William Blair Funds NCSR/A Certified annual shareholder report (management investment company) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number 811-5344

William Blair Funds

(Exact name of registrant as specified in charter)


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

Michelle R. Seitz

William Blair Funds

222 West Adams Street, Chicago, IL 60606

(Name and address of agent for service)

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

Date of fiscal year end: December 31

Date of reporting period: December 31, 2012

EXPLANATORY NOTE: The Registrant is filing this amendment to its Form N-CSR for fiscal year ended December 31, 2012 to correct typographical errors in the Financial Highlights for periods prior to 2012. Other than the corrections to the Financial Highlights, the Form N-CSR/A does not reflect events occurring after the filing of the original Form N-CSR or modify or update the disclosures in any way.

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

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

Item 1.

December 31, 2012 Annual Reports transmitted to shareholders.

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William Blair Funds

Annual Report

December 31, 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			16

Mid Cap Growth Fund
An Overview from the Portfolio Managers			18
Portfolio of Investments			21

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

Global Markets Overview			26

Global Leaders Fund (formerly known as Global Growth Fund)
An Overview from the Portfolio Managers			27
Portfolio of Investments			29

International Growth Fund
An Overview from the Portfolio Manager			31
Portfolio of Investments			33

International Equity Fund
An Overview from the Portfolio Manager			38
Portfolio of Investments			40

International Leaders Fund
An Overview from the Portfolio Managers			42
Portfolio of Investments			44

International Small Cap Growth Fund
An Overview from the Portfolio Manager			46
Portfolio of Investments			48

Emerging Markets Growth Fund
An Overview from the Portfolio Managers			51
Portfolio of Investments			53

Emerging Markets Leaders Fund (formerly known as Emerging Leaders Growth Fund)
An Overview from the Portfolio Managers			56
Portfolio of Investments			58

Emerging Markets Small Cap Growth Fund
An Overview from the Portfolio Managers			60
Portfolio of Investments			62

December 31, 2012

William Blair Funds 1



Large Cap Value Fund
An Overview from the Portfolio Manager			65
Portfolio of Investments			68

Small Cap Value Fund
An Overview from the Portfolio Managers			69
Portfolio of Investments			72

Mid Cap Value Fund
An Overview from the Portfolio Managers			74
Portfolio of Investments			76

Small-Mid Cap Value Fund
An Overview from the Portfolio Managers			77
Portfolio of Investments			80

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			121

Financial Highlights			139

Report of Independent Registered Public Accounting Firm			160

Board of Trustees and Officers			161

Fund Expenses			169

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.

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December 31, 2012

PERFORMANCE AS OF DECEMBER 31, 2012—CLASS N SHARES (Unaudited)


	1 yr		3 yr		5 yr			10 yr (or since inception)			Inception Date	Overall Morningstar Rating
Growth Fund
Class N		15.67		8.97		2.32			7.59		3/20/1946	««« Among 1,503 Large Growth Funds
Morningstar Large Growth		15.34		9.30		1.12			7.12
Russell 3000^® Growth		15.21		11.46		3.15			7.69
S&Ps 500		16.00		10.87		1.66			7.10

Large Cap Growth Fund
Class N		18.31		9.74		1.60			5.42		12/27/1999	««« Among 1,503 Large Growth Funds
Morningstar Large Growth		15.34		9.30		1.12			7.12
Russell 1000^® Growth		15.26		11.35		3.12			7.52

Small Cap Growth Fund
Class N		18.15		5.96		1.40			9.57		12/27/1999	«« Among 658 Small Growth Funds
Morningstar Small Growth		13.15		11.74		2.55			9.14
Russell 2000^® Growth		14.59		12.82		3.49			9.80

Mid Cap Growth Fund
Class N		10.90		11.81		4.42			5.92		2/1/2006	«««« Among 671 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		14.07		11.08		1.73			—
Russell MidCap^® Growth		15.81		12.91		3.23			4.57

Small-Mid Cap Growth Fund
Class N		12.20		11.16		4.23			7.34		12/29/2003	«««« Among 671 Mid-Cap Growth Funds
Morningstar Mid-Cap Growth		14.07		11.08		1.73			—
Russell 2500^TM Growth		16.13		13.78		4.07			7.07

Global Leaders Fund
Class N		17.25		10.90		(0.66	)		(0.84	)	10/15/2007	«««« Among 736 World Stock Funds
Morningstar World Stock		15.84		6.66		(0.76	)		—
MSCI All Country World IMI (net)		16.38		7.02		(0.73	)		(1.56	)

International Growth Fund
Class N		23.67		8.28		(2.95	)		9.88		10/1/1992	««« Among 223 Foreign Large Growth Funds
Morningstar Foreign Large Growth		17.70		5.77		(2.26	)		8.99
MSCI All Country World Ex-U.S. IMI (net)		17.04		4.18		(2.59	)		10.16

International Equity Fund
Class N		17.57		4.35		(5.03	)		4.01		5/24/2004	«« Among 223 Foreign Large Growth Funds
Morningstar Foreign Large Growth		17.70		5.77		(2.26	)		—
MSCI World Ex-U.S. (net)		16.41		3.65		(3.43	)		5.98

International Leaders Fund
Class N		—		—		—			8.16		8/16/2012	Not rated.
MSCI All Country World Ex-U.S. IMI (net)		—		—		—			9.61

International Small Cap Growth Fund
Class N		20.73		10.11		0.21			6.15		11/1/2005	««« Among 109 Foreign Small/Mid Growth Funds
Morningstar Foreign Small/Mid Growth		22.20		9.70		(0.49	)		—
MSCI All Country World Small Cap Ex-U.S. (net)		18.52		6.54		(0.39	)		5.99

Emerging Markets Growth Fund
Class N		20.70		7.21		(3.88	)		11.11		6/6/2005	««« Among 358 Diversified Emerging Markets Funds
Morningstar Diversified Emerging Markets		18.15		4.26		(2.16	)		—
MSCI Emerging Markets IMI (net)		18.68		4.64		(0.70	)		11.50

Please see the next page for important disclosure information.

December 31, 2012

William Blair Funds 3

PERFORMANCE AS OF DECEMBER 31, 2012—CLASS N SHARES (Unaudited)—CONTINUED


	1 yr		3 yr		5 yr		10 yr (or since inception)		Inception Date	Overall Morningstar Rating
Emerging Markets Leaders Fund
Class N		20.37		—		—		5.27	5/3/2010	«««« Among 358 Diversified Emerging Markets Funds
Morningstar Diversified Emerging Markets		18.15		—		—		—
MSCI Emerging Markets (net)		18.22		—		—		4.29

Emerging Markets Small Cap Growth Fund
Class N		34.23		—		—		25.19	10/24/2011	Not rated.
Morningstar Diversified Emerging Markets		18.15		—		—		—
MSCI Emerging Markets Small Cap (net)		22.22		—		—		12.05

Large Cap Value Fund
Class N		16.92		—		—		13.87	10/24/2011	Not rated.
Morningstar Large Value		14.57		—		—		—
Russell 1000^® Value		17.51		—		—		16.13

Small Cap Value Fund
Class N		12.49		11.08		5.11		8.76	12/23/1996	««« Among 279 Small Value Funds
Morningstar Small Value		16.00		11.04		4.20		9.96
Russell 2000^® Value		18.05		11.57		3.55		9.50

Mid Cap Value Fund
Class N		13.54		—		—		7.93	5/3/2010	Not rated.
Morningstar Mid-Cap Value		16.60		—		—		—
Russell Midcap^® Value		18.51		—		—		8.81

Small-Mid Cap Value Fund
Class N		11.95		—		—		16.18	12/15/2011	Not rated.
Morningstar Small Value		16.00		—		—		—
Russell 2500^® Value		19.21		—		—		23.03

Bond Fund
Class N		8.33		7.87		7.23		6.97	5/1/2007	«««« Among 1,001 Intermediate-Term Bond Funds
Morningstar Intermediate-Term Bond		7.01		6.96		6.07		—
Barclays Capital U.S. Aggregate Bond		4.21		6.19		5.95		6.11

Income Fund
Class N		6.00		5.75		4.85		3.75	10/1/1990	«««« Among 357 Short-Term Bond Funds
Morningstar Short-term Bond		3.67		3.21		3.30		3.20
Barclays Capital U.S. Intermediate		3.89		5.19		5.18		4.62
Govt./Credit Bond

Low Duration Fund
Class N		2.80		2.13		—		1.87	12/1/2009	«««« Among 87 Ultrashort Bond Funds
Morningstar Ultra Short Bond		1.99		1.52		—		—
Bank of America Merrill Lynch 1-Year U.S. Treasury Note		0.24		0.54		—		0.48

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 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.

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December 31, 2012

PERFORMANCE AS OF DECEMBER 31, 2012—CLASS N SHARES (Unaudited)—CONTINUED

Morningstar Ratings^™ are as of 12/31/2012 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 1,503/1,301/863 large growth funds; Small Cap Growth Fund «/««/«««, out of 658/570/384 small growth funds; Mid Cap Growth Fund «««/««««/NA and Small-Mid Cap Growth Fund «««/««««/NA out of 671/591/NA mid cap growth funds; Global Leaders Fund «««««/«««/NA out of 736/549/NA world stocks; International Growth Fund ««««/«««/««« and International Equity Fund ««/««/NA out of 223/182/105 foreign large growth funds; International Small Cap Growth Fund «««/«««/NA out of 109/96/NA foreign small/mid growth funds; Emerging Markets Growth Fund ««««/««/NA and Emerging Markets Leaders Fund ««««/NA/NA, out of 358/250/NA diversified emerging markets growth funds; Small Cap Value Fund «««/««««/««« out of 279/247/144 small value funds; Income Fund «««««/««««/«««« out of 357/319/206 short-term bond funds; Bond Fund ««««/««««/NA out of 1,001/874/NA intermediate-term bond funds; Low Duration Fund ««««/NA/NA out of 87/NA/NA ultrashort bond funds.

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

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 5

LOGO

David C. Fording

LOGO

John F. Jostrand

GROWTH FUND

The Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Growth Fund posted a 15.67% increase (Class N shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 3000^® Growth Index, increased by 15.21%.

In the year, investors continued to fluctuate between optimism and pessimism based on macroeconomic or political announcements. Market volatility remained, but less than recent years as there were fewer unknowns in the marketplace. In this environment, the Russell 3000^® Growth Index rose 15.21%, and climbed the proverbial “wall of worry.” In general, by the fourth quarter there was evidence that the global economy, ex-Europe, had stabilized after a slowing in the middle of the year. From a sector perspective, cyclical sectors such as Financials and Consumer Discretionary as well as Health Care performed best. Energy stocks were a drag as were more defensive Utilities and Consumer Staples sectors.

Technology stock selection stood out due to a top ten position in eBay, as well as SolarWinds. eBay benefited from strong revenue growth from its Marketplace and PayPal divisions. We believe PayPal is a key strategic asset and it should continue to see market share gains in the fast growing mobile payments arena. SolarWinds, a seller of licensed software for corporate and storage networks, had solid execution from new products and geographies. In our view, it has a unique strategy as the low cost, low touch, high performance provider of network management software using a telesales model, which should enable it to continue to take market share. Outside of Technology, Gilead Sciences in the Health Care sector, and TransDigm Group in Industrials were also key contributors. Gilead Sciences rallied on news that a major competitor put its HCV (hepatisis C virus) pipeline product on hold due to safety concerns, placing Gilead Sciences in a strong position with its own HCV product. Also, the U.S. FDA approved Gilead’s Quad pill (branded Stribild); it is the first four drug, single tablet, once-a-day, regimen for HIV. Lastly, aerospace/defense provider, TransDigm Group, gained ground due to strong revenue and margin trends, as well as continued execution of its acquisition strategy. We believe the firm has an attractive business model that focuses on the design of complex, low volume, low dollar value parts within an aircraft; it is the sole provider for the life of the aircraft (30 to 40 years) and typically generates close to 50% margins on these parts. Importantly, as the aforementioned stock positions rose during the year, we trimmed them, which is typical of our investment discipline. Other ancillary contributors were our sector underweights in Energy and Consumer Staples.

Conversely, Consumer stock selection for the year was disappointing. In Consumer Discretionary, Gentex announced pricing pressures, order volatility and lower industry volumes for its products. Our investment thesis was based on new products driving organic growth and higher average selling prices (ASPs) over the longer term. As a result, we eliminated the stock in July over the slowing product demand and stalled ASPs. In Consumer Staples, Mead Johnson Nutrition, a recent addition to the portfolio in June, trailed its sector peers. The stock lost ground given the firm’s recent performance related to a slowdown in Chinese consumer spending, and in hindsight, an ill timed price increase, which was met with temporary consumer resistance and market share loss. We believe these are near-term issues and the long-term investment thesis remains intact; we added to our existing position in the fourth quarter. In our view, it should benefit from the secular growth in emerging markets with the rising middle class and their desire for premium Western branded infant formula. Beyond the consumer group, NxStage Medical and Occidental Petroleum detracted from results. In Health Care, NxStage Medical reported weaker-than-expected patient additions for

6 Annual Report

December 31, 2012

home hemodialysis (HHD) reflecting a deceleration from last year. Despite these results, we remain confident in our long-term secular thesis; HHD improves the quality of life of patients through faster recovery times and we believe it will benefit from increased patient usage over time. Consequently, we increased our position in the fourth quarter. In Energy, Occidental Petroleum has been an absolute and relative underperformer this year. The company modified its strategy three years ago to place a greater focus on production growth. At the time, we found this strategy shift compelling; however, the company has struggled to achieve production growth in a cost and capital efficient manner. We sold the stock because we believe it will take an extended period to resolve these strategy issues.

In terms of changes over 2012, there were no major shifts in sector positioning for the year. In regards to market capitalization, our exposure to large cap stocks has increased from 40% to 53% based on our bottom up, fundamental work, and our mid and small cap weights declined about equally.

Going forward, many positive factors remain for the U.S. economy. The Federal Reserve’s accommodative policies continue, while the labor and housing markets recover albeit at a slow pace. That said, macro issues remain in the headlines, most notably the government debt ceiling and decisions regarding government deficits. The need to trim deficits may cause an intermediate-term headwind to growth, given likely spending cuts. Overseas, while Europe has stabilized with the announcement of OMT (Outright Monetary Transactions), uncertainties remain on implementation and economic growth has ground to a halt. For emerging market countries, the level of growth remains debatable; however, economies, particularly China, appear to be stabilizing.

In our view, stocks remain reasonably valued, especially in relation to bonds. While many investors continue to seek the safety of fixed income securities, stocks have continued to rise despite a substantial asset flow headwind. That said, a critical issue for the market remains peak operating margins. Those companies that can produce positive operating leverage in 2013 should be rewarded. We focus—as always—on fundamental analysis in an attempt to identify quality growth companies that sustain and improve upon their competitive position and earnings versus peers. Long-term, we believe investors differentiate between average companies and those with superior growth and quality characteristics in which we invest. In 2012, we began to see this distinguishing behavior take place again, which assisted performance results for our strategy.

December 31, 2012

William Blair Funds 7

Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Class N		15.67	%		8.97	%		2.32	%		7.59	%
Class I		16.03			9.30			2.65			7.92
Russell 3000^® Growth		15.21			11.46			3.15			7.69
S&P 500		16.00			10.87			1.66			7.10

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

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

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

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

LOGO

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

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December 31, 2012

Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Information Technology—33.8%
Apple, Inc.		92,185	$	49,137
*Citrix Systems, Inc.		267,800		17,608
*Cognizant Technology Solutions Corporation		162,800		12,055
*eBay, Inc.		500,100		25,515
*F5 Networks, Inc.		98,600		9,579
Genpact, Ltd.†		1,065,805		16,520
*Google, Inc.		51,705		36,678
Mastercard, Inc.		57,500		28,249
QUALCOMM, Inc.		465,040		28,842
*RealPage, Inc.		451,361		9,736
*SolarWinds, Inc.		157,500		8,261

				242,180

Industrials—17.7%
*B/E Aerospace, Inc.		193,100		9,539
*Encore Capital Group, Inc.		75,872		2,323
Fastenal Co.		377,558		17,628
*IHS, Inc.		78,931		7,577
*Jacobs Engineering Group, Inc.		396,800		16,892
Precision Castparts Corporation		102,400		19,397
*Stericycle, Inc.		143,200		13,356
TransDigm Group, Inc.		77,580		10,579
*Trimas Corporation		342,023		9,563
Union Pacific Corporation		160,500		20,178

				127,032

Consumer Discretionary—17.3%
*Amazon.com, Inc.		74,400		18,685
*Discovery Communications, Inc.		190,800		12,112
Harley-Davidson, Inc.		338,999		16,557
*K12, Inc.		284,942		5,824
McDonald’s Corporation		238,164		21,008
*Pandora Media, Inc.		973,783		8,939
*Sally Beauty Holdings, Inc.		296,900		6,998
Tractor Supply Co.		121,500		10,736
*Vera Bradley, Inc.		332,100		8,336
Yum! Brands, Inc.		215,900		14,336

				123,531

Health Care—11.8%
Allergan, Inc.		210,600		19,318
*Gilead Sciences, Inc.		225,635		16,573
*Haemonetics Corporation		339,600		13,869
*HMS Holdings Corporation		435,862		11,297
Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Health Care—(continued)
*IDEXX Laboratories, Inc.		98,618	$	9,152
*Illumina, Inc.		130,700		7,266
*NxStage Medical, Inc.		632,900		7,120

				84,595

Consumer Staples—5.8%
Costco Wholesale Corporation		182,100		17,986
*Green Mountain Coffee Roasters, Inc.		224,100		9,269
Mead Johnson Nutrition Co.		221,800		14,614

				41,869

Energy—5.1%
*Cameron International Corporation		229,947		12,983
Schlumberger, Ltd.†		340,200		23,572

				36,555

Materials—3.8%
Airgas, Inc.		162,800		14,862
Ecolab, Inc.		170,120		12,232

				27,094

Financials—3.2%
*IntercontinentalExchange, Inc.		140,600		17,408
LPL Financial Holdings, Inc.		194,800		5,485

				22,893

Total Common Stocks—98.5% (cost $581,999)				705,749


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $11,407, collateralized by US Treasury Note, 2.125%, due 12/31/2015	$	11,407		11,407

Total Repurchase Agreement—1.6% (cost $11,407)				11,407

Total Investments—100.1% (cost $593,406)				717,156
Liabilities, plus cash and other assets—(0.1)%				(911	)

Net assets—100.0%			$	716,245

* Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 9

LOGO

James S. Golan

LOGO

David P. Ricci

LARGE CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Large Cap Growth Fund posted a 18.31% increase (Class N shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 1000^® Growth Index, increased by 15.26%.

In 2012, investors continued to fluctuate between optimism and pessimism based on macroeconomic or political announcements. Market volatility remained, but less than recent years as there were fewer unknowns in the marketplace. In this environment, the Russell 1000^® Growth Index rose 15.26%, and climbed the proverbial “wall of worry.” In general by the fourth quarter, there was evidence that the global economy, ex-Europe, had stabilized after a slowing in the middle of the year. From a sector perspective, cyclical sectors such as Financials and Consumer Discretionary as well as Health Care performed best. Energy stocks were a drag as were more defensive Utilities and Consumer Staples sectors.

The primary driver of our results within the Fund was strong stock selection across multiple sectors, as is our goal from our fundamentally driven investment process. Technology stock positioning stood out due a large weight in eBay. The company reported strong revenue growth from both its Marketplace and PayPal divisions. We believe PayPal is a key strategic asset and it should continue to see market share gains in the fast growing mobile payments arena. Within Health Care, Gilead Sciences rallied on news that a major competitor put its HCV (hepatitis C virus) pipeline product on hold due to safety concerns, placing Gilead Sciences in a strong position with its own HCV product. Also, the U.S. FDA approved Gilead’s Quad pill (branded Stribild); it is the first four drug, single tablet, once-a-day, regimen for HIV. In the Telecommunications sector, SBA Communications notably contributed; it reported better than expected revenues and cash flows. Additionally, investors were optimistic on AT&T’s announcement for a significant ramp in capital expenditures in order to build out its 4G network, which we believe should be a positive for the tower industry and SBA Communications. Lastly, in Consumer Discretionary, Discovery Communications benefited from strong revenues and operating profits; international growth was particularly impressive. Over the long-term, the company’s earnings growth should be driven by higher affiliate fees with broader distribution and higher prices per subscriber as the company reformats existing networks. We believe it should also experience market share gains in advertising with viewership growth, as well as margin expansion through scale efficiency, cost controls and ramping its international advertising sales effort. Importantly, as these stock positions mentioned above rose during the year, we trimmed them, which is typical of our investment discipline. Other ancillary contributors were our sector underweight in Energy and overweight in Technology.

Despite the success in stock selection, there were a few modest detractors in the year. In the consumer group, both Mead Johnson and Dollar General lagged peers. In Consumer Staples, Mead Johnson Nutrition lost ground given the firm’s recent performance in China related to a slowdown in Chinese consumer spending, and in hindsight, an ill timed price increase, which was met with temporary consumer resistance and market share loss. We believe these are near-term issues and the long-term investment thesis remains intact. Mead Johnson should benefit from the secular growth in emerging markets with the rising middle class and their desire for premium branded Western infant formula. Within Consumer Discretionary, Dollar General declined on slowing store sales growth. In general, dollar stores have come under pressure recently given reduced spending by lower end consumers as worries over government debt and tax policies flared up at a time when government assistance programs

are leveling. In our view, the company offers an attractive combination of consumer value

10 Annual Report

December 31, 2012

and convenience, which should facilitate further store expansion and market share gains over time. Outside of consumer groups, select Energy holdings trailed, particularly Occidental Petroleum and Schlumberger. Occidental Petroleum modified its strategy three years ago to place a greater focus on production growth. At the time, we found this strategy shift compelling; however, the company has struggled to achieve production growth in a cost and capital efficient manner. We sold the stock because we believe it will take an extended period to resolve these strategy issues. Schlumberger remains one of our top ten positions, and in the long-term, it should benefit from increased deepwater exploration in international markets. Lastly, there were no major shifts in sector or market cap positioning for the year.

December 31, 2012

William Blair Funds 11

Large Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Class N		18.31	%		9.74	%		1.60	%		5.42	%
Class I		18.78			9.96			1.87			5.69
Russell 1000^® Growth		15.26			11.35			3.12			7.52

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

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

Sector Diversification (Unaudited)

LOGO

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

12 Annual Report

December 31, 2012

Large Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Information Technology—31.6%
Apple, Inc.		5,275	$	2,812
*Citrix Systems, Inc.		12,840		844
*Cognizant Technology Solutions Corporation Class “A”		11,780		872
*eBay, Inc.		16,490		842
*Google, Inc. Class “A”		1,858		1,318
Mastercard, Inc. Class “A”		2,085		1,024
QUALCOMM, Inc.		15,025		932
*Trimble Navigation, Ltd.		5,440		325

				8,969

Consumer Discretionary—16.4%
*Amazon.com, Inc.		1,500		377
*Discovery Communications, Inc. Class “A”		12,810		813
*Dollar General Corporation		12,660		558
Harley-Davidson, Inc.		14,640		715
*priceline.com, Inc.		1,051		653
Starbucks Corporation		18,740		1,005
Yum! Brands, Inc.		8,390		557

				4,678

Industrials—14.3%
Donaldson Co., Inc.		20,590		676
Precision Castparts Corporation		6,730		1,275
*Stericycle, Inc.		8,100		755
Union Pacific Corporation		8,190		1,030
W.W. Grainger, Inc.		1,610		326

				4,062

Financials—8.8%
*Affiliated Managers Group, Inc.		5,200		677
JPMorgan Chase & Co.		29,350		1,290
T Rowe Price Group, Inc.		8,350		544

				2,511

Consumer Staples—8.6%
Colgate-Palmolive Co.		8,850		925
*Green Mountain Coffee Roasters, Inc.		12,530		518
Mead Johnson Nutrition Co.		11,960		788
Whole Foods Market, Inc.		2,220		203

				2,434


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Health Care—6.9%
Allergan, Inc.		8,085	$	741
*Gilead Sciences, Inc.		11,010		809
*IDEXX Laboratories, Inc.		4,340		403

				1,953

Materials—5.4%
Monsanto Co.		10,970		1,038
Praxair, Inc.		4,645		509

				1,547

Energy—3.8%
Schlumberger, Ltd.†		15,490		1,073

Telecommunication Services—3.1%
*SBA Communications Corporation Class “A”		12,330		876

Total Common Stocks—98.9% (cost $22,083)				28,103


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $265, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	265		265

Total Repurchase Agreement—0.9% (cost $265)				265

Total Investments—99.8% (cost $22,348)				28,368
Cash and other assets, less liabilities—0.2%				45

Net assets—100.0%			$	28,413

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 13

* Non-income producing securities

† = U.S. listed foreign security

LOGO

Michael P. Balkin

LOGO

Karl W. Brewer

SMALL CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

After another above-average total return for 2012 we now stand nearly four years into the current bull market, which began in early 2009. The William Blair Small Cap Growth Fund posted an 18.15% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 2000^® Growth Index, increased by 14.59%.

Improving US economic data points, especially housing-related, and global central bank actions were the primary drivers of equity market returns in 2012. Despite a brief correction mid-year due to elevated fears regarding Euro zone financial stability, emerging market growth and a pause in the US economic recovery, most small and mid cap indices finished the year near all-time highs. Propelling the market higher in the back half of the year was European Central Bank messaging and actions, which restored confidence in Spanish and Italian borrowing capacity and the overall sustainability of the currency bloc. In the US, the Federal Reserve announced new quantitative easing programs aimed to maintain low government and consumer borrowing rates. Finally, investors cheered further improvements in the housing industry. Rebounding home prices and homebuilding activity positively impacts housing-related employment and overall consumer confidence. Thus, the market digested the possibility of a more sustainable domestic economic recovery.

The William Blair Small Cap Growth Fund’s 2012 outperformance is attributable to positive stock picks and a modest style benefit. While style factors were mostly muted this year for our strategy, our valuation sensitivity was a modest tailwind, primarily driven by fourth quarter market forces. From a stock selection front, Kensey Nash was the top performer during the year after being one of the largest underperformers in the Fund the previous year. On Assignment, SolarWinds and TriMas were other notable winners in the strategy this year. On the other hand, NxStage Medical, U.S. Auto Parts and Polypore International were detractors from return. Our typical lack of ownership in the outperforming Biotechnology and Real Estate Investment Trusts (REITs) industries detracted as well, despite the overall outperformance.

Despite progress on certain fronts in the US and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the US, the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a renewed debt-ceiling debate. On the other hand, the improving housing market and overall economy in the US provides some ballast to these downside risks. Outside the US, European Central Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks continue to exist in the region. Finally, while there are signs the Chinese economy has shown some improvement, investors will keep a close eye on this important global economic engine.

Equity valuations expanded in 2012, but they begin the year near long-term averages and thus should be neither a tailwind nor headwind to equity returns. Profit margins are elevated and therefore a premium should be placed on companies with above-average revenue growth opportunities, such as the companies in which we seek to invest. Corporate balance sheets remain strong and should provide companies the ability to invest or increase merger and acquisition activities, both of which would be a tailwind for the stock market.

We continue to find good ideas across sectors and are confident the Fund’s portfolio consists of well-managed companies with solid competitive positions whose stocks are at reasonable valuations compared to the expected growth and consistency of their business.

14 Annual Report

December 31, 2012

Small Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Class N		18.15	%		5.96	%		1.40	%		9.57	%
Class I		18.43			6.26			1.69			9.86
Russell 2000^® Growth		14.59			12.82			3.49			9.80

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.

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 15

Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Industrials—20.5%
Acorn Energy, Inc.		425,352	$	3,322
Barrett Business Services, Inc.		70,561		2,688
*CAI International, Inc.		570,283		12,518
*Clean Harbors, Inc.		78,150		4,299
*Encore Capital Group, Inc.		235,122		7,199
*Franklin Covey Co.		584,703		7,543
*Furmanite Corporation		536,272		2,880
Healthcare Services Group, Inc.		157,768		3,665
*Heritage-Crystal Clean, Inc.		209,999		3,152
*Huron Consulting Group, Inc.		174,307		5,872
*ICF International, Inc.		191,054		4,478
*Navigant Consulting, Inc.		263,525		2,941
*Old Dominion Freight Line, Inc.		68,520		2,349
*On Assignment, Inc.		142,965		2,899
*Performant Financial Corporation		255,490		2,580
*Trimas Corporation		280,932		7,855
US Ecology, Inc.		209,799		4,939

				81,179

Health Care—18.3%
*ABIOMED, Inc.		133,080		1,791
Air Methods Corporation		134,406		4,958
*Brookdale Senior Living, Inc.		151,872		3,845
*Conceptus, Inc.		167,279		3,514
*Cyberonics, Inc.		101,521		5,333
*ExamWorks Group, Inc.		486,851		6,811
*Haemonetics Corporation		172,052		7,027
*HealthSouth Corporation		168,345		3,554
*HMS Holdings Corporation		179,157		4,644
*Novadaq Technologies, Inc.†		364,631		3,238
*NxStage Medical, Inc.		483,182		5,436
*Quidel Corporation		251,469		4,695
*Spectranetics Corporation		334,767		4,944
*TearLab Corporation		536,909		2,201
*The Providence Service Corporation		339,643		5,771
Trinity Biotech plc—ADR		347,010		5,004

				72,766

Information Technology—17.4%
*Audience, Inc.		335,151		3,482
*Bottomline Technologies, Inc.		292,927		7,730
*Cardtronics, Inc.		161,234		3,828
*Envestnet, Inc.		158,725		2,214
*Exar Corporation		387,541		3,449
*Guidewire Software, Inc.		29,840		887
*Inuvo, Inc.		1,886,947		1,755
*Liquidity Services, Inc.		177,616		7,258
*OSI Systems, Inc.		62,240		3,986
*RealPage, Inc.		215,770		4,654
Syntel, Inc.		61,417		3,291
*Tangoe, Inc.		461,037		5,473


Issuer	Shares		Value

*Common Stocks—(continued)*
Information Technology—(continued)
*TeleTech Holdings, Inc.		215,730	$	3,840
*Ultimate Software Group, Inc.		30,452		2,875
*ValueClick, Inc.		190,875		3,705
*WEX, Inc.		48,151		3,629
*WNS Holdings, Ltd.—ADR		663,088		6,909

				68,965

Consumer Discretionary—15.1%
Dorman Products, Inc.		127,100		4,492
*Genesco, Inc.		80,147		4,408
*Gentherm, Inc.		546,474		7,268
*Jarden Corporation		70,104		3,624
*K12, Inc.		229,144		4,684
*Mattress Firm Holding Corporation		139,100		3,412
MDC Partners, Inc.†		234,912		2,655
*Pandora Media, Inc.		847,728		7,782
*Select Comfort Corporation		119,989		3,140
*SHFL Entertainment, Inc.		255,923		3,711
Six Flags Entertainment Corporation		144,091		8,818
*U.S. Auto Parts Network, Inc.		1,091,812		1,998
*Vera Bradley, Inc.		157,258		3,947

				59,939

Financials—14.7%
*Cowen Group, Inc.		2,171,714		5,321
*First Cash Financial Services, Inc.		242,742		12,045
*FirstService Corporation†		133,408		3,770
GFI Group, Inc.		1,519,291		4,922
*ICG Group, Inc.		749,921		8,572
Jones Lang LaSalle, Inc.		63,744		5,351
Manning & Napier, Inc.		357,011		4,498
Marlin Business Services Corporation		197,161		3,955
*National Financial Partners Corporation		573,551		9,831

				58,265

Energy—4.8%
*Atwood Oceanics, Inc.		84,052		3,849
*Dril-Quip, Inc.		49,476		3,614
Gulfmark Offshore, Inc.		70,430		2,426
*Hornbeck Offshore Services, Inc.		95,069		3,265
*Oil States International, Inc.		44,972		3,217
*PDC Energy, Inc.		85,618		2,844

				19,215

Materials—2.2%
*Horsehead Holding Corporation		348,151		3,555
*Stillwater Mining Co.		416,076		5,317

				8,872

Consumer Staples—1.4%
Nu Skin Enterprises, Inc.		150,253		5,567

See accompanying Notes to Portfolio of Investments.

16 Annual Report

December 31, 2012

Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Total Common Stocks—94.4% (cost $335,034)			$	374,768


*Exchange-Traded Fund*
iShares Russell 2000 Growth Index Fund		77,993		7,433

Total Exchange-Traded Fund—1.9% (cost $7,257)				7,433


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $13,843, collateralized by U.S. Treasury Notes, 1.375%—2.125%, due 11/30/15—12/31/15		13,843		13,843

Total Repurchase Agreement—3.5% (cost $13,843)				13,843

Total Investments—99.8% (cost $356,134)				396,044
Cash and other assets, less liabilities—0.2%				769

Net assets—100.0%			$	396,813

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 year ended December 31, 2012 with companies deemed affiliated during the year or at December 31, 2012.


		Share Activity								Year Ended December 31, 2012
										(in thousands)
Security Name		Balance 12/31/2011		Purchases		Sales		Balance 12/31/2012		Value		Dividends Included in Income
	Dreams, Inc.		2,671,926		119,643		2,791,569		—	$	—	$	—
p	Inuvo, Inc.		861,747		1,309,992		284,792		1,886,947		1,755		—
	Kensey Nash Corporation		483,937		44,009		527,946		—		—		217
*	Vertro, Inc.		847,343		—		847,343		—		—		—

										$	1,755	$	217

p Affiliated company at December 31, 2012. The Small Cap Growth Fund’s total value in companies deemed to be affiliated at December 31, 2012 was $ 1,755 ( in thousands).

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

Affiliate companies accounted for $(15,309) of the net realized loss on investments and $(21,044) of the change in net unrealized (depreciation) on investments during the year.

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 17

LOGO

Robert C. Lanphier, IV

LOGO

David P. Ricci

MID CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

After another above-average total return for 2012 we now stand nearly four years into the current bull market, which began in early 2009. The William Blair Mid Cap Growth Fund posted a 10.90% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell Midcap^® Growth Index, increased by 15.81%.

While this review is focused on 2012, we believe it is appropriate to add a brief perspective on our intermediate term performance. Our five-year relative performance, which includes nearly a full market cycle, remains well above benchmark. However, our Fund’s subdued relative performance over the past three years is partially the result of the market’s unsustainably strong returns in three of the last four calendar years, producing a 110% benchmark four-year cumulative return. Looking forward, while not overly bearish, we believe the market environment over the next three to five years will be more normalized (and therefore more conducive to our style of investing) and remain confident in our ability to produce the level of outperformance our shareholders expect over the long run.

The William Blair Mid Cap Growth Fund’s 2012 underperformance is attributable to style and industry headwinds and negative stock selection. Given the strong market return, our more conservative investment style (typical lower portfolio beta) was a headwind during the year. Our lack of ownership in outperforming industries such as Biotechnology and Real Estate Investment Trusts (REITs) detracted from relative performance as well. We have historically not invested in these areas due to lack of quality (Biotechnology) or lack of growth (REITs). From a stock specific perspective, Gentex, HMS Holdings, Gardner Denver and Clean Harbors all detracted from relative performance. We liquidated Gentex and Gardner Denver, but continue to believe HMS Holdings and Clean Harbors will be good investments. On the other hand, Illumina, SBA Communications and SolarWinds were stock picks that helped partially offset the overall underperformance during the year.

Despite progress on certain fronts in the US and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the US, the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a renewed debt-ceiling debate. In addition, the increase in payroll taxes will likely be a headwind for consumer spending and could potentially shift market leadership away from the consumer discretionary sector. On the other hand, the improving housing market and overall economy in the US provides some ballast to these downside risks. Outside the US, European Central

18 Annual Report

December 31, 2012

Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks remain. And while the Chinese economy has improved, investors will keep a close eye on this important global economic engine.

Equity valuations expanded in 2012, but they begin the year near long-term averages. Profit margins are elevated and therefore a premium should be placed on companies with above-average revenue growth opportunities, such as the companies in which we seek to invest. Corporate balance sheets remain strong, providing companies the ability to invest or increase merger and acquisition activities, both of which would be a tailwind for the stock market.

We continue to find good ideas across sectors, and are confident the Fund’s portfolio consists of well-managed companies with solid competitive positions whose stocks are at reasonable valuations compared to the expected growth and consistency of their business.

December 31, 2012

William Blair Funds 19

Mid Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		10.90	%		11.81	%		4.42	%		5.92	%
Class I		11.30			12.12			4.71			6.22
Russell Midcap^® Growth		15.81			12.91			3.23			4.57

(a)

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

Sector Diversification (Unaudited)

LOGO

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

20 Annual Report

December 31, 2012

Mid Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Industrials—19.7%
AMETEK, Inc.		146,500	$	5,504
*B/E Aerospace, Inc.		76,700		3,789
*Clean Harbors, Inc.		127,600		7,019
Donaldson Co., Inc.		250,300		8,220
Fastenal Co.		213,962		9,990
J.B. Hunt Transport Services, Inc.		151,500		9,046
*Jacobs Engineering Group, Inc.		131,000		5,577
*Polypore International, Inc.		105,400		4,901
*Stericycle, Inc.		100,230		9,348
TransDigm Group, Inc.		68,950		9,402

				72,796

Information Technology—18.7%
Amphenol Corporation		154,100		9,970
*Cavium, Inc.		122,702		3,830
*Citrix Systems, Inc.		181,500		11,934
*Concur Technologies, Inc.		28,230		1,906
*F5 Networks, Inc.		38,600		3,750
Genpact, Ltd.†		348,212		5,397
*Guidewire Software, Inc.		121,700		3,617
*RealPage, Inc.		213,800		4,612
*Silicon Laboratories, Inc.		175,469		7,336
*SolarWinds, Inc.		155,400		8,151
*Trimble Navigation, Ltd.		77,204		4,615
*VeriSign, Inc.		109,300		4,243

				69,361

Consumer Discretionary—17.3%
*Bed Bath & Beyond, Inc.		158,160		8,843
*Chipotle Mexican Grill, Inc.		18,590		5,530
Dick’s Sporting Goods, Inc.		277,429		12,620
Harley-Davidson, Inc.		174,800		8,537
Harman International Industries, Inc.		83,306		3,719
*Lululemon Athletica, Inc.		106,700		8,134
*O’Reilly Automotive, Inc.		116,780		10,442
*Select Comfort Corporation		174,378		4,564
Tractor Supply Co.		18,700		1,652

				64,041

Health Care—10.5%
*Cerner Corporation		34,700		2,694
*HealthSouth Corporation		331,524		6,999
*HMS Holdings Corporation		478,000		12,390
*IDEXX Laboratories, Inc.		103,872		9,639
*Mettler-Toledo International, Inc.		10,000		1,933
Perrigo Co.		51,600		5,368

				39,023

Financials—10.5%
*Affiliated Managers Group, Inc.		55,875		7,272
First Republic Bank		178,100		5,838
LPL Financial Holdings, Inc.		301,379		8,487
*Signature Bank		127,600		9,103
T Rowe Price Group, Inc.		126,200		8,219

				38,919

Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Staples—7.9%
*Green Mountain Coffee Roasters, Inc.		225,146	$	9,312
McCormick & Co., Inc.		143,200		9,098
Mead Johnson Nutrition Co.		165,900		10,931

				29,341

Energy—4.8%
*Cameron International Corporation		107,100		6,046
*Denbury Resources, Inc.		272,770		4,419
Helmerich & Payne, Inc.		70,200		3,932
Range Resources Corporation		51,900		3,261

				17,658

Materials—4.2%
Airgas, Inc.		90,100		8,225
Ecolab, Inc.		101,500		7,298

				15,523

Telecommunication Services—3.1%
*SBA Communications Corporation Class “A”		159,600		11,335

Total Common Stocks—96.7% (cost $331,273)				357,997


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $11,791, collateralized by US Treasury Note, 2.125%, due 12/31/15	$	11,791		11,791

Total Repurchase Agreement—3.2% (cost $11,791)				11,791

Total Investments—99.9% (cost $343,064)				369,788
Cash and other assets, less liabilities—0.1%				447

Net assets—100.0%			$	370,235

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 21

* Non-income producing securities

† = U.S. listed foreign security

LOGO

Karl W. Brewer

LOGO

Robert C. Lanphier, IV

LOGO

Matthew A. Litfin

SMALL-MID CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

After another above-average total return for 2012 we now stand nearly four years into the current bull market, which began in early 2009. The William Blair Small-Mid Cap Growth Fund posted a 12.20% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 2500^™ Growth Index, increased by 16.13%.

While this review is focused on 2012, we believe it is appropriate to add a brief perspective on our intermediate term performance. Our Fund’s subdued relative performance over the intermediate term is partially the result of the market’s unsustainably strong returns in three of the last four calendar years, producing a 108% benchmark four-year cumulative return. However, while not overly bearish, we believe the market environment over the next three to five years will be more normalized (and therefore more conducive to our style of investing) and remain confident in our ability to produce the level of outperformance our clients expect over the long run.

The William Blair Small-Mid Cap Growth Fund’s 2012 underperformance is attributable to style and industry headwinds and negative stock selection. Given the strong market return, our more conservative investment style (typical lower portfolio beta) was a headwind during the year. In addition, both our traditional overweight to the highest growth stocks and our underweight to cheaper stocks were disadvantageous for the year, driven mostly by fourth quarter market dynamics. Our underweight or lack of ownership in outperforming industries such as Biotechnology and Real Estate Investment Trusts (REITs) detracted from relative performance as well. We have historically been significantly underweight in these areas due to lack of quality (Biotechnology) or lack of growth (REITs). From a stock specific perspective, Constant Contact, Tempur-Pedic, Gentex and Fossil were the largest detractors for the year. On the other hand, SBA Communications, Catamaran and Fortune Brands Home & Security helped partially offset the overall underperformance during the year.

Despite progress on certain fronts in the US and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the US, the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a renewed debt-ceiling debate. On the other hand, the improving housing market and overall economy in the US provides some ballast to these downside risks. Outside the US, European Central Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks continue to exist in the region. And while the Chinese economy has improved, investors will keep a close eye on this important global economic engine.

22 Annual Report

December 31, 2012

William Blair Funds 23

Small-Mid Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		12.20	%		11.16	%		4.23	%		7.34	%
Class I		12.36			11.41			4.50			7.60
Russell 2500^™ Growth		16.13			13.78			4.07			7.07

(a)

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

Sector Diversification (Unaudited)

LOGO

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

24 Annual Report

December 31, 2012

Small-Mid Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Industrials—23.3%
Allegiant Travel Co.		60,065	$	4,409
*B/E Aerospace, Inc.		181,053		8,944
*Fortune Brands Home & Security, Inc.		225,200		6,580
Healthcare Services Group, Inc.		225,932		5,248
*Huron Consulting Group, Inc.		144,285		4,861
*ICF International, Inc.		240,125		5,629
Manpower, Inc.		97,950		4,157
*Old Dominion Freight Line, Inc.		113,900		3,905
*Portfolio Recovery Associates, Inc.		72,400		7,737
Robert Half International, Inc.		308,800		9,826
*Standard Parking Corporation		161,418		3,550
*Stericycle, Inc.		140,870		13,139
The Corporate Executive Board Co.		115,135		5,464
TransDigm Group, Inc.		9,475		1,292
*Trimas Corporation		231,010		6,459

				91,200

Health Care—21.8%
*ABIOMED, Inc.		223,938		3,014
*Align Technology, Inc.		160,903		4,465
*BioMarin Pharmaceutical, Inc.		135,000		6,649
*Brookdale Senior Living, Inc.		191,476		4,848
*Catamaran Corporation†		177,932		8,382
*Conceptus, Inc.		146,534		3,079
*Cyberonics, Inc.		83,700		4,397
*Haemonetics Corporation		113,500		4,635
*HealthSouth Corporation		211,184		4,458
*HMS Holdings Corporation		311,792		8,081
*Hologic, Inc.		323,500		6,480
*Mettler-Toledo International, Inc.		20,500		3,963
*Myriad Genetics, Inc.		64,000		1,744
Perrigo Co.		84,800		8,822
*Sirona Dental Systems, Inc.		94,683		6,103
*Team Health Holdings, Inc.		215,811		6,209

				85,329

Information Technology—17.5%
*Akamai Technologies, Inc.		86,600		3,543
*ANSYS, Inc.		46,400		3,125
*Aruba Networks, Inc.		230,700		4,787
*Concur Technologies, Inc.		56,100		3,788
*CoStar Group, Inc.		44,500		3,977
*Envestnet, Inc.		157,119		2,192
*Gartner, Inc.		133,800		6,157
Genpact, Ltd.†		342,000		5,301
*Guidewire Software, Inc.		176,300		5,240
*Liquidity Services, Inc.		101,600		4,151
NIC, Inc.		215,770		3,526
*RealPage, Inc.		290,960		6,276
*Riverbed Technology, Inc.		206,500		4,072
*SolarWinds, Inc.		75,300		3,949
*Ultimate Software Group, Inc.		32,925		3,108
*WEX, Inc.		70,400		5,306

				68,498

* Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares or Principal Amount		Value
Consumer Discretionary—15.4%
Dick’s Sporting Goods, Inc.		232,790	$	10,590
*Grand Canyon Education, Inc.		200,400		4,703
*Jarden Corporation		71,600		3,702
*K12, Inc.		296,914		6,069
*LKQ Corporation		303,600		6,406
*Pandora Media, Inc.		309,202		2,838
Polaris Industries, Inc.		50,000		4,208
*Sally Beauty Holdings, Inc.		245,400		5,784
Texas Roadhouse, Inc.		200,143		3,362
Tractor Supply Co.		78,600		6,945
*Under Armour, Inc.		114,820		5,572

				60,179

Financials—8.8%
*Affiliated Managers Group, Inc.		69,909		9,099
CBOE Holdings, Inc.		146,900		4,328
*First Cash Financial Services, Inc.		61,143		3,034
First Republic Bank		152,500		4,999
*FirstService Corporation†		107,741		3,045
Jones Lang LaSalle, Inc.		76,900		6,455
*National Financial Partners Corporation		199,624		3,421

				34,381

Energy—5.2%
Cabot Oil & Gas Corporation		54,400		2,706
Core Laboratories N.V.†		37,700		4,121
Helmerich & Payne, Inc.		85,100		4,766
*KiOR, Inc.		258,797		1,659
Oceaneering International, Inc.		78,900		4,244
*Oil States International, Inc.		39,000		2,790

				20,286

Telecommunication Services—2.6%
*SBA Communications Corporation		147,000		10,440

Materials—2.4%
Celanese Corporation		114,500		5,099
Rockwood Holdings, Inc.		85,000		4,204

				9,303

Consumer Staples—1.9%
*Green Mountain Coffee Roasters, Inc.		118,723		4,910
Nu Skin Enterprises, Inc.		68,900		2,553

				7,463

Total Common Stocks—98.9% (cost $347,882)				387,079


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $729 collateralized by US Treasury Note, 2.125%, due 12/31/15	$	729		729

Total Repurchase Agreement—0.2% (cost $729)				729

Total Investments—99.1% (cost $348,611)				387,808
Cash and other assets, less liabilities—0.9%				3,552

Net assets—100.0%			$	391,360

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 25

GLOBAL MARKETS OVERVIEW

In a year beset by concerns about macroeconomic policies, debt and global growth, where most investors generally maintained a cautious stance, risk assets produced a stealth rally. The global equity market, as reflected by the MSCI ACWI IMI rose 16.38% during the period, while high yield fixed income and real estate also performed well. Financials was the strongest performing sector during 2012, rising nearly 28%, followed by a 24% Discretionary return, as Utilities and Energy lagged, each returning below 3%. The strong 2012 double digit equity return, however, masks the volatility that occurred during the year, as the market moved from expectations of reinvigorated China-led global growth in the first quarter, to second quarter concerns about a European Union collapse, to third quarter improved European sentiment and stabilizing Chinese economic indicators. The fourth quarter of 2012 ended with a bang despite US “fiscal cliff” concerns as equity markets rallied on the expectations of a stabilizing Chinese economy, continued progress in Europe, and as a reform-minded Shinzo Abe was re-elected as prime minister of Japan. High quality stocks with good earnings trends and growth prospects outpaced their lower quality counterparts during 2012; although this varied during the period. In particular, as the market rallied in the first and fourth quarters on expectations of improving global growth, companies with low valuations and lower quality characteristics rallied the strongest.

The MSCI EM IMI rose 18.68% during the year, outpacing the developed world, due largely to a strong fourth quarter, when the Index rose 5.52%. EMEA and Asia were particularly strong, rising 22.55% and 20.72%, respectively. Within Asia, Southeast Asia countries Thailand and Philippines led the rally, while Indonesia lagged, up just 4.2%. Within EMEA, Turkey rose over 63%, while Egypt was up nearly 50%; conversely, the Czech Republic and Russia trailed. Latin America was the worst performing emerging markets region, up 9.88%, as Brazil was the key laggard, rising only 1.61% on a slowing economy and concerns about the interventionist government. The MSCI World Index was up 16.06% during the year, led by Pacific ex-Japan, which rose by 23.88% on strength in Singapore and New Zealand. Despite market angst about the viability of the European Union during the second quarter, Europe ex-UK rose 21.63% in USD terms, led by Core Europe and the Nordic Region, as well as Greece, which was up 24.60%, due largely to December’s results. Conversely, Spain and Portugal lagged notably during the period, up just 3.17% and 8.17%, respectively, as concerns about the banking system continued to plague the markets. Conversely, Japan and Canada were notable laggards, rising 7.54% and 8.10%, respectively, as the USD appreciated approximately 11% versus the Japanese Yen during the period. Small cap stocks generally outpaced their larger cap counterparts during 2012, particularly in Europe, Emerging Markets and the US, while Developed Asian and Canadian small cap stocks lagged.

26 Annual Report

December 31, 2012

LOGO

W. George Greig

LOGO

Kenneth J. McAtamney

GLOBAL LEADERS FUND (FORMERLY KNOWN AS GLOBAL GROWTH FUND)

The Global Leaders Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Global Leaders Fund (formerly the Global Growth Fund) posted a 17.25% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World IMI Index (net) increased 16.38%.

Year to date Fund outperformance was driven by good stock selection in Consumer Staples, Health Care, Industrials, and Information Technology (IT), which more than offset weakness in Consumer Discretionary, Energy and Financials. Consumer Staples stock selection was bolstered by strong performance by Monster Beverage in the first half of the year, Diageo, a beverage company, on continued emerging markets demand and solid North American results and McCormick & Company, the US food company, on solid operating performance throughout the year. Pharmaceuticals performed particularly well during the year, while Industrials benefited from strong Aerospace performance, coupled with solid operating results by a number of holdings. Despite underperforming in the fourth quarter, Apple was a full year contributor to IT performance, along with ARM Holdings, a semiconductors company, and Samsung Electronics. Offsetting these positive results were Autos and Luxury performance, while Energy was hampered by weakness in Oil/Gas, due largely to BG Group, oil & gas company’s production cuts. Financials stock selection was hurt by limited exposure in Commercial Banks, which accelerated beginning in mid-year, along with limited real estate-related holdings. Regionally the US and Europe performed well, offsetting weakness in Japan and Emerging Asia.

The Fund’s Financials weighting increased from approximately 15% of the Fund as of year-end 2011 to 21%, due to an increase in Commercial Banks. Funding this increase was a decrease in Consumer Staples, IT and Energy. Regionally, the US remained underweighted during the period, ending the year at 41.9% of the Fund, with the biggest weighting in Consumer Discretionary. Developed Europe was overweighted versus the Index, while Developed Asia and Emerging Markets largely approximated the Index.

December 31, 2012

William Blair Funds 27

Global Leaders Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		17.25	%		10.90	%		(0.66	)%		(0.84	)%
Class I		17.64			11.17			(0.41	)		(0.56	)
MSCI AC World IMI - Net		16.38			7.02			(0.73	)		(1.56	)

(a)

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

Sector Diversification (Unaudited)

LOGO

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

28 Annual Report

December 31, 2012

Global Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Western Hemisphere—45.0%*
Canada—3.1%
Brookfield Asset Management, Inc. (Real estate management & development)†		27,755	$	1,017
The Toronto-Dominion Bank (Commercial banks)		12,657		1,066

				2,083

United States—41.9%
*Affiliated Managers Group, Inc. (Capital markets)		6,298		820
American Express Co. (Consumer finance)		16,739		962
AMETEK, Inc. (Electrical equipment)		20,843		783
Apple, Inc. (Computers & peripherals)		2,859		1,524
*Citrix Systems, Inc. (Software)		12,481		821
Colgate-Palmolive Co. (Household products)		7,150		747
Costco Wholesale Corporation (Food & staples retailing)		9,914		979
*Discovery Communications, Inc. (Media)		16,667		1,058
*Express Scripts Holding Co. (Health care providers & services)		19,257		1,040
Exxon Mobil Corporation (Oil, gas & consumable fuels)		14,071		1,218
*Fortune Brands Home & Security, Inc. (Building products)		26,545		776
Harley-Davidson, Inc. (Automobiles)		21,962		1,072
*IDEXX Laboratories, Inc. (Health care equipment & supplies)		6,102		566
Jones Lang LaSalle, Inc. (Real estate management & development)		10,376		871
JPMorgan Chase & Co. (Diversified financial services)		33,820		1,487
Marriott International, Inc. (Hotels, restaurants & leisure)		25,678		957
Mastercard, Inc. Class “A” (IT services)		2,477		1,217
McCormick & Co., Inc. (Food products)		10,395		660
*O’Reilly Automotive, Inc. (Specialty retail)		7,973		713
*priceline.com, Inc. (Internet & catalog retail)		1,579		981
QUALCOMM, Inc. (Communications equipment)		17,836		1,106
Schlumberger, Ltd. (Energy equipment & services)†		20,623		1,429
*SolarWinds, Inc. (Software)		9,873		518
Starbucks Corporation (Hotels, restaurants & leisure)		19,091		1,024
The Walt Disney Co. (Media)		22,640		1,127
Union Pacific Corporation (Road & rail)		9,858		1,239
W.W. Grainger, Inc. (Trading companies & distributors)		1,872		379
Williams-Sonoma, Inc. (Specialty retail)		22,508		985
Yum! Brands, Inc. (Hotels, restaurants & leisure)		15,116		1,004

				28,063


*Europe, Mid-East—19.2%*
Denmark—2.8%
CHR Hansen Holding A/S (Chemicals)		9,194		300
Coloplast A/S Class “B” (Health care equipment & supplies)		8,185		401
Novo Nordisk A/S Class “B” (Pharmaceuticals)		7,285		1,186

				1,887


*Common Stocks—Europe, Mid-East—19.2%—(continued)*
France—4.0%
BNP Paribas S.A. (Commercial banks)		24,001	$	1,366
Essilor International S.A. (Health care equipment & supplies)		3,726		376
Technip S.A. (Energy equipment & services)		8,078		934

				2,676

Germany—5.4%
Bayerische Motoren Werke AG (Automobiles)		10,923		1,063
Brenntag AG (Trading companies & distributors)		4,078		537
Fresenius SE & Co. KGaA (Health care providers & services)		6,241		718
MTU Aero Engines Holding AG (Aerospace & defense)		3,653		334
SAP AG (Software)		11,804		949

				3,601

Ireland—0.7%
Paddy Power plc (Hotels, restaurants & leisure)		5,311		439

Israel—1.1%
*Check Point Software Technologies, Ltd. (Software)†		15,704		748

Sweden—1.4%
Atlas Copco AB (Machinery)		34,197		948

Switzerland—3.8%
Nestle S.A. (Food products)		10,123		660
Partners Group Holding AG (Capital markets)		3,434		794
Syngenta AG (Chemicals)		2,737		1,106

				2,560


*United Kingdom—13.8%*
Abcam plc (Biotechnology)		42,503		268
AMEC plc (Energy equipment & services)		29,001		479
ARM Holdings plc (Semiconductors & semiconductor equipment)		69,599		879
Ashmore Group plc (Capital markets)		85,961		508
Babcock International Group plc (Commercial services & supplies)		26,705		422
BHP Billiton plc (Metals & mining)		38,069		1,343
Compass Group plc (Hotels, restaurants & leisure)		84,563		1,004
Diageo plc (Beverages)		39,426		1,148
Experian plc (Professional services)		63,378		1,021
Hargreaves Lansdown plc (Capital markets)		36,243		405
Lancashire Holdings, Ltd. (Insurance)		14,531		185
*Rolls-Royce Holdings plc (Aerospace & defense)		68,186		978
The Weir Group plc (Machinery)		18,668		577

				9,217


*Emerging Asia—7.0%*
China—2.6%
*Baidu, Inc.—ADR (Internet software & services)		6,586		661
China Mobile, Ltd. (Wireless telecommunication services)		80,000		941
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		9,897		156

				1,758

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 29

Global Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Asia—7.0%—(continued)*
Indonesia—1.2%
PT Bank Rakyat Indonesia (Commercial banks)		1,071,500	$	777

South Korea—3.2%
*Hyundai Motor Co. (Automobiles)		4,125		850
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		903		1,298

				2,148


*Japan—3.2%*
Fanuc Corporation (Machinery)		5,800		1,079
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		28,600		1,040

				2,119


*Emerging Europe, Mid-East, Africa—2.8%*
South Africa—1.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		27,661		554
Bidvest Group, Ltd. (Industrial conglomerates)		17,601		450

				1,004

Turkey—1.3%
Turkiye Halk Bankasi A.S. (Commercial banks)		88,141		869


*Asia—1.8%*
Hong Kong—1.8%
AIA Group, Ltd. (Insurance)		311,400		1,235


*Emerging Latin America—1.6%*
Argentina—0.6%
MercadoLibre, Inc. (Internet software & services)		5,651		444

Brazil—1.0%
BR Malls Participacoes S.A. (Real estate management & development)		49,300		651

Total Common Stocks—94.4% (cost $54,930)				63,227


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $338, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	338		338

Total Repurchase Agreement—0.5% (cost $338)				338

Total Investments—94.9% (cost $55,268)				63,565
Cash and other assets, less liabilities—5.1%				3,429

Net assets—100.0%			$	66,994

ADR = American Depository Receipt

† = U.S. listed foreign security

* Non-income producing securities

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

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			20.7%
Consumer Discretionary			19.4%
Information Technology			17.7%
Industrials			15.1%
Health Care			8.3%
Consumer Staples			6.6%
Energy			6.4%
Materials			4.3%
Telecommunication Services			1.5%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


U.S. Dollar			48.9%
British Pound Sterling			14.6%
Euro			10.6%
Swiss Franc			4.0%
Hong Kong Dollar			3.7%
South Korean Won			3.4%
Japanese Yen			3.4%
Danish Krone			3.0%
Canadian Dollar			1.7%
South African Rand			1.6%
Swedish Krona			1.5%
Turkish Lira			1.4%
Indonesian Rupiah			1.2%
Brazilian Real			1.0%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

30 Annual Report

December 31, 2012

LOGO

W. George Greig

INTERNATIONAL GROWTH FUND

The International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Growth Fund posted a 23.67% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net) increased 17.04%.

Year to date, the Fund outperformed the Index by 6.63% as stock selection was strong across most sectors and currency hedging added approximately 75 basis points to relative performance. The Fund’s Financials holdings were up over 34% during the period, well ahead of the 29% Index return, on strong Commercial Banks performance, both within developed and emerging markets. In addition, the strategy’s higher weighting in Real Estate Management and Development holdings, which rallied nearly 45%, added value. The Fund’s Healthcare stocks were up nearly 31% during the year, significantly outpacing the 18.59% index sector return, led by strong performance in European Pharmaceuticals Bayer and Sanofi, while the Fund’s Industrial holdings outperformed by 10% as stock selection was strong across industries. The Fund’s Materials stocks also outperformed by 10%, as Chemicals added value, as did the underweighting in Metals and Mining. Somewhat detracting from relative full year results was Energy stock selection as Oil/Gas holdings underperformed.

As of year-end, the Fund remained focused on Europe at the expense of Developed Asia and Canada. Japan represented 13.6% of the Fund, an increase since December 2011. Emerging markets totaled 20.4% of the Fund as of December 31, and shifted towards Emerging Asia at the expense of Latin America. From a sector perspective, Financials was the largest weighting at 25.3% of the Fund, just above the 25.2% Index weighting, increasing throughout the year. The Fund remained overweighted in Discretionary, Healthcare and Industrials at the expense of Energy and Materials.

December 31, 2012

William Blair Funds 31

International Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Class N		23.67	%		8.28	%		(2.95	)%		9.88	%
Class I		23.96			8.60			(2.67	)		10.18
MSCI AC World ex USA IMI - Net		17.04			4.18			(2.59	)		10.16

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 December 31, 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)

LOGO

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

32 Annual Report

December 31, 2012

International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—32.9%*
Austria—0.8%
Andritz AG (Machinery)		361,521	$	23,231
Schoeller-Bleckmann Oilfield Equipment AG (Energy equipment & services)		66,551		6,974

				30,205

Belgium—0.3%
Colruyt S.A. (Food & staples retailing)		218,571		10,838

Denmark—1.2%
Coloplast A/S Class “B” (Health care equipment & supplies)		576,930		28,293
GN Store Nord A/S (Health care equipment & supplies)		688,070		10,000
SimCorp A/S (Software)		27,340		6,099

				44,392

Finland—1.0%
Kone Oyj (Machinery)		344,705		25,494
Nokian Renkaat Oyj (Auto components)		318,913		12,775

				38,269

France—9.9%
Arkema S.A. (Chemicals)		375,252		39,401
BNP Paribas S.A. (Commercial banks)		1,755,170		99,922
Christian Dior S.A. (Textiles, apparel & luxury goods)		176,154		30,026
Hermes International (Textiles, apparel & luxury goods)		42,683		12,761
Sanofi (Pharmaceuticals)		776,171		73,604
Societe BIC S.A. (Commercial services & supplies)		110,463		13,241
Unibail-Rodamco SE (Real estate investment trusts (REITs))		197,589		47,916
Vivendi S.A. (Diversified telecommunication services)		1,524,540		34,479
Zodiac Aerospace (Aerospace & defense)		100,906		11,171

				362,521

Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)		94,263		1,124
Bayer AG (Pharmaceuticals)		495,064		47,210
Bertrandt AG (Professional services)		30,087		3,021
Brenntag AG (Trading companies & distributors)		104,500		13,767
Deutsche Bank AG (Capital markets)		317,317		13,960
Deutsche Wohnen AG (Real estate management & development)		593,081		11,011
Fresenius SE & Co. KGaA (Health care providers & services)		217,585		25,037
Gerry Weber International AG (Textiles, apparel & luxury goods)		198,113		9,596
MTU Aero Engines Holding AG (Aerospace & defense)		200,063		18,258

				142,984

Ireland—0.2%
Paddy Power plc (Hotels, restaurants & leisure)		103,881		8,575


*Common Stocks—Europe—32.9%—(continued)*

Italy—0.9%
Azimut Holding SpA (Capital markets)		444,394	$	6,395
Intesa Sanpaolo SpA (Commercial banks)		7,396,197		12,790
Pirelli & C. SpA (Auto components)		485,411		5,593
Tod’s SpA (Textiles, apparel & luxury goods)		74,809		9,499

				34,277

Netherlands—3.7%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		190,662		12,228
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		1,801,374		64,266
Unilever N.V. (Food products)		1,546,193		59,163

				135,657

Norway—3.0%
Fred Olsen Energy ASA (Energy equipment & services)		150,866		6,624
Schibsted ASA (Media)		241,070		10,309
Statoil ASA (Oil, gas & consumable fuels)		2,245,712		56,602
Telenor ASA (Diversified telecommunication services)		1,810,226		36,860

				110,395

Spain—1.4%
Inditex S.A. (Specialty retail)		298,903		41,998
Viscofan S.A. (Food products)		142,213		8,055

				50,053

Sweden—2.0%
Atlas Copco AB Class “A” (Machinery)		1,429,293		39,635
Getinge AB (Health care equipment & supplies)		701,597		23,849
Hexpol AB (Chemicals)		165,901		8,803

				72,287

Switzerland—4.6%
Burckhardt Compression Holding AG (Machinery)		9,859		3,240
*Credit Suisse Group AG (Capital markets)		754,741		18,420
*Geberit AG (Building products)		107,677		23,869
Glencore International plc (Metals & mining)		9,224,636		53,289
Partners Group Holding AG (Capital markets)		86,049		19,893
SGS S.A. (Professional services)		9,686		21,513
Syngenta AG (Chemicals)		70,281		28,393

				168,617

*United Kingdom—18.1%*
Abcam plc (Biotechnology)		1,032,007		6,500
Aberdeen Asset Management plc (Capital markets)		1,639,890		9,868
AMEC plc (Energy equipment & services)		1,008,806		16,677
Amlin plc (Insurance)		1,898,424		11,802
ARM Holdings plc (Semiconductors & semiconductor equipment)		1,473,463		18,608
Ashmore Group plc (Capital markets)		2,697,495		15,928
Babcock International Group plc (Commercial services & supplies)		1,882,905		29,722

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 33

International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—United Kingdom—18.1%—(continued)*
Bunzl plc (Trading companies & distributors)		710,378	$	11,758
Croda International plc (Chemicals)		173,582		6,784
Debenhams plc (Multiline retail)		527,553		985
Derwent London plc (Real estate investment trusts (REITs))		346,263		11,984
Diageo plc (Beverages)		2,231,381		64,993
Dunelm Group plc (Specialty retail)		1,032,488		11,841
Elementis plc (Chemicals)		2,209,133		8,435
Experian plc (Professional services)		1,106,470		17,833
Halma plc (Electronic equipment, instruments & components)		1,365,998		10,279
Hargreaves Lansdown plc (Capital markets)		218,368		2,442
Hiscox, Ltd. (Insurance)		932,283		6,940
IG Group Holdings plc (Diversified financial services)		1,280,360		9,423
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		1,097,734		30,781
ITV plc (Media)		18,892,162		32,773
John Wood Group plc (Energy equipment & services)		1,607,261		19,214
Johnson Matthey plc (Chemicals)		547,655		21,514
Jupiter Fund Management plc (Capital markets)		1,528,336		6,995
Lancashire Holdings, Ltd. (Insurance)		1,081,998		13,776
Meggitt plc (Aerospace & defense)		1,907,774		11,946
Moneysupermarket.com Group plc (Internet software & services)		3,081,548		7,901
*Ocado Group plc (Internet & catalog retail)		1,923,504		2,748
Oxford Instruments plc (Electronic equipment, instruments & components)		169,907		3,971
Prudential plc (Insurance)		3,093,495		44,136
Reckitt Benckiser Group plc (Household products)		658,498		41,801
Rightmove plc (Media)		275,322		6,473
*Rolls-Royce Holdings plc (Aerospace & defense)		2,483,004		35,615
Rotork plc (Machinery)		285,126		11,902
RPS Group plc (Commercial services & supplies)		1,049,791		3,629
Spirax-Sarco Engineering plc (Machinery)		200,592		7,511
St James’s Place plc (Insurance)		905,796		6,262
*The Berkeley Group Holdings plc (Household durables)		874,528		25,158
Tullow Oil plc (Oil, gas & consumable fuels)		1,792,496		37,369
Victrex plc (Chemicals)		376,308		10,029
Wolseley plc (Trading companies & distributors)		232,075		11,098

				665,404


*Japan—13.6%*
ABC-Mart, Inc. (Specialty retail)		151,700		6,604
Ain Pharmaciez, Inc. (Food & staples retailing)		62,500		3,419
Arnest One Corporation (Household durables)		357,800		5,861

*Common Stocks—Japan—13.6% —(continued)*
Astellas Pharma, Inc. (Pharmaceuticals)		537,200	$	24,153
Chiyoda Corporation (Construction & engineering)		993,000		14,225
Cosmos Pharmaceutical Corporation (Food & staples retailing)		35,900		3,568
Daito Trust Construction Co., Ltd. (Real estate management & development)		166,500		15,736
FamilyMart Co., Ltd. (Food & staples retailing)		346,600		14,279
Fast Retailing Co., Ltd. (Specialty retail)		92,500		23,607
Fuji Heavy Industries, Ltd. (Automobiles)		1,906,000		24,035
Japan Tobacco, Inc. (Tobacco)		1,208,900		34,151
Keyence Corporation (Electronic equipment, instruments & components)		82,000		22,741
Lawson, Inc. (Food & staples retailing)		290,700		19,720
M3, Inc. (Health care technology)		3,730		5,953
Miraca Holdings, Inc. (Health care providers & services)		140,600		5,669
MISUMI Group, Inc. (Trading companies & distributors)		212,900		5,819
MonotaRO Co., Ltd. (Trading companies & distributors)		103,800		3,344
Nitori Co., Ltd. (Specialty retail)		117,920		8,640
ORIX Corporation (Diversified financial services)		570,880		64,486
Ryohin Keikaku Co., Ltd. (Multiline retail)		85,900		4,804
Shimamura Co., Ltd. (Specialty retail)		100,400		9,756
Ship Healthcare Holdings, Inc. (Health care providers & services)		201,700		5,361
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		2,202,900		80,057
Sumitomo Realty & Development Co., Ltd. (Real estate management & development)		1,286,000		42,842
Sundrug Co., Ltd. (Food & staples retailing)		198,700		6,796
Suruga Bank, Ltd. (Commercial banks)		888,000		10,922
Tsuruha Holdings, Inc. (Food & staples retailing)		71,100		5,607
United Arrows, Ltd. (Specialty retail)		154,300		3,553
Yahoo! Japan Corporation (Internet software & services)		74,387		24,086

				499,794


*Emerging Asia—11.2%*
China—2.6%
*Brilliance China Automotive Holdings, Ltd. (Automobiles)		11,342,000		14,253
China Overseas Land & Investment, Ltd. (Real estate management & development)		12,084,000		36,741
Great Wall Motor Co., Ltd. Class “H” (Automobiles)		5,227,000		16,812
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		403,494		4,789
Lenovo Group, Ltd. (Computers & peripherals)		17,024,000		15,697

See accompanying Notes to Portfolio of Investments.

