Class I—actual return		1,000.00		1,144.90		7.47		1.40
Class I—hypothetical 5% return		1,000.00		1,017.90		7.02		1.40
Large Cap Value Fund
Class N—actual return		1,000.00		1,091.50		6.24		1.20
Class N—hypothetical 5% return		1,000.00		1,018.90		6.02		1.20
Class I—actual return		1,000.00		1,093.50		4.94		0.95
Class I—hypothetical 5% return		1,000.00		1,020.14		4.77		0.95
Small Cap Value Fund
Class N—actual return		1,000.00		1,054.60		7.20		1.41
Class N—hypothetical 5% return		1,000.00		1,017.65		7.07		1.41
Class I—actual return		1,000.00		1,055.30		5.93		1.16
Class I—hypothetical 5% return		1,000.00		1,019.14		5.82		1.16
Mid Cap Value Fund
Class N—actual return		1,000.00		1,046.80		6.87		1.35
Class N—hypothetical 5% return		1,000.00		1,018.15		6.77		1.35
Class I—actual return		1,000.00		1,047.70		5.60		1.10
Class I—hypothetical 5% return		1,000.00		1,019.39		5.52		1.10
Small-Mid Cap Value Fund
Class N—actual return		1,000.00		1,045.90		7.12		1.40
Class N—hypothetical 5% return		1,000.00		1,017.90		7.02		1.40
Class I—actual return		1,000.00		1,046.90		5.85		1.15
Class I—hypothetical 5% return		1,000.00		1,019.14		5.77		1.15
Bond Fund
Class N—actual return		1,000.00		1,039.30		3.30		0.65
Class N—hypothetical 5% return		1,000.00		1,021.63		3.27		0.65
Class I—actual return		1,000.00		1,040.30		2.54		0.50
Class I—hypothetical 5% return		1,000.00		1,022.38		2.51		0.50
Income Fund
Class N—actual return		1,000.00		1,029.40		4.12		0.82
Class N—hypothetical 5% return		1,000.00		1,020.81		4.10		0.82
Class I—actual return		1,000.00		1,030.80		2.88		0.57
Class I—hypothetical 5% return		1,000.00		1,022.02		2.87		0.57
Low Duration Fund
Class N—actual return		1,000.00		1,015.90		3.51		0.70
Class N—hypothetical 5%		1,000.00		1,021.38		3.52		0.70
Class I—actual return		1,000.00		1,016.70		2.76		0.55
Class I—hypothetical 5%		1,000.00		1,022.13		2.77		0.55
Ready Reserve Fund
Class N—actual return		1,000.00		1,000.00		0.62		0.13
Class N—hypothetical 5% return		1,000.00		1,024.24		0.63		0.13

(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 182, and divided by 366 (to reflect the one-half year period).

June 30, 2012 William Blair Funds    165

BOARD OF TRUSTEES

Phillip O. Peterson

Retired Partner, KPMG LLP

Lisa A. Pollina

Senior Advisor to RBC Financial Group—International Banking and Insurance Division

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, Chairman and President

Partner, William Blair & Company, L.L.C.,

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl, Senior Vice President

Partner, William Blair & Company L.L.C.

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

Chad M. Kilmer, 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

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Brian D. Singer, Senior Vice President

Paul J. Sularz, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Kathleen M. Lynch, Vice President

David F. Hone, Vice President

John Abunassar, Vice President

Peter Carl, Vice President

D. Trowbridge Elliman III, Vice President

Christopher Walvoord, Vice President

Brian Ziv, Vice President

Edwin Denson, Vice President

Thomas Clarke, Vice President

Walter R. Randall, Jr., Chief Compliance Officer and Assistant Secretary

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

John M. Raczek, Assistant Treasurer

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)

166     Semi-Annual Report June 30, 2012

William Blair Funds

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
Large Cap Value Fund	International Small Cap Growth Fund	Ready Reserves Fund
Small Cap Value Fund	Emerging Markets Growth Fund
Mid Cap Value Fund	Emerging Leaders Growth Fund
Small-Mid Cap Value Fund	Emerging Markets Small Cap Growth Fund

		©William Blair & Company, L.L.C., distributor
	+1 800 742 7272 williamblairfunds.com	222 West Adams Street Chicago, Illinois 60606

William Blair Funds

Institutional

Semiannual Report

June 30, 2012

Table of Contents

Global Markets Overview	2
Institutional International Growth Fund
An Overview from the Portfolio Manager	4
Portfolio of Investments	6
Institutional International Equity Fund
An Overview from the Portfolio Manager	10
Portfolio of Investments	12
International Small Cap Growth Fund
An Overview from the Portfolio Manager	14
Portfolio of Investments	16
Emerging Markets Growth Fund
An Overview from the Portfolio Managers	19
Portfolio of Investments	21
Emerging Leaders Growth Fund
An Overview from the Portfolio Managers	24
Portfolio of Investments	26
Fixed-Income Markets Overview	28
Bond Fund
An Overview from the Portfolio Managers	29
Portfolio of Investments	31
Low Duration Fund
An Overview from the Portfolio Managers	35
Portfolio of Investments	37
Financial Statements	40
Notes to Financial Statements	46
Financial Highlights	56
Board of Trustees and Officers	63
Fund Expense	72

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

June 30, 2012 William Blair Funds    1

GLOBAL MARKETS OVERVIEW

The global growth scare that began in March continued through the second quarter, leading equity markets into negative territory. In addition, increased concerns about the viability of the Eurozone and remedies for significant bank and sovereign debt, a volatile Greek election cycle, and doubts about the wherewithal and will of European governments to forge tighter fiscal and monetary integration, weighed on the equity markets. Following a significant decline in March through May, the markets rebounded in June on expectations of a broad agreement on the European Stability Mechanism (ESM) lending directly to banks without seniority, more discussions of a pan-European regulator and deposit insurance, and the prospects for growth-oriented measures through the EIB (European Investment Bank). Despite the nearly 5% rally in June, the MSCI ACWI IMI fell 5.68% during the second quarter, paring year to date gains to 5.76%. High quality companies outperformed during the second quarter, as did those with strong earnings trends, price momentum, and good growth prospects. Year to date companies with lower valuations performed well, due to a rally in these companies during the beginning of the year, along with those exhibiting higher quality and growth characteristics.

Most sectors retreated during the second quarter with the Resources sectors—Materials and Energy—leading the decline, falling 11.16% and 9.58%, respectively, on expectations of slower emerging markets infrastructure spending and resources demand, coupled with recessionary pressures in Europe. Telecom Services and Healthcare each had positive returns, rising 2.55% and 1.32%, respectively, while Utilities and Staples were each slightly negative. Despite negative second quarter results, most sectors remained in solid positive territory year to date, with Information Technology (IT), Healthcare, and Discretionary up 9.91%, 9.88% and 9.67%, respectively, while Energy and Materials underperformed, falling 4.85% and 1.65%, respectively.

The MSCI World Index IMI fell 5.23% during the second quarter, resulting in a year to date return of 5.98%. The U.S. Dollar was strong relative to most other currencies during the period, as the U.S. was viewed as a relative safe haven. The U.S. led developed market regions during the quarter, falling 3.33%, per the MSCI developed markets national (IMI) indices. Europe Ex-U.K. was the worst performing developed region, falling 9.49%, as Greece and Portugal fell over 20% and 17%, respectively, and as core European markets also lagged. The natural-resource oriented Canadian market fell 8.48% during the period. Year to date, the U.S. rose 9.01%, significantly outpacing other developed market regions, although all regions except Canada had positive returns. While Europe Ex-U.K. rose 2.14% during the first half of the year, this result masked significantly different results by country, as Greece, Portugal and Spain all fell between 12-16%, while countries such as Denmark and Belgium were each up approximately the same amount. While the MSCI World Index Small Cap fell 6.31% during the second quarter, underperforming their larger cap counterparts across most regions, with the exception of Japan, they outpaced large cap stocks year to date, rising 6.34%, led by the UK and the US.

After outpacing developed markets during the first quarter, the MSCI Emerging Markets IMI lagged during the second, falling 8.79%, reducing year to date returns to 4.31%. Latin America fell over 13%, dragged down by Brazil, which fell 18.64%, on concerns about slowing growth amidst lower resource oriented demand, and a weakening Real. Conversely, Mexico performed relatively well, falling just over 1%. Emerging Europe, Mid-East, and Africa (EMEA) fell 8.14% during the second quarter, as Russia (14.67%) led the decline both on resource demand concerns and amidst USD appreciation, which more than offset the 0.71% Turkey return. Asia fell 7.43%, as weaker results in India and Taiwan were partially offset by a positive 4.71% Philippines return, and -5-6% returns for China and Thailand. Year to date all emerging markets regions posted positive results, with EMEA rising 6.81%, as Egypt rose nearly 34% despite ongoing political unrest and as Turkey rose over 29%. Emerging Asia was up just over 5%, as the Philippines and Thailand posted double digit returns and as India outperformed during the first quarter. Latin America eked out a slightly positive return, despite the -6.93% Brazilian market return, given strong market performance in Chile, Mexico and Peru.

2     Semi-Annual Report June 30, 2012

As doubts about sovereign debt and banking solvency were alleviated in the first quarter, markets rallied. But apprehension quickly reasserted itself in the second quarter, with weakening growth replacing balance sheet woes as the focus of concern. Austerity and falling business confidence in Europe, combined with an industrial slowdown in China that seemed to spread out to the rest of the emerging world, lowered expectations for global growth and eroded belief in the effectiveness of policy.

The Eurozone is almost certainly in recession already, with the latest industrial production reading down by more than 2%. Weakness in the Euro periphery was already beginning to take a toll on growth in the core, and the more recent slowdown in emerging economies has only added to the problem. Deleveraging in the banking system and the overhang of prolonged uncertainty in the debt markets have exacerbated the problem, and ongoing weakness in Europe and China has become somewhat synergistic as trade flow growth decelerates.

In China, the landing is fairly soft at the reported real GDP level, but more pronounced in specific areas of output. Primary, extractive, and heavy industry generally are bearing the brunt of the economy’s slowdown. The pace of growth in new industrial capacity and infrastructure investment has slowed, and with it the demand for basic materials and commodities. In turn, softer commodity markets are impacting growth in areas that had been profiting from the resource boom, while India, Brazil, and Russia are all being restrained, ironically, by infrastructure shortfalls.

The picture that emerges is one of ‘Japanization’ in debt-burdened developed markets combined with a downshift and awkward growth transition in developing economies. Even if the narrative gets exaggerated in a downturn, there’s still a core of plausibility to the contention that the growth potential of the global economy may be subdued in the next several years.

In these circumstances, challenges to corporate performance multiply. The customer base—whether household, business or public sector—is squeezed, suppliers are under pressure, and the cost/quality/service equation is harder to solve than ever. It’s not a 2008-style collapse, but it looks like a competitive environment with fewer winners and more also-rans. We are finding increasing evidence of this phenomenon in instances of sharply differentiated growth and/or profitability between peer groups companies previously considered to be fairly comparable in performance. Our strategy in the most basic sense is to invest in that differentiation—to select more rigorously for organic value creation at the company level.

June 30, 2012 William Blair Funds    3

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 7.99% increase for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), increased 2.93%.

Performance was due to strong stock selection across sectors, coupled with a focus on high quality companies with good earnings and price trends. In addition, industry and country weightings also contributed to results. Stock selection was particularly strong in Consumer, Financials and Industrials. In particular, Media performance was strong within Discretionary, along with Luxury and Retail, while the Food/Staples weighting and stock selection augmented Staples results as did strong performance by Diageo, the global spirits company. Commercial Banks stock selection was strong, given the sale in Barclays in early February following its strong rally, along with Japanese and emerging markets performance. The Fund’s focus on core Europe at the expense of peripheral countries, overweighting in the strongly performing UK market, and underweighting in natural resource-oriented economies enhanced performance. Somewhat detracting from year to date results was the Fund’s underweighting in Utilities, along with Japanese stock selection, due to underperformance by internet-related holdings.

During the six month period we increased Discretionary from approximately 14% to over 18%, due to higher Autos and Media exposure, which more than offset a decline in Auto Components. As a result, at quarter end, the portfolio was 7.6% overweighted in Discretionary. Staples, Healthcare, and Industrials also increased during the period. These increases were funded by a decrease in Financials from 22.4% to 22.1%, remaining below the 23.5% Index weighting, due to a reduction and underweighting in European Capital Markets and Commercial Banks in early February, following their strong performance run to start 2012. We also decreased the Resources sectors primarily in Energy E&P (Exploration and Production) companies as well as Metals/Mining on a slower growth outlook. Both were underweighted versus the Index at June 30, with Materials representing under 5% of the portfolio, well below the 11.2% Index weighting due to the lower Metals/Mining exposure. Regionally, we increased emerging markets from approximately 21% as of year end to 24.4%, above the 23.8% Index weighting, on an improving growth outlook at the beginning of the year, bolstered by lower inflationary pressure and valuation support. This increase was funded by a reduction in the UK from 23.8% to 19.2%, although it remained well above the 14.0% Index weighting. Developed Asia remained significantly underweighted versus the Index at a combined 13.9%, well below the 24.9% Index weighting, due to lower exposure across the region.

4     Semi-Annual Report June 30, 2012

Institutional International Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Institutional International Growth Fund		7.99	%		-8.73	%		10.99	%		-4.05	%		8.37	%
MSCI All Country World Ex-U.S. IMI (net)		2.93			(14.79	)		7.36			(4.46	)		8.69

(a) For the period July 26, 2002 (Commencement of Operations) to June 30, 2012.

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. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    5

Institutional International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Europe, Mid-East—33.6%
Austria—0.6%
Andritz AG (Machinery)		190,729	$	9,780
Denmark—1.6%
CHR Hansen Holding A/S (Chemicals)		154,015		3,951
Coloplast A/S Class “B” (Health care equipment & supplies)		60,873		10,921
SimCorp A/S (Software)		14,342		2,463
*William Demant Holding A/S (Health care equipment & supplies)		102,791		9,212
				26,547
Finland—1.0%
Kone Oyj (Machinery)		163,087		9,830
Nokian Renkaat Oyj (Auto components)		169,811		6,417
				16,247
France—8.2%
Arkema S.A. (Chemicals)		121,290		7,913
AXA S.A. (Insurance)		2,034,064		26,977
BNP Paribas S.A. (Commercial banks)		928,544		35,646
Christian Dior S.A. (Textiles, apparel & luxury goods)		114,658		15,707
Essilor International S.A. (Health care equipment & supplies)		90,550		8,399
L’Oreal S.A. (Personal products)		61,093		7,131
Sanofi (Pharmaceuticals)		408,887		30,912
Zodiac Aerospace (Aerospace & defense)		53,141		5,386
				138,071
Germany—4.2%
Bayer AG (Pharmaceuticals)		376,877		27,080
Bayerische Motoren Werke AG (Automobiles)		277,168		19,969
Brenntag AG (Trading companies & distributors)		44,899		4,954
Deutsche Bank AG (Capital markets)		94,530		3,409
Gerry Weber International AG (Textiles, apparel & luxury goods)		111,887		4,607
Hugo Boss AG (Textiles, apparel & luxury goods)		23,033		2,269
MTU Aero Engines Holding AG (Aerospace & defense)		105,553		7,739
Pfeiffer Vacuum Technology AG (Machinery)		14,828		1,508
				71,535
Ireland—0.7%
Paddy Power plc (Hotels, restaurants & leisure)		78,860		5,145
Shire plc (Pharmaceuticals)		234,845		6,738
				11,883
Israel—0.3%
*Check Point Software Technologies, Ltd. (Software)†		108,720		5,391
Italy—0.3%
Pirelli & C. SpA (Auto components)		522,069		5,480
Luxembourg—0.6%
Millicom International Cellular S.A. (Wireless telecommunication services)		115,147		10,837
Common Stocks—Europe, Mid-East—33.6%—(continued)
Netherlands—4.5%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		309,710	$	15,703
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		860,614		29,990
Unilever N.V. (Food products)		929,213		31,026
				76.719
Norway—2.5%
*Norwegian Air Shuttle ASA (Airlines)		146,600		2,662
Schibsted ASA (Media)		125,983		4,079
Statoil ASA (Oil, gas & consumable fuels)		771,749		18,344
Telenor ASA (Diversified telecommunication services)		980,.930		16,309
				41,394
Spain—1.8%
Inditex S.A. (Specialty retail)		252,664		26,069
Viscofan S.A. (Food products)		104,690		4,495
				30,564
Sweden—2.0%
Atlas Copco AB Class “A” (Machinery)		753,614		16,167
Axis Communications AB (Communications equipment)		90,856		1,970
Getinge AB (Health care equipment & supplies)		538,308		13,307
JM AB (Household durables)		140,075		2,465
NIBE Industrier AB (Building products)		24,176		330
				34,239
Switzerland—5.3%
*Geberit AG (Building products)		56,809		11,174
Glencore International plc (Metals & mining)		1,973,497		9,135
Nestle S.A. (Food products)		663,881		39,554
*Orascom Development Holding AG (Hotels, restaurants & leisure)		27,188		432
Partners Group Holding AG (Capital markets)		42,248		7,505
SGS S.A. (Professional services)		3,602		6,736
Sika AG (Chemicals)		1,444		2,781
Syngenta AG (Chemicals)		37,134		12,649
				89,966
United Kingdom—19.2%
Abcam plc (Biotechnology)		1,019,413		6,662
AMEC plc (Energy equipment & services)		616,604		9,676
Amlin plc (Insurance)		999,760		5,541
ARM Holdings plc (Semiconductors & semiconductor equipment)		683,306		5,410
Ashmore Group plc (Capital markets)		1,180,943		6,446
Babcock International Group plc (Commercial services & supplies)		993,392		13,279
Croda International plc (Chemicals)		169,798		6,018
Derwent London plc (Real estate investment trusts (REITs))		180,902		5,250
Diageo plc (Beverages)		1,326,694		34,118
Dunelm Group plc (Specialty retail)		539,817		4,392
Elementis plc (Chemicals)		1,062,176		3,302
Experian plc (Professional services)		647,625		9,134
Halma plc (Electronic equipment, instruments & components)		714,191		4,671
Hiscox, Ltd. (Insurance)		488,991		3,272
IG Group Holdings plc (Diversified financial services)		669,429		5,022

See accompanying Notes to Portfolio of Investments.