34 Annual Report

December 31, 2012

International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—11.2%—(continued)*

China—(continued)
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		250,119	$	4,402
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		233,977		3,685

				96,379

India—2.1%
CRISIL, Ltd. (Diversified financial services)		175,788		3,486
Gruh Finance, Ltd. (Thrifts & mortgage finance)		574,950		2,497
IndusInd Bank, Ltd. (Commercial banks)		611,736		4,722
Ipca Laboratories, Ltd. (Pharmaceuticals)		601,557		5,697
Lupin, Ltd. (Pharmaceuticals)		744,202		8,405
Oberoi Realty, Ltd. (Real estate management & development)		850,309		4,513
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		1,047,751		14,172
Tata Motors, Ltd. (Automobiles)		4,526,391		26,018
Yes Bank, Ltd. (Commercial banks)		906,173		7,718

				77,228


Indonesia—1.0%
PT Alam Sutera Realty Tbk (Real estate management & development)		89,256,000		5,585
PT Bank Rakyat Indonesia (Commercial banks)		17,443,000		12,651
PT Kalbe Farma Tbk (Pharmaceuticals)		103,961,000		11,457
PT Media Nusantara Citra Tbk (Media)		22,070,000		5,734

				35,427


Philippines—0.4%
International Container Terminal Services, Inc. (Transportation infrastructure)		2,063,320		3,728
Puregold Price Club, Inc. (Food & staples retailing)		4,613,700		3,711
SM Prime Holdings, Inc. (Real estate management & development)		20,256,350		8,165

				15,604

South Korea—3.5%
*Hyundai Motor Co. (Automobiles)		183,207		37,767
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		55,234		79,360
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		51,851		10,534

				127,661

Taiwan—0.4%
Asustek Computer, Inc. (Computers & peripherals)		1,089,000		12,332

Thailand—1.2%
Advanced Info Service PCL (Wireless telecommunication services)		2,565,300		17,643
BEC World PCL (Media)		3,101,400		7,229
Kasikornbank PCL (Commercial banks)		3,136,500		19,938

				44,810


Issuer		Shares		Value

*Common Stocks—(continued)*

*Asia—6.7%*
Australia—2.5%
Cochlear, Ltd. (Health care equipment & supplies)			144,978	$	12,018
CSL, Ltd. (Biotechnology)			495,308		27,964
Telstra Corporation, Ltd. (Diversified telecommunication services)			11,588,351		52,805

					92,787

Hong Kong—2.2%
AIA Group, Ltd. (Insurance)			11,780,600		46,726
China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§			6,597,000		1,055
Hutchison Telecommunications Hong Kong Holdings, Ltd. (Diversified telecommunication services)			19,412,000		8,981
Sa Sa International Holdings, Ltd. (Specialty retail)			10,214,000		8,482
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)			4,764,500		8,735
Value Partners Group, Ltd. (Capital markets)			7,266,000		4,896

					78,875

Singapore—2.0%
First Resources, Ltd. (Food products)			3,932,000		6,557
Global Logistic Properties, Ltd. (Real estate management & development)			13,141,000		30,391
Keppel Corporation, Ltd. (Industrial conglomerates)			4,138,300		37,789
	��
					74,737


*Emerging Latin America—5.6%*
Brazil—2.1%
BR Malls Participacoes S.A. (Real estate management & development)			952,400		12,568
Cia de Concessoes Rodoviarias (Transportation infrastructure)			1,813,200		17,224
Cia Hering (Specialty retail)			600,400		12,313
Cielo S.A. (IT services)			447,000		12,442
*Lupatech S.A. (Energy equipment & services)			756,125		609
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)			361,800		6,008
*Qualicorp S.A. (Health care providers & services)			382,100		3,958
T4F Entretenimento S.A. (Media)			206,100		789
Tractebel Energia S.A. (Independent power producers & energy traders)			504,200		8,213
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A. (Commercial services & supplies)			223,100		4,958

					79,082

Chile—1.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)			24,273,928		6,135
ENTEL Chile S.A. (Wireless telecommunication services)			610,835		12,631

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 35

International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

Common Stocks—Emerging Latin America—5.6%—(continued)
Chile—(continued)
Inversiones La Construccion S.A. (Diversified financial services)		210,385	$	4,131
Parque Arauco S.A. (Real estate management & development)		5,220,316		12,964
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		222,810		12,842
Sonda S.A. (IT services)		1,750,122		5,575

				54,278

Colombia—0.8%
Ecopetrol S.A. (Oil, gas & consumable fuels)		9,188,901		28,394

Mexico—0.9%
Banregio Grupo Financiero S.A.B. de C.V. (Commercial banks)		1,121,900		5,112
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		604,600		3,904
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,532,100		23,564

				32,580

Panama—0.3%
Copa Holdings S.A. (Airlines)†		119,362		11,871


*Western Hemisphere—4.7%*
Bermuda—0.3%
RenaissanceRe Holdings, Ltd. (Insurance)†		152,797		12,416

Canada—4.4%
Alimentation Couche Tard, Inc. (Food & staples retailing)		364,351		17,923
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		1,318,135		48,310
Canadian National Railway Co. (Road & rail)†		480,185		43,702
CI Financial Corporation (Capital markets)		621,838		15,585
Metro, Inc. (Food & staples retailing)		315,282		20,073
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		668,491		15,450

				161,043


*Emerging Europe, Mid-East, Africa—3.6%*
Nigeria—0.3%
Guaranty Trust Bank plc (Commercial banks)		70,554,411		10,431

South Africa—2.7%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		956,263		19,146
Bidvest Group, Ltd. (Industrial conglomerates)		713,574		18,256
FirstRand, Ltd. (Diversified financial services)		5,890,170		21,674
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		1,970,581		7,919
Naspers, Ltd. (Media)		315,673		20,389
Tiger Brands, Ltd. (Food products)		318,913		12,298

				99,682


*Common Stocks—Emerging Europe, Mid-East, Africa—3.6%—(continued)*
Turkey—0.4%
Turkiye Halk Bankasi A.S. (Commercial banks)		1,588,316	$	15,657

United Arab Emirates—0.2%
First Gulf Bank PJSC (Commercial banks)		1,899,878		6,099

Total Common Stocks—96.4% (cost $2,909,418)				3,541,641


*Exchange-Traded Fund*
China—1.0%
iShares FTSE A50 China Index		26,431,410		37,989

Total Exchange-Traded Fund—1.0% (cost $35,050)				37,989


*Affiliated Fund*
China—0.6%
William Blair China A-Share Fund, LLC		2,202,200		22,022

Total Affiliated Fund—0.6% (cost $22,022)				22,022


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $61,402, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	61,401		61,401

Total Repurchase Agreement—1.7% (cost $61,401)				61,401

Total Investments—99.7% (cost $3,027,891)				3,663,053
Cash and other assets, less liabilities—0.3%				9,580

Net assets—100.0%			$	3,672,633

ADR = American Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.03% of the Fund’s net assets at December 31, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.03% of the net assets at December 31, 2012.

See accompanying Notes to Portfolio of Investments.

36 Annual Report

December 31, 2012

International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)

The International Growth Fund invested in the following affiliated fund. There are no unfunded commitments to the affiliated fund and the Fund may redeem its investment monthly.

Share Activity

Year Ended
December 31, 2012

(in thousands)

Fund Name

Balance
12/31/2011

Purchases

Sales

Balance
12/31/2012

Value

Dividends
Included
in Income

William Blair China-A Share Fund, LLC

—

2,202,200

—

2,202,200

22,022

—

As of December 31, 2012 the Fund invested in William Blair China A Share Fund, LLC, an Affiliated Fund. There was no realized or unrealized gain/(loss) from investments in the affiliated fund.

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			25.3%
Industrials			14.1%
Consumer Discretionary			13.6%
Health Care			10.5%
Consumer Staples			9.3%
Information Technology			8.1%
Energy			7.0%
Materials			6.0%
Telecommunication Services			4.8%
Exchange-Traded Funds			1.1%
Utilities			0.2%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			21.7%
Euro			20.8%
Japanese Yen			13.9%
Hong Kong Dollar			5.8%
U.S. Dollar			4.3%
South Korean Won			3.5%
Swiss Franc			3.2%
Norwegian Krone			3.1%
South African Rand			2.8%
Australian Dollar			2.6%
Brazilian Real			2.2%
Indian Rupee			2.1%
Singapore Dollar			2.1%
Swedish Krona			2.0%
Canadian Dollar			1.9%
Thai Baht			1.2%
Danish Krone			1.2%
Chilean Peso			1.2%
All Other Currencies			4.4%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 37

LOGO

David Merjan

INTERNATIONAL EQUITY FUND

The International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Equity Fund posted a 17.57% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI World ex-US Index (net) increased 16.41%.

In 2012, the Fund outpaced the MSCI World ex-US Index (net) on strong Health Care, Information Technology (IT), Materials and Telecom Services stock selection. Essilor, the contact lens manufacturer, was a strong contributor as it continued to perform well fundamentally and benefited from its defensive nature mid-year, while the Fund’s Pharmaceutical companies also performed well, led by Novo Nordisk and Bayer. IT stock selection benefited from the overweighting and performance in Semiconductors and Semiconductor Equipment, particularly due to strong performance by Samsung Electronics and Arm Holdings. Materials added value given the Fund’s underweighting in the underperforming Metals/Mining industry, coupled with good Chemicals stock selection. Somewhat mitigating these positive results were the Fund’s Discretionary, Energy and Financials stock selection. Discretionary underperformance was largely the result of Automobiles performance, coupled with underperformance in Japanese holdings. Energy’s underperformance was due largely to BG Group’s production guidance in the fourth quarter, along with broader Oil/Gas stock selection. Financials stock selection was hampered by conservative positioning in Commercial Banks during the latter part of 2012, as the market accelerated.

During the year, we increased the weighting in European and Emerging Markets commercial banks, thereby increasing the Financials weighting from approximately 19.9% to just over 21%, although it remained underweighted relative to the 25.7% benchmark Index weighting. IT also increased from approximately 11.2% to 13.5% well ahead of the 4% benchmark Index weighting, which was funded by reduced Discretionary and Energy weightings. Regionally, emerging markets totaled approximately 13%. The Fund ended the year overweighted in Developed Europe and underweighted in Developed Asia.

38 Annual Report

December 31, 2012

International Equity Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		17.57	%		4.35	%		(5.03	)%		4.01	%
Class I		17.89			4.60			(4.80	)		4.28
MSCI World Ex-U.S. (net)		16.41			3.65			(3.43	)		5.98

(a)

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 39

International Equity Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—42.2%*
Denmark—2.4%
Coloplast A/S Class “B” (Health care equipment & supplies)		11,727	$	575
Novo Nordisk A/S Class “B” (Pharmaceuticals)		6,815		1,110

				1,685

France—13.4%
Arkema S.A. (Chemicals)		7,963		836
BNP Paribas S.A. (Commercial banks)		24,801		1,412
Christian Dior S.A. (Textiles, apparel & luxury goods)		5,973		1,018
Dassault Systemes S.A. (Software)		11,152		1,247
Essilor International S.A. (Health care equipment & supplies)		8,618		869
L’Oreal S.A. (Personal products)		4,034		561
Sanofi (Pharmaceuticals)		16,912		1,604
Technip S.A. (Energy equipment & services)		9,532		1,102
Unibail-Rodamco SE (Real estate investment trusts (REITs))		3,282		796

				9,445

Germany—8.4%
BASF SE (Chemicals)		14,736		1,394
Bayer AG (Pharmaceuticals)		13,122		1,251
Fresenius SE & Co. KGaA (Health care providers & services)		10,596		1,219
MTU Aero Engines Holding AG (Aerospace & defense)		5,318		485
SAP AG (Software)		19,286		1,551

				5,900

Ireland—4.5%
Accenture plc Class “A” (IT services)†		16,362		1,088
Ryanair Holdings plc—ADR (Airlines)		25,537		875
Shire plc (Pharmaceuticals)		38,521		1,185

				3,148

Netherlands—2.0%
Unilever N.V. (Food products)		36,123		1,382

Norway—1.6%
Telenor ASA (Diversified telecommunication services)		53,922		1,098

Spain—1.9%
Inditex S.A. (Specialty retail)		9,579		1,346

Sweden—1.5%
Atlas Copco AB Class “A” (Machinery)		38,795		1,076

Switzerland—6.5%
*Geberit AG (Building products)		4,641		1,029
Nestle S.A. (Food products)		12,790		834
Roche Holding AG (Pharmaceuticals)		5,005		1,012
Syngenta AG (Chemicals)		4,135		1,671

				4,546


*United Kingdom—20.9%*
ARM Holdings plc (Semiconductors & semiconductor equipment)		78,445		991
Babcock International Group plc (Commercial services & supplies)		52,393		827
Issuer	Shares		Value

*Common Stocks—United Kingdom—20.9%—(continued)*
Burberry Group plc (Textiles, apparel & luxury goods)		42,718	$	859
Compass Group plc (Hotels, restaurants & leisure)		135,961		1,614
Diageo plc (Beverages)		49,228		1,434
Experian plc (Professional services)		47,732		769
HSBC Holdings plc (Commercial banks)		100,766		1,068
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		26,064		731
John Wood Group plc (Energy equipment & services)		75,992		908
Johnson Matthey plc (Chemicals)		27,057		1,063
Prudential plc (Insurance)		84,529		1,206
*Rolls-Royce Holdings plc (Aerospace & defense)		87,953		1,261
Tullow Oil plc (Oil, gas & consumable fuels)		28,437		593
Wolseley plc (Trading companies & distributors)		27,501		1,315

				14,639


*Japan—11.3%*
Chiyoda Corporation (Construction & engineering)		29,000		415
Daito Trust Construction Co., Ltd. (Real estate management & development)		11,700		1,106
Fuji Heavy Industries, Ltd. (Automobiles)		69,000		870
Keyence Corporation (Electronic equipment, instruments & components)		3,300		915
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)		15,900		938
ORIX Corporation (Diversified financial services)		10,770		1,217
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		34,700		1,261
Suruga Bank, Ltd. (Commercial banks)		52,000		639
Yahoo! Japan Corporation (Internet software & services)		1,688		547

				7,908


*Emerging Asia—8.6%*
China—4.1%
China Mobile, Ltd. (Wireless telecommunication services)		87,000		1,024
CNOOC, Ltd. (Oil, gas & consumable fuels)		359,000		791
Sun Art Retail Group, Ltd. (Food & staples retailing)		684,500		1,058

				2,873

India—0.8%
Tata Consultancy Services, Ltd. (IT services)		22,747		524

Papua New Guinea—0.7%
Oil Search, Ltd. (Oil, gas & consumable fuels)		70,771		523

South Korea—2.3%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,114		1,601

Thailand—0.7%
Kasikornbank PCL (Commercial banks)		78,100		496


*Canada—6.3%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		39,656		1,453

See accompanying Notes to Portfolio of Investments.

40 Annual Report

December 31, 2012

International Equity Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Canada—6.3%—(continued)*
Canadian National Railway Co. (Road & rail)†		10,814	$	984
Goldcorp, Inc. (Metals & mining)†		26,196		962
The Toronto-Dominion Bank (Commercial banks)		12,399		1,044

				4,443


*Asia—5.3%*
Australia—1.7%
BHP Billiton, Ltd.—ADR (Metals & mining)		15,574		1,222

Hong Kong—2.2%
AIA Group, Ltd. (Insurance)		389,000		1,543

Singapore—1.4%
Keppel Corporation, Ltd. (Industrial conglomerates)		107,000		977


*Emerging Latin America—2.3%*
Mexico—1.2%
Fomento Economico Mexicano S.A.B. de C.V—ADR (Beverages)		8,308		837

Panama—1.1%
Copa Holdings S.A. (Airlines)†		7,869		782


*Emerging Europe, Mid-East, Africa—2.3%*
South Africa—1.7%
FirstRand, Ltd. (Diversified financial services)		322,679		1,188

Turkey—0.6%
Turkiye Garanti Bankasi A.S. (Commercial banks)		79,366		414

Total Common Stocks—99.2% (cost $57,147)				69,596

Total Investments—99.2% (cost $57,147)				69,596
Cash and other assets, less liabilities—0.8%				588

Net assets—100.0%			$	70,184

ADR = American Depository Receipt

† = U.S. listed foreign security

* Non-income producing securities

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			21.3%
Industrials			15.5%
Information Technology			13.5%
Health Care			12.7%
Materials			10.3%
Consumer Discretionary			9.2%
Consumer Staples			8.8%
Energy			5.6%
Telecommunication Services			3.1%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Euro			26.0%
British Pound Sterling			22.7%
U.S. Dollar			11.8%
Japanese Yen			11.4%
Swiss Franc			6.5%
Hong Kong Dollar			6.3%
Danish Krone			2.4%
South Korean Won			2.3%
South African Rand			1.7%
Norwegian Krone			1.6%
Swedish Krona			1.6%
Canadian Dollar			1.5%
Singapore Dollar			1.4%
All Other Currencies			2.8%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 41

LOGO

W. George Greig

LOGO

Kenneth J. McAtamney

INTERNATIONAL LEADERS FUND

The International Leaders Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The International Leaders Fund posted an 8.16% increase (Class N Shares) since its inception date of August 16, 2012 through December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net) increased 9.61% over the same period.

The International Leaders Fund underperformed the Index since its August 2012 inception, due largely to Energy, Information Technology (IT) and Materials stock selection, which was only somewhat mitigated by strong stock selection in Health Care, Industrials and Consumer Discretionary. Within Energy, Oil/Gas underperformed, due primarily to weakness in BG Group, as it reported production growth targets below market expectations. Chinese internet-related names were the key detractors from IT performance due to increased competition and potential valuation concerns. As a result of these company-specific issues, we sold both companies. Metals/Mining stock selection was the primary detractor from Materials outperformance, but was somewhat mitigated by strong Chemicals results and an underweighting in the Metals/Mining segment. Conversely, Auto companies bolstered Discretionary results, while Pharmaceuticals stock selection was also particularly strong. Within Industrials, the overweighting in the outperforming Machinery industry added value, as did stock selection in Trading Companies.

The market’s increased confidence in a positive resolution to the European sovereign crisis and related banking system has highlighted the attractive valuations in Financials, not only in Europe but globally as well. As a result, during the course of the period Financials increased to approximately 25% of the Fund, due largely to an increase in Developed Market Commercial Banks. Industrials increased to 17% of the Fund on an improved outlook and good valuations. Conversely, IT, Telecommunication Services and Consumer Staples decreased, as we reduced valuation risk in the Fund and on company-specific concerns. Regionally, the Fund maintained its significant overweighting in Europe, due largely to Health Care and IT, while the UK was also significantly overweighted in Consumer Discretionary and Industrials. Conversely, Emerging Markets and Developed Asia remained underweighted versus the Index.

42 Annual Report

December 31, 2012

International Leaders Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2012


	Since Inception(a)
Class N		8.16	%
Class I		8.26
MSCI AC World Ex-U.S. IMI (net)		9.61

(a)

For the period from August 16, 2012 (Commencement of Operations) to December 31, 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 presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 43

International Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe, Mid-East—41.4%*
Denmark—3.7%
Coloplast A/S Class “B” (Health care equipment & supplies)		2,795	$	137
Novo Nordisk A/S Class “B” (Pharmaceuticals)		1,502		245

				382

France—10.7%
Arkema S.A. (Chemicals)		1,633		171
BNP Paribas S.A. (Commercial banks)		5,569		317
Dassault Systemes S.A. (Software)		1,633		182
Sanofi (Pharmaceuticals)		2,380		226
Technip S.A. (Energy equipment & services)		1,623		188

				1,084

Germany—7.6%
Bayerische Motoren Werke AG (Automobiles)		2,451		238
Brenntag AG (Trading companies & distributors)		834		110
Fresenius SE & Co. KGaA (Health care providers & services)		1,816		209
SAP AG (Software)		2,645		213

				770

Israel—1.4%
*Check Point Software Technologies, Ltd. (Software)†		2,951		141

Netherlands—3.8%
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		5,940		212
Unilever N.V. (Food products)		4,583		175

				387

Norway—1.7%
Statoil ASA (Oil, gas & consumable fuels)		6,722		169

Spain—2.4%
Inditex S.A. (Specialty retail)		1,719		242

Sweden—2.1%
Atlas Copco AB Class “A” (Machinery)		7,605		211

Switzerland—8.0%
*Geberit AG (Building products)		631		140
Glencore International plc (Metals & mining)		34,532		199
*Lindt & Spruengli AG (Food products)		2		76
Partners Group Holding AG (Capital markets)		693		160
Syngenta AG (Chemicals)		604		244

				819


*United Kingdom—22.1%*
ARM Holdings plc (Semiconductors & semiconductor equipment)		15,539		196
Babcock International Group plc (Commercial services & supplies)		7,982		126
Compass Group plc (Hotels, restaurants & leisure)		16,940		201
Diageo plc (Beverages)		6,181		180
Experian plc (Professional services)		7,720		125
HSBC Holdings plc (Commercial banks)		21,600		229


Issuer	Shares		Value

*Common Stocks—United Kingdom—22.1%—(continued)*
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		6,025	$	169
Intertek Group plc (Professional services)		3,025		154
John Wood Group plc (Energy equipment & services)		9,330		112
Johnson Matthey plc (Chemicals)		4,221		166
*Rolls-Royce Holdings plc (Aerospace & defense)		7,130		102
*The Berkeley Group Holdings plc (Household durables)		4,737		136
The Weir Group plc (Machinery)		4,686		145
Wolseley plc (Trading companies & distributors)		4,212		201

				2,242


*Japan—10.0%*
Daito Trust Construction Co., Ltd. (Real estate management & development)		800		76
Fanuc Corporation (Machinery)		1,100		205
Fuji Heavy Industries, Ltd. (Automobiles)		8,000		101
Makita Corporation (Machinery)		3,400		158
ORIX Corporation (Diversified financial services)		2,410		272
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		5,700		207

				1,019


*Emerging Asia—6.9%*
China—3.3%
*Baidu, Inc.—ADR (Internet software & services)		1,417		142
China Mobile, Ltd. (Wireless telecommunication services)		16,000		188

				330

Indonesia—1.2%
PT Bank Rakyat Indonesia (Commercial banks)		170,000		123

South Korea—2.4%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		173		249


*Emerging Latin America—5.4%*
Argentina—1.1%
MercadoLibre, Inc. (Internet software & services)		1,418		111

Brazil—1.0%
BR Malls Participacoes S.A. (Real estate management & development)		7,500		99

Mexico—1.5%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		1,506		152

Peru—1.8%
Credicorp, Ltd. (Commercial banks)†		1,290		189


*Asia—4.3%*
Hong Kong—4.3%
AIA Group, Ltd. (Insurance)		70,600		280
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)		12,500		154

				434

See accompanying Notes to Portfolio of Investments.

44 Annual Report

December 31, 2012

International Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Canada—4.2%*
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		5,720	$	209
The Toronto-Dominion Bank (Commercial banks)		2,622		221

				430


*Emerging Europe, Mid-East, Africa—3.8%*
South Africa—3.8%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		4,198		84
Discovery Holdings, Ltd. (Insurance)		19,787		146
FirstRand, Ltd. (Diversified financial services)		41,624		153

				383

Total Common Stocks—98.1% (cost $9,254)				9,966


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $166, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	166		166

Total Repurchase Agreement—1.6% (cost $166)				166

Total Investments—99.7% (cost $9,420)				10,132
Cash and other assets, less liabilities—0.3%				32

Net assets—100.0%			$	10,164

ADR = American Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			24.9%
Industrials			16.9%
Information Technology			16.0%
Consumer Discretionary			10.9%
Health Care			9.0%
Materials			7.8%
Energy			6.8%
Consumer Staples			5.8%
Telecommunication Services			1.9%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			24.3%
Euro			22.8%
Japanese Yen			10.2%
U.S. Dollar			9.5%
Hong Kong Dollar			8.6%
Swiss Franc			6.2%
South African Rand			3.9%
Danish Krone			3.8%
South Korean Won			2.5%
Canadian Dollar			2.2%
Swedish Krona			2.1%
Norwegian Krone			1.7%
Indonesian Rupiah			1.2%
All Other Currencies			1.0%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 45

LOGO

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Small Cap Growth Fund posted a 20.73% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. Small Cap Index (net) increased 18.52%.

2012 performance was bolstered by particularly strong Discretionary stock selection, coupled with the significant overweighting, as well as strong performance in Materials and Industrials. Discretionary performance was driven by strong Auto-related company performance, in addition to strength in Hotels/Restaurants, Household Durables and Luxury holdings, which more than offset weakness in Japanese internet-related holdings. The Fund’s Materials stocks were up over 34%, as compared to the 5.25% Index return in the benchmark index, led by strength in Chemicals, and benefitting from the underweighting in the underperforming Metals/Mining industry. Industrials stock selection was also additive, as MTU Aero Engines, the German aerospace engine company, benefited from strong sales and earnings growth during the period. Babcock International, the UK engineering outsourcing company, also benefited from strong results that exceeded market expectations. Somewhat offsetting these positive results were the Fund’s underweighting in Materials and Financials, coupled with Energy and Information Technology (IT) stock selection.

Overall sector positioning did not substantially change during the year, although Consumer Discretionary was marginally increased to 26.9%, and remained overweighted versus the 17.4% Index weighting. While Financials increased to 13.2% of the Fund during the period, it remained significantly underweighted versus the 19.7% benchmark Index weighting. Industrials and Materials remained significantly underweighted as well, with a corresponding overweighting in Healthcare, which totaled 13.6% of the Fund as of year-end, well ahead of the 5.2% benchmark Index weighting, due to significant holdings in Healthcare Providers and Pharmaceuticals. Regionally, the Fund remained focused on Developed Europe at the expense of Developed Asia, particularly Pacific ex-Japan. Emerging markets totaled 15.2% of the Fund, below the 23.3% Index weighting, due largely to a significant underweighting in Emerging Asia.

46 Annual Report

December 31, 2012

International Small Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		20.73	%		10.11	%		0.21	%		6.15	%
Class I		21.10			10.46			0.56			6.49
MSCI AC World ex-U.S. Small Cap - Net		18.52			6.54			(0.39	)		5.99

(a)

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 47

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Europe—28.5%*
Austria—0.3%
AMS AG (Semiconductors & semiconductor equipment)		22,333	$	2,405

Belgium—0.4%
*ThromboGenics N.V. (Biotechnology)		52,627		2,929

Denmark—1.0%
CHR Hansen Holding A/S (Chemicals)		70,769		2,305
GN Store Nord A/S (Health care equipment & supplies)		318,173		4,624

				6,929

Finland—0.7%
Tikkurila Oyj (Chemicals)		259,406		5,067

France—0.1%
*GameLoft SE (Software)		150,004		1,055

Germany—9.2%
Aixtron AG (Semiconductors & semiconductor equipment)		29,277		349
Bertrandt AG (Professional services)		20,097		2,018
ElringKlinger AG (Auto components)		331,992		11,260
Gerry Weber International AG (Textiles, apparel & luxury goods)		141,348		6,846
MTU Aero Engines Holding AG (Aerospace & defense)		116,389		10,621
Pfeiffer Vacuum Technology AG (Machinery)		42,530		5,183
Symrise AG (Chemicals)		215,847		7,755
Wincor Nixdorf AG (Computers & peripherals)		297,749		14,042
Wirecard AG (IT services)		320,351		7,909

				65,983

Ireland—2.1%
Paddy Power plc (Hotels, restaurants & leisure)		181,117		14,952

Italy—5.4%
Azimut Holding SpA (Capital markets)		733,543		10,556
De’Longhi SpA (Household durables)		544,103		7,819
Recordati SpA (Pharmaceuticals)		863,611		7,897
Salvatore Ferragamo Italia SpA (Textiles, apparel & luxury goods)		76,084		1,684
Tod’s SpA (Textiles, apparel & luxury goods)		51,896		6,589
*Yoox SpA (Internet & catalog retail)		257,471		4,078

				38,623

Norway—2.8%
Fred Olsen Energy ASA (Energy equipment & services)		153,966		6,760
Opera Software ASA (Internet software & services)		676,617		3,876
Schibsted ASA (Media)		222,219		9,503

				20,139

Spain—2.6%
Viscofan S.A. (Food products)		331,071		18,753


Issuer	Shares		Value

*Common Stocks—Europe—28.5%—(continued)*
Sweden—3.2%
Axis Communications AB (Communications equipment)		341,012	$	9,392
Hexpol AB (Chemicals)		171,111		9,080
JM AB (Household durables)		234,915		4,213
NIBE Industrier AB (Building products)		39,408		571

				23,256

Switzerland—0.7%
Burckhardt Compression Holding AG (Machinery)		15,674		5,150


*United Kingdom—26.2%*
Abcam plc (Biotechnology)		932,027		5,870
Ashmore Group plc (Capital markets)		1,736,586		10,254
*ASOS plc (Internet & catalog retail)		253,510		11,182
Aveva Group plc (Software)		321,425		11,535
AZ Electronic Materials S.A. (Chemicals)		903,483		5,198
Booker Group plc (Food & staples retailing)		8,108,578		12,940
Debenhams plc (Multiline retail)		4,908,407		9,164
Domino’s Pizza Group plc (Hotels, restaurants & leisure)		653,589		5,336
Dunelm Group plc (Specialty retail)		582,726		6,683
Elementis plc (Chemicals)		904,915		3,455
Fidessa Group plc (Software)		119,591		2,975
Halma plc (Electronic equipment, instruments & components)		850,474		6,400
Hiscox, Ltd. (Insurance)		470,236		3,501
IG Group Holdings plc (Diversified financial services)		1,232,896		9,074
*Imagination Technologies Group plc (Computers & peripherals)		187,732		1,224
Lancashire Holdings, Ltd. (Insurance)		897,939		11,433
Moneysupermarket.com Group plc (Internet software & services)		2,922,139		7,492
Oxford Instruments plc (Electronic equipment, instruments & components)		240,759		5,627
Rotork plc (Machinery)		347,388		14,501
RPS Group plc (Commercial services & supplies)		872,849		3,018
*Salamander Energy plc (Oil, gas & consumable fuels)		1,617,863		5,009
*Sports Direct International plc (Specialty retail)		873,033		5,524
St James’s Place plc (Insurance)		613,072		4,238
Synergy Health plc (Health care providers & services)		201,939		3,582
Telecity Group plc (Internet software & services)		260,085		3,359
*The Berkeley Group Holdings plc (Household durables)		432,957		12,455
Victrex plc (Chemicals)		268,463		7,155

				188,184

See accompanying Notes to Portfolio of Investments.

48 Annual Report

December 31, 2012

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*

*Japan—16.4%*
Ain Pharmaciez, Inc. (Food & staples retailing)		109,000	$	5,962
Chiyoda Corporation (Construction & engineering)		885,000		12,678
Cosmos Pharmaceutical Corporation (Food & staples retailing)		77,000		7,652
CyberAgent, Inc. (Media)		2,170		4,459
F.C.C. Co., Ltd. (Auto components)		365,509		7,592
FamilyMart Co., Ltd. (Food & staples retailing)		165,500		6,818
Kakaku.com, Inc. (Internet software & services)		89,600		2,958
M3, Inc. (Health care technology)		3,791		6,051
Miraca Holdings, Inc. (Health care providers & services)		254,200		10,250
MISUMI Group, Inc. (Trading companies & distributors)		269,500		7,365
MonotaRO Co., Ltd. (Trading companies & distributors)		126,000		4,059
Park24 Co., Ltd. (Commercial services & supplies)		116,000		1,832
Ryohin Keikaku Co., Ltd. (Multiline retail)		164,900		9,222
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		64,800		6,505
Ship Healthcare Holdings, Inc. (Health care providers & services)		301,200		8,005
Suruga Bank, Ltd. (Commercial banks)		985,000		12,115
United Arrows, Ltd. (Specialty retail)		197,800		4,555

				118,078


*Emerging Asia—7.8%*
China—4.9%
China Medical System Holdings, Ltd. (Pharmaceuticals)		5,891,000		4,598
Dongyue Group (Chemicals)		8,759,000		5,922
*Haier Electronics Group Co., Ltd. (Household durables)		7,758,000		11,507
Haitian International Holdings, Ltd. (Machinery)		3,933,496		4,714
Minth Group, Ltd. (Auto components)		1,580,000		1,836
Sino Biopharmaceutical (Pharmaceuticals)		7,808,000		3,765
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)†		176,359		2,778

				35,120

India—2.9%
CRISIL, Ltd. (Diversified financial services)		174,919		3,469
eClerx Services, Ltd. (Professional services)		100,070		1,251
Ipca Laboratories, Ltd. (Pharmaceuticals)		429,511		4,068
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		146,216		3,471
Motherson Sumi Systems, Ltd. (Auto components)		1,957,109		7,126
Oberoi Realty, Ltd. (Real estate management & development)		337,316		1,790

				21,175


*Common Stocks—(continued)*

*Emerging Europe, Mid-East, Africa—5.7%*
Russia—0.1%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)†		154,616	$	845

South Africa—2.9%
Capitec Bank Holdings, Ltd. (Commercial banks)		227,238		4,917
Coronation Fund Managers, Ltd. (Capital markets)		998,657		4,676
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,746,547		11,038

				20,631

Turkey—2.7%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		1,196,176		7,042
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		9,869,085		12,728

				19,770


*Asia—5.7%*
Australia—1.4%
Domino’s Pizza Enterprises, Ltd. (Hotels, restaurants & leisure)		327,274		3,588
Seek, Ltd. (Professional services)		900,328		6,653

				10,241

Hong Kong—2.9%
Sa Sa International Holdings, Ltd. (Specialty retail)		11,950,000		9,923
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		5,804,000		10,641

				20,564

Singapore—1.4%
ARA Asset Management Ltd.—144A (Capital markets)		343,000		459
*Biosensors International Group, Ltd. (Health care equipment & supplies)		2,932,000		2,927
First Resources, Ltd. (Food products)		4,203,000		7,008

				10,394


*Canada—4.8%*
Canadian Energy Services & Technology Corporation (Energy equipment & services)		312,295		3,328
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		1,326,320		9,147
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		261,923		6,054
Precision Drilling Corporation (Energy equipment & services)		745,292		6,159
Total Energy Services, Inc. (Energy equipment & services)		222,362		3,351
Trilogy Energy Corporation (Oil, gas & consumable fuels)		214,885		6,288

				34,327

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 49

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*

*Emerging Latin America—1.7%*
Brazil—0.9%
*Lupatech S.A. (Energy equipment & services)		252,217	$	203
OdontoPrev S.A. (Health care providers & services)		472,000		2,473
*Qualicorp S.A. (Health care providers & services)		359,100		3,720
T4F Entretenimento S.A. (Media)		88,500		339

				6,735

Chile—0.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)		13,645,276		3,449

Mexico—0.3%
*Macquarie Mexico Real Estate Management S.A. de C.V.—144A (Real estate investment trusts (REITs))		906,973		1,796

Total Common Stocks—96.8% (cost $590,782)				696,550


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $20,374, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	20,374		20,374

Total Repurchase Agreement—2.8% (cost $20,374)				20,374

Total Investments—99.6% (cost $611,156)				716,924
Cash and other assets, less liabilities—0.4%				2,584

Net assets—100.0%			$	719,508

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Consumer Discretionary			26.9%
Health Care			13.6%
Financials			13.2%
Information Technology			11.8%
Industrials			11.3%
Consumer Staples			8.5%
Energy			6.6%
Materials			6.6%
Telecommunication Services			1.5%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			27.0%
Euro			21.2%
Japanese Yen			17.0%
Hong Kong Dollar			8.0%
Canadian Dollar			4.9%
Swedish Krona			3.3%
Indian Rupee			3.0%
South African Rand			3.0%
Norwegian Krone			2.9%
Turkish Lira			2.8%
Singapore Dollar			1.5%
Australian Dollar			1.5%
Swiss Franc			1.1%
All Other Currencies			2.8%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

50 Annual Report

December 31, 2012

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Growth Fund posted a 20.70% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net) increased 18.68%.

2012 outperformance was driven by strong stock selection across most sectors, with particular value added in the overweighted Consumer sectors, coupled with strong results in Materials and Energy. The Fund’s Discretionary stocks were up over 25%, compared to the 17.6% return in the benchmark Index due to broad strength across industries. Staples was up over 38%, due largely to strong outperformance in overweighted Food/Staples Retailing. Energy benefited from strong performance by CNOOC on a recovering production growth profile and Ecopetrol on strong results during the first half. In addition, limited exposure to Petrobras, a Brazil oil company, during the year was positive, given operational disappointments and continued concerns about governmental intervention. Materials benefited from good operational results from Grupo Mexico, the Fund’s sole Metals/Mining holding during the period. The key detractor from 2012 results was Information Technology (IT) stock selection, due largely to Chinese internet-related performance coupled with operational weakness at Comba Telecom and HTC, which we sold during the year.

As of year-end, Consumer Discretionary and Staples remained overweighted at a combined 27.1% of the Fund, compared to the 17.7% Index weighting, with a tilt towards Discretionary. Financials increased during the year to 24.7% from 15.9% as of year-end 2012 primarily due to an increase in Commercial Banks and real estate-related weightings, but remained underweighted versus the 25.7% benchmark Index weighting. IT and Energy marginally decreased to fund this increase. Regionally, the Fund was underweighted in Emerging Asia, despite above-market weightings in China, India and the ASEAN countries, due to a significant underweighting in Korea and Taiwan. Latin America totaled 21.1% of the Fund at year-end, a significant decrease since year-end 2011 due to lower exposure in Brazil on economic slowdown and governmental intervention concerns.

December 31, 2012

William Blair Funds 51

Emerging Markets Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Class N		20.70	%		7.21	%		(3.88	)%		11.11	%
Class I		21.01			7.52			(3.63	)		11.39
MSCI Emerging Markets IMI (net)		18.68			4.64			(0.70	)		11.50

(a)

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

Sector Diversification (Unaudited)

LOGO

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

52 Annual Report

December 31, 2012

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Emerging Asia—55.5%*
China—19.8%
AAC Technologies Holdings, Inc. (Communications equipment)		875,959	$	3,106
*Baidu, Inc.—ADR (Internet software & services)		47,987		4,813
Belle International Holdings, Ltd. (Specialty retail)		2,346,610		5,190
*Brilliance China Automotive Holdings, Ltd. (Automobiles)		8,818,000		11,081
China BlueChemical, Ltd. (Chemicals)		3,610,609		2,463
China Mobile, Ltd. (Wireless telecommunication services)		3,274,755		38,536
China Overseas Land & Investment, Ltd. (Real estate management & development)		3,456,000		10,508
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		2,233,304		10,004
CNOOC, Ltd. (Oil, gas & consumable fuels)		10,840,601		23,882
Dongyue Group (Chemicals)		5,456,287		3,689
Golden Eagle Retail Group, Ltd. (Multiline retail)		956,547		2,382
*Haier Electronics Group Co., Ltd. (Household durables)		4,822,000		7,152
Haitian International Holdings, Ltd. (Machinery)		2,334,870		2,798
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		19,945,000		14,396
Lenovo Group, Ltd. (Computers & peripherals)		15,575,014		14,361
Sino Biopharmaceutical (Pharmaceuticals)		1,548,000		746
Sun Art Retail Group, Ltd. (Food & staples retailing)		5,414,745		8,371
Tencent Holdings, Ltd. (Internet software & services)		446,835		14,655
Want Want China Holdings, Ltd. (Food products)		6,291,217		8,817
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		144,501		2,276
Yingde Gases (Chemicals)		2,062,981		2,114

				191,340

India—9.5%
Asian Paints, Ltd. (Chemicals)		40,286		3,282
Bajaj Auto, Ltd. (Automobiles)		217,835		8,522
HDFC Bank, Ltd. (Commercial banks)		614,440		7,660
Housing Development Finance Corporation (Thrifts & mortgage finance)		648,245		9,903
IndusInd Bank, Ltd. (Commercial banks)		370,437		2,859
ITC, Ltd. (Tobacco)		2,622,889		13,812
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		107,827		2,559
Lupin, Ltd. (Pharmaceuticals)		208,913		2,359
Motherson Sumi Systems, Ltd. (Auto components)		1,019,801		3,713
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		560,729		7,585
Tata Consultancy Services, Ltd. (IT services)		416,320		9,592
Tata Motors, Ltd. (Automobiles)		3,400,953		19,549

				91,395


*Common Stocks—Emerging Asia—55.5%—(continued)*
Indonesia—4.4%
PT Astra International Tbk (Automobiles)		17,263,240	$	13,675
PT Bank Rakyat Indonesia (Commercial banks)		18,996,821		13,778
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		876,724		3,795
PT Jasa Marga Persero Tbk (Transportation infrastructure)		7,091,000		4,017
PT Kalbe Farma Tbk (Pharmaceuticals)		28,249,415		3,113
PT XL Axiata Tbk (Diversified telecommunication services)		6,536,500		3,879

				42,257

Malaysia—2.1%
CIMB Group Holdings Bhd (Commercial banks)		5,420,087		13,567
*IHH Healthcare Bhd (Health care providers & services)		5,739,800		6,358

				19,925

Papua New Guinea—1.0%
Oil Search, Ltd. (Oil, gas & consumable fuels)		1,306,597		9,662

Philippines—0.4%
SM Prime Holdings, Inc. (Real estate management & development)		9,556,100		3,852

South Korea—8.3%
Celltrion, Inc. (Pharmaceuticals)		175,399		4,283
*Hyundai Motor Co. (Automobiles)		87,825		18,105
*LG Household & Health Care, Ltd. (Household products)		5,802		3,554
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		27,900		40,087
Samsung Engineering Co., Ltd. (Construction & engineering)		15,089		2,351
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		34,088		6,925
Samsung Heavy Industries Co., Ltd. (Machinery)		135,964		4,968

				80,273

Taiwan—5.6%
Asustek Computer, Inc. (Computers & peripherals)		1,341,000		15,186
Catcher Technology Co., Ltd. (Computers & peripherals)		464,064		2,330
Hiwin Technologies Corporation (Machinery)		239,429		1,770
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		5,845,893		18,095
MediaTek, Inc. (Semiconductors & semiconductor equipment)		851,064		9,521
TPK Holding Co., Ltd. (Electronic equipment, instruments & components)		383,979		6,876

				53,778

Thailand—4.4%
Advanced Info Service PCL (Wireless telecommunication services)		1,168,362		8,036
BEC World PCL (Media)		3,646,100		8,498
CP ALL PCL (Food & staples retailing)		5,417,518		8,146

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 53

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—55.5%—(continued)*
Thailand—(continued)
Kasikornbank PCL (Commercial banks)		2,248,482	$	14,293
Siam Makro PCL (Food & staples retailing)		226,932		3,319

				42,292


*Emerging Latin America—21.1%*
Argentina—0.5%
MercadoLibre, Inc. (Internet software & services)		56,934		4,473

Brazil—7.9%
BR Malls Participacoes S.A. (Real estate management & development)		858,690		11,332
BR Properties S.A. (Real estate management & development)		275,997		3,437
Cia de Bebidas das Americas—ADR (Beverages)		590,382		24,790
Cia de Concessoes Rodoviarias (Transportation infrastructure)		750,389		7,128
Cia Hering (Specialty retail)		201,116		4,125
Cielo S.A. (IT services)		201,100		5,598
CPFL Energia S.A.—ADR (Electric utilities)		25,717		539
Iochpe-Maxion S.A. (Machinery)		167,600		2,239
Lojas Renner S.A. (Multiline retail)		67,222		2,618
*Lupatech S.A. (Energy equipment & services)		421,326		340
OdontoPrev S.A. (Health care providers & services)		448,666		2,351
*Qualicorp S.A. (Health care providers & services)		234,300		2,427
Raia Drogasil S.A. (Food & staples retailing)		219,145		2,469
Totvs S.A. (Software)		110,832		2,186
Tractebel Energia S.A. (Independent power producers & energy traders)		296,538		4,830

				76,409

Chile—2.9%
Banco Santander Chile—ADR (Commercial banks)		166,393		4,740
CFR Pharmaceuticals S.A. (Pharmaceuticals)		9,228,150		2,332
ENTEL Chile S.A. (Wireless telecommunication services)		334,333		6,914
Inversiones La Construccion S.A. (Diversified financial services)		102,017		2,003
S.A.C.I. Falabella (Multiline retail)		446,216		4,586
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		84,509		4,871
Sonda S.A. (IT services)		907,561		2,891

				28,337

Colombia—2.8%
Ecopetrol S.A. (Oil, gas & consumable fuels)		6,054,150		18,707
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		369,891		8,594

				27,301

Mexico—5.7%
Fibra Uno Administracion S.A. de C.V. (Real estate investment trusts (REITs))		192,369		581
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		93,678		9,433

Common Stocks—Emerging Latin America—21.1%—(continued)
Mexico—(continued)
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		3,230,910	$	20,863
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,740,267		24,315

				55,192

Panama—0.2%
Copa Holdings S.A. Class “A” (Airlines)†		16,927		1,683

Peru—1.1%
Credicorp, Ltd. (Commercial banks)†		69,363		10,166


*Emerging Europe, Mid-East, Africa—16.8%*
Nigeria—0.7%
Guaranty Trust Bank plc (Commercial banks)		28,471,188		4,209
Nigerian Breweries plc (Beverages)		2,388,036		2,257

				6,466

Poland—0.2%
Eurocash S.A. (Food & staples retailing)		166,187		2,351

Qatar—1.2%
Industries Qatar QSC (Industrial conglomerates)		271,417		11,604

Russia—2.5%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		408,600		2,235
M Video OJSC (Specialty retail)		193,600		1,543
Magnit OAO (Food & staples retailing)†		64,463		10,227
Mail.ru Group, Ltd.—GDR (Internet software & services)		69,724		2,435
*Yandex N.V. Class “A” (Internet software & services)†		381,211		8,223

				24,663

South Africa—7.8%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		283,871		5,683
AVI, Ltd. (Food products)		316,748		2,244
Bidvest Group, Ltd. (Industrial conglomerates)		189,187		4,840
Discovery Holdings, Ltd. (Insurance)		439,270		3,240
FirstRand, Ltd. (Diversified financial services)		4,241,154		15,606
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		1,827,565		7,345
Mr Price Group, Ltd. (Specialty retail)		134,316		2,226
MTN Group, Ltd. (Wireless telecommunication services)		519,782		10,941
Naspers, Ltd. (Media)		228,562		14,763
Shoprite Holdings, Ltd. (Food & staples retailing)		224,152		5,438
Tiger Brands, Ltd. (Food products)		65,572		2,529

				74,855

Turkey—3.8%
Arcelik A.S. (Household durables)		735,219		4,835
BIM Birlesik Magazalar A.S. (Food & staples retailing)		49,474		2,426

See accompanying Notes to Portfolio of Investments.

54 Annual Report

December 31, 2012

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

Common Stocks—Emerging Europe, Mid-East, Africa—16.8%—(continued)
Turkey—(continued)
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		639,220	$	3,763
Turkiye Halk Bankasi A.S. (Commercial banks)		2,586,661		25,498

				36,522

United Arab Emirates—0.6%
First Gulf Bank PJSC (Commercial banks)		1,905,256		6,116

Total Common Stocks—93.4% (cost $749,631)				900,912


*Preferred Stock*
Brazil—2.0%
Itau Unibanco Holding S.A. (Commercial banks)		1,211,941		19,764

Total Preferred Stock—2.0% (cost $18,035)				19,764


*Affiliated Fund*
China—2.5%
William Blair China A-Share Fund, LLC		2,362,400		23,624

Total Affiliated Fund—2.5% (cost $23,624)				23,624


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $13,524, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	13,524	$	13,524

Total Repurchase Agreement—1.4% (cost $13,524)				13,524

Total Investments—99.3% (cost $804,814)				957,824
Cash and other assets, less liabilities—0.7%				6,413

Net assets—100.0%			$	964,237

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

The Emerging Markets Growth Fund invested in the following affiliated fund. There are no unfunded commitments to the affiliated fund and the Fund may redeem its investment monthly.

Share Activity

Year Ended
December 31, 2012

(in thousands)

Fund Name

Balance
12/31/2011

Purchases

Sales

Balance
12/31/2012

Value

Dividends
Included
in Income

William Blair China-A Share Fund, LLC

—

2,362,400

—

2,362,400

23,624

—

As of December 31, 2012 the Fund invested in William Blair China A Share Fund, LLC, an Affiliated Fund. There was no realized or unrealized gain/(loss) from investments in the affiliated fund.

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			24.7%
Information Technology			17.9%
Consumer Discretionary			15.1%
Consumer Staples			12.0%
Energy			8.1%
Telecommunication Services			7.3%
Health Care			5.1%
Industrials			4.8%
Materials			4.4%
Utilities			0.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Hong Kong Dollar			19.8%
U.S. Dollar			11.8%
Indian Rupee			9.7%
South Korean Won			8.5%
South African Rand			7.9%
Brazilian Real			7.5%
New Taiwan Dollar			5.7%
Mexican Peso			4.8%
Thai Baht			4.5%
Indonesian Rupiah			4.5%
Turkish Lira			3.9%
Malaysian Ringgit			2.1%
Chilean Peso			2.0%
Colombian Peso			2.0%
Qatari Rial			1.2%
Australian Dollar			1.0%
All Other Currencies			3.1%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 55

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS LEADERS FUND (FORMERLY KNOWN AS EMERGING LEADERS GROWTH FUND)

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Leaders Fund posted a 20.37% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Index (net) increased 18.22%.

2012 to date performance surpassed the MSCI Emerging Markets Index (net), on strong outperformance across a number of sectors. The overweighted Consumer Staples sector added approximately 2% to outperformance, as the overweighted Food/Staples Retailing segment was up over 52% with broad strength across names. Energy stock selection was bolstered by limited exposure in Petrobras, a Brazil oil company, during the year, given operational disappointments and continued concerns about governmental intervention. It also benefited from strong performance by CNOOC, a Chinese energy company, on a recovering production growth profile and Ecopetrol on strong results during the first half. Commercial Banks were up nearly 29% during the year and were the most significant contributor to Financials outperformance, while Materials benefited from good operational results from Grupo Mexico, the Fund’s sole Metals/Mining holding during the period. The key detractor from 2012 results was Information Technology (IT) stock selection, due largely to Chinese internet-related performance coupled with concerns about revenue trends at Cielo, the Brazilian card processing company.

During the year as valuations expanded, the Fund’s weighting in Consumer Discretionary and Staples decreased substantially from approximately 36% of the Fund to approximately 28%, but remained above the 16.7% benchmark Index weighting. Conversely, Financials increased from 19.8% to 30.6%, as we added to Commercial Banks and Real Estate-related holdings. Conversely, Industrials decreased from an index weighting of approximately 6.5% to 3.1% on deteriorating demand trends, while IT marginally increased. Regionally, the Fund was underweighted in Emerging Asia, despite above-market weightings in China, India and the Southeast Asia countries, due to a significant underweighting in Korea and Taiwan. Europe, Middle East and Africa decreased slightly during the year, due to a reduction in South African holdings on valuation concerns. Latin America totaled 21.3% of the Fund at year-end, approximately 3% above the Index weighting, due to holdings in Chile, Colombia, Mexico and Peru, which more than offset the lower Brazil weighting.

56 Annual Report

December 31, 2012

Emerging Markets Leaders Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year		Since Inception
Class N(a)		20.37	%		N/A		5.27	%
MSCI Emerging Markets (net)(a)		18.22			N/A		4.29
MSCI Emerging Markets Large Cap (net)(a)		17.79			N/A		4.40
Class I(b)		20.64			6.37		0.60
MSCI Emerging Markets (net)(b)		18.22			4.66		1.43
MSCI Emerging Markets Large Cap (net)(b)		17.79			4.71		1.32

(a)

Since Inception is for the period from May 3, 2010 (Commencement of Operations) to December 31, 2012.

(b)

Since Inception is for the period from March 26, 2008 (Commencement of Operations) to December 31, 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 Index (net) is a free float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

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.

On December 31, 2012, the Fund’s Benchmark changed from the Morgan Stanley Capital International (MSCI) Emerging Markets Large Cap Index (net) to the Morgan Stanley Capital International (MSCI) Emerging Markets Index (net). The primary reason for this change is to compare the Fund to a benchmark that more closely reflects the market capitalization focus the Fund uses in its investment strategy.

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 57

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Emerging Asia—56.6%*
China—20.0%
Belle International Holdings, Ltd. (Specialty retail)		449,000	$	993
* Brilliance China Automotive Holdings, Ltd. (Automobiles)		938,000		1,179
China Mobile, Ltd. (Wireless telecommunication services)		260,500		3,066
China Overseas Land & Investment, Ltd. (Real estate management & development)		546,000		1,660
CNOOC, Ltd. (Oil, gas & consumable fuels)		618,000		1,361
Lenovo Group, Ltd. (Computers & peripherals)		1,506,000		1,389
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		87,500		746
Sun Art Retail Group, Ltd. (Food & staples retailing)		484,000		748
Tencent Holdings, Ltd. (Internet software & services)		59,700		1,958
Want Want China Holdings, Ltd. (Food products)		521,000		730

				13,830

India—10.1%
Bajaj Auto, Ltd. (Automobiles)		26,380		1,032
HDFC Bank, Ltd. (Commercial banks)		59,521		742
Housing Development Finance Corporation (Thrifts & mortgage finance)		50,310		769
ITC, Ltd. (Tobacco)		210,623		1,109
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		77,316		1,046
Tata Consultancy Services, Ltd. (IT services)		30,914		712
Tata Motors, Ltd. (Automobiles)		271,948		1,563

				6,973

Indonesia—3.1%
PT Astra International Tbk (Automobiles)		1,155,000		915
PT Bank Rakyat Indonesia (Commercial banks)		1,656,500		1,201

				2,116

Malaysia—2.9%
CIMB Group Holdings Bhd (Commercial banks)		514,800		1,289
* IHH Healthcare Bhd (Health care providers & services)		630,600		698

				1,987

South Korea—7.9%
* Hyundai Motor Co. (Automobiles)		8,070		1,664
* LG Household & Health Care, Ltd. (Household products)		582		356
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		2,383		3,424

				5,444


*Common Stocks—Emerging Asia—56.6%—(continued)*
Taiwan—6.5%
Asustek Computer, Inc. (Computers & peripherals)		124,000	$	1,404
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		552,770		1,711
MediaTek, Inc. (Semiconductors & semiconductor equipment)		61,000		683
Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		40,175		689

				4,487

Thailand—6.1%
Advanced Info Service PCL (Wireless telecommunication services)		222,500		1,530
CP ALL PCL (Food & staples retailing)		881,400		1,326
Kasikornbank PCL (Commercial banks)		210,200		1,336

				4,192


*Emerging Latin America—21.3%*
Brazil—4.6%
BR Malls Participacoes S.A. (Real estate management & development)		104,600		1,381
Cia de Bebidas das Americas—ADR (Beverages)		43,016		1,806

				3,187

Chile—3.3%
Banco Santander Chile—ADR (Commercial banks)		24,273		691
S.A.C.I. Falabella (Multiline retail)		70,614		726
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		15,429		889

				2,306

Colombia—2.9%
Ecopetrol S.A. (Oil, gas & consumable fuels)		654,079		2,021

Mexico—8.9%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		13,452		1,355
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		358,800		2,317
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		676,400		2,440

				6,112

Peru—1.6%
Credicorp, Ltd. (Commercial banks)†		7,284		1,067


*Emerging Europe, Mid-East, Africa—17.3%*
Qatar—2.0%
Industries Qatar QSC (Industrial conglomerates)		33,058		1,414

Russia—4.8%
Magnit OAO (Food & staples retailing)†		902		143
Magnit OJSC—144A—GDR (Food & staples retailing)		30,146		1,226
Sberbank of Russian Federation (Commercial banks)†		628,838		1,922

				3,291

See accompanying Notes to Portfolio of Investments.

58 Annual Report

December 31, 2012

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—17.3%—(continued)*
South Africa—7.0%
Bidvest Group, Ltd. (Industrial conglomerates)		27,569	$	705
FirstRand, Ltd. (Diversified financial services)		304,841		1,122
MTN Group, Ltd. (Wireless telecommunication services)		37,013		779
Naspers, Ltd. (Media)		16,375		1,058
Shoprite Holdings, Ltd. (Food & staples retailing)		32,125		779
Tiger Brands, Ltd. (Food products)		9,106		351

				4,794

Turkey—3.5%
Turkiye Garanti Bankasi A.S. (Commercial banks)		461,388		2,408

Total Common Stocks—95.2% (cost $55,595)				65,629


*Preferred Stock*
Brazil—3.0%
Itau Unibanco Holding S.A. (Commercial banks)		127,900		2,086

Total Preferred Stock—3.0% (cost $1,986)				2,086


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $2,909, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	2,909		2,909

Total Repurchase Agreement—4.2% (cost $2,909)				2,909

Total Investments—102.4% (cost $60,490)				70,624
Liabilities, plus cash and other assets—(2.4)%				(1,645	)

Net assets—100.0%			$	68,979

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of total long-term investments):


Financials			30.6%
Information Technology			17.7%
Consumer Staples			14.7%
Consumer Discretionary			13.5%
Telecommunication Services			7.9%
Energy			5.0%
Materials			4.9%
Industrials			3.1%
Health Care			2.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of total long-term investments):


Hong Kong Dollar			20.4%
U.S. Dollar			14.5%
Indian Rupee			10.3%
South Korean Won			8.0%
South African Rand			7.1%
Mexican Peso			7.0%
Thai Baht			6.2%
New Taiwan Dollar			5.6%
Brazilian Real			5.1%
Turkish Lira			3.6%
Indonesian Rupiah			3.1%
Colombian Peso			3.0%
Malaysian Ringgit			2.9%
Qatari Rial			2.1%
Chilean Peso			1.1%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 59

LOGO

Todd M. McClone

LOGO

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 34.23% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Small Cap Index (net) increased 22.22%.

Year to date, the Fund outpaced the Index by over 12%, led by significant outperformance in the overweighted Consumer sectors. Discretionary stocks were up over 41% for the year, well ahead of the 22% Index return, due largely to outperformance in Latin American and Asian Hotels/Restaurants, coupled with strong results in Household Durables and in Asian Media companies. The Fund’s Staples stocks were up approximately 57%, well ahead of the 27% Index return, on strength in the overweighted Food/Staples Retailing industry, in addition to outperformance in Asian Food products companies. The Fund’s Industrials stocks were up over 35%, with broad-based strength across industries except Transportation Infrastructure. In addition, the lack of Construction/Engineering holdings somewhat detracted from results. While the underweighting in Materials added significant value during the year, stock selection was negative, as all industries underperformed. Regionally, Asian stock selection was particularly strong as a focus on Southeast Asian Nation (ASEAN) countries at the expense of South Korea and Taiwan added value, as did strong stock selection across a number of countries.

The Fund maintained its significant focus on Consumer, which represented a combined 46% of the Fund as of year end, compared with the 26% Index weighting. Financials was also overweighted at 23% of the Fund versus the 20% Index weighting, an increase since year-end 2011. Conversely, Industrials, Information Technology (IT) and Telecommunication Services were the most underweighted. Regionally, the Fund’s Asian holdings totalled 57.2%, well below the 74.5% Index weighting due primarily to significant underweightings in South Korea and Taiwan, which were only somewhat mitigated by higher India and ASEAN exposures. Conversely, Latin America totalled 22.8%, well above the 11.3% Index weighting, due to significant exposure in Brazil and Mexico and a higher weighting in Chile.

60 Annual Report

December 31, 2012

Emerging Markets Small Cap Growth Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	Year To Date			Since Inception(a)
Class N		34.23	%		25.19	%
Class I		34.62			25.49
MSCI Emerging Markets Small Cap (net)		22.22			12.05

(a)

For the period from October 24, 2011 (Commencement of Operations) to December 31, 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 (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 61

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*

*Emerging Asia—57.2%*
Cambodia—1.6%
NagaCorp, Ltd. (Hotels, restaurants & leisure)		710,000	$	434

China—12.1%
AAC Technologies Holdings, Inc. (Communications equipment)		73,000		259
China Medical System Holdings, Ltd. (Pharmaceuticals)		240,000		187
China Overseas Grand Oceans Group, Ltd. (Real estate management & development)		428,000		523
Dongyue Group (Chemicals)		500,000		338
Golden Eagle Retail Group, Ltd. (Multiline retail)		130,000		324
*Haier Electronics Group Co., Ltd. (Household durables)		255,000		378
Haitian International Holdings, Ltd. (Machinery)		250,000		300
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		11,059		131
Minth Group, Ltd. (Auto components)		108,000		125
Prince Frog International Holdings, Ltd. (Personal products)		571,000		243
Sino Biopharmaceutical Ltd. (Pharmaceuticals)		580,000		280
Tiangong International Co., Ltd. (Metals & mining)		776,000		189

				3,277

India—12.7%
Bata India, Ltd. (Textiles, apparel & luxury goods)		11,797		188
Colgate-Palmolive India, Ltd. (Personal products)		7,779		225
CRISIL, Ltd. (Diversified financial services)		5,146		102
Eicher Motors, Ltd. (Machinery)		3,304		176
GlaxoSmithKline Consumer Healthcare, Ltd. (Food products)		4,041		284
Godrej Consumer Products, Ltd. (Personal products)		13,706		182
Gruh Finance, Ltd. (Thrifts & mortgage finance)		54,158		235
Havells India, Ltd. (Electrical equipment)		2,075		24
IndusInd Bank, Ltd. (Commercial banks)		38,858		300
Ipca Laboratories, Ltd. (Pharmaceuticals)		22,423		212
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		7,314		174
Lupin, Ltd. (Pharmaceuticals)		24,125		272
Marico, Ltd. (Personal products)		63,017		252
Motherson Sumi Systems, Ltd. (Auto components)		38,643		141
Page Industries, Ltd. (Textiles, apparel & luxury goods)		2,464		154
Pidilite Industries, Ltd. (Chemicals)		54,818		219
Yes Bank, Ltd. (Commercial banks)		32,711		279

				3,419

Indonesia—6.4%
PT Ace Hardware Indonesia Tbk (Specialty retail)		5,295,500		453
PT Alam Sutera Realty Tbk (Real estate management & development)		1,792,000		112

*Common Stocks—Emerging Asia—57.2%—(continued)*
Indonesia—(continued)
*PT Bank Tabungan Pensiunan Nasional Tbk (Commercial banks)		227,000	$	124
PT Ciputra Development Tbk (Real estate management & development)		2,034,500		169
PT Holcim Indonesia Tbk (Construction materials)		584,000		176
PT Jasa Marga (Transportation infrastructure)		87,000		49
PT Kalbe Farma Tbk (Pharmaceuticals)		1,349,500		149
PT Media Nusantara Citra Tbk (Media)		234,500		61
*PT MNC Sky Vision Tbk (Media)		311,000		77
PT Sumber Alfaria Trijaya Tbk (Food & staples retailing)		133,000		73
*PT Tower Bersama Infrastructure Tbk (Wireless telecommunication services)		492,500		292

				1,735

Malaysia—3.5%
Aeon Co. M Bhd (Multiline retail)		44,200		204
Dayang Enterprise Holdings Bhd (Energy equipment & services)		207,200		162
Guinness Anchor Bhd (Beverages)		69,400		377
Nestle Malaysia Bhd (Food products)		9,000		186
Padini Holdings Bhd (Specialty retail)		45,400		28

				957

Philippines—6.1%
Alliance Global Group, Inc. (Industrial conglomerates)		787,000		322
*East West Banking Corporation (Commercial banks)		13,900		10
Puregold Price Club, Inc. (Food & staples retailing)		673,000		541
Security Bank Corporation (Commercial banks)		88,450		337
SM Prime Holdings, Inc. (Real estate management & development)		264,375		107
Universal Robina Corporation (Food products)		160,700		328

				1,645

South Korea—2.5%
*Able C&C Co., Ltd. (Personal products)		2,351		175
*Gamevil, Inc. (Software)		2,051		193
*Kolao Holdings (Automobiles)		10,328		178
*Paradise Co., Ltd. (Hotels, restaurants & leisure)		8,360		135

				681

Sri Lanka—1.0%
Commercial Bank of Ceylon plc (Commercial banks)		148,872		120
John Keells Holdings plc (Industrial conglomerates)		84,914		147

				267

Taiwan—3.4%
Eclat Textile Co., Ltd. (Textiles, apparel & luxury goods)		54,000		199
Ginko International Co., Ltd. (Health care equipment & supplies)		12,000		134
Hiwin Technologies Corporation (Machinery)		3,300		24
Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		5,000		135

See accompanying Notes to Portfolio of Investments.

62 Annual Report

December 31, 2012

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—57.2%—(continued)*
Taiwan—(continued)
Merida Industry Co., Ltd. (Leisure equipment & products)		43,000	$	193
St Shine Optical Co., Ltd. (Health care equipment & supplies)		15,000		230

				915

Thailand—7.9%
Bangkok Dusit Medical Services PCL (Health care providers & services)		52,100		194
BEC World PCL (Media)		146,300		341
Home Product Center PCL (Specialty retail)		652,040		271
LPN Development PCL (Real estate management & development)		266,600		161
Minor International PCL (Hotels, restaurants & leisure)		474,810		306
Robinson Department Store PCL (Multiline retail)		123,700		271
Siam Makro PCL (Food & staples retailing)		13,650		200
Thai Tap Water Supply PCL (Water utilities)		795,500		240
Tisco Financial Group PCL (Commercial banks)		80,700		138

				2,122


*Emerging Latin America—22.8%*
Brazil—12.4%
Arezzo Industria e Comercio S.A. (Textiles, apparel & luxury goods)		12,800		247
BR Properties S.A. (Real estate management & development)		10,500		131
Cia Hering (Specialty retail)		10,200		209
Ez Tec Empreendimentos e Participacoes S.A. (Household durables)		14,500		182
Iguatemi Empresa de Shopping Centers S.A. (Real estate management & development)		20,400		271
*Kroton Educacional S.A. (Diversified consumer services)		17,790		402
Localiza Rent a Car S.A. (Road & rail)		10,700		196
Lojas Renner S.A. (Multiline retail)		6,600		257
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		21,586		359
*Qualicorp S.A. (Professional services)		23,300		241
Raia Drogasil S.A. (Food & staples retailing)		9,700		109
Tegma Gestao Logistica S.A. (Road & rail)		10,700		183
Totvs S.A. (Software)		9,200		182
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A (Commercial services & supplies)		16,900		376

				3,345

Chile—3.1%
Inversiones La Construccion S.A. (Diversified financial services)		15,590		306
Parque Arauco S.A. (Real estate management & development)		77,460		192
Sonda S.A. (IT services)		103,879		331

				829

Mexico—5.4%
*Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)		189,869		379
Banregio Grupo Financiero S.A.B. de C.V. (Commercial banks)		87,838		400

Common Stocks—Emerging Latin America—22.8%—(continued)
Mexico—(Continued)
Compartamos S.A.B. de C.V. (Consumer finance)		105,200	$	150
Fibra Uno Administracion S.A. de C.V. (Real estate investment trusts (REITs))		88,500		267
*Macquarie Mexico Real Estate Management S.A. de C.V.—144A (Real estate investment trusts (REITs))		140,965		279

				1,475

Panama—1.0%
Copa Holdings S.A. (Airlines)†		2,648		263

Peru—0.9%
*Inretail Peru Corporation (Food & staples retailing)		4,077		86
*Inretail Peru Corporation—144A (Food & staples retailing)†		1,346		28
Intercorp Financial Services, Inc. (Diversified financial services)		3,529		126

				240


*Emerging Europe, Mid-East, Africa—13.5%*
Kenya—1.0%
Safaricom, Ltd. (Wireless telecommunication services)		4,588,400		267

Nigeria—1.7%
Guaranty Trust Bank plc (Commercial banks)		1,908,274		282
Nestle Nigeria plc (Food products)		40,090		180

				462

Poland—2.9%
*Alior Bank S.A. (Commercial banks)		7,026		142
Eurocash S.A. (Food & staples retailing)		18,191		258
LPP S.A. (Textiles, apparel & luxury goods)		257		379

				779

Russia—0.5%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		4,868		27
*MD Medical Group Investments plc—144A—GDR (Health care providers & services)		9,432		117

				144

South Africa—4.2%
AVI, Ltd. (Food products)		23,285		165
Coronation Fund Managers, Ltd. (Capital markets)		59,162		277
Discovery Holdings, Ltd. (Insurance)		19,818		146
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		24,717		99
Mr Price Group, Ltd. (Specialty retail)		12,072		200
The Foschini Group, Ltd. (Specialty retail)		7,077		118
Tsogo Sun Holdings, Ltd. (Hotels, restaurants & leisure)		48,096		135

				1,140

Turkey—3.2%
Arcelik A.S. (Household durables)		26,925		177

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 63

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—13.5%—(continued)*
Turkey—(continued)
Bizim Toptan Satis Magazalari A.S. (Food & staples retailing)		19,285	$	301
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		41,406		244
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		108,970		141

				863

Total Common Stocks—93.5% (cost $23,445)				25,259


*Preferred Stock*
Brazil—1.2%
Marcopolo S.A. (Machinery)		49,000		309

Total Preferred Stock—1.2% (cost $284)				309


Issuer	Principal Amount		Value

*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $2,088, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	2,088	$	2,088

Total Repurchase Agreement—7.7% (cost $2,088)				2,088

Total Investments—102.4% (cost $25,817)				27,656
Liabilities, plus cash and other assets—(2.4)%				(635	)

Net assets—100.0%			$	27,021

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories as a percentage of total long-term investments:


Consumer Discretionary			29.6%
Financials			22.9%
Consumer Staples			16.4%
Industrials			10.7%
Health Care			8.3%
Information Technology			4.8%
Materials			3.6%
Telecommunication Services			2.2%
Utilities			0.9%
Energy			0.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories as a percentage of total long-term investments:


Brazilian Real			14.3%
Hong Kong Dollar			14.0%
Indian Rupee			13.4%
Thai Baht			8.3%
Indonesian Rupiah			6.8%
Philippine Peso			6.4%
Mexican Peso			5.8%
South African Rand			4.5%
Malaysian Ringgit			3.7%
New Taiwan Dollar			3.6%
Turkish Lira			3.4%
Chilean Peso			3.2%
U.S. Dollar			3.0%
South Korean Won			2.7%
Euro			2.5%
Nigerian Naira			1.8%
Kenyan Shilling			1.0%
Sri Lanka Rupee			1.0%
All Other Currencies			0.6%

Total			100.0%

See accompanying Notes to Portfolio of Investments.

64 Annual Report

December 31, 2012

LOGO

David F. Hone

LARGE CAP VALUE FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The William Blair Large Cap Value Fund posted a 16.92% increase (Class N Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 1000^® Value Index, increased by 17.51%.

In 2012, investors continued to fluctuate between optimism and pessimism based on macroeconomic or political announcements. Market volatility remained, but less than recent years as there were fewer unknowns in the marketplace. In this environment, the Russell 1000^® Value Index rose 17.51%, and climbed the proverbial “wall of worry.” In general, by the fourth quarter, there was evidence that the global economy, ex-Europe, had stabilized after a slowing in the middle of the year. From a sector perspective, cyclical sectors such as Consumer Discretionary, Financials and Industrials performed best. Technology and Energy stocks were a drag as was the more defensive Utilities sector.

Performance results of certain holdings across a variety of sectors were weaker than our expectation. Hewlett-Packard’s stock price declined considerably and was our largest relative underperformer. This Technology company is in the midst of a multi-year turnaround; it disappointed investors with a weaker than expected outlook on the overall IT demand environment. We believe the firm should benefit from its efforts to cut costs and restructure its business. Within Consumer Discretionary, Big Lots lost ground due to softness in same store sales, weakness in merchandising, and the departure of key management such as the Chief Merchandising Officer and Chief Financial Officer. Over time, we believe Big Lots should benefit from a turnaround in merchandising as well as a re-imaging of its stores; as we wait for progress toward the investment thesis, the company has solid cash flows and a good balance sheet. In Financials, Bank of America’s underweight relative to the benchmark detracted for the year. The stock gained ground significantly in the first quarter; however, we added it 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. Lastly, cash was a drag on relative results in the strong upward market; on average, it was 2.3%.

Stock contributors to results were primarily in the Financials and Consumer Discretionary sectors. Financial stocks were strong benchmark performers and our positions in Discover Financial Services and SunTrust Banks stood out above their peers. Discover Financial gained ground from rising demand for credit and improving credit cards trends as both losses and delinquencies declined. We believe this company will benefit from an improving domestic economy and consumer credit environment. With improvements in the U.S. housing market, SunTrust Banks was well positioned due to its significant mortgage business especially relative to other regional banks. For the Consumer Discretionary sector, Time Warner Cable and Brunswick performed best. Time Warner Cable’s management provided strong execution on its high speed data and voice businesses as well as an attractive return of capital through dividends and stock buybacks. Brunswick, a leading manufacturer and marketer of marine and leisure products, reported healthy retail sales and continues to draw down inventory. Its marine engine business continues to do well, and demand remains solid in its fiberglass outboard and aluminum boating businesses. We believe Brunswick should continue to benefit from an improving economy as well as market share gains.

December 31, 2012

William Blair Funds 65

In terms of changes over 2012, there were no major shifts in sector or market cap positioning for the year. The Financials sector rose with the addition of Allstate, Morgan Stanley and Bank of America. (Note: American Tower was reclassified by Russell to Financials from Telecommunications). Energy stock exposure also grew; we added new positions in Baker Hughes, Southwestern Energy and Chevron. Health care declined as we trimmed select existing holdings on share price strength.

For the Large Cap Value Fund, we continue to find attractive opportunities on a valuation basis across most sectors. As always, our focus remains on fundamental analysis to identify quality companies that are temporarily out-of-favor with investors. Over time, we believe investors will benefit from the attractive value creation as the company returns towards its historical growth trends. In 2012, we found it promising that investors began to distinguish underlying company fundamentals instead of being influenced by macro events; this behavior assisted performance results for our strategy.

66 Annual Report

December 31, 2012

Large Cap Value Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			Since Inception(a)
Class N		16.92	%		13.87	%
Class I		17.28	%		14.17
Russell 1000^® Value		17.51	%		16.13

(a)

For the period from October 24, 2011 (Commencement of Operations) to December 31, 2012.

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.

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 67

Large Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—27.2%
American Tower Corporation		869	$	67
Bank of America Corporation		5,938		69
*CBRE Group, Inc.		1,599		32
Citigroup, Inc.		2,233		88
CNA Financial Corporation		860		24
Discover Financial Services		1,288		50
JPMorgan Chase & Co.		2,637		116
Lazard, Ltd.†		2,197		65
Lincoln National Corporation		1,025		26
Morgan Stanley		2,397		46
Prudential Financial, Inc.		691		37
Regions Financial Corporation		5,122		36
State Street Corporation		991		47
SunTrust Banks, Inc.		1,929		55
The Allstate Corporation		1,342		54
The Goldman Sachs Group, Inc.		297		38
US Bancorp		1,567		50
Wells Fargo & Co.		2,897		99
Zions Bancorporation		2,236		48

				1,047

Energy—14.7%
Anadarko Petroleum Corporation		731		54
Baker Hughes, Inc.		1,112		45
Chevron Corporation		802		87
Devon Energy Corporation		829		43
Exxon Mobil Corporation		1,738		151
Hess Corporation		1,095		58
Occidental Petroleum Corporation		877		67
Schlumberger, Ltd.†		442		31
*Southwestern Energy Co.		932		31

				567

Health Care—11.9%
Amgen, Inc.		380		33
Baxter International, Inc.		726		48
Cardinal Health, Inc.		1,267		52
*Express Scripts Holding Co.		750		41
Merck & Co., Inc.		1,701		70
Pfizer, Inc.		4,431		111
UnitedHealth Group, Inc.		807		44
Zimmer Holdings, Inc.		855		57

				456

Information Technology—8.9%
*Adobe Systems, Inc.		1,576		59
*BMC Software, Inc.		851		34
*Broadcom Corporation		1,053		35
Corning, Inc.		2,425		31
Hewlett-Packard Co.		2,041		29
Intel Corporation		624		13
Microsoft Corporation		1,083		29
*NetApp, Inc.		1,143		38
*Symantec Corporation		2,375		45
*VeriFone Systems, Inc.		1,029		30

				343

* Non-income producing securities

† = U.S. listed foreign security


Issuer	Shares		Value

*Common Stocks—(continued)*
Industrials—8.9%
Gardner Denver, Inc.		172	$	12
General Electric Co.		4,981		105
Honeywell International, Inc.		293		19
Kansas City Southern		665		55
SPX Corporation		507		36
Textron, Inc.		2,561		63
The Boeing Co.		375		28
Union Pacific Corporation		187		23

				341

Consumer Discretionary—8.6%
*Big Lots, Inc.		1,218		35
Brunswick Corporation		1,452		42
*General Motors Co.		1,895		55
Lear Corporation		915		43
Marriott International, Inc.		409		15
*MGM Resorts International		2,206		26
*Saks, Inc.		1,953		20
The Walt Disney Co.		807		40
Time Warner Cable, Inc.		558		54

				330

Consumer Staples—7.1%
General Mills, Inc.		1,350		55
Kimberly-Clark Corporation		428		36
Molson Coors Brewing Co.		570		24
Philip Morris International, Inc.		671		56
The Procter & Gamble Co.		1,148		78
Walgreen Co.		625		23

				272

Utilities—4.8%
CMS Energy Corporation		2,461		60
NextEra Energy, Inc.		893		62
Wisconsin Energy Corporation		1,721		63

				185

Materials—3.8%
Alcoa, Inc.		3,518		31
Freeport-McMoRan Copper & Gold, Inc.		1,679		57
Rockwood Holdings, Inc.		738		37
The Dow Chemical Co.		688		22

				147

Telecommunication Services—2.9%
AT&T, Inc.		1,279		43
CenturyLink, Inc.		1,213		48
Verizon Communications, Inc.		489		21

				112

Total Common Stocks—98.8% (cost $3,392)				3,800

Total Investments—98.8% (cost $3,392)				3,800
Cash and other assets, less liabilities—1.2%				45

Net assets—100.0%			$	3,845

See accompanying Notes to Portfolio of Investments.

68 Annual Report

December 31, 2012

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

David S. Mitchell

SMALL CAP VALUE FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Small Cap Value Fund (Class N shares) posted a 12.49% increase for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 2000^® Value Index, returned 18.05%.

Improving U.S. economic data points, especially housing-related, and global central bank actions were the primary drivers of equity market returns in 2012. Despite a brief correction mid-year due to elevated fears regarding Euro zone financial stability, emerging market growth and a pause in the U.S. economic recovery, most small and mid cap indices finished the year near all-time highs. Propelling the market higher in the back half of the year was European Central Bank messaging and actions, which restored confidence in Spanish and Italian borrowing capacity and the overall sustainability of the currency bloc. In the U.S., the Federal Reserve announced new quantitative easing programs aimed to maintain low government and consumer borrowing rates. Finally, investors cheered further improvements in the housing industry. Rebounding home prices and homebuilding activity positively impacts housing-related employment and overall consumer confidence. Thus, the market digested the possibility of a more sustainable domestic economic recovery.

The William Blair Small Cap Value Fund’s 2012 underperformance is attributable to style and industry headwinds and negative stock selection. Quality was out of favor for the year, which negatively impacted relative performance due to our strategy’s high quality bias. Size was another significant style factor for the year in the small cap value space. Stocks with market capitalizations of $2 billion and above lagged the market, hurting relative returns for our portfolio, which tends to have more exposure to the $2B to $3B range as compared to the Russell 2000^® Value Index. Another notable trend was the sustained outperformance of homebuilding stocks along with other stocks tied to the housing resurgence. While we had some exposure, we exited our one homebuilder position early in the year due to what was already an elevated valuation. Even though we’ve seen encouraging data points in 2012 that suggest signs of a housing recovery, the multiples being applied to the homebuilding stocks implied housing growth at levels which to us seemed unrealistically optimistic. Our underweight to what we consider to be an overvalued segment of the market also detracted from relative returns. Looking at stock selection, Key Energy Services Inc. and Adtran Inc. detracted from relative performance, both of which are stocks we continue to own, while partially offsetting the underperformance were investments in PolyOne Corp., AFC Enterprises Inc., and Western Alliance Bancorp.

Despite progress on certain fronts in the U.S. and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the US, the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a new debt-ceiling debate. On the other hand, the improving housing market and overall economy in the U.S. provides some ballast to these downside risks. Outside the US, European Central Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks continue to exist in the region. And while the Chinese economy has improved, investors will keep a close eye on this important global economic engine.

December 31, 2012

William Blair Funds 69

growth opportunities, such as the companies in which we seek to invest. Corporate balance sheets remain strong and should provide companies the ability to invest or increase merger and acquisition activities, both of which would be a tailwind for the stock market.

In the end, while we factor various economic scenarios into our stock picking, we focus our time on constructing the portfolio from a bottom-up perspective. As always, we remain focused on finding quality companies at discount prices and corporate transformation opportunities, and we continue to find good ideas across sectors. We believe building a fund with these types of companies should produce solid investment results over the long term.

70 Annual Report

December 31, 2012

Small Cap Value Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Class N		12.49	%		11.08	%		5.11	%		8.76	%
Class I		12.73			11.33			5.32			8.98
Russell 2000^® Value		18.05			11.57			3.55			9.50

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

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 71

Small Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—29.5%
Acadia Realty Trust		94,640	$	2,374
Alterra Capital Holdings, Ltd.†		103,155		2,908
American Assets Trust, Inc.		61,540		1,719
Bank of the Ozarks, Inc.		90,710		3,036
Berkshire Hills Bancorp, Inc.		112,970		2,695
CoBiz Financial, Inc.		272,445		2,035
Coresite Realty Corporation		54,770		1,515
*Eagle Bancorp, Inc.		150,122		2,998
East West Bancorp, Inc.		108,545		2,333
EastGroup Properties, Inc.		43,390		2,335
Education Realty Trust, Inc.		210,140		2,236
First Horizon National Corporation		248,880		2,466
*Forest City Enterprises, Inc.		139,835		2,258
*Genworth Financial, Inc.		168,010		1,262
Highwoods Properties, Inc.		53,865		1,802
LaSalle Hotel Properties		70,329		1,786
Mid-America Apartment Communities, Inc.		36,665		2,374
*National Financial Partners Corporation		144,850		2,483
National Retail Properties, Inc.		54,365		1,696
Old National Bancorp		171,866		2,040
PacWest Bancorp		123,493		3,060
Pebblebrook Hotel Trust		97,889		2,261
ProAssurance Corporation		50,750		2,141
Prosperity Bancshares, Inc.		61,995		2,604
*Safeguard Scientifics, Inc.		209,101		3,084
Susquehanna Bancshares, Inc.		214,155		2,244
The Hanover Insurance Group, Inc.		68,405		2,650
Webster Financial Corporation		139,520		2,867
West Coast Bancorp		74,635		1,653
*Western Alliance Bancorp		224,315		2,362

				69,277

Industrials—16.5%
Actuant Corporation		76,993		2,149
Belden, Inc.		86,330		3,884
Cubic Corporation		49,395		2,369
EMCOR Group, Inc.		107,181		3,709
ESCO Technologies, Inc.		83,107		3,109
*FTI Consulting, Inc.		72,453		2,391
G&K Services, Inc.		73,433		2,508
Interface, Inc.		130,940		2,105
*Kadant, Inc.		92,094		2,441
*Moog, Inc.		90,809		3,726
*Northwest Pipe Co.		87,415		2,086
*Old Dominion Freight Line, Inc.		67,140		2,302
Quanex Building Products Corporation		98,430		2,009
TAL International Group, Inc.		41,675		1,516
*Tetra Tech, Inc.		90,837		2,403

				38,707

Consumer Discretionary—13.5%
Core-Mark Holding Co., Inc.		40,185		1,903
*Krispy Kreme Doughnuts, Inc.		337,645		3,167
*Life Time Fitness, Inc.		51,200		2,519
Meredith Corporation		66,870		2,304
Pier 1 Imports, Inc.		168,460		3,369
*Pinnacle Entertainment, Inc.		238,635		3,778
Regis Corporation		154,735		2,618

*Common Stocks—(continued)*
Consumer Discretionary—(continued)
*The Children’s Place Retail Stores, Inc.		44,475	$	1,970
The Men’s Wearhouse, Inc.		95,975		2,991
The PEP Boys-Manny, Moe & Jack		185,260		1,821
*The Warnaco Group, Inc.		40,500		2,899
*WMS Industries, Inc.		144,080		2,521

				31,860

Information Technology—11.8%
ADTRAN, Inc.		137,860		2,694
*Cadence Design Systems, Inc.		179,930		2,431
*Digital River, Inc.		103,535		1,490
Earthlink, Inc.		465,425		3,007
Genpact, Ltd.†		146,245		2,267
*Integrated Device Technology, Inc.		500,347		3,652
j2 Global Communications, Inc.		75,225		2,300
Monolithic Power Systems, Inc.		87,704		1,954
*ON Semiconductor Corporation		353,835		2,495
*Parametric Technology Corporation		110,440		2,486
*Silicon Laboratories, Inc.		42,605		1,781
*Ultra Clean Holdings		231,312		1,136

				27,693

Energy—7.3%
*Bonanza Creek Energy, Inc.		57,255		1,591
Bristow Group, Inc.		26,775		1,437
Gulfmark Offshore, Inc.		59,919		2,064
*Gulfport Energy Corporation		57,029		2,180
*Helix Energy Solutions Group, Inc.		112,475		2,321
*Key Energy Services, Inc.		211,085		1,467
*Magnum Hunter Resources Corporation		291,111		1,162
*Swift Energy Co.		147,375		2,268
*TETRA Technologies, Inc.		349,565		2,653

				17,143

Materials—6.6%
Minerals Technologies, Inc.		84,525		3,374
PolyOne Corporation		204,225		4,170
*RTI International Metals, Inc.		93,825		2,586
Sensient Technologies Corporation		76,305		2,713
Silgan Holdings, Inc.		65,245		2,714

				15,557

Utilities—6.5%
ALLETE, Inc.		66,600		2,729
Chesapeake Utilities Corporation		42,080		1,910
Cleco Corporation		68,180		2,728
PNM Resources, Inc.		115,590		2,371
Southwest Gas Corporation		64,295		2,727
WGL Holdings, Inc.		73,145		2,867

				15,332

Health Care—4.9%
CONMED Corporation		83,620		2,337
*Greatbatch, Inc.		96,445		2,241
*HealthSouth Corporation		97,210		2,052
*Magellan Health Services, Inc.		39,235		1,923
*Mednax, Inc.		37,113		2,951

				11,504

See accompanying Notes to Portfolio of Investments.

72 Annual Report

December 31, 2012

Small Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—(continued)*
Consumer Staples—2.1%
J&J Snack Foods Corporation		40,727	$	2,604
Spartan Stores, Inc.		157,019		2,412

				5,016

Telecommunication Services—0.7%
*tw telecom, Inc.		64,475		1,642

Total Common Stocks—99.4% (cost $204,594)				233,731


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $4,519, collateralized by U.S. Treasury Note, 2.125%, due 12/31/2015	$	4,519		4,519

Total Repurchase Agreement—1.9% (cost $4,519)				4,519

Total Investments—101.3% (cost $209,113)				238,250
Liabilities, plus cash and other assets—(1.3)%				(2,982	)

Net assets—100.0%			$	235,268

† = U.S. listed foreign security

* Non-income producing securities

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 73

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

David S. Mitchell

MID CAP VALUE FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Mid Cap Value Fund (Class N shares) posted a 13.54% increase for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell Midcap^® Value Index, returned 18.51%.

Improving U.S. economic data points, especially housing-related, and global central bank actions were the primary drivers of equity market returns in 2012. Despite a brief correction mid-year due to elevated fears regarding Euro zone financial stability, emerging market growth and a pause in the U.S. economic recovery, most small and mid cap indices finished the year near all-time highs. Propelling the market higher in the back half of the year was European Central Bank messaging and actions which restored confidence in Spanish and Italian borrowing capacity and the overall sustainability of the currency bloc. In the U.S., the Federal Reserve announced new quantitative easing programs aimed to maintain low government and consumer borrowing rates. Finally, investors cheered further improvements in the housing industry. Rebounding home prices and homebuilding activity positively impacts housing-related employment and overall consumer confidence. Thus, the market digested the possibility of a more sustainable domestic economic recovery.

The William Blair Mid Cap Value Fund’s 2012 underperformance is attributable to style headwinds and negative stock selection. Quality was out of favor for the year, which negatively impacted relative performance due to our strategy’s high quality bias. In terms of stock selection, SM Energy Co., Hill-Rom Holdings Inc., and Atmel Corp. detracted from relative performance. Partially offsetting this was outperformance by Discover Financial Services, Wyndham Worldwide Corp. and Snap-On Inc.

Despite progress on certain fronts in the U.S. and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the U.S., the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a new debt-ceiling debate. On the other hand, the improving housing market and overall economy in the U.S. provides some ballast to these downside risks. Outside the U.S., European Central Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks continue to exist in the region. And while the Chinese economy has improved, investors will keep a close eye on this important global economic engine.

Equity valuations expanded in 2012, but they begin the year near long-term averages and thus should be neither a tailwind nor headwind to equity returns. Profit margins are elevated and therefore we believe a premium should be placed on companies with above-average revenue growth opportunities, such as the companies in which we seek to invest. Corporate balance sheets remain strong and should provide companies the ability to invest or increase merger and acquisition activities, both of which would be a tailwind for the stock market.

74 Annual Report

December 31, 2012

Mid Cap Value Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			Since Inception(a)
Class N		13.54	%		7.93	%
Class I		13.77			8.17
Russell Midcap^® Value		18.51			8.81

(a)

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 75

Mid Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—29.8%
Alexandria Real Estate Equities, Inc.		725	$	50
Allied World Assurance Co. Holdings, Ltd.†		535		42
American Campus Communities, Inc.		905		42
Ameriprise Financial, Inc.		1,465		92
Comerica, Inc.		1,410		43
Digital Realty Trust, Inc.		565		38
Discover Financial Services		1,670		64
East West Bancorp, Inc.		1,890		41
Essex Property Trust, Inc.		245		36
Fifth Third Bancorp		3,310		50
First Horizon National Corporation		4,315		43
*Forest City Enterprises, Inc.		2,745		44
*Genworth Financial, Inc.		3,735		28
Host Hotels & Resorts, Inc.		3,095		49
Marsh & McLennan Cos., Inc.		1,825		63
People’s United Financial, Inc.		3,280		40
Realty Income Corporation		1,075		43
SL Green Realty Corporation		745		57
SunTrust Banks, Inc.		2,270		64
Taubman Centers, Inc.		500		39
The Hanover Insurance Group, Inc.		1,195		46
The Hartford Financial Services Group, Inc.		2,925		66
Validus Holdings, Ltd.†		1,695		59
Ventas, Inc.		1,020		66
Zions Bancorporation		1,260		27

				1,232

Industrials—13.4%
Dover Corporation		810		53
Eaton Corporation plc†		1,200		65
Hubbell, Inc.		550		47
Joy Global, Inc.		895		57
*Old Dominion Freight Line, Inc.		1,160		40
Pall Corporation		870		52
Parker Hannifin Corporation		650		55
Pentair, Ltd.†		955		47
Rockwell Automation, Inc.		580		49
Rockwell Collins, Inc.		775		45
Snap-On, Inc.		565		45

				555

Information Technology—10.2%
*Atmel Corporation		5,140		34
Genpact, Ltd.†		2,595		40
*Ingram Micro, Inc.		2,790		47
*Juniper Networks, Inc.		2,500		49
Linear Technology Corporation		1,325		45
*ON Semiconductor Corporation		4,635		33
*Parametric Technology Corporation		2,030		46
TE Connectivity, Ltd.†		1,890		70
Xerox Corporation		8,640		59

				423

Utilities—9.7%
American Water Works Co., Inc.		1,485		55
Cleco Corporation		920		37
DTE Energy Co.		900		54
Northeast Utilities		1,510		59
NV Energy, Inc.		2,815		51

† = U.S. listed foreign security

* Non-income producing securities


Issuer	Shares		Value

*Common Stocks—(continued)*
Utilities—(continued)
Pinnacle West Capital Corporation		935	$	48
Wisconsin Energy Corporation		1,055		39
Xcel Energy, Inc.		2,170		58

				401

Energy—8.9%
Noble Energy, Inc.		415		42
Pioneer Natural Resources Co.		630		67
*Rowan Cos. plc†		1,575		49
SM Energy Co.		995		52
*Superior Energy Services, Inc.		1,745		36
Valero Energy Corporation		2,095		72
*Whiting Petroleum Corporation		1,160		50

				368

Consumer Discretionary—8.9%
Autoliv, Inc.		525		35
*Bed Bath & Beyond, Inc.		670		38
Coach, Inc.		920		51
DISH Network Corporation		1,610		59
H&R Block, Inc.		2,415		45
Kohl’s Corporation		960		41
Newell Rubbermaid, Inc.		2,605		58
VF Corporation		265		40

				367

Health Care—7.0%
*CareFusion Corporation		1,880		54
CIGNA Corporation		1,365		73
*Laboratory Corporation of America Holdings		515		44
*Mettler-Toledo International, Inc.		310		60
Zimmer Holdings, Inc.		865		58

				289

Consumer Staples—5.5%
ConAgra Foods, Inc.		2,385		70
HJ Heinz Co.		715		41
Ingredion, Inc.		1,015		66
The Kroger Co.		1,965		51

				228

Materials—5.2%
Airgas, Inc.		640		59
Carpenter Technology Corporation		855		44
FMC Corporation		1,150		67
Steel Dynamics, Inc.		3,350		46

				216

Telecommunication Services—0.7%
*tw telecom, Inc.		1,110		28

Total Common Stocks—99.3% (cost $3,632)				4,107

Total Investments—99.3% (cost $3,632)				4,107
Cash and other assets, less liabilities—0.7%				30

Net assets—100.0%			$	4,137

See accompanying Notes to Portfolio of Investments.

76 Annual Report

December 31, 2012

LOGO

Chad M. Kilmer

LOGO

Mark T. Leslie

LOGO

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 William Blair Small-Mid Cap Value Fund (Class N shares) posted an 11.95% increase for the twelve month period ended December 31, 2012. By comparison, the Fund’s benchmark, the Russell 2500^® Value Index, returned 19.21%.

The William Blair Small-Mid Value Fund’s 2012 underperformance is attributable to style and industry headwinds and negative stock selection. Quality was out of favor for the year, which negatively impacted relative performance due to our strategy’s high quality bias. Another notable trend was the sustained outperformance of homebuilding stocks along with other stocks tied to the housing resurgence. While we had some exposure, we exited our one homebuilder position early in the year due to what was already an elevated valuation. Even though we’ve seen encouraging data points in 2012 that suggest signs of a housing recovery, the multiples being applied to the homebuilding stocks implied housing growth at levels which to us seemed unrealistically optimistic. Our underweight to what we consider to be an overvalued segment of the market also detracted from relative returns. Looking at stock selection, Key Energy Services Inc. and Adtran Inc. detracted from relative performance, both of which are stocks we continue to own, while partially offsetting the underperformance were investments in PolyOne Corp., Pinnacle Entertainment Inc., and Monolithic Power Systems Inc.

Despite progress on certain fronts in the U.S. and abroad during 2012, there remain several uncertainties the market will grapple with in 2013. In the U.S., the late 2012 “fiscal cliff” negotiations produced some clarity on tax policy, but government spending policy remains in flux. These discussions will take center stage in the coming months along with a new debt-ceiling debate. On the other hand, the improving housing market and overall economy in the US provides some ballast to these downside risks. Outside the U.S., European Central Bank activities have suppressed fears of draconian scenarios but financial stability, government budget and economic risks continue to exist in the region. And while the Chinese economy has improved, investors will keep a close eye on this important global economic engine.

Equity valuations expanded in 2012, but they begin the year near long-term averages and thus should be neither a tailwind nor headwind to equity returns. Profit margins are elevated and therefore we believe a premium should be placed on companies with above-average revenue growth opportunities, such as the companies in which we seek to invest. Corporate balance sheets remain strong and should provide companies the ability to invest or increase merger and acquisition activities, both of which would be a tailwind for the stock market.

December 31, 2012

William Blair Funds 77

78 Annual Report

December 31, 2012

Small-Mid Cap Value Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			Since Inception(a)
Class N		11.95	%		16.18	%
Class I		12.22			16.44
Russell 2500^® Value		19.21			23.03

(a)

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 79

Small-Mid Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks*
Financials—27.3%
Alexandria Real Estate Equities, Inc.		317	$	22
Allied World Assurance Co. Holdings, Ltd.†		220		17
Alterra Capital Holdings, Ltd.†		685		19
American Assets Trust, Inc.		410		11
Bank of the Ozarks, Inc.		590		20
Comerica, Inc.		805		24
East West Bancorp, Inc.		740		16
EastGroup Properties, Inc.		325		18
Education Realty Trust, Inc.		1,605		17
Essex Property Trust, Inc.		100		15
First Horizon National Corporation		2,460		24
*Forest City Enterprises, Inc.		1,290		21
*Genworth Financial, Inc.		2,510		19
Highwoods Properties, Inc.		465		16
LaSalle Hotel Properties		428		11
Mid-America Apartment Communities, Inc.		235		15
*National Financial Partners Corporation		1,180		20
National Retail Properties, Inc.		540		17
Old National Bancorp		1,370		16
PacWest Bancorp		894		22
Pebblebrook Hotel Trust		728		17
People’s United Financial, Inc.		1,860		22
ProAssurance Corporation		504		21
Prosperity Bancshares, Inc.		505		21
Realty Income Corporation		430		17
SL Green Realty Corporation		350		27
Susquehanna Bancshares, Inc.		1,580		17
Taubman Centers, Inc.		210		17
The Hanover Insurance Group, Inc.		495		19
The Hartford Financial Services Group, Inc.		1,200		27
Validus Holdings, Ltd.†		830		29
Webster Financial Corporation		1,055		22
*Western Alliance Bancorp		1,280		13
Zions Bancorporation		1,065		23

				652

Industrials—17.2%
Actuant Corporation		762		21
Belden, Inc.		790		36
Cubic Corporation		370		18
EMCOR Group, Inc.		870		30
ESCO Technologies, Inc.		760		28
*FTI Consulting, Inc.		405		13
G&K Services, Inc.		635		22
Hubbell, Inc.		205		17
Interface, Inc.		1,170		19
Joy Global, Inc.		395		25
*Moog, Inc.		770		32
*Old Dominion Freight Line, Inc.		665		23
Pall Corporation		450		27
Pentair, Ltd.†		540		26
Quanex Building Products Corporation		865		18
Snap-On, Inc.		245		19
TAL International Group, Inc.		345		13
*Tetra Tech, Inc.		899		24

				411

Consumer Discretionary—13.4%
Autoliv, Inc.		360		24
Core-Mark Holding Co., Inc.		320		15

*Common Stocks—(continued)*
Consumer Discretionary—(continued)
H&R Block, Inc.		1,365	$	25
*Krispy Kreme Doughnuts, Inc.		2,875		27
*Life Time Fitness, Inc.		510		25
Meredith Corporation		565		19
Newell Rubbermaid, Inc.		1,240		28
Pier 1 Imports, Inc.		1,290		26
*Pinnacle Entertainment, Inc.		1,760		28
Regis Corporation		1,230		21
*The Children’s Place Retail Stores, Inc.		350		16
The Men’s Wearhouse, Inc.		880		27
The PEP Boys-Manny, Moe & Jack		1,485		15
*WMS Industries, Inc.		1,350		24

				320

Information Technology—9.9%
ADTRAN, Inc.		1,093		21
*Atmel Corporation		2,245		15
*Cadence Design Systems, Inc.		1,350		18
*Digital River, Inc.		770		11
Earthlink, Inc.		3,655		24
Genpact, Ltd.†		1,460		23
*Ingram Micro, Inc. Class “A”		1,175		20
*Integrated Device Technology, Inc.		4,420		32
j2 Global Communications, Inc.		560		17
Monolithic Power Systems, Inc.		693		16
*ON Semiconductor Corporation		2,610		18
*Parametric Technology Corporation		995		22

				237

Utilities—8.0%
ALLETE, Inc.		515		21
American Water Works Co., Inc.		815		30
Cleco Corporation		530		21
NV Energy, Inc.		1,490		27
Pinnacle West Capital Corporation		495		25
PNM Resources, Inc.		880		18
Southwest Gas Corporation		555		24
WGL Holdings, Inc.		635		25

				191

Materials—7.3%
Airgas, Inc.		245		22
Carpenter Technology Corporation		265		14
FMC Corporation		400		23
Minerals Technologies, Inc.		520		21
PolyOne Corporation		1,190		24
*RTI International Metals, Inc.		685		19
Sensient Technologies Corporation		415		15
Silgan Holdings, Inc.		475		20
Steel Dynamics, Inc.		1,225		17

				175

Energy—7.0%
*Bonanza Creek Energy, Inc.		460		13
Gulfmark Offshore, Inc.		525		18
*Gulfport Energy Corporation		370		14
*Helix Energy Solutions Group, Inc.		915		19
*Key Energy Services, Inc.		2,085		14
*Magnum Hunter Resources Corporation		3,206		13
*Rowan Cos. plc†		700		22

See accompanying Notes to Portfolio of Investments.

80 Annual Report

December 31, 2012

Small-Mid Cap Value Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—(continued)*
Energy—(continued)
SM Energy Co.		350	$	18
*Swift Energy Co.		1,140		17
*TETRA Technologies, Inc.		2,455		19

				167

Health Care—5.5%
*CareFusion Corporation		830		24
CONMED Corporation		415		12
*Greatbatch, Inc.		530		12
*HealthSouth Corporation		860		18
*Magellan Health Services, Inc.		290		14
*Mednax, Inc.		360		29
*Mettler-Toledo International, Inc.		125		24

				133

Consumer Staples—2.8%
Ingredion, Inc.		530		34
J&J Snack Foods Corporation		255		16
Spartan Stores, Inc.		1,135		18

				68

Telecommunication Services—0.7%
*tw telecom, Inc.		640		16

Total Common Stocks—99.1% (cost $2,126)				2,370

† = U.S. listed foreign security

* Non-income producing securities


Issuer	Principal Amount		Value

*Repurchase Agreement*
State Street Bank and Trust Company, 0.110% dated 12/31/12, due 1/2/13, repurchase price $37, collateralized by FHLMC, 2.000% due 1/30/2023	$	37	$	37

Total Repurchase Agreement—1.5% (cost $37)				37

Total Investments—100.6% (cost $2,163)				2,407
Liabilities, plus cash and other assets—(0.6)%				(15	)

Net assets—100.0%			$	2,392

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 81

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

BOND FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Bond Fund posted an 8.33% increase (Class N shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Index, increased by 4.21%.

Several factors contributed to the outperformance of the William Blair Bond Fund versus its benchmark during 2012. Security selection within the Fund had the largest positive impact on performance, with results particularly strong among the Fund’s corporate and mortgage-backed securities. The Fund benefitted from several security selection themes in the corporate sector, including its overweight of U.S. banks and financial services, positioning within investment-grade industrials, and its allocation to high yield corporate bonds. In the mortgage-backed sector, the Fund’s emphasis on higher-coupon pools comprised of low loan balance borrowers continued to add value relative to comparable duration alternatives. Finally, sector positioning contributed to performance, as the Fund eschewed nominal fixed-rate Treasuries in favor of corporate bonds, mortgage-backed securities, and Treasury Inflation-Protected Securities (TIPS).

Some factors detracted from the William Blair Bond Fund’s performance on a relative basis during 2012. An underweight allocation to Commercial Mortgage-Backed Securities (CMBS) had a marginal negative impact on relative performance. However, the Fund was overweight to REITs to account for that underweight, and that positioning offset the relative underperformance. The Fund’s cash holdings detracted from performance as bonds posted solid performance. We attempt to minimize the amount of cash in the Fund at any time and to keep the Fund fully invested.

The major sectors of the U.S. fixed income market generated positive total returns during 2012. The primary drivers of returns have been income and narrowing risk spreads as investors’ demand for incremental yield has been insatiable. The 10-year Treasury note yielded 1.76% at year-end.

We believe that the threat of any rapid rise in interest rates is subdued. The Federal Open Market Committee’s (FOMC’s) stance towards monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining rates at low levels until the unemployment rate declines below 6.5%.

We expect economic growth to be low in the short-to-intermediate term (two to three years), with continued high levels of unemployment and a depressed real estate market constraining growth. However, we do not believe that the economy is at imminent risk of a “double-dip” recession.

Corporate bond issuance was robust in 2012. Corporations sought to secure longer-term financing at low all-in yields. Net issuance ended the year slightly lower than the record levels experienced in 2009. We expect that issuance will decline modestly from this pace in 2013.

We believe that spread sectors are poised to lead the market. Risk premiums across all spread sectors remain elevated versus long-term averages but not approaching the historically cheap levels experienced in prior years. These valuations, coupled with the strength of corporate balance sheets, make us bullish on spread product relative to Treasuries.

82 Annual Report

December 31, 2012

Bond Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 year			3 year			5 year			Since Inception(a)
Class N		8.33	%		7.87	%		7.23	%		6.97	%
Class I		8.54			8.02			7.39			7.14
Barclays Capital U.S. Aggregate Index		4.21			6.19			5.95			6.11

(a)

For the period from May 1, 2007 (Commencement of Operations) to December 31, 2012.

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

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

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

LOGO

The sector diversification shown is based on the total investments.

December 31, 2012

William Blair Funds 83

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—40.3%*
U.S. Treasury Inflation Indexed Notes/Bonds—7.5%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	5,913	$	6,872
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29		9,287		15,393

Total U.S. Treasury Inflation Indexed Notes/Bonds				22,265

U.S. Treasury—1.1%
U.S. Treasury Bond, 3.125%, due 2/15/42		525		549
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,900		2,641

Total U.S. Treasury Obligations				3,190

Government National Mortgage Association (GNMA)—2.3%
#344834, 6.250%, due 7/15/13		2		2
#344902, 6.250%, due 3/15/14		4		4
#623162, 6.500%, due 7/15/18		35		40
#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		130
GNR 2006-67 GB, 4.775%, due 9/16/34, VRN		517		526
#699118, 6.000%, due 9/15/38		5,488		6,171

Total GNMA Mortgage Obligations				6,886

Federal Home Loan Mortgage Corp. (FHLMC)—6.3%
#J16051, 4.500%, due 7/1/26		1,198		1,306
#G01728, 7.500%, due 7/1/32		252		309
#C01385, 6.500%, due 8/1/32		245		283
#A13303, 5.000%, due 9/1/33		474		534
#C01623, 5.500%, due 9/1/33		339		369
#A15039, 5.500%, due 10/1/33		6		7
#G01843, 6.000%, due 6/1/35		65		72
#G02141, 6.000%, due 3/1/36		1,372		1,522
#A62179, 6.000%, due 6/1/37		685		759
#A63539, 6.000%, due 7/1/37		888		986
#A62858, 6.500%, due 7/1/37		473		532
#G03170, 6.500%, due 8/1/37		1,138		1,281
#A66843, 6.500%, due 10/1/37		1,680		1,907
#A78138, 5.500%, due 6/1/38		1,001		1,129
#G04544, 6.000%, due 8/1/38		2,893		3,179
#A81799, 6.500%, due 9/1/38		1,960		2,225
#A86143, 5.000%, due 5/1/39		120		133
#C03665, 9.000%, due 4/1/41		1,583		1,966

Total FHLMC Mortgage Obligations				18,499

Federal National Mortgage Association (FNMA)—23.1%
#576553, 8.000%, due 2/1/16		8		9
#580793, 6.000%, due 4/1/16		2		2
#624506, 6.000%, due 1/1/17		2		2
#679247, 7.000%, due 8/1/17		8		8
#689612, 5.000%, due 5/1/18		224		241
#695910, 5.000%, due 5/1/18		455		489
#697593, 5.000%, due 5/1/18		408		439


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—40.3%—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#770395, 5.000%, due 4/1/19	$	8	$	9
#900725, 6.000%, due 8/1/21		109		121
#893325, 7.000%, due 9/1/21		9		9
#AA2924, 4.500%, due 4/1/24		791		872
#255956, 5.500%, due 10/1/25		52		57
#AB2256, 3.500%, due 2/1/26		1,179		1,283
#890329, 4.000%, due 4/1/26		465		510
#AI9811, 4.500%, due 8/1/26		505		556
#AH9564, 3.500%, due 9/1/26		1,031		1,121
#AJ8149, 3.500%, due 12/1/26		1,299		1,413
#AJ9402, 4.000%, due 12/1/26		2,200		2,422
#AB4818, 4.000%, due 4/1/27		1,211		1,334
#AP0446, 3.500%, due 7/1/27		3,377		3,674
#AL2590, 4.000%, due 7/1/27		2,344		2,581
#252925, 7.500%, due 12/1/29		3		3
#535977, 6.500%, due 4/1/31		22		26
#253907, 7.000%, due 7/1/31		3		4
#587849, 6.500%, due 11/1/31		32		37
#545437, 7.000%, due 2/1/32		122		143
#545759, 6.500%, due 7/1/32		1,282		1,460
#678007, 6.000%, due 9/1/32		24		27
#254548, 5.500%, due 12/1/32		56		62
#684601, 6.000%, due 3/1/33		1,213		1,361
#703391, 5.000%, due 5/1/33		198		214
#708993, 5.000%, due 6/1/33		74		83
#190340, 5.000%, due 9/1/33		170		186
#254868, 5.000%, due 9/1/33		18		20
#727056, 5.000%, due 9/1/33		911		1,032
#739243, 6.000%, due 9/1/33		1,506		1,720
#739331, 6.000%, due 9/1/33		718		820
#555800, 5.500%, due 10/1/33		189		208
#555946, 5.500%, due 11/1/33		645		739
#756153, 5.500%, due 11/1/33		1,521		1,729
#725017, 5.500%, due 12/1/33		75		86
#725205, 5.000%, due 3/1/34		2,231		2,426
#725232, 5.000%, due 3/1/34		2,397		2,612
#725238, 5.000%, due 3/1/34		844		920
#763798, 5.500%, due 3/1/34		244		276
#776964, 5.000%, due 4/1/34		619		698
#725611, 5.500%, due 6/1/34		308		338
#783786, 5.500%, due 7/1/34		241		277
#786546, 6.000%, due 7/1/34		656		736
#787816, 6.000%, due 7/1/34		730		833
#190353, 5.000%, due 8/1/34		253		275
#794474, 6.000%, due 10/1/34		127		142
#745092, 6.500%, due 7/1/35		920		1,047
#357944, 6.000%, due 9/1/35		79		89
#829306, 6.000%, due 9/1/35		959		1,075
#836140, 5.500%, due 10/1/35		109		118
#843487, 6.000%, due 10/1/35		206		235
#849191, 6.000%, due 1/1/36		421		472
#848782, 6.500%, due 1/1/36		559		632
#745349, 6.500%, due 2/1/36		834		943
#888305, 7.000%, due 3/1/36		22		26
#895637, 6.500%, due 5/1/36		320		361
#831540, 6.000%, due 6/1/36		114		128
#745802, 6.000%, due 7/1/36		434		496

See accompanying Notes to Portfolio of Investments.

84 Annual Report

December 31, 2012

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount			Value

*U.S. Government and U.S. Government Agency—40.3%—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#886220, 6.000%, due 7/1/36			$	957		$	1,093
#893318, 6.500%, due 8/1/36				135			152
#902974, 6.000%, due 12/1/36				921			1,029
#909480, 6.000%, due 2/1/37				919			1,030
#938440, 6.000%, due 7/1/37				430			480
#928561, 6.000%, due 8/1/37				538			614
#948689, 6.000%, due 8/1/37				863			964
#946646, 6.000%, due 9/1/37				277			310
#888967, 6.000%, due 12/1/37				1,770			2,022
#889385, 6.000%, due 2/1/38				525			589
#962058, 6.500%, due 3/1/38				3,647			4,132
#934006, 6.500%, due 9/1/38				1,189			1,347
#986856, 6.500%, due 9/1/38				906			1,018
#991911, 7.000%, due 11/1/38				664			756
#AA8443, 5.000%, due 6/1/39				484			548
#931492, 6.000%, due 7/1/39				329			376
#AA6898, 6.000%, due 7/1/39				1,710	��		1,952
#932279, 5.000%, due 12/1/39				213			236
#AE0082, 5.000%, due 5/1/40				1,213			1,347
#AL0913, 6.000%, due 7/1/41				2,371			2,642
#AK2733, 5.000%, due 2/1/42				3,286			3,721

Total FNMA Mortgage Obligations							68,625


*Non-Agency Mortgage-Backed Obligations—0.2%*
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§*		D		199			166
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 2.587%, 8/25/34, VRN		Aaa		382			382

Total Non-Agency Mortgage-Backed Obligations							548


*Asset-Backed Securities—3.0%*
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		1,140			1,146
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		600			653
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		1,935			2,084
GE Capital Credit Card Master Note Trust, 2012-6, Tranche B, 1.830%, 8/17/20		AA-		2,800			2,843
Centre Point Funding LLC—144A, 2012-2A, Tranche 1, 2.610%, 8/20/21		Baa2		1,979			1,978

Total Asset-Backed Securities							8,812


*Corporate Obligations—55.0%*
Petrobras International Finance Co., 6.125%, due 10/6/16		A3	$	1,400		$	1,582
Ally Financial, Inc., 5.500%, due 2/15/17		BB-		1,788			1,913
American International Group, Inc., 3.800%, due 3/22/17		A-		2,375			2,571
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB+		2,000			2,093
ERP Operating L.P., 5.750%, due 6/15/17		BBB+		2,075			2,448
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		1,600			1,869
General Motors Financial Co., Inc.—144A, 4.750%, due 8/15/17		BB		1,000			1,051
American Express Co., 6.150%, due 8/28/17		A+		2,050			2,470
Capital One Financial Corporation, 6.750%, due 9/15/17		A-		1,900			2,320
Exelon Generation Co. LLC, 6.200%, due 10/1/17		Baa1		1,160			1,370
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-		1,050			1,326
Triumph Group, Inc., 8.000%, due 11/15/17		B+		1,550			1,674
American Tower Corporation, 4.500%, due 1/15/18		Baa3		1,200			1,315
Morgan Stanley, 6.625%, due 4/1/18		A		2,575			3,035
Simon Property Group L.P., 6.125%, due 5/30/18		A-		2,500			3,045
Petrohawk Energy Corporation, 7.250%, due 8/15/18		A		1,050			1,185
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A		1,100			1,347
CSX Corporation, 7.375%, due 2/1/19		BBB		870			1,106
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A+		1,300			1,658
Citigroup, Inc., 8.500%, due 5/22/19		A		2,050			2,757
Discovery Communications LLC, 5.625%, due 8/15/19		BBB		550			657
Roper Industries, Inc., 6.250%, due 9/1/19		BBB		1,850			2,211
Continental Rubber Of America Corp.—144A, 4.500%, due 9/15/19		BB-		250			256
Republic Services, Inc., 5.500%, due 9/15/19		BBB		1,725			2,043
SBA Communications Corp.—144A, 5.625%, due 10/1/19		B2		1,250			1,313
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,575			1,878
Crown Castle International Corporation, 7.125%, due 11/1/19		BB-		1,550			1,713

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 85

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Corporate Obligations—(continued)*
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-	$	500	$	594
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Baa3		3,050		3,908
Jarden Corporation, 7.500%, due 1/15/20		B		1,550		1,701
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB+		1,675		1,904
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		2,575		3,060
Hologic, Inc.—144A, 6.250%, due 8/1/20		BB		1,100		1,185
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		2,050		2,239
Omnicom Group, Inc., 4.450%, due 8/15/20		BBB+		2,075		2,309
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B+		1,500		1,646
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A		1,500		1,784
Progress Energy, Inc., 4.400%, due 1/15/21		BBB		1,675		1,867
Standard Pacific Corporation, 8.375%, due 1/15/21		B		1,750		2,030
Petrobras International Finance Co., 5.375%, due 1/27/21		A3		1,200		1,351
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-		2,430		2,742
Wyndham Worldwide Corporation, 5.625%, due 3/1/21		BBB-		1,000		1,116
Ball Corporation, 5.750%, due 5/15/21		BB+		1,550		1,678
Energizer Holdings, Inc., 4.700%, due 5/19/21		BBB-		2,050		2,197
Discovery Communications LLC, 4.375%, due 6/15/21		BBB		2,000		2,233
O’Reilly Automotive, Inc., 4.625%, due 9/15/21		BBB		2,275		2,491
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1		1,900		2,070
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2		2,500		2,763
SABMiller Holdings, Inc.—144A, 3.750%, due 1/15/22		BBB+		2,000		2,160
SLM Corporation, 7.250%, due 1/25/22		BBB-		2,075		2,288
Fresenius Medical Care US Finance II, Inc.—144A, 5.875%, due 1/31/22		BB+		1,000		1,085
Lamar Media Corporation, 5.875%, due 2/1/22		BB-		1,550		1,682
Masco Corporation, 5.950%, due 3/15/22		BBB-		1,675		1,857
BE Aerospace, Inc., 5.250%, due 4/1/22		BB		1,550		1,643
Pinnacle Entertainment, Inc., 7.750%, due 4/1/22		B		1,315		1,400

*Corporate Obligations—(continued)*
Discover Financial Services, 5.200%, due 4/27/22		BBB-	$	2,150	$	2,448
Kraft Foods Group, Inc.—144A, 3.500%, due 6/6/22		BBB		1,900		2,028
Embraer S.A., 5.150%, due 6/15/22		BBB-		2,500		2,738
Comcast Corporation, 3.125%, due 7/15/22		BBB+		2,000		2,084
America Movil S.A.B. de C.V., 3.125%, due 7/16/22		A2		2,850		2,897
PPG Industries, Inc., 2.700%, due 8/15/22		A-		1,000		990
DR Horton, Inc., 4.375%, due 9/15/22		Ba2		2,350		2,397
Mexichem S.A.B. de C.V.—144A, 4.875%, due 9/19/22		BBB-		1,500		1,616
WEA Finance LLC—144A, 3.375%, due 10/3/22		A2		2,650		2,723
American Axle & Manufacturing, Inc., 6.625%, due 10/15/22		B		1,550		1,573
Southern Copper Corporation, 3.500%, due 11/8/22		BBB+		2,500		2,553
Jones Lang LaSalle, Inc., 4.400%, due 11/15/22		Baa2		1,650		1,686
Camden Property Trust, 2.950%, due 12/15/22		Baa1		2,325		2,267
Owens Corning, Inc., 4.200%, due 12/15/22		BBB-		500		509
Royal Bank of Scotland Group plc, 6.125%, due 12/15/22		BB+		2,325		2,454
CC Holdings GS V LLC—144A, 3.849%, due 4/15/23		Baa3		400		407
The Kroger Co., 8.000%, due 9/15/29		BBB		450		601
Conoco Funding Co., 7.250%, due 10/15/31		A1		450		663
Kohl’s Corporation, 6.000%, due 1/15/33		BBB+		1,065		1,228
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A+		525		669
Comcast Corporation, 6.450%, due 3/15/37		BBB+		650		834
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB		625		853
JPMorgan Chase & Co., 6.400%, due 5/15/38		A+		1,470		1,971
Philip Morris International, Inc., 6.375%, due 5/16/38		A		2,175		2,962
COX Communications, Inc.—144A, 6.950%, due 6/1/38		BBB+		370		486
General Electric Capital Corporation, 6.875%, due 1/10/39		AA+		750		1,019
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3		1,565		1,929
Illinois Tool Works, Inc., 4.875%, due 9/15/41		A+		900		1,055
Union Pacific Corporation, 4.750%, due 9/15/41		A-		1,450		1,626

See accompanying Notes to Portfolio of Investments.

86 Annual Report

December 31, 2012

Bond Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Corporate Obligations—(continued)*
Aristotle Holding, Inc.—144A, 6.125%, due 11/15/41		BBB+	$	2,500	$	3,189
Gilead Sciences, Inc., 5.650%, due 12/1/41		A-		1,775		2,205
Citigroup, Inc., 5.875%, due 1/30/42		A		750		926
Bank of America Corporation, 5.875%, due 2/7/42		A		2,375		2,963
CSX Corporation, 4.750%, due 5/30/42		BBB		1,225		1,319
Odebrecht Finance Ltd.—144A, 7.125%, due 6/26/42		BBB-		2,000		2,320

Total Corporate Obligations						163,377

Total Long-Term Investments—98.5% (cost $270,789)						292,202


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $1,622, collateralized by FHLMC, 3.720%, due 2/27/32		Aaa	$	1,622		1,622

Total Repurchase Agreement—0.5% (cost $1,622)						1,622

Total Investments—99.0% (cost $272,411)						293,824

Cash and other assets, less liabilities—1.0%						2,918

Net assets—100.0%					$	296,742

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 December 31, 2012.

* = Non-income producing security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at December 31, 2012.

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 87

LOGO

Christopher T. Vincent

INCOME FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The William Blair Income Fund posted a 6.00% increase (Class N shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Barclays Capital Intermediate Government/Credit Bond Index, increased by 3.89%.

Several factors contributed to the outperformance of the William Blair Income Fund versus its benchmark during 2012. Security selection within the Fund had the largest positive impact on performance, with results particularly strong among the Fund’s corporate and mortgage-backed securities. The Fund benefited from several security selection themes in the corporate sector, including its overweight of U.S. banks and financial services and positioning within investment-grade industrials. In the mortgage-backed sector, the Fund’s emphasis on higher-coupon pools comprised of low loan balance borrowers continued to add value relative to comparable duration alternatives. Finally, sector positioning contributed to performance, as the Fund eschewed nominal fixed-rate Treasuries in favor of corporate bonds, mortgage-backed securities, and Treasury Inflation—Protected Securities (TIPS).

Some factors detracted from the William Blair Income Fund’s performance on a relative basis during 2012. The Fund was underweight compared to its benchmark in BBB-rated corporate bonds as a result of its limitation of investing no more than 10% of its total assets in BBB-rated debt securities. This positioning detracted as lower-quality bonds outperformed their higher-quality counterparts in 2012. The Fund’s cash holdings also detracted from performance as bonds posted solid performance. We attempt to minimize the amount of cash in the Fund at any time and to keep the Fund fully invested.

We believe that the threat of any rapid rise in interest rates is subdued. The Federal Open Market Committee’s (FOMC’s) stance towards monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining interest rates at low levels until the unemployment rate declines below 6.5%.

We expect economic growth to be low in the short-to-intermediate term (2—3 years), with continued high levels of unemployment and a depressed real estate market constraining growth. However, we do not believe that the economy is at imminent risk of a “double-dip” recession.

We believe that spread sectors are poised to lead the market. Risk premiums across all spreads sectors remain elevated versus long-term averages but not approaching the historically cheap levels experienced in prior years. These valuations, coupled with the strength of corporate balance sheets, make us bullish on spread product relative to Treasuries.

88 Annual Report

December 31, 2012

Income Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 year			3 year			5 year			10 year
Class N		6.00	%		5.75	%		4.85	%		3.75	%
Class I		6.28			6.02			5.06			3.94
Barclays Capital U.S. Intermediate Government/Credit		3.89			5.19			5.18			4.62

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

Sector Diversification (Unaudited)

LOGO

The sector diversification shown is based on the total investments.

December 31, 2012

William Blair Funds 89

Income Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)



Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—45.1%*
U.S. Treasury Inflation Indexed Notes/Bonds—7.5%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	4,158	$	4,833
U.S. Treasury Inflation Indexed Note, 1.125%, due 1/15/21		4,917		5,775

Total U.S. Treasury Inflation Indexed Notes/Bonds				10,608

U.S. Treasury—0.6%
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		1,000		911

Government National Mortgage Association (GNMA)—0.1%
#780405, 9.500%, due 11/15/17		79		84
#357322, 7.000%, due 9/15/23		57		67

Total GNMA Mortgage Obligations				151

Federal Home Loan Mortgage Corp. (FHLMC)—7.7%
#E72924, 7.000%, due 10/1/13		46		46
#E81703, 7.000%, due 5/1/15		104		106
#E81697, 8.000%, due 5/1/15		317		336
#E81908, 8.500%, due 12/1/15		23		24
#J02184, 8.000%, due 4/1/16		172		180
#G90022, 8.000%, due 9/17/16		94		95
#M30028, 5.500%, due 5/1/17		11		11
#E90398, 7.000%, due 5/1/17		330		354
#E97112, 4.000%, due 5/1/18		161		169
#D95621, 6.500%, due 7/1/22		1,344		1,499
#J16051, 4.500%, due 7/1/26		2,220		2,420
#J19032, 3.500%, due 5/1/27		1,401		1,519
#A45790, 7.500%, due 5/1/35		220		270
#G02141, 6.000%, due 3/1/36		687		762
#A66843, 6.500%, due 10/1/37		760		863
#A81799, 6.500%, due 9/1/38		1,099		1,248
#C03665, 9.000%, due 4/1/41		768		953

Total FHLMC Mortgage Obligations				10,855

Federal National Mortgage Association (FNMA)—29.2%
#725315, 8.000%, due 5/1/13		2		2
#593561, 9.500%, due 8/1/14		32		34
#567027, 7.000%, due 9/1/14		153		155
#567026, 6.500%, due 10/1/14		92		93
#458124, 7.000%, due 12/15/14		26		27
#576554, 8.000%, due 1/1/16		345		369
#576553, 8.000%, due 2/1/16		496		532
#555747, 8.000%, due 5/1/16		35		37
#735569, 8.000%, due 10/1/16		240		257
#725410, 7.500%, due 4/1/17		82		87
#643217, 6.500%, due 6/1/17		126		138
#679247, 7.000%, due 8/1/17		457		505
#695910, 5.000%, due 5/1/18		473		509
#740847, 6.000%, due 10/1/18		270		297
#323501, 6.500%, due 1/1/19		89		99
#751313, 5.000%, due 3/1/19		400		441
#852864, 7.000%, due 7/1/20		1,024		1,135
#458147, 10.000%, due 8/15/20		236		271
#835563, 7.000%, due 10/1/20		391		430
#735574, 8.000%, due 3/1/22		255		295
#679253, 6.000%, due 10/1/22		649		720
FNR G93-19 SH, 11.234%, due 4/25/23, VRN		11		17
Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#982878, 4.500%, due 5/1/23			$	658	$	725
#AC5124, 4.000%, due 11/1/24				628		692
#AD8164, 4.000%, due 8/1/25				797		877
#AE1176, 4.000%, due 8/1/25				743		818
#255956, 5.500%, due 10/1/25				157		172
#AB2256, 3.500%, due 2/1/26				1,179		1,283
#890329, 4.000%, due 4/1/26				2,326		2,548
#AI9811, 4.500%, due 8/1/26				757		834
#AJ2322, 3.500%, due 10/1/26				889		967
#AJ3203, 4.000%, due 10/1/26				1,837		2,022
#AJ8149, 3.500%, due 12/1/26				2,572		2,798
#AJ7724, 4.000%, due 12/1/26				892		982
#AK0498, 3.500%, due 1/1/27				543		591
#256639, 5.000%, due 2/1/27				40		43
#AB4818, 4.000%, due 4/1/27				937		1,032
#AP0446, 3.500%, due 7/1/27				3,377		3,674
#AL2590, 4.000%, due 7/1/27				2,910		3,204
#806458, 8.000%, due 6/1/28				211		258
#880155, 8.500%, due 7/1/29				377		471
#797846, 7.000%, due 3/1/32				595		668
#745519, 8.500%, due 5/1/32				186		233
#654674, 6.500%, due 9/1/32				125		142
#733897, 6.500%, due 12/1/32				266		306
#254693, 5.500%, due 4/1/33				26		28
#555531, 5.500%, due 6/1/33				71		78
#555591, 5.500%, due 7/1/33				43		47
#725231, 5.000%, due 2/1/34				535		583
#725220, 5.000%, due 3/1/34				523		570
#725232, 5.000%, due 3/1/34				517		564
#725238, 5.000%, due 3/1/34				291		317
#776964, 5.000%, due 4/1/34				929		1,047
#725424, 5.500%, due 4/1/34				278		306
#255630, 5.000%, due 3/1/35				31		34
#886220, 6.000%, due 7/1/36				681		778
#928658, 6.500%, due 9/1/37				88		98
#889385, 6.000%, due 2/1/38				1,225		1,374
#962058, 6.500%, due 3/1/38				1,278		1,448
#991911, 7.000%, due 11/1/38				424		483
#AL0913, 6.000%, due 7/1/41				1,694		1,887

Total FNMA Mortgage Obligations						41,432


*Non-Agency Mortgage-Backed Obligations—0.7%*
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
First Plus Home Loan Trust, 1998-3, Tranche M2, 7.920%, 5/10/24§*		Caa1ø		256		247
*Lehman Structured Securities Corp.—144A, 2004-2, Tranche M1, 2.991%, 2/28/33, VRN§		CCC		312		150

Total Non-Agency Mortgage-Backed Obligations						1,067

See accompanying Notes to Portfolio of Investments.