6     Semi-Annual Report June 30, 2012

Institutional International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—United Kingdom—19.2%—(continued)
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		189,942	$	4,566
ITV plc (Media)		5,384,442		6,460
John Wood Group plc (Energy equipment & services)		612,360		6,574
Johnson Matthey plc (Chemicals)		412,616		14,268
Jupiter Fund Management plc (Capital markets)		801,626		2,702
Kingfisher plc (Specialty retail)		1,296,216		5,834
Lancashire Holdings, Ltd. (Insurance)		568,999		7,098
Meggitt plc (Aerospace & defense)		1,004,681		6,063
Moneysupermarket.com Group plc (Internet software & services)		909,451		1,783
Next plc (Multiline retail)		153,796		7,705
*Ocado Group plc (Internet & catalog retail)		1,754,917		2,136
Pearson plc (Media)		714,220		14,161
Petrofac, Ltd. (Energy equipment & services)		204,149		4,438
Prudential plc (Insurance)		1,166,453		13,482
Rightmove plc (Media)		218,251		5,442
*Rolls-Royce Holdings plc (Aerospace & defense)		1,862,411		25,026
Rotork plc (Machinery)		150,156		4,633
RPS Group plc (Commercial services & supplies)		548,859		1,792
Scottish & Southern Energy plc (Electric utilities)		1,045,468		22,776
Spirax-Sarco Engineering plc (Machinery)		105,203		3,272
*Sports Direct International plc (Specialty retail)		347,718		1,665
St James’s Place plc (Insurance)		475,105		2,487
Standard Chartered plc (Commercial banks)		532,145		11,539
*The Berkeley Group Holdings plc (Household durables)		461,384		10,181
The Weir Group plc (Machinery)		188,829		4,525
Tullow Oil plc (Oil, gas & consumable fuels)		376,615		8,671
Victrex plc (Chemicals)		196,747		3,916
				325,388
Emerging Asia—13.1%
China—3.1%
China BlueChemical, Ltd. (Chemicals)		4,974,000		2,821
China Overseas Land & Investment, Ltd. (Real estate management & development)		2,840,000		6,582
CNOOC, Ltd. (Oil, gas & consumable fuels)		7,914,000		15,710
Dongyue Group (Chemicals)		1,171,000		542
Great Wall Motor Co., Ltd. (Automobiles)		1,055,000		2,091
Hainan International Holdings, Ltd. (Machinery)		1,669,000		1,648
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		165,542		1,410
Lenovo Group, Ltd. (Computers & peripherals)		15,322,000		12,916
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		131,873		2,328
Sun Art Retail Group, Ltd. (Food & staples retailing)		1,910,500		2,091
Common Stocks—Emerging Asia—13.1%—(continued)
China—(continued)
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		124,200	$	1,754
Yingde Gases (Chemicals)		2,149,000		1,956
				51,849
India—3.3%
CRISIL, Ltd. (Diversified financial services)		45,076		867
HDFC Bank, Ltd. (Commercial banks)		860,147		8,682
IndusInd Bank, Ltd. (Commercial banks)		244,781		1,492
Ipca Laboratories, Ltd. (Pharmaceuticals)		269,667		1,732
Lupin, Ltd. (Pharmaceuticals)		389,094		3,743
Oberoi Realty, Ltd. (Real estate management & development)		344,892		1,503
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		622,490		7,088
Tata Consultancy Services, Ltd. (IT services)		751,410		17,191
Tata Motors, Ltd. (Automobiles)		2,387,930		10,369
Yes Bank, Ltd. (Commercial banks)		474,891		2,887
				55,554
Indonesia—1.0%
PT Alam Sutera Realty Tbk (Real estate management & development)		28,653,000		1,495
PT Kalbe Farma Tbk (Pharmaceuticals)		10,867,500		4,368
PT Media Nusantara Citra Tbk (Media)		11,523,000		2,441
PT United Tractors Tbk (Machinery)		3,670,151		8,343
				16,647
Philippines—0.3%
International Container Terminal Services, Inc. (Transportation infrastructure)		1,099,240		1,918
SM Prime Holdings, Inc. (Real estate management & development)		10,725,575		3,314
				5,232
South Korea—3.8%
Celltrion, Inc. (Pharmaceuticals)		237,352		6,279
Hyundai Motor Co. (Automobiles)		96,656		19,620
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		29,139		30,555
Samsung Heavy Industries Co., Ltd. (Machinery)		244,200		7,953
				64,407
Thailand—1.6%
Advanced Info Service PCL (Wireless telecommunication services)		1,709,000		9,928
BEC World PCL (Media)		1,626,100		2,585
CP ALL PCL (Food & staples retailing)		5,950,900		6,652
Kasikornbank PCL (Commercial banks)		1,654,600		8,596
				27,761
Japan—10.1%
Ain Pharmaciez, Inc. (Food & staples retailing)		36,200		2,171
Cosmos Pharmaceutical Corporation (Food & staples retailing)		2,000		132
CyberAgent, Inc. (Media)		1,811		4,606
Daito Trust Construction Co., Ltd. (Real estate management & development)		99,700		9,417

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    7

Institutional International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Japan—10.1%—(continued)
Exedy Corporation (Auto components)		110,300	$	2,372
FamilyMart Co., Ltd. (Food & staples retailing)		146,700		6,699
Fast Retailing Co., Ltd. (Specialty retail)		61,200		12,158
*Gree, Inc. (Internet software & services)		322,400		6,377
Lawson, Inc. (Food & staples retailing)		112,200		7,832
Miraca Holdings, Inc. (Health care providers & services)		72,900		3,014
*Nexon Co., Ltd. (Software)		162,900		3,159
Nikon Corporation (Leisure equipment & products)		878,300		26,392
Nitori Co., Ltd. (Specialty retail)		133,280		12,572
ORIX Corporation (Diversified financial services)		249,500		23,004
Ship Healthcare Holdings, Inc. (Health care providers & services)		105,400		2,525
Softbank Corporation (Wireless telecommunication services)		222,600		8,223
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		1,067,900		34,895
Sundrug Co., Ltd. (Food & staples retailing)		45,400		1,472
Tsuruha Holdings, Inc. (Food & staples retailing)		23,000		1,426
United Arrows, Ltd. (Specialty retail)		80,200		1,989
				170,435
Emerging Latin America—6.4%
Brazil—3.2%
BR Malls Participacoes S.A. (Real estate management & development)		500,400		5,730
BR Properties S.A. (Real estate management & development)		425,500		5,021
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		249,646		3,120
Cia de Concessoes Rodoviarias (Transportation infrastructure)		956,300		7,775
Cia Hering (Specialty retail)		315,300		5,981
Cielo S.A. (IT services)		235,200		6,918
Iochpe-Maxion S.A. (Machinery)		78,500		915
OdontoPrev S.A. (Health care providers & services)		450,300		2,287
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		658,600		6,197
*Qualicorp S.A. (Professional services)		203,300		1,777
T4F Entretenimento S.A. (Media)		296,200		2,455
Tractebel Energia S.A. (Independent power producers & energy traders)		264,300		4,889
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A. (Commercial services & supplies)		118,200		1,766
				54,831
Chile—1.7%
Banco Santander Chile—ADR (Commercial banks)		90,886		7,043
CFR Pharmaceuticals S.A. (Pharmaceuticals)		12,731,968		2,860
Common Stocks—Emerging Latin America—6.4%—(continued)
Chile—(continued)
ENTEL Chile S.A. (Wireless telecommunication services)		321,056	$	6,091
Parque Arauco S.A. (Real estate management & development)		2,745,066		4,879
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		117,161		6,522
Sonda S.A. (IT services)		807,384		2,269
				29,664
Colombia—0.5%
Ecopetrol S.A. (Oil, gas & consumable fuels)		2,829,647		7,911
Panama—0.3%
Copa Holdings S.A. (Airlines)†		63,173		5,211
Peru—0.7%
Credicorp, Ltd. (Commercial banks)†		89,109		11,218
Emerging Europe, Mid-East, Africa—4.9%
Nigeria—0.2%
Guaranty Trust Bank plc (Commercial banks)		31,707,972		2,923
South Africa—4.0%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		444,348		6,841
Bidvest Group, Ltd. (Industrial conglomerates)		376,464		8,381
FirstRand, Ltd. (Diversified financial services)		3,107,498		10,031
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		1,545,845		5,887
Mr Price Group, Ltd. (Specialty retail)		56,975		780
Naspers, Ltd. (Media)		166,526		8,861
Sasol, Ltd. (Oil, gas & consumable fuels)		186,267		7,802
Shoprite Holdings, Ltd. (Food & staples retailing)		398,113		7,337
The Foschini Group, Ltd. (Specialty retail)		420,685		6,587
Tiger Brands, Ltd. (Food products)		167,947		5,033
				67,540
Turkey—0.7%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		173,078		7,130
Turkiye Halk Bankasi A.S. (Commercial banks)		734,966		5,750
				12,880
Western Hemisphere—4.8%
Bermuda—0.2%
RenaissanceRe Holdings, Ltd. (Insurance)†		34,231		2,602
Canada—4.6%
Alimentation Couche Tard, Inc. (Food & staples retailing)		328,956		14,365
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		695,355		23,016
CI Financial Corporation (Capital markets)		326,988		7,092
Dollarama, Inc. (Multiline retail)		128,580		7,727
Metro, Inc. (Food & staples retailing)		166,065		8,503
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		442,016		8,353

See accompanying Notes to Portfolio of Investments.

8     Semi-Annual Report June 30, 2012

Institutional International Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Western Hemisphere—4.8%—(continued)
Canada—(continued)
* Precision Drilling Corporation (Energy equipment & services)		882,498	$	6,007
Tim Hortons, Inc. (Hotels, restaurants & leisure)		57,143		3,012
				78,075
Asia—3.8%
Australia—0.3%
Cochlear, Ltd. (Health care equipment & supplies)		76,351		5,145
Hong Kong—2.0%
AIA Group, Ltd. (Insurance)		6,215,800		21,232
China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§		1,127,000		299
Hutchison Telecommunications Hong Kong Holdings, Ltd. (Diversified telecommunication services)		10,146,000		4,695
Sa Sa International Holdings, Ltd. (Specialty retail)		3,524,000		2,203
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		2,114,500		4,061
Value Partners Group, Ltd. (Capital markets)		3,840,000		1,847
				34.337
Singapore—1.5%
*Global Logistic Properties, Ltd. (Real estate management & development)		5,681,000		9,373
Keppel Corporation, Ltd. (Industrial conglomerates)		1,897,300		15,397
				24,770
Total Common Stocks—95.9% (cost $1,525,150)				1,623,033
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	941		246
Total Convertible Bond—0.0% (cost $488)				246
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $55,989, collateralized by U.S. Treasury Notes, 0.375%, due 4/15/15		55,989		55,989
Total Repurchase Agreement—3.3% (cost $55,989)				55,989
Total Investments—99.2% (cost $1,581,627)				1,679,268
Cash and other assets, less liabilities—0.8%				13,756
Net assets—100.0%			$	1,693,024

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. These holdings represent 0.03% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.03% of the net assets at June 30, 2012.

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	22.1	%
Consumer Discretionary	17.9	%
Industrials	12.6	%
Consumer Staples	11.5	%
Health Care	10.3	%
Energy	8.0	%
Information Technology	7.5	%
Materials	4.7	%
Telecommunication Services	3.7	%
Utilities	1.7	%
Total	100.0	%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	22.9	%
Euro	19.9	%
Japanese Yen	10.5	%
Hong Kong Dollar	5.2	%
Swiss Franc	5.0	%
South African Rand	4.2	%
South Korean Won	4.0	%
U.S. Dollar	3.8	%
Indian Rupee	3.4	%
Brazilian Real	3.4	%
Canadian Dollar	3.4	%
Swedish Krona	2.8	%
Norwegian Krone	2.6	%
Thai Baht	1.7	%
Danish Krone	1.6	%
Singapore Dollar	1.5	%
Indonesian Rupiah	1.0	%
All Other Currencies	3.1	%
Total	100.0	%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    9

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 4.96% increase for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI World Ex-U.S. (net) Index increased 2.43%.

This performance was enhanced by positive stock selection across a number of sectors, coupled with the underweighting in Metals/Mining. During the period, the Fund’s Information Technology (IT) stocks were up 12.7%, well ahead of -3% Index return, ASML Holding N.V.’s performance was enhanced by rumors of a corporate breakup, while SAP AG and Samsung Electronics Co., Ltd. performed well in the first quarter on strong results. European Healthcare holdings bolstered that sector’s return, while Aerospace/Defense holdings and Keppel Corporation, Ltd. boosted Industrials performance. Somewhat detracting from first half performance was the Fund’s Staples underweighting, along with Financials and Utilities performance.

During the six month period, Consumer decreased by 3.3% in favor of Healthcare and Materials. As of period end, the Fund remained the most overweighted in Industrials and IT, which totaled 16.1% and 8.8%, respectively. While Financials represented 20.7% of the portfolio, it was below the 23.9% Index weighting, due to limited Developed Asia and Europe Ex-U.K. exposure. Regionally, Europe represented 37.9% of the Fund, due to an over 12% Healthcare weighting. The U.K. totaled 21.8%, slightly ahead of the Index weighting, while emerging markets represented 10.8%, a reduction from year end, when it represented 14.2%.

10     Semi-Annual Report June 30, 2012

Institutional International Equity Fund

Performance Highlights (unaudited)

Average Annual Total Return 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Institutional International Equity Fund		4.96	%		-10.98	%		7.37	%		-5.78	%		2.23	%
MSCI World Ex-U.S. (net)		2.43			(14.13	)		6.20			(5.67	)		2.86

(a) For the period December 1, 2004 (Commencement of Operations) to June 30, 2012.

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.

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

The Morgan Stanley Capital International (MSCI) World Ex-U.S. (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    11

Institutional International Equity Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Europe, Mid-East—38.2%
Denmark—2.1%
Novo Nordisk A/S (Pharmaceuticals)		16,457	$	2,377
France—11.0%
AXA S.A. (Insurance)		96,252		1,276
BNP Paribas S.A. (Commercial banks)		36,339		1,395
Christian Dior S.A. (Textiles, apparel & luxury goods)		9,520		1,304
Dassault Systemes S.A. (Software)		16,684		1,561
Essilor International S.A. (Health care equipment & supplies)		26,290		2,439
L’Oreal S.A. (Personal products)		12,062		1,408
Sanofi (Pharmaceuticals)		30,289		2,290
Technip S.A. (Energy equipment & services)		9,031		936
				12,609
Germany—7.0%
BASF SE (Chemicals)		26,592		1,841
Bayer AG (Pharmaceuticals)		24,356		1,750
Fresenius SE & Co. KGaA (Health care providers & services)		21,822		2,258
Infineon Technologies AG (Semiconductors & semiconductor equipment)		83,719		565
SAP AG (Software)		27,264		1,606
				8,020
Ireland—2.9%
*Ryanair Holdings plc—ADR (Airlines)		45,783		1,392
Shire plc (Pharmaceuticals)		69,450		1,992
				3,384
Israel—0.9%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)		26,824		1,058
Italy—1.1%
Saipem SpA (Energy equipment & services)		28,816		1,276
Netherlands—4.1%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		29,377		1,489
Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		385		13
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		32,186		1,122
Unilever N.V. (Food products)		62,643		2,092
				4,716
Norway—1.4%
Telenor ASA (Diversified telecommunication services)		96,535		1,605
Spain—1.5%
Inditex S.A. (Specialty retail)		17,276		1,782
Sweden—1.3%
Atlas Copco AB Class “A” (Machinery)		69,907		1,500
Switzerland—4.9%
*Geberit AG (Building products)		6,566		1,292
Nestle S.A. (Food products)		29,443		1,754
Syngenta AG (Chemicals)		7,454		2,539
				5,585
Common Stocks—(continued)
United Kingdom—20.8%
Barclays plc (Commercial banks)		270,465	$	690
BG Group plc (Oil, gas & consumable fuels)		62,141		1,265
Burberry Group plc (Textiles, apparel & luxury goods)		77,020		1,598
Compass Group plc (Hotels, restaurants & leisure)		230,104		2,411
Diageo plc (Beverages)		88,707		2,281
Experian plc (Professional services)		108,356		1,528
HSBC Holdings plc (Commercial banks)		176,278		1,558
Johnson Matthey plc (Chemicals)		51,099		1,767
Pearson plc (Media)		101,202		2,007
Petrofac, Ltd. (Energy equipment & services)		78,182		1,699
Prudential plc (Insurance)		127,777		1,477
*Rolls-Royce Holdings plc (Aerospace & defense)		189,100		2,541
Standard Chartered plc (Commercial banks)		88,587		1,921
Tullow Oil plc (Oil, gas & consumable fuels)		51,254		1,180
				23,923
Japan—14.0%
Chiyoda Corporation (Construction & engineering)		71,000		861
Daito Trust Construction Co., Ltd. (Real estate management & development)		21,100		1,993
FamilyMart Co., Ltd. (Food & staples retailing)		35,000		1,598
Fanuc Corporation (Machinery)		12,400		2,009
Keyence Corporation (Electronic equipment, instruments & components)		5,800		1,423
Nikon Corporation (Leisure equipment & products)		56,700		1,704
Nitori Co., Ltd. (Specialty retail)		13,100		1,236
ORIX Corporation (Diversified financial services)		18,120		1,671
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		43,700		1,428
Suruga Bank, Ltd. (Commercial banks)		95,000		967
THK Co., Ltd. (Machinery)		66,500		1,241
				16,131
Canada—7.1%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		57,864		1,915
Canadian National Railway Co. (Road & rail)†		19,485		1,644
Goldcorp, Inc. (Metals & mining)†		28,563		1,073
The Toronto-Dominion Bank (Commercial banks)		30,570		2,393
Tim Hortons, Inc. (Hotels, restaurants & leisure)		22,535		1,188
				8,213
Emerging Asia—5.6%
China—2.2%
China Mobile, Ltd. (Wireless telecommunication services)		113,000		1,235
CNOOC, Ltd. (Oil, gas & consumable fuels)		647,000		1,284
				2,519
India—0.8%
Tata Consultancy Services, Ltd. (IT services)		40,992		938

See accompanying Notes to Portfolio of Investments.

12     Semi-Annual Report June 30, 2012

Institutional International Equity Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Emerging Asia—5.6%—(continued)
Papua New Guinea—0.8%
Oil Search, Ltd. (Oil, gas & consumable fuels)		127,500	$	858
South Korea—1.8%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,994		2,091
Asia—5.0%
Australia—1.6%
BHP Billiton, Ltd.—ADR (Metals & mining)		28,069		1,833
Hong Kong—2.1%
AIA Group, Ltd. (Insurance)		701,600		2,397
Singapore—1.3%
Keppel Corporation, Ltd. (Industrial conglomerates)		193,000		1,566
Emerging Latin America—3.4%
Brazil—1.0%
Embraer S.A.—ADR (Aerospace & defense)		41,660		1,105
Chile—1.5%
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		31,185		1,736
Panama—0.9%
Copa Holdings S.A. (Airlines)†		12,914		1,065
Emerging Europe, Mid-East, Africa—1.4%
South Africa—1.4%
FirstRand, Ltd. (Diversified financial services)		491,768		1,588
Total Common Stocks—95.5% (cost $99,116)				109,875
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $5,659, collateralized by FNMA, 5.000%, due 4/15/15	$	5,659		5,659
Total Repurchase Agreement—4.9% (cost $5,659)				5,659
Total Investments—100.4% (cost $104,775)				115,534
Liabilities, plus cash and other assets—(0.4)%				(413	)
Net assets—100.0%			$	115,121

ADR = American Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	20.7	%
Industrials	16.1	%
Health Care	12.9	%
Consumer Discretionary	12.0	%
Materials	9.8	%
Information Technology	8.8	%
Energy	8.8	%
Consumer Staples	8.3	%
Telecommunication Services	2.6	%
Total	100.0	%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Euro	24.8	%
British Pound Sterling	23.2	%
Japanese Yen	14.7	%
U.S. Dollar	11.7	%
Hong Kong Dollar	5.9	%
Swiss Franc	5.1	%
Canadian Dollar	3.2	%
Danish Krone	2.2	%
South Korean Won	1.9	%
Norwegian Krone	1.5	%
South African Rand	1.4	%
Singapore Dollar	1.4	%
Swedish Krona	1.4	%
All Other Currencies	1.6	%
Total	100.0	%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    13

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 6.43% increase \(Institutional Class Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI All Country Ex-U.S. Small Cap Index (net), increased 4.09%.

Performance was driven by strong stock selection across a number of sectors, along with a focus on high quality companies with good growth prospects. In addition, the Fund’s sector/industry exposures were positive given the significant Metals/Mining underweighting and Consumer overweighting. Within Discretionary, Nokian Renkaat (Tyres), the Finnish tire company, added to results on strong demand from its important Russian end market, while Salvatore Ferragamo Italia SpA, the Italian luxury goods company, rose on strong sales trends across most regions and distribution channels. Dollarama, Inc. also performed well over the period. Somewhat detracting from results was K’s Holdings Corporation, the Japanese electronics retailer, which had weak TV sales as incentives expired. Financials stock selection was bolstered by conservative Commercial Banks positioning coupled with strong results in Insurance and Real Estate. Defensive positioning within Industrials added value as well. Somewhat detracting from results was weak performance in Energy, as Legacy Oil & Gas, Inc. detracted from results on lower production growth and reserves than the market expected, and as Celtic Exploration Ltd. and Peyto Exploration & Development Corporation each underperformed on concerns of lower natural gas prices and slowing production growth.

The Fund maintained its significant Consumer focus, representing 35.8% as of June 30, approximately 10% above the Index weighting. At June 30, the Fund remained significantly overweighted in Health Care, which totaled 12.5%, well above the 5% Index weighting, although below the 15.8% weighting as of year end. Conversely, Resources, Industrials and Financials were significantly underweighted. Overall regional positioning did not change appreciably during the six month period, as the Fund maintained its significant weighting in the UK at the expense of Developed Asia and Canada. Emerging markets totaled 22.2% as of June 30, below the 23.1% Index weighting and a reduction from year end, due to lower exposure in Emerging Asia, given slowing growth in that region.

14     Semi-Annual Report June 30, 2012

International Small Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		6.43	%		-11.09	%		14.48	%		-2.05	%		5.11	%
MSCI ACWI Ex-U.S. Small Cap (net)		4.09			(16.43	)		10.41			(3.74	)		4.41

(a) For the period November 1, 2005 (Commencement of Operations) to June 30, 2012.