90 Annual Report

December 31, 2012

Income Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Asset-Backed Securities—3.0%*
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa	$	750	$	754
Centre Point Funding LLC—144A, 2010-1A, Tranche 1,5.430%, 7/20/16		A2		991		1,067
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.959%, 8/15/18, VRN		Aaa		1,000		1,040
GE Capital Credit Card Master Note Trust, 2012-6, Tranche B, 1.830%, 8/17/20		AA-		1,350		1,371

Total Asset-Backed Securities						4,232


*Corporate Obligations—49.7%*
Bank of America Corporation, 7.375%, due 5/15/14		A		715		774
American International Group, Inc., 3.000%, due 3/20/15		A-		1,000		1,041
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A		600		625
Royal Bank of Scotland Group plc, 2.550%, due 9/18/15		A		750		768
PepsiCo, Inc., 2.500%, due 5/10/16		Aa3		700		737
Petrobras International Finance Co., 6.125%, due 10/6/16		A3		1,250		1,413
PACCAR Financial Corporation, 1.600%, due 3/15/17		A+		1,000		1,016
BHP Billiton Finance USA, Ltd., 5.400%, due 3/29/17		A+		1,000		1,172
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB+		500		523
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		1,750		2,044
Kimberly-Clark Corporation, 6.125%, due 8/1/17		A		1,250		1,533
American Express Co., 6.150%, due 8/28/17		A+		1,500		1,807
IBM Corporation, 5.700%, due 9/14/17		AA-		900		1,087
Capital One Financial Corporation, 6.750%, due 9/15/17		A-		1,000		1,221
Standard Chartered Bank—144A, 6.400%, due 9/26/17		A+		1,000		1,164
Baidu, Inc., 2.250%, due 11/28/17		A		1,250		1,258
Wells Fargo & Co., 5.625%, due 12/11/17		AA-		1,250		1,491
Morgan Stanley, 6.625%, due 4/1/18		A		1,250		1,473
General Electric Capital Corporation, 5.625%, due 5/1/18		AA+		1,725		2,049
Philip Morris International, Inc., 5.650%, due 5/16/18		A		1,250		1,515
Simon Property Group L.P., 6.125%, due 5/30/18		A-		1,250		1,523
John Deere Capital Corporation, 5.750%, due 9/10/18		A		1,300		1,585

*Corporate Obligations—(continued)*
Honeywell International, Inc., 5.000%, due 2/15/19		A	$	1,280	$	1,522
The Procter & Gamble Co., 4.700%, due 2/15/19		AA-		500		591
Citigroup, Inc., 8.500%, due 5/22/19		A		1,250		1,681
Burlington Northern Santa Fe LLC, 4.700%, due 10/1/19		A3		1,000		1,153
Boston Properties L.P., 5.875%, due 10/15/19		A-		1,350		1,610
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A		1,250		1,485
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		750		819
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A		1,000		1,190
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-		250		282
E.I. du Pont de Nemours & Co., 4.250%, due 4/1/21		A		1,000		1,148
Ford Motor Credit Co. LLC, 5.875%, due 8/2/21		Baa3		750		873
Praxair, Inc., 3.000%, due 9/1/21		A		1,000		1,049
Verizon Communications, Inc., 3.500%, due 11/1/21		A		1,000		1,094
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1		1,000		1,090
Gilead Sciences, Inc., 4.400%, due 12/1/21		A-		1,425		1,624
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2		1,000		1,105
McDonald’s Corporation, 2.625%, due 1/15/22		A		1,250		1,283
SLM Corporation, 7.250%, due 1/25/22		BBB-		1,000		1,103
AT&T, Inc., 3.000%, due 2/15/22		A2		1,500		1,560
Masco Corporation, 5.950%, due 3/15/22		BBB-		1,000		1,108
Potomac Electric Power Co., 3.050%, due 4/1/22		A		1,000		1,045
Discover Financial Services, 5.200%, due 4/27/22		BBB-		750		854
Caterpillar Financial Services Corporation, 2.850%, due 6/1/22		A		1,000		1,023
United Technologies Corporation, 3.100%, due 6/1/22		A		1,500		1,588
Embraer S.A., 5.150%, due 6/15/22		BBB-		1,000		1,095
Odebrecht Finance Ltd.—144A, 5.125%, due 6/26/22		BBB-		1,000		1,085
Anheuser-Busch InBev Worldwide, Inc., 2.500%, due 7/15/22		A		1,000		1,006
America Movil S.A.B. de C.V., 3.125%, due 7/16/22		A2		1,500		1,525
PPG Industries, Inc., 2.700%, due 8/15/22		A-		550		545
Dominion Resources, Inc., 2.750%, due 9/15/22		A-		1,000		1,009

See accompanying Notes to Portfolio of Investments

December 31, 2012

William Blair Funds 91

Income Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Corporate Obligations—(continued)*
Mexichem S.A.B. de C.V.—144A, 4.875%, due 9/19/22		BBB-	$	1,000	$	1,078
WEA Finance LLC—144A, 3.375%, due 10/3/22		A2		1,000		1,028
Southern Copper Corporation, 3.500%, due 11/8/22		BBB+		200		204
Jones Lang LaSalle, Inc., 4.400%, due 11/15/22		Baa2		600		613
National Oilwell Varco, Inc., 2.600%, due 12/1/22		A2		1,300		1,318
Camden Property Trust, 2.950%, due 12/15/22		Baa1		600		585
Royal Bank of Scotland Group plc, 6.125%, due 12/15/22		BBB-		800		844
Teva Pharmaceutical Finance Co. BV, 2.950%, due 12/18/22		A-		1,300		1,315
Union Pacific Corporation, 2.950%, due 1/15/23		A-		1,000		1,034
CC Holdings GS V LLC—144A, 3.849%, due 4/15/23		Baa3		500		509

Total Corporate Obligations						70,492

Total Long-Term Investments—98.5% (cost $133,438)						139,748


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $938, collateralized by FNMA, 3.250%, due 12/27/32		Aaa		938		938

Total Repurchase Agreement—0.7% (cost $938)						938

Total Investments—99.2% (cost $134,376)						140,686
Cash and other assets, less liabilities—0.8%						1,091

Net assets—100.0%					$	141,777

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. These holdings represent 0.75% of the net assets at December 31, 2012.

* = Non-income producing securities

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 0.65% of the Fund’s net assets at December 31, 2012.

ø = Moody’s withdrew its rating as of July 29, 2011. The rating shown represents the last issued. The bond is currently not rated by a NRSRO.

See accompanying Notes to Portfolio of Investments.

92 Annual Report

December 31, 2012

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

LOW DURATION FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Low Duration Fund posted a 2.80% increase (Class N shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Bank of America Merrill Lynch 1-Year Treasury Note Index (net), increased by 0.24%.

Several factors contributed to the outperformance of the William Blair Low Duration Fund versus its benchmark during 2012. Security selection within the Fund had the largest positive impact on performance, with results particularly strong among the Fund’s mortgage-backed, asset-backed, and corporate securities. In the mortgage-backed sector, the Fund’s emphasis on higher-coupon pools comprised of low loan balance borrowers continued to add value relative to comparable duration alternatives. The Fund’s asset-backed security positions were also a source of value, as the Fund’s holdings generated incremental income throughout the year. The Fund benefitted from several security selection themes in the corporate sector, including its overweight of U.S. banks and financial services and positioning within investment-grade industrials. Finally, sector positioning contributed to performance, as the Fund eschewed nominal fixed-rate Treasuries in favor of mortgage-backed securities, asset-backed securities, and corporate bonds.

Some factors detracted from the William Blair Low Duration Fund’s performance on a relative basis during 2012. The Fund held some floating-rate instruments in its effort to protect against a rise in interest rate rates. However, floating-rate instruments lagged fixed-rate alternatives during the year, as the interest rate environment was fairly benign. The Fund’s cash holdings detracted from performance as bonds posted solid performance. We attempt to minimize the amount of cash in the Fund at any time and to keep the Fund fully invested.

We believe that the threat of any rapid rise in interest rates is subdued. The Federal Open Market Committee’s (FOMC’s) stance towards monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining interest rates at low levels until the unemployment rate declines below 6.5%.

December 31, 2012

William Blair Funds 93

Low Duration Fund

Performance Highlights (Unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			Since Inception(a)
Class N		2.80	%		2.13	%		1.87	%
Class I		2.96			2.28			2.02
Bank of America Merrill Lynch 1-Year U.S. Treasury Note Index		0.24			0.54			0.48

(a)

For the period from December 1, 2009 (Commencement of Operations) to December 31, 2012.

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

Sector Diversification (Unaudited)

LOGO

The sector diversification shown is based on the total investments.

94 Annual Report

December 31, 2012

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—67.4%*
U.S. Treasury Inflation Indexed Notes/Bonds—2.9%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	3,728	$	4,333
U.S. Treasury Inflation Indexed Note, 1.625%, due 1/15/18		3,478		4,034

Total U.S. Treasury Inflation Indexed Notes/Bonds				8,367

Government National Mortgage Association (GNMA)—1.1%
#002584, 6.000%, due 4/20/13		3		3
#623159, 5.000%, due 11/15/13		26		28
#628400, 6.000%, due 11/15/13		43		44
#002682, 6.500%, due 11/20/13		13		14
#623182, 5.000%, due 12/15/13		36		39
#781010, 6.500%, due 4/15/14		31		32
#002761, 6.000%, due 5/20/14		21		23
#002787, 5.500%, due 7/20/14		3		3
#781275, 6.000%, due 10/15/14		77		80
GNR 2011-24 VA, 3.500%, due 2/20/16		1,242		1,305
#561031, 5.500%, due 9/15/16		196		212
#003180, 6.000%, due 1/20/17		30		33
#781567, 5.000%, due 2/15/18		72		77
#606406, 5.000%, due 4/15/18		99		109
#003438, 4.500%, due 9/20/18		179		196
#003465, 4.500%, due 11/20/18		60		65
#004430, 4.500%, due 5/20/24		895		977

Total GNMA Mortgage Obligations				3,240

Federal Home Loan Mortgage Corp. (FHLMC)—16.9%
#B18053, 5.000%, due 3/1/15		34		35
#G11885, 5.000%, due 1/1/16		119		127
#E86134, 5.000%, due 11/1/16		126		135
#G12631, 5.500%, due 4/1/17		259		278
#G13127, 4.500%, due 4/1/18		74		78
#E95355, 5.000%, due 4/1/18		273		294
#G11606, 4.500%, due 5/1/18		29		30
#E96700, 5.000%, due 5/1/18		738		794
#E96962, 4.000%, due 6/1/18		123		133
#E01418, 4.000%, due 7/1/18		28		30
#E01411, 5.000%, due 7/1/18		143		153
#E01424, 4.000%, due 8/1/18		14		15
#E99160, 4.500%, due 9/1/18		139		152
#E99582, 5.000%, due 9/1/18		34		37
#E99659, 4.500%, due 10/1/18		192		209
#E01488, 5.000%, due 10/1/18		312		334
#E99895, 5.000%, due 10/1/18		637		685
#B11386, 5.000%, due 12/1/18		135		145
#B11362, 5.500%, due 12/1/18		20		22
#G13367, 5.500%, due 12/1/18		478		515
#E01545, 5.000%, due 1/1/19		169		181
#B12826, 4.500%, due 3/1/19		818		880
#G11766, 5.000%, due 3/1/19		119		128
#B13051, 4.500%, due 4/1/19		101		110
#B13143, 4.500%, due 4/1/19		495		539
#B14961, 4.500%, due 6/1/19		100		109
#B15141, 4.500%, due 6/1/19		107		114
#G11596, 5.500%, due 8/1/19		165		179
#G11605, 5.500%, due 9/1/19		79		86
#B17142, 4.500%, due 11/1/19		1,247		1,355
#B17161, 4.500%, due 11/1/19		36		39

*U.S. Government and U.S. Government Agency—67.4%—(continued)*
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#G18045, 5.000%, due 3/1/20	$	133	$	144
#B19078, 5.000%, due 4/1/20		97		105
#G18048, 5.000%, due 4/1/20		92		99
#G11697, 5.500%, due 4/1/20		1,308		1,423
#J08152, 5.000%, due 5/1/20		105		113
#J02537, 5.000%, due 9/1/20		83		90
#G12394, 5.000%, due 5/1/21		171		184
#G13296, 5.000%, due 5/1/21		459		494
#G12113, 5.500%, due 5/1/21		234		255
#G12286, 5.000%, due 7/1/21		91		98
#G12432, 5.000%, due 12/1/21		77		83
#E02322, 5.500%, due 5/1/22		67		73
#J06484, 5.500%, due 11/1/22		525		571
#J06871, 5.500%, due 1/1/23		214		233
#J08703, 5.500%, due 9/1/23		91		99
#C00351, 8.000%, due 7/1/24		108		129
#G13695, 4.000%, due 9/1/24		1,530		1,661
#G00363, 8.000%, due 6/1/25		146		176
#J12853, 4.000%, due 8/1/25		224		243
#C80329, 8.000%, due 8/1/25		31		38
#J13022, 4.000%, due 9/1/25		2,837		3,080
#J14491, 4.000%, due 2/1/26		7,617		8,357
#G14150, 4.500%, due 4/1/26		3,677		4,009
#E02912, 5.000%, due 6/1/26		1,183		1,278
#J16051, 4.500%, due 7/1/26		4,488		4,893
#J19032, 3.500%, due 5/1/27		1,658		1,798
#G04053, 5.500%, due 3/1/38		3,194		3,581
#G04424, 6.000%, due 6/1/38		247		273
#G04778, 6.000%, due 7/1/38		225		250
#A81372, 6.000%, due 8/1/38		94		103
#G04544, 6.000%, due 8/1/38		1,446		1,589
#G04687, 6.000%, due 9/1/38		331		365
#G04745, 6.000%, due 9/1/38		180		199
#A81799, 6.500%, due 9/1/38		1,031		1,171
#G06017, 5.500%, due 6/1/40		2,785		3,123

Total FHLMC Mortgage Obligations				48,301

Federal National Mortgage Association (FNMA)—46.5%
#679220, 6.000%, due 12/1/14		14		15
#256224, 5.500%, due 4/1/16		22		24
#254181, 5.000%, due 1/1/17		68		74
#256559, 5.500%, due 1/1/17		12		13
#256606, 5.500%, due 2/1/17		16		17
#256646, 5.500%, due 3/1/17		13		14
#545862, 5.000%, due 8/1/17		68		74
#545898, 5.500%, due 9/1/17		369		397
#545899, 5.500%, due 9/1/17		413		445
#254510, 5.000%, due 11/1/17		63		68
#555029, 5.000%, due 11/1/17		50		55
#254545, 5.000%, due 12/1/17		28		30
#254590, 5.000%, due 1/1/18		32		34
#257067, 5.000%, due 1/1/18		72		78
#663692, 5.000%, due 1/1/18		154		167
#674713, 5.000%, due 1/1/18		12		13
#679305, 5.000%, due 1/1/18		56		60
#254591, 5.500%, due 1/1/18		281		303
#678938, 5.500%, due 2/1/18		28		30
#683100, 5.500%, due 2/1/18		366		395
#254684, 5.000%, due 3/1/18		20		21

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 95

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—67.4%—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#675717, 5.000%, due 3/1/18	$	237	$	258
#681361, 5.000%, due 3/1/18		86		94
#656564, 5.000%, due 4/1/18		1,343		1,459
#696677, 5.000%, due 4/1/18		87		95
#702888, 5.000%, due 4/1/18		138		150
#695838, 5.500%, due 4/1/18		84		90
#254721, 5.000%, due 5/1/18		221		240
#697593, 5.000%, due 5/1/18		218		234
#702332, 5.000%, due 5/1/18		47		51
#704049, 5.500%, due 5/1/18		832		895
#735357, 5.500%, due 5/1/18		1,164		1,253
#656573, 5.000%, due 6/1/18		222		245
#709838, 5.000%, due 6/1/18		2,760		3,008
#709848, 5.000%, due 6/1/18		196		216
#728715, 5.000%, due 7/1/18		329		359
#735003, 5.500%, due 7/1/18		1,250		1,346
#711991, 5.000%, due 8/1/18		180		199
#190341, 5.000%, due 9/1/18		51		56
#743183, 5.000%, due 10/1/18		81		89
#555872, 5.000%, due 11/1/18		197		214
#749596, 5.000%, due 11/1/18		288		317
#745237, 5.000%, due 12/1/18		58		63
#753866, 6.000%, due 12/1/18		378		416
#761246, 5.000%, due 1/1/19		406		448
#761267, 4.500%, due 2/1/19		660		727
#255079, 5.000%, due 2/1/19		51		56
#766059, 5.500%, due 2/1/19		284		311
#766276, 5.000%, due 3/1/19		431		471
#742086, 4.500%, due 4/1/19		2,424		2,671
#779363, 5.000%, due 6/1/19		81		89
#785259, 5.000%, due 8/1/19		344		376
#788424, 5.500%, due 9/1/19		83		91
#725953, 5.000%, due 10/1/19		102		112
#735401, 5.500%, due 3/1/20		233		251
#357865, 5.000%, due 7/1/20		241		263
#357978, 5.000%, due 9/1/20		239		263
#745735, 5.000%, due 3/1/21		757		827
#879607, 5.500%, due 4/1/21		121		133
#831497, 6.000%, due 4/1/21		455		501
#880993, 6.000%, due 1/1/22		32		36
#972934, 5.500%, due 2/1/23		375		406
#889342, 5.000%, due 3/1/23		146		159
#982878, 4.500%, due 5/1/23		595		655
#254908, 5.000%, due 9/1/23		68		74
#AE0011, 5.500%, due 9/1/23		200		216
#255165, 4.500%, due 3/1/24		97		106
#934808, 4.500%, due 3/1/24		298		325
#AA4519, 4.500%, due 3/1/24		2,069		2,280
#AA2922, 4.000%, due 4/1/24		1,103		1,215
#AA5028, 4.500%, due 4/1/24		406		447
#190988, 9.000%, due 6/1/24		164		191
#993231, 4.000%, due 7/1/24		1,402		1,544
#AC1520, 4.000%, due 9/1/24		167		183
#AC3674, 4.500%, due 10/1/24		1,865		2,054
#AC5124, 4.000%, due 11/1/24		1,256		1,383
#AC6600, 4.500%, due 11/1/24		90		99
#AC6257, 4.000%, due 12/1/24		1,246		1,372
#AC8857, 4.500%, due 12/1/24		81		88
#AC9560, 5.000%, due 1/1/25		4,072		4,485
Issuer	NRSRO Rating (unaudited)		Principal Amount		Value
Federal National Mortgage Association (FNMA)—(continued)
#932449, 4.000%, due 2/1/25			$	498	$	548
#932629, 4.000%, due 3/1/25				544		599
#AD0855, 4.000%, due 3/1/25				411		451
#932723, 4.000%, due 4/1/25				600		661
#AD4073, 4.000%, due 5/1/25				206		227
#935995, 4.000%, due 6/1/25				202		222
#AD4677, 4.000%, due 6/1/25				2,059		2,267
#AD8164, 4.000%, due 8/1/25				4,363		4,804
#AE1176, 4.000%, due 8/1/25				835		920
#AB1459, 4.000%, due 9/1/25				413		454
#AD8190, 4.000%, due 9/1/25				1,856		2,033
#AH2671, 4.000%, due 1/1/26				1,559		1,717
#890329, 4.000%, due 4/1/26				3,489		3,822
#AI4856, 4.500%, due 6/1/26				3,325		3,664
#AI9811, 4.500%, due 8/1/26				2,869		3,161
#AH9564, 3.500%, due 9/1/26				4,647		5,056
#AB3497, 4.000%, due 9/1/26				2,045		2,240
#AB3608, 3.500%, due 10/1/26				4,735		5,152
#AI7363, 3.500%, due 10/1/26				1,208		1,314
#AJ2322, 3.500%, due 10/1/26				4,162		4,528
#AB3975, 3.500%, due 12/1/26				1,662		1,808
#AJ8149, 3.500%, due 12/1/26				3,362		3,657
#AJ7724, 4.000%, due 12/1/26				2,676		2,946
#AK0498, 3.500%, due 1/1/27				897		976
#AK2768, 3.500%, due 3/1/27				2,876		3,129
#AK7384, 4.000%, due 3/1/27				3,718		4,094
#AB4818, 4.000%, due 4/1/27				2,810		3,095
#AL2223, 3.000%, due 6/1/27				3,151		3,385
#AP0446, 3.500%, due 7/1/27				7,201		7,835
#AP0462, 3.500%, due 7/1/27				1,138		1,238
#AL2590, 4.000%, due 7/1/27				6,814		7,503
#AQ8404, 3.000%, due 12/1/27				3,112		3,344
#809926, 5.500%, due 2/1/35				237		269
#829306, 6.000%, due 9/1/35				144		162
#928574, 6.000%, due 7/1/37				282		315
#889385, 6.000%, due 2/1/38				1,750		1,963
#975649, 6.000%, due 7/1/38				381		417
#935532, 4.500%, due 8/1/39				108		122
#AC6651, 4.500%, due 12/1/39				136		154
#AL0913, 6.000%, due 7/1/41				4,065		4,529

Total FNMA Mortgage Obligations						133,363


*Asset-Backed Securities—10.9%*
Mercedes-Benz Auto Receivables Trust, 2009-1, Tranche A3, 1.670%, 1/15/14		AAA		19		19
Honda Auto Receivables Owner Trust, 2010-2, Tranche A3, 1.340%, 3/18/14		Aaa		17		17
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		883		887
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/14		AAA		30		30
Ford Credit Auto Owner Trust, 2010-A, Tranche A3, 1.320%, 6/15/14		AAA		50		50

See accompanying Notes to Portfolio of Investments.

96 Annual Report

December 31, 2012

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Asset-Backed Securities—10.9%—(continued)*
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		Aaa	$	236	$	236
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.359%, 1/15/15, VRN		AAA		2,300		2,301
CarMax Auto Owner Trust, 2012-1, Tranche A2, 0.590%, 3/16/15		AAA		675		676
CNH Equipment Trust, 2010-C, Tranche A3, 1.170%, 5/15/15		AAA		194		195
Harley-Davidson Motorcycle Trust, 2011-2, Tranche A2, 0.710%, 5/15/15		Aaa		863		864
FPL Recovery Funding LLC, 2007-A, Tranche A2, 5.044%, 8/1/15		AAA		354		359
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.509%, 9/15/15, VRN		AAA		2,215		2,217
Chase Issuance Trust, 2008-A13, Tranche A13, 1.808%, 9/15/15, VRN		AAA		100		101
Discover Card Master Trust I, 2010-A1, Tranche A1, 0.859%, 9/15/15, VRN		Aaa		447		448
Honda Auto Receivables Owner Trust, 2012-1, Tranche A3, 0.770%, 1/15/16		AAA		1,000		1,005
Ford Credit Floorplan Master Owner Trust, 2011-1, Tranche A2, 0.809%, 2/15/16, VRN		AAA		1,250		1,255
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa		2,350		2,556
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		1,352		1,456
CNH Equipment Trust, 2011-B, Tranche A3, 0.910%, 8/15/16		AAA		700		703
Discover Card Master Trust, 2011-A1, Tranche A1, 0.559%, 8/15/16, VRN		Aaa		1,400		1,404
Bank of America Credit Card Trust, 2007-A6, Tranche A6, 0.269%, 9/15/16, VRN		AAA		20		20
Enterprise Fleet Financing LLC—144A, 2011-2, Tranche A2, 1.430%, 10/20/16		AAA		1,236		1,239
GE Capital Credit Card Master Note Trust, 2011-1, Tranche A, 0.759%, 1/15/17, VRN		Aaa		500		503

*Asset-Backed Securities—10.9%—(continued)*
GE Dealer Floorplan Master Note Trust, 2012-1, Tranche A, 0.781%, 2/20/17, VRN		Aaa	$	1,250	$	1, 256
Bank of America Credit Card Trust, 2007-A15, Tranche A15, 0.559%, 4/17/17, VRN		AAA		100		100
Citibank Credit Card Issuance Trust, 2008-A6, Tranche A6, 1.411%, 5/22/17, VRN		AAA		200		205
Discover Card Master Trust, 2010-A2, Tranche A2, 0.789%, 3/15/18, VRN		AAA		350		355
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.959%, 8/15/18, VRN		Aaa		2,000		2,081
Capital One Multi-Asset Execution Trust, 2007-A2, Tranche A2, 0.289%, 12/16/19, VRN		AAA		215		214
MBNA Credit Card Master Note Trust, 2004-A3, Tranche A3, 0.469%, 8/16/21, VRN		AAA		475		471
SLM Student Loan Trust, 2008-5, Tranche A4, 2.015%, 7/25/23, VRN		Aaa		4,000		4,222
SLM Student Loan Trust—144A, 2011-A, Tranche A3, 2.709%, 1/15/43, VRN		AAA		2,000		2,085

Total Asset-Backed Securities						31,105


*Corporate Obligations—12.9%*
JPMorgan Chase & Co., 1.116%, due 1/24/14, VRN		A+		1,100		1,107
Morgan Stanley, 1.916%, due 1/24/14, VRN		A		1,000		1,007
Bank of America Corporation, 1.733%, due 1/30/14, VRN		A		1,000		1,008
Citigroup, Inc., 1.290%, due 4/1/14, VRN		A		1,000		1,001
Morgan Stanley, 6.000%, due 5/13/14		A		1,300		1,377
The Goldman Sachs Group, Inc., 0.843%, due 1/12/15, VRN		A		1,000		986
General Dynamics Corporation, 1.375%, due 1/15/15		A		1,325		1,346
The Goldman Sachs Group, Inc., 5.125%, due 1/15/15		A		1,000		1,074
AT&T, Inc., 0.875%, due 2/13/15		A2		1,000		1,005
Wells Fargo & Co., 1.250%, due 2/13/15		AA-		2,250		2,271
Toyota Motor Credit Corporation, 1.000%, due 2/17/15		AA-		1,000		1,007
The Bank of New York Mellon Corporation, 1.200%, due 2/20/15		Aa3		1,000		1,011
American International Group, Inc., 3.000%, due 3/20/15		A-		1,150		1,197
JPMorgan Chase & Co., 1.875%, due 3/20/15		A+		1,525		1,552
Bank of America Corporation, 4.500%, due 4/1/15		A		2,000		2,132
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A		800		834

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 97

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Corporate Obligations—12.9%—(continued)*
Citigroup, Inc., 4.700%, due 5/29/15		A	$	1,300	$	1,400
John Deere Capital Corporation, 0.950%, due 6/29/15		A		1,000		1,006
General Electric Capital Corporation, 1.625%, due 7/2/15		AA+		1,650		1,677
Anheuser-Busch InBev Worldwide, Inc., 0.800%, due 7/15/15		A		300		301
Royal Bank of Scotland Group plc, 2.550%, due 9/18/15		A		3,000		3,070
AbbVie, Inc.—144A, 1.200%, due 11/6/15		A		1,250		1,258
Capital One Financial Corporation, 1.000%, due 11/6/15		A-		3,000		2,990
American Express Centurion Bank, 0.875%, due 11/13/15		A+		1,000		999
Volkswagen International Finance N.V.—144A, 1.150%, due 11/20/15		A-		1,500		1,502
AT&T, Inc., 0.800%, due 12/1/15		A2		2,000		2,000
McKesson Corporation, 0.950%, due 12/4/15		A-		1,000		1,001

Total Corporate Obligations						37,119

Total Long-Term Investments—91.2% (cost $259,259)						261,495

Total Investments—91.2% (cost $259,259)						261,495
Cash and other assets, less liabilities—8.8%						25,335

Net assets—100.0%					$	286,830

VRN = Variable Rate Note

See accompanying Notes to Portfolio of Investments.

98 Annual Report

December 31, 2012

LOGO

Christopher T. Vincent

LOGO

Kathleen M. Lynch

READY RESERVES FUND

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Ready Reserves Fund posted a 0.01% return (Class N shares) for the year ended December 31, 2012. The Fund’s benchmark, the AAAm Rated Money Market Funds Average, also posted a 0.01% return.

The William Blair Ready Reserves Fund is managed with a focus on liquidity, quality and yield. The Fund manages overnight liquidity and one week liquidity in excess of the SEC’s Rule 2a-7 mandate, which requires 10% and 30% of total assets to be convertible into cash in one and five business days, respectively. We favor overnight repurchase agreements as these instruments are highly liquid and are backed by Treasuries, government agency debentures and government agency mortgage-backed securities. Furthermore, the offered yields on these instruments, although volatile, tend to be more attractive than other longer dated money market eligible securities. The Fund is also invested in individual securities such as Treasuries, government agency discount notes and bonds as well as high-quality corporate bonds and commercial paper. The Fund continues to maintain a relatively short average maturity. As of December 31, 2012, the Fund’s average maturity was 31 days, shorter than the maximum allowable average maturity of 60 days as specified by the SEC’s Rule 2a-7.

The Federal Open Market Committee’s (FOMC’s) position on monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining interest rates at low levels until the unemployment rate declines below 6.5%. As such, the target Fed Funds rate remains unchanged in the range of 0-0.25%, where it has been since December 2008. Therefore, we expect to continue to navigate through low interest rates as we believe that there is minimal probability that there will be a shift in monetary policy in the near-term. These conditions have a direct impact on yields of money market funds. Due to the extended low interest rate environment, many money market funds continue to waive fees in order to offer a positive return.

Our expectations for limited economic growth in the short to intermediate time frame is supported by our belief that unemployment levels are likely to remain high and the real estate market is likely to remain depressed. That said, we do not believe that the economy is at imminent risk of a “double-dip” recession.

On the regulatory front, money market fund reform continues to be aggressively debated. In August 2012, SEC Chairman Mary Schapiro announced that the SEC would not vote on money market fund reform proposals due to a lack of support from a majority of the SEC commissioners. Chairman Schapiro urged other policymakers, including the Financial Stability Oversight Council (FSOC), to consider addressing money market fund issues. In response to Chairman Schapiro’s failed attempt to implement additional money market fund reform, FSOC, under the authority of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), put forth several reform proposals and requested comments from various market participants. Money market fund sponsors and investors have been extremely outspoken against additional reform. Participants are anxious for a resolution but the timing is unclear.

December 31, 2012

William Blair Funds 99

Ready Reserves Fund

Performance Highlights (Unaudited)

The Fund’s 7 day yield on December 31, 2012 was 0.01%.

Average Annual Total Returns—Class N Shares year ended December 31, 2012.


	1 year			3 year			5 year			10 year
Class N		0.01	%		0.01	%		0.47	%		1.55	%
AAA Rated Money Market Funds		0.01			0.02			0.49			1.52
30 Day Treasury Bills		0.05			0.08			0.33			1.60

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

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

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

LOGO

The sector diversification shown is based on the total Investments.

100 Annual Report

December 31, 2012

Ready Reserves Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Amortized Cost

*U.S. Government and U.S. Government Agency—7.6%*
Federal Home Loan Mortgage Corp. (FHLMC)—0.9%
Federal Home Loan Mortgage Corporation, 0.750%-4.500%, 1/9/13-6/12/13	$	14,041	$	14,076

Total Federal Home Loan Mortgage Corp. (FHLMC)				14,076

Federal National Mortgage Association (FNMA)—3.7%
Federal National Mortgage Association, 0.500%-4.000%, 2/12/13-9/17/13		55,790		56,047

Total Federal National Mortgage Association (FNMA)				56,047

U.S. Treasury—3.0%
U.S. Treasury Bill, 0.100%-0.110%, 5/30/13-6/6/13		30,000		29,987
U.S. Treasury Note, 0.625%-3.875%, 1/31/13-5/15/13		15,000		15,088

Total U.S. Treasury				45,075


*Corporate Notes—5.9%*
Boeing Capital Corporation, 5.800%, 1/15/13		15,613		15,645
Boeing Co. (The), 5.125%, 2/15/13		1,975		1,987
Caterpillar Financial Services Corporation, 2.000%-4.900%, 2/8/13-8/15/13		13,203		13,305
General Electric Capital Corporation, 1.875%-5.450%, 1/15/13-9/16/13		11,949		12,063
International Business Machines Corporation, 1.000%-2.100%, 5/6/13-8/5/13		16,132		16,213
John Deere Capital Corporation, 1.875%-5.100%, 1/15/13-9/9/13		12,410		12,625
Merck & Co., Inc., 4.375%, 2/15/13		2,000		2,010
Oracle Corporation, 4.950%, 4/15/13		300		304
PepsiCo, Inc., 4.650%, 2/15/13		6,940		6,977
Praxair, Inc., 3.950%, 6/1/13		775		787
Wal-Mart Stores, Inc., 4.250%-4.550%, 4/15/13-5/1/13		7,506		7,593

Total Corporate Notes				89,509


*Commercial Paper—64.9%*
Abbott Laboratories, 0.090%, 1/3/13		11,700		11,700
American Honda Finance Corporation, 0.120%-0.150%, 1/7/13-1/25/13		51,000		50,997
Caterpillar Financial Services Corporation, 0.150%-0.190%, 1/14/13-3/25/13		36,020		36,012
Chariot Funding LLC, 0.140%-0.190%, 1/3/13-2/14/13		55,200		55,195
Chevron Corporation, 0.100%-0.120%, 1/8/13-1/14/13		37,000		36,999
Coca-Cola Co., 0.140%-0.200%, 1/9/13-4/17/13		39,000		38,993

*Commercial Paper—(continued)*
Colgate Palmolive Co., 0.080%-0.090%, 1/3/13-1/4/13	$	35,000	$	35,000
ConocoPhillips Qatar Funding, Ltd., 0.150%-0.160%, 1/18/13-3/19/13		40,000		39,993
Deere & Co., 0.130%, 1/15/13		8,924		8,923
Dover Corporation, 0.100%-0.120%, 1/3/13-1/7/13		45,000		45,000
General Electric Capital Corporation, 0.030%-0.090%, 1/2/13-2/22/13		34,000		33,999
Illinois Tool Works, Inc., 0.120%, 1/3/13-1/8/13		25,000		24,999
International Business Machines Corporation, 0.070%, 1/2/13-1/7/13		46,000		46,000
John Deere Credit, Ltd., 0.120%-0.150%, 1/9/13-2/19/13		21,950		21,948
Johnson & Johnson, 0.060%, 1/7/13-1/11/13		35,000		35,000
Kimberly-Clark Corporation, 0.080%-0.100%, 1/7/13-1/14/13		55,700		55,699
Merck & Co., Inc., 0.100%-0.130%, 1/9/13-1/17/13		47,000		46,999
PACCAR Financial Corporation, 0.130%-0.170%, 1/2/13-2/8/13		52,000		51,997
PepsiCo, Inc., 0.050%-0.070%, 1/3/13-1/28/13		17,000		16,999
Pfizer, Inc., 0.070%-0.080%, 1/10/13-1/11/13		20,000		20,000
Praxair, Inc., 0.090%-0.110%, 1/3/13-1/10/13		15,000		15,000
Private Export Funding, 0.110%-0.160%, 1/22/13-1/30/13		22,300		22,298
Procter & Gamble Co. (The), 0.100%-0.160%, 1/17/13-3/7/13		50,000		49,990
Roche Holdings, Inc., 0.100%, 1/7/13-1/15/13		40,000		40,000
Toyota Credit de Puerto Rico Corporation, 0.090%-0.200%, 1/2/13-2/22/13		35,000		34,998
Toyota Motor Credit Corporation, 0.110%, 1/2/13		10,000		10,000
Unilever Capital Corporation, 0.160%-0.330%, 1/17/13-2/4/13		15,000		14,997
Wal-Mart Stores, Inc., 0.090%-0.100%, 1/4/13-2/5/13		44,000		43,996
Walt Disney Co. (The), 0.110%-0.150%, 1/18/13-3/28/13		39,000		38,991

Total Commercial Paper				982,722


*Repurchase Agreements—21.7%*
Bank of America, 0.150% dated 12/31/12, due 1/2/13, repurchase price $65,001, Collateralized by FNMA, 4.000%, due 1/1/42		65,000		65,000
Barclays Capital, 0.200% dated 12/31/12, due 1/2/13, repurchase price $20,000, collateralized by U.S. Treasury Note, 2.125%, due 5/31/15		20,000		20,000

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 101

Ready Reserves Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Amortized Cost

*Repurchase Agreements—(continued)*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $179,305, collateralized by FHLB, 5.500%, due 7/15/36, and FHLMC, 3.720%, due 2/27/32, and FNMA, 3.250%-3.300%, due 8/27/32-12/27/32	$	179,304	$	179,304
Goldman Sachs, 0.250% dated 12/31/12, due 1/2/13, repurchase price $65,001, Collateralized by FNMA, 3.500%-4.000%, due 2/1/18-10/1/40		65,000		65,000

Total Repurchase Agreements				329,304

Total Investments—100.1% (cost $1,516,733)				1,516,733
Liabilities, plus cash and other assets—(0.1)%				(1,403	)

Net assets—100.0%			$	1,515,330

Portfolio Weighted Average Maturity				31 days

VRN = Variable Rate Note

See accompanying Notes to Portfolio of Investments.

102 Annual Report

December 31, 2012

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Growth Fund		Large Cap Growth Fund			Small Cap Growth Fund		Mid Cap Growth Fund
*Assets*
Investments in securities, at cost	$	593,406	$	22,348		$	356,134	$	343,064

Investments in securities, at value	$	717,156	$	28,368		$	396,044	$	369,788
Receivable for securities sold		3,370		—			5,294		1,039
Receivable for fund shares sold		892		77			373		429
Receivable from Advisor		—		5			—		9
Dividend and interest receivable		183		14			—		115

Total assets		721,601		28,464			401,711		371,380
*Liabilities*
Payable for investment securities purchased		3,626		—			2,850		—
Payable for fund shares redeemed		1,048		—			1,250		760
Management fee payable		433		19			535		296
Distribution and shareholder administration fees payable		48		1			28		9
Other payables and accrued expenses		201		31			235		80

Total liabilities		5,356		51			4,898		1,145

Net Assets	$	716,245	$	28,413		$	396,813	$	370,235

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest		58		3			16		30
Capital paid in excess of par value		580,540		23,473			356,267		344,328
Accumulated net investment income (loss)		8		—			—		—
Accumulated net realized gain (loss)		11,889		(1,083	)		620		(847	)
Net unrealized appreciation (depreciation) of investments and foreign currencies . . . . . . . . . . . . . . . . . . . . ..		123,750		6,020			39,910		26,724

Net Assets		716,245		28,413			396,813		370,235


Class N Shares
Net Assets	$	248,121	$	4,238		$	130,382	$	40,940
Shares Outstanding		20,593,188		520,825			5,507,405		3,235,187
Net Asset Value Per Share	$	12.05	$	8.14		$	23.68	$	12.65
Class I Shares
Net Assets	$	468,124	$	24,175		$	266,431	$	329,295
Shares Outstanding		37,199,616		2,896,680			10,806,479		25,500,033
Net Asset Value Per Share	$	12.58	$	8.35		$	24.66	$	12.91

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 103

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Growth Fund		Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
*Investment income*
Dividends	$	7,344	$	271		$	2,741		$	4,019
Less foreign tax withheld		—		(2	)		(10	)		—
Interest		11		—			11			9

Total income		7,355		269			2,742			4,028
*Expenses*
Investment advisory fees		4,727		219			5,538			3,046
Distribution fees		521		10			416			103
Custodian fees		21		32			39			38
Transfer agent fees		162		11			112			38
Sub-transfer agent fees
Class N		282		5			214			61
Class I		319		10			491			137
Professional fees		58		22			54			40
Registration fees		35		32			35			32
Shareholder reporting fees		48		4			276			64
Trustee fees		31		1			32			10
Other expenses		28		5			27			9

Total expenses before waiver and reimbursements		6,232		351			7,234			3,578
Expenses reimbursed to (waived or absorbed by) the Advisor		—		(81	)		(508	)		(34	)

Net expenses		6,232		270			6,726			3,544

Net investment income (loss)		1,123		(1	)		(3,984	)		484
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments in securities		29,181		2,407			71,506			7,689

Total net realized gain (loss)		29,181		2,407			71,506			7,689
Change in net unrealized appreciation (depreciation) of:
Investments		60,237		2,131			18,864			15,618

Change in net unrealized appreciation (depreciation)		60,237		2,131			18,864			15,618

Net increase (decrease) in net assets resulting from operations	$	90,541	$	4,537		$	86,386		$	23,791

See accompanying Notes to Financial Statements.

104 Annual Report

December 31, 2012

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	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)	$	1,123		$	(886	)	$	(1	)	$	21		$	(3,984	)	$	(7,875	)	$	484		$	(573	)
Net realized gain (loss) on investments		29,181			27,540			2,407			3,351			71,506			27,224			7,689			13,458
Change in net unrealized appreciation (depreciation) on investments		60,237			(38,002	)		2,131			(4,038	)		18,864			(110,707	)		15,618			(12,060	)

Net increase (decrease) in net assets resulting from operations		90,541			(11,348	)		4,537			(666	)		86,386			(91,358	)		23,791			825
*Distributions to shareholders from*
Net investment income
Class N		(10	)		—			—			—			—			—			—			—
Class I		(1,133	)		(329	)		—			(37	)		—			—			(488	)		—
Net realized gain
Class N		(7,281	)		(5,882	)		—			—			(564	)		—			(905	)		(2,378	)
Class I		(12,939	)		(10,199	)		—			—			(1,107	)		—			(7,042	)		(8,679	)

Total Distributions		(21,363	)		(16,410	)		—			(37	)		(1,671	)		—			(8,435	)		(11,057	)
*Capital stock transactions*
Net proceeds from sale of shares		178,095			134,130			3,967			4,139			93,413			123,447			273,232			88,823
Shares issued in reinvestment of income dividends and capital gain distributions		19,820			14,916			—			32			1,627			—			8,342			10,898
Less cost of shares redeemed		(117,590	)		(130,159	)		(5,040	)		(10,554	)		(337,680	)		(368,940	)		(72,449	)		(44,983	)

Net increase (decrease) in net assets resulting from capital share transactions		80,325			18,887			(1,073	)		(6,383	)		(242,640	)		(245,493	)		209,125			54,738

Increase (decrease) in net assets		149,503			(8,871	)		3,464			(7,086	)		(157,925	)		(336,851	)		224,481			44,506
*Net assets*
Beginning of year		566,742			575,613			24,949			32,035			554,738			891,589			145,754			101,248

End of year	$	716,245		$	566,742		$	28,413		$	24,949		$	396,813		$	554,738		$	370,235		$	145,754

Accumulated net investment income (loss) at the end of the year	$	8		$	—		$	—		$	—		$	—		$	—		$	—		$	—

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 105

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Small-Mid Cap Growth Fund		Global Leaders Fund			International Growth Fund
*Assets*
Investments in securities, at cost	$	348,611	$	55,268		$	3,005,869
Investment in affiliate, at cost		—		—			22,022

Investments in securities, at value	$	387,808	$	63,565		$	3,641,031
Investment in affiliate, at value		—		—			22,022
Cash		—		—			886
Foreign currency, at value (Cost $—; $—; $3,171)		—		—			3,202
Receivable for securities sold		888		7			5,294
Receivable for fund shares sold		8,495		10,023			16,250
Receivable from Advisor		9		12			—
Dividend and interest receivable		—		42			4,308

Total assets		397,200		73,649			3,692,993
*Liabilities*
Payable for investment securities purchased		4,813		6,496			8,833
Payable for fund shares redeemed		294		39			6,785
Management fee payable		433		49			3,103
Distribution and shareholder administration fees payable		9		8			268
Other payables and accrued expenses		291		63			1,371

Total liabilities		5,840		6,655			20,360

Net Assets	$	391,360	$	66,994		$	3,672,633

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	27	$	7		$	161
Capital paid in excess of par value		348,572		72,738			4,173,696
Accumulated net investment income (loss)		—		(7	)		(14,690	)
Accumulated net realized gain (loss)		3,564		(14,041	)		(1,122,026	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		39,197		8,297			635,492

Net Assets	$	391,360	$	66,994		$	3,672,633


Class N Shares
Net Assets	$	42,015	$	5,215		$	1,269,736
Shares Outstanding		2,956,963		549,967			56,608,236
Net Asset Value Per Share	$	14.21	$	9.47		$	22.43
Class I Shares
Net Assets	$	349,345	$	45,757		$	2,402,897
Shares Outstanding		24,001,491		4,828,543			104,730,039
Net Asset Value Per Share	$	14.55	$	9.47		$	22.94

See accompanying Notes to Financial Statements.

106 Annual Report

December 31, 2012

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Small-Mid Cap Growth Fund			Global Leaders Fund			International Growth Fund
*Investment income*
Dividends	$	5,410		$	947		$	100,432
Less foreign tax withheld		(5	)		(52	)		(7,817	)
Interest		10			1			387

Total income		5,415			896			93,002
*Expenses*
Investment advisory fees		3,462			501			35,031
Distribution fees		114			12			3,160
Shareholder administration fees		—			75			—
Custodian fees		43			72			599
Transfer agent fees		52			19			404
Sub-transfer agent fees
Class N		69			3			1,466
Class I		375			15			1,885
Professional fees		35			41			300
Registration fees		47			42			75
Shareholder reporting fees		44			7			448
Trustee fees		14			2			196
Other expenses		14			6			163

Total expenses before waiver		4,269	��		795			43,727
Expenses reimbursed to (waived or absorbed by) the Advisor		(334	)		(157	)		—

Net expenses		3,935			638			43,727

Net investment income (loss)		1,480			258			49,275
*Realized and unrealized gain (loss)*
Net Realized gain (loss) on transactions from:
Investments in securities		11,592			3,726			89,404
Forward foreign currency contracts		—			—			20,690
Foreign currency transactions		—			(22	)		(4,674	)

Total net realized gain (loss)		11,592			3,704			105,420
Change in net unrealized appreciation (depreciation) of:
Investments		22,741			3,879			578,479
Forward foreign currency contracts		—			—			1,799
Foreign currency translations		—			—			397

Change in net unrealized appreciation (depreciation)		22,741			3,879			580,675

Net increase (decrease) in net assets resulting from operations	$	35,813		$	7,841		$	735,370

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 107

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	Small-Mid Cap Growth Fund						Global Leaders Fund						International Growth Fund
	2012			2011			2012			2011			2012			2011
*Operations*
Net investment income (loss)	$	1,480		$	(1,387	)	$	258		$	225		$	49,275		$	56,294
Net realized gain (loss) on investments, forwards, and foreign currency		11,592			27,339			3,704			4,570			105,420			347,948
Change in net unrealized appreciation (depreciation) on investments, forwards, and foreign currency		22,741			(27,537	)		3,879			(6,320	)		580,675			(971,769	)

Net increase (decrease) in net assets resulting from operations		35,813			(1,585	)		7,841			(1,525	)		735,370			(567,527	)
*Distributions to shareholders from*
Net investment income
Class N		(61	)		—			(15	)		(4	)		(37,353	)		—
Class I		(1,426	)		—			(227	)		(170	)		(74,977	)		(6,046	)
Net realized gain
Class N		(1,028	)		(3,138	)		—			—			—			—
Class I		(8,102	)		(19,875	)		—			—			—			—

Total Distributions		(10,617	)		(23,013	)		(242	)		(174	)		(112,330	)		(6,046	)
*Capital stock transactions*
Net proceeds from sale of shares		188,047			85,339			32,763			3,738			673,026			756,415
Shares issued in reinvestment of income dividends and capital gain distributions		9,387			20,564			234			166			103,180			5,030
Less cost of shares redeemed		(84,867	)		(35,773	)		(16,176	)		(4,508	)		(955,515	)		(2,041,149	)

Net increase (decrease) in net assets resulting from capital share transactions		112,567			70,130			16,821			(604	)		(179,309	)		(1,279,704	)

Increase (decrease) in net assets		137,763			45,532			24,420			(2,303	)		443,731			(1,853,277	)
Net assets
Beginning of year		253,597			208,065			42,574			44,877			3,228,902			5,082,179

End of year	$	391,360		$	253,597		$	66,994		$	42,574		$	3,672,633		$	3,228,902

Accumulated net investment income (loss) at the end of the year	$	—		$	—		$	(7	)	$	(3	)	$	(14,690	)	$	27,949

See accompanying Notes to Financial Statements.

108 Annual Report

December 31, 2012

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	International Equity Fund			International Leaders Fund			International Small Cap Growth Fund
*Assets*
Investments in securities, at cost	$	57,147		$	9,420		$	611,156


Investments in securities, at value	$	69,596		$	10,132		$	716,924
Foreign currency, at value (Cost $63 ; $8 ;$2,085)		63			8			2,086
Receivable for securities sold		843			1			4,361
Receivable for fund shares sold		1			305			774
Receivable from Advisor		4			7			—
Dividend and interest receivable		59			2			401

Total assets		70,566			10,455			724,546
*Liabilities*
Payable for investment securities purchased		—			241			3,141
Payable for fund shares redeemed		2			—			1,064
Payable to custodian		239			—			—
Management fee payable		65			8			605
Distribution and shareholder administration fees payable		1			1			50
Other payables and accrued expenses		75			41			178

Total liabilities		382			291			5,038

Net Assets	$	70,184		$	10,164		$	719,508

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	6		$	1		$	53
Capital paid in excess of par value		150,126			9,558			673,078
Accumulated net investment income (loss)		(126	)		(3	)		(1,792	)
Accumulated net realized gain (loss)		(92,267	)		(104	)		(57,594	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		12,445			712			105,763

Net Assets	$	70,184		$	10,164		$	719,508


Class N Shares
Net Assets	$	5,648		$	542		$	14,771
Shares Outstanding		468,835			50,101			1,097,146
Net Asset Value Per Share	$	12.05		$	10.81		$	13.46
Class I Shares
Net Assets	$	64,536		$	4,336		$	359,557
Shares Outstanding		5,299,357			401,086			26,470,513
Net Asset Value Per Share	$	12.18		$	10.81		$	13.58

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 109

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	International Equity Fund			International Leaders Fund (a)			International Small Cap Growth Fund
*Investment income*
Dividends	$	1,778		$	30		$	16,759
Less foreign tax withheld		(131	)		(1	)		(1,245	)
Interest		1			—			128

Total income		1,648			29			15,642
*Expenses*
Investment advisory fees		763			22			6,995
Distribution fees		16			—			38
Shareholder administration fees		—			2			566
Custodian fees		77			22			201
Transfer agent fees		6			5			38
Sub-transfer agent fee
Class N		7			—			20
Class I		50			—			266
Professional fees		54			27			98
Registration fees		32			4			41
Shareholder reporting fees		—			—			99
Trustee fees		5			—			36
Other expenses		5			1			27

Total expenses before waiver		1,015			83			8,425
Expenses reimbursed to (waived or absorbed by) the Advisor		(166	)		(57	)		—

Net expenses		849			26			8,425

Net investment income (loss)		799			3			7,217
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments in securities		2,124			(104	)		7,787
Forward foreign currency contracts		(46	)		9			1,901
Foreign currency transactions		(37	)		1			(397	)

Total net realized gain (loss)		2,041			(94	)		9,291
Change in net unrealized appreciation (depreciation) of:
Investments		8,566			712			125,451
Forward foreign currency contracts		—			—			311
Foreign currency translations		3			—			231

Change in net unrealized appreciation (depreciation)		8,569			712			125,993

Net increase (decrease) in net assets resulting from operations	$	11,409		$	621		$	142,501

(a)

For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.

See accompanying Notes to Financial Statements.

110 Annual Report

December 31, 2012

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	International Equity Fund						International Leaders Fund			International Small Cap Growth Fund
	2012			2011			2012(a)			2012			2011
*Operations*
Net investment income (loss)	$	799		$	1,890		$	3		$	7,217		$	6,857
Net realized gain (loss) on investments, forwards, and foreign currency		2,041			22,846			(94	)		9,291			60,435
Change in net unrealized appreciation (depreciation) on investments, forwards, and foreign currency		8,569			(36,134	)		712			125,993			(155,577	)

Net increase (decrease) in net assets resulting from operations		11,409			(11,398	)		621			142,501			(88,285	)
*Distributions to shareholders from*
Net investment income
Class N		(172	)		—			—			(274	)		(193	)
Class I		(2,061	)		—			(6	)		(7,774	)		(5,147	)
Class Institutional		—			—			(10	)		(8,146	)		(5,384	)

Total Distributions		(2,233	)		—			(16	)		(16,194	)		(10,724	)
*Capital stock transactions*
Net proceeds from sale of shares		3,288			26,832			9,543			122,084			313,989
Shares issued in reinvestment of income dividends and capital gain distributions		1,945			—			16			14,490			8,514
Less cost of shares redeemed		(19,882	)		(117,832	)		—			(261,594	)		(152,224	)

Net increase (decrease) in net assets resulting from capital share transactions		(14,649	)		(91,000	)		9,559			(125,020	)		170,279
		(14,649	)		(91,000	)		9,559			(125,020	)		170,279

Increase (decrease) in net assets		(5,473	)		(102,398	)		10,164			1,287			71,270
Net assets
Beginning of year		75,657			178,055			—			718,221			646,951

End of year	$	70,184		$	75,657		$	10,164		$	719,508		$	718,221

Accumulated net investment income (loss) at the end of the year	$	(126	)	$	1,379		$	(3	)	$	(1,792	)	$	4,542

(a)	For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 111

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Emerging Markets Growth Fund			Emerging Markets Leaders Fund			Emerging Markets Small Cap Growth Fund
*Assets*
Investments in securities, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	781,190		$	60,490		$	25,817
Investments in affiliate, at cost		23,624			—			—


Investments in securities, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	934,200		$	70,624		$	27,656
Investments in affiliate, at value		23,624			—			—
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		—			—			12
Foreign currency, at value (cost $1,679; $5; $93)		1,680			5			93
Receivable for securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		9,380			—			311
Receivable for fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5,660			13			1,239
Receivable from Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		—			11			25
Dividend and interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		662			40			10

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		975,206			70,693			29,346
*Liabilities*
Payable for investment securities purchased . . . . . . . . . . . . . . . . . . . . .		7,788			1,563			2,214
Payable for fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		242			—			—
Management fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		870			60			14
Distribution and shareholder administration fees payable. . . . . . . . . .		24			3			2
Foreign income tax payable		1,738			—			29
Other payables and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..		307			88			66

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		10,969			1,714			2,325

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	964,237		$	68,979		$	27,021

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . .	$	71		$	8		$	2
Capital paid in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . .		852,556			63,868			25,269
Accumulated net investment income (loss) . . . . . . . . . . . . . . . . . . . . .		(2,280	)		(44	)		(59	)
Accumulated realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		(37,394	)		(4,987	)		(4	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		151,284			10,134			1,813

Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	964,237		$	68,979		$	27,021


Class N Shares
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	16,724		$	249		$	3,016
Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1,248,048			27,027			232,133
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	13.40		$	9.20		$	12.99
Class I Shares
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	144,942		$	25,628		$	8,763
Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		10,733,551			2,791,568			674,405
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	13.50		$	9.18		$	12.99

See accompanying Notes to Financial Statements.

112 Annual Report

December 31, 2012

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Emerging Markets Growth Fund			Emerging Markets Leaders Fund			Emerging Markets Small Cap Growth Fund
*Investment income*
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		24,475			1,364			160
Less foreign tax withheld .		(2,200	)		(113	)		(17	)
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..		208			1			—

Total income		22,483			1,252			143
*Expenses*
Investment advisory fees		10,670			631			78
Distribution fees		44			—			5
Shareholder administration fees		232			37			10
Custodian fees		578			121			105
Transfer agent fees		49			21			7
Sub-transfer agent fee
Class N		15			—			—
Class I		70			1			—
Professional fees		165			71			55
Registration fees		50			52			38
Shareholder reporting fees		72			4			5
Trustee fees		50			4			—
Other expenses		42			12			6

Total expenses before waiver and reimbursements		12,037			954			309
Expenses reimbursed to (waived or absorbed by) the Advisor		—			(198	)		(205	)

Net expenses		12,037			756			104

Net investment income (loss)		10,446			496			39
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments in securities.		(9,098	)		(2,337	)		54
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		(1,371	)		(53	)		(6	)

Total net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		(10,469	)		(2,390	)		48
Change in net unrealized appreciation (depreciation) of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		172,004			12,648			1,856
Foreign currency translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		(1,409	)		45			(25	)

Change in net unrealized appreciation (depreciation)		170,595			12,693			1,831

Net increase (decrease) in net assets resulting from operations		170,572			10,799			1,918

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 113

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	Emerging Markets Growth Fund						Emerging Markets Leaders Fund						Emerging Markets Small Cap Growth Fund
	2012			2011			2012			2011			2012			2011(a)
*Operations*
Net investment income (loss)	$	10,446		$	8,885		$	496		$	701		$	39		$	2
Net realized gain (loss) on investments and foreign currency		(10,469	)		127,536			(2,390	)		112			48			(75	)
Change in net unrealized appreciation (depreciation) on investments, and foreign currency		170,595			(304,105	)		12,693			(20,181	)		1,831			(17	)

Net increase (decrease) in net assets resulting from operations		170,572			(167,684	)		10,799			(19,368	)		1,918			(90	)
*Distributions to shareholders from*
Net investment income
Class N		(88	)		—			(1	)		—			(13	)		—
Class I		(1,209	)		(466	)		(169	)		(126	)		(65	)		—
Class Institutional		(7,965	)		(3,984	)		(303	)		(181	)		—			—
Net realized gain
Class N		—			(2,577	)		—			(3	)		—			—
Class I		—			(18,690	)		—			(1,745	)		—			—
Class Institutional		—			(93,763	)		—			(1,956	)		—			—
Return of capital
Class I		—			—			—			(11	)		—			—
Class Institutional		—			—			—			(14	)		—			—

Total Distributions		(9,262	)		(119,480	)		(473	)		(4,036	)		(78	)		—
*Capital stock transactions*
Net proceeds from sale of shares		260,741			352,369			29,723			19,857			25,035			3,362
Shares issued in reinvestment of income dividends and capital gain distributions		8,174			100,061			413			3,491			52			—
Less cost of shares redeemed		(283,834	)		(597,963	)		(19,305	)		(47,023	)		(3,178	)		—

Net increase (decrease) in net assets resulting from capital share transactions		(14,919	)		(145,533	)		10,831			(23,675	)		21,909			3,362

Increase (decrease) in net assets		146,391			(432,697	)		21,157			(47,079	)		23,749			3,272
*Net assets*
Beginning of year		817,846			1,250,543			47,822			94,901			3,272			—

End of year	$	964,237		$	817,846		$	68,979		$	47,822		$	27,021		$	3,272

Accumulated net investment income (loss) at the end of the year	$	(2,280	)	$	(1,953	)	$	(44	)	$	(14	)	$	(59	)	$	(13	)

(a)

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

See accompanying Notes to Financial Statements.

114 Annual Report

December 31, 2012

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Large Cap Value Fund		Small Cap Value Fund			Mid Cap Value Fund		Small-Mid Cap Value Fund
*Assets*
Investments in securities, at cost	$	3,392	$	209,113		$	3,633	$	2,163


Investments in securities, at value	$	3,800	$	238,250		$	4,107	$	2,407
Cash		56		—			53		—
Receivable for fund shares sold		—		399			—		—
Receivable from Advisor		15		32			9		21
Dividend and interest receivable		5		99			5		2

Total assets		3,876		238,780			4,174		2,430
*Liabilities*
Payable for fund shares redeemed		—		3,162			10		—
Management fee payable		3		220			3		2
Distribution and shareholder administration fees payable		—		9			—		—
Other payables and accrued expenses		28		121			24		36

Total liabilities		31		3,512			37		38

Net Assets	$	3,845	$	235,268		$	4,137	$	2,392

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	—	$	17		$	—	$	—
Capital paid in excess of par value		3,436		206,849			3,652		2,126
Accumulated net investment income (loss)		—		97			1		—
Accumulated net realized gain (loss)		1		(832	)		10		22
Net unrealized appreciation (depreciation) of investments and foreign currencies		408		29,137			474		244

Net Assets	$	3,845	$	235,268		$	4,137	$	2,392


Class N Shares
Net Assets	$	1,416	$	39,084		$	79	$	950
Shares Outstanding		122,651		2,863,527			6,948		84,173
Net Asset Value Per Share	$	11.54	$	13.65		$	11.39	$	11.29
Class I Shares
Net Assets	$	2,429	$	196,184		$	4,058	$	1,442
Shares Outstanding		210,312		14,130,986			356,231		127,705
Net Asset Value Per Share	$	11.55	$	13.88		$	11.39	$	11.29

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 115

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Large Cap Value Fund			Small Cap Value Fund			Mid Cap Value Fund			Small-Mid Cap Value Fund
*Investment income*
Dividends		70			5,041			92			50
Interest		—			4			—			—

Total income		70			5,045			92			50
*Expenses*
Investment advisory fees		26			2,663			45			23
Distribution fees		3			107			—			2
Custodian fees		39			36			36			47
Transfer agent fees		6			46			7			7
Sub-transfer agent fee
Class N		—			66			—			3
Class I		—			198			—			2
Professional fees		24			38			25			24
Registration fees		28			41			29			23
Shareholder reporting fees		3			46			1			—
Trustee fees		—			12			—			—
Other expenses		5			13			8			11

Total expenses before waiver and reimbursements		134			3,266			151			142
Expenses reimbursed to (waived or absorbed by) the Advisor		(101	)		(294	)		(98	)		(112	)

Net expenses		33			2,972			53			30

Net investment income (loss)		37			2,073			39			20
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments in securities		5			6,771			186			93

Total net realized gain (loss)		5			6,771			186			93
Change in net unrealized appreciation (depreciation) of:
Investments		415			19,569			377			150

Change in net unrealized appreciation (depreciation)		415			19,569			377			150

Net increase (decrease) in net assets resulting from operations		457			28,413			602			263

See accompanying Notes to Financial Statements.

116 Annual Report

December 31, 2012

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	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)	$	37		$	7		$	2,073		$	440		$	39		$	46		$	20		$	1
Net realized gain (loss) on investments		5			(4	)		6,771			890			186			40			93			(3	)
Change in net unrealized appreciation (depreciation) on investments		415			(7	)		19,569			(16,890	)		377			(92	)		150			94

Net increase (decrease) in net assets resulting from operations		457			(4	)		28,413			(15,560	)		602			(6	)		263			92
*Distributions to shareholders from*
Net investment income
Class N		(12	)		(3	)		(256	)		(23	)		(1	)		(1	)		(7	)		—
Class I		(25	)		(4	)		(1,734	)		(466	)		(35	)		(47	)		(14	)		—
Net realized gain
Class N		—			—			(164	)		(1,471	)		(3	)		(1	)		(27	)		—
Class I		—			—			(782	)		(6,717	)		(148	)		(50	)		(41	)		—
Return of capital
Class N		—			—			—			(60	)		—			—			—			—
Class I		—			—			—			(273	)		—			—			—			—

Total Distributions		(37	)		(7	)		(2,936	)		(9,010	)		(187	)		(99	)		(89	)		—
*Capital stock transactions*
Net proceeds from sale of shares		957			2,457			47,641			162,792			303			1,698			72			2,064
Shares issued in reinvestment of income dividends and capital gain distributions		15			7			2,750			8,075			158			85			20			—
Less cost of shares redeemed		—			—			(71,998	)		(79,398	)		(1,312	)		(498	)		(30	)		—

Net increase (decrease) in net assets resulting from capital share transactions		972			2,464			(21,607	)		91,469			(851	)		1,285			62			2,064

Increase (decrease) in net assets		1,392			2,453			3,870			66,899			(436	)		1,180			236			2,156
*Net assets*
Beginning of year		2,453			—			231,398			164,499			4,573			3,393			2,156			—

End of year	$	3,845		$	2,453		$	235,268		$	231,398		$	4,137		$	4,573		$	2,392		$	2,156

Accumulated net investment income (loss) at the end of the year	$	—		$	—		$	97		$	25		$	1		$	—		$	—		$	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.

December 31, 2012

William Blair Funds 117

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Bond Fund		Income Fund			Low Duration Fund			Ready Reserves Fund
*Assets*
Investments in securities, at cost	$	272,411	$	134,376		$	259,259		$	1,187,429
Repurchase agreements, at cost		—		—			—			329,304


Investments in securities, at value	$	293,824	$	140,686		$	261,495		$	1,187,429
Repurchase agreements, at value		—		—			—			329,304
Cash		—		6			—			—
Receivable for fund shares sold		733		596			26,188			—
Receivable from Advisor		21		—			20			717
Dividend and interest receivable		2,588		910			896			1,730

Total assets		297,166		142,198			288,599			1,519,180
*Liabilities*
Payable for investment securities purchased		—		—			1,213			3,087
Payable for fund shares redeemed		141		257			30			3
Payable to custodian		—		—			323			—
Management fee payable		71		48			60			286
Distribution and shareholder administration fees payable		28		8			19			409
Shareholder distributions payable		121		44			76			2
Other payables and accrued expenses		63		64			48			63

Total liabilities		424		421			1,769			3,850

Net Assets	$	296,742	$	141,777		$	286,830		$	1,515,330

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest		27		15			29			1,515
Capital paid in excess of par value		273,907		171,215			289,373			1,513,724
Accumulated net investment income (loss)		2		—			—			112
Accumulated net realized gain (loss)		1,393		(35,763	)		(4,808	)		(21	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		21,413		6,310			2,236			—

Net Assets		296,742		141,777			286,830			1,515,330


Class N Shares
Net Assets	$	32,867	$	68,947		$	11,216		$	1,515,330
Shares Outstanding		2,912,746		7,219,490			1,141,105			1,515,330,408
Net Asset Value Per Share	$	11.28	$	9.55		$	9.83		$	1.00
Class I Shares
Net Assets	$	172,836	$	72,830		$	157,213
Shares Outstanding		15,468,274		7,683,605			15,997,262
Net Asset Value Per Share	$	11.17	$	9.48		$	9.83

See accompanying Notes to Financial Statements.

118 Annual Report

December 31, 2012

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Bond Fund			Income Fund		Low Duration Fund			Ready Reserves Fund
*Investment income*
Interest	$	10,566		$	4,277	$	4,030		$	1,915

Total income		10,566			4,277		4,030			1,915
*Expenses*
Investment advisory fees		803			533		583			3,131
Distribution fees		36			85		13			—
Shareholder administration fees		280			—		170			4,579
Custodian fees		59			55		71			43
Transfer agent fees		35			40		27			37
Sub-transfer agent fee
Class N		32			72		2			—
Class I		53			16		4			—
Professional fees		33			16		38			108
Registration fees		44			37		57			22
Shareholder reporting fees		14			17		5			87
Trustee fees		12			6		8			64
Other expenses		15			7		12			56

Total expenses before waiver		1,416			884		990			8,127
Expenses reimbursed to (waived or absorbed by) the Advisor		(162	)		—		(31	)		(6,343	)

Net expenses		1,254			884		959			1,784

Net investment income (loss)		9,312			3,393		3,071			131
*Realized and unrealized gain (loss)*
Net realized gain (loss) on transactions from:
Investments in securities		4,348			2,712		192			—

Total net realized gain (loss)		4,348			2,712		192			—
Change in net unrealized appreciation (depreciation) of:
Investments		8,020			1,352		1,977			—

Change in net unrealized appreciation (depreciation)		8,020			1,352		1,977			—

Net increase (decrease) in net assets resulting from operations	$	21,680		$	7,457	$	5,240		$	131

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 119

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all amounts in thousands)


	Bond Fund						Income Fund						Low Duration Fund						Ready Reserves Fund
	2012			2011			2012			2011			2012			2011			2012			2011
*Operations*
Net investment income (loss)	$	9,312		$	8,820		$	3,393		$	3,627		$	3,071		$	2,586		$	131		$	125
Net realized gain (loss) on investments		4,348			3,325			2,712			2,582			192			59			—			—
Change in net unrealized appreciation (depreciation) on investments		8,020			3,590			1,352			(897	)		1,977			360			—			—

Net increase (decrease) in net assets resulting from operations		21,680			15,735			7,457			5,312			5,240			3,005			131			125
*Distributions to shareholders from*
Net investment income
Class N		(961	)		(229	)		(1,884	)		(1,377	)		(219	)		(152	)		(131	)		(125	)
Class I		(6,754	)		(6,707	)		(2,587	)		(2,800	)		(2,909	)		(2,098	)		—			—
Class Institutional		(3,467	)		(2,764	)		—			—			(2,382	)		(1,853	)		—			—
Net realized gain
Class N		(211	)		(66	)		—			—			—			—			—			—
Class I		(1,126	)		(1,188	)		—			—			—			—			—			—
Class Institutional		(597	)		(577	)		—			—			—			—			—			—

Total Distributions		(13,116	)		(11,531	)		(4,471	)		(4,177	)		(5,510	)		(4,103	)		(131	)		(125	)
*Capital stock transactions*
Net proceeds from sale of shares		82,419			100,839			71,248			34,055			191,001			121,427			867,610			838,997
Shares issued in reinvestment of income dividends and capital gain distributions		10,216			8,489			3,667			3,514			4,275			3,322			131			125
Less cost of shares redeemed		(36,473	)		(74,292	)		(48,109	)		(39,996	)		(65,323	)		(109,974	)		(624,157	)		(783,919	)

Net increase (decrease) in net assets resulting from capital share transactions		56,162			35,036			26,806			(2,427	)		129,953			14,775			243,584			55,203

Increase (decrease) in net assets		64,726			39,240			29,792			(1,292	)		129,683			13,677			243,584			55,203
*Net assets*
Beginning of year		232,016			192,776			111,985			113,277			157,147			143,470			1,271,746			1,216,543

End of year	$	296,742		$	232,016		$	141,777		$	111,985		$	286,830		$	157,147		$	1,515,330		$	1,271,746

Accumulated net investment income (loss) at the end of the year	$	2		$	2		$	—		$	—		$	—		$	—		$	112		$	108

See accompanying Notes to Financial Statements.

120 Annual Report

December 31, 2012

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 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-five funds (the “Funds”), each with its own investment objective and policies. For each Fund, the number of shares authorized is unlimited.


Domestic 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 Leaders (formerly known as Global Growth) Multi-Asset and Alternative Funds Macro Allocation Commodity Strategy Long/Short		International Equity Funds International Growth International Equity International Leaders Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Markets Leaders (formerly known as Emerging Leaders Growth) Emerging Markets Small Cap Growth Fixed-Income Funds Bond Income Low Duration Money Market Fund Ready Reserves

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

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 Global Leaders Fund, the International Leaders Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Markets Leaders Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund and the Low Duration Fund 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 Leaders, the International Leaders, the International Small Cap Growth, the Emerging Markets Growth, the Emerging Markets Leaders, the Emerging Markets Small Cap Growth, the Bond and the Low Duration)

December 31, 2012

William Blair Funds 121


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 Leaders, the International Leaders, the International Small Cap Growth, the Emerging Markets Growth, the Emerging Markets Leaders, the Emerging Markets Small Cap Growth, the Bond and the Low Duration 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 of record are held 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 using evaluated prices provided by an independent pricing service. The evaluated prices are formed using various market inputs the pricing vendor believes accurately represents the market value of a security at a particular point in time. The pricing service determines evaluated prices for fixed-income securities using inputs including, but not limited to, recent transaction prices, dealer quotes, transaction prices for securities with similar characteristics, collateral characteristics, credit quality, payment history, liquidity and market conditions.

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 that are not exchange-traded 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 fair value.

As of December 31, 2012, there were securities held in the International Growth, Bond and Income Funds requiring fair valuation pursuant to the Trust’s Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

122 Annual Report

December 31, 2012

Interest income is recorded on an accrual basis, adjusted for amortization of premium or accretion of 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 December 31, 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-backed and asset-backed securities are treated as an adjustment to interest income. For the period ended December 31, 2012, the Bond, Income and Low Duration Funds recognized a reduction of interest income and a decrease of net realized loss of $(1,870), $(1,073) and $(2,439), 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	Year Ended December 31, 2012		Year Ended December 31, 2011
Growth	$	7	$	11
Large Cap Growth		—		—
Small Cap Growth		4		15
Mid Cap Growth		12		13
Small-Mid Cap Growth		9		8
Global Leaders		1		1
International Growth		38		107
International Equity		7		4
International Leaders		—		—
International Small Cap Growth		19		18

December 31, 2012

William Blair Funds 123


Fund	Year Ended December 31, 2012		Year Ended December 31, 2011
Emerging Markets Growth		1		4
Emerging Markets Leaders		1		1
Emerging Markets Small Cap Growth		3		—
Large Cap Value		—		—
Small Cap Value		8		48
Mid Cap Value		—		—
Small-Mid Cap Value		1		—

Distributions from net investment income, if any, of all Equity 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 Equity and International Equity 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.

Certain Funds may be subject to foreign income taxes imposed on realized gains on securities of issuers from 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, 2012, 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 December 31, 2012, were as follows (in thousands):


Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Growth	$	595,000	$	127,495	$	5,339	$	122,156
Large Cap Growth		22,544		6,017		193		5,824
Small Cap Growth		362,402		68,182		34,540		33,642
Mid Cap Growth		347,001		29,795		7,008		22,787
Small-Mid Cap Growth		351,999		44,202		8,393		35,809
Global Leaders		55,537		8,332		304		8,028

124 Annual Report

December 31, 2012


Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
International Growth	$	3,075,534	$	607,683	$	20,164	$	587,519
International Equity		57,693		12,081		178		11,903
International Leaders		9,453		737		58		679
International Small Cap Growth		618,210		108,461		9,747		98,714
Emerging Markets Growth		818,359		146,056		6,591		139,465
Emerging Markets Leaders		62,365		8,388		129		8,259
Emerging Markets Small Cap Growth		25,961		1,736		41		1,695
Large Cap Value		3,397		469		66		403
Small Cap Value		211,372		33,216		6,338		26,878
Mid Cap Value		3,644		553		90		463
Small-Mid Cap Value		2,163		297		53		244
Bond		272,412		21,690		278		21,412
Income		134,376		6,772		462		6,310
Low Duration		259,260		2,595		360		2,235
Ready Reserves		1,516,733		—		—		—

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, expiration of capital loss carryforward, recharacterization of dividends received from investments in Real Estate Investment Trust, 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, 2012, the following reclassifications were recorded (in thousands):


Fund	Undistributed Net Investment Income (Loss)			Accumulated Undistributed Net Realized Gain/(Loss)			Capital Paid in Excess of Par Value
Growth	$	28		$	(28	)	$	—
Large Cap Growth		1			(1	)		—
Small Cap Growth		3,984			—			(3,984	)
Mid Cap Growth		4			—			(4	)
Small-Mid Cap Growth		7			(7	)		—
Global Leaders		(20	)		20			—
International Growth		20,416			(20,416	)		—
International Equity		(71	)		71			—
International Leaders		10			(10	)		—
International Small Cap Growth		2,643			(2,665	)		22
Emerging Markets Growth		(1,511	)		1,511			—
Emerging Markets Leaders		(53	)		53			—
Emerging Markets Small Cap Growth		(7	)		6			1
Large Cap Value		—			—			—
Small Cap Value		(12	)		12			—
Mid Cap Value		(2	)		(32	)		34
Small-Mid Cap Value		—			—			—
Bond		1,870			(1,870	)		—
Income		1,078			1,412			(2,490	)
Low Duration		2,439			(2,439	)		—
Ready Reserves		4			20			(24	)

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.

December 31, 2012

William Blair Funds 125

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 2012 and 2011 was as follows (in thousands):


	Distributions Paid in 2012								Distributions Paid in 2011
	Ordinary Income				Long-Term Capital Gains				Return of Capital				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	$	10	$	1,133	$	7,281	$	12,939	$	—	$	—	$	—	$	329	$	5,882	$	10,199
Large Cap Growth		—		—		—		—		—		—		—		37		—		—
Small Cap Growth		—		—		564		1,107		—		—		—		—		—		—
Mid Cap Growth		—		488		905		7,042		—		—		—		—		2,378		8,679
Small-Mid Cap Growth		63		1,436		1,026		8,092		—		—		595		3,772		2,542		16,104
Global Leaders		15		227		—		—		—		—		4		170		—		—
International Growth		37,353		74,977		—		—		—		—		—		6,046		—		—
International Equity		172		2,061		—		—		—		—		—		—		—		—
International Leaders		—		6		—		—		—		—		—		—		—		—
International Small Cap Growth		274		7,774		—		—		—		—		193		5,147		—		—
Emerging Markets Growth		88		1,209		—		—		—		—		—		466		2,577		18,690
Emerging Markets Leaders		1		169		—		—		—		11		1		582		3		1,287
Emerging Markets Small Cap Growth		13		65		—		—		—		—		—		—		—		—
Large Cap Value		12		25		—		—		—		—		3		4		—		—
Small Cap Value		256		1,734		164		782		60		273		6		483		1,471		6,717
Mid Cap Value		1		62		3		121		—		—		1		64		—		34
Small-Mid Cap Value		34		55		—		—		—		—		—		—		—		—
Bond		961		6,754		211		1,126		—		—		229		6,707		66		1,188
Income		1,884		2,587		—		—		—		—		1,377		2,800		—		—
Low Duration		219		2,909		—		—		—		—		152		2,098		—		—
Ready Reserves		131		—		—		—		—		—		125		—		—		—

As of December 31, 2012, 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	$	10	$	—		$	13,481	$	122,156
Large Cap Growth		—		(887	)		—		5,824
Small Cap Growth		—		—			6,887		33,642
Mid Cap Growth		—		(168	)		3,258		22,787
Small-Mid Cap Growth		—		1			6,952		35,809
Global Leaders		2		(13,781	)		—		8,028
International Growth		16,303		(1,105,046	)		—		587,519
International Equity		120		(91,971	)		—		11,903
International Leaders		30		(104	)		—		679
International Small Cap Growth		1,592		(53,929	)		—		98,714
Emerging Markets Growth		155		(28,010	)		—		139,465
Emerging Markets Leaders		57		(3,213	)		—		8,259
Emerging Markets Small Cap Growth		56		(37	)		36		1,695
Large Cap Value		1		—			5		403
Small Cap Value		83		—			1,441		26,878
Mid Cap Value		8		—			14		463
Small-Mid Cap Value		14		—			8		244
Bond		2		(104	)		1,498		21,412
Income		—		(35,763	)		—		6,310
Low Duration		—		(4,807	)		—		2,235
Ready Reserves		113		(22	)		—		—

126 Annual Report

December 31, 2012

As of December 31, 2012, 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	2013		2014		2015		2016		2017		2018		Total
Large Cap Growth	$	—	$	—	$	—	$	—	$	887	$	—	$	887
Global Leaders		—		—		—		644		13,127		—		13,771
International Growth		—		—		—		—		1,101,382		—		1,101,382
International Equity		—		—		—		10,048		81,926		—		91,974
International Small Cap Growth		—		—		—		—		53,954		—		53,954
Income		3,398		4,138		9,190		14,459		4,577		—		35,762
Low Duration		—		—		—		—		—		955		955
Ready Reserves		—		—		2		—		—		—		2

Under current law, the Funds may carry forward net capital losses indefinitely to use to offset capital gains realized in future years. Previous law limited the carry forward of capital losses to the eight tax years following the year the capital loss was realized. If a Fund has capital losses that are subject to current law and also has capital losses subject to prior law, the losses realized under current law will be utilized to offset capital gains before any of the losses governed by prior law can be used. As a result of these ordering rules, capital losses realized under previous law may be more likely to expire unused. Capital losses realized under current law will carry forward retaining their classification as long-term or short-term losses; as compared to under prior law in which all capital losses were carried forward as short term capital losses.

As of December 31, 2012, the Funds incurred the following capital losses which will not expire (in thousands):


Fund	Short- Term		Long- Term
International Leaders	$	33	$	—
Emerging Markets Growth		23,905		—
Emerging Markets Leaders		2,240		—
Low Duration		2,054		1,296
Ready Reserves		19		—

In order to meet certain excise tax distribution requirements, the Funds are required to measure and distribute annually, net capital gains realized during a twelve month period ending October 31 and net investment income earned during a twelve month period ending December 31. In connection with this, the Funds are permitted for tax purposes to defer into their next fiscal year qualified late year losses. Qualified late year capital losses are any net capital losses incurred between November 1 and the end of their fiscal year, December 31, 2012. Qualified late year ordinary losses are comprised of losses related to foreign currency and PFICs, incurred between November 1 and the end of their fiscal year, December 31, 2012.

At December 31, 2012, the following Funds deferred, on a tax basis, qualified late year losses of:


	Qualified Late Year Losses
Fund	Ordinary Loss		Short-Term Capital		Long-Term Capital
Mid Cap Growth	$	—	$	168	$	—
Global Leaders		10		—		—
International Growth		—		4,050		—
International Leaders		—		71		—
Emerging Markets Growth		—		2,380		—
Emerging Markets Leaders		—		464		507
Emerging Markets Small Cap Growth		—		7		—
Bond		—		104		—
Low Duration		—		291		210

(h) Repurchase Agreements

December 31, 2012

William Blair Funds 127

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.

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 following tables with the reasons for the transfers disclosed in a note to the tables, if applicable.

As of December 31, 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 Leaders
Level 1—Quoted prices
Common Stocks	$	705,749	$	28,103	$	374,768	$	357,997	$	387,079	$	32,806
Exchange Traded Funds		—		—		7,433		—		—		—

128 Annual Report

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Investments in securities	Growth		Large Cap Growth		Small Cap Growth		Mid Cap Growth		Small-Mid Cap Growth		Global Leaders
Level 2—Other significant observable inputs
Common Stocks		—		—		—		—		—		30,421
Short-Term Investments		11,407		265		13,843		11,791		729		338
Level 3—Significant unobservable inputs
None		—		—		—		—		—		—

Total investments in securities	$	717,156	$	28,368	$	396,044	$	369,788	$	387,808	$	63,565

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2 (a)		—		—		—		—		—		11,929
Transfers from Level 2 to Level 1		—		—		—		—		—		—


Investments in securities	International Growth		International Equity		International Leaders		International Small Cap Growth		Emerging Markets Growth		Emerging Markets Leaders		Emerging Markets Small Cap Growth
Level 1—Quoted prices
Common Stocks	$	392,541	$	9,247	$	1,265	$	50,335	$	218,872	$	16,608	$	6,809
Preferred Stocks		—		—		—		—		19,764		2,086		309
Exchange Traded Funds		37,989		—		—		—		—		—		—
Level 2—Other significant observable inputs
Common Stocks		3,148,045		60,349		8,701		646,215		682,040		49,021		18,450
Affiliated Funds		22,022		—		—		—		23,624		—		—
Short-Term Investments		61,401		—		166		20,374		13,524		2,909		2,088
Level 3—Significant unobservable inputs
Common Stock		1,055		—		—		—		—		—		—

Total investments in securities	$	3,663,053	$	69,596	$	10,132	$	716,924	$	957,824	$	70,624	$	27,656

Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2 (a)		1,422,279		25,925		—		352,290		388,205		26,326		1,325
Transfers from Level 2 to Level 1		—		—		—		—		—		—		—


Investments in securities	Large Cap Value		Small Cap Value		Mid Cap Value		Small-Mid Cap Value
Level 1—Quoted prices
Common Stocks	$	3,800	$	233,731	$	4,107	$	2,370
Level 2—Other significant observable inputs
Short-Term Investments		—		4,519		—		37
Level 3—Significant unobservable inputs
None		—		—		—		—

Total investments in securities	$	3,800	$	238,250	$	4,107	$	2,407


Investments in securities	Bond		Income		Low Duration Fund		Ready Reserves
Level 1—Quoted Prices
Short-Term Investments	$	—	$	—	$	—	$	—
Level 2—Other significant observable inputs
US Government and Agency Bonds		119,464		63,957		193,271		115,198
Corporate Bonds		163,377		70,492		37,119		89,509
Asset-Backed Bonds		9,194		4,382		31,105		—
Commercial Paper		—		—		—		982,722
Short-Term Investments		1,622		938		—		329,304
Level 3—Significant unobservable inputs
Asset-Backed Bonds		167		917		—		—

Total investments in securities	$	293,824	$	140,686	$	261,495	$	1,516,733

December 31, 2012

William Blair Funds 129

Fair Valuation Transfers

(a)

Fair valuation estimates were obtained from the Funds’ pricing vendor and applied to certain foreign securities at December 31, 2012 but not on December 31, 2011, resulting in a transfer from Level 1 to Level 2.

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, 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 issuer market trends that influence its performance and the potential for an adverse outcome in pending litigation. Level 3 securities represented 0.03%, 0.06%, and 0.65% as a percentage of Net Assets in the International Growth, Bond, and Income Funds, respectively. The change in net unrealized gain (loss) related to those securities held at December 31, 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.

(l) Redemptions In-Kind

In accordance with the Trust’s prospectus, the Funds may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). For financial reporting purposes, the Fund recognizes a gain or loss on the transfer of securities depending on the value of those securities on the date of redemption. Gains and losses realized on in-kind redemptions are not recognized for tax purposes and are reclassified from undistributed realized gain (loss) to paid-in capital. During the year ended December 31, 2012, the International Small Cap Growth Fund redeemed in-kind $62,716 (in thousands) with realized gains of $464.

(2) Recent Accounting Pronouncement

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” These common disclosure requirements are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a Fund’s financial position. They also improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received. In addition, ASU 2011-11 facilitates comparison between those entities that prepare their financial statements on the basis of U.S. generally accepted accounting principles and those entities that prepare their financial statements on the basis of International Financial Reporting Standards. ASU 2011-11 requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the financial position; and disclose instruments and transactions subject to an agreement similar to a master netting agreement. ASU 2011-11 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. The Trust is currently evaluating the implications of ASU 2011-11 and its impact on financial statement disclosures.

130 Annual Report

December 31, 2012

(3) 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:


Domestic 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 Leaders	0.95	%
			International Small Cap Growth	1.00	%
Global Equity Fund			Emerging Markets Growth	1.10	%
Global Leaders	1.00	%	Emerging Markets Leaders	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.

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 Leaders		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 Leaders		1.45	% (a)		N/A			1.20	% (a)		N/A
International Small Cap Growth		1.65	%		1.65	%		1.40	%		1.40	%
Emerging Markets Growth		1.70	%		1.70	%		1.45	%		1.45	%
Emerging Markets Leaders		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	%

December 31, 2012

William Blair Funds 131


	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
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	%

(a)	Effective August 16, 2012 through April 30, 2014

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 December 31, 2012 was (in thousands):


Fund	Available for Recapture
International Leaders	$	57
Emerging Markets Small Cap Growth		253
Large Cap Value		130
Mid Cap Value		279
Small-Mid Cap Value		128

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 year ended December 31, 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		66		10		5		81
Small Cap Growth		—		360		148		508
Mid Cap Growth		—		—		34		34
Small-Mid Cap Growth		9		267		58		334
Global Leaders		140		14		3		157
International Growth		—		—		—		—
International Equity		112		47		7		166
International Leaders		57		—		—		57
International Small Cap Growth		—		—		—		—
Emerging Markets Growth		—		—		—		—
Emerging Markets Leaders		196		1		1		198
Emerging Markets Small Cap Growth		205		—		—		205
Large Cap Value		101		—		—		101
Small Cap Value		36		193		65		294
Mid Cap Value		98		—		—		98
Small-Mid Cap Value		112		—		—		112
Bond		77		53		32		162
Income		—		—		—		—
Low Duration		25		4		2		31
Ready Reserves		6,343		—		—		6,343

(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

132 Annual Report

December 31, 2012

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 entered into a Service Agreement with the Advisor under which the Advisor agrees to provide certain support services to Class N shareholders, including shareholder services and automatic sweep services, for a fee of 0.35% of the Fund’s average daily net assets attributable to Class N shares. The Board of Trustees has determined that the amount payable for “service fee” (as defined by FINRA, Financial Industry Regulatory Authority) does not exceed 0.25% of the average annual net assets attributable to the Class N shares of the Ready Reserves Fund.

The Global Leaders, International Leaders, International Small Cap Growth, Emerging Markets 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 year ended December 31, 2012, the following fees were incurred (in thousands):


Fund	Class N		Class I		Total
Global Leaders	$	7	$	68	$	75
International Leaders		—		2		2
International Small Cap Growth		23		543		566
Emerging Markets Growth		26		206		232
Emerging Markets Leaders		—		37		37
Emerging Markets Small Cap Growth		3		7		10
Bond		36		244		280
Low Duration		13		157		170
Ready Reserves		4,579		—		4,579

(4) Investment Transactions

Investment transactions, excluding money market instruments, repurchase agreements and demand notes for the year ended December 31, 2012, were as follows (in thousands):


Fund	Purchases		Sales
Growth	$	517,771	$	(453,240	)
Large Cap Growth		13,602		(14,813	)
Small Cap Growth		433,203		(688,431	)
Mid Cap Growth		381,110		(189,676	)
Small-Mid Cap Growth		383,753		(272,728	)
Global Leaders		49,749		(36,269	)
International Growth		2,776,011		(3,044,611	)
International Equity		54,762		(70,050	)
International Leaders		10,340		(982	)
International Small Cap Growth		522,503		(661,617	)
Emerging Markets Growth		847,110		(869,517	)
Emerging Markets Leaders		61,689		(52,654	)
Emerging Markets Small Cap Growth		26,387		(5,999	)
Large Cap Value		1,608		(644	)
Small Cap Value		121,348		(142,014	)
Mid Cap Value		2,843		(3,813	)
Small-Mid Cap Value		1,273		(1,264	)
Bond		148,553		(92,844	)
Income		82,791		(56,684	)
Low Duration		186,371		(78,475	)

December 31, 2012

William Blair Funds 133

(5) Forward Foreign Currency Contracts

The Global and International Equity 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 year ended December 31, 2012, the International Growth, International Equity, International Leaders, 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	$	310,013
International Equity		2,510
International Leaders		351
International Small Cap Growth		7,102

The effect of forward foreign currency contracts on the Statements of Operations for the year ended December 31, 2012 (values in thousands):


Net realized gain (loss) on transactions from forward foreign currency contracts
Fund	Value
International Growth	$	20,690
International Equity		(46	)
International Leaders		9
International Small Cap Growth		1,901

Change in net unrealized appreciation (depreciation) of forward foreign currency contracts
Fund	Value
International Growth	$	1,799
International Equity		—
International Leaders		—
International Small Cap Growth		311

There were no open Forward Foreign Currency Contracts as of December 31, 2012.

134 Annual Report

December 31, 2012

(6) Fund Share Transactions

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


	Sales (Dollars)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth	$	78,696	$	99,399	$	178,095	$	71,261	$	62,869	$	134,130
Large Cap Growth		910		3,057		3,967		900		3,239		4,139
Small Cap Growth		11,395		82,018		93,413		30,204		93,243		123,447
Mid Cap Growth		23,163		250,069		273,232		21,824		66,999		88,823
Small Mid-Cap Growth		21,591		166,456		188,047		14,552		70,787		85,339
Global Leaders		2,165		14,574		16,739		475		3,263		3,738
International Growth		201,960		471,066		673,026		280,122		476,293		756,415
International Equity		230		3,058		3,288		693		26,139		26,832
International Leaders (a)		501		4,042		4,543		—		—		—
International Small Cap Growth		1,764		70,906		72,670		5,220		163,897		169,117
Emerging Markets Growth		439		14,379		14,818		1,576		24,982		26,558
Emerging Markets Leaders		182		5,784		29,541		34		19,823		19,857
Emerging Markets Small Cap Growth (b)		3,152		6,883		10,035		1,040		2,322		3,362
Large Cap Value (b)		247		710		957		1,000		1,457		2,457
Small Cap Value		13,727		33,914		47,641		42,726		120,066		162,792
Mid Cap Value		27		276		303		81		1,617		1,698
Small-Mid Cap Value (c)		22		50		72		823		1,241		2,064
Bond		29,217		30,744		59,961		4,585		41,430		46,015
Income		46,878		24,370		71,248		25,156		8,899		34,055
Low Duration		13,181		106,781		119,962		2,975		56,988		59,963
Ready Reserves		867,610		—		867,610		838,997		—		838,997


	Reinvested Distributions (Dollars)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth	$	7,021	$	12,799	$	19,820	$	5,705	$	9,211	$	14,916
Large Cap Growth		—		—		—		—		32		32
Small Cap Growth		558		1,069		1,627		—		—		—
Mid Cap Growth		883		7,459		8,342		2,354		8,544		10,898
Small Mid-Cap Growth		1,057		8,330		9,387		3,020		17,544		20,564
Global Leaders		14		220		234		4		162		166
International Growth		36,834		66,346		103,180		—		5,030		5,030
International Equity		172		1,773		1,945		—		—		—
International Leaders (a)		—		6		6		—		—		—
International Small Cap Growth		249		6,537		6,786		182		3,176		3,358
Emerging Markets Growth		71		863		934		2,055		13,471		15,526
Emerging Markets Leaders		1		109		110		3		1,336		1,339
Emerging Markets Small Cap Growth (b)		12		40		52		—		—		—
Large Cap Value (b)		2		13		15		3		4		7
Small Cap Value		412		2,338		2,750		1,502		6,573		8,075
Mid Cap Value		4		154		158		1		84		85
Small-Mid Cap Value (c)		1		19		20		—		—		—
Bond		1,107		5,895		7,002		219		5,706		5,925
Income		1,690		1,977		3,667		1,249		2,265		3,514
Low Duration		97		1,897		1,994		80		1,426		1,506
Ready Reserves		131		—		131		125		—		125

December 31, 2012

William Blair Funds 135


	Redemptions (Dollars)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth	$	66,403	$	51,187	$	117,590	$	61,036	$	69,123	$	130,159
Large Cap Growth		679		4,361		5,040		4,715		5,839		10,554
Small Cap Growth		114,495		223,185		337,680		188,253		180,687		368,940
Mid Cap Growth		15,631		56,818		72,449		6,014		38,969		44,983
Small Mid-Cap Growth		18,344		66,523		84,867		7,153		28,620		35,773
Global Leaders		1,342		14,834		16,176		1,725		2,783		4,508
International Growth		478,336		477,179		955,515		1,472,224		568,925		2,041,149
International Equity		2,397		17,485		19,882		6,340		111,492		117,832
International Leaders (a)		—		—		—		—		—		—
International Small Cap Growth		8,879		146,425		155,304		5,634		95,320		100,954
Emerging Markets Growth		4,491		19,348		23,839		12,534		59,984		72,518
Emerging Markets Leaders		10		6,173		6,183		30		8,683		8,713
Emerging Markets Small Cap Growth (b)		1,607		1,571		3,178		—		—		—
Large Cap Value (b)		—		—		—		—		—		—
Small Cap Value		20,304		51,694		71,998		33,678		45,720		79,398
Mid Cap Value		16		1,296		1,312		24		474		498
Small-Mid Cap Value (c)		2		28		30		—		—		—
Bond		6,469		23,329		29,798		1,033		43,605		44,638
Income		25,694		22,415		48,109		17,730		22,266		39,996
Low Duration		8,314		34,142		42,456		3,689		63,525		67,214
Ready Reserves		624,157		—		624,157		783,918		—		783,918


	Net Change in Net Assets relating to Fund Share Activity (Dollars)
	Year Ended December 31, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Growth	$	19,314		$	61,011		$	80,325		$	15,930		$	2,957		$	18,887
Large Cap Growth		231			(1,304	)		(1,073	)		(3,815	)		(2,568	)		(6,383	)
Small Cap Growth		(102,542	)		(140,098	)		(242,640	)		(158,049	)		(87,444	)		(245,493	)
Mid Cap Growth		8,415			200,710			209,125			18,164			36,574			54,738
Small Mid-Cap Growth		4,304			108,263			112,567			10,419			59,711			70,130
Global Leaders		837			(40	)		797			(1,246	)		642			(604	)
International Growth		(239,542	)		60,233			(179,309	)		(1,192,102	)		(87,602	)		(1,279,704	)
International Equity		(1,995	)		(12,654	)		(14,649	)		(5,647	)		(85,353	)		(91,000	)
International Leaders (a)		501			4,048			4,549			—			—			—
International Small Cap Growth		(6,866	)		(68,982	)		(75,848	)		(232	)		71,753			71,521
Emerging Markets Growth		(3,981	)		(4,106	)		(8,087	)		(8,903	)		(21,531	)		(30,434	)
Emerging Markets Leaders		23,748			(280	)		23,468			7			12,476			12,483
Emerging Markets Small Cap Growth (b)		1,557			5,352			6,909			1,040			2,322			3,362
Large Cap Value (b)		249			723			972			1,003			1,461			2,464
Small Cap Value		(6,165	)		(15,442	)		(21,607	)		10,550			80,919			91,469
Mid Cap Value		15			(866	)		(851	)		58			1,227			1,285
Small-Mid Cap Value (c)		21			41			62			823			1,241			2,064
Bond		23,855			13,310			37,165			3,771			3,531			7,302
Income		22,874			3,932			26,806			8,675			(11,102	)		(2,427	)
Low Duration		4,964			74,536			79,500			(634	)		(5,111	)		(5,745	)
Ready Reserves		243,584			—			243,584			55,204			—			55,204

(a)

For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.

(b)

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

(c)

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

136 Annual Report

December 31, 2012


	Sales (Shares)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		6,511		7,918		14,429		6,242		5,321		11,563
Large Cap Growth		117		382		499		125		451		576
Small Cap Growth		507		3,541		4,048		1,396		4,242		5,638
Mid Cap Growth		1,835		19,576		21,411		1,734		5,091		6,825
Small Mid-Cap Growth		1,549		11,543		13,092		997		4,690		5,687
Global Leaders		237		1,589		1,826		59		378		437
International Growth		9,747		22,026		31,773		13,859		22,239		36,098
International Equity		20		266		286		58		2,177		2,235
International Leaders (a)		50		401		451		—		—		—
International Small Cap Growth		140		5,547		5,687		409		12,634		13,043
Emerging Markets Growth		35		1,140		1,175		110		1,744		1,854
Emerging Markets Leaders		22		702		724		3		2,073		2,076
Emerging Markets Small Cap Growth (b)		261		568		829		104		232		336
Large Cap Value (b)		23		63		86		100		145		245
Small Cap Value		1,057		2,556		3,613		3,200		8,897		12,097
Mid Cap Value		2		24		26		8		151		159
Small-Mid Cap Value (c)		2		5		7		82		124		206
Bond		2,628		2,776		5,404		421		3,871		4,292
Income		4,948		2,595		7,543		2,705		967		3,672
Low Duration		1,337		10,837		12,174		301		5,769		6,070
Ready Reserves		867,610		—		867,610		838,996		—		838,996


	Reinvested Distributions (Shares)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		581		1,014		1,595		552		854		1,406
Large Cap Growth		—		—		—		—		5		5
Small Cap Growth		24		44		68		—		—		—
Mid Cap Growth		70		576		646		208		742		950
Small Mid-Cap Growth		74		570		644		239		1,356		1,595
Global Leaders		1		24		25		—		21		21
International Growth		1,647		2,899		4,546		—		271		271
International Equity		14		146		160		—		—		—
International Leaders (a)		—		—		—		—		—		—
International Small Cap Growth		19		483		502		17		286		303
Emerging Markets Growth		5		64		69		188		1,225		1,413
Emerging Markets Leaders		—		12		12		1		178		179
Emerging Markets Small Cap Growth (b)		1		3		4		—		—		—
Large Cap Value (b)		—		1		1		—		1		1
Small Cap Value		30		169		199		128		550		678
Mid Cap Value		—		14		14		—		8		8
Small-Mid Cap Value (c)		—		2		2		—		—		—
Bond		99		531		630		20		533		553
Income		178		210		388		135		246		381
Low Duration		10		192		202		8		145		153
Ready Reserves		131		—		131		125		—		125

December 31, 2012

William Blair Funds 137


	Redemptions (Shares)
	Year Ended December 31, 2012						Year Ended December 31, 2011
Fund	Class N		Class I		Total		Class N		Class I		Total
Growth		5,556		4,123		9,679		5,345		5,968		11,313
Large Cap Growth		88		550		638		633		802		1,435
Small Cap Growth		5,073		9,629		14,702		8,432		7,958		16,390
Mid Cap Growth		1,251		4,392		5,643		465		2,990		3,455
Small Mid-Cap Growth		1,290		4,593		5,883		478		1,908		2,386
Global Leaders		150		1,585		1,735		204		334		538
International Growth		23,161		22,367		45,528		68,547		27,431		95,978
International Equity		207		1,569		1,776		549		9,168		9,717
International Leaders (a)		—		—		—		—		—		—
International Small Cap Growth		734		11,369		12,103		431		7,627		8,058
Emerging Markets Growth		358		1,558		1,916		911		4,152		5,063
Emerging Markets Leaders		1		745		746		3		1,006		1,009
Emerging Markets Small Cap Growth (b)		134		129		263		—		—		—
Large Cap Value (b)		—		—		—		—		—		—
Small Cap Value		1,543		3,881		5,424		2,509		3,505		6,014
Mid Cap Value		1		113		114		2		43		45
Small-Mid Cap Value (c)		—		3		3		—		—		—
Bond		579		2,114		2,693		95		4,083		4,178
Income		2,712		2,382		5,094		1,913		2,423		4,336
Low Duration		843		3,465		4,308		373		6,432		6,805
Ready Reserves		624,157		—		624,157		783,918		—		783,918


	Net Change in Shares Outstanding relating to Fund Share Activity (Shares)
	Year Ended December 31, 2012									Year Ended December 31, 2011
Fund	Class N			Class I			Total			Class N			Class I			Total
Growth		1,536			4,809			6,345			1,449			207			1,656
Large Cap Growth		29			(168	)		(139	)		(508	)		(346	)		(854	)
Small Cap Growth		(4,542	)		(6,044	)		(10,586	)		(7,036	)		(3,716	)		(10,752	)
Mid Cap Growth		654			15,760			16,414			1,477			2,843			4,320
Small Mid-Cap Growth		333			7,520			7,853			758			4,138			4,896
Global Leaders		88			28			116			(145	)		65			(80	)
International Growth		(11,767	)		2,558			(9,209	)		(54,688	)		(4,921	)		(59,609	)
International Equity		(173	)		(1,157	)		(1,330	)		(491	)		(6,991	)		(7,482	)
International Leaders (a)		50			401			451			—			—			—
International Small Cap Growth		(575	)		(5,339	)		(5,914	)		(5	)		5,293			5,288
Emerging Markets Growth		(318	)		(354	)		(672	)		(613	)		(1,183	)		(1,796	)
Emerging Markets Leaders		21			(31	)		(10	)		1			1,245			1,246
Emerging Markets Small Cap Growth (b)		128			442			570			104			232			336
Large Cap Value (b)		23			64			87			100			146			246
Small Cap Value		(456	)		(1,156	)		(1,612	)		819			5,942			6,761
Mid Cap Value		1			(75	)		(74	)		6			116			122
Small-Mid Cap Value (c)		2			4			6			82			124			206
Bond		2,148			1,193			3,341			346			321			667
Income		2,414			423			2,837			927			(1,210	)		(283	)
Low Duration		504			7,564			8,068			(64	)		(518	)		(582	)
Ready Reserves		243,584			—			243,584			55,203			—			55,203

(a)

For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.

(b)

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

(c)

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

138 Annual Report

December 31, 2012

Financial Highlights

Growth Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	10.73		$	11.28		$	9.89		$	7.12		$	11.70
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.04	)		(0.01	)		(0.02	)		(0.05	)
Net realized and unrealized gain (loss) on investments		1.69			(0.19	)		1.40			2.79			(4.35	)

Total from investment operations		1.68			(0.23	)		1.39			2.77			(4.40	)
Less distributions from:
Net investment income		0.00	^		—			—			—			—
Net realized gain		0.36			0.32			—			—			0.18

Total distributions		0.36			0.32			—			—			0.18

Net asset value, end of year	$	12.05		$	10.73		$	11.28		$	9.89		$	7.12

Total Return (%)		15.67			(1.93	)		14.05			38.90			(37.61	)
Ratios to average daily net assets (%):
Expenses		1.20			1.21			1.16			1.23			1.17
Net investment income (loss)		(0.06	)		(0.37	)		(0.13	)		(0.20	)		(0.54	)
Net assets at end of year (in thousands)	$	248,121		$	204,476		$	198,622		$	153,987		$	85,142
Portfolio turnover rate (%)		73			59			66			67			60

	Class I
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	11.18		$	11.71		$	10.24		$	7.35		$	12.02
Income (loss) from investment operations:
Net investment income (loss)		0.04			0.00	^		0.02			0.01			(0.02	)
Net realized and unrealized gain (loss) on investments		1.75			(0.20	)		1.45			2.88			(4.47	)

Total from investment operations		1.79			(0.20	)		1.47			2.89			(4.49	)
Less distributions from:
Net investment income		0.03			0.01			0.00	^		0.00	^		—
Net realized gain		0.36			0.32			—			—			0.18

Total distributions		0.39			0.33			0.00	^		0.00	^		0.18

Net asset value, end of year	$	12.58		$	11.18		$	11.71		$	10.24		$	7.35

Total Return (%)		16.03			(1.60	)		14.36			39.34			(37.35	)
Ratios to average daily net assets (%):
Expenses		0.89			0.86			0.84			0.89			0.85
Net investment income (loss)		0.30			(0.03	)		0.20			0.14			(0.22	)
Net assets at end of year (in thousands)	$	468,124		$	362,266		$	376,991		$	265,533		$	153,444
Portfolio turnover rate (%)		73			59			66			67			60

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 139

Financial Highlights

Large Cap Growth Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	6.88		$	7.14		$	6.16		$	4.68		$	7.52
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		(0.01	)		(0.00	)^		(0.01	)		(0.02	)
Net realized and unrealized gain (loss) on investments		1.28			(0.25	)		0.98			1.49			(2.82	)

Total from investment operations		1.26			(0.26	)		0.98			1.48			(2.84	)
Less distributions from:
Net investment income		—			—			—			—			0.00	^
Net realized gain		—			—			—			—			—

Total distributions		—			—			—			—			0.00	^

Net asset value, end of year	$	8.14		$	6.88		$	7.14		$	6.16		$	4.68

Total Return (%)		18.31			(3.64	)		15.91			31.62			(37.76	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20			1.20			1.21			1.23			1.23
Expenses, before waivers and reimbursements		1.57			1.51			1.53			2.28			1.85
Net investment income (loss), net of waivers and reimbursements		(0.21	)		(0.13	)		(0.08	)		(0.13	)		(0.29	)
Net investment income (loss), before waivers and reimbursements		(0.58	)		(0.44	)		(0.40	)		(1.18	)		(0.91	)
Net assets at end of year (in thousands)	$	4,238		$	3,387		$	7,135		$	5,952		$	4,842
Portfolio turnover rate (%)		50			67			54			88			85

	Class I
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	7.03		$	7.30		$	6.30		$	4.77		$	7.64
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.01			0.01			0.01			0.00	^
Net realized and unrealized gain (loss) on investments		1.32			(0.27	)		1.00			1.52			(2.87	)

Total from investment operations		1.32			(0.26	)		1.01			1.53			(2.87	)
Less distributions from:
Net investment income		—			0.01			0.01			0.00	^		0.00	^
Net realized gain		—			—			—			—			—

Total distributions		—			0.01			0.01			0.00	^		0.00	^

Net asset value, end of year	$	8.35		$	7.03		$	7.30		$	6.30		$	4.77

Total Return (%)		18.78			(3.54	)		16.03			32.17			(37.56	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.95			0.95			0.96			0.98			0.98
Expenses, before waivers and reimbursements		1.23			1.16			1.16			1.26			1.21
Net investment income (loss), net of waivers and reimbursements		0.03			0.11			0.16			0.12			(0.04	)
Net investment income (loss), before waivers and reimbursements		(0.25	)		(0.10	)		(0.04	)		(0.16	)		(0.27	)
Net assets at end of year (in thousands)	$	24,175		$	21,562		$	24,900		$	24,359		$	18,437
Portfolio turnover rate (%)		50			67			54			88			85

Amount is less than $0.005 per share.

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

140 Annual Report

December 31, 2012

Financial Highlights

Small Cap Growth Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	20.13		$	23.22		$	19.99		$	11.79		$	23.30
Income (loss) from investment operations:
Net investment income (loss)		(0.22	)		(0.28	)		(0.21	)		(0.15	)		(0.19	)
Net realized and unrealized gain (loss) on investments		3.87			(2.81	)		3.44			8.35			(10.73	)

Total from investment operations		3.65			(3.09	)		3.23			8.20			(10.92	)
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		0.10			—			—			—			0.59

Total distributions		0.10			—			—			—			0.59

Net asset value, end of year	$	23.68		$	20.13		$	23.22		$	19.99		$	11.79

Total Return (%)		18.15			(13.31	)		16.16			69.55			(46.85	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50			1.50			1.50			1.50			1.50
Expenses, before waivers and reimbursements		1.59			1.59			1.52			1.55			1.50
Net investment income (loss), net of waivers and reimbursements		(0.96	)		(1.25	)		(1.03	)		(0.93	)		(1.05	)
Net investment income (loss), before waivers and reimbursements		(1.05	)		(1.34	)		(1.05	)		(0.98	)		(1.05	)
Net assets at end of year (in thousands)	$	130,382		$	202,341		$	396,767		$	469,746		$	224,612
Portfolio turnover rate (%)		89			97			117			122			135

	Class I
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	20.91		$	24.07		$	20.64		$	12.14		$	23.89
Income (loss) from investment operations:
Net investment income (loss)		(0.16	)		(0.23	)		(0.16	)		(0.11	)		(0.14	)
Net realized and unrealized gain (loss) on investments		4.01			(2.93	)		3.59			8.61			(11.02	)

Total from investment operations		3.85			(3.16	)		3.43			8.50			(11.16	)
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		0.10			—			—			—			0.59

Total distributions		0.10			—			—			—			0.59

Net asset value, end of year	$	24.66		$	20.91		$	24.07		$	20.64		$	12.14

Total Return (%)		18.43			(13.13	)		16.62			70.02			(46.70	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25			1.25			1.25			1.20			1.20
Expenses, before waivers and reimbursements		1.35			1.35			1.25			1.20			1.20
Net investment income (loss), net of waivers and reimbursements		(0.71	)		(1.00	)		(0.76	)		(0.63	)		(0.75	)
Net investment income (loss), before waivers and reimbursements		(0.81	)		(1.10	)		(0.76	)		(0.63	)		(0.75	)
Net assets at end of year (in thousands)	$	266,431		$	352,397		$	494,822		$	293,052		$	177,015
Portfolio turnover rate (%)		89			97			117			122			135

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

December 31, 2012

William Blair Funds 141

Financial Highlights

Mid Cap Growth Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	11.66		$	12.50		$	10.08		$	7.41		$	11.35
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		(0.08	)		(0.05	)		(0.04	)		(0.07	)
Net realized and unrealized gain (loss) on investments		1.29			0.25			2.47			2.71			(3.87	)

Total from investment operations		1.27			0.17			2.42			2.67			(3.94	)
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		0.28			1.01			—			—			0.00	^

Total distributions		0.28			1.01			—			—			0.00	^

Net asset value, end of year	$	12.65		$	11.66		$	12.50		$	10.08		$	7.41

Total Return (%)		10.90			1.65			24.01			36.03			(34.71	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.35			1.35			1.35			1.36			1.36
Expenses, before waivers and reimbursements		1.42			1.43			1.42			2.13			2.03
Net investment income (loss), net of waivers and reimbursements		(0.15	)		(0.65	)		(0.42	)		(0.51	)		(0.76	)
Net investment income (loss), before waivers and reimbursements		(0.22	)		(0.73	)		(0.49	)		(1.28	)		(1.43	)
Net assets at end of year (in thousands)	$	40,940		$	30,093		$	13,802		$	10,379		$	4,803
Portfolio turnover rate (%)		62			70			73			87			76

	Class I
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	11.87		$	12.68		$	10.20		$	7.48		$	11.42
Income (loss) from investment operations:
Net investment income (loss)		0.03			(0.05	)		(0.02	)		(0.02	)		(0.05	)
Net realized and unrealized gain (loss) on investments		1.31			0.25			2.50			2.74			(3.89	)

Total from investment operations		1.34			0.20			2.48			2.72			(3.94	)
Less distributions from:
Net investment income		0.02			—			—			—			—
Net realized gain		0.28			1.01			—			—			0.00	^

Total distributions		0.30			1.01			—			—			0.00	^

Net asset value, end of year	$	12.91		$	11.87		$	12.68		$	10.20		$	7.48

Total Return (%)		11.30			1.86			24.31			36.36			(34.50	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.07			1.10			1.10			1.11			1.11
Expenses, before waivers and reimbursements		1.07			1.13			1.15			1.28			1.23
Net investment income (loss), net of waivers and reimbursements		0.19			(0.42	)		(0.14	)		(0.26	)		(0.51	)
Net investment income (loss), before waivers and reimbursements		0.19			(0.45	)		(0.19	)		(0.43	)		(0.63	)
Net assets at end of year (in thousands)	$	329,295		$	115,661		$	87,446		$	60,455		$	35,723
Portfolio turnover rate (%)		62			70			73			87			76

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.

142 Annual Report

December 31, 2012

Financial Highlights

Small-Mid Cap Growth Fund


	Class N
	Years Ended December 31,
	2012		2011			2010			2009			2008
Net asset value, beginning of year	$	13.00	$	14.40		$	11.73		$	8.16		$	13.10
Income (loss) from investment operations:
Net investment income (loss)		0.02		(0.11	)		(0.09	)		(0.06	)		(0.03	)
Net realized and unrealized gain (loss) on investments		1.57		0.03			2.76			3.63			(4.91	)

Total from investment operations		1.59		(0.08	)		2.67			3.57			(4.94	)
Less distributions from:
Net investment income		0.02		—			—			—			—
Net realized gain		0.36		1.32			—			—			0.00	^

Total distributions		0.38		1.32			—			—			0.00	^

Net asset value, end of year	$	14.21	$	13.00		$	14.40		$	11.73		$	8.16

Total Return (%)		12.20		(0.27	)		22.76			43.75			(37.71	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.35		1.35			1.35			1.36			1.36
Expenses, before waivers and reimbursements		1.47		1.46			1.46			1.49			1.41
Net investment income (loss), net of waivers and reimbursements		0.16		(0.77	)		(0.76	)		(0.60	)		(0.26	)
Net investment income (loss), before waivers and reimbursements		0.04		(0.88	)		(0.87	)		(0.73	)		(0.31	)
Net assets at end of year (in thousands)	$	42,015	$	34,123		$	26,876		$	23,576		$	7,954
Portfolio turnover rate (%)		82		76			93			112			77

	Class I
	Years Ended December 31,
	2012		2011			2010			2009			2008
Net asset value, beginning of year	$	13.32	$	14.68		$	11.93		$	8.27		$	13.24
Income (loss) from investment operations:
Net investment income (loss)		0.07		(0.08	)		(0.06	)		(0.03	)		0.00	^
Net realized and unrealized gain (loss) on investments		1.58		0.04			2.81			3.69			(4.97	)

Total from investment operations		1.65		(0.04	)		2.75			3.66			(4.97	)
Less distributions from:
Net investment income		0.06		—			—			0.00	^		—
Net realized gain		0.36		1.32			—			—			0.00	^

Total distributions		0.42		1.32			—			0.00	^		0.00	^

Net asset value, end of year	$	14.55	$	13.32		$	14.68		$	11.93		$	8.27

Total Return (%)		12.36		0.01			23.05			44.26			(37.54	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10		1.10			1.10			1.11			1.11
Expenses, before waivers and reimbursements		1.20		1.12			1.11			1.18			1.17
Net investment income (loss), net of waivers and reimbursements		0.48		(0.54	)		(0.50	)		(0.33	)		0.03
Net investment income (loss), before waivers and reimbursements		0.38		(0.56	)		(0.51	)		(0.40	)		(0.03	)
Net assets at end of year (in thousands)	$	349,345	$	219,474		$	181,189		$	123,252		$	75,525
Portfolio turnover rate (%)		82		76			93			112			77

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 143

Financial Highlights

Global Leaders Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	8.10		$	8.40		$	6.97		$	4.96		$	9.89
Income (loss) from investment operations:
Net investment income (loss) (a)		0.03			0.02			(0.01	)		(0.01	)		0.08
Net realized and unrealized gain (loss) on investments		1.37			(0.31	)		1.44			2.02			(4.98	)

Total from investment operations		1.40			(0.29	)		1.43			2.01			(4.90	)
Less distributions from:
Net investment income		0.03			0.01			—			—			0.03
Net realized gain		—			—			—			—			—

Total distributions		0.03			0.01			—			—			0.03

Net asset value, end of year	$	9.47		$	8.10		$	8.40		$	6.97		$	4.96

Total Return (%)		17.25			(3.47	)		20.52			40.52			(49.52	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50			1.50			1.52			1.55			1.55
Expenses, before waivers and reimbursements		1.84			1.82			1.93			2.61			2.17
Net investment income (loss), net of waivers and reimbursements		0.29			0.29			(0.09	)		(0.17	)		0.98
Net investment income (loss), before waivers and reimbursements		(0.05	)		(0.03	)		(0.50	)		(1.23	)		0.36
Net assets at end of year (in thousands)	$	5,215		$	3,740		$	5,101		$	4,721		$	3,652
Portfolio turnover rate (%)		73			75			96			133			124

	Class I
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	8.09		$	8.40		$	6.96		$	4.94		$	9.91
Income (loss) from investment operations:
Net investment income (loss) (a)		0.05			0.04			0.01			0.00	^		0.08
Net realized and unrealized gain (loss) on investments		1.38			(0.31	)		1.43			2.02			(4.98	)

Total from investment operations		1.43			(0.27	)		1.44			2.02			(4.90	)
Less distributions from:
Net investment income		0.05			0.04			0.00	^		0.00	^		0.07
Net realized gain		—			—			—			—			—

Total distributions		0.05			0.04			0.00	^		0.00	^		0.07

Net asset value, end of year	$	9.47		$	8.09		$	8.40		$	6.96		$	4.94

Total Return (%)		17.64			(3.26	)		20.73			40.90			(49.41	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25			1.25			1.27			1.30			1.30
Expenses, before waivers and reimbursements		1.56			1.55			1.62			1.62			1.74
Net investment income (loss), net of waivers and reimbursements		0.54			0.52			0.16			0.05			1.05
Net investment income (loss), before waivers and reimbursements		0.23			0.22			(0.19	)		(0.27	)		0.61
Net assets at end of year (in thousands)	$	45,757		$	38,834		$	39,776		$	33,566		$	24,353
Portfolio turnover rate (%)		73			75			96			133			124

(a)

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 2012, 2011, 2010, 2009 and 2008, respectively.

Amount is less than $0.005 per share.

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

144 Annual Report

December 31, 2012

Financial Highlights

International Growth Fund


	Class N
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	18.68	$	21.85		$	18.55	$	13.12	$	29.12
Income (loss) from investment operations:
Net investment income (loss) (a)		0.26		0.26			0.14		0.07		0.29
Net realized and unrealized gain (loss) on investments		4.16		(3.43	)		3.58		5.47		(15.54	)

Total from investment operations		4.42		(3.17	)		3.72		5.54		(15.25	)
Less distributions from:
Net investment income		0.67		—			0.42		0.11		—
Net realized gain		—		—			—		—		0.75

Total distributions		0.67		—			0.42		0.11		0.75

Net asset value, end of year	$	22.43	$	18.68		$	21.85	$	18.55	$	13.12

Total Return (%)		23.67		(14.51	)		20.09		42.27		(52.33	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.44		1.45			1.43		1.45		1.39
Expenses, before waivers and reimbursements		1.44		1.46			1.43		1.46		1.39
Net investment income (loss), net of waivers and reimbursements		1.25		1.22			0.73		0.48		1.29
Net investment income (loss), before waivers and reimbursements		1.25		1.21			0.73		0.47		1.29
Net assets at end of year (in thousands)	$	1,269,736	$	1,277,534		$	2,689,417	$	2,539,596	$	1,980,750
Portfolio turnover rate (%)		81		103			99		121		91

	Class I
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	19.10	$	22.34		$	18.95	$	13.40	$	29.61
Income (loss) from investment operations:
Net investment income (loss) (a)		0.32		0.30			0.20		0.12		0.37
Net realized and unrealized gain (loss) on investments		4.25		(3.48	)		3.67		5.59		(15.83	)

Total from investment operations		4.57		(3.18	)		3.87		5.71		(15.46	)
Less distributions from:
Net investment income		0.73		0.06			0.48		0.16		—
Net realized gain		—		—			—		—		0.75

Total distributions		0.73		0.06			0.48		0.16		0.75

Net asset value, end of year	$	22.94	$	19.10		$	22.34	$	18.95	$	13.40

Total Return (%)		23.96		(14.23	)		20.47		42.63		(52.17	)
Ratios to average daily net assets (%):
Expenses		1.15		1.15			1.14		1.17		1.08
Net investment income (loss)		1.51		1.40			0.99		0.74		1.58
Net assets at end of year (in thousands)	$	2,402,897	$	1,951,368		$	2,392,762	$	1,933,812	$	1,150,188
Portfolio turnover rate (%)		81		103			99		121		91

(a)

Excludes $0.10, $0.00, $0.13, $0.08 and $(0.18) of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for the years 2012, 2011, 2010, 2009, and 2008, respectively.

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

December 31, 2012

William Blair Funds 145

Financial Highlights

International Equity Fund


	Class N
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	10.56	$	12.12		$	11.07	$	8.35	$	16.53
Income (loss) from investment operations:
Net investment income (loss) (a)		0.11		0.13			0.06		0.09		0.10
Net realized and unrealized gain (loss) on investments		1.75		(1.69	)		1.15		2.64		(8.16	)

Total from investment operations		1.86		(1.56	)		1.21		2.73		(8.06	)
Less distributions from:
Net investment income		0.37		—			0.16		0.01		—
Net realized gain		—		—			—		—		0.12

Total distributions		0.37		—			0.16		0.01		0.12

Net asset value, end of year	$	12.05	$	10.56		$	12.12	$	11.07	$	8.35

Total Return (%)		17.57		(12.87	)		10.92		32.69		(48.75	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.45		1.45			1.45		1.45		1.45
Expenses, before waivers and reimbursements		1.71		1.60			1.66		1.59		1.45
Net investment income (loss), net of waivers and reimbursements		0.95		1.09			0.55		1.03		0.80
Net investment income (loss), before waivers and reimbursements		0.69		0.94			0.34		0.89		0.80
Net assets at end of year (in thousands)	$	5,648	$	6,773		$	13,733	$	15,436	$	42,824
Portfolio turnover rate (%)		80		99			71		88		92

	Class I
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	10.67	$	12.22		$	11.16	$	8.44	$	16.66
Income (loss) from investment operations:
Net investment income (loss) (a)		0.14		0.17			0.10		0.08		0.15
Net realized and unrealized gain (loss) on investments		1.77		(1.72	)		1.15		2.70		(8.25	)

Total from investment operations		1.91		(1.55	)		1.25		2.78		(8.10	)
Less distributions from:
Net investment income		0.40		—			0.19		0.06		—
Net realized gain		—		—			—		—		0.12

Total distributions		0.40		—			0.19		0.06		0.12

Net asset value, end of year	$	12.18	$	10.67		$	12.22	$	11.16	$	8.44

Total Return (%)		17.89		(12.68	)		11.19		32.93		(48.61	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20		1.20			1.20		1.20		1.20
Expenses, before waivers and reimbursements		1.44		1.33			1.28		1.39		1.22
Net investment income (loss), net of waivers and reimbursements		1.17		1.43			0.88		0.86		1.12
Net investment income (loss), before waivers and reimbursements		0.93		1.30			0.80		0.67		1.10
Net assets at end of year (in thousands)	$	64,536	$	68,884		$	164,322	$	282,732	$	185,662
Portfolio turnover rate (%)		80		99			71		88		92

(a)

Excludes $0.01, $0.00, $0.04, $0.00 and $0.00 of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for the years 2012, 011, 2010, 2009, and 2008, respectively.

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

146 Annual Report

December 31, 2012

Financial Highlights

International Leaders Fund


	Class N
	Period Ended December 31,
	2012 (a)
Net asset value, beginning of year	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.00	^
Net realized and unrealized gain (loss) on investments		0.82

Total from investment operations		0.82
Less distributions from:
Net investment income		0.01
Net realized gain		—

Total distributions		0.01

Net asset value, end of year	$	10.81

Total Return (%)*		8.16
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.45
Expenses, before waivers and reimbursements		4.98
Net investment income (loss), net of waivers and reimbursements		—
Net investment income (loss), before waivers and reimbursements		(3.53	)
Net assets at end of year (in thousands)	$	542
Portfolio turnover rate (%)*		16

	Class I
	Period Ended December 31,
	2012 (a)
Net asset value, beginning of year	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.01
Net realized and unrealized gain (loss) on investments		0.82

Total from investment operations		0.83
Less distributions from:
Net investment income		0.02
Net realized gain		—

Total distributions		0.02

Net asset value, end of year	$	10.81

Total Return (%)*		8.26
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.20
Expenses, before waivers and reimbursements		4.56
Net investment income (loss), net of waivers and reimbursements		0.22
Net investment income (loss), before waivers and reimbursements		(3.14	)
Net assets at end of year (in thousands)	$	4,336
Portfolio turnover rate (%)*		16

(a)

For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.

(b)

Excludes $0.01 of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for 2012.

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

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

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 147

Financial Highlights

International Small Cap Growth Fund


	Class N
	Years Ended December 31,
	2012		2011			2010		2009			2008
Net asset value, beginning of year	$	11.36	$	13.07		$	10.40	$	6.62		$	13.98
Income (loss) from investment operations:
Net investment income (loss) (a)		0.08		0.07			0.03		(0.01	)		(0.02	)
Net realized and unrealized gain (loss) on investments		2.27		(1.66	)		2.66		3.79			(7.22	)

Total from investment operations		2.35		(1.59	)		2.69		3.78			(7.24	)
Less distributions from:
Net investment income		0.25		0.12			0.02		—			—
Net realized gain		—		—			—		—			0.12

Total distributions		0.25		0.12			0.02		—			0.12

Net asset value, end of year	$	13.46	$	11.36		$	13.07	$	10.40		$	6.62

Total Return (%)		20.73		(12.16	)		25.88		57.10			(51.82	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.61		1.64			1.55		1.65			1.65
Expenses, before waivers and reimbursements		1.61		1.64			1.55		1.83			1.62
Net investment income (loss), net of waivers and reimbursements		0.65		0.55			0.30		(0.16	)		(0.20	)
Net investment income (loss), before waivers and reimbursements		0.65		0.55			0.30		(0.34	)		(0.17	)
Net assets at end of year (in thousands)	$	14,771	$	18,991		$	21,916	$	14,854		$	11,363
Portfolio turnover rate (%)		76		85			85		136			78

	Class I
	Years Ended December 31,
	2012		2011			2010		2009			2008
Net asset value, beginning of year	$	11.46	$	13.19		$	10.49	$	6.67		$	14.01
Income (loss) from investment operations:
Net investment income (loss) (a)		0.12		0.12			0.07		0.01			0.01
Net realized and unrealized gain (loss) on investments		2.30		(1.69	)		2.68		3.83			(7.23	)

Total from investment operations		2.42		(1.57	)		2.75		3.84			(7.22	)
Less distributions from:
Net investment income		0.30		0.16			0.05		0.02			—
Net realized gain		—		—			—		—			0.12

Total distributions		0.30		0.16			0.05		0.02			0.12

Net asset value, end of year	$	13.58	$	11.46		$	13.19	$	10.49		$	6.67

Total Return (%)		21.10		(11.84	)		26.24		57.51			(51.56	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30		1.28			1.25		1.31			1.31
Expenses, before waivers and reimbursements		1.30		1.28			1.25		1.31			1.28
Net investment income (loss), net of waivers and reimbursements		0.95		0.92			0.61		0.11			0.11
Net investment income (loss), before waivers and reimbursements		0.95		0.92			0.61		0.11			0.14
Net assets at end of year (in thousands)	$	359,557	$	364,574		$	349,679	$	210,561		$	89,452
Portfolio turnover rate (%)		76		85			85		136			78

(a)

Excludes $0.04, $0.00, $0.15, $0.01 and $(0.02) of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for the years 2012, 2011, 2010, 2009 and 2008, respectively.

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

148 Annual Report

December 31, 2012

Financial Highlights

Emerging Markets Growth Fund


	Class N
	Years Ended December 31,
	2012		2011			2010			2009			2008
Net asset value, beginning of year	$	11.16	$	15.76		$	12.87		$	7.46		$	21.92
Income (loss) from investment operations:
Net investment income (loss) (a)		0.07		0.07			(0.01	)		0.00	^		0.11
Net realized and unrealized gain (loss) on investments		2.24		(2.84	)		3.02			5.51			(13.63	)

Total from investment operations		2.31		(2.77	)		3.01			5.51			(13.52	)
Less distributions from:
Net investment income		0.07		—			0.12			0.10			—
Net realized gain		—		1.83			—			—			0.94

Total distributions		0.07		1.83			0.12			0.10			0.94

Net asset value, end of year	$	13.40	$	11.16		$	15.76		$	12.87		$	7.46

Total Return (%)		20.70		(17.29	)		23.44			73.85			(61.71	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.69		1.68			1.63			1.70			1.67
Expenses, before waivers and reimbursements		1.69		1.68			1.63			1.81			1.65
Net investment income (loss), net of waivers and reimbursements		0.59		0.48			(0.05	)		0.04			0.65
Net investment income (loss), before waivers and reimbursements		0.59		0.48			(0.05	)		(0.07	)		0.67
Net assets at end of year (in thousands)	$	16,724	$	17,474		$	34,324		$	27,271		$	16,486
Portfolio turnover rate (%)		90		104			121			113			118

	Class I
	Years Ended December 31,
	2012		2011			2010			2009			2008
Net asset value, beginning of year	$	11.25	$	15.87		$	12.95		$	7.51		$	21.99
Income (loss) from investment operations:
Net investment income (loss) (a)		0.11		0.11			0.04			0.03			0.15
Net realized and unrealized gain (loss) on investments		2.25		(2.85	)		3.03			5.54			(13.69	)

Total from investment operations		2.36		(2.74	)		3.07			5.57			(13.54	)
Less distributions from:
Net investment income		0.11		0.05			0.15			0.13			—
Net realized gain		—		1.83			—			—			0.94

Total distributions		0.11		1.88			0.15			0.13			0.94

Net asset value, end of year	$	13.50	$	11.25		$	15.87		$	12.95		$	7.51

Total Return (%)		21.01		(17.00	)		23.77			74.18			(61.60	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.41		1.38			1.36			1.41			1.41
Expenses, before waivers and reimbursements		1.41		1.38			1.36			1.41			1.39
Net investment income (loss), net of waivers and reimbursements		0.86		0.77			0.26			0.31			0.91
Net investment income (loss), before waivers and reimbursements		0.86		0.77			0.26			0.31			0.93
Net assets at end of year (in thousands)	$	144,942	$	124,739		$	194,763		$	180,329		$	69,363
Portfolio turnover rate (%)		90		104			121			113			118

(a)

Excludes $0.00, $0.01, $0.11, $0.15 and $(0.09) of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for the years 2012, 2011, 2010, 2009 and 2008, respectively.