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. 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. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    15

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
United Kingdom—22.1%
Abcam plc (Biotechnology)		962,205	$	6,288
*ASOS plc (Internet & catalog retail)		118,426		3,292
Aveva Group plc (Software)		265,190		6,770
Babcock International Group plc (Commercial services & supplies)		1,107,282		14,801
Booker Group plc (Food & staples retailing)		8,352,829		11,904
Croda International plc (Chemicals)		398,298		14,116
Domino’s Pizza Group plc (Hotels, restaurants & leisure)		313,120		2,523
Dunelm Group plc (Specialty retail)		445,908		3,628
Elementis plc (Chemicals)		1,427,404		4,438
*EnQuest plc (Oil, gas & consumable fuels)		1,476,078		2,490
Fidessa Group plc (Software)		122,805		2,981
Halma plc (Electronic equipment, instruments & components)		878,060		5,743
Hiscox, Ltd. (Insurance)		488,558		3,269
IG Group Holdings plc (Diversified financial services)		1,272,904		9,549
*Imagination Technologies Group plc (Computers & peripherals)		903,107		6,600
Lancashire Holdings, Ltd. (Insurance)		927,090		11,565
Moneysupermarket.com Group plc (Internet software & services)		1,770,555		3,472
*Salamander Energy plc (Oil, gas & consumable fuels)		1,680,109		4,492
Spirax-Sarco Engineering plc (Machinery)		211,563		6,580
*Sports Direct International plc (Specialty retail)		1,338,244		6,409
St James’s Place plc (Insurance)		636,618		3,333
Synergy Health plc (Health care providers & services)		207,366		2,928
*Telecity Group plc (Internet software & services)		491,879		6,186
				143,357
Europe—20.7%
Denmark—0.9%
CHR Hansen Holding A/S (Chemicals)		225,500		5,785
Germany—7.0%
Aixtron AG (Semiconductors & semiconductor equipment)		306,454		4,367
Delticom AG (Specialty retail)		30,200		1,983
ElringKlinger AG (Auto components)		191,003		4,537
Gerry Weber International AG (Textiles, apparel & luxury goods)		145,938		6,009
MTU Aero Engines Holding AG (Aerospace & defense)		169,142		12,402
Pfeiffer Vacuum Technology AG (Machinery)		58,801		5,980
Wincor Nixdorf AG (Computers & peripherals)		197,352		6,988
Wirecard AG (IT services)		184,136		3,563
				45,829
Ireland—1.4%
Paddy Power plc (Hotels, restaurants & leisure)		143,495		9,361
Italy—3.2%
De’Longhi SpA (Household durables)		391,776		3,760
Recordati SpA (Pharmaceuticals)		397,789		2,829
Common Stocks—Europe—20.7%—(continued)
Italy—(continued)
Salvatore Ferragamo Italia SpA (Textiles, apparel & luxury goods)		299,415	$	6,214
Tod’s SpA (Textiles, apparel & luxury goods)		50,442		5,040
*Yoox SpA (Internet & catalog retail)		201,285		2,899
				20,742
Norway—1.9%
Opera Software ASA (Internet software & services)		533,186		3,756
Schibsted ASA (Media)		271,063		8,776
				12,532
Spain—2.3%
Viscofan S.A. (Food products)		341,795		14,676
Sweden—3.0%
Axis Communications AB (Communications equipment)		351,804		7,629
JM AB (Household durables)		280,780		4,942
Mekonomen AB (Specialty retail)		130,585		3,992
NIBE Industrier AB (Building products)		211,658		2,884
				19,447
Switzerland—1.0%
Partners Group Holding AG (Capital markets)		36,436		6,472
Japan—16.2%
Ain Pharmaciez, Inc. (Food & staples retailing)		112,400		6,742
Cosmos Pharmaceutical Corporation (Food & staples retailing)		60,600		4,010
CyberAgent, Inc. (Media)		3,535		8,991
F.C.C. Co., Ltd. (Auto components)		326,709		5,436
FamilyMart Co., Ltd. (Food & staples retailing)		320,900		14,653
Kakaku.com, Inc. (Internet software & services)		93,000		3,143
M3, Inc. (Health care technology)		812		3,870
Miraca Holdings, Inc. (Health care providers & services)		262,600		10,858
MISUMI Group, Inc. (Trading companies & distributors)		278,100		6,499
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		30,100		3,231
Ship Healthcare Holdings, Inc. (Health care providers & services)		209,000		5,007
Start Today Co., Ltd. (Internet & catalog retail)		284,300		3,951
Suruga Bank, Ltd. (Commercial banks)		1,017,000		10,356
THK Co., Ltd. (Machinery)		472,200		8,814
United Arrows, Ltd. (Specialty retail)		167,700		4,158
Xebio Co., Ltd. (Specialty retail)		257,300		5,849
				105,568
Emerging Asia—11.1%
China—4.9%
AAC Technologies Holdings, Inc. (Communications equipment)		2,111,559		6,070
Dongyue Group (Chemicals)		3,435,000		1,590

See accompanying Notes to Portfolio of Investments.

16     Semi-Annual Report June 30, 2012

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Asia—11.1%—(continued)
China—(continued)
*Haier Electronics Group Co., Ltd. (Household durables)		8,292,000	$	9,876
Haitian International Holdings, Ltd. (Machinery)		3,820,496		3,772
Minth Group, Ltd. (Auto components)		2,728,000		2,929
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)†		209,135		3,691
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)†		261,262		3,689
				31,617
India—2.0%
CRISIL, Ltd. (Diversified financial services)		181,617		3,492
eClerx Services, Ltd. (Professional services)		160,640		1,745
Ipca Laboratories, Ltd. (Pharmaceuticals)		300,246		1,929
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		112,272		2,351
Motherson Sumi Systems, Ltd. (Auto components)		715,247		2,094
Oberoi Realty, Ltd. (Real estate management & development)		344,191		1,500
				13,111
Indonesia—1.6%
PT Harum Energy Tbk (Oil, gas & consumable fuels)		2,587,500		1,570
PT Kalbe Farma Tbk (Pharmaceuticals)		6,134,500		2,466
PT Media Nusantara Citra Tbk (Media)		12,923,000		2,738
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		12,969,500		3,694
				10,468
South Korea—0.6%
Daum Communications Corporation (Internet software & services)		44,148		3,943
Taiwan—1.1%
Hiwin Technologies Corporation (Machinery)		370,000		3,739
Simplo Technology Co., Ltd. (Computers & peripherals)		524,500		3,571
				7,310
Thailand—0.9%
Bangkok Dusit Medical Services PCL (Health care providers & services)		831,500		2,552
Siam Makro PCL (Food & staples retailing)		267,900		3,003
				5,555
Asia—9.0%
Australia—3.0%
Cochlear, Ltd. (Health care equipment & supplies)		196,219		13,222
Seek, Ltd. (Professional services)		929,525		6,032
				19,254
Hong Kong—4.6%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)		1,249,300		15,854
Sa Sa International Holdings, Ltd. (Specialty retail)		5,746,000		3,592
Common Stocks—Asia—9.0%—(continued)
Hong Kong—(continued)
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		4,925,500	$	9,460
Value Partners Group, Ltd. (Capital markets)		1,968,000		946
				29,852
Singapore—1.4%
*Biosensors International Group, Ltd. (Health care equipment & supplies)		3,011,000		2,698
First Resources, Ltd. (Food products)		4,340,000		6,578
				9,276
Canada—6.5%
Canadian Energy Services & Technology Corporation (Energy equipment & services)		202,155		1,944
Canadian Western Bank (Commercial banks)		83,749		2,173
*Celtic Exploration, Ltd. (Oil, gas & consumable fuels)		510,250		6,901
Dollarama, Inc. (Multiline retail)		197,301		11,856
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		831,220		4,588
Major Drilling Group International, Inc. (Metals & mining)		195,191		2,257
Petrominerales, Ltd. (Oil, gas & consumable fuels)		158,581		1,791
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		327,812		6,195
*Precision Drilling Corporation (Energy equipment & services)		417,208		2,840
Total Energy Services, Inc. (Energy equipment & services)		128,308		1,814
				42,359
Emerging Europe, Mid-East, Africa—6.3%
Poland—1.0%
Eurocash S.A. (Food & staples retailing)		235,146		2,894
Lubelski Wegiel Bogdanka S.A. (Oil, gas & consumable fuels)		97,701		3,577
				6,471
Russia—0.4%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)†		419,810		2,288
South Africa—3.5%
Capitec Bank Holdings, Ltd. (Commercial banks)		271,332		7,053
Coronation Fund Managers, Ltd. (Capital markets)		1,036,290		3,508
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,264,242		8,622
Mr Price Group, Ltd. (Specialty retail)		256,068		3,506
				22,689
Turkey—1.4%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		945,477		4,047
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		5,205,656		5,296
				9,343

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    17

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
Common Stocks—(continued)
Emerging Latin America—3.8%
Brazil—2.7%
Arezzo Industria e Comercio S.A. (Textiles, apparel & luxury goods)		268,796	$	4,002
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		148,542		1,856
Iochpe-Maxion S.A. (Machinery)		166,500		1,940
OdontoPrev S.A. (Health care providers & services)		837,700		4,254
Restoque Comercio e Confeccoes de Roupas S.A. (Textiles, apparel & luxury goods)		439,800		2,251
T4F Entretenimento S.A. (Media)		413,800		3,430
				17,733
Chile—0.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)		14,169,396		3,183
Panama—0.6%
Copa Holdings S.A. (Airlines)†		45,616		3,763
Total Common Stocks—95.7% (cost $580,931)				621,984
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		251
Total Convertible Bond—0.0% (cost $497)				251
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $26,085, collateralized by FNMA, 5.000%, due 4/15/15		26,085		26,085
Total Repurchase Agreement—4.0% (cost $26,085)				26,085
Total Investments—99.7% (cost $607,513)				648,320
Cash and other assets, less liabilities—0.3%				2,202
Net assets—100.0%			$	650,522

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 0.04% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2012.

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	24.8%
Information Technology	15.2%
Industrials	12.7%
Health Care	12.5%
Financials	11.7%
Consumer Staples	11.0%
Energy	6.1%
Materials	4.5%
Telecommunication Services	1.5%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	23.0%
Japanese Yen	17.0%
Euro	15.6%
Hong Kong Dollar	9.9%
Canadian Dollar	6.8%
South African Rand	3.7%
Swedish Krona	3.1%
Australian Dollar	3.1%
Brazilian Real	2.9%
Indian Rupee	2.1%
Norwegian Krone	2.0%
Indonesian Rupiah	1.7%
Turkish Lira	1.5%
Singapore Dollar	1.5%
New Taiwan Dollar	1.2%
Swiss Franc	1.0%
All Other Currencies	3.9%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

18     Semi-Annual Report June 30, 2012

Todd M. McClone

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 7.33% increase (Institutional Class Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net), increased 4.31%.

Year-to-date, performance was strong. The Fund’s significant outperformance was driven by stock selection, coupled with the its focus on high quality companies with good growth prospects. In addition, the Fund’s industry positioning augmented performance during the period. Staples stock selection was strong, with good performance in Food/Staples Retailing and Food Products. In particular Magnit OJSC, the Russian grocery store chain was additive to results on strong same store sales, while CP ALL Public Company Limited, the Thai convenience store operator, also reported better than expected results on strong same store sales growth. BIM Birlesik Magazalar A.S., the hard discounter in Turkey, reported strong sales growth during the period. Financials stock selection was strong, supported by Turkiye Garanti Bankasi A.S., the Turkish bank specializing in lending. Somewhat detracting from performance was Information Technology (IT) stock selection, given weakness in HTC Corporation, the Taiwan smartphone producer, and Infosys Technologies Limited, the Indian IT and software company.

Consumer was reduced during the six month period to approximately 26% of the portfolio, with a tilt towards Staples, yet remained significantly overweighted versus the 17.5% Index weighting, given higher Autos, Media, Retailing and Food/Staples Retailing weightings. This decrease funded a slight increase in Resources, although it remained significantly underweighted versus the 23.8% Index weighting, due primarily to the significant underweighting in Mining, given concerns about slowing infrastructure spending growth and the impact on commodity prices prospectively. Regionally, the portfolio’s positioning did not change significantly during the six month period and remained relatively similar to the Index, despite significant country weighting variances. Within Emerging Asia, the 8.2% India weighting and 4.4% weighting in Indonesia, was offset by lower Korean and Taiwanese exposure, while in Emerging Europe, Mid East, and Africa (EMEA), limited Eastern Europe and Russian exposure was offset by higher weightings in South Africa and Turkey. Emerging Latin America totaled 23.7% as of quarter end, above the 24.5% Index weighting given larger weights in Chile, Colombia and Peru, which offset lower Mexican exposure.

June 30, 2012 William Blair Funds    19

Emerging Markets Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		7.33	%		-10.32	%		13.17	%		-2.56	%		10.53	%
MSCI Emerging Markets IMI (net)		4.31			(16.29	)		9.97			(0.01	)		10.34

(a) For the period June 6, 2005 (Commencement of Operations) to June 30, 2012.

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.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

20     Semi-Annual Report June 30, 2012

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Emerging Asia—53.7%
China—19.4%
AAC Technologies Holdings, Inc. (Communications equipment)		1,157,959	$	3,329
*Baidu, Inc.—ADR (Internet software & services)		151,291		17,395
Belle International Holdings, Ltd. (Specialty retail)		2,638,610		4,462
China BlueChemical, Ltd. (Chemicals)		4,060,609		2,303
China Mobile, Ltd. (Wireless telecommunication services)		3,218,755		35,163
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		2,218,304		7,735
CNOOC, Ltd. (Oil, gas & consumable fuels)		12,063,601		23,947
Comba Telecom Systems Holdings, Ltd. (Communications equipment)		4,121,361		1,711
Dongfeng Motor Group Co., Ltd. (Automobiles)		7,888,186		12,100
Dongyue Group (Chemicals)		2,825,287		1,307
Golden Eagle Retail Group, Ltd. (Multiline retail)		1,130,547		2,294
*Haier Electronics Group Co., Ltd. (Household durables)		5,423,000		6,459
Haitian International Holdings, Ltd. (Machinery)		2,617,870		2,585
Lenovo Group, Ltd. (Computers & peripherals)		15,137,014		12,761
*NetEase, Inc.—ADR (Internet software & services)		76,617		4,509
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		1,261,449		10,032
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		163,268		2,882
Sun Art Retail Group, Ltd. (Food & staples retailing)		8,773,245		9,601
Tencent Holdings, Ltd. (Internet software & services)		310,335		9,040
Want Want China Holdings, Ltd. (Food products)		7,076,217		8,665
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		162,514		2,295
Yingde Gases (Chemicals)		2,319,981		2,111
*Youku.com, Inc.—ADR (Internet software & services)		80,097		1,736
				184,422
India—8.2%
Asian Paints, Ltd. (Chemicals)		45,181		3,147
Bajaj Auto, Ltd. (Automobiles)		168,227		4,739
HDFC Bank, Ltd. (Commercial banks)		998,051		10,073
Housing Development Finance Corporation (Thrifts & mortgage finance)		803,261		9,397
IndusInd Bank, Ltd. (Commercial banks)		476,422		2,903
ITC, Ltd. (Tobacco)		3,557,037		16,494
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		120,928		2,532
Lupin, Ltd. (Pharmaceuticals)		234,955		2,260
Motherson Sumi Systems, Ltd. (Auto components)		640,080		1,874
Nestle India, Ltd. (Food products)		28,797		2,341
Common Stocks—Emerging Asia—53.7%—(continued)
India—(continued)
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		430,529	$	4,903
Tata Consultancy Services, Ltd. (IT services)		370,963		8,487
Tata Motors, Ltd. (Automobiles)		2,149,801		9,335
				78,485
Indonesia—4.4%
PT Astra International Tbk (Automobiles)		13,191,240		9,620
PT Bank Rakyat Indonesia (Commercial banks)		17,979,821		12,156
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		986,224		3,775
PT Jasa Marga Persero Tbk (Transportation infrastructure)		2,980,500		1,713
PT Kalbe Farma Tbk (Pharmaceuticals)		6,336,283		2,547
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)		9,279,728		2,643
PT Unilever Indonesia Tbk (Household products)		2,696,997		6,576
PT United Tractors Tbk (Machinery)		1,036,273		2,355
				41,385
Malaysia—1.0%
CIMB Group Holdings Bhd (Commercial banks)		4,167,287		9,934
Papua New Guinea—1.0%
Oil Search, Ltd. (Oil, gas & consumable fuels)		1,471,402		9,910
Philippines—0.1%
Alliance Global Group, Inc. (Industrial conglomerates)		1,862,972		510
South Korea—8.2%
Celltrion, Inc. (Pharmaceuticals)		171,765		4,544
Hyundai Motor Co. (Automobiles)		82,330		16,713
LG Household & Health Care, Ltd. (Household products)		8,178		4,405
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		31,001		32,507
Samsung Engineering Co., Ltd. (Construction & engineering)		45,297		7,099
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		38,338		7,565
Samsung Heavy Industries Co., Ltd. (Machinery)		152,914		4,980
				77,813
Taiwan—6.4%
Asustek Computer, Inc. (Computers & peripherals)		1,218,000		11,065
Catcher Technology Co., Ltd. (Computers & peripherals)		609,064		4,046
Hiwin Technologies Corporation (Machinery)		260,742		2,635
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		6,635,994		19,851
HTC Corporation (Communications equipment)		499,800		6,514
MediaTek, Inc. (Semiconductors & semiconductor equipment)		754,064		6,888

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    21

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Asia—53.7% (continued)
Taiwan—(continued)
Simplo Technology Co., Ltd. (Computers & peripherals)		618,122	$	4,209
TPK Holding Co., Ltd. (Electronic equipment, instruments & components)		442,979		5,544
TSRC Corporation (Chemicals)		111,708		274
				61,026
Thailand—5.0%
Advanced Info Service PCL (Wireless telecommunication services)		2,656,362		15,431
BEC World PCL (Media)		2,929,000		4,657
CP ALL PCL (Food & staples retailing)		8,589,718		9,601
Kasikornbank PCL (Commercial banks)		2,772,682		14,405
Siam Makro PCL (Food & staples retailing)		304,532		3,414
				47,508
Emerging Latin America—21.8%
Argentina—0.5%
MercadoLibre, Inc. (Internet software & services)		64,031		4,853
Brazil—10.2%
BR Malls Participacoes S.A. (Real estate management & development)		596,190		6,827
BR Properties S.A. (Real estate management & development)		309,597		3,653
CETIP S.A.—Balcao Organizado de Ativos e Derivativos (Capital markets)		153,548		1,919
Cia de Bebidas das Americas—ADR (Beverages)		498,098		19,092
Cia de Concessoes Rodoviarias (Transportation infrastructure)		652,489		5,305
Cia Hering (Specialty retail)		229,116		4,346
Cielo S.A. (IT services)		498,800		14,672
CPFL Energia S.A.—ADR (Electric utilities)		274,394		6,857
Embraer S.A.—ADR (Aerospace & defense)		358,522		9,512
Iochpe-Maxion S.A. (Machinery)		188,500		2,196
Lojas Renner S.A. (Multiline retail)		168,222		4,720
OdontoPrev S.A. (Health care providers & services)		504,566		2,562
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)		811,289		2,222
Raia Drogasil S.A. (Food & staples retailing)		246,545		2,486
Totvs S.A. (Software)		124,732		2,403
Tractebel Energia S.A. (Independent power producers & energy traders)		435,038		8,047
				96,819
Chile—3.4%
Banco Santander Chile—ADR (Commercial banks)		119,420		9,254
CFR Pharmaceuticals S.A. (Pharmaceuticals)		10,378,475		2,332
ENTEL Chile S.A. (Wireless telecommunication services)		349,425		6,629
S.A.C.I. Falabella (Multiline retail)		768,693		7,023
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		82,591		4,598
Sonda S.A. (IT services)		902,990		2,537
				32,373
Common Stocks—Emerging Latin America—21.8% (continued)
Colombia—2.3%
Ecopetrol S.A. (Oil, gas & consumable fuels)		5,554,705	$	15,530
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		285,240		6,041
				21,571
Mexico—4.5%
Coca-Cola Femsa S.A.B. de C.V.—ADR (Beverages)		37,395		4,894
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)		1,239,169		2,448
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		3,187,010		16,471
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,411,812		19,058
				42,871
Peru—0.9%
Credicorp, Ltd. (Commercial banks)†		71,223		8,966
Emerging Europe, Mid-East, Africa—19.6%
Nigeria—0.3%
Guaranty Trust Bank plc (Commercial banks)		32,723,983		3,016
Poland—0.6%
Eurocash S.A. (Food & staples retailing)		466,227		5,738
Qatar—1.5%
Industries Qatar QSC (Industrial conglomerates)		412,537		14,161
Russia—2.7%
* Etalon Group Ltd.—144A—GDR (Real estate management & development)		473,600		2,581
Magnit OAO (Food & staples retailing)†		120,783		14,526
*Mail.ru Group, Ltd.—GDR (Internet software & services)		78,415		2,658
*Yandex N.V. Class “A” (Internet software & services)†		328,102		6,250
				26,015
South Africa—10.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		319,257		4,915
AVI, Ltd. (Food products)		771,245		4,717
Bidvest Group, Ltd. (Industrial conglomerates)		457,034		10,175
FirstRand, Ltd. (Diversified financial services)		4,552,014		14,694
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,323,740		8,849
Mr Price Group, Ltd. (Specialty retail)		188,991		2,587
MTN Group, Ltd. (Wireless telecommunication services)		584,575		10,077
Naspers, Ltd. (Media)		188,266		10,018
Sasol, Ltd. (Oil, gas & consumable fuels)		407,706		17,076
Shoprite Holdings, Ltd. (Food & staples retailing)		385,753		7,110
Tiger Brands, Ltd. (Food products)		137,081		4,108
Truworths International, Ltd. (Specialty retail)		472,654		5,176
				99,502

See accompanying Notes to Portfolio of Investments.

22     Semi-Annual Report June 30, 2012

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2011 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—19.6%—(continued)
Turkey—4.0%
Arcelik A.S. (Household durables)		576,339	$	2,913
BIM Birlesik Magazalar A.S. (Food & staples retailing)		220,658		9,090
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		718,901		3,076
Turkiye Halk Bankasi A.S. (Commercial banks)		2,920,553		22,851
				37,930
Total Common Stocks—95.1% (cost $858,643)				904,808
Preferred Stocks
Brazil—2.0%
Itau Unibanco Holding S.A. (Commercial banks)		983,041		13,846
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		539,525		4,902
				18,748
Total Preferred Stocks—2.0% (cost $19,749)				18,748
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		419
Total Convertible Bond—0.0% (cost $831)				419
Total Investments—97.1% (cost $879,223)				923,975
Cash and other assets, less liabilities—2.9%				27,724
Net assets—100.0%			$	951,699

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 0.04% of the Fund’s net assets at June 30, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2012.

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Information Technology	20.1%
Financials	19.5%
Consumer Staples	14.7%
Consumer Discretionary	12.4%
Energy	9.9%
Telecommunication Services	7.3%
Industrials	6.9%
Health Care	4.1%
Materials	3.5%
Utilities	1.6%
Total	100.0%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.4%
U.S. Dollar	12.5%
South African Rand	10.8%
Brazilian Real	8.7%
Indian Rupee	8.5%
South Korean Won	8.4%
New Taiwan Dollar	6.6%
Thai Baht	5.1%
Indonesian Rupiah	4.5%
Mexican Peso	4.1%
Turkish Lira	4.1%
Chilean Peso	2.0%
Colombian Peso	1.7%
Qatari Rial	1.5%
Malaysian Ringgit	1.1%
Australian Dollar	1.1%
All Other Currencies	1.9%
Total	100.0%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    23

Todd M. McClone

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 posted a 7.06% increase (Institutional Class Shares) for the six months ended June 30, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) increased 3.60% during the same period.

Year-to-date, performance was strong. The Fund’s significant outperformance was driven by stock selection, coupled with the Fund’s focus on high quality companies with good growth prospects. The overweighting in Staples along with good stock selection bolstered performance, as Magnit OJSC, the Russian grocery store chain, was additive to results on strong same store sales growth, while CP All, the Thai convenience store operator, also reported better than expected results on strong same store sales growth. Financials performance was bolstered by Banorte, which continued to generate strong results. Redecard, the Brazilian payment processing company, was up significantly on Itau Unibanco’s tender for outstanding shares. We sold the company as a result. Resources stock selection was also strong, driven by good performance in Oil/Gas and Metals/Mining holdings. Somewhat detracting from results was the Fund’s underperformance in IT and Industrials.

Consumer was reduced during the six month period to approximately 28% of the portfolio, with a tilt towards Staples, yet remained significantly overweighted versus the 14.7% Index weighting, given higher Autos, Retailing and Food/Staples Retailing weightings. This decrease funded a 2.5% increase in Resources, although it remained significantly underweighted versus the 26.7% Index weighting, due primarily to the significant underweighting in Mining, given concerns about slowing infrastructure spending growth and the impact on commodity prices prospectively. Regionally, the portfolio’s positioning did not change significantly during the three month period. EM Asia was slightly underweighted versus the Index as of June 30, due to lower Korean and Taiwanese exposure, which more than offset a 3% overweighting in India and slightly higher Chinese and Indonesian exposure. In EMEA, limited Eastern Europe and Russian exposure was offset by a 5% overweighting in South Africa. Latin America totaled 23.8% as of quarter end, above the 22.8% Index weighting given larger weights in Chile, Colombia and Peru, which offset lower Brazilian and Mexican exposure.

24     Semi-Annual Report June 30, 2012

Emerging Leaders Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			Since Inception(a)
Institutional Class		7.06	%		-11.55	%		12.02	%		-2.01	%
MSCI Emerging Markets Large Cap (net)		3.60			(15.51	)		9.62			(1.53	)

(a) For the period March 26, 2008 (Commencement of Operations) to June 30, 2012.

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 includes 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.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

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

June 30, 2012 William Blair Funds    25

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks
Emerging Asia—55.9%
China—20.0%
* Baidu, Inc.—ADR (Internet software & services)		8,786	$	1,010
Belle International Holdings, Ltd. (Specialty retail)		244,000		413
China Mobile, Ltd. (Wireless telecommunication services)		177,500		1,939
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		102,000		356
CNOOC, Ltd. (Oil, gas & consumable fuels)		750,000		1,489
Dongfeng Motor Group Co., Ltd. (Automobiles)		484,000		742
Lenovo Group, Ltd. (Computers & peripherals)		836,000		705
* NetEase, Inc.—ADR (Internet software & services)		3,908		230
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		73,000		581
Sun Art Retail Group, Ltd. (Food & staples retailing)		514,000		562
Tencent Holdings, Ltd. (Internet software & services)		18,700		545
Want Want China Holdings, Ltd. (Food products)		327,000		400
				8,972
India—10.1%
Bajaj Auto, Ltd. (Automobiles)		15,682		442
HDFC Bank, Ltd. (Commercial banks)		67,729		684
Housing Development Finance Corporation (Thrifts & mortgage finance)		42,550		498
ITC, Ltd. (Tobacco)		165,531		767
Nestle India, Ltd. (Food products)		2,736		222
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		63,475		723
Tata Consultancy Services, Ltd. (IT services)		22,902		524
Tata Motors, Ltd. (Automobiles)		161,854		703
				4,563
Indonesia—5.5%
PT Astra International Tbk (Automobiles)		1,225,500		894
PT Bank Rakyat Indonesia (Commercial banks)		1,153,000		779
PT Unilever Indonesia Tbk (Household products)		232,000		566
PT United Tractors Tbk (Machinery)		108,500		247
				2,486
Malaysia—1.8%
CIMB Group Holdings Bhd (Commercial banks)		330,200		787
South Korea—8.8%
Hyundai Motor Co. (Automobiles)		4,437		901
LG Household & Health Care, Ltd. (Household products)		1,063		572
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,769		1,855
Samsung Engineering Co., Ltd. (Construction & engineering)		4,091		641
				3,969

Issuer	Shares		Value
Common Stocks—Emerging Asia—55.9%—(continued)
Taiwan—3.4%
Asustek Computer, Inc. (Computers & peripherals)		41,000	$	372
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		380,700		1,139
				1,511
Thailand—6.3%
Advanced Info Service PCL (Wireless telecommunication services)		164,800		957
CP ALL PCL (Food & staples retailing)		965,700		1,080
Kasikornbank PCL (Commercial banks)		155,800		809
				2,846
Emerging Latin America—21.8%
Brazil—9.9%
BR Malls Participacoes S.A. (Real estate management & development)		63,300		725
Cia de Bebidas das Americas—ADR (Beverages)		28,876		1,107
Cia de Concessoes Rodoviarias (Transportation infrastructure)		63,100		513
Cielo S.A. (IT services)		23,300		685
CPFL Energia S.A.—ADR (Electric utilities)		16,614		415
Embraer S.A.—ADR (Aerospace & defense)		15,600		414
Tractebel Energia S.A. (Independent power producers & energy traders)		31,400		581
				4,440
Chile—3.7%
Banco Santander Chile—ADR (Commercial banks)		10,225		792
S.A.C.I. Falabella (Multiline retail)		52,314		478
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		7,336		409
				1,679
Colombia—2.5%
Ecopetrol S.A. (Oil, gas & consumable fuels)		394,565		1,103
Mexico—4.9%
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		184,600		954
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		420,200		1,249
				2,203
Peru—0.8%
Credicorp, Ltd. (Commercial banks)†		3,045		383
Emerging Europe, Mid-East, Africa—19.6%
Qatar—1.9%
Industries Qatar QSC (Industrial conglomerates)		24,491		841
Russia—3.6%
Magnit OAO (Food & staples retailing)†		924		111
* Magnit OJSC—144A—GDR (Food & staples retailing)†		21,877		658
Sberbank of Russian Federation (Commercial banks)†		316,195		844
				1,613

See accompanying Notes to Portfolio of Investments.

26     Semi-Annual Report June 30, 2012

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Shares		Value
Common Stocks—Emerging Europe, Mid-East, Africa—19.6%—(continued)
South Africa—12.3%
Bidvest Group, Ltd. (Industrial conglomerates)		31,864	$	709
FirstRand, Ltd. (Diversified financial services)		283,763		916
MTN Group, Ltd. (Wireless telecommunication services)		27,421		473
Naspers, Ltd. (Media)		9,621		512
Sasol, Ltd. (Oil, gas & consumable fuels)		25,709		1,077
Shoprite Holdings, Ltd. (Food & staples retailing)		48,720		898
Tiger Brands, Ltd. (Food products)		14,106		423
Truworths International, Ltd. (Specialty retail)		47,800		523
				5,531
Turkey—1.8%
Turkiye Garanti Bankasi A.S. (Commercial banks)		210,924		828
Total Common Stocks—97.3% (cost $41,454)				43,755
Preferred Stocks
Brazil—2.1%
Itau Unibanco Holding S.A. (Commercial banks)		45,600		642
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		32,055		291
				933
Total Preferred Stocks—2.1% (cost $986)				933
Total Investments—99.4% (cost $42,440)				44,688
Cash and other assets, less liabilities—0.6%				278
Net assets—100.0%			$	44,966

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

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 June 30, 2012, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	23.0	%
Consumer Staples	16.5	%
Information Technology	15.8	%
Consumer Discretionary	12.5	%
Energy	9.7	%
Telecommunication Services	7.5	%
Industrials	7.5	%
Materials	3.7	%
Utilities	2.2	%
Health Care	1.6	%
Total	100.0	%

At June 30, 2012, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.3	%
U.S. Dollar	14.2	%
South African Rand	12.4	%
Indian Rupee	10.2	%
South Korean Won	8.9	%
Brazilian Real	7.7	%
Thai Baht	6.4	%
Indonesian Rupiah	5.6	%
Mexican Peso	4.9	%
New Taiwan Dollar	3.4	%
Colombian Peso	2.5	%
Qatari Rial	1.9	%
Turkish Lira	1.8	%
Malaysian Ringgit	1.7	%
Chilean Peso	1.1	%
Total	100.0	%

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    27

FIXED-INCOME MARKETS OVERVIEW

Fixed Income Summary

The global capital markets continued to experience elevated levels of volatility during the first half of 2012 as investors focused on the ongoing European debt crisis. Despite the volatility, global equities have gained year-to-date, with U.S. stocks outperforming their non-U.S. counterparts. U.S. dollar-based, investment-grade fixed income instruments have also gained as interest rates declined to record-low levels as investors continue to flock to high-quality assets.

The European debt crisis took center stage during the second quarter and drove volatility as attention shifted to events in Greece and Spain. Greece held two elections to form a new government during the second quarter after a radical anti-austerity political bloc, the Syriza party, gained popularity and threatened to reverse the country’s austerity progress. Investors assigned an increased probability that Greece could exit the euro amid the uncertainty of the Greek elections. Ultimately, the pro-austerity New Democracy party emerged as the country’s preeminent political party. In Spain, the Spanish banking crisis added volatility as Spanish government officials sought financial aid packages to recapitalize its banks.

Within the U.S., it was revealed that the labor markets continued to show signs of weakness and hampered growth. The market is beginning to show signs of concern over the “fiscal cliff,” which refers to the automatic tax increases and spending cuts scheduled to start in the beginning of 2013 unless politicians agree to a compromise to extend the beginning of the tax increases and spending cuts. Another noteworthy event was the J.P. Morgan trading loss. The trading loss was not meaningful because of its size (initially reported at $2 billion), but it was meaningful because it highlighted the difficulties of monitoring activities at large banking institutions with regulations that seek to curb risk-taking at banks.

The Federal Open Market Committee (FOMC) remained accommodative and continued its unconventional easing programs. The FOMC continued to state that conditions “warrant exceptionally low levels for the federal funds rate at least through late-2014.” At its June 20 meeting, the FOMC announced plans to extend its “Operation Twist” program, which was scheduled to expire on June 30, through the end of the year. The FOMC also announced plans to continue to reinvest principal from its agency MBS portfolio.

Fixed income instruments have gained as investors continue to flock to safe haven assets amid the uncertainties in Europe and the U.S. High yield bonds and emerging market debt have been the strongest-performing segments of the bond market. Corporate bonds and Treasury Inflation-Protected Securities (TIPS) have been the best-performing segment of the investment-grade fixed-income market. The 10-year Treasury note yielded 1.65% at the end of June, 23 basis points lower year-to-date.

28     Semi-Annual Report June 30, 2012

Christopher T. Vincent

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

Year-to-date the Fund gained 4.01%, outpacing its benchmark, the Barclay’s Capital U.S. Aggregate Bond Index, which rose 2.37%.

Security selection has been the primary driver of performance year-to-date. Results were particularly strong among the Fund’s corporate bond holdings. The Fund has maintained an overweight exposure to financials that has been additive as investment-grade financials have been strong performers year-to-date. Positioning within the Industrial sector was also additive. Within the Industrials sector, we had exposure to high-yield issuers, and that allocation contributed to results as high-yield issuers have outperformed investment-grade issuers year-to-date.

In addition, security selection within the Fund’s mortgage-backed securities added value year-to-date. The pools owned provided incremental yield over Treasuries and experienced manageable prepayment speeds.

Another factor that affected performance favorably was the Fund’s allocation to longer-dated U.S. TIPS (Treasury Inflation-Protected Securities). These positions benefitted as interest rates declined and Treasury instruments benefitted from a global flight to quality.

Sector positioning has impacted performance favorably year-to-date. The William Blair Bond Fund is structured to be underweight to Treasury instruments, which have been the weakest-performing segment of the market, and to be overweight in corporate and mortgage-backed securities, both of which have outperformed Treasuries year-to-date.

Outlook and Positioning

We are positioned neutral on interest rates with the portfolio’s duration in-line with that of the benchmark. We believe that interest rates will remain range-bound at lower levels over the next two years, as the FOMC (Federal Open Market Committee) continues to state that current conditions “warrant exceptionally low levels for the federal funds rate at least through late 2014.”

We are overweight agency mortgage-backed securities. We seek pools with better-than-market convexity characteristics through favoring pools with above-market coupon rates comprised of either low loan balances or seasoned pools and avoiding the generic, current-coupon pools that dominate the Mortgage Index. We view specified pool mortgage-backed securities as a cheap alternative to agency debentures (to which we are underweight).

We are overweight investment-grade corporate bonds, as we believe the sector continues to offer good relative value. Within the sector, we are overweight industrials and financials. We emphasize companies with positive free cash flow and strong and experienced management teams. We believe that certain names in the financial sector offer value, and we are encouraged by the improvement of balance sheets within the sector despite the regulatory issues facing the industry. We hold an allocation to high yield bonds near its 10% maximum. We emphasize higher quality (BB- and B-rated) industrial issuers.

We hold an allocation to TIPS, as we find its embedded option on unexpected inflation to be an appealing feature versus owning nominal Treasury notes.

June 30, 2012 William Blair Funds    29

Bond Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		4.01	%		8.76	%		8.73	%		7.62	%		7.13	%
Barclays Capital U.S. Aggregate Bond Index		2.37			7.47			6.93			6.79			6.35

(a) For the period May 1, 2007 (Commencement of Operations) to June 30, 2012.

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.

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 June 30, 2012. 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)

The sector diversification shown is based on the total investments.

30     Semi-Annual Report June 30, 2012

Bond Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—42.2%
U.S. Treasury Inflation Indexed Notes/Bonds—7.7%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	5,881	$	6,788
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29		8,538		13,795	��
Total U.S. Treasury Inflation Indexed Notes/Bonds				20,583
U.S. Treasury—1.1%
U.S. Treasury Bond, 3.125%, due 2/15/42		525		564
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,575		2,319
Total U.S. Treasury Obligations				2,883
Government National Mortgage Association (GNMA)—3.3%
#344834, 6.250%, due 7/15/13		5		5
#344902, 6.250%, due 3/15/14		6		6
#623162, 6.500%, due 7/15/18		41		46
#616250, 6.000%, due 2/15/24		10		11
#422470, 7.500%, due 3/15/26		1		1
#509405, 7.500%, due 8/15/29		1		1
GNR 2004-2 M5, 4.891%, due 7/16/34		125		138
GNR 2006-67 GB, 4.741%, due 9/16/34, VRN		1,620		1,679
#699118, 6.000%, due 9/15/38		6,152		6,964
Total GNMA Mortgage Obligations				8,851
Federal Home Loan Mortgage Corp. (FHLMC)—8.2%
#G90024, 7.000%, due 1/20/13		3		3
#J14232, 3.500%, due 1/1/21		1,345		1,416
#J16051, 4.500%, due 7/1/26		1,338		1,457
#G01728, 7.500%, due 7/1/32		273		334
#C01385, 6.500%, due 8/1/32		278		316
#C01623, 5.500%, due 9/1/33		409		449
#A15039, 5.500%, due 10/1/33		7		8
#G01843, 6.000%, due 6/1/35		77		87
#G02141, 6.000%, due 3/1/36		1,573		1,756
#A62179, 6.000%, due 6/1/37		818		914
#A63539, 6.000%, due 7/1/37		1,035		1,156
#A62858, 6.500%, due 7/1/37		558		631
#G03170, 6.500%, due 8/1/37		1,275		1,441
#A66843, 6.500%, due 10/1/37		1,919		2,188
#A78138, 5.500%, due 6/1/38		1,147		1,279
#G04544, 6.000%, due 8/1/38		3,614		4,010
#A81799, 6.500%, due 9/1/38		2,334		2,661
#C03665, 9.000%, due 4/1/41		1,672		2,080
Total FHLMC Mortgage Obligations				22,186
Federal National Mortgage Association (FNMA)—21.9%
#124947, 7.000%, due 7/1/13		1		1
#576553, 8.000%, due 2/1/16		10		11
#580793, 6.000%, due 4/1/16		2		2
#624506, 6.000%, due 1/1/17		2		3
#679247, 7.000%, due 8/1/17		9		10
#689612, 5.000%, due 5/1/18		263		287
#695910, 5.000%, due 5/1/18		551		602
#697593, 5.000%, due 5/1/18		479		523
#770395, 5.000%, due 4/1/19		9		10
#745735, 5.000%, due 3/1/21		600		653
#900725, 6.000%, due 8/1/21		137		151
#893325, 7.000%, due 9/1/21		9		10
#AA2924, 4.500%, due 4/1/24		920		1,010
#AD8164, 4.000%, due 8/1/25		63		69
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#255956, 5.500%, due 10/1/25	$	62	$	68
#AB2256, 3.500%, due 2/1/26		1,294		1,394
#890329, 4.000%, due 4/1/26		518		562
#AI9811, 4.500%, due 8/1/26		550		604
#AH9564, 3.500%, due 9/1/26		1,126		1,213
#AJ8149, 3.500%, due 12/1/26		1,358		1,462
#AB4818, 4.000%, due 4/1/27		1,274		1,390
#252925, 7.500%, due 12/1/29		3		3
#535977, 6.500%, due 4/1/31		24		28
#253907, 7.000%, due 7/1/31		4		5
#587849, 6.500%, due 11/1/31		35		40
#545437, 7.000%, due 2/1/32		139		162
#545759, 6.500%, due 7/1/32		1,511		1,730
#678007, 6.000%, due 9/1/32		27		30
#254548, 5.500%, due 12/1/32		68		75
#684601, 6.000%, due 3/1/33		1,479		1,665
#708993, 5.000%, due 6/1/33		86		96
#190340, 5.000%, due 9/1/33		218		237
#254868, 5.000%, due 9/1/33		22		24
#739243, 6.000%, due 9/1/33		1,653		1,861
#739331, 6.000%, due 9/1/33		787		886
#555800, 5.500%, due 10/1/33		237		261
#555946, 5.500%, due 11/1/33		715		800
#756153, 5.500%, due 11/1/33		1,739		1,932
#725017, 5.500%, due 12/1/33		83		93
#725205, 5.000%, due 3/1/34		2,779		3,024
#725232, 5.000%, due 3/1/34		3,010		3,275
#725238, 5.000%, due 3/1/34		1,042		1,134
#763798, 5.500%, due 3/1/34		322		358
#725611, 5.500%, due 6/1/34		357		393
#783786, 5.500%, due 7/1/34		294		329
#786546, 6.000%, due 7/1/34		734		825
#787816, 6.000%, due 7/1/34		769		865
#190353, 5.000%, due 8/1/34		322		350
#794474, 6.000%, due 10/1/34		159		179
#745092, 6.500%, due 7/1/35		1,054		1,206
#357944, 6.000%, due 9/1/35		89		100
#829306, 6.000%, due 9/1/35		1,197		1,340
#836140, 5.500%, due 10/1/35		118		132
#843487, 6.000%, due 10/1/35		225		252
#849191, 6.000%, due 1/1/36		491		550
#848782, 6.500%, due 1/1/36		661		750
#745349, 6.500%, due 2/1/36		922		1,054
#888305, 7.000%, due 3/1/36		25		29
#895637, 6.500%, due 5/1/36		375		426
#831540, 6.000%, due 6/1/36		139		155
#745802, 6.000%, due 7/1/36		496		555
#886220, 6.000%, due 7/1/36		1,071		1,199
#893318, 6.500%, due 8/1/36		182		207
#902974, 6.000%, due 12/1/36		1,078		1,202
#909480, 6.000%, due 2/1/37		1,061		1,188
#938440, 6.000%, due 7/1/37		504		562
#928561, 6.000%, due 8/1/37		595		666
#948689, 6.000%, due 8/1/37		1,084		1,206
#946646, 6.000%, due 9/1/37		302		338
#888967, 6.000%, due 12/1/37		2,010		2,250
#889385, 6.000%, due 2/1/38		637		713
#962058, 6.500%, due 3/1/38		4,014		4,598
#934006, 6.500%, due 9/1/38		1,367		1,566
#986856, 6.500%, due 9/1/38		1,075		1,221