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 149

Financial Highlights

Emerging Markets Leaders Fund


	Class N
	Periods Ended December 31,
	2012			2011			2010(a)
Net asset value, beginning of year	$	7.68		$	10.34		$	8.80
Income (loss) from investment operations:
Net investment income (loss) (c)		0.02			0.04			(0.02	)
Net realized and unrealized gain (loss) on investments		1.54			(2.08	)		1.64

Total from investment operations		1.56			(2.04	)		1.62
Less distributions from:
Net investment income		0.04			—			0.02
Net realized gain		—			0.62			0.06

Total distributions		0.04			0.62			0.08

Net asset value, end of year	$	9.20		$	7.68		$	10.34

Total Return (%)*		20.37			(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		0.26			0.44			(0.38	)
Net investment income (loss), before waivers and reimbursements		(0.19	)		0.26			(0.44	)
Net assets at end of year (in thousands)	$	249		$	46		$	53
Portfolio turnover rate (%)*		94			142			176


	Class I
	Periods Ended December 31,
	2012		2011			2010		2009		2008(b)
Net asset value, beginning of year	$	7.66	$	10.35		$	8.43	$	4.79	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (c)		0.07		0.06			0.02		0.02		0.04
Net realized and unrealized gain (loss) on investments		1.51		(2.08	)		1.98		3.73		(5.25	)

Total from investment operations		1.58		(2.02	)		2.00		3.75		(5.21	)
Less distributions from:
Net investment income		0.06		0.05			0.02		0.11		0.00	^
Net realized gain		—		0.62			0.06		—		—
Return of capital		—		0.00	^		—		—		—

Total distributions		0.06		0.67			0.08		0.11		0.00	^

Net asset value, end of year	$	9.18	$	7.66		$	10.35	$	8.43	$	4.79

Total Return (%)*		20.64		(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		1.75		1.58			1.52		1.54		1.56
Net investment income (loss), net of waivers and reimbursements		0.83		0.69			0.25		0.37		0.70
Net investment income (loss), before waivers and reimbursements		0.48		0.51			0.13		0.23		0.54
Net assets at end of year (in thousands)	$	25,628	$	21,610		$	16,332	$	8,823	$	2,914
Portfolio turnover rate (%)*		94		142			176		176		151

(a)

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

(b)

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

(c)

Excludes $0.00, $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 2012, 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.

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

150 Annual Report

December 31, 2012

Financial Highlights

Emerging Markets Small Cap Growth Fund


	Class N
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	9.73		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.06			0.00	^
Net realized and unrealized gain (loss) on investments		3.27			(0.27	)

Total from investment operations		3.33			(0.27	)
Less distributions from:
Net investment income		0.07			—
Net realized gain		—			—

Total distributions		0.07			—

Net asset value, end of year	$	12.99		$	9.73

Total Return (%)*		34.23			(2.70	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.65			1.65
Expenses, before waivers and reimbursements		4.76			9.53
Net investment income (loss), net of waivers and reimbursements		0.56			0.08
Net investment income (loss), before waivers and reimbursements		(2.54	)		(7.80	)
Net assets at end of year (in thousands)	$	3,016		$	1,012
Portfolio turnover rate (%)*		78			17

	Class I
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	9.73		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08			0.01
Net realized and unrealized gain (loss) on investments		3.29			(0.28	)

Total from investment operations		3.37			(0.27	)
Less distributions from:
Net investment income		0.11			—
Net realized gain		—			—

Total distributions		0.11			—

Net asset value, end of year	$	12.99		$	9.73

Total Return (%)*		34.62			(2.70	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40			1.40
Expenses, before waivers and reimbursements		4.40			9.28
Net investment income (loss), net of waivers and reimbursements		0.70			0.33
Net investment income (loss), before waivers and reimbursements		(2.30	)		(7.55	)
Net assets at end of year (in thousands)	$	8,763		$	2,260
Portfolio turnover rate (%)*		78			17

(a)

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

(b)

Excludes $0.05 and $0.00, of PFIC mark to market, which is treated as ordinary income for Federal tax purposes for the year 2012 and 2011 respectively.

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

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

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 151

Financial Highlights

Large Cap Value Fund


	Class N
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	9.95		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.11			0.03
Net realized and unrealized gain (loss) on investments		1.57			(0.05	)

Total from investment operations		1.68			(0.02	)
Less distributions from:
Net investment income		0.09			0.03
Net realized gain		—			0.00	^

Total distributions		0.09			0.03

Net asset value, end of year	$	11.54		$	9.95

Total Return (%)*		16.92			(0.19	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.20			1.20
Expenses, before waivers and reimbursements		4.25			7.83
Net investment income (loss), net of waivers and reimbursements		0.96			1.41
Net investment income (loss), before waivers and reimbursements		(2.09	)		(5.22	)
Net assets at end of year (in thousands)	$	1,416		$	998
Portfolio turnover rate (%)*		20			5

	Class I
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	9.95		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.14			0.03
Net realized and unrealized gain (loss) on investments		1.58			(0.05	)

Total from investment operations		1.72			(0.02	)
Less distributions from:
Net investment income		0.12			0.03
Net realized gain		—			0.00	^

Total distributions		0.12			0.03

Net asset value, end of year	$	11.55		$	9.95

Total Return (%)*		17.28			(0.19	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.95			0.95
Expenses, before waivers and reimbursements		4.06			7.58
Net investment income (loss), net of waivers and reimbursements		1.22			1.66
Net investment income (loss), before waivers and reimbursements		(1.89	)		(4.97	)
Net assets at end of year (in thousands)	$	2,429		$	1,455
Portfolio turnover rate (%)*		20			5

(a)

For the period from 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.

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

152 Annual Report

December 31, 2012

Financial Highlights

Small Cap Value Fund


	Class N
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	12.26	$	13.71		$	10.49	$	8.33	$	11.31
Income (loss) from investment operations:
Net investment income (loss)		0.10		0.00	^		0.03		0.06		0.09
Net realized and unrealized gain (loss) on investments		1.43		(0.97	)		3.22		2.13		(3.02	)

Total from investment operations		1.53		(0.97	)		3.25		2.19		(2.93	)
Less distributions from:
Net investment income		0.08		0.02			0.03		0.03		0.05
Net realized gain		0.06		0.46			—		—		—
Return of capital		—		0.00	^		—		—		—

Total distributions		0.14		0.48			0.03		0.03		0.05

Net asset value, end of year	$	13.65	$	12.26		$	13.71	$	10.49	$	8.33

Total Return (%)		12.49		(6.95	)		30.94		26.24		(25.85	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.43		1.38			1.33		1.29		1.29
Expenses, before waivers and reimbursements		1.60		1.60			1.57		1.78		1.82
Net investment income (loss), net of waivers and reimbursements		0.78		(0.01	)		0.25		0.68		0.84
Net investment income (loss), before waivers and reimbursements		0.61		(0.23	)		0.01		0.19		0.31
Net assets at end of year (in thousands)	$	39,084	$	40,712		$	34,285	$	7,745	$	7,061
Portfolio turnover rate (%)		51		65			71		62		87

	Class I
	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	12.47	$	13.93		$	10.65	$	8.45	$	11.50
Income (loss) from investment operations:
Net investment income (loss)		0.14		0.03			0.05		0.08		0.11
Net realized and unrealized gain (loss) on investments		1.45		(0.98	)		3.27		2.16		(3.08	)

Total from investment operations		1.59		(0.95	)		3.32		2.24		(2.97	)
Less distributions from:
Net investment income		0.12		0.03			0.04		0.04		0.08
Net realized gain		0.06		0.46			—		—		—
Return of capital		—		0.02			—		—		—

Total distributions		0.18		0.51			0.04		0.04		0.08

Net asset value, end of year	$	13.88	$	12.47		$	13.93	$	10.65	$	8.45

Total Return (%)		12.73		(6.68	)		31.16		26.56		(25.77	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.18		1.14			1.10		1.09		1.09
Expenses, before waivers and reimbursements		1.29		1.30			1.29		1.50		1.57
Net investment income (loss), net of waivers and reimbursements		1.02		0.26			0.43		0.86		1.06
Net investment income (loss), before waivers and reimbursements		0.91		0.10			0.24		0.45		0.58
Net assets at end of year (in thousands)	$	196,184	$	190,686		$	130,214	$	47,114	$	29,188
Portfolio turnover rate (%)		51		65			71		62		87

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 153

Financial Highlights

Mid Cap Value Fund


	Class N
	Periods Ended December 31,
	2012			2011			2010(a)
Net asset value, beginning of year	$	10.48		$	10.75		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08			0.12			0.09
Net realized and unrealized gain (loss) on investments		1.34			(0.17	)		0.74

Total from investment operations		1.42			(0.05	)		0.83
Less distributions from:
Net investment income		0.08			0.09			0.06
Net realized gain		0.43			0.13			0.02

Total distributions		0.51			0.22			0.08

Net asset value, end of year	$	11.39		$	10.48		$	10.75

Total Return (%)*		13.54			(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		3.40			3.85			5.09
Net investment income (loss), net of waivers and reimbursements		0.70			1.15			0.92
Net investment income (loss), before waivers and reimbursements		(1.35	)		(1.35	)		(2.82	)
Net assets at end of year (in thousands)	$	79		$	58		$	4
Portfolio turnover rate (%)*		63			69			35

	Class I
	Periods Ended December 31,
	2012			2011			2010(a)
Net asset value, beginning of year	$	10.48		$	10.76		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.10			0.13			0.11
Net realized and unrealized gain (loss) on investments		1.35			(0.17	)		0.75

Total from investment operations		1.45			(0.04	)		0.86
Less distributions from:
Net investment income		0.11			0.11			0.08
Net realized gain		0.43			0.13			0.02

Total distributions		0.54			0.24			0.10

Net asset value, end of year	$	11.39		$	10.48		$	10.76

Total Return (%)*		13.77			(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		3.13			3.60			4.92
Net investment income (loss), net of waivers and reimbursements		0.92			1.20			1.10
Net investment income (loss), before waivers and reimbursements		(1.11	)		(1.30	)		(2.72	)
Net assets at end of year (in thousands)	$	4,058		$	4,515		$	3,389
Portfolio turnover rate (%)*		63			69			35

(a)

For the period from 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.

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

154 Annual Report

December 31, 2012

Financial Highlights

Small-Mid Cap Value Fund


	Class N
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	10.45		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.10			0.00	^
Net realized and unrealized gain (loss) on investments		1.15			0.45

Total from investment operations		1.25			0.45
Less distributions from:
Net investment income		0.09			—
Net realized gain		0.32			—

Total distributions		0.41			—

Net asset value, end of year	$	11.29		$	10.45

Total Return (%)*		11.95			4.50
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40			1.40
Expenses, before waivers and reimbursements		6.34			18.68
Net investment income (loss), net of waivers and reimbursements		0.87			0.53
Net investment income (loss), before waivers and reimbursements		(4.07	)		(16.75	)
Net assets at end of year (in thousands)	$	950		$	860
Portfolio turnover rate (%)*		56			1

	Class I
	Periods Ended December 31,
	2012			2011(a)
Net asset value, beginning of year	$	10.45		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.13			0.00	^
Net realized and unrealized gain (loss) on investments		1.15			0.45

Total from investment operations		1.28			0.45
Less distributions from:
Net investment income		0.12			—
Net realized gain		0.32			—

Total distributions		0.44			—

Net asset value, end of year	$	11.29		$	10.45

Total Return (%)*		12.22			4.50
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.15			1.15
Expenses, before waivers and reimbursements		5.88			18.43
Net investment income (loss), net of waivers and reimbursements		1.12			0.79
Net investment income (loss), before waivers and reimbursements		(3.61	)		(16.49	)
Net assets at end of year (in thousands)	$	1,442		$	1,296
Portfolio turnover rate (%)*		56			1

(a)

For the period from 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.

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

December 31, 2012

William Blair Funds 155

Financial Highlights

Bond Fund


	Class N
	Years Ended December 31,
	2012		2011		2010		2009		2008
Net asset value, beginning of year	$	10.91	$	10.70	$	10.40	$	9.82	$	10.07
Income (loss) from investment operations:
Net investment income (loss)		0.36		0.43		0.46		0.48		0.47
Net realized and unrealized gain (loss) on investments		0.53		0.34		0.35		0.59		(0.31	)

Total from investment operations		0.89		0.77		0.81		1.07		0.16
Less distributions from:
Net investment income		0.45		0.47		0.48		0.49		0.41
Net realized gain		0.07		0.09		0.03		—		—

Total distributions		0.52		0.56		0.51		0.49		0.41

Net asset value, end of year	$	11.28	$	10.91	$	10.70	$	10.40	$	9.82

Total Return (%)		8.33		7.41		7.86		11.11		1.64
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.65		0.65		0.65		0.65		0.65
Expenses, before waivers and reimbursements		0.81		0.76		0.70		1.40		2.47
Net investment income (loss), net of waivers and reimbursements		3.25		3.97		4.25		4.76		4.69
Net investment income (loss), before waivers and reimbursements		3.09		3.86		4.20		4.01		2.87
Net assets at end of year (in thousands)	$	32,867	$	8,345	$	4,479	$	3,580	$	407
Portfolio turnover rate (%)		25		28		25		29		52

	Class I
	Years Ended December 31,
	2012		2011		2010		2009		2008
Net asset value, beginning of year	$	10.80	$	10.59	$	10.31	$	9.72	$	10.04
Income (loss) from investment operations:
Net investment income (loss)		0.38		0.45		0.47		0.49		0.48
Net realized and unrealized gain (loss) on investments		0.52		0.33		0.33		0.59		(0.31	)

Total from investment operations		0.90		0.78		0.80		1.08		0.17
Less distributions from:
Net investment income		0.46		0.48		0.49		0.49		0.49
Net realized gain		0.07		0.09		0.03		—		—

Total distributions		0.53		0.57		0.52		0.49		0.49

Net asset value, end of year	$	11.17	$	10.80	$	10.59	$	10.31	$	9.72

Total Return (%)		8.54		7.62		7.89		11.40		1.72
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		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
Net investment income (loss), net of waivers and reimbursements		3.45		4.17		4.41		4.92		4.90
Net investment income (loss), before waivers and reimbursements		3.39		4.12		4.36		4.84		4.69
Net assets at end of year (in thousands)	$	172,836	$	154,224	$	147,807	$	127,538	$	63,763
Portfolio turnover rate (%)		25		28		25		29		52

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

156 Annual Report

December 31, 2012

Financial Highlights

Income Fund


	Class N
	Years Ended December 31,
	2012		2011		2010		2009		2008
Net asset value, beginning of year	$	9.32	$	9.22	$	9.07	$	8.69	$	9.29
Income (loss) from investment operations:
Net investment income (loss)		0.24		0.32		0.35		0.40		0.37
Net realized and unrealized gain (loss) on investments		0.31		0.15		0.19		0.44		(0.59	)

Total from investment operations		0.55		0.47		0.54		0.84		(0.22	)
Less distributions from:
Net investment income		0.32		0.37		0.39		0.46		0.38
Net realized gain		—		—		—		—		—

Total distributions		0.32		0.37		0.39		0.46		0.38

Net asset value, end of year	$	9.55	$	9.32	$	9.22	$	9.07	$	8.69

Total Return (%)		6.00		5.21		6.04		9.88		(2.46	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.83		0.85		0.85		0.85		0.90
Expenses, before waivers and reimbursements		0.83		0.91		0.85		0.93		0.93
Net investment income (loss), net of waivers and reimbursements		2.49		3.40		3.79		4.48		4.38
Net investment income (loss), before waivers and reimbursements		2.49		3.34		3.79		4.41		4.35
Net assets at end of year (in thousands)	$	68,947	$	44,802	$	35,755	$	37,567	$	47,009
Portfolio turnover rate (%)		33		39		29		40		38

	Class I
	Years Ended December 31,
	2012		2011		2010		2009		2008
Net asset value, beginning of year	$	9.25	$	9.15	$	9.00	$	8.64	$	9.30
Income (loss) from investment operations:
Net investment income (loss)		0.26		0.34		0.37		0.41		0.39
Net realized and unrealized gain (loss) on investments		0.31		0.15		0.19		0.43		(0.59	)

Total from investment operations		0.57		0.49		0.56		0.84		(0.20	)
Less distributions from:
Net investment income		0.34		0.39		0.41		0.48		0.46
Net realized gain		—		—		—		—		—

Total distributions		0.34		0.39		0.41		0.48		0.46

Net asset value, end of year	$	9.48	$	9.25	$	9.15	$	9.00	$	8.64

Total Return (%)		6.28		5.46		6.33		9.89		(2.26	)
Ratios to average daily net assets (%):
Expenses		0.58		0.64		0.63		0.66		0.72
Net investment income (loss)		2.78		3.66		4.01		4.67		4.57
Net assets at end of year (in thousands)	$	72,830	$	67,183	$	77,522	$	80,041	$	93,426
Portfolio turnover rate (%)		33		39		29		40		38

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

December 31, 2012

William Blair Funds 157

Financial Highlights

Low Duration Bond Fund


	Class N
	Periods Ended December 31,
	2012		2011		2010		2009(a)
Net asset value, beginning of year	$	9.82	$	9.90	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.13		0.15		0.13		0.01
Net realized and unrealized gain (loss) on investments		0.14		0.02		0.05		(0.07	)

Total from investment operations		0.27		0.17		0.18		(0.06	)
Less distributions from:
Net investment income		0.26		0.25		0.21		0.01
Net realized gain		—		—		—		—

Total distributions		0.26		0.25		0.21		0.01

Net asset value, end of year	$	9.83	$	9.82	$	9.90	$	9.93

Total Return (%)*		2.80		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		0.74		0.73		0.78		0.94
Net investment income (loss), net of waivers and reimbursements		1.37		1.52		1.33		1.27
Net investment income (loss), before waivers and reimbursements		1.33		1.49		1.25		1.03
Net assets at end of year (in thousands)	$	11,216	$	6,260	$	6,937	$	1,861
Portfolio turnover rate (%)*		20		43		51		—

	Class I
	Periods Ended December 31,
	2012		2011		2010		2009(a)
Net asset value, beginning of year	$	9.82	$	9.89	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.15		0.17		0.15		0.01
Net realized and unrealized gain (loss) on investments		0.14		0.02		0.04		(0.07	)

Total from investment operations		0.29		0.19		0.19		(0.06	)
Less distributions from:
Net investment income		0.28		0.26		0.23		0.01
Net realized gain		—		—		—		—

Total distributions		0.28		0.26		0.23		0.01

Net asset value, end of year	$	9.83	$	9.82	$	9.89	$	9.93

Total Return (%)*		2.96		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		0.57		0.58		0.63		0.79
Net investment income (loss), net of waivers and reimbursements		1.52		1.67		1.46		1.39
Net investment income (loss), before waivers and reimbursements		1.50		1.64		1.38		1.15
Net assets at end of year (in thousands)	$	157,213	$	82,828	$	88,568	$	79,773
Portfolio turnover rate (%)*		20		43		51		—

(a)

For the period from 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.

158 Annual Report

December 31, 2012

Financial Highlights

Ready Reserves Fund


	Class N
	Years Ended December 31,
	2012			2011			2010			2009			2008
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.00	^		0.00	^		0.00	^		0.02
Net realized and unrealized gain (loss) on investments		—			—			—			—			—

Total from investment operations		0.00	^		0.00	^		0.00	^		0.00	^		0.02
Less distributions from:
Net investment income		0.00	^		0.00	^		0.00	^		0.00	^		0.02
Net realized gain		—			—			—			—			—

Total distributions		0.00	^		0.00	^		0.00	^		0.00	^		0.02

Net asset value, end of year	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00

Total Return (%)		0.01			0.01			0.01			0.10			2.20
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.14			0.14			0.24			0.46			0.60
Expenses, before waivers and reimbursements		0.62			0.62			0.61			0.66			0.60
Net investment income (loss), net of waivers and reimbursements		0.01			0.01			0.01			0.11			2.12
Net investment income (loss), before waivers and reimbursements		(0.47	)		(0.47	)		(0.36	)		(0.09	)		2.12
Net assets at end of year (in thousands)	$	1,515,330		$	1,271,746		$	1,216,543		$	1,352,901		$	1,841,189

Amount is less than $0.005 per share.

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

December 31, 2012

William Blair Funds 159

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of

William Blair Funds

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Growth Fund, Large Cap Growth Fund, Small Cap Growth Fund, Mid Cap Growth Fund, Small-Mid Cap Growth Fund, Global Leaders Fund (formerly known as Global Growth Fund), International Growth Fund, International Equity Fund, International Leaders Fund, International Small Cap Growth Fund, Emerging Markets Growth Fund, Emerging Markets Leaders Fund (formerly known as Emerging Leaders Growth Fund), Emerging Markets Small Cap Growth Fund, Large Cap Value Fund, Small Cap Value Fund, Mid Cap Value Fund, Small-Mid Cap Value Fund, Bond Fund, Income Fund, Low Duration Fund and Ready Reserves Fund (collectively, the “Funds”) (twenty-one of the Funds constituting William Blair Funds) as of December 31, 2012, and the related statements of operations, statements of changes in net assets, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above mentioned Funds of William Blair Funds at December 31, 2012, the results of their operations, the changes in their net assets, and the financial highlights for the periods indicated therein in conformity with U.S. generally accepted accounting principles.

LOGO

Chicago, Illinois

April 22, 2013

160 Annual Report

December 31, 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*	Chairman of the Board of Trustees and President	Trustee since 2002; Chairman since 2010 Since 2007	Partner, William Blair & Company, L.L.C.; Limited Partner, WBC Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	25	Chairman, William Blair SICAV; Director, William Blair CLS Ltd.; Director, William Blair MAS Ltd.; 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.; Limited Partner, WBC Holdings, L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	25	Director, William Blair SICAV Director, William Blair CLS Ltd.; Director, William Blair MAS Ltd.;

Non-Interested Trustees
Vann A. Avedisian, 1964	Trustee	Since 2012	Principal, Highgate Holdings since 2009; formerly, co-founder and Managing Director, Oxford Capital Partners, Inc. from 1994 to 2006	25	Potbelly Sandwich Works, LLC

Phillip O. Peterson, 1944	Trustee	Since 2007	Retired; formerly, President, Strong Mutual Funds, 2004 to 2005; formerly, Partner, KPMG LLP	25	The Hartford Group of Mutual Funds (87 portfolios); Symetra Mutual Funds Trust (variable annuity funds) (14 portfolios)

Donald J. Reaves, 1946	Trustee	Since 2004	Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002 to 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)

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

December 31, 2012

William Blair Funds 161


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
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 (2005-2009)		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

162 Annual Report

December 31, 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 Management (2004-2009)	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

December 31, 2012

William Blair Funds 163


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. (since 2008); prior thereto, Associate Counsel and Chief Compliance Officer, Calamos Investments (2006-2008)	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. (since 2008); prior thereto, Associate, Bell, Boyd & Lloyd, LLP (2006-2008)	N/A

John M. Raczek, 1970	Assistant Treasurer	Since 2010	Associate, William Blair & Company, L.L.C. (since 2009); prior thereto, Manager, Calamos Investments (2003-2009)	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 WBC 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.

164 Annual Report

December 31, 2012

Approval of the Management Agreement for the William Blair International Leaders Fund

On April 24, 2012 and August 3, 2012, the Board of Trustees (the “Board”) of William Blair Funds (the “Trust”), including the Trustees who are not interested persons of the Trust as defined by the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the Management Agreement between the Trust, on behalf of the William Blair International Leaders Fund (the “Fund”), and William Blair & Company, L.L.C. (the “Advisor”). On April 23 and 24, 2012 and August 3, 2012, the Board met to consider the approval of the Management Agreement. On April 23 and 24, 2012 and August 2, 2012, the Independent Trustees also met independently of Trust management and the interested Trustees of the Trust to consider the approval of the Management Agreement. The Independent Trustees reviewed materials provided by the Advisor for the approval of the Management Agreement and were assisted by independent legal counsel in making their determination. The Board considered the following factors in making its determination, but did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of services expected to be provided by the Advisor to the Fund, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high quality people. The Board considered biographical information about the Fund’s portfolio managers, financial information regarding the Advisor, the compliance regime created by the Advisor and the proposed financial support of the Fund. The Board considered that the proposed portfolio management team currently co-manages the William Blair Global Growth Fund and that a member of the portfolio management team currently manages the William Blair International Growth Fund and the William Blair Institutional International Growth Fund. The Board also considered the Advisor’s experience in managing new funds. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Advisor to the Fund were expected to be satisfactory.

Fees and Expenses. The Board reviewed the proposed advisory fee for the Fund and reviewed information comparing the advisory fee to a peer group of funds provided by Lipper Inc. The Lipper peer group for the Fund consisted of other no-load international large-cap growth funds. In considering the information, the Board noted that the proposed advisory fee for the Fund was slightly above the median of the Lipper peer group. The Board also considered that the Advisor had proposed to limit total operating expenses, including waiving advisory fees, if necessary, for each share class of the Fund until April 30, 2014. On the basis of the information provided, the Board concluded that the proposed advisory fee was reasonable in light of the nature, quality and extent of services expected to be provided by the Advisor.

Profitability. With respect to the estimated profitability of the Management Agreement to the Advisor, the Board considered the proposed advisory fee, that the Fund was newly organized and had no assets and the Advisor’s agreement to limit total expenses until April 30, 2014. The Board concluded that the expected profits to be realized by the Advisor were not expected to be unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board reviewed the Fund’s advisory fee compared to peer funds and the Fund’s estimated expense ratios giving effect to the Advisor’s agreement to limit total expenses until April 30, 2014, and concluded that the advisory fee was reasonable.

Other Benefits to the Advisor. The Board considered benefits to be derived by the Advisor from its relationship with the Fund. The Board concluded that, after taking into account these benefits, the proposed advisory fee was reasonable.

Conclusion. Based upon all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement are fair and reasonable and that the approval of the Management Agreement is in the best interests of the Fund.

December 31, 2012

William Blair Funds 165

(unaudited)

Proxy Voting

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds 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 Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended January 31 and July 31) 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.

Shareholder Meeting Results

A Special Meeting of Shareholders (the “Meeting”) of William Blair Funds (the “Trust”) was held on August 2, 2012 in the 2nd Floor Conference Room at 222 West Adams Street, Chicago, Illinois 60606. At the Meeting, the following matter was voted upon by shareholders (the resulting votes are presented below).

1.	Election of Trustees to the Board of Trustees of the Trust. (“Number of Votes” represents all series of the Trust.)


	Number of Votes:
Trustee	For	Withhold
Vann A. Avedisian	1,644,687,158.154	12,090,164.011
Phillip O. Peterson	1,644,159,693.572	12,617,628.593
Lisa A. Pollina*	1,644,478,204.339	12,299,117.826
Donald J. Reaves	1,642,694,755.277	14,082,566.888
Donald L. Seeley	1,644,312,102.168	12,465,219.997
Michelle R. Seitz	1,640,209,136.710	16,568,185.455
Thomas J. Skelly	1,643,851,882.961	12,925,439.204
Richard W. Smirl	1,640,721,918.768	16,055,403.397

Ms. Pollina resigned from the Board of Trustees on October 23, 2012.

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, 2012:



Growth Fund	Small Cap Growth	Mid Cap Growth	Small Mid Cap Growth
20,221,469	1,671,239	7,948,197	9,118,849

Small Cap Value	Mid Cap Value	Small Mid Cap Value	Bond Fund
946,031	145,618	123	1,934,272

166 Annual Report

December 31, 2012

The following table provides the percentage of the 2012 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:


Fund	Dividend Received Deduction%			Qualified Dividend Income%
Growth		100.00	%		100.00	%
Large Cap Growth		0.00	%		0.00	%
Small Cap Growth		0.00	%		0.00	%
Mid Cap Growth		100.00	%		100.00	%
Small Mid-Cap Growth		99.13	%		100.00	%
Global Leaders		100.00	%		100.00	%
International Growth		0.00	%		72.82	%
International Equity		0.00	%		70.29	%
International Leaders		0.42	%		92.76	%
International Small Cap Growth		0.00	%		78.98	%
Emerging Markets Growth		0.27	%		100.00	%
Emerging Markets Leaders		0.00	%		100.00	%
Emerging Markets Small Cap Growth		0.21	%		100.00	%
Large Cap Value		100.00	%		100.00	%
Small Cap Value		100.00	%		100.00	%
Mid Cap Value		89.10	%		100.00	%
Small-Mid Cap Value		38.86	%		47.73	%
Bond		0.00	%		0.00	%
Income		0.00	%		0.00	%
Low Duration		0.00	%		0.00	%
Ready Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		0.00	%		0.00	%

In January 2013, investors were notified on IRS Form 1099-Div or substitute 1099 DIV as to the Federal tax status of the distributions received by investors in the calendar year 2012.

December 31, 2012

William Blair Funds 167

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 Leaders Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Markets Leaders 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 July 1, 2012 to December 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.

168 Annual Report

December 31, 2012

Fund Expenses (unaudited)

The examples below show you the ongoing costs (in dollars) of investing in your fund and allows you to compare these costs with those of other mutual funds. Please refer to the previous page for a detailed explanation of the information presented on this chart.


Expense Example	Beginning Account Value 7/1/2012		Ending Account Value 12/31/2012		Expenses Paid During the Period(a)		Annualized Expense Ratio
Growth Fund
Class N—actual return	$	1,000.00	$	1,061.71	$	6.17		1.19	%
Class N—hypothetical 5% return		1,000.00		1,019.15		6.04		1.19
Class I—actual return		1,000.00		1,063.30		4.66		0.90
Class I—hypothetical 5% return		1,000.00		1,020.62		4.56		0.90
Large Cap Growth Fund
Class N—actual return		1,000.00		1,055.77		6.20		1.20
Class N—hypothetical 5% return		1,000.00		1,019.10		6.09		1.20
Class I—actual return		1,000.00		1,056.96		4.91		0.95
Class I—hypothetical 5% return		1,000.00		1,020.36		4.82		0.95
Small Cap Growth Fund
Class N—actual return		1,000.00		1,082.02		7.85		1.50
Class N—hypothetical 5% return		1,000.00		1,017.60		7.61		1.50
Class I—actual return		1,000.00		1,083.23		6.55		1.25
Class I—hypothetical 5% return		1,000.00		1,018.85		6.34		1.25
Mid Cap Growth Fund
Class N—actual return		1,000.00		1,036.18		6.91		1.35
Class N—hypothetical 5% return		1,000.00		1,018.35		6.85		1.35
Class I—actual return		1,000.00		1,037.81		5.53		1.08
Class I—hypothetical 5% return		1,000.00		1,019.71		5.48		1.08
Small-Mid Cap Growth Fund
Class N—actual return		1,000.00		1,068.54		6.95		1.34
Class N—hypothetical 5% return		1,000.00		1,018.42		6.78		1.34
Class I—actual return		1,000.00		1,069.04		5.72		1.10
Class I—hypothetical 5% return		1,000.00		1,019.61		5.58		1.10
Global Leaders Fund
Class N—actual return		1,000.00		1,079.20		7.84		1.50
Class N—hypothetical 5% return		1,000.00		1,017.60		7.61		1.50
Class I—actual return		1,000.00		1,081.49		6.54		1.25
Class I—hypothetical 5% return		1,000.00		1,018.85		6.34		1.25
International Growth Fund
Class N—actual return		1,000.00		1,148.74		7.62		1.41
Class N—hypothetical 5% return		1,000.00		1,018.04		7.16		1.41
Class I—actual return		1,000.00		1,149.89		6.17		1.14
Class I—hypothetical 5% return		1,000.00		1,019.40		5.79		1.14
International Equity Fund
Class N—actual return		1,000.00		1,124.54		7.74		1.45
Class N—hypothetical 5% return		1,000.00		1,017.85		7.35		1.45
Class I—actual return		1,000.00		1,126.16		6.41		1.20
Class I—hypothetical 5% return		1,000.00		1,019.10		6.09		1.20
International Leaders Fund
Class N—actual return(b)		1,000.00		1,106.60		7.68		1.45
Class N—hypothetical 5% return (6 month period)		1,000.00		1,017.85		7.35		1.45
Class I—actual return(b)		1,000.00		1,108.60		6.36		1.20
Class I—hypothetical 5% return (6 month period)		1,000.00		1,019.10		6.09		1.20
International Small Cap Growth Fund
Class N—actual return		1,000.00		1,137.22		8.48		1.58
Class N—hypothetical 5% return		1,000.00		1,017.20		8.01		1.58
Class I—actual return		1,000.00		1,139.40		7.01		1.30
Class I—hypothetical 5% return		1,000.00		1,018.59		6.61		1.30

(a)

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period 184, and divided by 366 (to reflect the one-half year period).

(b)

For the period August 16, 2012 (Commencement of Operations) to December 31, 2012.

December 31, 2012

William Blair Funds 169


Expense Example	Beginning Account Value 7/1/2012		Ending Account Value 12/31/2012		Expenses Paid During the Period(a)		Annualized Expense Ratio
Emerging Markets Growth Fund
Class N—actual return	$	1,000.00	$	1,127.25	$	8.98		1.68	%
Class N—hypothetical 5% return		1,000.00		1,016.70		8.51		1.68
Class I—actual return		1,000.00		1,127.85		7.55		1.41
Class I—hypothetical 5% return		1,000.00		1,018.04		7.16		1.41
Emerging Markets Leaders Fund
Class N—actual return		1,000.00		1,125.97		8.82		1.65
Class N—hypothetical 5% return		1,000.00		1,016.84		8.36		1.65
Class I—actual return		1,000.00		1,128.32		7.49		1.40
Class I—hypothetical 5% return		1,000.00		1,018.10		7.10		1.40
Emerging Markets Small Cap Growth Fund
Class N—actual return		1,000.00		1,174.55		9.02		1.65
Class N—hypothetical 5% return		1,000.00		1,016.84		8.36		1.65
Class I—actual return		1,000.00		1,175.79		7.66		1.40
Class I—hypothetical 5% return		1,000.00		1,018.10		7.10		1.40
Large Cap Value Fund
Class N—actual return		1,000.00		1,071.23		6.25		1.20
Class N—hypothetical 5% return		1,000.00		1,019.10		6.09		1.20
Class I—actual return		1,000.00		1,072.56		4.95		0.95
Class I—hypothetical 5% return		1,000.00		1,020.36		4.82		0.95
Small Cap Value Fund
Class N—actual return		1,000.00		1,066.59		7.53		1.45
Class N—hypothetical 5% return		1,000.00		1,017.85		7.35		1.45
Class I—actual return		1,000.00		1,068.16		6.24		1.20
Class I—hypothetical 5% return		1,000.00		1,019.10		6.09		1.20
Mid Cap Value Fund
Class N—actual return		1,000.00		1,084.71		7.07		1.35
Class N—hypothetical 5% return .		1,000.00		1,018.35		6.85		1.35
Class I—actual return		1,000.00		1,085.88		5.77		1.10
Class I—hypothetical 5% return		1,000.00		1,019.61		5.58		1.10
Small-Mid Cap Value Fund
Class N—actual return		1,000.00		1,070.36		7.29		1.40
Class N—hypothetical 5% return		1,000.00		1,018.10		7.10		1.40
Class I—actual return		1,000.00		1,071.92		5.99		1.15
Class I—hypothetical 5% return		1,000.00		1,019.36		5.84		1.15
Bond Fund
Class N—actual return		1,000.00		1,042.40		3.34		0.65
Class N—hypothetical 5% return		1,000.00		1,021.87		3.30		0.65
Class I—actual return		1,000.00		1,043.43		2.57		0.50
Class I—hypothetical 5% return		1,000.00		1,022.62		2.54		0.50
Income Fund
Class N—actual return		1,000.00		1,029.70		4.29		0.84
Class N—hypothetical 5% return		1,000.00		1,020.91		4.27		0.84
Class I—actual return		1,000.00		1,031.08		2.97		0.58
Class I—hypothetical 5% return		1,000.00		1,022.22		2.95		0.58
Low Duration Fund
Class N—actual return		1,000.00		1,011.91		3.54		0.70
Class N—hypothetical 5%		1,000.00		1,021.62		3.56		0.70
Class I—actual return		1,000.00		1,012.69		2.78		0.55
Class I—hypothetical 5%		1,000.00		1,022.37		2.80		0.55
Ready Reserves Fund
Class N—actual return		1,000.00		1,000.23		0.50		0.10
Class N—hypothetical 5% return		1,000.00		1,024.63		0.51		0.10

(a)

170 Annual Report

December 31, 2012

BOARD OF TRUSTEES

Vann A. Avedisian

Principal, Highgate Holdings

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, 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)

December 31, 2012

William Blair Funds 171

William Blair Funds


DOMESTIC EQUITY	GLOBAL EQUITY	FIXED-INCOME
Growth Fund	Global Leaders 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
	International Leaders Fund
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 Markets Leaders 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

00093586

LOGO

William Blair Funds

Institutional

Annual Report

December 31, 2012

Table of Contents


Global Markets Overview			2

Global Leaders Fund (Formerly known as Global Growth Fund)
An Overview from the Portfolio Managers			3
Portfolio of Investments			5

Institutional International Growth Fund
An Overview from the Portfolio Manager			7
Portfolio of Investments			9

Institutional International Equity Fund
An Overview from the Portfolio Manager			14
Portfolio of Investments			16

International Leaders Fund
An Overview from the Portfolio Managers			18
Portfolio of Investments			20

International Small Cap Growth Fund
An Overview from the Portfolio Manager			22
Portfolio of Investments			24

Emerging Markets Growth Fund
An Overview from the Portfolio Managers			27
Portfolio of Investments			29

Emerging Markets Leaders Fund (Formerly known as Emerging Leaders Growth Fund)
An Overview from the Portfolio Managers			32
Portfolio of Investments			34

Emerging Markets Small Cap Growth Fund
An Overview from the Portfolio Managers			36
Portfolio of Investments			38

Bond Fund
An Overview from the Portfolio Managers			41
Portfolio of Investments			43

Low Duration Fund
An Overview from the Portfolio Managers			47
Portfolio of Investments			49

Financial Statements			53

Notes to Financial Statements			62

Financial Highlights			73

Report of Independent Registered Public Accounting Firm			83

Board of Trustees and Officers			84

Fund Expense			91

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

December 31, 2012

William Blair Funds 1

GLOBAL MARKETS OVERVIEW

In a year beset by concerns about macroeconomic policies, debt and global growth, where most investors generally maintained a cautious stance, risk assets produced a stealth rally. The global equity market, as reflected by the MSCI ACWI IMI rose 16.38% during the period, while high yield fixed income and real estate also performed well. Financials was the strongest performing sector during 2012, rising nearly 28%, followed by a 24% Discretionary return, as Utilities and Energy lagged, each returning below 3%. The strong 2012 double digit equity return, however, masks the volatility that occurred during the year, as the market moved from expectations of reinvigorated China-led global growth in the first quarter, to second quarter concerns about a European Union collapse, to third quarter improved European sentiment and stabilizing Chinese economic indicators. The fourth quarter of 2012 ended with a bang despite US Fiscal Cliff concerns as equity markets rallied on the expectations of a stabilizing Chinese economy, continued progress in Europe, and as a reform-minded Shinzo Abe was re-elected as prime minister of Japan. High quality stocks with good earnings trends and growth prospects outpaced their lower quality counterparts during 2012; although this varied during the period. In particular, as the market rallied in the first and fourth quarters on expectations of improving global growth, companies with low valuations and lower quality characteristics rallied the strongest.

2 Annual Report

December 31, 2012

LOGO

W. George Greig

LOGO

Kenneth J. McAtamney

GLOBAL LEADERS FUND (FORMERLY KNOWN AS GLOBAL GROWTH FUND)

The Global Leaders Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The Global Leaders Fund (formerly the Global Growth Fund) posted a 0.32% decrease (Institutional Class Shares) since its inception date of December 19, 2012 through December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World IMI Index (net) increased 0.59%.

The Fund’s Financials weighting increased from approximately 15% of the fund as of year-end 2011 to 21%, due to an increase in Commercial Banks. Funding this increase was a decrease in Consumer Staples, IT and Energy. Regionally, the US remained underweighted during the period, ending the year at 41.9% of the Fund, with the biggest weighting in Consumer Discretionary. Developed Europe was overweighted versus the Index, while Developed Asia and Emerging Markets largely approximated the Index.

December 31, 2012

William Blair Funds 3

Global Leaders Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2012


	Since Inception(a)
Institutional Class		(0.32	)%
MSCI All Country World IMI (net)		0.59

(a)

For the period from December 19, 2012 (Commencement of Operations)

to December 31, 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.

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

Sector Diversification (Unaudited)

LOGO

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

4 Annual Report

December 31, 2012

Global Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Western Hemisphere—45.0%*
Canada—3.1%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		27,755	$	1,017
The Toronto-Dominion Bank (Commercial banks)		12,657		1,066

				2,083

United States—41.9%
*Affiliated Managers Group, Inc. (Capital markets)		6,298		820
American Express Co. (Consumer finance)		16,739		962
AMETEK, Inc. (Electrical equipment)		20,843		783
Apple, Inc. (Computers & peripherals)		2,859		1,524
*Citrix Systems, Inc. (Software)		12,481		821
Colgate-Palmolive Co. (Household products)		7,150		747
Costco Wholesale Corporation (Food & staples retailing)		9,914		979
*Discovery Communications, Inc. Class “A” (Media)		16,667		1,058
*Express Scripts Holding Co. (Health care providers & services)		19,257		1,040
Exxon Mobil Corporation (Oil, gas & consumable fuels)		14,071		1,218
*Fortune Brands Home & Security, Inc. (Building products)		26,545		776
Harley-Davidson, Inc. (Automobiles)		21,962		1,072
*IDEXX Laboratories, Inc. (Health care equipment & supplies)		6,102		566
Jones Lang LaSalle, Inc. (Real estate management & development)		10,376		871
JPMorgan Chase & Co. (Diversified financial services)		33,820		1,487
Marriott International, Inc. Class “A” (Hotels, restaurants & leisure)		25,678		957
Mastercard, Inc. Class “A” (IT services)		2,477		1,217
McCormick & Co., Inc. (Food products)		10,395		660
*O’Reilly Automotive, Inc. (Specialty retail)		7,973		713
*priceline.com, Inc. (Internet & catalog retail)		1,579		981
QUALCOMM, Inc. (Communications equipment)		17,836		1,106
Schlumberger, Ltd. (Energy equipment & services)†		20,623		1,429
*SolarWinds, Inc. (Software)		9,873		518
Starbucks Corporation (Hotels, restaurants & leisure)		19,091		1,024
The Walt Disney Co. (Media)		22,640		1,127
Union Pacific Corporation (Road & rail)		9,858		1,239
W.W. Grainger, Inc. (Trading companies & distributors)		1,872		379
Williams-Sonoma, Inc. (Specialty retail)		22,508		985
Yum! Brands, Inc. (Hotels, restaurants & leisure)		15,116		1,004

				28,063


*Europe, Mid-East—19.2%*
Denmark—2.8%
CHR Hansen Holding A/S (Chemicals)		9,194		300
Coloplast A/S Class “B” (Health care equipment & supplies)		8,185		401
Novo Nordisk A/S Class “B” (Pharmaceuticals)		7,285		1,186

				1,887


*Common Stocks—Europe, Mid-East—19.2%—(continued)*
France—4.0%
BNP Paribas S.A. (Commercial banks)		24,001	$	1,366
Essilor International S.A. (Health care equipment & supplies)		3,726		376
Technip S.A. (Energy equipment & services)		8,078		934

				2,676

Germany—5.4%
Bayerische Motoren Werke AG (Automobiles)		10,923		1,063
Brenntag AG (Trading companies & distributors)		4,078		537
Fresenius SE & Co. KGaA (Health care providers & services)		6,241		718
MTU Aero Engines Holding AG (Aerospace & defense)		3,653		334
SAP AG (Software)		11,804		949

				3,601

Ireland—0.7%
Paddy Power plc (Hotels, restaurants & leisure)		5,311		439

Israel—1.1%
*Check Point Software Technologies, Ltd. (Software)†		15,704		748

Sweden—1.4%
Atlas Copco AB Class “A” (Machinery)		34,197		948

Switzerland—3.8%
Nestle S.A. (Food products)		10,123		660
Partners Group Holding AG (Capital markets)		3,434		794
Syngenta AG (Chemicals)		2,737		1,106

				2,560


*United Kingdom—13.8%*
Abcam plc (Biotechnology)		42,503		268
AMEC plc (Energy equipment & services)		29,001		479
ARM Holdings plc (Semiconductors & semiconductor equipment)		69,599		879
Ashmore Group plc (Capital markets)		85,961		508
Babcock International Group plc (Commercial services & supplies)		26,705		422
BHP Billiton plc (Metals & mining)		38,069		1,343
Compass Group plc (Hotels, restaurants & leisure)		84,563		1,004
Diageo plc (Beverages)		39,426		1,148
Experian plc (Professional services)		63,378		1,021
Hargreaves Lansdown plc (Capital markets)		36,243		405
Lancashire Holdings, Ltd. (Insurance)		14,531		185
*Rolls-Royce Holdings plc (Aerospace & defense)		68,186		978
The Weir Group plc (Machinery)		18,668		577

				9,217


*Emerging Asia—7.0%*
China—2.6%
*Baidu, Inc.—ADR (Internet software & services)		6,586		661
China Mobile, Ltd. (Wireless telecommunication services)		80,000		941

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 5

Global Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount				Value

*Common Stocks—Emerging Asia—7.0%—(continued)*
China—(continued)
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		9,897			$	156

						1,758

Indonesia—1.2%
PT Bank Rakyat Indonesia (Commercial banks)		1,071,500				777

South Korea—3.2%
*Hyundai Motor Co. (Automobiles)		4,125				850
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		903				1,298

						2,148


*Japan—3.2%*
Fanuc Corporation (Machinery)		5,800				1,079
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		28,600				1,040

						2,119


*Emerging Europe, Mid-East, Africa—2.8%*
South Africa—1.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		27,661				554
Bidvest Group, Ltd. (Industrial conglomerates)		17,601				450

						1,004

Turkey—1.3%
Turkiye Halk Bankasi A.S. (Commercial banks)		88,141				869


*Asia—1.8%*
Hong Kong—1.8%
AIA Group, Ltd. (Insurance)		311,400				1,235


*Emerging Latin America—1.6%*
Argentina—0.6%
MercadoLibre, Inc. (Internet software & services)		5,651				444

Brazil—1.0%
BR Malls Participacoes S.A. (Real estate management & development)		49,300				651

Total Common Stocks—94.4% (cost $54,930)						63,227


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $338, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	338				338

Total Repurchase Agreement—0.5% (cost $338)						338

Total Investments—94.9% (cost $55,268)			$	63,565
Cash and other assets, less liabilities—5.1%				3,429

Net assets—100.0%			$	66,994

ADR = American Depository Receipt

† = U.S. listed foreign security

*Non-income producing securities

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			20.7%
Consumer Discretionary			19.4%
Information Technology			17.7%
Industrials			15.1%
Health Care			8.3%
Consumer Staples			6.6%
Energy			6.4%
Materials			4.3%
Telecommunication Services			1.5%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


U.S. Dollar			48.9%
British Pound Sterling			14.6%
Euro			10.6%
Swiss Franc			4.0%
Hong Kong Dollar			3.7%
South Korean Won			3.4%
Japanese Yen			3.4%
Danish Krone			3.0%
Canadian Dollar			1.7%
South African Rand			1.6%
Swedish Krona			1.5%
Turkish Lira			1.4%
Indonesian Rupiah			1.2%
Brazilian Real			1.0%

Total			100.0%

See accompanying Notes to Financial Statements.

6 Annual Report

December 31, 2012

LOGO

W. George Greig

INSTITUTIONAL INTERNATIONAL GROWTH FUND

The Institutional International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The Institutional International Growth Fund posted a 24.11% increase for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net) increased 17.04%.

The Fund slightly outpaced the Index during the fourth quarter, but added significant alpha during 2012. Fourth quarter performance was bolstered by positive stock selection across a number of sectors, more than offsetting Consumer and Energy underperformance. In particular, Financials stock selection was strong, particularly within Commercial Banks, while REITs also added value. The Fund’s Health Care stocks outperformed the Index by over 3% during the period, given strong results in Pharmaceuticals, while Samsung Electronics, the South Korean Semiconductors & semiconductor equipment company and ARM Holdings, the UK Semiconductors & semiconductor equipment company reported good results during the period, bolstering Information Technology (IT ) performance. Discretionary results were hampered by underperformance by Hyundai Motor, the South Korean Automobiles company, along with Nitori Holdings, the Japanese Specialty retail company, on weak sales results and a price cutting initiative, while both Services and Oil/Gas underperformed within Energy during the period. Stock selection was strong across regions during the fourth quarter, with the notable exception of Japan, while currency hedging added approximately 20 basis points to performance, as we hedged Japanese Yen exposure and the USD rallied.

As of year end, the Fund remained focused on Europe at the expense of Developed Asia and Canada. Japan represented 13.6% of the Fund, an increase since December 2011. Emerging Markets totaled 20.4% of the Fund as of December 31, and shifted towards Emerging Asia at the expense of Latin America. From a sector perspective, Financials was the largest weighting at nearly 26% of the Fund, just above the 25.2% Index weighting, increasing throughout the year. The Fund remained overweighted in Discretionary, Healthcare and Industrials at the expense of Energy and Materials.

December 31, 2012

William Blair Funds 7

Institutional International Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			10 Year
Institutional International Growth Fund		24.11	%		8.77	%		(2.47	)%		10.31	%
MSCI All Country World Ex-US IMI (net)		17.04			4.18			(2.59	)		10.16

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

Sector Diversification (unaudited)

LOGO

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

8 Annual Report

December 31, 2012

Institutional International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Europe—33.0%*
Austria—0.8%
Andritz AG (Machinery)		194,576	$	12,503
Schoeller-Bleckmann Oilfield Equipment AG (Energy equipment & services)		35,819		3,754

				16,257

Belgium—0.3%
Colruyt S.A. (Food & staples retailing)		117,882		5,845

Denmark—1.2%
Coloplast A/S Class “B” (Health care equipment & supplies)		310,515		15,228
GN Store Nord A/S (Health care equipment & supplies)		369,812		5,374
SimCorp A/S (Software)		14,716		3,283

				23,885

Finland—1.1%
Kone Oyj (Machinery)		185,526		13,721
Nokian Renkaat Oyj (Auto components)		171,094		6,854

				20,575

France—9.9%
Arkema S.A. (Chemicals)		202,193		21,230
BNP Paribas S.A. (Commercial banks)		944,659		53,779
Christian Dior S.A. (Textiles, apparel & luxury goods)		94,916		16,179
Hermes International (Textiles, apparel & luxury goods)		22,941		6,859
Sanofi (Pharmaceuticals)		417,747		39,615
Societe BIC S.A. (Commercial services & supplies)		59,323		7,111
Unibail-Rodamco SE (Real estate investment trusts (REITs))		106,346		25,789
Vivendi S.A. (Diversified telecommunication services)		820,530		18,557
Zodiac Aerospace (Aerospace & defense)		54,135		5,993

				195,112

Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)		50,114		598
Bayer AG (Pharmaceuticals)		266,450		25,409
Bertrandt AG (Professional services)		16,168		1,623
Brenntag AG (Trading companies & distributors)		56,064		7,386
Deutsche Bank AG (Capital markets)		170,238		7,490
Deutsche Wohnen AG (Real estate management & development)		329,116		6,110
Fresenius SE & Co. KGaA (Health care providers & services)		117,109		13,475
Gerry Weber International AG (Textiles, apparel & luxury goods)		106,286		5,148
MTU Aero Engines Holding AG (Aerospace & defense)		107,678		9,827

				77,066

Ireland—0.2%
Paddy Power plc (Hotels, restaurants & leisure)		55,910		4,616


*Common Stocks—Europe—33.0%—(continued)*
Italy—0.9%
Azimut Holding SpA (Capital markets)		238,414	$	3,431
Intesa Sanpaolo SpA (Commercial banks)		3,967,997		6,862
Pirelli & C. SpA (Auto components)		260,418		3,000
Tod’s SpA (Textiles, apparel & luxury goods)		40,134		5,096

				18,389

Netherlands—3.7%
ASML Holding N.V. (Semiconductors & semiconductor equipment)		102,288		6,560
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		969,528		34,589
Unilever N.V. (Food products)		832,186		31,843

				72,992

Norway—3.0%
Fred Olsen Energy ASA (Energy equipment & services)		80,938		3,554
Schibsted ASA (Media)		129,332		5,531
Statoil ASA (Oil, gas & consumable fuels)		1,208,676		30,464
Telenor ASA (Diversified telecommunication services)		974,291		19,838

				59,387

Spain—1.4%
Inditex S.A. (Specialty retail)		160,875		22,604
Viscofan S.A. (Food products)		76,567		4,337

				26,941

Sweden—2.0%
Atlas Copco AB Class “A” (Machinery)		769,266		21,332
Getinge AB (Health care equipment & supplies)		379,333		12,894
Hexpol AB (Chemicals)		89,005		4,723

				38,949

Switzerland—4.6%
Burckhardt Compression Holding AG (Machinery)		5,223		1,717
*Credit Suisse Group AG (Capital markets)		406,213		9,914
*Geberit AG (Building products)		57,955		12,847
Glencore International plc (Metals & mining)		4,985,620		28,801
Partners Group Holding AG (Capital markets)		46,350		10,715
SGS S.A. (Professional services)		5,214		11,581
Syngenta AG (Chemicals)		37,826		15,281

				90,856


*United Kingdom—18.2%*
Abcam plc (Biotechnology)		555,441		3,498
Aberdeen Asset Management plc (Capital markets)		882,711		5,312
AMEC plc (Energy equipment & services)		541,215		8,947
Amlin plc (Insurance)		1,018,489		6,332
ARM Holdings plc (Semiconductors & semiconductor equipment)		793,041		10,015
Ashmore Group plc (Capital markets)		1,447,183		8,545
Babcock International Group plc (Commercial services & supplies)		1,013,408		15,997

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 9

Institutional International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—United Kingdom—18.2%—(continued)*
Bunzl plc (Trading companies & distributors)		381,112	$	6,308
Croda International plc (Chemicals)		93,425		3,652
Debenhams plc (Multiline retail)		334,010		624
Derwent London plc (Real estate investment trusts (REITs))		185,767		6,429
Diageo plc (Beverages)		1,200,964		34,980
Dunelm Group plc (Specialty retail)		553,921		6,352
Elementis plc (Chemicals)		1,194,458		4,561
Experian plc (Professional services)		595,519		9,598
Halma plc (Electronic equipment, instruments & components)		732,846		5,515
Hargreaves Lansdown plc (Capital markets)		119,752		1,339
Hiscox, Ltd. (Insurance)		501,767		3,735
IG Group Holdings plc (Diversified financial services)		686,902		5,055
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		590,818		16,567
ITV plc (Media)		10,168,053		17,639
John Wood Group plc (Energy equipment & services)		868,086		10,378
Johnson Matthey plc (Chemicals)		294,755		11,579
Jupiter Fund Management plc (Capital markets)		822,574		3,765
Lancashire Holdings, Ltd. (Insurance)		580,483		7,391
Meggitt plc (Aerospace & defense)		1,023,504		6,409
Moneysupermarket.com Group plc (Internet software & services)		1,658,536		4,252
*Ocado Group plc (Internet & catalog retail)		1,026,644		1,467
Oxford Instruments plc (Electronic equipment, instruments & components)		91,517		2,139
Prudential plc (Insurance)		1,672,556		23,863
Reckitt Benckiser Group plc (Household products)		357,445		22,690
Rightmove plc (Media)		147,708		3,473
*Rolls-Royce Holdings plc (Aerospace & defense)		1,336,392		19,168
Rotork plc (Machinery)		152,968		6,385
RPS Group plc (Commercial services & supplies)		552,726		1,911
Spirax-Sarco Engineering plc (Machinery)		107,962		4,042
St James’s Place plc (Insurance)		487,514		3,370
*The Berkeley Group Holdings plc (Household durables)		470,683		13,541
Tullow Oil plc (Oil, gas & consumable fuels)		969,148		20,204
Victrex plc (Chemicals)		201,886		5,381
Wolseley plc (Trading companies & distributors)		124,506		5,954

				358,362


*Japan—13.6%*
ABC-Mart, Inc. (Specialty retail)		82,200		3,579
Ain Pharmaciez, Inc. (Food & staples retailing)		33,800		1,849
Arnest One Corporation (Household durables)		192,500		3,153
Astellas Pharma, Inc. (Pharmaceuticals)		288,300		12,962

*Common Stocks—Japan—13.6%—(continued)*
Chiyoda Corporation (Construction & engineering)		538,000	$	7,707
Cosmos Pharmaceutical Corporation (Food & staples retailing)		19,200		1,908
Daito Trust Construction Co., Ltd. (Real estate management & development)		89,300		8,440
FamilyMart Co., Ltd. (Food & staples retailing)		186,600		7,688
Fast Retailing Co., Ltd. (Specialty retail)		49,900		12,735
Fuji Heavy Industries, Ltd. (Automobiles)		1,031,000		13,001
Japan Tobacco, Inc. (Tobacco)		650,700		18,382
Keyence Corporation (Electronic equipment, instruments & components)		44,500		12,341
Lawson, Inc. (Food & staples retailing)		156,500		10,616
M3, Inc. (Health care technology)		2,007		3,203
Miraca Holdings, Inc. (Health care providers & services)		75,400		3,040
MISUMI Group, Inc. (Trading companies & distributors)		114,300		3,124
MonotaRO Co., Ltd. (Trading companies & distributors)		56,300		1,814
Nitori Co., Ltd. (Specialty retail)		62,430		4,574
ORIX Corporation (Diversified financial services)		307,270		34,709
Ryohin Keikaku Co., Ltd. (Multiline retail)		46,200		2,584
Shimamura Co., Ltd. (Specialty retail)		53,900		5,238
Ship Healthcare Holdings, Inc. (Health care providers & services)		108,600		2,886
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		1,185,700		43,090
Sumitomo Realty & Development Co., Ltd. (Real estate management & development)		692,000		23,053
Sundrug Co., Ltd. (Food & staples retailing)		106,900		3,656
Suruga Bank, Ltd. (Commercial banks)		476,000		5,854
Tsuruha Holdings, Inc. (Food & staples retailing)		38,300		3,021
United Arrows, Ltd. (Specialty retail)		81,100		1,868
Yahoo! Japan Corporation (Internet software & services)		40,299		13,049

				269,124


*Emerging Asia—11.2%*
China—2.6%
*Brilliance China Automotive Holdings, Ltd. (Automobiles)		6,108,000		7,676
China Overseas Land & Investment, Ltd. (Real estate management & development)		6,532,000		19,860
Great Wall Motor Co., Ltd. Class “H” (Automobiles)		2,804,000		9,018
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		214,215		2,543
Lenovo Group, Ltd. (Computers & peripherals)		9,164,000		8,450
Spreadtrum Communications, Inc.—ADR (Semiconductors & semiconductor equipment)		134,617		2,369

See accompanying Notes to Financial Statements.

10 Annual Report

December 31, 2012

Institutional International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—11.2%—(continued)*
China—(continued)
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		124,883	$	1,967

				51,883

India—2.1%
CRISIL, Ltd. (Diversified financial services)		93,643		1,857
Gruh Finance, Ltd. (Thrifts & mortgage finance)		308,895		1,342
IndusInd Bank, Ltd. (Commercial banks)		327,111		2,525
Ipca Laboratories, Ltd. (Pharmaceuticals)		323,767		3,066
Lupin, Ltd. (Pharmaceuticals)		399,258		4,509
Oberoi Realty, Ltd. (Real estate management & development)		457,649		2,429
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		562,110		7,603
Tata Motors, Ltd. (Automobiles)		2,436,173		14,003
Yes Bank, Ltd. (Commercial banks)		487,715		4,154

				41,488

Indonesia—1.0%
PT Alam Sutera Realty Tbk (Real estate management & development)		48,039,500		3,006
PT Bank Rakyat Indonesia (Commercial banks)		9,358,000		6,787
PT Kalbe Farma Tbk (Pharmaceuticals)		55,774,500		6,147
PT Media Nusantara Citra Tbk (Media)		11,878,500		3,086

				19,026

Philippines—0.4%
International Container Terminal Services, Inc. (Transportation infrastructure)		1,101,280		1,989
Puregold Price Club, Inc. (Food & staples retailing)		2,466,100		1,984
SM Prime Holdings, Inc. (Real estate management & development)		10,867,375		4,381

				8,354

South Korea—3.5%
*Hyundai Motor Co. (Automobiles)		98,605		20,327
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		29,729		42,715
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		27,818		5,651

				68,693

Taiwan—0.4%
Asustek Computer, Inc. (Computers & peripherals)		584,000		6,613

Thailand—1.2%
Advanced Info Service PCL (Wireless telecommunication services)		1,380,500		9,495
BEC World PCL (Media)		1,669,200		3,891
Kasikornbank PCL (Commercial banks)		1,688,200		10,731

				24,117


*Common Stocks—Asia—6.7%*
Australia—2.5%
Cochlear, Ltd. (Health care equipment & supplies)		77,780	$	6,448
CSL, Ltd. (Biotechnology)		268,263		15,145
Telstra Corporation, Ltd. (Diversified telecommunication services)		6,237,029		28,421

				50,014

Hong Kong—2.2%
AIA Group, Ltd. (Insurance)		6,340,400		25,148
China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§		3,373,000		540
Hutchison Telecommunications Hong Kong Holdings, Ltd. (Diversified telecommunication services)		10,414,000		4,818
Sa Sa International Holdings, Ltd. (Specialty retail)		5,494,000		4,562
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		2,556,000		4,686
Value Partners Group, Ltd. (Capital markets)		3,920,000		2,641

				42,395

Singapore—2.0%
First Resources, Ltd. (Food products)		2,110,000		3,518
Global Logistic Properties, Ltd. (Real estate management & development)		7,074,000		16,360
Keppel Corporation, Ltd. (Industrial conglomerates)		2,226,300		20,330

				40,208


*Emerging Latin America—5.6%*
Brazil—2.1%
BR Malls Participacoes S.A. (Real estate management & development)		510,900		6,742
Cia de Concessoes Rodoviarias (Transportation infrastructure)		975,900		9,270
Cia Hering (Specialty retail)		322,100		6,606
Cielo S.A. (IT services)		239,800		6,675
*Lupatech S.A. (Energy equipment & services)		247,483		199
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		194,500		3,230
*Qualicorp S.A. (Health care providers & services)		203,900		2,112
T4F Entretenimento S.A. (Media)		104,900		402
Tractebel Energia S.A. (Independent power producers & energy traders)		270,500		4,406
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A. (Commercial services & supplies)		117,700		2,615

				42,257

Chile—1.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)		13,064,602		3,302
ENTEL Chile S.A. (Wireless telecommunication services)		327,708		6,777

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 11

Institutional International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Latin America—5.6%—(continued)*
Chile—(continued)
Inversiones La Construccion S.A. (Diversified financial services)		112,289	$	2,205
Parque Arauco S.A. (Real estate management & development)		2,800,655		6,955
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		119,536		6,890
Sonda S.A. (IT services)		922,766		2,939

				29,068

Colombia—0.8%
Ecopetrol S.A. (Oil, gas & consumable fuels)		4,945,608		15,282

Mexico—0.9%
Banregio Grupo Financiero S.A.B. de C.V. (Commercial banks)		602,900		2,747
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		325,400		2,101
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		3,519,600		12,697

				17,545

Panama—0.3%
Copa Holdings S.A. (Airlines)†		64,037		6,368


*Western Hemisphere—4.7%*
Bermuda—0.3%
RenaissanceRe Holdings, Ltd. (Insurance)†		81,975		6,661

Canada—4.4%
Alimentation Couche Tard, Inc. (Food & staples retailing)		196,099		9,646
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		709,440		26,001
Canadian National Railway Co. (Road & rail)†		258,736		23,548
CI Financial Corporation (Capital markets)		333,611		8,361
Metro, Inc. (Food & staples retailing)		169,690		10,804
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		358,639		8,289

				86,649


*Emerging Europe, Mid-East, Africa—3.6%*
Nigeria—0.3%
Guaranty Trust Bank plc (Commercial banks)		37,969,896		5,613

South Africa—2.7%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		514,677		10,304
Bidvest Group, Ltd. (Industrial conglomerates)		384,058		9,826
FirstRand, Ltd. (Diversified financial services)		3,170,179		11,665
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		1,060,597		4,262

*Common Stocks—Emerging Europe, Mid-East, Africa—3.6%—(continued)*
Naspers, Ltd. (Media)		169,900	$	10,974
Tiger Brands, Ltd. (Food products)		171,094		6,598

				53,629

Turkey—0.4%
Turkiye Halk Bankasi A.S. (Commercial banks)		855,961		8,438

United Arab Emirates—0.2%
First Gulf Bank PJSC (Commercial banks)		1,019,268		3,272

Total Common Stocks—96.6% (cost $1,577,573)				1,905,929


*Exchange-Traded Fund*
China—1.0%
iShares FTSE A50 China Index		14,221,840		20,441

Total Exchange-Traded Fund—1.0% (cost $18,862)				20,441


*Affiliated Fund*
China—0.6%
William Blair China A—Share Fund, LLC		1,183,400		11,834

Total Affiliated Fund—0.6% (cost $11,834)				11,834


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $37,717, collateralized by U.S. Treasury Note, 1.375%, due 11/30/15	$	37,717		37,717

Total Repurchase Agreement—1.9% (cost $37,717)				37,717

Total Investments—100.1% (cost $1,645,986)				1,975,921
Liabilities, plus cash and other assets—(0.1)%				(1,791	)

Net assets—100.0%			$	1,974,130

ADR = American Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.03% of the Fund’s net assets at December 31, 2012.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.03% of the net assets at December 31, 2012.

See accompanying Notes to Financial Statements.

12 Annual Report

December 31, 2012

Institutional International Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			25.3%
Industrials			14.1%
Consumer Discretionary			13.6%
Health Care			10.5%
Consumer Staples			9.3%
Information Technology			8.1%
Energy			7.0%
Materials			6.0%
Telecommunication Services			4.8%
Exchange-Traded Funds			1.1%
Utilities			0.2%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			21.8%
Euro			20.8%
Japanese Yen			13.9%
Hong Kong Dollar			5.8%
U.S. Dollar			4.3%
South Korean Won			3.5%
Swiss Franc			3.2%
Norwegian Krone			3.1%
South African Rand			2.8%
Australian Dollar			2.6%
Brazilian Real			2.2%
Indian Rupee			2.1%
Singapore Dollar			2.1%
Swedish Krona			2.0%
Canadian Dollar			1.9%
Thai Baht			1.3%
Danish Krone			1.2%
Chilean Peso			1.1%
All Other Currencies			4.3%

Total			100.0%

The Institutional International Growth Fund invested in the following affiliated fund. There are no unfunded commitments to the affiliated fund and the Fund may redeem its investment monthly.