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    31

Bond Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#991911, 7.000%, due 11/1/38			$	801	$	916
#931492, 6.000%, due 7/1/39				341		382
#AA6898, 6.000%, due 7/1/39				1,769		1,980
#AL0913, 6.000%, due 7/1/41				1,250		1,393
Total FNMA Mortgage Obligations						58,831
Non-Agency Mortgage-Backed Obligations—0.2%
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§**		D		199		167
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 2.660%, 8/25/34, VRN		AA		400		368
Total Non-Agency Mortgage-Backed Obligations						535
Asset-Backed Securities—3.0%
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1		1,500		1,522
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		2,280		2,321
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		600		659
Avis Budget Rental Car Funding AESOP LLC—144A, 2010-3A, Tranche A, 4.640%, 5/20/16		Aaa		100		108
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2		2,274		2,383
Sierra Receivables Funding Co. LLC—144A, 2011-1A, Tranche A, 3.350%, 4/20/26		A		1,129		1,141
Total Asset-Backed Securities						8,134
Corporate Obligations—52.9%
Yum! Brands, Inc., 6.250%, due 4/15/16		BBB		1,400		1,615
Supervalu, Inc., 8.000%, due 5/1/16		B		1,550		1,569
Ford Motor Credit Co. LLC—144A, 3.984%, due 6/15/16		Baa3		2,000		2,060
Petrobras International Finance Co., 6.125%, due 10/6/16		A3		1,400		1,566
Ally Financial, Inc., 5.500%, due 2/15/17		BB-		1,788		1,816
American International Group, Inc., 3.800%, due 3/22/17		A-		2,375		2,421
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB+		2,000		2,016
ERP Operating L.P., 5.750%, due 6/15/17		BBB+		2,075		2,394
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		600		668
American Express Co., 6.150%, due 8/28/17		A+		2,050		2,429
Capital One Financial Corporation, 6.750%, due 9/15/17		A-		1,900		2,254
Corporate Obligations—(continued)
Exelon Generation Co. LLC, 6.200%, due 10/1/17		Baa1	$	1,160	$	1,337
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-		1,050		1,291
Motorola Solutions, Inc., 6.000%, due 11/15/17		BBB		2,050		2,328
Triumph Group, Inc., 8.000%, due 11/15/17		B+		1,550		1,689
Kohl’s Corporation, 6.250%, due 12/15/17		BBB+		1,000		1,200
Cemex S.A.B. de C.V.—144A, 9.000%, due 1/11/18		B+		1,000		893
American Tower Corporation, 4.500%, due 1/15/18		Baa3		1,200		1,268
Morgan Stanley, 6.625%, due 4/1/18		A		2,575		2,692
General Electric Capital Corporation, 5.625%, due 5/1/18		AA+		1,275		1,466
Simon Property Group L.P., 6.125%, due 5/30/18		A-		1,800		2,130
Petrohawk Energy Corporation, 7.250%, due 8/15/18		A		1,050		1,181
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A		1,100		1,232
CSX Corporation, 7.375%, due 2/1/19		BBB		870		1,110
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A+		1,300		1,655
Owens Corning, 9.000%, due 6/15/19		BBB-		1,050		1,309
Discovery Communications LLC, 5.625%, due 8/15/19		BBB		550		644
Roper Industries, Inc., 6.250%, due 9/1/19		BBB		1,850		2,202
Republic Services, Inc., 5.500%, due 9/15/19		BBB		1,725		1,996
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,575		1,816
Crown Castle International Corporation, 7.125%, due 11/1/19		BB-		1,550		1,662
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-		500		554
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Baa3		2,050		2,504
Jarden Corporation, 7.500%, due 1/15/20		B		1,550		1,693
JBS USA LLC—144A, 8.250%, due 2/1/20		BB		1,000		973
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB+		1,675		1,894
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		2,575		2,749
Commonwealth Edison Co., 4.000%, due 8/1/20		A-		1,000		1,112
Citigroup, Inc., 5.375%, due 8/9/20		A		2,050		2,215
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		2,050		2,158
Omnicom Group, Inc., 4.450%, due 8/15/20		BBB+		2,075		2,237
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B+		1,500		1,588
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A-		1,500		1,741

See accompanying Notes to Portfolio of Investments.

32     Semi-Annual Report June 30, 2012

Bond Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Corporate Obligations—(continued)
Progress Energy, Inc., 4.400%, due 1/15/21		BBB	$	1,675	$	1,862
Simon Property Group L.P., 6.125%, due 5/30/18		A-		1,800		2,130
Petrohawk Energy Corporation, 7.250%, due 8/15/18		A		1,050		1,181
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A		1,100		1,232
CSX Corporation, 7.375%, due 2/1/19		BBB		870		1,110
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A+		1,300		1,655
Owens Corning, 9.000%, due 6/15/19		BBB-		1,050		1,309
Discovery Communications LLC, 5.625%, due 8/15/19		BBB		550		644
Roper Industries, Inc., 6.250%, due 9/1/19		BBB		1,850		2,202
Republic Services, Inc., 5.500%, due 9/15/19		BBB		1,725		1,996
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,575		1,816
Crown Castle International Corporation, 7.125%, due 11/1/19		BB-		1,550		1,662
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-		500		554
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Baa3		2,050		2,504
Jarden Corporation, 7.500%, due 1/15/20		B		1,550		1,693
JBS USA LLC—144A, 8.250%, due 2/1/20		BB		1,000		973
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB+		1,675		1,894
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		2,575		2,749
Commonwealth Edison Co., 4.000%, due 8/1/20		A-		1,000		1,112
Citigroup, Inc., 5.375%, due 8/9/20		A		2,050		2,215
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		2,050		2,158
Omnicom Group, Inc., 4.450%, due 8/15/20		BBB+		2,075		2,237
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B+		1,500		1,588
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A-		1,500		1,741
Progress Energy, Inc., 4.400%, due 1/15/21		BBB		1,675		1,862
Standard Pacific Corporation, 8.375%, due 1/15/21		B		1,750		1,899
Petrobras International Finance Co., 5.375%, due 1/27/21		A3		1,200		1,293
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-		2,430		2,628
Wyndham Worldwide Corporation, 5.625%, due 3/1/21		BBB-		1,000		1,089
Ball Corporation, 5.750%, due 5/15/21		BB+		1,550		1,666
Energizer Holdings, Inc., 4.700%, due 5/19/21		BBB-		2,050		2,161
Discovery Communications LLC, 4.375%, due 6/15/21		BBB		1,000		1,086
O’Reilly Automotive, Inc., 4.625%, due 9/15/21		BBB		2,275		2,378
Corporate Obligations—(continued)
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1	$	1,900	$	1,999
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2		2,500		2,600
SABMiller Holdings, Inc.—144A, 3.750%, due 1/15/22		BBB+		2,000		2,127
SLM Corporation, 7.250%, due 1/25/22		BBB-		2,075		2,194
Fresenius Medical Care US Finance II, Inc.—144A, 5.875%, due 1/31/22		BB+		1,000		1,041
Lamar Media Corp.—144A, 5.875%, due 2/1/22		BB-		1,000		1,025
Masco Corporation, 5.950%, due 3/15/22		BBB-		1,675		1,724
BE Aerospace, Inc., 5.250%, due 4/1/22		BB		1,550		1,596
FMG Resources August 2006 Pty Ltd.—144A, 6.875%, due 4/1/22		BB+		1,050		1,058
Pinnacle Entertainment, Inc., 7.750%, due 4/1/22		B		1,315		1,405
Kraft Foods Group, Inc.—144A, 3.500%, due 6/6/22		Baa2		1,900		1,950
Embraer S.A., 5.150%, due 6/15/22		BBB-		2,500		2,566
Comcast Corporation, 3.125%, due 7/15/22		BBB+		1,000		1,005
Continental Airlines 2012-1 Class A Pass Thru Trusts, 4.150%, due 10/11/25		A-		2,375		2,333
The Kroger Co., 8.000%, due 9/15/29		BBB		450		586
Conoco Funding Co., 7.250%, due 10/15/31		A1		450		650
Kohl’s Corporation, 6.000%, due 1/15/33		BBB+		1,065		1,195
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A+		525		667
Comcast Corporation, 6.450%, due 3/15/37		BBB+		650		790
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB		625		828
JPMorgan Chase & Co., 6.400%, due 5/15/38		A+		1,470		1,767
COX Communications, Inc.—144A, 6.950%, due 6/1/38		BBB		370		446
General Electric Capital Corporation, 6.875%, due 1/10/39		AA+		750		968
Abbott Laboratories, 6.000%, due 4/1/39		AA		2,250		2,982
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3		1,565		1,866
Illinois Tool Works, Inc., 4.875%, due 9/15/41		A1		900		1,025
Union Pacific Corporation, 4.750%, due 9/15/41		A-		1,450		1,573
Aristotle Holding, Inc.—144A, 6.125%, due 11/15/41		BBB+		2,500		3,038
Philip Morris International, Inc., 4.375%, due 11/15/41		A		2,075		2,140
Gilead Sciences, Inc., 5.650%, due 12/1/41		A-		1,775		2,069
Citigroup, Inc., 5.875%, due 1/30/42		A		750		819
Bank of America Corporation, 5.875%, due 2/7/42		A		2,375		2,602

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    33

Bond Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Corporate Obligations—(continued)
CSX Corporation, 4.750%, due 5/30/42		BBB	$	1,225	$	1,263
Odebrecht Finance Ltd.—144A, 7.125%, due 6/26/42		BBB-		1,000		995
Total Corporate Obligations						142,281
Total Long-Term Investments—98.3% (cost $247,901)						264,284
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $3,157, collateralized by FHLB, 3.650%, due 2/24/32		Aaa		3,157		3,157
Total Repurchase Agreement—1.2% (cost $3,157)						3,157
Total Investments—99.5% (cost $251,058)						267,441
Cash and other assets, less liabilities—0.5%						1,398
Net assets—100.0%					$	268,839

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 0.06% of the net assets at June 30, 2012.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2012.

See accompanying Notes to Portfolio of Investments.

34     Semi-Annual Report June 30, 2012

Christopher T. Vincent

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

Year-to-date, the Fund gained 1.64%, outpacing its benchmark, the Merrill Lynch 1-Year U.S. Treasuries Index, which rose 0.04%.

Security selection results in the mortgage-backed sector had the largest positive impact on performance year-to-date. The majority of the Fund is invested in seasoned agency (Fannie Mae and Freddie Mac) mortgage-backed securities. The pools employed by the Fund experienced manageable prepayment speeds and earned positive returns during the first quarter.

The Fund’s asset-backed securities (ABS) and corporate bonds were also additive to performance. Within both sectors, we emphasize both fixed- and floating-rate securities, all of which were rated “A” or better from a Nationally Recognized Statistical Rating Organization. These securities benefitted from the incremental yield they offer despite an increase in risk spreads during the quarter.

Finally, the Low Duration Fund has benefitted from the reduction in interest rates that has been experienced year-to-date.

Outlook and Positioning

The Low Duration Fund is structured to earn a competitive yield by taking a little more interest rate risk than money market instruments. Duration is managed within a band of 0.5 – 2.0 years, and all securities must carry a credit rating of “A” or better. Most of the securities we employ are amortizing instruments, meaning they make monthly payments of principal and interest; such a cash flow pattern allows for quicker reinvestment if interest rates were to rise.

Our primary emphasis remains in agency mortgage-backed securities. In the Low Duration Fund, we favor both seasoned and newer-vintage higher-coupon, low loan balance, 15-year pools. We believe these securities will generate steady, predictable cash flows and experience slower prepayment speeds in the current lower interest rate environment.

Within the asset-backed sector, we are allocated to short-dated auto and credit card loan receivable pools originated by “Tier 1” issuers. Some of our asset-backed holdings are floating-rate instruments, which help protect principal in a rising interest rate environment.

In the corporate sector, we favor short-dated, high-quality bonds of large, systemically important financial institutions as well as blue-chip industrials.

June 30, 2012 William Blair Funds    35

Low Duration Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2012

	Year To Date			1 Year			Since Inception(a)
Institutional Class		1.64	%		2.39	%		2.07	%
Merrill Lynch 1-Year U.S. Treasury Note Index		0.04			0.26			0.50

(a) For the period December 1, 2009 (Commencement of Operations to June 30, 2012.

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.

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.

This report identifies the Fund’s investments on June 30, 2012. 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)

The sector diversification shown is based on the total investments.

36     Semi-Annual Report June 30, 2012

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—66.2%
U.S. Treasury Inflation Indexed Notes/Bonds—1.0%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	1,711	$	1,975
Government National Mortgage Association (GNMA)—1.5%
#002584, 6.000%, due 4/20/13		14		15
#623159, 5.000%, due 11/15/13		50		54
#628400, 6.000%, due 11/15/13		74		76
#002682, 6.500%, due 11/20/13		26		28
#623182, 5.000%, due 12/15/13		66		72
#781010, 6.500%, due 4/15/14		46		48
#002761, 6.000%, due 5/20/14		32		35
#002787, 5.500%, due 7/20/14		5		5
#781275, 6.000%, due 10/15/14		123		128
GNR 2011-24 VA, 3.500%, due 2/20/16		1,427		1,513
#561031, 5.500%, due 9/15/16		227		248
#003180, 6.000%, due 1/20/17		33		36
#781567, 5.000%, due 2/15/18		86		92
#606406, 5.000%, due 4/15/18		118		129
#003438, 4.500%, due 9/20/18		209		227
#003465, 4.500%, due 11/20/18		70		75
Total GNMA Mortgage Obligations				2,781
Federal Home Loan Mortgage Corp. (FHLMC)—19.5%
#M80982, 5.000%, due 7/1/12		98		100
#B18053, 5.000%, due 3/1/15		46		48
#G11885, 5.000%, due 1/1/16		155		166
#E86134, 5.000%, due 11/1/16		175		187
#E96536, 5.000%, due 3/1/18		251		270
#E95355, 5.000%, due 4/1/18		338		363
#E01377, 4.500%, due 5/1/18		329		349
#G11618, 4.500%, due 5/1/18		1,508		1,614
#E96700, 5.000%, due 5/1/18		925		994
#E96962, 4.000%, due 6/1/18		161		174
#E01411, 5.000%, due 7/1/18		171		183
#G12024, 4.500%, due 8/1/18		431		461
#E99963, 4.500%, due 10/1/18		101		108
#E01488, 5.000%, due 10/1/18		375		401
#E99895, 5.000%, due 10/1/18		762		818
#G12093, 4.500%, due 12/1/18		465		497
#B11386, 5.000%, due 12/1/18		155		167
#B11362, 5.500%, due 12/1/18		24		26
#G13367, 5.500%, due 12/1/18		125		136
#E01545, 5.000%, due 1/1/19		211		225
#B12826, 4.500%, due 3/1/19		754		811
#G11766, 5.000%, due 3/1/19		151		162
#G18001, 4.500%, due 7/1/19		209		223
#G11596, 5.500%, due 8/1/19		186		203
#B16291, 5.000%, due 9/1/19		1,118		1,201
#G11605, 5.500%, due 9/1/19		94		103
#B17142, 4.500%, due 11/1/19		1,509		1,635
#G18045, 5.000%, due 3/1/20		165		177
#B19078, 5.000%, due 4/1/20		113		121
#G18048, 5.000%, due 4/1/20		110		118
#J08152, 5.000%, due 5/1/20		129		139
#G11720, 4.500%, due 8/1/20		35		37
U.S. Government and U.S. Government Agency—(continued)
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#G12394, 5.000%, due 5/1/21	$	208	$	224
#G13296, 5.000%, due 5/1/21		564		606
#G12113, 5.500%, due 5/1/21		289		316
#G12286, 5.000%, due 7/1/21		113		121
#E02322, 5.500%, due 5/1/22		77		84
#J06484, 5.500%, due 11/1/22		664		724
#C00351, 8.000%, due 7/1/24		120		144
#G13695, 4.000%, due 9/1/24		1,682		1,823
#G00363, 8.000%, due 6/1/25		155		187
#C80329, 8.000%, due 8/1/25		36		44
#J13022, 4.000%, due 9/1/25		3,141		3,406
#G14150, 4.500%, due 4/1/26		3,403		3,706
#E02912, 5.000%, due 6/1/26		1,541		1,664
#E02913, 5.000%, due 6/1/26		1,364		1,468
#J16051, 4.500%, due 7/1/26		4,595		5,003
#G04424, 6.000%, due 6/1/38		278		309
#G04778, 6.000%, due 7/1/38		256		286
#A81372, 6.000%, due 8/1/38		132		146
#G04544, 6.000%, due 8/1/38		1,807		2,005
#G04687, 6.000%, due 9/1/38		373		416
#G04745, 6.000%, due 9/1/38		207		230
#A81799, 6.500%, due 9/1/38		1,229		1,401
Total FHLMC Mortgage Obligations				36,530
Federal National Mortgage Association (FNMA)—44.2%
#256224, 5.500%, due 4/1/16		29		31
#256559, 5.500%, due 1/1/17		15		17
#256606, 5.500%, due 2/1/17		20		22
#256646, 5.500%, due 3/1/17		15		17
#545898, 5.500%, due 9/1/17		460		501
#545899, 5.500%, due 9/1/17		521		568
#555029, 5.000%, due 11/1/17		65		70
#257067, 5.000%, due 1/1/18		72		78
#663692, 5.000%, due 1/1/18		219		237
#674713, 5.000%, due 1/1/18		15		16
#679305, 5.000%, due 1/1/18		69		75
#254591, 5.500%, due 1/1/18		347		377
#678938, 5.500%, due 2/1/18		35		37
#683100, 5.500%, due 2/1/18		453		496
#254684, 5.000%, due 3/1/18		24		26
#675717, 5.000%, due 3/1/18		299		324
#681361, 5.000%, due 3/1/18		113		122
#656564, 5.000%, due 4/1/18		1,614		1,748
#696677, 5.000%, due 4/1/18		108		117
#702888, 5.000%, due 4/1/18		171		185
#695838, 5.500%, due 4/1/18		99		109
#254721, 5.000%, due 5/1/18		268		291
#697593, 5.000%, due 5/1/18		255		279
#702332, 5.000%, due 5/1/18		58		63
#704049, 5.500%, due 5/1/18		962		1,054
#735357, 5.500%, due 5/1/18		1,383		1,515
#656573, 5.000%, due 6/1/18		267		292
#709848, 5.000%, due 6/1/18		222		243
#735003, 5.500%, due 7/1/18		1,501		1,645
#711991, 5.000%, due 8/1/18		202		221

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    37

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer			Principal Amount				Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#743183, 5.000%, due 10/1/18			$	93			$	102
#749596, 5.000%, due 11/1/18				331				361
#745237, 5.000%, due 12/1/18				72				78
#761267, 4.500%, due 2/1/19				771				846
#255079, 5.000%, due 2/1/19				62				67
#766276, 5.000%, due 3/1/19				503				547
#779363, 5.000%, due 6/1/19				102				112
#785259, 5.000%, due 8/1/19				392				427
#725953, 5.000%, due 10/1/19				116				127
#735401, 5.500%, due 3/1/20				274				299
#879607, 5.500%, due 4/1/21				138				151
#880993, 6.000%, due 1/1/22				41				45
#972934, 5.500%, due 2/1/23				432				473
#982878, 4.500%, due 5/1/23				710				779
#254908, 5.000%, due 9/1/23				84				91
#255165, 4.500%, due 3/1/24				109				119
#934808, 4.500%, due 3/1/24				134				147
#AA4519, 4.500%, due 3/1/24				2,474				2,715
#AA5028, 4.500%, due 4/1/24				583				639
#190988, 9.000%, due 6/1/24				181				212
#AC1520, 4.000%, due 9/1/24				189				205
#AC5124, 4.000%, due 11/1/24				1,370				1,494
#AC6600, 4.500%, due 11/1/24				101				111
#AC6257, 4.000%, due 12/1/24				1,414				1,541
#AC8857, 4.500%, due 12/1/24				93				101
#AC9560, 5.000%, due 1/1/25				4,259				4,652
#932449, 4.000%, due 2/1/25				582				635
#AD0855, 4.000%, due 3/1/25				300				325
#932723, 4.000%, due 4/1/25				693				756
#935995, 4.000%, due 6/1/25				214				233
#AD4677, 4.000%, due 6/1/25				2,287				2,494
#AD8164, 4.000%, due 8/1/25				2,601				2,836
#AE1176, 4.000%, due 8/1/25				972				1,060
#AB1459, 4.000%, due 9/1/25				389				424
#AH2671, 4.000%, due 1/1/26				1,745				1,903
#890329, 4.000%, due 4/1/26				1,726				1,875
#AI4856, 4.500%, due 6/1/26				2,111				2,317
#AI9811, 4.500%, due 8/1/26				3,082				3,382
#AH9564, 3.500%, due 9/1/26				4,233				4,558
#AB3497, 4.000%, due 9/1/26				2,065				2,243
#AB3608, 3.500%, due 10/1/26				3,703				3,988
#AI7363, 3.500%, due 10/1/26				1,260				1,356
#AJ2322, 3.500%, due 10/1/26				2,903				3,126
#AB3975, 3.500%, due 12/1/26				1,135				1,223
#AJ8149, 3.500%, due 12/1/26				3,301				3,555
#AJ7724, 4.000%, due 12/1/26				2,570				2,802
#AK2768, 3.500%, due 3/1/27				3,009				3,240
#AK7384, 4.000%, due 3/1/27				3,465				3,778
#AB4818, 4.000%, due 4/1/27				2,957				3,224
#829306, 6.000%, due 9/1/35				180				202
#889385, 6.000%, due 2/1/38				2,123				2,377
#975649, 6.000%, due 7/1/38				463				516
#935532, 4.500%, due 8/1/39				121				134
#AC6651, 4.500%, due 12/1/39				148				164
#AL0913, 6.000%, due 7/1/41				834				929
Total FNMA Mortgage Obligations								82,872
Issuer	NRSRO Rating				Principal Amount				Value
Asset-Backed Securities—19.1%
American Express Issuance Trust, 2007-2, Tranche A, 0.492%, 7/15/13, VRN		AAA			$	473			$	473
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13		Aa1				1,333				1,353
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A3, 1.310%, 1/20/14		AAA				158				158
Honda Auto Receivables Owner Trust, 2010-2, Tranche A3, 1.340%, 3/18/14		Aaa				43				43
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa				1,765				1,797
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/14		AAA				121				121
Ford Credit Auto Owner Trust, 2010-A, Tranche A3, 1.320%, 6/15/14		AAA				196				197
Capital Auto Receivables Asset Trust, 2008-1, Tranche A4B, 1.592%, 7/15/14, VRN		AAA				73				73
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14		AAA				70				70
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		Aaa				399				399
Mercedes-Benz Auto Lease Trust—144A, 2011-B, Tranche A3, 1.070%, 8/15/14		Aaa				1,500				1,508
Nissan Auto Receivables Owner Trust, 2009-1, Tranche A3, 5.000%, 9/15/14		AAA				50				50
Nissan Auto Receivables Owner Trust, 2012-A, Tranche A2, 0.540%, 10/15/14		Aaa				1,400				1,400
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.392%, 1/15/15, VRN		AAA				2,300				2,313
CarMax Auto Owner Trust, 2012-1, Tranche A2, 0.590%, 3/16/15		AAA				1,000				1,000
CNH Equipment Trust, 2010-C, Tranche A3, 1.170%, 5/15/15		AAA				484				486
Harley-Davidson Motorcycle Trust, 2011-2, Tranche A2, 0.710%, 5/15/15		Aaa				1,403				1,405
Discover Card Master Trust, 2007-A2, Tranche A2, 0.808%, 6/15/15, VRN		AAA				292				292
Discover Card Master Trust I, 2005-4, Tranche A2, 0.332%, 6/16/15, VRN		AAA				77				77
FPL Recovery Funding LLC, 2007-A, Tranche A2, 5.044%, 8/1/15		AAA				518				531
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.542%, 9/15/15, VRN		AAA				2,000				2,004

See accompanying Notes to Portfolio of Investments.