Share Activity

Year Ended
December 31, 2012

(in thousands)

Fund Name

Balance
12/31/2011

Purchases

Sales

Balance
12/31/2012

Value

Dividends
Included
in Income

William Blair China A—Share Fund, LLC

—

1,183,400

—

1,183,400

11,834

—

As of December 31, 2012, the Fund invested in the William Blair China A—Share Fund, LLC, an affiliated fund. There was no realized or unrealized gain/ (loss) from investments in the affiliated fund.

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 13

LOGO

David Merjan

INSTITUTIONAL INTERNATIONAL EQUITY FUND

The Institutional International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The Institutional International Equity Fund posted an 18.31% increase for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI World ex-US Index (net) increased 16.41%.

In 2012, the Fund outpaced the MSCI World ex-US Index (net) on strong Healthcare, Information Technology (IT), Materials and Telecom Services stock selection. Essilor, the contact lens manufacturer, was a strong contributor as it continued to perform well fundamentally and benefited from its defensive nature mid-year, while the Fund’s Pharmaceutical companies also performed well, led by Novo Nordisk and Bayer. IT stock selection benefited from the overweighting and performance in Semiconductors and Semiconductor Equipment, particularly due to strong performance by Samsung Electronics and Arm Holdings. Materials added value given the Fund’s underweighting in the underperforming Metals/Mining industry, coupled with good Chemicals stock selection. Somewhat mitigating these positive results were the Fund’s Discretionary, Energy and Financials stock selection. Discretionary underperformance was largely the result of Automobiles performance, coupled with underperformance in Japanese holdings. Energy’s underperformance was due largely to BG Group’s production guidance in the fourth quarter, along with broader Oil/Gas stock selection. Financials stock selection was hampered by conservative positioning in Commercial Banks during the latter part of 2012, as the market accelerated.

During the year, we increased the weighting in European and Emerging Markets commercial banks, thereby increasing the Financials weighting from approximately 19.9% to just over 21%, although it remained underweighted relative to the 25.7% Index weighting. IT also increased from approximately 11.2% to 13.5%, well ahead of the 4% Index weighting, which was funded by reduced Discretionary and Energy weightings. Regionally, emerging markets totaled approximately 13%. The Fund ended the year overweighted in Developed Europe and underweighted in Developed Asia.

14 Annual Report

December 31, 2012

Institutional International Equity Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional International Equity Fund		18.31	%		4.93	%		(4.93	)%		3.62	%
MSCI World Ex-U.S. (net)		16.41			3.65			(3.43	)		4.32

(a)

For the period December 1, 2004 (Commencement of Operations) to December 31, 2012.

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

Sector Diversification (unaudited)

LOGO

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

December 31, 2012

William Blair Funds 15

Institutional International Equity Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Europe—42.2%*
Denmark—2.4%
Coloplast A/S Class “B” (Health care equipment & supplies)		18,300	$	898
Novo Nordisk A/S Class “B” (Pharmaceuticals)		10,631		1,731

				2,629

France—13.4%
Arkema S.A. (Chemicals)		12,431		1,305
BNP Paribas S.A. (Commercial banks)		38,756		2,206
Christian Dior S.A. (Textiles, apparel & luxury goods)		9,324		1,589
Dassault Systemes S.A. (Software)		17,400		1,946
Essilor International S.A. (Health care equipment & supplies)		13,449		1,357
L’Oreal S.A. (Personal products)		6,326		880
Sanofi (Pharmaceuticals)		26,394		2,503
Technip S.A. (Energy equipment & services)		14,884		1,721
Unibail-Rodamco SE (Real estate investment trusts (REITs))		5,124		1,243

				14,750

Germany—8.4%
BASF SE (Chemicals)		23,014		2,176
Bayer AG (Pharmaceuticals)		20,491		1,954
Fresenius SE & Co. KGaA (Health care providers & services)		16,552		1,905
MTU Aero Engines Holding AG (Aerospace & defense)		8,343		761
SAP AG (Software)		30,112		2,422

				9,218

Ireland—4.5%
Accenture plc Class “A” (IT services)†		25,540		1,698
Ryanair Holdings plc—ADR (Airlines)		39,838		1,366
Shire plc (Pharmaceuticals)		60,114		1,849

				4,913

Netherlands—2.0%
Unilever N.V. (Food products)		56,374		2,157

Norway—1.6%
Telenor ASA (Diversified telecommunication services)		84,131		1,713

Spain—1.9%
Inditex S.A. (Specialty retail)		14,956		2,101

Sweden—1.5%
Atlas Copco AB Class “A” (Machinery)		60,522		1,678

Switzerland—6.5%
*Geberit AG (Building products)		7,240		1,605
Nestle S.A. (Food products)		19,953		1,302
Roche Holding AG (Pharmaceuticals)		7,808		1,578
Syngenta AG (Chemicals)		6,453		2,607

				7,092


*United Kingdom—20.8%*
ARM Holdings plc (Semiconductors & semiconductor equipment)		122,394		1,546

*Common Stocks—United Kingdom—20.8%—(continued)*
Babcock International Group plc (Commercial services & supplies)		81,755	$	1,290
Burberry Group plc (Textiles, apparel & luxury goods)		66,664		1,340
Compass Group plc (Hotels, restaurants & leisure)		212,105		2,518
Diageo plc (Beverages)		76,798		2,237
Experian plc (Professional services)		74,463		1,200
HSBC Holdings plc (Commercial banks)		157,199		1,666
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		40,662		1,140
John Wood Group plc (Energy equipment & services)		118,551		1,417
Johnson Matthey plc (Chemicals)		42,209		1,658
Prudential plc (Insurance)		131,868		1,881
*Rolls-Royce Holdings plc (Aerospace & defense)		137,211		1,968
Tullow Oil plc (Oil, gas & consumable fuels)		44,567		929
Wolseley plc (Trading companies & distributors)		42,902		2,052

				22,842


*Japan—11.3%*
Chiyoda Corporation (Construction & engineering)		46,000		659
Daito Trust Construction Co., Ltd. (Real estate management & development)		18,200		1,720
Fuji Heavy Industries, Ltd. (Automobiles)		107,000		1,349
Keyence Corporation (Electronic equipment, instruments & components)		5,200		1,442
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)		24,800		1,463
ORIX Corporation (Diversified financial services)		16,790		1,897
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		54,100		1,966
Suruga Bank, Ltd. (Commercial banks)		81,000		996
Yahoo! Japan Corporation (Internet software & services)		2,645		857

				12,349


*Emerging Asia—8.5%*
China—4.1%
China Mobile, Ltd. (Wireless telecommunication services)		135,500		1,595
CNOOC, Ltd. (Oil, gas & consumable fuels)		559,000		1,231
Sun Art Retail Group, Ltd. (Food & staples retailing)		1,061,000		1,640

				4,466

India—0.7%
Tata Consultancy Services, Ltd. (IT services)		35,652		822

Papua New Guinea—0.7%
Oil Search, Ltd. (Oil, gas & consumable fuels)		110,906		820

South Korea—2.3%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		1,738		2,497

See accompanying Notes to Financial Statements.

16 Annual Report

December 31, 2012

Institutional International Equity Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—8.5%—(continued)*
Thailand—0.7%
Kasikornbank PCL (Commercial banks)		121,800	$	774

Canada—6.3%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		61,865		2,267
Canadian National Railway Co. (Road & rail)†		16,870		1,535
Goldcorp, Inc. (Metals & mining)†		40,868		1,500
The Toronto-Dominion Bank (Commercial banks)		19,353		1,630

				6,932


*Asia—5.3%*
Australia—1.7%
BHP Billiton, Ltd.—ADR (Metals & mining)		24,301		1,906

Hong Kong—2.2%
AIA Group, Ltd. (Insurance)		607,000		2,408

Singapore—1.4%
Keppel Corporation, Ltd. (Industrial conglomerates)		166,000		1,516


*Emerging Latin America—2.3%*
Mexico—1.2%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		12,967		1,306

Panama—1.1%
Copa Holdings S.A. (Airlines)†		12,286		1,222


*Emerging Europe, Mid-East, Africa—2.3%*
South Africa—1.7%
FirstRand, Ltd. (Diversified financial services)		503,396		1,852

Turkey—0.6%
Turkiye Garanti Bankasi A.S. (Commercial banks)		124,423		650

Total Common Stocks—99.0% (cost $88,597)				108,613

Total Investments—99.0% (cost $88,597)				108,613
Cash and other assets, less liabilities—1.0%				1,077

Net assets—100.0%			$	109,690

ADR = American Depository Receipt

† = U.S. listed foreign security

*Non-income producing securities

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			21.3%
Industrials			15.5%
Information Technology			13.5%
Health Care			12.7%
Materials			10.3%
Consumer Discretionary			9.2%
Consumer Staples			8.8%
Energy			5.6%
Telecommunication Services			3.1%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Euro			26.0%
British Pound Sterling			22.7%
U.S. Dollar			11.8%
Japanese Yen			11.4%
Swiss Franc			6.5%
Hong Kong Dollar			6.3%
Danish Krone			2.4%
South Korean Won			2.3%
South African Rand			1.7%
Norwegian Krone			1.6%
Swedish Krona			1.6%
Canadian Dollar			1.5%
Singapore Dollar			1.4%
All Other Currencies			2.8%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 17

LOGO

W. George Greig

LOGO

Kenneth J. McAtamney

INTERNATIONAL LEADERS FUND

The International Leaders Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The International Leaders Fund posted a 5.67% increase (Institutional Class Shares) since its inception date of December 2, 2012 through December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. IMI Index (net) increased 4.74% over the same period.

The International Leaders Fund outperformed the Index since its December 2012 inception. Auto companies bolstered Discretionary results, while Pharmaceuticals stock selection was also particularly strong. Within Industrials, the overweighting in the outperforming Machinery industry added value, as did stock selection in Trading Companies.

The market’s increased confidence in a positive resolution to the European sovereign crisis and related banking system has highlighted the attractive valuations in Financials, not only in Europe but globally as well. As a result, during the course of the period Financials increased to approximately 25% of the fund, due largely to an increase in Developed Market Commercial Banks. Industrials increased to 17% of the fund on an improved outlook and good valuations. Conversely, IT, Telecommunication Services and Consumer Staples decreased, as we reduced valuation risk in the Fund and on company-specific concerns. Regionally, the Fund maintained its significant overweighting in Europe, due largely to Health Care and IT, while the UK was also significantly overweighted in Consumer Discretionary and Industrials. Conversely, emerging markets and Developed Asia remained underweighted versus the Index.

18 Annual Report

December 31, 2012

International Leaders Fund

Performance Highlights (Unaudited)

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

Sector Diversification (Unaudited)

LOGO

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

Average Annual Total Return at 12/31/2012


	Since Inception(a)
Institutional Class		5.67	%
MSCI All Country World Ex-US IMI (net)		4.74

(a)

For the period from November 2, 2012 (Commencement of Operations) to December 31, 2012.

December 31, 2012

William Blair Funds 19

International Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Europe, Mid-East—41.4%*
Denmark—3.7%
Coloplast A/S Class “B” (Health care equipment & supplies)		2,795	$	137
Novo Nordisk A/S Class “B” (Pharmaceuticals)		1,502		245

				382

France—10.7%
Arkema S.A. (Chemicals)		1,633		171
BNP Paribas S.A. (Commercial banks)		5,569		317
Dassault Systemes S.A. (Software)		1,633		182
Sanofi (Pharmaceuticals)		2,380		226
Technip S.A. (Energy equipment & services)		1,623		188

				1,084

Germany—7.6%
Bayerische Motoren Werke AG (Automobiles)		2,451		238
Brenntag AG (Trading companies & distributors)		834		110
Fresenius SE & Co. KGaA (Health care providers & services)		1,816		209
SAP AG (Software)		2,645		213

				770

Israel—1.4%
*Check Point Software Technologies, Ltd. (Software)†		2,951		141

Netherlands—3.8%
Royal Dutch Shell plc Class “B” (Oil, gas & consumable fuels)		5,940		212
Unilever N.V. (Food products)		4,583		175

				387

Norway—1.7%
Statoil ASA (Oil, gas & consumable fuels)		6,722		169

Spain—2.4%
Inditex S.A. (Specialty retail)		1,719		242

Sweden—2.1%
Atlas Copco AB Class “A” (Machinery)		7,605		211

Switzerland—8.0%
*Geberit AG (Building products)		631		140
Glencore International plc (Metals & mining)		34,532		199
*Lindt & Spruengli AG (Food products)		2		76
Partners Group Holding AG (Capital markets)		693		160
Syngenta AG (Chemicals)		604		244

				819


*United Kingdom—22.1%*
ARM Holdings plc (Semiconductors & semiconductor equipment)		15,539		196
Babcock International Group plc (Commercial services & supplies)		7,982		126
Compass Group plc (Hotels, restaurants & leisure)		16,940		201
Diageo plc (Beverages)		6,181		180
Experian plc (Professional services)		7,720		125
HSBC Holdings plc (Commercial banks)		21,600		229
InterContinental Hotels Group plc (Hotels, restaurants & leisure)		6,025		169

*Common Stocks—United Kingdom—22.1%—(continued)*
Intertek Group plc (Professional services)		3,025	$	154
John Wood Group plc (Energy equipment & services)		9,330		112
Johnson Matthey plc (Chemicals)		4,221		166
*Rolls-Royce Holdings plc (Aerospace & defense)		7,130		102
*The Berkeley Group Holdings plc (Household durables)		4,737		136
The Weir Group plc (Machinery)		4,686		145
Wolseley plc (Trading companies & distributors)		4,212		201

				2,242


*Japan—10.0%*
Daito Trust Construction Co., Ltd. (Real estate management & development)		800		76
Fanuc Corporation (Machinery)		1,100		205
Fuji Heavy Industries, Ltd. (Automobiles)		8,000		101
Makita Corporation (Machinery)		3,400		158
ORIX Corporation (Diversified financial services)		2,410		272
Sumitomo Mitsui Financial Group, Inc. (Commercial banks)		5,700		207

				1,019


*Emerging Asia—6.9%*
China—3.3%
*Baidu, Inc.—ADR (Internet software & services)		1,417		142
China Mobile, Ltd. (Wireless telecommunication services)		16,000		188

				330

Indonesia—1.2%
PT Bank Rakyat Indonesia (Commercial banks)		170,000		123

South Korea—2.4%
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		173		249


*Emerging Latin America—5.4%*
Argentina—1.1%
MercadoLibre, Inc. (Internet software & services)		1,418		111

Brazil—1.0%
BR Malls Participacoes S.A. (Real estate management & development)		7,500		99

Mexico—1.5%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		1,506		152

Peru—1.8%
Credicorp, Ltd. (Commercial banks)†		1,290		189


*Asia—4.3%*
Hong Kong—4.3%
AIA Group, Ltd. (Insurance)		70,600		280
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)		12,500		154

				434

See accompanying Notes to Financial Statements.

20 Annual Report

December 31, 2012

International Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Asia—4.3%—(continued)*
Canada—4.2%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†		5,720	$	209
The Toronto-Dominion Bank (Commercial banks)		2,622		221

				430


*Emerging Europe, Mid-East, Africa—3.8%*
South Africa—3.8%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		4,198		84
Discovery Holdings, Ltd. (Insurance)		19,787		146
FirstRand, Ltd. (Diversified financial services)		41,624		153

				383

Total Common Stocks—98.1% (cost $9,254)				9,966


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $166, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	166		166

Total Repurchase Agreement—1.6% (cost $166)				166

Total Investments—99.7% (cost $9,420)				10,132
Cash and other assets, less liabilities—0.3%				32

Net assets—100.0%			$	10,164

ADR = American Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			24.9%
Industrials			16.9%
Information Technology			16.0%
Consumer Discretionary			10.9%
Health Care			9.0%
Materials			7.8%
Energy			6.8%
Consumer Staples			5.8%
Telecommunication Services			1.9%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			24.3%
Euro			22.8%
Japanese Yen			10.2%
U.S. Dollar			9.5%
Hong Kong Dollar			8.6%
Swiss Franc			6.2%
South African Rand			3.9%
Danish Krone			3.8%
South Korean Won			2.5%
Canadian Dollar			2.2%
Swedish Krona			2.1%
Norwegian Krone			1.7%
Indonesian Rupiah			1.2%
All Other Currencies			1.0%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 21

LOGO

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGER

The International Small Cap Growth Fund posted a 21.36% increase (Institutional Class Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI All Country World ex-U.S. Small Cap Index (net) increased 18.52%.

2012 performance was bolstered by particularly strong Discretionary stock selection, coupled with the significant overweighting, as well as strong performance in Materials and Industrials. Discretionary performance was driven by strong Auto-related company performance, in addition to strength in Hotels/Restaurants, Household Durables and Luxury holdings, which more than offset weakness in Japanese internet-related holdings. The Fund’s Materials stocks were up over 34%, as compared to the 5.25% Index return in the benchmark index, led by strength in Chemicals, and benefiting from the underweighting in the underperforming Metals/Mining industry. Industrials stock selection was also additive, as MTU Aero Engines, the German aerospace engine company, benefited from strong sales and earnings growth during the period. Babcock International, the UK engineering outsourcing company, also benefited from strong results that exceeded market expectations. Somewhat offsetting these positive results were the Fund’s underweighting in Materials and Financials, coupled with Energy and Information Technology (IT) stock selection.

Overall sector positioning did not substantially change during the year, although Discretionary was marginally increased to 26.9%, and remained overweighted versus the 17.4% Index weighting. While Financials increased to 13.2% of the Fund during the period, it remained significantly underweighted versus the 19.7% benchmark Index weighting. Industrials and Materials remained significantly underweighted as well, with a corresponding overweighting in Healthcare, which totaled 13.6% of the Fund as of year end, well ahead of the 5.2% benchmark Index weighting, due to significant holdings in Healthcare Providers and Pharmaceuticals. Regionally, the Fund remained focused on Developed Europe at the expense of Developed Asia, particularly Pacific ex-Japan. Emerging markets totaled 15.2% of the Fund, below the 23.3% Index weighting, due largely to a significant underweighting in Emerging Asia.

22 Annual Report

December 31, 2012

International Small Cap Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		21.36	%		10.69	%		0.74	%		6.68	%
MSCI ACWI Ex-U.S. Small Cap (net)		18.52			6.54			(0.39	)		5.99

(a)

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

Sector Diversification (unaudited)

LOGO

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

December 31, 2012

William Blair Funds 23

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Europe—28.5%*
Austria—0.3%
AMS AG (Semiconductors & semiconductor equipment)		22,333	$	2,405

Belgium—0.4%
*ThromboGenics N.V. (Biotechnology)		52,627		2,929

Denmark—1.0%
CHR Hansen Holding A/S (Chemicals)		70,769		2,305
GN Store Nord A/S (Health care equipment & supplies)		318,173		4,624

				6,929

Finland—0.7%
Tikkurila Oyj (Chemicals)		259,406		5,067

France—0.1%
*GameLoft SE (Software)		150,004		1,055

Germany—9.2%
Aixtron AG (Semiconductors & semiconductor equipment)		29,277		349
Bertrandt AG (Professional services)		20,097		2,018
ElringKlinger AG (Auto components)		331,992		11,260
Gerry Weber International AG (Textiles, apparel & luxury goods)		141,348		6,846
MTU Aero Engines Holding AG (Aerospace & defense)		116,389		10,621
Pfeiffer Vacuum Technology AG (Machinery)		42,530		5,183
Symrise AG (Chemicals)		215,847		7,755
Wincor Nixdorf AG (Computers & peripherals)		297,749		14,042
Wirecard AG (IT services)		320,351		7,909

				65,983

Ireland—2.1%
Paddy Power plc (Hotels, restaurants & leisure)		181,117		14,952

Italy—5.4%
Azimut Holding SpA (Capital markets)		733,543		10,556
De’Longhi SpA (Household durables)		544,103		7,819
Recordati SpA (Pharmaceuticals)		863,611		7,897
Salvatore Ferragamo Italia SpA (Textiles, apparel & luxury goods)		76,084		1,684
Tod’s SpA (Textiles, apparel & luxury goods)		51,896		6,589
*Yoox SpA (Internet & catalog retail)		257,471		4,078

				38,623

Norway—2.8%
Fred Olsen Energy ASA (Energy equipment & services)		153,966		6,760
Opera Software ASA (Internet software & services)		676,617		3,876
Schibsted ASA (Media)		222,219		9,503

				20,139

Spain—2.6%
Viscofan S.A. (Food products)		331,071		18,753


*Common Stocks—Europe—28.5%—(continued)*
Sweden—3.2%
Axis Communications AB (Communications equipment)		341,012	$	9,392
Hexpol AB (Chemicals)		171,111		9,080
JM AB (Household durables)		234,915		4,213
NIBE Industrier AB (Building products)		39,408		571

				23,256

Switzerland—0.7%
Burckhardt Compression Holding AG (Machinery)		15,674		5,150


*United Kingdom—26.2%*
Abcam plc (Biotechnology)		932,027		5,870
Ashmore Group plc (Capital markets)		1,736,586		10,254
*ASOS plc (Internet & catalog retail)		253,510		11,182
Aveva Group plc (Software)		321,425		11,535
AZ Electronic Materials S.A. (Chemicals)		903,483		5,198
Booker Group plc (Food & staples retailing)		8,108,578		12,940
Debenhams plc (Multiline retail)		4,908,407		9,164
Domino’s Pizza Group plc (Hotels, restaurants & leisure)		653,589		5,336
Dunelm Group plc (Specialty retail)		582,726		6,683
Elementis plc (Chemicals)		904,915		3,455
Fidessa Group plc (Software)		119,591		2,975
Halma plc (Electronic equipment, instruments & components)		850,474		6,400
Hiscox, Ltd. (Insurance)		470,236		3,501
IG Group Holdings plc (Diversified financial services)		1,232,896		9,074
*Imagination Technologies Group plc (Computers & peripherals)		187,732		1,224
Lancashire Holdings, Ltd. (Insurance)		897,939		11,433
Moneysupermarket.com Group plc (Internet software & services)		2,922,139		7,492
Oxford Instruments plc (Electronic equipment, instruments & components)		240,759		5,627
Rotork plc (Machinery)		347,388		14,501
RPS Group plc (Commercial services & supplies)		872,849		3,018
*Salamander Energy plc (Oil, gas & consumable fuels)		1,617,863		5,009
*Sports Direct International plc (Specialty retail)		873,033		5,524
St James’s Place plc (Insurance)		613,072		4,238
Synergy Health plc (Health care providers & services)		201,939		3,582
Telecity Group plc (Internet software & services)		260,085		3,359
*The Berkeley Group Holdings plc (Household durables)		432,957		12,455
Victrex plc (Chemicals)		268,463		7,155

				188,184


*Japan—16.4%*
Ain Pharmaciez, Inc. (Food & staples retailing)		109,000		5,962
Chiyoda Corporation (Construction & engineering)		885,000		12,678
Cosmos Pharmaceutical Corporation (Food & staples retailing)		77,000		7,652

See accompanying Notes to Financial Statements.

24 Annual Report

December 31, 2012

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Japan—16.4%—(continued)*
CyberAgent, Inc. (Media)		2,170	$	4,459
F.C.C. Co., Ltd. (Auto components)		365,509		7,592
FamilyMart Co., Ltd. (Food & staples retailing)		165,500		6,818
Kakaku.com, Inc. (Internet software & services)		89,600		2,958
M3, Inc. (Health care technology)		3,791		6,051
Miraca Holdings, Inc. (Health care providers & services)		254,200		10,250
MISUMI Group, Inc. (Trading companies & distributors)		269,500		7,365
MonotaRO Co., Ltd. (Trading companies & distributors)		126,000		4,059
Park24 Co., Ltd. (Commercial services & supplies)		116,000		1,832
Ryohin Keikaku Co., Ltd. (Multiline retail)		164,900		9,222
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)		64,800		6,505
Ship Healthcare Holdings, Inc. (Health care providers & services)		301,200		8,005
Suruga Bank, Ltd. (Commercial banks)		985,000		12,115
United Arrows, Ltd. (Specialty retail)		197,800		4,555

				118,078


*Emerging Asia—7.8%*
China—4.9%
China Medical System Holdings, Ltd. (Pharmaceuticals)		5,891,000		4,598
Dongyue Group (Chemicals)		8,759,000		5,922
*Haier Electronics Group Co., Ltd. (Household durables)		7,758,000		11,507
Haitian International Holdings, Ltd. (Machinery)		3,933,496		4,714
Minth Group, Ltd. (Auto components)		1,580,000		1,836
Sino Biopharmaceutical (Pharmaceuticals)		7,808,000		3,765
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)†		176,359		2,778

				35,120

India—2.9%
CRISIL, Ltd. (Diversified financial services)		174,919		3,469
eClerx Services, Ltd. (Professional services)		100,070		1,251
Ipca Laboratories, Ltd. (Pharmaceuticals)		429,511		4,068
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		146,216		3,471
Motherson Sumi Systems, Ltd. (Auto components)		1,957,109		7,126
Oberoi Realty, Ltd. (Real estate management & development)		337,316		1,790

				21,175


*Emerging Europe, Mid-East, Africa—5.7%*
Russia—0.1%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)†		154,616		845

South Africa—2.9%
Capitec Bank Holdings, Ltd. (Commercial banks)		227,238		4,917
Coronation Fund Managers, Ltd. (Capital markets)		998,657		4,676

*Common Stocks—Emerging Europe, Mid-East, Africa—5.7%—(continued)*
South Africa—(continued)
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		2,746,547	$	11,038

				20,631

Turkey—2.7%
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		1,196,176		7,042
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		9,869,085		12,728

				19,770


*Asia—5.7%*
Australia—1.4%
Domino’s Pizza Enterprises, Ltd. (Hotels, restaurants & leisure)		327,274		3,588
Seek, Ltd. (Professional services)		900,328		6,653

				10,241

Hong Kong—2.9%
Sa Sa International Holdings, Ltd. (Specialty retail)		11,950,000		9,923
SmarTone Telecommunications Holdings, Ltd. (Wireless telecommunication services)		5,804,000		10,641

				20,564

Singapore—1.4%
ARA Asset Management Ltd.—144A (Capital markets)		343,000		459
*Biosensors International Group, Ltd. (Health care equipment & supplies)		2,932,000		2,927
First Resources, Ltd. (Food products)		4,203,000		7,008

				10,394

Canada—4.8%
Canadian Energy Services & Technology Corporation (Energy equipment & services)		312,295		3,328
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)		1,326,320		9,147
Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		261,923		6,054
Precision Drilling Corporation (Energy equipment & services)		745,292		6,159
Total Energy Services, Inc. (Energy equipment & services)		222,362		3,351
Trilogy Energy Corporation (Oil, gas & consumable fuels)		214,885		6,288

				34,327


*Emerging Latin America—1.7%*
Brazil—0.9%
*Lupatech S.A. (Energy equipment & services)		252,217		203
OdontoPrev S.A. (Health care providers & services)		472,000		2,473
*Qualicorp S.A. (Health care providers & services)		359,100		3,720
T4F Entretenimento S.A. (Media)		88,500		339

				6,735

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 25

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Latin America—1.7%—(continued)*
Chile—0.5%
CFR Pharmaceuticals S.A. (Pharmaceuticals)		13,645,276	$	3,449

Mexico—0.3%
*Macquarie Mexico Real Estate Management S.A. de C.V.—144A (Real estate investment trusts (REITs))		906,973		1,796

Total Common Stocks—96.8% (cost $590,782)				696,550


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $20,374, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	20,374		20,374

Total Repurchase Agreement—2.8% (cost $20,374)				20,374

Total Investments—99.6% (cost $611,156)				716,924
Cash and other assets, less liabilities—0.4%				2,584

Net assets—100.0%			$	719,508

ADR = American Depository Receipt

GDR = Global Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Consumer Discretionary			26.9%
Health Care			13.6%
Financials			13.2%
Information Technology			11.8%
Industrials			11.3%
Consumer Staples			8.5%
Energy			6.6%
Materials			6.6%
Telecommunication Services			1.5%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


British Pound Sterling			27.0%
Euro			21.2%
Japanese Yen			17.0%
Hong Kong Dollar			8.0%
Canadian Dollar			4.9%
Swedish Krona			3.3%
Indian Rupee			3.0%
South African Rand			3.0%
Norwegian Krone			2.9%
Turkish Lira			2.8%
Singapore Dollar			1.5%
Australian Dollar			1.5%
Swiss Franc			1.1%
All Other Currencies			2.8%

Total			100.0%

See accompanying Notes to Financial Statements.

26 Annual Report

December 31, 2012

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Growth Fund posted a 21.28% increase (Institutional Class Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index (net) increased 18.68%.

As of year end, Consumer Discretionary and Staples remained overweighted at a combined 27.1% of the Fund, compared to the 17.7% Index weighting, with a tilt towards Discretionary. Financials increased during the year to 24.7% from 15.9% as of year-end 2012 primarily due to an increase in Commercial Banks and real estate-related weightings, but remained underweighted versus the 25.7% benchmark Index weighting. IT and Energy marginally decreased to fund this increase. Regionally, the Fund was underweighted in Emerging Asia, despite above-market weightings in China, India and the ASEAN countries, due to significantly underweighted Korea and Taiwan. Latin America totaled 21.1% of the Fund at year-end, a significant decrease since year-end 2011 due to lower exposure in Brazil on economic slowdown and governmental intervention concerns.

December 31, 2012

William Blair Funds 27

Emerging Markets Growth Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		21.28	%		7.72	%		(3.46	)%		11.58	%
MSCI Emerging Markets IMI (net)		18.68			4.64			(0.70	)		11.50

(a)

For the period June 6, 2005 (Commencement of Operations) to December 31, 2012.

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

Sector Diversification (unaudited)

LOGO

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

28 Annual Report

December 31, 2012

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—55.5%*
China—19.8%
AAC Technologies Holdings, Inc. (Communications equipment)		875,959	$	3,106
*Baidu, Inc.—ADR (Internet software & services)		47,987		4,813
Belle International Holdings, Ltd. (Specialty retail)		2,346,610		5,190
*Brilliance China Automotive Holdings, Ltd. (Automobiles)		8,818,000		11,081
China BlueChemical, Ltd. (Chemicals)		3,610,609		2,463
China Mobile, Ltd. (Wireless telecommunication services)		3,274,755		38,536
China Overseas Land & Investment, Ltd. (Real estate management & development)		3,456,000		10,508
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)		2,233,304		10,004
CNOOC, Ltd. (Oil, gas & consumable fuels)		10,840,601		23,882
Dongyue Group (Chemicals)		5,456,287		3,689
Golden Eagle Retail Group, Ltd. (Multiline retail)		956,547		2,382
*Haier Electronics Group Co., Ltd. (Household durables)		4,822,000		7,152
Haitian International Holdings, Ltd. (Machinery)		2,334,870		2,798
Industrial and Commercial Bank of China, Ltd. Class “H” (Commercial banks)		19,945,000		14,396
Lenovo Group, Ltd. (Computers & peripherals)		15,575,014		14,361
Sino Biopharmaceutical (Pharmaceuticals)		1,548,000		746
Sun Art Retail Group, Ltd. (Food & staples retailing)		5,414,745		8,371
Tencent Holdings, Ltd. (Internet software & services)		446,835		14,655
Want Want China Holdings, Ltd. (Food products)		6,291,217		8,817
*WuXi PharmaTech Cayman, Inc.—ADR (Life sciences tools & services)		144,501		2,276
Yingde Gases (Chemicals)		2,062,981		2,114

				191,340

India—9.5%
Asian Paints, Ltd. (Chemicals)		40,286		3,282
Bajaj Auto, Ltd. (Automobiles)		217,835		8,522
HDFC Bank, Ltd. (Commercial banks)		614,440		7,660
Housing Development Finance Corporation (Thrifts & mortgage finance)		648,245		9,903
IndusInd Bank, Ltd. (Commercial banks)		370,437		2,859
ITC, Ltd. (Tobacco)		2,622,889		13,812
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		107,827		2,559
Lupin, Ltd. (Pharmaceuticals)		208,913		2,359
Motherson Sumi Systems, Ltd. (Auto components)		1,019,801		3,713
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		560,729		7,585
Tata Consultancy Services, Ltd. (IT services)		416,320		9,592
Tata Motors, Ltd. (Automobiles)		3,400,953		19,549

				91,395


*Common Stocks—Emerging Asia—55.5%—(continued)*
Indonesia—4.4%
PT Astra International Tbk (Automobiles)		17,263,240	$	13,675
PT Bank Rakyat Indonesia (Commercial banks)		18,996,821		13,778
PT Indo Tambangraya Megah (Oil, gas & consumable fuels)		876,724		3,795
PT Jasa Marga Persero Tbk (Transportation infrastructure)		7,091,000		4,017
PT Kalbe Farma Tbk (Pharmaceuticals)		28,249,415		3,113
PT XL Axiata Tbk (Diversified telecommunication services)		6,536,500		3,879

				42,257

Malaysia—2.1%
CIMB Group Holdings Bhd (Commercial banks)		5,420,087		13,567
*IHH Healthcare Bhd (Health care providers & services)		5,739,800		6,358

				19,925

Papua New Guinea—1.0%
Oil Search, Ltd. (Oil, gas & consumable fuels)		1,306,597		9,662

Philippines—0.4%
SM Prime Holdings, Inc. (Real estate management & development)		9,556,100		3,852

South Korea—8.3%
Celltrion, Inc. (Pharmaceuticals)		175,399		4,283
*Hyundai Motor Co. (Automobiles)		87,825		18,105
*LG Household & Health Care, Ltd. (Household products)		5,802		3,554
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		27,900		40,087
Samsung Engineering Co., Ltd. (Construction & engineering)		15,089		2,351
Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		34,088		6,925
Samsung Heavy Industries Co., Ltd. (Machinery)		135,964		4,968

				80,273

Taiwan—5.6%
Asustek Computer, Inc. (Computers & peripherals)		1,341,000		15,186
Catcher Technology Co., Ltd. (Computers & peripherals)		464,064		2,330
Hiwin Technologies Corporation (Machinery)		239,429		1,770
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		5,845,893		18,095
MediaTek, Inc. (Semiconductors & semiconductor equipment)		851,064		9,521
TPK Holding Co., Ltd. (Electronic equipment, instruments & components)		383,979		6,876

				53,778

Thailand—4.4%
Advanced Info Service PCL (Wireless telecommunication services)		1,168,362		8,036
BEC World PCL (Media)		3,646,100		8,498

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 29

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—55.5%—(continued)*
Thailand—(continued)
CP ALL PCL (Food & staples retailing)		5,417,518	$	8,146
Kasikornbank PCL (Commercial banks)		2,248,482		14,293
Siam Makro PCL (Food & staples retailing)		226,932		3,319

				42,292


*Emerging Latin America—21.1%*
Argentina—0.5%
MercadoLibre, Inc. (Internet software & services)		56,934		4,473

Brazil—7.9%
BR Malls Participacoes S.A. (Real estate management & development)		858,690		11,332
BR Properties S.A. (Real estate management & development)		275,997		3,437
Cia de Bebidas das Americas—ADR (Beverages)		590,382		24,790
Cia de Concessoes Rodoviarias (Transportation infrastructure)		750,389		7,128
Cia Hering (Specialty retail)		201,116		4,125
Cielo S.A. (IT services)		201,100		5,598
CPFL Energia S.A.—ADR (Electric utilities)		25,717		539
Iochpe-Maxion S.A. (Machinery)		167,600		2,239
Lojas Renner S.A. (Multiline retail)		67,222		2,618
*Lupatech S.A. (Energy equipment & services)		421,326		340
OdontoPrev S.A. (Health care providers & services)		448,666		2,351
*Qualicorp S.A. (Health care providers & services)		234,300		2,427
Raia Drogasil S.A. (Food & staples retailing)		219,145		2,469
Totvs S.A. (Software)		110,832		2,186
Tractebel Energia S.A. (Independent power producers & energy traders)		296,538		4,830

				76,409

Chile—2.9%
Banco Santander Chile—ADR (Commercial banks)		166,393		4,740
CFR Pharmaceuticals S.A. (Pharmaceuticals)		9,228,150		2,332
ENTEL Chile S.A. (Wireless telecommunication services)		334,333		6,914
Inversiones La Construccion S.A. (Diversified financial services)		102,017		2,003
S.A.C.I. Falabella (Multiline retail)		446,216		4,586
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		84,509		4,871
Sonda S.A. (IT services)		907,561		2,891

				28,337

Colombia—2.8%
Ecopetrol S.A. (Oil, gas & consumable fuels)		6,054,150		18,707
Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)		369,891		8,594

				27,301


*Common Stocks—Emerging Latin America—21.1%—(continued)*
Mexico—5.7%
Fibra Uno Administracion S.A. de C.V. (Real estate investment trusts (REITs))		192,369	$	581
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		93,678		9,433
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		3,230,910		20,863
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		6,740,267		24,315

				55,192

Panama—0.2%
Copa Holdings S.A. Class “A” (Airlines)†		16,927		1,683

Peru—1.1%
Credicorp, Ltd. (Commercial banks)†		69,363		10,166


*Emerging Europe, Mid-East, Africa—16.8%*
Nigeria—0.7%
Guaranty Trust Bank plc (Commercial banks)		28,471,188		4,209
Nigerian Breweries plc (Beverages)		2,388,036		2,257

				6,466

Poland—0.2%
Eurocash S.A. (Food & staples retailing)		166,187		2,351

Qatar—1.2%
Industries Qatar QSC (Industrial conglomerates)		271,417		11,604

Russia—2.5%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		408,600		2,235
M Video OJSC (Specialty retail)		193,600		1,543
Magnit OAO (Food & staples retailing)†		64,463		10,227
Mail.ru Group, Ltd.—GDR (Internet software & services)		69,724		2,435
*Yandex N.V. Class “A” (Internet software & services)†		381,211		8,223

				24,663

South Africa—7.8%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		283,871		5,683
AVI, Ltd. (Food products)		316,748		2,244
Bidvest Group, Ltd. (Industrial conglomerates)		189,187		4,840
Discovery Holdings, Ltd. (Insurance)		439,270		3,240
FirstRand, Ltd. (Diversified financial services)		4,241,154		15,606
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		1,827,565		7,345
Mr Price Group, Ltd. (Specialty retail)		134,316		2,226
MTN Group, Ltd. (Wireless telecommunication services)		519,782		10,941
Naspers, Ltd. (Media)		228,562		14,763
Shoprite Holdings, Ltd. (Food & staples retailing)		224,152		5,438
Tiger Brands, Ltd. (Food products)		65,572		2,529

				74,855

See accompanying Notes to Financial Statements.

30 Annual Report

December 31, 2012

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—16.8%—(continued)*
Turkey—3.8%
Arcelik A.S. (Household durables)		735,219	$	4,835
BIM Birlesik Magazalar A.S. (Food & staples retailing)		49,474		2,426
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		639,220		3,763
Turkiye Halk Bankasi A.S. (Commercial banks)		2,586,661		25,498

				36,522

United Arab Emirates—0.6%
First Gulf Bank PJSC (Commercial banks)		1,905,256		6,116

Total Common Stocks—93.4% (cost $749,631)				900,912


*Preferred Stock*
Brazil—2.0%
Itau Unibanco Holding S.A. (Commercial banks)		1,211,941		19,764

Total Preferred Stock—2.0% (cost $18,035)				19,764


*Affiliated Fund*
China—2.5%
William Blair China A—Share Fund, LLC		2,362,400		23,624

Total Affiliated Fund—2.5% (cost $23,624)				23,624


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $13,524, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	13,524		13,524

Total Repurchase Agreement—1.4% (cost $13,524)				13,524

Total Investments—99.3% (cost $804,814)				957,824
Cash and other assets, less liabilities—0.7%				6,413

Net assets—100.0%			$	964,237

ADR = American Depository Receipt

GDR = Global Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

The Emerging Markets Growth Fund invested in the following affiliated fund. There are no unfunded commitments to the affiliated fund and the Fund may redeem its investment monthly.

Share Activity

Year Ended
December 31, 2012

(in thousands)

Fund Name

Balance
12/31/2011

Purchases

Sales

Balance
12/31/2012

Value

Dividends
Included
in Income

William Blair China A—Share Fund, LLC

—

2,362,400

—

2,362,400

23,624

—

As of December 31, 2012, the Fund invested in the William Blair China A—Share Fund, LLC, an affiliated fund. There was no realized or unrealized gain/(loss) from investments in the affiliated fund.

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			24.7%
Information Technology			17.9%
Consumer Discretionary			15.1%
Consumer Staples			12.0%
Energy			8.1%
Telecommunication Services			7.3%
Health Care			5.1%
Industrials			4.8%
Materials			4.4%
Utilities			0.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Hong Kong Dollar			19.8%
U.S. Dollar			11.8%
Indian Rupee			9.7%
South Korean Won			8.5%
South African Rand			7.9%
Brazilian Real			7.5%
New Taiwan Dollar			5.7%
Mexican Peso			4.8%
Thai Baht			4.5%
Indonesian Rupiah			4.5%
Turkish Lira			3.9%
Malaysian Ringgit			2.1%
Chilean Peso			2.0%
Colombian Peso			2.0%
Qatari Rial			1.2%
Australian Dollar			1.0%
All Other Currencies			3.1%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 31

LOGO

Todd M. McClone

LOGO

Jeffrey A. Urbina

EMERGING MARKETS LEADERS FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Emerging Markets Leaders Fund (formerly the Emerging Leaders Growth Fund Institutional Class Shares) posted a 20.97% increase (Institutional Class Shares) for the twelve months ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Index (net) increased 18.22%.

2012 to date performance surpassed the MSCI Emerging Markets Index (net), on strong outperformance across a number of sectors. The overweighted Consumer Staples sector added approximately 2% to outperformance, as the overweighted Food/Staples Retailing segment was up over 52% with broad strength across names. Energy stock selection was bolstered by limited exposure in Petrobras , a Brazil oil company, during the year, given operational disappointments and continued concerns about governmental intervention. It also benefited from strong performance by CNOOC, a Chinese energy company, on a recovering production growth profile and Ecopetrol on strong results during the first half. Commercial Banks were up nearly 29% during the year and were the most significant contributor to Financials outperformance, while Materials benefited from good operational results from Grupo Mexico, the Fund’s sole Metals/Mining holding during the period. The key detractor from 2012 results was Information Technology (IT) stock selection, due largely to Chinese internet-related performance coupled with concerns about revenue trends at Cielo, the Brazilian card processing company.

During the year as valuations expanded, the Fund’s weighting in Consumer Discretionary and Staples decreased substantially from approximately 36% of the Fund to approximately 28%, but remained above the 16.7% benchmark Index weighting. Conversely, Financials increased from 19.8% to 30.6%, as we added to Commercial Banks and Real Estate-related holdings. Conversely, Industrials decreased from a index weighting of approximately 6.5% to 3.1% on deteriorating demand trends, while IT marginally increased. Regionally, the Fund was underweighted in Emerging Asia, despite above-market weightings in China, India and the Southeast Asia countries, due to significantly underweighted Korea and Taiwan. Europe, Middle East and Africa decreased slightly during the year, due to a reduction in South African holdings on valuation concerns. Latin America totaled 21.3% of the Fund at year end, approximately 3% above the Index weighting, due to holdings in Chile, Colombia, Mexico and Peru, which more than offset the lower Brazil weighting.

32 Annual Report

December 31, 2012

Emerging Markets Leaders Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			Since Inception(a)
Institutional Class		20.97	%		6.53	%		0.75	%
MSCI Emerging Markets Large Cap (net)		17.79			4.71			1.32
MSCI Emerging Markets (net)		18.22			4.66			1.43

(a)

For the period March 26, 2008 (Commencement of Operations) to December 31, 2012.

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

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

Sector Diversification (unaudited)

LOGO

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

December 31, 2012

William Blair Funds 33

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—56.6%*
China—20.0%
Belle International Holdings, Ltd. (Specialty retail)		449,000	$	993
*Brilliance China Automotive Holdings, Ltd. (Automobiles)		938,000		1,179
China Mobile, Ltd. (Wireless telecommunication services)		260,500		3,066
China Overseas Land & Investment, Ltd. (Real estate management & development)		546,000		1,660
CNOOC, Ltd. (Oil, gas & consumable fuels)		618,000		1,361
Lenovo Group, Ltd. (Computers & peripherals)		1,506,000		1,389
Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		87,500		746
Sun Art Retail Group, Ltd. (Food & staples retailing)		484,000		748
Tencent Holdings, Ltd. (Internet software & services)		59,700		1,958
Want Want China Holdings, Ltd. (Food products)		521,000		730

				13,830

India—10.1%
Bajaj Auto, Ltd. (Automobiles)		26,380		1,032
HDFC Bank, Ltd. (Commercial banks)		59,521		742
Housing Development Finance Corporation (Thrifts & mortgage finance)		50,310		769
ITC, Ltd. (Tobacco)		210,623		1,109
Sun Pharmaceutical Industries, Ltd. (Pharmaceuticals)		77,316		1,046
Tata Consultancy Services, Ltd. (IT services)		30,914		712
Tata Motors, Ltd. (Automobiles)		271,948		1,563

				6,973

Indonesia—3.1%
PT Astra International Tbk (Automobiles)		1,155,000		915
PT Bank Rakyat Indonesia (Commercial banks)		1,656,500		1,201

				2,116

Malaysia—2.9%
CIMB Group Holdings Bhd (Commercial banks)		514,800		1,289
*IHH Healthcare Bhd (Health care providers & services)		630,600		698

				1,987

South Korea—7.9%
*Hyundai Motor Co. (Automobiles)		8,070		1,664
*LG Household & Health Care, Ltd. (Household products)		582		356
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)		2,383		3,424

				5,444

Taiwan—6.5%
Asustek Computer, Inc. (Computers & peripherals)		124,000		1,404
Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)		552,770		1,711
MediaTek, Inc. (Semiconductors & semiconductor equipment)		61,000		683

*Common Stocks—Emerging Asia—56.6%—(continued)*
Taiwan—(continued)
Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		40,175	$	689

				4,487

Thailand—6.1%
Advanced Info Service PCL (Wireless telecommunication services)		222,500		1,530
CP ALL PCL (Food & staples retailing)		881,400		1,326
Kasikornbank PCL (Commercial banks)		210,200		1,336

				4,192


*Emerging Latin America—21.3%*
Brazil—4.6%
BR Malls Participacoes S.A. (Real estate management & development)		104,600		1,381
Cia de Bebidas das Americas—ADR (Beverages)		43,016		1,806

				3,187

Chile—3.3%
Banco Santander Chile—ADR (Commercial banks)		24,273		691
S.A.C.I. Falabella (Multiline retail)		70,614		726
Sociedad Quimica y Minera de Chile S.A.—ADR (Chemicals)		15,429		889

				2,306

Colombia—2.9%
Ecopetrol S.A. (Oil, gas & consumable fuels)		654,079		2,021

Mexico—8.9%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		13,452		1,355
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)		358,800		2,317
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)		676,400		2,440

				6,112

Peru—1.6%
Credicorp, Ltd. (Commercial banks)†		7,284		1,067


*Emerging Europe, Mid-East, Africa—17.3%*
Qatar—2.0%
Industries Qatar QSC (Industrial conglomerates)		33,058		1,414

Russia—4.8%
Magnit OAO (Food & staples retailing)†		902		143
Magnit OJSC—144A—GDR (Food & staples retailing)		30,146		1,226
Sberbank of Russian Federation (Commercial banks)†		628,838		1,922

				3,291

South Africa—7.0%
Bidvest Group, Ltd. (Industrial conglomerates)		27,569		705
FirstRand, Ltd. (Diversified financial services)		304,841		1,122
MTN Group, Ltd. (Wireless telecommunication services)		37,013		779

See accompanying Notes to Financial Statements.

34 Annual Report

December 31, 2012

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—17.3%—(continued)*
South Africa—(continued)
Naspers, Ltd. (Media)		16,375	$	1,058
Shoprite Holdings, Ltd. (Food & staples retailing)		32,125		779
Tiger Brands, Ltd. (Food products)		9,106		351

				4,794

Turkey—3.5%
Turkiye Garanti Bankasi A.S. (Commercial banks)		461,388		2,408

Total Common Stocks—95.2% (cost $55,595)				65,629


*Preferred Stock*
Brazil—3.0%
Itau Unibanco Holding S.A. (Commercial banks)		127,900		2,086

Total Preferred Stock—3.0% (cost $1,986)				2,086


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $2,909, collateralized by U.S.Treasury Note, 2.125%, due 12/31/15	$	2,909		2,909

Total Repurchase Agreement—4.2% (cost $2,909)				2,909

Total Investments—102.4% (cost $60,490)				70,624
Liabilities, plus cash and other assets—(2.4)%				(1,645	)

Net assets—100.0%			$	68,979

ADR = American Depository Receipt

GDR = Global Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Financials			30.6%
Information Technology			17.7%
Consumer Staples			14.7%
Consumer Discretionary			13.5%
Telecommunication Services			7.9%
Energy			5.0%
Materials			4.9%
Industrials			3.1%
Health Care			2.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Hong Kong Dollar			20.4%
U.S. Dollar			14.5%
Indian Rupee			10.3%
South Korean Won			8.0%
South African Rand			7.1%
Mexican Peso			7.0%
Thai Baht			6.2%
New Taiwan Dollar			5.6%
Brazilian Real			5.1%
Turkish Lira			3.6%
Indonesian Rupiah			3.1%
Colombian Peso			3.0%
Malaysian Ringgit			2.9%
Qatari Rial			2.1%
Chilean Peso			1.1%

Total			100.0%

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 35

LOGO

Todd M. McClone

LOGO

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 1.64% increase (Institutional Class Shares) for the period ended December 31, 2012. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Small Cap Index (net) increased 1.43%.

The Fund outpaced the Index, led by outperformance in the overweighted Consumer sectors. Discretionary stocks were up over 41% for the year, well ahead of the 22% Index return, due largely to outperformance in Latin American and Asian Hotels/Restaurants, coupled with strong results in Household Durables and in Asian Media companies. The Fund’s Staples stocks were up approximately 57%, well ahead of the 27% Index return, on strength in the overweighted Food/Staples Retailing industry, in addition to outperformance in Asian Food products companies. The Fund’s Industrials stocks were up over 35%, with broad-based strength across industries except Transportation Infrastructure. In addition, the lack of Construction/Engineering holdings somewhat detracted from results. While the underweighting in Materials added significant value during the year, stock selection was negative, as all industries underperformed. Regionally, Asian stock selection was particularly strong as a focus on Southeast Asian Nation (ASEAN) countries at the expense of South Korea and Taiwan added value, as did strong stock selection across a number of countries.

36 Annual Report

December 31, 2012

Emerging Markets Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2012


	Since Inception(a)
Institutional Class		1.64	%
MSCI Emerging Markets Small Cap (net)		1.43

(a)

For the period from December 20, 2012 (Commencement of Operations) to December 31, 2012.

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

Sector Diversification (Unaudited)

LOGO

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

December 31, 2012

William Blair Funds 37

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—57.2%*
Cambodia—1.6%
NagaCorp, Ltd. (Hotels, restaurants & leisure)		710,000	$	434

China—12.1%
AAC Technologies Holdings, Inc. (Communications equipment)		73,000		259
China Medical System Holdings, Ltd. (Pharmaceuticals)		240,000		187
China Overseas Grand Oceans Group, Ltd. (Real estate management & development)		428,000		523
Dongyue Group (Chemicals)		500,000		338
Golden Eagle Retail Group, Ltd. (Multiline retail)		130,000		324
*Haier Electronics Group Co., Ltd. (Household durables)		255,000		378
Haitian International Holdings, Ltd. (Machinery)		250,000		300
*Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		11,059		131
Minth Group, Ltd. (Auto components)		108,000		125
Prince Frog International Holdings, Ltd. (Personal products)		571,000		243
Sino Biopharmaceutical Ltd. (Pharmaceuticals)		580,000		280
Tiangong International Co., Ltd. (Metals & mining)		776,000		189

				3,277

India—12.7%
Bata India, Ltd. (Textiles, apparel & luxury goods)		11,797		188
Colgate-Palmolive India, Ltd. (Personal products)		7,779		225
CRISIL, Ltd. (Diversified financial services)		5,146		102
Eicher Motors, Ltd. (Machinery)		3,304		176
GlaxoSmithKline Consumer Healthcare, Ltd. (Food products)		4,041		284
Godrej Consumer Products, Ltd. (Personal products)		13,706		182
Gruh Finance, Ltd. (Thrifts & mortgage finance)		54,158		235
Havells India, Ltd. (Electrical equipment)		2,075		24
IndusInd Bank, Ltd. (Commercial banks)		38,858		300
Ipca Laboratories, Ltd. (Pharmaceuticals)		22,423		212
*Jubilant Foodworks, Ltd. (Hotels, restaurants & leisure)		7,314		174
Lupin, Ltd. (Pharmaceuticals)		24,125		272
Marico, Ltd. (Personal products)		63,017		252
Motherson Sumi Systems, Ltd. (Auto components)		38,643		141
Page Industries, Ltd. (Textiles, apparel & luxury goods)		2,464		154
Pidilite Industries, Ltd. (Chemicals)		54,818		219
Yes Bank, Ltd. (Commercial banks)		32,711		279

				3,419

Indonesia—6.4%
PT Ace Hardware Indonesia Tbk (Specialty retail)		5,295,500		453
PT Alam Sutera Realty Tbk (Real estate management & development)		1,792,000		112
*PT Bank Tabungan Pensiunan Nasional Tbk (Commercial banks)		227,000		124

*Common Stocks—Emerging Asia—57.2%—(continued)*
Indonesia—(continued)
PT Ciputra Development Tbk (Real estate management & development)		2,034,500	$	169
PT Holcim Indonesia Tbk (Construction materials)		584,000		176
PT Jasa Marga (Transportation infrastructure)		87,000		49
PT Kalbe Farma Tbk (Pharmaceuticals)		1,349,500		149
PT Media Nusantara Citra Tbk (Media)		234,500		61
*PT MNC Sky Vision Tbk (Media)		311,000		77
PT Sumber Alfaria Trijaya Tbk (Food & staples retailing)		133,000		73
*PT Tower Bersama Infrastructure Tbk (Wireless telecommunication services)		492,500		292

				1,735

Malaysia—3.5%
Aeon Co. M Bhd (Multiline retail)		44,200		204
Dayang Enterprise Holdings Bhd (Energy equipment & services)		207,200		162
Guinness Anchor Bhd (Beverages)		69,400		377
Nestle Malaysia Bhd (Food products)		9,000		186
Padini Holdings Bhd (Specialty retail)		45,400		28

				957

Philippines—6.1%
Alliance Global Group, Inc. (Industrial conglomerates)		787,000		322
*East West Banking Corporation (Commercial banks)		13,900		10
Puregold Price Club, Inc. (Food & staples retailing)		673,000		541
Security Bank Corporation (Commercial banks)		88,450		337
SM Prime Holdings, Inc. (Real estate management & development)		264,375		107
Universal Robina Corporation (Food products)		160,700		328

				1,645

South Korea—2.5%
*Able C&C Co., Ltd. (Personal products)		2,351		175
*Gamevil, Inc. (Software)		2,051		193
*Kolao Holdings (Automobiles)		10,328		178
*Paradise Co., Ltd. (Hotels, restaurants & leisure)		8,360		135

				681

Sri Lanka—1.0%
Commercial Bank of Ceylon plc (Commercial banks)		148,872		120
John Keells Holdings plc (Industrial conglomerates)		84,914		147

				267

Taiwan—3.4%
Eclat Textile Co., Ltd. (Textiles, apparel & luxury goods)		54,000		199
Ginko International Co., Ltd. (Health care equipment & supplies)		12,000		134
Hiwin Technologies Corporation (Machinery)		3,300		24
Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		5,000		135
Merida Industry Co., Ltd. (Leisure equipment & products)		43,000		193

See accompanying Notes to Financial Statements.

38 Annual Report

December 31, 2012

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares		Value

*Common Stocks—Emerging Asia—57.2%—(continued)*
Taiwan—(continued)
St Shine Optical Co., Ltd. (Health care equipment & supplies)		15,000	$	230

				915

Thailand—7.9%
Bangkok Dusit Medical Services PCL (Health care providers & services)		52,100		194
BEC World PCL (Media)		146,300		341
Home Product Center PCL (Specialty retail)		652,040		271
LPN Development PCL (Real estate management & development)		266,600		161
Minor International PCL (Hotels, restaurants & leisure)		474,810		306
Robinson Department Store PCL (Multiline retail)		123,700		271
Siam Makro PCL (Food & staples retailing)		13,650		200
Thai Tap Water Supply PCL (Water utilities)		795,500		240
Tisco Financial Group PCL (Commercial banks)		80,700		138

				2,122


*Emerging Latin America—22.8%*
Brazil—12.4%
Arezzo Industria e Comercio S.A. (Textiles, apparel & luxury goods)		12,800		247
BR Properties S.A. (Real estate management & development)		10,500		131
Cia Hering (Specialty retail)		10,200		209
Ez Tec Empreendimentos e Participacoes S.A. (Household durables)		14,500		182
Iguatemi Empresa de Shopping Centers S.A. (Real estate management & development)		20,400		271
*Kroton Educacional S.A. (Diversified consumer services)		17,790		402
Localiza Rent a Car S.A. (Road & rail)		10,700		196
Lojas Renner S.A. (Multiline retail)		6,600		257
Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)		21,586		359
*Qualicorp S.A. (Professional services)		23,300		241
Raia Drogasil S.A. (Food & staples retailing)		9,700		109
Tegma Gestao Logistica S.A. (Road & rail)		10,700		183
Totvs S.A. (Software)		9,200		182
Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao S.A (Commercial services & supplies)		16,900		376

				3,345

Chile—3.1%
Inversiones La Construccion S.A. (Diversified financial services)		15,590		306
Parque Arauco S.A. (Real estate management & development)		77,460		192
Sonda S.A. (IT services)		103,879		331

				829

Mexico—5.4%
*Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)		189,869		379
Banregio Grupo Financiero S.A.B. de C.V. (Commercial banks)		87,838		400

*Common Stocks—Emerging Latin America—22.8%—(continued)*
Mexico—(continued)
Compartamos S.A.B. de C.V. (Consumer finance)		105,200	$	150
Fibra Uno Administracion S.A. de C.V. (Real estate investment trusts (REITs))		88,500		267
*Macquarie Mexico Real Estate Management S.A. de C.V.—144A (Real estate investment trusts (REITs))		140,965		279

				1,475

Panama—1.0%
Copa Holdings S.A. (Airlines)†		2,648		263

Peru—0.9%
*Inretail Peru Corporation (Food & staples retailing)		4,077		86
*Inretail Peru Corporation—144A (Food & staples retailing)†		1,346		28
Intercorp Financial Services, Inc. (Diversified financial services)		3,529		126

				240


*Emerging Europe, Mid-East, Africa—13.5%*
Kenya—1.0%
Safaricom, Ltd. (Wireless telecommunication services)		4,588,400		267

Nigeria—1.7%
Guaranty Trust Bank plc (Commercial banks)		1,908,274		282
Nestle Nigeria plc (Food products)		40,090		180

				462

Poland—2.9%
*Alior Bank S.A. (Commercial banks)		7,026		142
Eurocash S.A. (Food & staples retailing)		18,191		258
LPP S.A. (Textiles, apparel & luxury goods)		257		379

				779

Russia—0.5%
*Etalon Group Ltd.—144A—GDR (Real estate management & development)		4,868		27
*MD Medical Group Investments plc—144A—GDR (Health care providers & services)		9,432		117

				144

South Africa—4.2%
AVI, Ltd. (Food products)		23,285		165
Coronation Fund Managers, Ltd. (Capital markets)		59,162		277
Discovery Holdings, Ltd. (Insurance)		19,818		146
Life Healthcare Group Holdings Pte, Ltd. (Health care providers & services)		24,717		99
Mr Price Group, Ltd. (Specialty retail)		12,072		200
The Foschini Group, Ltd. (Specialty retail)		7,077		118
Tsogo Sun Holdings, Ltd. (Hotels, restaurants & leisure)		48,096		135

				1,140

Turkey—3.2%
Arcelik A.S. (Household durables)		26,925		177
Bizim Toptan Satis Magazalari A.S. (Food & staples retailing)		19,285		301

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 39

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Shares or Principal Amount		Value

*Common Stocks—Emerging Europe, Mid-East, Africa—13.5%—(continued)*
Turkey—(continued)
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		41,406	$	244
Turkiye Sinai Kalkinma Bankasi A.S. (Commercial banks)		108,970		141

				863

Total Common Stocks—93.5% (cost $23,445)				25,259


*Preferred Stock*
Brazil—1.2%
Marcopolo S.A. (Machinery)		49,000		309

Total Preferred Stock—1.2% (cost $284)				309


*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $2,088, collateralized by U.S. Treasury Note, 2.125%, due 12/31/15	$	2,088		2,088

Total Repurchase Agreement—7.7% (cost $2,088)				2,088

Total Investments—102.4% (cost $25,817)				27,656
Liabilities, plus cash and other assets—(2.4)%				(635	)

Net assets—100.0%			$	27,021

GDR = Global Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

At December 31, 2012, the Fund’s Portfolio of Investments includes the following sector categories (as a percentage of long-term investments):


Consumer Discretionary			29.6%
Financials			22.9%
Consumer Staples			16.4%
Industrials			10.7%
Health Care			8.3%
Information Technology			4.8%
Materials			3.6%
Telecommunication Services			2.2%
Utilities			0.9%
Energy			0.6%

Total			100.0%

At December 31, 2012, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):


Brazilian Real			14.3%
Hong Kong Dollar			14.0%
Indian Rupee			13.4%
Thai Baht			8.3%
Indonesian Rupiah			6.8%
Philippine Peso			6.4%
Mexican Peso			5.8%
South African Rand			4.5%
Malaysian Ringgit			3.7%
New Taiwan Dollar			3.6%
Turkish Lira			3.4%
Chilean Peso			3.2%
U.S. Dollar			3.0%
South Korean Won			2.7%
Euro			2.5%
Nigerian Naira			1.8%
Kenyan Shilling			1.0%
Sri Lanka Rupee			1.0%
All Other Currencies			0.6%

Total			100.0%

See accompanying Notes to Financial Statements.

40 Annual Report

December 31, 2012

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

BOND FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Bond Fund posted an 8.61% increase (Institutional Class Shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Index, increased by 4.21%.

Several factors contributed to the outperformance of the William Blair Bond Fund versus its benchmark during 2012. Security selection within the Fund had the largest positive impact on performance, with results particularly strong among the Fund’s corporate and mortgage-backed securities. The Fund benefited from several security selection themes in the corporate sector, including its overweight of U.S. banks and financial services, positioning within investment-grade industrials, and its allocation to high yield corporate bonds. In the mortgage-backed sector, the Fund’s emphasis on higher-coupon pools comprised of low loan balance borrowers continued to add value relative to comparable duration alternatives. Finally, sector positioning contributed to performance, as the Fund eschewed nominal fixed-rate Treasuries in favor of corporate bonds, mortgage-backed securities, and Treasury Inflation-Protected Securities (TIPS).

Some factors detracted from the William Blair Bond Fund’s performance on a relative basis during 2012. An underweight allocation to Commercial Mortgage-Backed Securities (CMBS) had a marginal negative impact on relative performance. However, the Fund was overweight to REITs to account for that underweight, and that positioning offset the relative underperformance. The Fund’s cash holdings detracted from performance as bonds have posted solid performance. We attempt to minimize the amount of cash in the Fund at any time and to keep the Fund’s Fund fully invested.

We believe that the threat of any rapid rise in interest rates is subdued. The Federal Open Market Committee’s) (FOMC’s) stance towards monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining rates at low levels until the unemployment rate declines below 6.5%.

December 31, 2012

William Blair Funds 41

Bond Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			5 Year			Since Inception(a)
Institutional Class		8.61	%		8.19	%		7.55	%		7.29	%
Barclays Capital U.S. Aggregate Index		4.21			6.19			5.95			6.11

(a)

For the period May 1, 2007 (Commencement of Operations) to December 31, 2012.

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

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

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investments.