38     Semi-Annual Report June 30, 2012

Low Duration Fund

Portfolio of Investments, June 30, 2012 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating		Principal Amount		Value
Asset-Backed Securities—(continued)
Chase Issuance Trust, 2008-A13, Tranche A13, 1.968%, 9/15/15, VRN		AAA	$	100	$	102
Discover Card Master Trust, 2010-A1, Tranche A1, 0.892%, 9/15/15, VRN		Aaa		447		449
USAA Auto Owner Trust, 2010-1, Tranche A4, 2.140%, 9/15/15		AAA		685		693
American Express Credit Account Master Trust, 2010-1, Tranche A, 0.492%, 11/16/15, VRN		AAA		500		501
Honda Auto Receivables Owner Trust, 2012-1, Tranche A3, 0.770%, 1/15/16		AAA		1,000		1,001
Ford Credit Floorplan Master Owner Trust, 2011-1, Tranche A2, 0.842%, 2/15/16, VRN		AAA		1,000		1,005
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		2,350		2,580
Ally Master Owner Trust, 2011-3, Tranche A1, 0.872%, 5/15/16, VRN		Aaa		1,100		1,103
CNH Equipment Trust, 2010-C, Tranche A4, 1.750%, 5/16/16		AAA		60		61
Avis Budget Rental Car Funding AESOP LLC—144A, 2010-3A, Tranche A, 4.640%, 5/20/16		Aaa		1,400		1,514
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16		A2		1,589		1,665
CNH Equipment Trust, 2011-B, Tranche A3, 0.910%, 8/15/16		AAA		500		501
Discover Card Master Trust, 2011-A1, Tranche A1, 0.592%, 8/15/16, VRN		Aaa		1,400		1,406
Enterprise Fleet Financing LLC—144A, 2011-2, Tranche A2, 1.430%, 10/20/16		AAA		1,780		1,785
GE Capital Credit Card Master Note Trust, 2011-1, Tranche A, 0.792%, 1/15/17, VRN		Aaa		500		503
GE Dealer Floorplan Master Note Trust, 2012-1, Tranche A, 0.814%, 2/20/17, VRN		Aaa		1,000		1,002
Discover Card Master Trust, 2010-A2, Tranche A2, 0.822%, 3/15/18, VRN		AAA		350		354
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.992%, 8/15/18, VRN		Aaa		2,000		2,100
Capital One Multi-Asset Execution Trust, 2007-A2, Tranche A2, 0.322%, 12/16/19, VRN		AAA		215		211
MBNA Credit Card Master Note Trust, 2004-A3, Tranche A3, 0.502%, 8/16/21, VRN		AAA		475		468
Sierra Receivables Funding Co. LLC—144A, 2011-1A, Tranche A, 3.350%, 4/20/26		A		941		951
Total Asset-Backed Securities						35,705
Corporate Obligations—10.7%
JPMorgan Chase & Co., 1.266%, due 1/24/14, VRN		A+	$	1,000	$	1,003
Morgan Stanley, 2.066%, due 1/24/14, VRN		A		1,000		972
Bank of America Corporation, 1.886%, due 1/30/14, VRN		A		1,000		990
Citigroup, Inc., 1.391%, due 4/1/14, VRN		A		1,000		984
Morgan Stanley, 6.000%, due 5/13/14		A		1,000		1,036
The Goldman Sachs Group, Inc., 0.969%, due 1/12/15, VRN		A		1,000		943
General Dynamics Corporation, 1.375%, due 1/15/15		A		1,000		1,014
The Goldman Sachs Group, Inc., 5.125%, due 1/15/15		A		1,000		1,044
AT&T, Inc., 0.875%, due 2/13/15		A2		1,000		999
Wells Fargo & Co., 1.250%, due 2/13/15		AA-		2,250		2,247
Toyota Motor Credit Corporation, 1.000%, due 2/17/15		AA-		1,000		1,001
The Bank of New York Mellon Corporation, 1.200%, due 2/20/15		Aa3		1,000		1,005
American International Group, Inc., 3.000%, due 3/20/15		A-		1,150		1,156
JPMorgan Chase & Co., 1.875%, due 3/20/15		A+		1,300		1,299
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A		800		800
Citigroup, Inc., 4.700%, due 5/29/15		A		1,100		1,148
John Deere Capital Corporation, 0.950%, due 6/29/15		A		1,000		1,002
General Electric Capital Corporation, 1.625%, due 7/2/15		A1		1,425		1,424
Total Corporate Obligations						20,067
Total Long-Term Investments—96.0% (cost $178,646)						179,930
Repurchase Agreement
Fixed Income Clearing Corporation, 0.100% dated 6/29/12, due 7/2/12, repurchase price $5,406, collateralized by FHLB, 3.650%, due 2/24/32		Aaa		5,406		5,406
Total Repurchase Agreement—2.9% (cost $5,406)						5,406
Total Investments—98.9% (cost $184,052)						185,336
Cash and other assets, less liabilities—1.1%						2,078
Net assets—100.0%					$	187,414

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

See accompanying Notes to Portfolio of Investments.

June 30, 2012 William Blair Funds    39

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands)

	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
Assets
Investments in securities, at cost	$	1,581,627		$	104,775		$	607,513
Investments in securities, at value	$	1,679,268		$	115,534		$	648,320
Foreign currency, at value (cost $2,043; $46; $234)		2,042			46			233
Receivable for securities sold		39,698			1,501			1,783
Receivable for fund shares sold		9,874			—			1,285
Receivable from Advisor		—			37			—
Dividend and interest receivable		2,636			219			1,071
Unrealized appreciation on forward foreign currency contracts		9			—			—
Total assets		1,733,527			117,337			652,692
Liabilities
Payable for investment securities purchased		38,968			2,064			1,053
Payable for fund shares redeemed		95			—			379
Unrealized depreciation on forward foreign currency contracts		—			11			—
Investment advisory fee payable		1,275			91			518
Distribution and shareholder service fee payable		—			—			45
Other payables and accrued expenses		165			50			175
Total liabilities		40,503			2,216			2,170
Net Assets	$	1,693,024		$	115,121		$	650,522
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	127		$	12		$	53
Capital paid in excess of par value		1,747,740			230,454			677,939
Accumulated net investment income (loss)		36,355			1,009			9,353
Accumulated net realized gain (loss)		(188,752	)		(127,093	)		(77,620	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		97,554			10,739			40,797
Net Assets	$	1,693,024		$	115,121		$	650,522
Net Assets	$	1,693,024		$	115,121
Shares Outstanding		126,568,937			11,827,202
Net Asset Value Per Share		13.38			9.73
Institutional Share Class
Net Assets								297,994
Shares Outstanding								24,327,664
Net Asset Value Per Share							$	12.25

See accompanying Notes to Financial Statements.

40     Semi-Annual Report June 30, 2012

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands)

	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
Investment income
Dividends	$	31,754		$	1,847		$	9,998
Less foreign tax withheld		(3,116	)		(170	)		(933	)
Interest		11			1			8
Total income		28,649			1,678			9,073
Expenses
Investment advisory fees		7,987			586			3,544
Distribution fees		—			—			20
Shareholder services fees		—			—			288
Custodian fees		149			49			115
Transfer agent fees		19			2			18
Sub-transfer agent fees
Class N		—			—			12
Class I		—			—			128
Professional fees		57			21			37
Registration fees		31			12			34
Shareholder reporting fees		3			—			39
Trustee fees		36			5			13
Other expenses		27			6			14
Total expenses		8,309			681			4,262
Expenses reimbursed to (waived or absorbed by) the Advisor		—			(37	)		—
Net expenses		8,309			644			4,262
Net investment income (loss)		20,340			1,034			4,811
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		12,716			2,261			(14,939	)
Foreign currency transactions		5,464			37			1,539
Total net realized gain (loss)		18,180			2,298			(13,400	)
Change in net unrealized appreciation (depreciation) of:
Investments		81,718			2,500			60,489
Foreign currency translations		987			(10	)		538
Total change in net unrealized appreciation (depreciation)		82,705			2,490			61,027
Net increase (decrease) in net assets resulting from operations	$	121,225		$	5,822		$	52,438

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    41

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands)

	Institutional International Growth Fund						Institutional International Equity Fund						International Small Cap Growth Fund
	2012			2011			2012			2011			2012			2011
Operations
Net investment income (loss)	$	20,340		$	25,588		$	1,034		$	3,338		$	4,811		$	6,857
Net realized gain (loss) on investments and foreign currency transactions		18,180			68,491			2,298			29,945			(13,400	)		60,435
Change in net unrealized appreciation (depreciation) on investments and foreign currency transactions		82,705			(329,733	)		2,490			(61,430	)		61,027			(155,577	)
Net increase (decrease) in net assets resulting from operations		121,225			(235,654	)		5,822			(28,147	)		52,438			(88,285	)
Distributions to shareholders from
Net investment income		—			(1,997	)		—			(2,326	)		—			(10,724	)
Net realized gain		—			—			—			—			—			—
		—			(1,997	)		—			(2,326	)		—			(10,724	)
Capital stock transactions
Net proceeds from sale of shares		125,366			357,122			4,556			12,843			66,178			313,989
Shares issued in reinvestment of income dividends and capital gain distributions		—			1,885			—			2,328			—			8,514
Less cost of shares redeemed		(96,161	)		(464,979	)		(6,731	)		(164,692	)		(186,315	)		(152,224	)
Net increase (decrease) in net assets resulting from capital share transactions		29,205			(105,972	)		(2,175	)		(149,521	)		(120,137	)		170,279
Increase (decrease) in net assets		150,430			(343,623	)		3,647			(179,994	)		(67,699	)		71,270
Net assets
Beginning of period	$	1,542,594		$	1,886,217		$	111,474		$	291,468		$	718,221		$	646,951
End of period	$	1,693,024		$	1,542,594		$	115,121		$	111,474		$	650,522		$	718,221
Accumulated net investment income (loss) at the end of the period	$	36,355		$	18,657		$	1,009		$	655		$	9,353		$	(4,453	)

See accompanying Notes to Financial Statements.

42     Semi-Annual Report June 30, 2012

Statements of Assets and Liabilities

June 30, 2012 (dollar amounts in thousands)

	Emerging Markets Growth Fund			Emerging Leaders Fund			Bond Fund			Low Duration Fund
Assets
Investments in securities, at cost	$	879,223		$	42,440		$	251,058		$	184,052
Investments in securities, at value	$	923,975		$	44,688		$	267,441		$	185,336
Foreign currency, at value (cost $5,846; $570; $-; $-)		5,858			571			—			—
Receivable for securities sold		30,628			916			—			—
Receivable for fund shares sold		10			—			297			3,340
Receivable from Advisor		—			21			14			2
Dividend and interest receivable		2,228			89			2,484			572
Total assets		962,699			46,285			270,236			189,250
Liabilities
Payable for investment securities purchased		4,394			—			999			1,711
Payable for fund shares redeemed		258			—			190			—
Payble to custodian		4,277			—			—			—
Investment advisory fee payable		877			43			65			45
Distribution and shareholder service fee payable		21			3			26			14
Other payables and accrued expenses		1,173			1,273			117			66
Total liabilities		11,000			1,319			1,397			1,836
Net Assets	$	951,699		$	44,966		$	268,839		$	187,414
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	78		$	5		$	24		$	19
Capital paid in excess of par value		944,952			46,607			250,394			189,501
Accumulated net investment income (loss)		5,647			378			(780	)		(984	)
Accumulated net realized gain (loss)		(42,919	)		(4,271	)		2,818			(2,406	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		43,941			2,247			16,383			1,284
Net Assets	$	951,699		$	44,966		$	268,839		$	187,414
Institutional Share Class
Net Assets	$	801,502		$	21,043		$	83,775		$	76,151
Shares Outstanding		65,989,169			2,567,844			7,628,817			7,737,804
Net Asset Value Per Share	$	12.15		$	8.19		$	10.98		$	9.84

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    43

Statements of Operations

for the Period Ended June 30, 2012 (all amounts in thousands)

	Emerging Markets Growth Fund			Emerging Leaders Fund			Bond Fund			Low Duration Fund
Investment income
Dividends	$	14,885		$	816		$	—		$	—
Less foreign tax withheld		(1,101	)		(59	)		—			—
Interest		8			—			5,340			1,963
Total income		13,792			757			5,340			1,963
Expenses
Investment advisory fees		5,534			305			374			257
Distribution fees		23			—			14			5
Shareholder services fees		117			19			132			73
Custodian fees		273			64			27			34
Transfer agent fees		25			10			16			11
Sub-transfer agent fees
Class N		9			—			9			1
Class I		34			—			20			—
Professional fees		69			28			13			10
Registration fees		34			38			29			31
Shareholder reporting fees		34			—			2			—
Trustee fees		21			2			5			3
Other expenses		19			5			6			6
Total expenses before waiver		6,192			471			647			431
Expenses waived by the Advisor		—			(106	)		(64	)		(10	)
Net expenses		6,192			365			583			421
Net investment income (loss)		7,600			392			4,757			1,542
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		(13,238	)		(1,591	)		1,969			155
Foreign currency transactions		(1,245	)		(30	)		—			—
Total net realized gain (loss)		(14,483	)		(1,621	)		1,969			155
Change in net unrealized appreciation (depreciation) of:
Investments		63,746			4,762			2,990			1,025
Foreign currency translations		(494	)		44			—			—
Total change in net unrealized appreciation (depreciation)		63,252			4,806			2,990			1,025
Net increase (decrease) in net assets resulting from operations	$	56,369		$	3,577		$	9,716		$	2,722

See accompanying Notes to Financial Statements.

44     Semi-Annual Report June 30, 2012

Statements of Changes in Net Assets

for the Period Ended June 30, 2012 and the Year Ended December 31, 2011 (all amounts in thousands)

	Emerging Markets Growth Fund						Emerging Leaders Fund						Bond Fund						Low Duration Fund
	2012			2011			2012			2011			2012			2011			2012			2011
Operations
Net investment income (loss)	$	7,600		$	8,885		$	392		$	701		$	4,757		$	8,820		$	1,542		$	2,586
Net realized gain (loss) on investments and foreign currency transactions		(14,483	)		127,536			(1,621	)		112			1,969			3,325			155			59
Change in net unrealized appreciation (depreciation) on investments and foreign currency transactions		63,252			(304,105	)		4,806			(20,181	)		2,990			3,590			1,025			360
Net increase (decrease) in net assets resulting from operations		56,369			(167,684	)		3,577			(19,368	)		9,716			15,735			2,722			3,005
Distributions to shareholders from
Net investment income		—			(4,450	)		—			(332	)		(5,539	)		(9,700	)		(2,526	)		(4,103	)
Net realized gain		—			(115,030	)		—			(3,704	)		—			(1,831	)		—			—
		—			(119,480	)		—			(4,036	)		(5,539	)		(11,531	)		(2,526	)		(4,103	)
Capital stock transactions
Net proceeds from sale of shares		194,763			352,369			10,538			19,857			47,896			109,328			55,396			124,749
Shares issued in reinvestment of income dividends and capital gain distributions		—			100,061			—			3,491			4,205			—			1,963			—
Less cost of shares redeemed		(117,279	)		(597,963	)		(16,971	)		(47,023	)		(19,455	)		(74,292	)		(27,288	)		(109,974	)
Net increase (decrease) in net assets resulting from capital share transactions		77,484			(145,533	)		(6,433	)		(23,675	)		32,646			35,036			30,071			14,775
Increase (decrease) in net assets		133,853			(432,697	)		(2,856	)		(47,079	)		36,823			39,240			30,267			13,677
Net assets
Beginning of period	$	817,846		$	1,250,543		$	47,822		$	94,901		$	232,016		$	192,776		$	157,147		$	143,470
End of period	$	951,699		$	817,846		$	44,966		$	47,822		$	268,839		$	232,016		$	187,414		$	157,147
Accumulated net investment income (loss) at the end of the period	$	5,647		$	(7,892	)	$	378		$	238		$	(780	)	$	(879	)	$	(984	)	$	(1,517	)

See accompanying Notes to Financial Statements.

June 30, 2012 William Blair Funds    45

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of William Blair Funds’ (the “Trust”) 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

The Fund 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 Trust is unlimited. The Trust currently consists of the following twenty-four funds (the “Funds”), each with its own investment objective and policies. For each Fund, the number of shares authorized is unlimited.

Equity Funds	International Equity Funds
Growth Large Cap Growth Small Cap Growth Mid Cap Growth Small-Mid Cap Growth Large Cap Value Small Cap Value Mid Cap Value Small-Mid Cap Value Global Equity Fund Global Growth Multi-Asset and Alternative Funds Macro Allocation Commodity Strategy Long/Short	International Growth International Equity Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Leaders Growth Emerging Markets Small Cap Growth Fixed-Income Funds Bond Income Low Duration Money Market Fund Ready Reserves

The investment objectives of the Funds 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 Fund, the Institutional International Equity Fund and the Institutional Share Classes of the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, Bond Fund, and the Low Duration Fund are the only Funds covered in this report.

The Macro Allocation Fund and the Commodity Strategy Long/Short Fund have a fiscal year end of October 31, and issue a separate report.

(b) Share Classes

Three different classes of shares of the Global Growth, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, Emerging Markets Small Cap Growth, Bond and the Low Duration Funds 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. The Global Growth and Emerging Markets Small Cap Growth Funds do not have any shareholders in the Institutional Class as of June 30, 2012.

46     Semi-Annual Report June 30, 2012

Investment income realized and unrealized gains and losses, and certain Fund 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 Funds 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 Funds 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 Funds may use an independent pricing service to fair value the security as of the close of regular trading on the New York Stock Exchange. As a result, a Fund’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 matrices that produce estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Securities, and other assets, 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 Fund is carrying the security.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. As of June 30, 2012, there were securities held in the Institutional International Growth, International Small Cap Growth, Emerging Markets Growth and Bond Funds 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 June 30, 2012. 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 period ended June 30, 2012, the Bond and Low Duration Funds recognized an increase of interest income and a decrease of net realized loss of $(786) and $(984), respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Funds.

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.

June 30, 2012 William Blair Funds    47

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 year 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 Funds no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Dividends to Shareholders

Shares are sold and redeemed on a continuous basis at net asset value. The net asset value per share is determined by dividing the Fund’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 Funds. Dividends from the Bond and Low Duration Funds 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 Funds (excluding the Bond and Low Duration Funds) 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 (the “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 Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies. Each Fund 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 Institutional International Growth, Institutional International Equity, International Small Cap Growth, Emerging Markets Growth, and Emerging Leaders Growth Funds may be subject to a tax imposed on net realized and unrealized gains on securities of certain foreign countries.

Management has evaluated all of the uncertain tax positions of the Funds 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, 2011 remains open and the returns are subject to examination.

48     Semi-Annual Report June 30, 2012

The Funds have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for federal income tax purposes. The Funds also treat the deferred loss associated with current and prior year wash sales as an adjustment to the cost of investments for tax purposes. The cost of investments for federal income tax purposes and related gross unrealized appreciation (depreciation) and net unrealized appreciation (depreciation) at June 30, 2012 were as follows (in thousands):

Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation (Depreciation)
Institutional International Growth		1,585,567		165,144		71,443		93,701
Institutional International Equity		106,321		12,491		3,277		9,214
International Small Cap Growth		613,406		69,552		34,638		34,914
Emerging Markets Growth		894,872		70,072		40,969		29,103
Emerging Leaders Growth		44,328		2,000		1,640		360
Bond		184,052		1,671		387		1,284
Low Duration		251,058		16,751		368		16,383

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 Funds 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, paydown gains and losses and redemptions in-kind. These reclassifications have no impact on the net asset values of the Funds. Accordingly, at December 31, 2011, the following reclassifications were recorded (in thousands):

Fund	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain (Loss)			Capital Paid in Excess of Par Value
Institutional International Growth	$	(2,642	)	$	2,642		$	—
Institutional International Equity		(679	)		701			(22	)
International Small Cap Growth		8,995			(8,995	)		—
Emerging Markets Growth		5,939			(24,168	)		18,229
Emerging Leaders Growth		(251	)		276			(25	)
Bond		879			(879	)		—
Low Duration		1,517			(1,517	)		—

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 2011 and 2010 was as follows (in thousands):

	Distributions Paid in 2011						Distributions Paid in 2010
Fund	Return of Capital		Ordinary Income		Long-Term Capital Gains		Return of Capital		Ordinary Income		Long-Term Capital Gains
Institutional International Growth	$	—	$	1,997	$	—	$	—	$	35,383	$	—
Institutional International Equity		—		2,306		—		—		4,059		—
International Small Cap Growth		—		5,384		—		—		1,388		—
Emerging Markets Growth		—		3,984		93,763		—		11,311		—
Emerging Leaders Growth		13		697		1,443		—		—		—
Bond		—		2,764		577		—		1,483		99
Low Duration		—		1,853		—		—		1,041		—

As of December 31, 2011, the components of distributable earnings on a tax basis were as follows (in thousands):

Fund	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation (Depreciation)
Institutional International Growth	$	17,088	$	(202,354	)	$	—	$	9,198
Institutional International Equity		—		(127,316	)		—		6,149
International Small Cap Growth		5,874		(59,252	)		—		(26,530	)
Emerging Markets Growth		—		(13,506	)		—		(36,194	)

June 30, 2012 William Blair Funds    49

Fund	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation (Depreciation)
Emerging Leaders Growth	$	—	$	(931	)	$	—	$	(4,292	)
Bond		2		(79	)		928		13,393
Low Duration		—		(2,561	)		—		259

As of December 31, 2011, the Funds 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):

Fund	2016		2017		2018		Total
Institutional International Growth	$	—	$	182,481	$	—	$	182,481
Institutional International Equity		13,581		113,087		—		126,668
International Small Cap Growth		—		55,999		—		55,999
Low Duration		—		—		955		955

The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. Under the Act each Fund is permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred in periods after enactment will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. Each Fund has the following carry forward capital losses without expiration as of December 31, 2011 (in thousands):

Fund	Short Term		Long Term
Low Duration	$	951	$	406

For the period from November 1, 2011 through December 31, 2011, the following Funds incurred realized ordinary loss and capital losses. Ordinary Loss includes losses from currency transactions and PFICs. Each Fund intends to treat these losses as having occurred on the first day of fiscal year 2012 for federal income tax purposes (in thousands):

Fund	Ordinary Loss		Short-Term Capital		Long-Term Capital
Institutional International Growth	$	—	$	19,637	$	—
Institutional International Equity		19		613		—
International Small Cap Growth		537		2,491		—
Emerging Markets Growth		783		9,852		2,610
Emerging Leaders Growth		16		791		81
Bond		—		78		—
Low Duration		—		118		132

(h) Repurchase Agreements

In a repurchase agreement, a Fund 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 & Company, L.L.C. (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 Fund’s ability to dispose of the underlying securities. The risk to a Fund 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 Fund is entitled to sell the underlying collateral. The loss, if any, to a Fund 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 Fund 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 Fund enters into repurchase agreements to evaluate those risks. A Fund may, for tax purposes, deem repurchase agreements collateralized by U.S. Government securities to be investments in U.S. Government securities.

50     Semi-Annual Report June 30, 2012

(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) Indemnification

In the normal course of business, the Funds have entered into contracts in which the Funds agree to indemnify the other party or parties against various potential costs or liabilities. The Fund’s maximum exposure under these arrangements is unknown. No claim has been made for indemnification pursuant to any such agreement of the Funds.

(k) Fair Value Measurements

Fair value is defined as the price that a Fund 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 Fund’s investments. A three-tier hierarchy of inputs is used 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 (unadjusted) 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 Fund 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 Fund’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.

Any transfers between Level 1 and Level 2 are disclosed, effective as of the beginning of the year, in the tables below with the reasons for the transfers disclosed in a note to the tables, if applicable.

As of June 30, 2012, the hierarchical input levels of securities in each Fund, 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 Stocks	$	1,622,734	$	109,875		$	621,984	$	904,808	$	43,755
Preferred Stocks		—		—			—		18,748		933
Level 2—Other significant observable inputs
Short-Term Investments		55,989		5,659			26,085		—		—
Level 3—Significant unobservable inputs
Common Stock		299		—			—		—		—
Convertible Bonds		246		—			251		419		—
Total investments in securities	$	1,679,268	$	115,534		$	648,320	$	923,975	$	44,688
Other financial instruments—Liabilities
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	9	$	(11	)		—		—		—

June 30, 2012 William Blair Funds    51

	Bond		Low Duration
Investments in securities
Level 1—Quoted Prices
None		—		—
Level 2—Other significant observable inputs
U.S. Government and Agency Bonds		113,334		124,158
Corporate Bonds		142,281		20,067
Asset Backed Bonds		8,502		35,705
Short-Term Investments		3,157		5,406
Level 3—Significant unobservable inputs
Asset Backed Bonds		167		—
Total investments in securities	$	267,441	$	185,336

There were no transfers between Level 1 and Level 2 during the year.

Level 1 Common Stocks are exchange-traded securities with a quoted price. See Portfolio of Investments for Sector Classification.

The fair value estimates for the Level 3 securities in the Institutional International Growth, International Small Cap Growth, Emerging Markets Growth and Bond Funds 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 an adverse outcome in pending litigation. Level 3 securities represented 0.04%, 0.04%, 0.04%, 0.60% and 0.70% as a percentage of Net Assets in the Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Funds, respectively. The change in net unrealized gain (loss) related to those securities held at June 30, 2012 is included in the change in net unrealized appreciation (depreciation) of investments on the Statement of Operations. There were no transfers from or to Level 3 during the period.

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Fund has a management agreement with the Advisor for investment advisory, clerical, bookkeeping and administrative services. Each Fund 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:

International Funds:		Fixed-Income Funds
Institutional International Growth:		Bond	0.30%
First $500 million	1.00%	Low Duration	0.30%
Next $500 million	0.95%
Next $1.5 billion	0.90%
Next $2.5 billion	0.875%
Next $5 billion	0.85%
Next $5 billion	0.825%
In excess of $15 billion	0.80%
Institutional International Equity:
First $500 million	1.000%
Next $500 million	0.950%
In excess of $1 billion	0.900%
International Small Cap Growth	1.00%
Emerging Markets Growth	1.10%
Emerging Leaders Growth	1.10%

All of the Funds, except Institutional International Growth, 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 Fund for expenses in excess of the agreed upon rate. The amount the Advisor owes a Fund as of the report date is recorded as the

52     Semi-Annual Report June 30, 2012

Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Funds on an monthly 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, 2013, if total expenses of the Funds exceed the following rates (as a percentage of average daily net assets):

Fund	Effective May 1, 2012 through April 30, 2013			Effective May 1, 2011 through April 30, 2012
Institutional International Equity		1.10	%		1.10	%
International Small Cap Growth		1.25	%		1.25	%
Emerging Markets Growth		1.30	%		1.30	%
Emerging Leaders Growth		1.25	%		1.25	%
Bond		0.35	%		0.35	%
Low Duration		0.40	%		0.40	%

For a period of three years subsequent to the Commencement of Operations of the Fund, the Advisor is entitled to reimbursement from the Emerging Leaders Growth and Low Duration Funds for previously waived fees and expenses to the extent the overall expense ratio remains below the percentages indicated. The total amount available for recapture at June 30, 2012 is $163 (in thousands) for the Low Duration Fund. As a result, the total expense ratio for a Fund during the period the agreement is in effect will not fall below the percentage indicated.

For the period ended June 30, 2012, the fees waivers and/or reimbursements for each Fund were as follows (in thousands):

Fund	Fund Level Waiver		Class Specific Waiver*		Total Waiver
Institutional International Equity	$	37	$	—	$	37
Emerging Leaders Growth		105		1		106
Bond		35		29		64
Low Duration		9		1		10

* Class specific waivers include waivers on Class N and Class I, which are included in a separate report.

(3) Investment Transactions

Investment transactions, excluding money market instruments, repurchase agreements and demand notes for the period ended June 30, 2012 were as follows (in thousands):

Fund	Purchases		Sales
Institutional International Growth		727,714		(711,614	)
Institutional International Equity		55,249		(59,377	)
International Small Cap Growth		247,693		(373,436	)
Emerging Markets Growth		550,693		(481,027	)
Emerging Leaders Growth		27,931		(34,782	)
Bond		76,529		(41,620	)
Low Duration		65,849		(38,607	)

(4) Forward Foreign Currency Contracts

The Funds (excluding the Bond and Low Duration Funds) 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 Funds 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.

June 30, 2012 William Blair Funds    53

For the period ended June 30, 2012, the Institutional International Growth, Institutional International Equity, and International Small Cap Growth Funds engaged in forward foreign currency contracts with average notional volume (in thousands) of:

Fund	Average Notional Value
Institutional International Growth	$	162,356
Institutional International Equity		2,299
International Small Cap Growth		3,775

The following tables present the value of forward foreign currency contracts as of June 30, 2012 and their respective location on the Statement of Assets and Liabilities (values in thousands):

	Assets			Liabilities
Fund	Statement of Assets and Liabilities Location	Value		Statement of Assets and Liabilities Location	Value
Institutional International Growth	Unrealized appreciation on foreign forward currency contracts	$	9	Unrealized depreciation on foreign forward currency contracts		—
Institutional International equity	Unrealized appreciation on foreign forward currency contracts		—	Unrealized depreciation on foreign forward currency contracts	$	11

The effect of forward contracts on the Statements of Operations for the period ended June 30, 2012 (values in thousands):

Realized gain (loss) recognized in foreign currency transactions
Fund	Value
Institutional International Growth	$	4,859
Institutional International Equity		82
International Small Cap Growth		1,901
Change in unrealized gain (loss) recognized in foreign currency translations
Fund	Value
Institutional International Growth		$856
Institutional International Equity		(11	)
International Small Cap Growth		311

The following table presents open forward foreign currency contracts as of June 30, 2012 (values in thousands):

Institutional International Growth
Counterparty	Short Contracts	Settlement Date		Local Currency		Current Value		Unrealized Gain/Loss
State Street Bank and Trust	Japanese Yen		9/20/2012	¥	1,408,553	$	17,640		$9
Institutional International Equity
Counterparty	Short Contracts	Settlement Date		Local Currency		Current Value		Unrealized Gain/Loss
Morgan Stanley and Company	Euro Currency		9/18/2012		€3,893		$4,862		(11	)

54     Semi-Annual Report June 30, 2012

(5) Fund Share Transactions

The following table summarizes the activity in capital shares for Institutional Classes of each Fund (in thousands):

	Dollars
	For the period ended June 30, 2012
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	125,367	$	—	$	96,161	$	29,206
Institutional International Equity		4,556		—		6,731		(2,175	)
International Small Cap Growth		28,086		—		90,495		(62,409	)
Emerging Markets Growth		186,592		—		106,948		79,644
Emerging Leaders Growth		5,937		—		13,123		(7,186	)
Bond		14,964		1,297		3,177		13,084
Low Duration .		14,527		1,075		7,592		8,010
	Dollars
	For the year ended December 31, 2011
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	357,122	$	1,885	$	464,979	$	(105,972	)
Institutional International Equity		12,843		2,328		164,692		(149,521	)
International Small Cap Growth		144,872		5,156		51,270		98,758
Emerging Markets Growth		325,811		84,535		525,445		(115,099	)
Emerging Leaders Growth		—		2,152		38,310		(36,158	)
Bond		54,824		2,564		29,654		27,734
Low Duration.		61,464		1,816		42,760		20,520
	Shares
	For the period ended June 30, 2012
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		9,269		—		7,175		2,094
Institutional International Equity		470		—		667		(197	)
International Small Cap Growth		2,332		—		7,081		(4,749	)
Emerging Markets Growth		14,838		—		8,558		6,280
Emerging Leaders Growth		729		—		1,581		(852	)
Bond		1,369		119		292		1,196
Low Duration.		1,473		109		771		811
	Shares
	For the year ended December 31, 2011
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		26,212		156		33,111		(6,743	)
Institutional International Equity		1,239		259		16,514		(15,016	)
International Small Cap Growth		11,931		463		4,109		8,285
Emerging Markets Growth		22,569		7,644		34,501		(4,288	)
Emerging Leaders Growth		—		288		4,453		(4,165	)
Bond		5,142		239		2,774		2,607
Low Duration.		6,225		184		4,328		2,081

June 30, 2012 William Blair Funds    55

Financial Highlights

Institutional International Growth Fund

	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	12.39	$	14.37		$	12.20	$	8.66	$	19.20		$	19.39
Income (loss) from investment operations:
Net investment income (loss) (a)		0.16		0.21			0.14		0.10		0.25			0.15
Net realized and unrealized gain (loss) on investments		0.83		(2.17	)		2.31		3.61		(10.24	)		3.30
Total from investment operations		0.99		(1.96	)		2.45		3.71		(9.99	)		3.45
Less distributions from:
Net investment income		—		0.02			0.28		0.17		—			0.35
Net realized gain		—		—			—		—		0.55			3.29
Total distributions		—		0.02			0.28		0.17		0.55			3.64
Net asset value, end of year	$	13.38	$	12.39		$	14.37	$	12.20	$	8.66		$	19.20
Total Return (%)*		7.99		(13.66	)		20.10		42.83		(51.99	)		18.49
Ratios to average daily net assets (%):
Expenses, before waivers and reimbursements		0.98		0.99			0.99		1.01		0.98			1.02
Net investment income (loss), before waivers and reimbursements		2.40		1.51			1.12		0.95		1.68			0.74
Net assets at end of year (in thousands)	$	1,693,024	$	1,542,594		$	1,886,217	$	1,375,848	$	998,266		$	2,145,312
Portfolio turnover rate (%)		43		111			99		125		86			61

(a) Excludes $0.00, $0.09, $0.05, $(0.10), and $0.06 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

56     Semi-Annual Report June 30, 2012

Financial Highlights

Institutional International Equity Fund

	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	9.27	$	10.78		$	9.84	$	7.44	$	15.03		$	14.27
Income (loss) from investment operations:
Net investment income (loss)(a)		0.09		0.16			0.10		0.09		0.15			0.13
Net realized and unrealized gain (loss) on investments		0.37		(1.47	)		0.99		2.38		(7.60	)		2.42
Total from investment operations		0.46		(1.31	)		1.09		2.47		(7.45	)		2.55
Less distributions from:
Net investment income		—		0.20			0.15		0.07		—			0.22
Net realized gain		—		—			—		—		0.14			1.57
Total distributions		—		0.20			0.15		0.07		0.14			1.79
Net asset value, end of year	$	9.73	$	9.27		$	10.78	$	9.84	$	7.44		$	15.03
Total Return (%)*		4.96		(12.12	)		11.12		33.27		(49.57	)		18.36
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.10		1.10			1.07		1.09		1.05			1.09
Expenses, before waivers and reimbursements		1.16		1.10			1.07		1.09		1.05			1.06
Net investment income (loss), net of waivers and reimbursements		1.77		1.48			0.97		1.04		1.26			0.86
Net investment income (loss), before waivers and reimbursements		1.71		1.48			0.97		1.04		1.26			0.89
Net assets at end of year (in thousands)	$	115,133	$	111,474		$	291,468	$	365,271	$	360,451		$	618,179
Portfolio turnover rate (%)		48		91			73		78		91			66

(a) Excludes $0.00, $0.04, $0.00, $0.00, and $(0.07) of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2012 William Blair Funds    57

Financial Highlights

International Small Cap Growth Fund

			Institutional Class Shares
	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	11.51	$	13.24		$	10.53	$	6.69	$	14.04		$	13.43
Income (loss) from investment operations:
Net investment income (loss) (a)		0.09		0.14			0.09		0.04		0.03			0.05
Net realized and unrealized gain (loss) on investments		0.65		(1.68	)		2.69		3.83		(7.26	)		1.72
Total from investment operations		0.74		(1.54	)		2.78		3.87		(7.23	)		1.77
Less distributions from:
Net investment income		—		0.19			0.07		0.03		—			0.12
Net realized gain		—		—			—		—		0.12			1.04
Total distributions		—		0.19			0.07		0.03		0.12			1.16
Net asset value, end of year	$	12.25	$	11.51		$	13.24	$	10.53	$	6.69		$	14.04
Total Return (%)*		6.43		(11.60	)		26.40		57.84		(51.53	)		13.53
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.07		1.08			1.08		1.13		1.14			1.14
Expenses, before waivers and reimbursements		1.07		1.08			1.08		1.13		1.11			1.14
Net investment income (loss), net of waivers and reimbursements		1.45		1.10			0.77		0.48		0.28			0.32
Net investment income (loss), before waivers and reimbursements		1.45		1.10			0.77		0.48		0.31			0.32
Net assets at end of year (in thousands)	$	297,994	$	334,656		$	275,356	$	165,436	$	191,173		$	230,715
Portfolio turnover rate (%)		36		85			85		136		78			88

(a) Excludes $0.00, $0.15, $0.01, $(0.02), and $0.05 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

58     Semi-Annual Report June 30, 2012

Financial Highlights

Emerging Markets Growth Fund

	Period Ended June 30,		Years Ended December 31,
	2012		2011			2010		2009		2008			2007
Net asset value, beginning of year	$	11.32	$	15.96		$	13.03	$	7.56	$	22.07		$	19.54
Income (loss) from investment operations:
Net investment income (loss)(a)		0.10		0.14			0.06		0.06		0.17			(0.01	)
Net realized and unrealized gain (loss) on investments		0.73		(2.87	)		3.05		5.55		(13.74	)		7.27
Total from investment operations		0.83		(2.73	)		3.11		5.61		(13.57	)		7.26
Less distributions from:
Net investment income		—		0.08			0.18		0.14		—			0.19
Net realized gain		—		1.83			—		—		0.94			4.54
Total distributions		—		1.91			0.18		0.14		0.94			4.73
Net asset value, end of year	$	12.15	$	11.32		$	15.96	$	13.03	$	7.56		$	22.07
Total Return (%)*		7.33		(16.82	)		23.91		74.33		(61.51	)		38.21
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.19		1.19			1.17		1.22		1.22			1.25
Expenses, before waivers and reimbursements		1.19		1.19			1.17		1.22		1.20			1.25
Net investment income (loss), net of waivers and reimbursements		1.55		0.93			0.43		0.54		1.08			(0.05	)
Net investment income (loss), before waivers and reimbursements		1.55		0.93			0.43		0.54		1.10			(0.05	)
Net assets at end of year (in thousands)	$	801,502	$	675,633		$	1,021,456	$	830,660	$	299,739		$	809,071
Portfolio turnover rate (%)*		50		104			121		113		118			100

(a) Excludes $0.00, $0.11, $0.15, $(0.09), and $0.21 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2012 William Blair Funds    59

Financial Highlights

Emerging Leaders Growth Fund

	Period Ended June 30,		Periods Ended December 31,
	2012		2011			2010		2009		2008(a)
Net asset value, beginning of year	$	7.65	$	10.35		$	8.43	$	4.78	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.06		0.09			0.04		0.04		0.04
Net realized and unrealized gain (loss) on investments		0.48		(2.10	)		1.97		3.73		(5.26	)
Total from investment operations		0.54		(2.01	)		2.01		3.77		(5.22	)
Less distributions from:
Net investment income		—		0.06			0.03		0.12		0.00	^
Net realized gain		—		0.63			0.06		—		—
Return of capital		—		0.00	^		—		—		—
Total distributions		—		0.69			0.09		0.12		0.00	^
Net asset value, end of year	$	8.19	$	7.65		$	10.35	$	8.43	$	4.78
Total Return (%)*		7.06		(19.30	)		23.84		78.93		(52.11	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.25		1.25			1.26		1.25		1.25
Expenses, before waivers and reimbursements		1.62		1.41			1.35		1.36		1.41
Net investment income (loss), net of waivers and reimbursements		1.46		0.90			0.50		0.58		0.70
Net investment income (loss), before waivers and reimbursements		1.09		0.74			0.41		0.47		0.54
Net assets at end of year (in thousands)	$	21,043	$	26,166		$	78,516	$	106,313	$	43,762
Portfolio turnover rate (%)		52		142			176		176		151

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

(b) Excludes $0.00, $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 2011, 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.

Redemption fees represent less than $0.005 per share for all periods.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

60     Semi-Annual Report June 30, 2012

Financial Highlights

Bond Fund

	Institutional Class Shares
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.80	$	10.58	$	10.30	$	9.72	$	10.00		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.21		0.45		0.48		0.51		0.50			0.32
Net realized and unrealized gain (loss) on investments		0.22		0.36		0.34		0.58		(0.31	)		0.03
Total from investment operations		0.43		0.81		0.82		1.09		0.19			0.35
Less distributions from:
Net investment income		0.25		0.50		0.51		0.51		0.47			0.35
Net realized gain		—		0.09		0.03		—		—			—
Total distributions		0.25		0.59		0.54		0.51		0.47			0.35
Net asset value, end of year	$	10.98	$	10.80	$	10.58	$	10.30	$	9.72		$	10.00
Total Return (%)*		4.01		7.88		8.06		11.47		1.95			3.57
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.35		0.35		0.35		0.34		0.35			0.35
Expenses, before waivers and reimbursements		0.38		0.39		0.40		0.43		0.56			0.52
Net investment income (loss), net of waivers and reimbursements		3.93		4.24		4.54		5.07		5.04			5.09
Net investment income (loss), before waivers and reimbursements		3.90		4.20		4.49		4.98		4.83			4.92
Net assets at end of year (in thousands)	$	83,775	$	69,447	$	40,490	$	16,226	$	10,443		$	11,874
Portfolio turnover rate (%)*		12		28		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.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2012 William Blair Funds    61

Financial Highlights

Low Duration Bond Fund

			Institutional Class Shares
	Period Ended June 30,		Periods Ended December 31,
	2012		2011		2010		2009(a)
Net asset value, beginning of year	$	9.83	$	9.90	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.09		0.18		0.16		0.01
Net realized and unrealized gain (loss) on investments		0.07		0.03		0.05		(0.07	)
Total from investment operations		0.16		0.21		0.21		(0.06	)
Less distributions from:
Net investment income		0.15		0.28		0.24		0.01
Net realized gain		—		—		—		—
Total distributions		0.15		0.28		0.24		0.01
Net asset value, end of year	$	9.84	$	9.83	$	9.90	$	9.93
Total Return (%)*		1.64		2.14		2.15		(0.58	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.40		0.40		0.40		0.40
Expenses, before waivers and reimbursements		0.41		0.42		0.48		0.64
Net investment income (loss), net of waivers and reimbursements		1.89		1.81		1.61		1.54
Net investment income (loss), before waivers and reimbursements		1.88		1.79		1.53		1.30
Net assets at end of year (in thousands)	$	76,151	$	68,059	$	47,965	$	13,500
Portfolio turnover rate (%)*		12		43		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.

^ Amount is less than $0.005 per share.

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 annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

62     Semi-Annual Report June 30, 2012

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(2)	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	Trustee since 2002; Chairperson since 2010 Since 2007	Partner, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)	25	Director, William Blair SICAV; Financial Accounting Foundation (FAF)
Richard W. Smirl, 1967*	Trustee and Senior Vice President	Trustee since 2010 and Senior Vice President Since 2007	Partner, William Blair & Company, L.L.C.	25	Director, William Blair SICAV
Non-Interested Trustees
Phillip O. Peterson, 1944	Trustee	Since 2007	Retired; formerly, President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	25	The Hartford Group of Mutual Funds (87 portfolios); Symetra Mutual Funds Trust (variable annuity funds) (14 portfolios)
Lisa A. Pollina, 1965	Trustee	Since 2011	Senior Advisor to head of RBC Financial Group’s International Banking and Insurance division since 2010; formerly, Bank of America Corporation, Global Financial Institutions Executive from 2006-2008 and multiple Advisory from 2008-2010; prior thereto roles, Managing Partner, Bordeaux Capital from 2002-2006.	25	Darkstrand, high-speed fiber optic network provider (2009 to 2010); Jane Addams Hull House Association, Board of Trustees (2003 to 2009)
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.	25	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	25	Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)

June 30, 2012 William Blair Funds    63

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)	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	25	Mutual Trust Financial Group, provider of insurance and investment products; Board Member First MetLife Investors Insurance Company, NY Chartered Company for Metropolitan Life Insurance
Officers
Michael P. Balkin, 1959	Senior Vice President Vice President	Since 2009 2008-2009	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Partner, Magnetar Capital		N/A
Karl W. Brewer, 1966	Senior Vice President	Since 2000	Partner, William Blair & Company, L.L.C.		N/A
David C. Fording, 1967	Senior Vice President Vice President	Since 2009 2006-2009	Partner, 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	Partner, William Blair & Company, L.L.C.		N/A
W. George Greig, 1952	Senior Vice President	Since 1996	Partner, William Blair & Company, L.L.C.		N/A
Michael A. Jancosek, 1959	Senior Vice President	Since 2004	Partner, William Blair & Company L.L.C.		N/A
John F. Jostrand, 1954	Senior Vice President	Since 1999	Partner, William Blair & Company, L.L.C.		N/A
Chad M. Kilmer, 1975	Senior Vice President Vice President	Since 2011 2006-2011	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.		N/A
Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Partner, William Blair & Company, L.L.C.		Chairman, AG. Med, Inc.
Mark T. Leslie, 1967	Senior Vice President Vice President	Since 2008 2005-2008	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.		N/A
Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.		N/A
Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.		N/A

64     Semi-Annual Report June 30, 2012

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
Todd M. McClone, 1968	Senior Vice President Vice President	Since 2006 2005-2006	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A N/A
David Merjan, 1960	Senior Vice President	Since 2008	Partner, William Blair & Company, L.L.C.	N/A
David S. Mitchell, 1960	Senior Vice President	Since 2004	Partner, William Blair & Company, L.L.C.	N/A
David P. Ricci, 1958	Senior Vice President	Since 2006	Partner, William Blair & Company, L.L.C.	N/A
Brian D. Singer, 1960	Senior Vice President Vice President	Since 2012 2011-2012	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2003-2007)	N/A
Paul J. Sularz, 1967	Senior Vice President Vice President	Since 2012 2009-2012	Partner, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A
Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Partner, William Blair & Company, L.L.C.	N/A
Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Partner, William Blair & Company, L.L.C.	N/A
Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A
David F. Hone, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Portfolio Manager Large Cap Value, Deutsche Asset Management (2002-2010)	N/A
John Abunassar, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2009-2011); prior thereto. President and CEO of Allegiant Asset	N/A
Peter Carl, 1967	Vice President	Since 2011	Associate, William Blair & Company L.L.C. (since 2011); prior thereto, Portfolio Manager, Guidance Capital LLC (2006-2011)	N/A
D. Trowbridge Elliman III, 1957	Vice President	Since 2011	Associate, William Blair & Company L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2001-2011)	N/A

June 30, 2012 William Blair Funds    65

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
Christopher Walvoord, 1966	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2002-2011)	N/A
Brian Ziv, 1957	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Principal, Guidance Capital LLC (2001-2011)	N/A
Edwin Denson, 1967	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2001-2009)	N/A
Thomas Clarke, 1968	Vice President	Since 2011	Associate, William Blair & Company, L.L.C. (since 2011); prior thereto, Managing Partner, Singer Partners, LLC (2009-2011); prior thereto, UBS Global Asset Management (Americas) Inc. (2000-2009)	N/A
Walter R. Randall, Jr., 1960	Chief Compliance Officer and Assistant Secretary	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
John M. Raczek, 1970	Assistant Treasurer	Since 2010	Associate, William Blair & Company, L.L.C.; Manager, Calamos Investments	N/A

* Ms. Seitz and Mr. Smirl are interested persons of the William Blair Funds because each is a partner of William Blair & Company, L.L.C., the Fund’s 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 earlier of (a) the non-interested Trustee’s 72nd birthday or (b) the 15th anniversary of the date that the non-interested Trustee was first elected or appointed as a member of the Board of Trustees. 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 partners 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.

66     Semi-Annual Report June 30, 2012

Renewal of the Trust’s Management Agreement

On April 24, 2012, the Board of Trustees (the “Board”) of the William Blair Funds (the “Trust”), including the Trustees who are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the renewal for an additional one-year term of the Trust’s Management Agreement with William Blair & Company, L.L.C. (the “Advisor”), on behalf of each of the William Blair Global Growth Fund, the William Blair Institutional International Growth Fund, the William Blair Institutional International Equity Fund, the William Blair International Small Cap Growth Fund, the William Blair Emerging Markets Growth Fund, the William Blair Emerging Leaders Growth Fund, the William Blair Bond Fund and the William Blair Low Duration Fund (each, a “Fund” and collectively, the “Funds”). In deciding to approve the renewal of the Management Agreement, the Board did not identify any single factor or group of factors as all important or controlling and considered all factors together.

The information in this summary outlines the Board’s considerations associated with its renewal of the Management Agreement. In connection with its deliberations regarding the continuation of the Management Agreement, the Board considered such information and factors as it believed to be relevant. As described below, the Board considered the nature, extent and quality of the services performed by the Advisor under the existing Management Agreement; comparative management fees and expense ratios as prepared by an independent provider (Lipper Inc.); the estimated profits realized by the Advisor; the extent to which the Advisor realizes economies of scale as a Fund grows; and whether any fall-out benefits are being realized by the Advisor. In addition, the Independent Trustees discussed the renewal of the Management Agreement with Fund management and in private sessions with independent legal counsel at which no representatives of the Advisor were present.

The Board, including the Independent Trustees, considered the renewal of the Management Agreement pursuant to a process that concluded at the Board’s April 24, 2012 meeting. In preparation for the review process, the Independent Trustees met with independent legal counsel and discussed the type and nature of information to be requested and independent legal counsel sent a formal request for information to Trust management. The Advisor provided extensive information in response to the request. After reviewing the information received, the Independent Trustees requested supplemental information, which the Advisor provided in writing and/or orally. The Independent Trustees reviewed comparative performance and comparative advisory fees and expense ratios for a peer group and a peer universe of funds provided by Lipper for each Fund. In addition, the Independent Trustees considered: (i) materials describing the nature, quality and extent of services provided by the Advisor; (ii) information comparing the performance of each Fund to one or more relevant securities indexes; (iii) information comparing advisory fees of each Fund to fees charged by the Advisor to other funds and client accounts with similar investment strategies; (iv) the estimated allocated direct or indirect costs of services provided and estimated profits realized by the Advisor for both the Trust as a whole and each Fund individually; and (v) information describing other benefits to the Advisor resulting from its relationship with the Funds. The Independent Trustees also noted that they receive information from the Advisor regarding the Funds throughout the year in connection with regular Board meetings, including presentations from portfolio managers. The Independent Trustees also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Management Agreement. Finally, the Advisor made an in-person presentation to the Independent Trustees regarding the contract review information, including addressing the supplemental information requests, and answered questions from the Independent Trustees.

On April 16, 23 and 24, 2012, the Independent Trustees met independently of Trust management and of the interested Trustees to review and discuss with independent legal counsel the information provided by the Advisor, Lipper and independent legal counsel. The Independent Trustees noted that in evaluating the Management Agreement, they were taking into account their accumulated experience as Board members in working with the Advisor on matters relating to the Funds. Based on their review, the Independent Trustees concluded that it was in the best interest of each Fund to renew the Management Agreement and recommended to the Board the renewal of the Management Agreement. The Board considered the recommendation of the Independent Trustees along with the other factors that the Board deemed relevant.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Funds, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people and has a long association with the Funds, in each case other than the Growth Fund, since the inception of the Funds. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Funds knowing that the Advisor managed the Funds and knowing the investment advisory fee. The Board considered biographical information about the Trust’s officers and the Funds’ portfolio managers, including information on the portfolio managers’ investments in the Funds. The Board also considered the administrative services performed by the Advisor, financial information regarding the Advisor, the Advisor’s execution

June 30, 2012 William Blair Funds    67

quality and use of soft dollars, the compliance regime overseen by the Advisor, and the Advisor’s expense limitations in place for certain Funds. The Board was also provided with information pertaining to the Advisor’s organizational structure and senior management. The Board noted that the Advisor pays the compensation of all of the officers and the interested Trustees of the Trust.

The Board reviewed information on the annualized total returns of each Fund for the one, three, five and ten year periods ended December 31, 2011, as applicable, along with annualized total return information for the Lipper performance peer universe of funds and one or more relevant securities indexes. The Lipper performance peer universe for each Fund included all funds with a similar investment style as classified by Lipper regardless of asset size or primary channel of distribution. With respect to the comparative performance information generally, the Board considered the Advisor’s statement that it is committed to managing each Fund consistently with the Fund’s stated investment strategies through all market environments and that, as a result, the Funds’ relative performance compared to the Lipper performance peer universe and relevant securities indexes from year to year will be affected by whether the market environment favors or disfavors certain of the Advisor’s investment strategies, but that the Advisor seeks to provide superior performance over the long term. The Trustees reviewed each Fund’s ranking in its Lipper performance peer universe during the applicable periods, and based on that review, requested and discussed with the Advisor additional information regarding the performance of the Institutional International Equity Fund. With respect to the Institutional International Equity Fund, the Board considered the Advisor’s statement that the Fund’s lower allocations to emerging markets and small-cap securities relative to its peer funds had contributed to relative underperformance in recent periods.

Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Fund were satisfactory.

Fees and Expenses. The Board reviewed each Fund’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper expense peer group and Lipper expense peer universe for each Fund. The Lipper expense peer group for each Fund consisted of a group of funds with a similar investment style as classified by Lipper, distribution channel and asset size as the Fund. The Lipper expense peer universe for each Fund consisted of all funds with a similar investment style as classified by Lipper and distribution channel as the Fund. For each Fund, the Board also reviewed amounts charged by the Advisor to other pooled investment vehicles, including other registered funds for which the Advisor acts as a subadvisor, and the Advisor’s fee schedule for institutional separate accounts. With respect to other pooled investment vehicles and institutional separate accounts, the Board considered the Advisor’s statement that both the mix of services provided to the Funds and the additional regulatory responsibilities associated with sponsoring registered investment companies were greater as compared to the work involved for other pooled investment vehicles and separate accounts. In addition, the Board considered the Advisor’s statement that institutional separate accounts are distributed differently, operate under different investment and regulatory structures and have different business risks as compared to the Funds.

In considering the Lipper information, the Board noted that the contractual advisory fees for the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Bond Fund and the Low Duration Fund were at or below the average advisory fees of their Lipper expense peer group. The Board also noted that the contractual advisory fees for the Global Growth Fund, the Institutional International Growth Fund, the Institutional International Equity Fund and the Emerging Leaders Growth Fund were above the average advisory fees of their Lipper expense peer group, but that each Fund’s advisory fee was within range of the average advisory fees of its Lipper expense peer group. The Board also considered that the Advisor had proposed to contractually limit total expenses for the Global Growth Fund, the Institutional International Equity Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Bond Fund and the Low Duration Fund. On the basis of the information provided, the Board concluded that each Fund’s advisory fee, coupled with applicable expense limitations, was reasonable.

Profitability. With respect to the profitability of the Management Agreement to the Advisor, the Board considered the overall fees paid under the Management Agreement, including the estimated allocated costs of the services provided and profits realized by the Advisor from its relationship with the Trust as a whole and each Fund individually. The Board concluded that the estimated profits realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of investors. The Board noted the Advisor’s representation that certain Fund expenses are relatively fixed and unrelated to asset size and that the Advisor may enjoy some economies of scale as a Fund’s assets grow. The Board also noted that the Advisor increased the number of personnel working on Fund matters during 2011. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board

68     Semi-Annual Report June 30, 2012

reviewed each Fund’s asset size, breakpoints for those Funds with breakpoints in the advisory fee schedule, the Fund’s total and net expense ratios and the expense limitations in place and/or proposed, and concluded that in the aggregate they reasonably reflect appropriate recognition of any economies of scale.

Other Benefits to the Advisor. The Board considered benefits derived by the Advisor from its relationship with the Funds, including (i) non-advisory fee revenue from the Funds in the form of shareholder administration fees, service fees and/or distribution fees and the payment of some or all of those revenues to affiliates or third parties, (ii) soft dollars, which pertain primarily to the Funds investing in equity securities, and (iii) favorable media coverage. The Board concluded that, taking into account these benefits, each Fund’s advisory fee was reasonable.

Conclusion. Based upon all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement continue to be fair and reasonable and that the continuation of the Management Agreement is in the best interests of each Fund.

June 30, 2012 William Blair Funds    69

(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

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, 2011:

Emerging Markets Growth	Emerging Leaders Growth	Bond
$115,030,166	$2,732,548	$1,831,187

The following table provides the percentage of the 2011 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:

Fund	Dividend Received Deduction%			Qualified Dividend Income%
Institutional International Growth		0.00	%		80.38	%
Institutional International Equity		0.00	%		100.00	%
International Small Cap Growth		0.00	%		100.00	%
Emerging Markets Growth		0.10	%		100.00	%
Emerging Leaders Growth		0.00	%		100.00	%
Bond		0.00	%		0.00	%
Low Duration		0.00	%		0.00	%

In January 2012, 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 2011.

70     Semi-Annual Report June 30, 2012

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 Fund, 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 Fund’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2012 to June 30, 2012.

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 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. 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.

June 30, 2012 William Blair Funds    71

Fund Expenses; (unaudited)

The example below shows 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 in these charts.

Expense Example	Beginning Account Value 1/1/2012		Ending Account Value 6/30/2012		Expenses Paid During the Period (a)		Annualized Expense Ratio
Institutional International Growth Fund
Institutional Class—actual return	$	1,000.00	$	1,079.90	$	5.07		0.98	%
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,019.99	$	4.92		0.98
Institutional International Equity Fund
Class I—actual return	$	1,000.00	$	1,049.60	$	5.61		1.10
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,019.39	$	5.52		1.10
International Small Cap Growth Fund
Institutional Class—actual return	$	1,000.00	$	1,064.30	$	5.49		1.07
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,019.54	$	5.37		1.07
Emerging Markets Growth Fund
Institutional Class—actual return	$	1,000.00	$	1,073.30	$	6.13		1.19
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,018.95	$	5.97		1.19
Emerging Leaders Growth Fund
Institutional Class—actual return	$	1,000.00	$	1,070.60	$	6.44		1.25
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,018.65	$	6.27		1.25
Bond Fund
Institutional Class—actual return	$	1,000.00	$	1,040.10	$	1.78		0.35
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,023.12	$	1.76		0.35
Low Duration Fund
Institutional Class—actual return	$	1,000.00	$	1,016.40	$	2.01		0.40
Institutional Class—hypothetical 5% return	$	1,000.00	$	1,022.87	$	2.01		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 182, and divided by 366 (to reflect the one-half year period).

72     Semi-Annual Report June 30, 2012

BOARD OF TRUSTEES

Phillip O. Peterson

Retired Partner, KPMG LLP

Lisa A. Pollina

Senior Advisor to RBC Financial Group—International Banking and Insurance Division

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, Chairman and President

Partner, William Blair & Company, L.L.C.,

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl, Senior Vice President

Partner, William Blair & Company L.L.C.

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

Chad M. Kilmer, 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

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Brian D. Singer, Senior Vice President

Paul J. Sularz, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Kathleen M. Lynch, Vice President

David F. Hone, Vice President

John Abunassar, Vice President

Peter Carl, Vice President

D. Trowbridge Elliman III, Vice President

Christopher Walvoord, Vice President

Brian Ziv, Vice President

Edwin Denson, Vice President

Thomas Clarke, Vice President

Walter R. Randall, Jr., Chief Compliance Officer and Assistant Secretary

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

John M. Raczek, Assistant Treasurer

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)

June 30, 2012 William Blair Funds    73

William Blair Funds

INTERNATIONAL EQUITY	FIXED-INCOME
Institutional International Growth Fund	Bond Fund - Institutional Class Shares
Institutional International Equity Fund	Low Duration Fund - Institutional Class Shares
International Small Cap Growth Fund - Institutional Class Shares
Emerging Markets Growth Fund - Institutional Class Shares
Emerging Leaders Growth Fund - Institutional Class Shares

		©William Blair & Company, L.L.C., distributor
	+1 800 742 7272 williamblairfunds.com	222 West Adams Street Chicago, Illinois 60606

Item 2. Code of Ethics

Not applicable to this filing.

Item 3. Audit Committee Financial Expert

Not applicable to this filing.

Item 4. Principal Accountant Fees and Services

Not applicable to this filing.

Item 5. Audit Committee of Listed Registrants

Not Applicable to this Registrant, insofar as the Registrant is not a listed company.

Item 6. Schedule of Investments

See Schedule of Investments in Item 1

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 8. Portfolio Managers of Closed 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: August 16, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated

/s/ Michelle R. Seitz

By:	Michelle R. Seitz
	President (Chief Executive Officer)

Date: August 16, 2012

/s/ Colette M. Garavalia

By:	Colette M. Garavalia
	Treasurer (Chief Financial Officer)

Date: August 16, 2012