42 Annual Report

December 31, 2012

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—40.3%*
U.S. Treasury Inflation Indexed Notes/Bonds—7.5%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	5,913	$	6,872
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29		9,287		15,393

Total U.S. Treasury Inflation Indexed Notes/Bonds				22,265

U.S. Treasury—1.1%
U.S. Treasury Bond, 3.125%, due 2/15/42		525		549
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		2,900		2,641

Total U.S. Treasury Obligations				3,190

Government National Mortgage Association (GNMA)—2.3%
#344834, 6.250%, due 7/15/13		2		2
#344902, 6.250%, due 3/15/14		4		4
#623162, 6.500%, due 7/15/18		35		40
#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		130
GNR 2006-67 GB, 4.775%, due 9/16/34, VRN		517		526
#699118, 6.000%, due 9/15/38		5,488		6,171

Total GNMA Mortgage Obligations				6,886

Federal Home Loan Mortgage Corp. (FHLMC)—6.3%
#J16051, 4.500%, due 7/1/26		1,198		1,306
#G01728, 7.500%, due 7/1/32		252		309
#C01385, 6.500%, due 8/1/32		245		283
#A13303, 5.000%, due 9/1/33		474		534
#C01623, 5.500%, due 9/1/33		339		369
#A15039, 5.500%, due 10/1/33		6		7
#G01843, 6.000%, due 6/1/35		65		72
#G02141, 6.000%, due 3/1/36		1,372		1,522
#A62179, 6.000%, due 6/1/37		685		759
#A63539, 6.000%, due 7/1/37		888		986
#A62858, 6.500%, due 7/1/37		473		532
#G03170, 6.500%, due 8/1/37		1,138		1,281
#A66843, 6.500%, due 10/1/37		1,680		1,907
#A78138, 5.500%, due 6/1/38		1,001		1,129
#G04544, 6.000%, due 8/1/38		2,893		3,179
#A81799, 6.500%, due 9/1/38		1,960		2,225
#A86143, 5.000%, due 5/1/39		120		133
#C03665, 9.000%, due 4/1/41		1,583		1,966

Total FHLMC Mortgage Obligations				18,499

Federal National Mortgage Association (FNMA)—23.1%
#576553, 8.000%, due 2/1/16		8		9
#580793, 6.000%, due 4/1/16		2		2
#624506, 6.000%, due 1/1/17		2		2
#679247, 7.000%, due 8/1/17		8		8
#689612, 5.000%, due 5/1/18		224		241
#695910, 5.000%, due 5/1/18		455		489
#697593, 5.000%, due 5/1/18		408		439
#770395, 5.000%, due 4/1/19		8		9
#900725, 6.000%, due 8/1/21		109		121
#893325, 7.000%, due 9/1/21		9		9
#AA2924, 4.500%, due 4/1/24		791		872
#255956, 5.500%, due 10/1/25		52		57


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#AB2256, 3.500%, due 2/1/26	$	1,179	$	1,283
#890329, 4.000%, due 4/1/26		465		510
#AI9811, 4.500%, due 8/1/26		505		556	��
#AH9564, 3.500%, due 9/1/26		1,031		1,121
#AJ8149, 3.500%, due 12/1/26		1,299		1,413
#AJ9402, 4.000%, due 12/1/26		2,200		2,422
#AB4818, 4.000%, due 4/1/27		1,211		1,334
#AP0446, 3.500%, due 7/1/27		3,377		3,674
#AL2590, 4.000%, due 7/1/27		2,344		2,581
#252925, 7.500%, due 12/1/29		3		3
#535977, 6.500%, due 4/1/31		22		26
#253907, 7.000%, due 7/1/31		3		4
#587849, 6.500%, due 11/1/31		32		37
#545437, 7.000%, due 2/1/32		122		143
#545759, 6.500%, due 7/1/32		1,282		1,460
#678007, 6.000%, due 9/1/32		24		27
#254548, 5.500%, due 12/1/32		56		62
#684601, 6.000%, due 3/1/33		1,213		1,361
#703391, 5.000%, due 5/1/33		198		214
#708993, 5.000%, due 6/1/33		74		83
#190340, 5.000%, due 9/1/33		170		186
#254868, 5.000%, due 9/1/33		18		20
#727056, 5.000%, due 9/1/33		911		1,032
#739243, 6.000%, due 9/1/33		1,506		1,720
#739331, 6.000%, due 9/1/33		718		820
#555800, 5.500%, due 10/1/33		189		208
#555946, 5.500%, due 11/1/33		645		739
#756153, 5.500%, due 11/1/33		1,521		1,729
#725017, 5.500%, due 12/1/33		75		86
#725205, 5.000%, due 3/1/34		2,231		2,426
#725232, 5.000%, due 3/1/34		2,397		2,612
#725238, 5.000%, due 3/1/34		844		920
#763798, 5.500%, due 3/1/34		244		276
#776964, 5.000%, due 4/1/34		619		698
#725611, 5.500%, due 6/1/34		308		338
#783786, 5.500%, due 7/1/34		241		277
#786546, 6.000%, due 7/1/34		656		736
#787816, 6.000%, due 7/1/34		730		833
#190353, 5.000%, due 8/1/34		253		275
#794474, 6.000%, due 10/1/34		127		142
#745092, 6.500%, due 7/1/35		920		1,047
#357944, 6.000%, due 9/1/35		79		89
#829306, 6.000%, due 9/1/35		959		1,075
#836140, 5.500%, due 10/1/35		109		118
#843487, 6.000%, due 10/1/35		206		235
#849191, 6.000%, due 1/1/36		421		472
#848782, 6.500%, due 1/1/36		559		632
#745349, 6.500%, due 2/1/36		834		943
#888305, 7.000%, due 3/1/36		22		26
#895637, 6.500%, due 5/1/36		320		361
#831540, 6.000%, due 6/1/36		114		128
#745802, 6.000%, due 7/1/36		434		496
#886220, 6.000%, due 7/1/36		957		1,093
#893318, 6.500%, due 8/1/36		135		152
#902974, 6.000%, due 12/1/36		921		1,029
#909480, 6.000%, due 2/1/37		919		1,030
#938440, 6.000%, due 7/1/37		430		480
#928561, 6.000%, due 8/1/37		538		614
#948689, 6.000%, due 8/1/37		863		964
#946646, 6.000%, due 9/1/37		277		310

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 43

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#888967, 6.000%, due 12/1/37				$	1,770	$	2,022
#889385, 6.000%, due 2/1/38					525		589
#962058, 6.500%, due 3/1/38					3,647		4,132
#934006, 6.500%, due 9/1/38					1,189		1,347
#986856, 6.500%, due 9/1/38					906		1,018
#991911, 7.000%, due 11/1/38					664		756
#AA8443, 5.000%, due 6/1/39					484		548
#931492, 6.000%, due 7/1/39					329		376
#AA6898, 6.000%, due 7/1/39					1,710		1,952
#932279, 5.000%, due 12/1/39					213		236
#AE0082, 5.000%, due 5/1/40					1,213		1,347
#AL0913, 6.000%, due 7/1/41					2,371		2,642
#AK2733, 5.000%, due 2/1/42					3,286		3,721

Total FNMA Mortgage Obligations							68,625


*Non-Agency Mortgage-Backed Obligations—0.2%*
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23§*		D			199		166
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 2.587%, 8/25/34, VRN		Aaa			382		382

Total Non-Agency Mortgage-Backed Obligations							548


*Asset-Backed Securities—3.0%*
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa			1,140		1,146
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa			600		653
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			1,935		2,084
GE Capital Credit Card Master Note Trust, 2012-6, Tranche B, 1.830%, 8/17/20		AA-			2,800		2,843
Centre Point Funding LLC—144A, 2012-2A, Tranche 1, 2.610%, 8/20/21		Baa2			1,979		1,978

Total Asset-Backed Securities							8,812


*Corporate Obligations—55.0%*
Petrobras International Finance Co., 6.125%, due 10/6/16		A3			1,400		1,582
Ally Financial, Inc., 5.500%, due 2/15/17		BB-			1,788		1,913
American International Group, Inc., 3.800%, due 3/22/17		A-			2,375		2,571
Penske Truck Leasing Co. L.P.—144A, 3.750%, due 5/11/17		BBB	+		2,000		2,093
ERP Operating L.P., 5.750%, due 6/15/17		BBB	+		2,075		2,448

*Corporate Obligations—(continued)*
JPMorgan Chase & Co., 6.125%, due 6/27/17		A		$	1,600	$	1,869
General Motors Financial Co., Inc.—144A, 4.750%, due 8/15/17		BB			1,000		1,051
American Express Co., 6.150%, due 8/28/17		A	+		2,050		2,470
Capital One Financial Corporation, 6.750%, due 9/15/17		A-			1,900		2,320
Exelon Generation Co. LLC, 6.200%, due 10/1/17		Baa1			1,160		1,370
Toll Brothers Finance Corporation, 8.910%, due 10/15/17		BBB-			1,050		1,326
Triumph Group, Inc., 8.000%, due 11/15/17		B	+		1,550		1,674
American Tower Corporation, 4.500%, due 1/15/18		Baa3			1,200		1,315
Morgan Stanley, 6.625%, due 4/1/18		A			2,575		3,035
Simon Property Group L.P., 6.125%, due 5/30/18		A-			2,500		3,045
Petrohawk Energy Corporation, 7.250%, due 8/15/18		A			1,050		1,185
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18		A			1,100		1,347
CSX Corporation, 7.375%, due 2/1/19		BBB			870		1,106
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19		A	+		1,300		1,658
Citigroup, Inc., 8.500%, due 5/22/19		A			2,050		2,757
Discovery Communications LLC, 5.625%, due 8/15/19		BBB			550		657
Roper Industries, Inc., 6.250%, due 9/1/19		BBB			1,850		2,211
Continental Rubber Of America Corp.—144A, 4.500%, due 9/15/19		BB-			250		256
Republic Services, Inc., 5.500%, due 9/15/19		BBB			1,725		2,043
SBA Communications Corp.—144A, 5.625%, due 10/1/19		B2			1,250		1,313
Boston Properties L.P., 5.875%, due 10/15/19		A-			1,575		1,878
Crown Castle International Corporation, 7.125%, due 11/1/19		BB-			1,550		1,713
Toll Brothers Finance Corporation, 6.750%, due 11/1/19		BBB-			500		594
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20		Baa3			3,050		3,908
Jarden Corporation, 7.500%, due 1/15/20		B			1,550		1,701
Johnson Controls, Inc., 5.000%, due 3/30/20		BBB	+		1,675		1,904
The Goldman Sachs Group, Inc., 6.000%, due 6/15/20		A			2,575		3,060
Hologic, Inc.—144A, 6.250%, due 8/1/20		BB			1,100		1,185

See accompanying Notes to Portfolio of Investments.

44 Annual Report

December 31, 2012

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Alcoa, Inc., 6.150%, due 8/15/20		BBB-		$	2,050	$	2,239
Omnicom Group, Inc., 4.450%, due 8/15/20		BBB	+		2,075		2,309
The Goodyear Tire & Rubber Co., 8.250%, due 8/15/20		B	+		1,500		1,646
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20		A			1,500		1,784
Progress Energy, Inc., 4.400%, due 1/15/21		BBB			1,675		1,867
Standard Pacific Corporation, 8.375%, due 1/15/21		B			1,750		2,030
Petrobras International Finance Co., 5.375%, due 1/27/21		A3			1,200		1,351
L-3 Communications Corporation, 4.950%, due 2/15/21		BBB-			2,430		2,742
Wyndham Worldwide Corporation, 5.625%, due 3/1/21		BBB-			1,000		1,116
Ball Corporation, 5.750%, due 5/15/21		BB	+		1,550		1,678
Energizer Holdings, Inc., 4.700%, due 5/19/21		BBB-			2,050		2,197
Discovery Communications LLC, 4.375%, due 6/15/21		BBB			2,000		2,233
O’Reilly Automotive, Inc., 4.625%, due 9/15/21		BBB			2,275		2,491
Corporation Nacional del Cobre de Chile—144A, 3.875%, due 11/3/21		A1			1,900		2,070
Itau Unibanco Holding S.A.—144A, 6.200%, due 12/21/21		Baa2			2,500		2,763
SABMiller Holdings, Inc.—144A, 3.750%, due 1/15/22		BBB	+		2,000		2,160
SLM Corporation, 7.250%, due 1/25/22		BBB-			2,075		2,288
Fresenius Medical Care US Finance II, Inc.—144A, 5.875%, due 1/31/22		BB	+		1,000		1,085
Lamar Media Corporation, 5.875%, due 2/1/22		BB-			1,550		1,682
Masco Corporation, 5.950%, due 3/15/22		BBB-			1,675		1,857
BE Aerospace, Inc., 5.250%, due 4/1/22		BB			1,550		1,643
Pinnacle Entertainment, Inc., 7.750%, due 4/1/22		B			1,315		1,400
Discover Financial Services, 5.200%, due 4/27/22		BBB-			2,150		2,448
Kraft Foods Group, Inc.—144A, 3.500%, due 6/6/22		BBB			1,900		2,028
Embraer S.A., 5.150%, due 6/15/22		BBB-			2,500		2,738
Comcast Corporation, 3.125%, due 7/15/22		BBB	+		2,000		2,084
America Movil S.A.B. de C.V., 3.125%, due 7/16/22		A2			2,850		2,897
PPG Industries, Inc., 2.700%, due 8/15/22		A-			1,000		990
DR Horton, Inc., 4.375%, due 9/15/22		Ba2			2,350		2,397

*Corporate Obligations—(continued)*
Mexichem S.A.B. de C.V.—144A, 4.875%, due 9/19/22		BBB-		$	1,500	$	1,616
WEA Finance LLC—144A, 3.375%, due 10/3/22		A2			2,650		2,723
American Axle & Manufacturing, Inc., 6.625%, due 10/15/22		B			1,550		1,573
Southern Copper Corporation, 3.500%, due 11/8/22		BBB	+		2,500		2,553
Jones Lang LaSalle, Inc., 4.400%, due 11/15/22		Baa2			1,650		1,686
Camden Property Trust, 2.950%, due 12/15/22		Baa1			2,325		2,267
Owens Corning, Inc., 4.200%, due 12/15/22		BBB-			500		509
Royal Bank of Scotland Group plc, 6.125%, due 12/15/22		BB+			2,325		2,454
CC Holdings GS V LLC—144A, 3.849%, due 4/15/23		Baa3			400		407
The Kroger Co., 8.000%, due 9/15/29		BBB			450		601
Conoco Funding Co., 7.250%, due 10/15/31		A1			450		663
Kohl’s Corporation, 6.000%, due 1/15/33		BBB	+		1,065		1,228
Wisconsin Electric Power Co., 5.700%, due 12/1/36		A	+		525		669
Comcast Corporation, 6.450%, due 3/15/37		BBB	+		650		834
Yum! Brands, Inc., 6.875%, due 11/15/37		BBB			625		853
JPMorgan Chase & Co., 6.400%, due 5/15/38		A	+		1,470		1,971
Philip Morris International, Inc., 6.375%, due 5/16/38		A			2,175		2,962
COX Communications, Inc.—144A, 6.950%, due 6/1/38		BBB	+		370		486
General Electric Capital Corporation, 6.875%, due 1/10/39		AA	+		750		1,019
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40		A3			1,565		1,929
Illinois Tool Works, Inc., 4.875%, due 9/15/41		A	+		900		1,055
Union Pacific Corporation, 4.750%, due 9/15/41		A-			1,450		1,626
Aristotle Holding, Inc.—144A, 6.125%, due 11/15/41		BBB	+		2,500		3,189
Gilead Sciences, Inc., 5.650%, due 12/1/41		A-			1,775		2,205
Citigroup, Inc., 5.875%, due 1/30/42		A			750		926
Bank of America Corporation, 5.875%, due 2/7/42		A			2,375		2,963
CSX Corporation, 4.750%, due 5/30/42		BBB			1,225		1,319
Odebrecht Finance Ltd.—144A, 7.125%, due 6/26/42		BBB-			2,000		2,320

Total Corporate Obligations							163,377

Total Long-Term Investments—98.5% (cost $270,789)							292,202

See accompanying Notes to Portfolio of Investments.

December 31, 2012

William Blair Funds 45

Bond Fund

Portfolio of Investments, December 31, 2012 (all amounts in thousands)


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*Repurchase Agreement*
Fixed Income Clearing Corporation, 0.110% dated 12/31/12, due 1/2/13, repurchase price $1,622, collateralized by FHLMC, 3.720%, due 2/27/32		Aaa	$	1,622	$	1,622

Total Repurchase Agreement—0.5% (cost $1,622)						1,622

Total Investments—99.0% (cost $272,411)						293,824
Cash and other assets, less liabilities—1.0%						2,918

Net assets—100.0%					$	296,742

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 December 31, 2012.

* = Non-income producing security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at December 31, 2012.

See accompanying Notes to Portfolio of Investments.

46 Annual Report

December 31, 2012

LOGO

Christopher T. Vincent

LOGO

Paul J. Sularz

LOW DURATION FUND

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

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The William Blair Low Duration Fund posted a 3.01% increase (Institutional Class Shares) for the year ended December 31, 2012. By comparison, the Fund’s benchmark, the Bank of America Merrill Lynch 1-Year Treasury Note Index (net), increased by 0.24%.

Several factors contributed to the outperformance of the William Blair Low Duration Fund versus its benchmark during 2012. Security selection within the Fund had the largest positive impact on performance, with results particularly strong among the Fund’s mortgage-backed, asset-backed, and corporate securities. In the mortgage-backed sector, the Fund’s emphasis on higher-coupon pools comprised of low loan balance borrowers continued to add value relative to comparable duration alternatives. The Fund’s asset-backed security positions were also a source of value, as the Fund’s holdings generated incremental income throughout the year. The Fund benefited from several security selection themes in the corporate sector, including its overweight of U.S. banks and financial services and positioning within investment-grade industrials. Finally, sector positioning contributed to performance, as the Fund eschewed nominal fixed-rate Treasuries in favor of mortgage-backed securities, asset-backed securities, and corporate bonds.

We believe that the threat of any rapid rise in interest rates is subdued. The Federal Open Market Committee’s (FOMC’s) stance towards monetary policy has become increasingly accommodative due to concerns over the pace of economic growth, job growth, and inflation. The FOMC announced several unconventional easing policies this year, and the FOMC remains committed to maintaining interest rates at low levels until the unemployment rate declines below 6.5%.

December 31, 2012

William Blair Funds 47

Low Duration Fund

Performance Highlights (unaudited)

LOGO

Average Annual Total Return at 12/31/2012


	1 Year			3 Year			Since Inception(a)
Institutional Class		3.01	%		2.43	%		2.17	%
Bank of America Merrill Lynch 1-Year U.S. Treasury Note Index		0.24			0.54			0.48

(a)

For the period December 1, 2009 (Commencement of Operations) to December 31, 2012.

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

Sector Diversification (unaudited)

LOGO

The sector diversification shown is based on the total investments.

48 Annual Report

December 31, 2012

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—67.4%*
U.S. Treasury Inflation Indexed Notes/Bonds—2.9%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	3,728	$	4,333
U.S. Treasury Inflation Indexed Note, 1.625%, due 1/15/18		3,478		4,034

Total U.S. Treasury Inflation Indexed Notes/Bonds				8,367

Government National Mortgage Association (GNMA)—1.1%
#002584, 6.000%, due 4/20/13		3		3
#623159, 5.000%, due 11/15/13		26		28
#628400, 6.000%, due 11/15/13		43		44
#002682, 6.500%, due 11/20/13		13		14
#623182, 5.000%, due 12/15/13		36		39
#781010, 6.500%, due 4/15/14		31		32
#002761, 6.000%, due 5/20/14		21		23
#002787, 5.500%, due 7/20/14		3		3
#781275, 6.000%, due 10/15/14		77		80
GNR 2011-24 VA, 3.500%, due 2/20/16		1,242		1,305
#561031, 5.500%, due 9/15/16		196		212
#003180, 6.000%, due 1/20/17		30		33
#781567, 5.000%, due 2/15/18		72		77
#606406, 5.000%, due 4/15/18		99		109
#003438, 4.500%, due 9/20/18		179		196
#003465, 4.500%, due 11/20/18		60		65
#004430, 4.500%, due 5/20/24		895		977

Total GNMA Mortgage Obligations				3,240

Federal Home Loan Mortgage Corp. (FHLMC)—16.9%
#B18053, 5.000%, due 3/1/15		34		35
#G11885, 5.000%, due 1/1/16		119		127
#E86134, 5.000%, due 11/1/16		126		135
#G12631, 5.500%, due 4/1/17		259		278
#G13127, 4.500%, due 4/1/18		74		78
#E95355, 5.000%, due 4/1/18		273		294
#G11606, 4.500%, due 5/1/18		29		30
#E96700, 5.000%, due 5/1/18		738		794
#E96962, 4.000%, due 6/1/18		123		133
#E01418, 4.000%, due 7/1/18		28		30
#E01411, 5.000%, due 7/1/18		143		153
#E01424, 4.000%, due 8/1/18		14		15
#E99160, 4.500%, due 9/1/18		139		152
#E99582, 5.000%, due 9/1/18		34		37
#E99659, 4.500%, due 10/1/18		192		209
#E01488, 5.000%, due 10/1/18		312		334
#E99895, 5.000%, due 10/1/18		637		685
#B11386, 5.000%, due 12/1/18		135		145
#B11362, 5.500%, due 12/1/18		20		22
#G13367, 5.500%, due 12/1/18		478		515
#E01545, 5.000%, due 1/1/19		169		181
#B12826, 4.500%, due 3/1/19		818		880
#G11766, 5.000%, due 3/1/19		119		128
#B13051, 4.500%, due 4/1/19		101		110
#B13143, 4.500%, due 4/1/19		495		539
#B14961, 4.500%, due 6/1/19		100		109
#B15141, 4.500%, due 6/1/19		107		114
#G11596, 5.500%, due 8/1/19		165		179
#G11605, 5.500%, due 9/1/19		79		86
#B17142, 4.500%, due 11/1/19		1,247		1,355
#B17161, 4.500%, due 11/1/19		36		39
#G18045, 5.000%, due 3/1/20		133		144

*U.S. Government and U.S. Government Agency—(continued)*
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#B19078, 5.000%, due 4/1/20	$	97	$	105
#G18048, 5.000%, due 4/1/20		92		99
#G11697, 5.500%, due 4/1/20		1,308		1,423
#J08152, 5.000%, due 5/1/20		105		113
#J02537, 5.000%, due 9/1/20		83		90
#G12394, 5.000%, due 5/1/21		171		184
#G13296, 5.000%, due 5/1/21		459		494
#G12113, 5.500%, due 5/1/21		234		255
#G12286, 5.000%, due 7/1/21		91		98
#G12432, 5.000%, due 12/1/21		77		83
#E02322, 5.500%, due 5/1/22		67		73
#J06484, 5.500%, due 11/1/22		525		571
#J06871, 5.500%, due 1/1/23		214		233
#J08703, 5.500%, due 9/1/23		91		99
#C00351, 8.000%, due 7/1/24		108		129
#G13695, 4.000%, due 9/1/24		1,530		1,661
#G00363, 8.000%, due 6/1/25		146		176
#J12853, 4.000%, due 8/1/25		224		243
#C80329, 8.000%, due 8/1/25		31		38
#J13022, 4.000%, due 9/1/25		2,837		3,080
#J14491, 4.000%, due 2/1/26		7,617		8,357
#G14150, 4.500%, due 4/1/26		3,677		4,009
#E02912, 5.000%, due 6/1/26		1,183		1,278
#J16051, 4.500%, due 7/1/26		4,488		4,893
#J19032, 3.500%, due 5/1/27		1,658		1,798
#G04053, 5.500%, due 3/1/38		3,194		3,581
#G04424, 6.000%, due 6/1/38		247		273
#G04778, 6.000%, due 7/1/38		225		250
#A81372, 6.000%, due 8/1/38		94		103
#G04544, 6.000%, due 8/1/38		1,446		1,589
#G04687, 6.000%, due 9/1/38		331		365
#G04745, 6.000%, due 9/1/38		180		199
#A81799, 6.500%, due 9/1/38		1,031		1,171
#G06017, 5.500%, due 6/1/40		2,785		3,123

Total FHLMC Mortgage Obligations				48,301

Federal National Mortgage Association (FNMA)—46.5%
#679220, 6.000%, due 12/1/14		14		15
#256224, 5.500%, due 4/1/16		22		24
#254181, 5.000%, due 1/1/17		68		74
#256559, 5.500%, due 1/1/17		12		13
#256606, 5.500%, due 2/1/17		16		17
#256646, 5.500%, due 3/1/17		13		14
#545862, 5.000%, due 8/1/17		68		74
#545898, 5.500%, due 9/1/17		369		397
#545899, 5.500%, due 9/1/17		413		445
#254510, 5.000%, due 11/1/17		63		68
#555029, 5.000%, due 11/1/17		50		55
#254545, 5.000%, due 12/1/17		28		30
#254590, 5.000%, due 1/1/18		32		34
#257067, 5.000%, due 1/1/18		72		78
#663692, 5.000%, due 1/1/18		154		167
#674713, 5.000%, due 1/1/18		12		13
#679305, 5.000%, due 1/1/18		56		60
#254591, 5.500%, due 1/1/18		281		303
#678938, 5.500%, due 2/1/18		28		30
#683100, 5.500%, due 2/1/18		366		395
#254684, 5.000%, due 3/1/18		20		21
#675717, 5.000%, due 3/1/18		237		258

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 49

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#681361, 5.000%, due 3/1/18	$	86	$	94
#656564, 5.000%, due 4/1/18		1,343		1,459
#696677, 5.000%, due 4/1/18		87		95
#702888, 5.000%, due 4/1/18		138		150
#695838, 5.500%, due 4/1/18		84		90
#254721, 5.000%, due 5/1/18		221		240
#697593, 5.000%, due 5/1/18		218		234
#702332, 5.000%, due 5/1/18		47		51
#704049, 5.500%, due 5/1/18		832		895
#735357, 5.500%, due 5/1/18		1,164		1,253
#656573, 5.000%, due 6/1/18		222		245
#709838, 5.000%, due 6/1/18		2,760		3,008
#709848, 5.000%, due 6/1/18		196		216
#728715, 5.000%, due 7/1/18		329		359
#735003, 5.500%, due 7/1/18		1,250		1,346
#711991, 5.000%, due 8/1/18		180		199
#190341, 5.000%, due 9/1/18		51		56
#743183, 5.000%, due 10/1/18		81		89
#555872, 5.000%, due 11/1/18		197		214
#749596, 5.000%, due 11/1/18		288		317
#745237, 5.000%, due 12/1/18		58		63
#753866, 6.000%, due 12/1/18		378		416
#761246, 5.000%, due 1/1/19		406		448
#761267, 4.500%, due 2/1/19		660		727
#255079, 5.000%, due 2/1/19		51		56
#766059, 5.500%, due 2/1/19		284		311
#766276, 5.000%, due 3/1/19		431		471
#742086, 4.500%, due 4/1/19		2,424		2,671
#779363, 5.000%, due 6/1/19		81		89
#785259, 5.000%, due 8/1/19		344		376
#788424, 5.500%, due 9/1/19		83		91
#725953, 5.000%, due 10/1/19		102		112
#735401, 5.500%, due 3/1/20		233		251
#357865, 5.000%, due 7/1/20		241		263
#357978, 5.000%, due 9/1/20		239		263
#745735, 5.000%, due 3/1/21		757		827
#879607, 5.500%, due 4/1/21		121		133
#831497, 6.000%, due 4/1/21		455		501
#880993, 6.000%, due 1/1/22		32		36
#972934, 5.500%, due 2/1/23		375		406
#889342, 5.000%, due 3/1/23		146		159
#982878, 4.500%, due 5/1/23		595		655
#254908, 5.000%, due 9/1/23		68		74
#AE0011, 5.500%, due 9/1/23		200		216
#255165, 4.500%, due 3/1/24		97		106
#934808, 4.500%, due 3/1/24		298		325
#AA4519, 4.500%, due 3/1/24		2,069		2,280
#AA2922, 4.000%, due 4/1/24		1,103		1,215
#AA5028, 4.500%, due 4/1/24		406		447
#190988, 9.000%, due 6/1/24		164		191
#993231, 4.000%, due 7/1/24		1,402		1,544
#AC1520, 4.000%, due 9/1/24		167		183
#AC3674, 4.500%, due 10/1/24		1,865		2,054
#AC5124, 4.000%, due 11/1/24		1,256		1,383
#AC6600, 4.500%, due 11/1/24		90		99
#AC6257, 4.000%, due 12/1/24		1,246		1,372
#AC8857, 4.500%, due 12/1/24		81		88
#AC9560, 5.000%, due 1/1/25		4,072		4,485
#932449, 4.000%, due 2/1/25		498		548


Issuer	NRSRO Rating (unaudited)		Principal Amount		Value

*U.S. Government and U.S. Government Agency—(continued)*
Federal National Mortgage Association (FNMA)—(continued)
#932629, 4.000%, due 3/1/25			$	544	$	599
#AD0855, 4.000%, due 3/1/25				411		451
#932723, 4.000%, due 4/1/25				600		661
#AD4073, 4.000%, due 5/1/25				206		227
#935995, 4.000%, due 6/1/25				202		222
#AD4677, 4.000%, due 6/1/25				2,059		2,267
#AD8164, 4.000%, due 8/1/25				4,363		4,804
#AE1176, 4.000%, due 8/1/25				835		920
#AB1459, 4.000%, due 9/1/25				413		454
#AD8190, 4.000%, due 9/1/25				1,856		2,033
#AH2671, 4.000%, due 1/1/26				1,559		1,717
#890329, 4.000%, due 4/1/26				3,489		3,822
#AI4856, 4.500%, due 6/1/26				3,325		3,664
#AI9811, 4.500%, due 8/1/26				2,869		3,161
#AH9564, 3.500%, due 9/1/26				4,647		5,056
#AB3497, 4.000%, due 9/1/26				2,045		2,240
#AB3608, 3.500%, due 10/1/26				4,735		5,152
#AI7363, 3.500%, due 10/1/26				1,208		1,314
#AJ2322, 3.500%, due 10/1/26				4,162		4,528
#AB3975, 3.500%, due 12/1/26				1,662		1,808
#AJ8149, 3.500%, due 12/1/26				3,362		3,657
#AJ7724, 4.000%, due 12/1/26				2,676		2,946
#AK0498, 3.500%, due 1/1/27				897		976
#AK2768, 3.500%, due 3/1/27				2,876		3,129
#AK7384, 4.000%, due 3/1/27				3,718		4,094
#AB4818, 4.000%, due 4/1/27				2,810		3,095
#AL2223, 3.000%, due 6/1/27				3,151		3,385
#AP0446, 3.500%, due 7/1/27				7,201		7,835
#AP0462, 3.500%, due 7/1/27				1,138		1,238
#AL2590, 4.000%, due 7/1/27				6,814		7,503
#AQ8404, 3.000%, due 12/1/27				3,112		3,344
#809926, 5.500%, due 2/1/35				237		269
#829306, 6.000%, due 9/1/35				144		162
#928574, 6.000%, due 7/1/37				282		315
#889385, 6.000%, due 2/1/38				1,750		1,963
#975649, 6.000%, due 7/1/38				381		417
#935532, 4.500%, due 8/1/39				108		122
#AC6651, 4.500%, due 12/1/39				136		154
#AL0913, 6.000%, due 7/1/41				4,065		4,529

Total FNMA Mortgage Obligations						133,363


*Asset-Backed Securities—10.9%*
Mercedes-Benz Auto Receivables Trust, 2009-1, Tranche A3, 1.670%, 1/15/14		AAA		19		19
Honda Auto Receivables Owner Trust, 2010-2, Tranche A3, 1.340%, 3/18/14		Aaa		17		17
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14		Aaa		883		887
BMW Vehicle Owner Trust, 2010-A, Tranche A3, 1.390%, 4/25/14		AAA		30		30
Ford Credit Auto Owner Trust, 2010-A, Tranche A3, 1.320%, 6/15/14		AAA		50		50

See accompanying Notes to Financial Statements.

50 Annual Report

December 31, 2012

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Asset-Backed Securities—(continued)*
Nissan Auto Receivables Owner Trust, 2010-A, Tranche A3, 0.870%, 7/15/14		Aaa		$	236	$	236
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.359%, 1/15/15, VRN		AAA			2,300		2,301
CarMax Auto Owner Trust, 2012-1, Tranche A2, 0.590%, 3/16/15		AAA			675		676
CNH Equipment Trust, 2010-C, Tranche A3, 1.170%, 5/15/15		AAA			194		195
Harley-Davidson Motorcycle Trust, 2011-2, Tranche A2, 0.710%, 5/15/15		Aaa			863		864
FPL Recovery Funding LLC, 2007-A, Tranche A2, 5.044%, 8/1/15		AAA			354		359
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.509%, 9/15/15, VRN		AAA			2,215		2,217
Chase Issuance Trust, 2008-A13, Tranche A13, 1.808%, 9/15/15, VRN		AAA			100		101
Discover Card Master Trust I, 2010-A1, Tranche A1, 0.859%, 9/15/15, VRN		Aaa			447		448
Honda Auto Receivables Owner Trust, 2012-1, Tranche A3, 0.770%, 1/15/16		AAA			1,000		1,005
Ford Credit Floorplan Master Owner Trust, 2011-1, Tranche A2, 0.809%, 2/15/16, VRN		AAA			1,250		1,255
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A2, 5.290%, 3/25/16		Aaa			2,350		2,556
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			1,352		1,456
CNH Equipment Trust, 2011-B, Tranche A3, 0.910%, 8/15/16		AAA			700		703
Discover Card Master Trust, 2011-A1, Tranche A1, 0.559%, 8/15/16, VRN		Aaa			1,400		1,404
BA Credit Card Trust, 2007-A6, Tranche A6, 0.269%, 9/15/16, VRN		AAA			20		20
Enterprise Fleet Financing LLC—144A, 2011-2, Tranche A2, 1.430%, 10/20/16		AAA			1,236		1,239

*Asset-Backed Securities—(continued)*
GE Capital Credit Card Master Note Trust, 2011-1, Tranche A, 0.759%, 1/15/17, VRN		Aaa		$	500	$	503
GE Dealer Floorplan Master Note Trust, 2012-1, Tranche A, 0.781%, 2/20/17, VRN		Aaa			1,250		1,256
BA Credit Card Trust, 2007-A15, Tranche A15, 0.559%, 4/17/17, VRN		AAA			100		100
Citibank Credit Card Issuance Trust, 2008-A6, Tranche A6, 1.411%, 5/22/17, VRN		AAA			200		205
Discover Card Master Trust, 2010-A2, Tranche A2, 0.789%, 3/15/18, VRN		AAA			350		355
Citibank Omni Master Trust—144A, 2009-A14A, Tranche A14, 2.959%, 8/15/18, VRN		Aaa			2,000		2,081
Capital One Multi-Asset Execution Trust, 2007-A2, Tranche A2, 0.289%, 12/16/19, VRN		AAA			215		214
MBNA Credit Card Master Note Trust, 2004-A3, Tranche A3, 0.469%, 8/16/21, VRN		AAA			475		471
SLM Student Loan Trust, 2008-5, Tranche A4, 2.015%, 7/25/23, VRN		Aaa			4,000		4,222
SLM Student Loan Trust—144A, 2011-A, Tranche A3, 2.709%, 1/15/43, VRN		AAA			2,000		2,085

Total Asset-Backed Securities							31,105


*Corporate Obligations—12.9%*
JPMorgan Chase & Co., 1.116%, due 1/24/14, VRN		A	+		1,100		1,107
Morgan Stanley, 1.916%, due 1/24/14, VRN		A			1,000		1,007
Bank of America Corporation, 1.733%, due 1/30/14, VRN		A			1,000		1,008
Citigroup, Inc., 1.290%, due 4/1/14, VRN		A			1,000		1,001
Morgan Stanley, 6.000%, due 5/13/14		A			1,300		1,377
The Goldman Sachs Group, Inc., 0.843%, due 1/12/15, VRN		A			1,000		986
General Dynamics Corporation, 1.375%, due 1/15/15		A			1,325		1,346
The Goldman Sachs Group, Inc., 5.125%, due 1/15/15		A			1,000		1,074
AT&T, Inc., 0.875%, due 2/13/15		A2			1,000		1,005
Wells Fargo & Co., 1.250%, due 2/13/15		AA	-		2,250		2,271
Toyota Motor Credit Corporation, 1.000%, due 2/17/15		AA	-		1,000		1,007
The Bank of New York Mellon Corporation, 1.200%, due 2/20/15		Aa3			1,000		1,011

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 51

Low Duration Fund

Portfolio of Investments, December 31, 2012 (all dollar amounts in thousands)


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
American International Group, Inc., 3.000%, due 3/20/15		A	-	$	1,150	$	1,197
JPMorgan Chase & Co., 1.875%, due 3/20/15		A	+		1,525		1,552
Bank of America Corporation, 4.500%, due 4/1/15		A			2,000		2,132
The Goldman Sachs Group, Inc., 3.300%, due 5/3/15		A			800		834
Citigroup, Inc., 4.700%, due 5/29/15		A			1,300		1,400
John Deere Capital Corporation, 0.950%, due 6/29/15		A			1,000		1,006
General Electric Capital Corporation, 1.625%, due 7/2/15		AA	+		1,650		1,677
Anheuser-Busch InBev Worldwide, Inc., 0.800%, due 7/15/15		A			300		301
Royal Bank of Scotland Group plc, 2.550%, due 9/18/15		A			3,000		3,070
AbbVie, Inc.—144A, 1.200%, due 11/6/15		A			1,250		1,258

NRSRO = Nationally Recognized Statistical Rating Organization—

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

VRN = Variable Rate Note


Issuer	NRSRO Rating (unaudited)			Principal Amount		Value

*Corporate Obligations—(continued)*
Capital One Financial Corporation, 1.000%, due 11/6/15		A	-	$	3,000	$	2,990
American Express Centurion Bank, 0.875%, due 11/13/15		A	+		1,000		999
Volkswagen International Finance N.V.—144A, 1.150%, due 11/20/15		A	-		1,500		1,502
AT&T, Inc., 0.800%, due 12/1/15		A2			2,000		2,000
McKesson Corporation, 0.950%, due 12/4/15		A	-		1,000		1,001

Total Corporate Obligations							37,119

Total Long-Term Investments—91.2% (cost $259,259)							261,495

Total Investments—91.2% (cost $259,259)							261,495
Cash and other assets, less liabilities—8.8%							25,335

Net assets—100.0%						$	286,830

See accompanying Notes to Financial Statements.

52 Annual Report

December 31, 2012

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Global Leaders Fund			Institutional International Growth Fund			Institutional International Equity Fund			International Leaders Fund
*Assets*
Investments in securities, at cost	$	55,268		$	1,634,152		$	88,597		$	9,420
Investments in affiliated companies, at cost		—			11,834			—			—


Investments in securities, at value	$	63,565		$	1,964,087		$	108,613		$	10,132
Investments in affiliated companies, at cost		—			11,834			—			—
Cash		—			476			—			—
Foreign currency, at value (cost $- ; $1,544 ;$98 ; $8)		—			1,561			98			8
Receivable for securities sold		7			2,834			1,404			1
Receivable for fund shares sold		10,023			1,520			—			305
Receivable from Advisor		12			—			37			7
Dividend and interest receivable		42			1,708			96			2

Total assets		73,649			1,984,020			110,248			10,455
*Liabilities*
Payable for investment securities purchased		6,496			4,793			—			241
Payable for fund shares redeemed		39			2,651			—			—
Payable to custodian		—			—			400			—
Management fee payable		49			1,557			92			8
Distribution and shareholder administration fees payable		8			—			—			1
Foreign income tax payable		—			654			—			—
Other payables and accrued expenses		63			235			66			41

Total liabilities		6,655			9,890			558			291

Net Assets	$	66,994		$	1,974,130		$	109,690		$	10,164

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest		7			133			10			1
Capital paid in excess of par value		72,738			1,834,210			213,309			9,558
Accumulated net investment income (loss)		(7	)		(8,076	)		(196	)		(3	)
Accumulated realized gain (loss)		(14,041	)		(181,425	)		(123,444	)		(104	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		8,297			329,288			20,011			712

Net Assets	$	66,994		$	1,974,130		$	109,690		$	10,164


Net Assets	$	16,022		$	1,974,130		$	109,690		$	5,286
Shares Outstanding—Institutional Class		1,690,007			132,588,054			10,134,638			489,229
Net Asset Value Per Share	$	9.47		$	14.89		$	10.82		$	10.80

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 53

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Global Leaders Fund			Institutional International Growth Fund			Institutional International Equity Fund			International Leaders Fund(a)
*Investment income*
Dividends	$	947		$	50,411		$	2,931		$	30
Less foreign tax withheld		(52	)		(3,906	)		(215	)		(1	)
Interest		1			143			2			—

Total income		896			46,648			2,718			29
*Expenses*
Investment advisory fees		501			16,682			1,139			22
Distribution fees		12			—			—			—
Shareholder administration fees		75			—			—			2
Custodian fees		72			382			74			22
Transfer agent fees		19			41			4			5
Sub-transfer agent fees
Class N		3			—			—			—
Class I		15			—			—			—
Professional fees		41			173			62			27
Registration fees		42			44			21			4
Shareholder reporting fees		7			3			—			—
Trustee fees		2			86			9			—
Other expenses		6			68			13			1

Total expenses before waiver		795			17,479			1,322			83
Expenses reimbursed to (waived or absorbed by) the Advisor		(157	)		—			(69	)		(57	)

Net expenses		638			17,479			1,253			26

Net investment income (loss)		258			29,169			1,465			3
*Realized and unrealized gain (loss)*
Net Realized gain (loss) on transactions from:
Investments in securities		3,726			27,285			5,965			(104	)
Forward foreign currency contracts		—			10,281			(85	)		9
Foreign currency transactions		(22	)		(2,430	)		(87	)		1

Total net realized gain (loss)		3,704			35,136			5,793			(94	)
Change in net unrealized appreciation (depreciation) of:
Investments		3,879			314,012			11,757			712
Forward foreign currency contracts		—			837			—			—
Foreign currency translations		—			(410	)		5			—

Change in net unrealized appreciation (depreciation)		3,879			314,439			11,762			712

Net increase (decrease) in net assets resulting from operations	$	7,841		$	378,744		$	19,020		$	621

(a)

For the period from August 16, 2012 (commencement of operations) to December 31, 2012.

See accompanying Notes to Financial Statements.

54 Annual Report

December 31, 2012

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	Global Leaders Fund						Institutional International Growth Fund						Institutional International Equity Fund						International Leaders Fund
	2012			2011			2012			2011			2012			2011			2012(a)
*Operations*
Net investment income (loss)	$	258		$	225		$	29,169		$	25,588		$	1,465		$	3,338		$	3
Net realized gain (loss) on investments, forwards and foreign currency		3,704			4,570			35,136			68,491			5,793			29,945			(94	)
Change in net unrealized appreciation (depreciation) on investments, forwards and foreign currency		3,879			(6,320	)		314,439			(329,733	)		11,762			(61,430	)		712

Net increase (decrease) in net assets resulting from operations		7,841			(1,525	)		378,744			(235,654	)		19,020			(28,147	)		621
*Distributions to shareholders from*
Net investment income
Class N		(15	)		(4	)		—			—			—			—			—
Class I		(227	)		(170	)		—			—			—			—			(6	)
Class Institutional		—			—			(62,889	)		(1,997	)		(1,482	)		(2,326	)		(10	)

Total Distributions		(242	)		(174	)		(62,889	)		(1,997	)		(1,482	)		(2,326	)		(16	)
*Capital stock transactions*
Net proceeds from sale of shares		32,763			3,738			283,364			357,122			9,705			12,843			9,543
Shares issued in reinvestment of income dividends and capital gain distributions		234			166			58,949			1,885			1,482			2,328			16
Less cost of shares redeemed		(16,176	)		(4,508	)		(226,632	)		(464,979	)		(30,509	)		(164,692	)		—

Net increase (decrease) in net assets resulting from capital share transactions		16,821			(604	)		115,681			(105,972	)		(19,322	)		(149,521	)		9,559

Increase (decrease) in net assets		24,420			(2,303	)		431,536			(343,623	)		(1,784	)		(179,994	)		10,164
Net assets
Beginning of year		42,574			44,877			1,542,594			1,886,217			111,474			291,468			—

End of year	$	66,994		$	42,574		$	1,974,130		$	1,542,594		$	109,690		$	111,474		$	10,164

Accumulated net investment income (loss) at the end of the year	$	(7	)	$	(3	)	$	(8,076	)	$	16,015		$	(196	)	$	(25	)	$	(3	)

(a)

For the period from August 16, 2012 (commencement of operations) to December 31, 2012.

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 55

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Markets Leaders Fund			Emerging Markets Small Cap Growth Fund
*Assets*
Investments in securities, at cost	$	611,156		$	781,190		$	60,490		$	25,817
Investments in affiliated companies, at cost		—			23,624			—			—


Investments in securities, at value	$	716,924		$	934,200		$	70,624		$	27,656
Investments in affiliated companies, at cost		—			23,624			—			—
Cash		—			—			—			12
Foreign currency, at value (cost $2,085 ; $1,679 ;$5 ; $93)		2,086			1,680			5			93
Receivable for securities sold		4,361			9,380			—			311
Receivable for fund shares sold		774			5,660			13			1,239
Receivable from Advisor		—			—			11			25
Dividend and interest receivable		401			662			40			10

Total assets		724,546			975,206			70,693			29,346
*Liabilities*
Payable for investment securities purchased		3,141			7,788			1,563			2,214
Payable for fund shares redeemed		1,064			242			—			—
Management fee payable		605			870			60			14
Distribution and shareholder administration fees payable		50			24			3			2
Foreign income tax payable		—			1,738			—			29
Other payables and accrued expenses		178			307			88			66

Total liabilities		5,038			10,969			1,714			2,325

Net Assets	$	719,508		$	964,237		$	68,979		$	27,021

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest		53			71			8			2
Capital paid in excess of par value		673,078			852,556			63,868			25,269
Accumulated net investment income (loss)		(1,792	)		(2,280	)		(44	)		(59	)
Accumulated realized gain (loss)		(57,594	)		(37,394	)		(4,987	)		(4	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		105,763			151,284			10,134			1,813

Net Assets	$	719,508		$	964,237		$	68,979		$	27,021


Net Assets	$	345,180		$	802,571		$	43,102		$	15,242
Shares Outstanding—Institutional Class		25,301,236			59,076,898			4,697,641			1,172,791
Net Asset Value Per Share	$	13.64		$	13.59		$	9.18		$	13.00

See accompanying Notes to Financial Statements.

56 Annual Report

December 31, 2012

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Markets Leaders Fund			Emerging Markets Small Cap Growth Fund
*Investment income*
Dividends	$	16,759		$	24,475		$	1,364		$	160
Less foreign tax withheld		(1,245	)		(2,200	)		(113	)		(17	)
Interest		128			208			1			—

Total income		15,642			22,483			1,252			143
*Expenses*
Investment advisory fees		6,995			10,670			631			78
Distribution fees		38			44			—			5
Shareholder administration fees		566			232			37			10
Custodian fees		201			578			121			105
Transfer agent fees		38			49			21			7
Sub transfer agent fees
Class N		20			15			—			—
Class I		266			70			1			—
Professional fees		98			165			71			55
Registration fees		41			50			52			38
Shareholder reporting fees		99			72			4			5
Trustee fees		36			50			4			—
Other expenses		27			42			12			6

Total expenses before waiver		8,425			12,037			954			309
Expenses reimbursed to (waived or absorbed by) the Advisor		—			—			(198	)		(205	)

Net expenses		8,425			12,037			756			104

Net investment income (loss)		7,217			10,446			496			39
*Realized and unrealized gain (loss)*
Net Realized gain (loss) on transactions from:
Investments in securities		7,787			(9,098	)		(2,337	)		54
Forward foreign currency contracts		1,901			—			—			—
Foreign currency transactions		(397	)		(1,371	)		(53	)		(6	)

Total net realized gain (loss)		9,291			(10,469	)		(2,390	)		48
Change in net unrealized appreciation (depreciation) of:
Investments		125,451			172,004			12,648			1,856
Forward foreign currency contracts		311			—			—			—
Foreign currency translations		231			(1,409	)		45			(25	)

Change in net unrealized appreciation (depreciation)		125,993			170,595			12,693			1,831

Net increase (decrease) in net assets resulting from operations	$	142,501		$	170,572		$	10,799		$	1,918

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 57

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	International Small Cap Growth Fund						Emerging Markets Growth Fund						Emerging Markets Leaders Fund						Emerging Markets Small Cap Growth Fund
	2012			2011			2012			2011			2012			2011			2012			2011(a)
*Operations*
Net investment income (loss)	$	7,217		$	6,857		$	10,446		$	8,885		$	496		$	701		$	39		$	2
Net realized gain (loss) on investments, forwards and foreign currency		9,291			60,435			(10,469	)		127,536			(2,390	)		112			48			(75	)
Change in net unrealized appreciation (depreciation) on investments, forwards and foreign currency		125,993			(155,577	)		170,595			(304,105	)		12,693			(20,181	)		1,831			(17	)

Net increase (decrease) in net assets resulting from operations		142,501			(88,285	)		170,572			(167,684	)		10,799			(19,368	)		1,918			(90	)
*Distributions to shareholders from*
Net investment income
Class N		(274	)		(193	)		(88	)		—			(1	)		—			(13	)		—
Class I		(7,774	)		(5,147	)		(1,209	)		(466	)		(169	)		(126	)		(65	)		—
Class Institutional		(8,146	)		(5,384	)		(7,965	)		(3,984	)		(303	)		(181	)		—			—
Net realized gain
Class N		—			—			—			(2,577	)		—			(3	)		—			—
Class I		—			—			—			(18,690	)		—			(1,745	)		—			—
Class Institutional		—			—			—			(93,763	)		—			(1,956	)		—			—
Return of capital
Class I		—			—			—			—			—			(11	)		—			—
Class Institutional		—			—			—			—			—			(14	)		—			—

Total Distributions		(16,194	)		(10,724	)		(9,262	)		(119,480	)		(473	)		(4,036	)		(78	)		—
*Capital stock transactions*
Net proceeds from sale of shares		122,084			313,989			260,741			352,369			29,723			19,857			25,035			3,362
Shares issued in reinvestment of income dividends and capital gain distributions		14,490			8,514			8,174			100,061			413			3,491			52			—
Less cost of shares redeemed		(261,594	)		(152,224	)		(283,834	)		(597,963	)		(19,305	)		(47,023	)		(3,178	)		—

Net increase (decrease) in net assets resulting from capital share transactions		(125,020	)		170,279			(14,919	)		(145,533	)		10,831			(23,675	)		21,909			3,362

Increase (decrease) in net assets		1,287			71,270			146,391			(432,697	)		21,157			(47,079	)		23,749			3,272
Net assets
Beginning of year		718,221			646,951			817,846			1,250,543			47,822			94,901			3,272			—

End of year	$	719,508		$	718,221		$	964,237		$	817,846		$	68,979		$	47,822		$	27,021		$	3,272

Accumulated net investment income (loss) at the end of the year	$	(1,792	)	$	4,542		$	(2,280	)	$	(1,953	)	$	(44	)	$	(14	)	$	(59	)	$	(13)

(a)

For the period ended from October 24, 2011 (commencement of operations) to December 31, 2011

See accompanying Notes to Financial Statements.

58 Annual Report

December 31, 2012

Statements of Assets and Liabilities

December 31, 2012 (all dollar amounts in thousands)


	Bond Fund		Low Duration Fund
*Assets*
Investments in securities, at cost	$	272,411	$	259,259


Investments in securities, at value	$	293,824	$	261,495
Receivable for fund shares sold		733		26,188
Receivable from Advisor		21		20
Dividend and interest receivable		2,588		896

Total assets		297,166		288,599
*Liabilities*
Payable for investment securities purchased		—		1,213
Payable for fund shares redeemed		141		30
Payable to custodian		—		323
Management fee payable		71		60
Distribution and shareholder administration fees payable		28		19
Shareholders distribution payable		121		76
Other payables and accrued expenses		63		48

Total liabilities		424		1,769

Net Assets	$	296,742	$	286,830

*Capital*
Composition of Net Assets
Par value of shares of beneficial interest	$	27	$	29
Capital paid in excess of par value		273,907		289,373
Accumulated net investment income (loss)		2		—
Accumulated realized gain (loss)		1,393		(4,808	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		21,413		2,236

Net Assets	$	296,742	$	286,830


Net Assets	$	91,039	$	118,401
Shares Outstanding—Institutional Class		8,154,261		12,043,624
Net Asset Value Per Share	$	11.16	$	9.83

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 59

Statements of Operations

for the Year Ended December 31, 2012 (all dollar amounts in thousands)


	Bond Fund			Low Duration Fund
*Investment income*
Interest	$	10,566		$	4,030

Total income		10,566			4,030
*Expenses*
Investment advisory fees		803			583
Distribution fees		36			13
Shareholder administration fees		280			170
Custodian fees		59			71
Transfer agent fees		35			27
Sub transfer agent fees
Class N		32			2
Class I		53			4
Professional fees		33			38
Registration fees		44			57
Shareholder reporting fees		14			5
Trustee fees		12			8
Other expenses		15			12

Total expenses before waiver		1,416			990
Expenses reimbursed to (waived or absorbed by) the Advisor		(162	)		(31	)

Net expenses		1,254			959

Net investment income (loss)		9,312			3,071
*Realized and unrealized gain (loss)*
Net Realized gain (loss) on transactions from:
Investments in securities		4,348			192

Total net realized gain (loss)		4,348			192
Change in net unrealized appreciation (depreciation) of:
Investments		8,020			1,977

Change in net unrealized appreciation (depreciation)		8,020			1,977

Net increase (decrease) in net assets resulting from operations	$	21,680		$	5,240

See accompanying Notes to Financial Statements.

60 Annual Report

December 31, 2012

Statements of Changes in Net Assets

for the Years Ended December 31, 2012 and 2011 (all dollar amounts in thousands)


	Bond Fund						Low Duration Fund
	2012			2011			2012			2011
*Operations*
Net investment income (loss)	$	9,312		$	8,820		$	3,071		$	2,586
Net realized gain (loss) on investments		4,348			3,325			192			59
Change in net unrealized appreciation (depreciation) on investments		8,020			3,590			1,977			360

Net increase (decrease) in net assets resulting from operations		21,680			15,735			5,240			3,005
*Distributions to shareholders from*
Net investment income
Class N		(961	)		(229	)		(219	)		(152	)
Class I		(6,754	)		(6,707	)		(2,909	)		(2,098	)
Class Institutional		(3,467	)		(2,764	)		(2,382	)		(1,853	)
Net realized gain
Class N		(211	)		(66	)		—			—
Class I		(1,126	)		(1,188	)		—			—
Class Institutional		(597	)		(577	)		—			—

Total Distributions		(13,116	)		(11,531	)		(5,510	)		(4,103	)
*Capital stock transactions*
Net proceeds from sale of shares		82,419			100,839			191,001			121,427
Shares issued in reinvestment of income dividends and capital gain distributions		10,216			8,489			4,275			3,322
Less cost of shares redeemed		(36,473	)		(74,292	)		(65,323	)		(109,974	)

Net increase (decrease) in net assets resulting from capital share transactions		56,162			35,036			129,953			14,775

Increase (decrease) in net assets		64,726			39,240			129,683			13,677
Net assets
Beginning of year		232,016			192,776			157,147			143,470

End of year	$	296,742		$	232,016		$	286,830		$	157,147

Accumulated net investment income (loss) at the end of the year	$	2		$	2		$	—		$	—

See accompanying Notes to Financial Statements.

December 31, 2012

William Blair Funds 61

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 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-five funds (the “Funds”), each with its own investment objective and policies. For each Fund, the number of shares authorized is unlimited.

Domestic 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 Leaders (formerly known as Global Growth)

Multi-Asset and Alternative Funds

Macro Allocation

Commodity Strategy Long/Short

International Growth

International Equity

International Leaders

Institutional International Growth

Institutional International Equity

International Small Cap Growth

Emerging Markets Growth

Emerging Markets Leaders (formerly
known as Emerging Leaders Growth)

Emerging Markets Small Cap Growth

Fixed-Income Funds

Bond

Income

Low Duration

Money Market Fund

Ready Reserves

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

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 Global Leaders Fund, the International Leaders Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Markets Leaders Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund and the Low Duration Fund are the only Funds covered in this report.

(b) Share Classes

Three different classes of shares of the Global Leaders, International Leaders, International Small Cap Growth, Emerging Markets Growth, Emerging Markets Leaders, 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.

62 Annual Report

December 31, 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 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).

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 that are not exchange traded funds are valued at the underlying fund’s net asset value on the date of valuation.

As of December 31, 2012, there were securities held in the Institutional International Growth and Bond Funds requiring fair valuation pursuant to the Trust’s Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

Interest income is recorded on an accrual basis, adjusted for amortization of premium or discount. Variable rate bonds and floating rate notes earn interest at coupon rates that fluctuate at specific time intervals. The interest rate shown on the Portfolio of Investments for the Bond Fund and Low Duration Fund were the rates in effect on December 31, 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 December 31, 2012, the Bond and Low Duration Funds recognized an increase of interest income and a decrease of net realized loss of $(1,870) and $(2,439), respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Funds.

December 31, 2012

William Blair Funds 63

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 Global Leaders, Institutional International Growth, Institutional International Equity, International Leaders, International Small Cap Growth, Emerging Markets Growth, Emerging Markets Leaders, and Emerging Markets Small Cap 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

Certain 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, 2012 remains open and the returns are subject to examination.

64 Annual Report

December 31, 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 December 31, 2012 were as follows (in thousands):


Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Global Leaders	$	55,537	$	8,332	$	304	$	8,028
Institutional International Growth		1,669,697		315,921		9,697		306,224
Institutional International Equity		89,646		19,150		183		18,967
International Leaders		9,453		737		58		679
International Small Cap Growth		618,210		108,461		9,747		98,714
Emerging Markets Growth		818,359		146,056		6,591		139,465
Emerging Markets Leaders		62,365		8,388		129		8,259
Emerging Markets Small Cap Growth		25,961		1,736		41		1,695
Bond		272,412		21,690		278		21,412
Low Duration		259,260		2,595		360		2,235

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, expiration of capital loss carryforward, 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, 2012, the following reclassifications were recorded (in thousands):


Fund	Undistributed Net Investment Income (Loss)			Accumulated Undistributed Net Realized Gain/(Loss)			Capital Paid In Excess of Par Value
Global Leaders	$	(20	)	$	20		$	—
Institutional International Growth		9,629			(9,629	)		—
Institutional International Equity		(154	)		154			—
International Leaders		10			(10	)		—
International Small Cap Growth		2,643			(2,665	)		22
Emerging Markets Growth		(1,511	)		1,511			—
Emerging Markets Leaders		(53	)		53			—
Emerging Markets Small Cap Growth		(7	)		6			1
Bond		1,870			(1,870	)		—
Low Duration		2,439			(2,439	)		—

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 to the Institutional Class during 2012 and 2011 was as follows (in thousands):


	Distributions Paid in 2012				Distributions Paid in 2011
Fund	Ordinary Income		Long-Term Capital Gains		Return of Capital		Ordinary Income		Long-Term Capital Gains
Institutional International Growth	$	62,889	$	—	$	—	$	1,997	$	—
Institutional International Equity		1,482		—		—		2,326		—
International Leaders		10		—		—		—		—
International Small Cap Growth		8,146		—		—		5,384		—
Emerging Markets Growth		7,965		—		—		3,984		93,763
Emerging Markets Leaders		303		—		14		695		1,443
Bond		3,467		597		—		2,764		577
Low Duration		2,382		—		—		1,853		—

December 31, 2012

William Blair Funds 65

As of December 31, 2012, 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
Global Leaders	$	2	$	(13,781	)	$	—	$	8,028
Institutional International Growth		8,836		(175,273	)		—		306,224
Institutional International Equity		191		(122,787	)		—		18,967
International Leaders		30		(104	)		—		679
International Small Cap Growth		1,592		(53,929	)		—		98,714
Emerging Markets Growth		155		(28,010	)		—		139,465
Emerging Markets Leaders		57		(3,213	)		—		8,259
Emerging Markets Small Cap Growth		56		(37	)		36		1,695
Bond		2		(104	)		1,498		21,412
Low Duration		—		(4,807	)		—		2,235

As of December 31, 2012, 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
Global Leaders	$	644	$	13,127	$	—	$	13,771
Institutional International Growth		—		172,315		—		172,315
Institutional International Equity		9,705		113,087		—		122,792
International Small Cap Growth		—		53,954		—		53,954
Low Duration		—		—		955		955

As of December 31, 2012 the Funds incurred the following capital losses which will not expire (in thousands):


Fund	Short Term		Long Term
International Leaders	$	33	$	—
Emerging Market Growth		23,905		—
Emerging Market Leaders		2,240		—
Low Duration		2,054		1,296

66 Annual Report

December 31, 2012

At December 31, 2012, the following Funds deferred, on a tax basis, qualified late year losses of:


	Qualified Late Year Losses
Fund	Ordinary Income		Short-Term Capital		Long-Term Capital
Global Leaders	$	10	$	—	$	—
Institutional International Growth		—		2,341		—
International Leaders		—		71		—
Emerging Markets Growth		—		2,380		—
Emerging Markets Leaders		—		464		507
Emerging Markets Small Cap Growth		—		7		—
Bond		—		104		—
Low Duration		—		291		210

(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 security 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.

(i) Use of 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

•

Level 1—Quoted prices (unadjusted) in active markets for an identical security.

•

December 31, 2012

William Blair Funds 67

•

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 December 31, 2012, the hierarchical input levels of securities in each Fund, segregated by security class, are as follows (in thousands):


	Global Leaders		Institutional International Growth		Institutional International Equity		International Leaders			International Small Cap Growth		Emerging Markets Growth		Emerging Markets Leaders		Emerging Markets Small Cap Growth
Investments in securities
Level 1—Quoted prices
Common Stock	$	32,806	$	210,709	$	14,430	$	1,265		$	50,335	$	218,872	$	16,608	$	6,809
Preferred Stock		—		—		—		—			—		19,764		2,086		309
Exchange traded funds		—		20,441		—		—			—		—		—		—
Level 2—Other significant observable inputs
Common Stock		30,421		1,694,680		94,183		8,701			646,215		682,040		49,021		18,450
Affiliated Funds		—		11,834		—		—			—		23,624		—		—
Short-Term Investments		338		37,717		—		166			20,374		13,524		2,909		2,088
Level 3—Significant unobservable inputs
Common Stock		—		540		—		—			—		—		—		—

Total investments in securities	$	63,565	$	1,975,921	$	108,613	$	10,132		$	716,924	$	957,824	$	70,624	$	27,656
									��
Level 1 and Level 2 transfers
Transfers from Level 1 to Level 2		11,929		672,388		38,181		—			352,290		386,205		26,326		1,325
Transfers from Level 2 to Level 1		—		—		—		—			—		—		—		—


	Bond		Low Duration Fund
Investments in securities
Level 1—Quoted Prices
None	$	—	$	—
Level 2—Other significant observable inputs
US Government and Agency Bonds		119,464		193,271
Corporate Bonds		163,377		37,119
Asset Backed Bonds		9,194		31,105
Short-Term Investments		1,622		—
Level 3—Significant unobservable inputs
Asset Backed Bonds		167		—

Total investments in securities	$	293,824	$	261,495

Fair Valuation Transfers

(a)

68 Annual Report

December 31, 2012

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 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 0.03% and 0.06% as a percentage of Net Assets in the Institutional International Growth and Bond Funds, respectively. The change in net unrealized gain (loss) related to those securities held at December 31, 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.

(l) Redemptions In-Kind

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements


Global Equity Fund		Fixed-Income Funds
Global Leaders	1.00%	Bond	0.30%
International Funds		Low Duration	0.30%
Institutional International Growth:
First $500 million	1.00%
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 Leaders	0.95%
International Small Cap Growth	1.00%
Emerging Markets Growth	1.10%
Emerging Markets Leaders	1.10%
Emerging Markets Small Cap 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 Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Funds on an monthly basis.

December 31, 2012

William Blair Funds 69

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
Global Leaders		1.10	%		N/A
Institutional International Equity		1.10	%		1.10	%
International Leaders		1.05	%(a)		N/A
International Small Cap Growth		1.25	%		1.25	%
Emerging Markets Growth		1.30	%		1.30	%
Emerging Markets Leaders		1.25	%		1.25	%
Emerging Markets Small Cap Growth		1.25	%		N/A
Bond		0.35	%		0.35	%
Low Duration		0.40	%		0.40	%

(a)

Effective August 16, 2012 through April 30, 2014


Fund	Available for Recapture
International Leaders	$	57
Emerging Markets Small Cap Growth		253

For the year ended December 31, 2012, the fees 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
Global Leaders	$	140	$	14	$	3	$	157
Institutional International Equity		69		—		—		69
International Leaders		57		—		—		57
Emerging Markets Leaders		196		1		1		198
Emerging Markets Small Cap Growth		205		—		—		205
Bond		77		53		32		162
Low Duration		25		4		2		30

(3) Investment Transactions

Investment transactions, excluding money market instruments, repurchase agreements and demand notes for the year ended December 31, 2012 were as follows (in thousands):


Fund	Purchases		Sales
Global Leaders	$	49,749	$	(36,269	)
Institutional International Growth		1,520,125		(1,435,964	)
Institutional International Equity		95,866		(114,216	)
International Leaders		10,340		(982	)
International Small Cap Growth		522,503		(661,617	)
Emerging Markets Growth		847,110		(869,517	)
Emerging Markets Leaders		61,689		(52,654	)
Emerging Markets Small Cap Growth		26,387		(5,999	)
Bond		148,553		(92,844	)
Low Duration		186,371		(78,475	)

70 Annual Report

December 31, 2012

(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.

For the year ended December 31, 2012, the Institutional International Growth, Institutional International Equity, International Leaders 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	$	153,791
Institutional International Equity		4,056
International Leaders		351
International Small Cap Growth		7,102

The effect of forward contracts on the Statements of Operations for the year ended December 31, 2012 (values in thousands):


Net realized gain (loss) on transactions from forward foreign currency contracts
Fund	Value
Institutional International Growth	$	10,281
Institutional International Equity		(85	)
International Leaders		9
International Small Cap Growth		1,901


Change in net unrealized appreciation (depreciation) of forward foreign currency contracts
Fund	Value
Institutional International Growth		$837
Institutional International Equity		—
International Leaders		—
International Small Cap Growth		311

There were no open Forward Foreign Currency Contracts as of December 31, 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 Year Ended December 31, 2012
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Global Leaders (a)	$	16,024	$	—	$	—	$	16,024
Institutional International Growth		283,364		58,949		226,632		115,681
Institutional International Equity		9,705		1,482		30,509		(19,322	)
International Leaders (b)		5,000		10		—		5,010
International Small Cap Growth		49,414		7,704		106,290		(49,172	)
Emerging Markets Growth		245,923		7,240		259,995		(6,832	)
Emerging Markets Leaders		23,757		303		13,122		(12,637	)
Emerging Markets Small Cap Growth (c)		15,000		—		—		15,000
Bond		22,458		3,214		6,675		18,995
Low Duration		71,039		2,281		22,867		50,453

December 31, 2012

William Blair Funds 71


	Dollars
	For the Year Ended December 31, 2011
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Global Leaders (a)	$	—	$	—	$	—	$	—
Institutional International Growth		357,122		1,885		464,979		(105,972	)
Institutional International Equity		12,843		2,328		164,692		(149,521	)
International Leaders (b)		—		—		—		—
International Small Cap Growth		144,872		5,156		51,270		98,758
Emerging Markets Growth		325,811		84,535		525,445		(115,099	)
Emerging Markets Leaders		—		2,152		38,310		(36,158	)
Emerging Markets Small Cap Growth (c)		—		—		—		—
Bond		54,824		2,564		29,654		27,734
Low Duration		61,464		1,816		42,760		20,520

	Shares
	For the Year Ended December 31, 2012
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Global Leaders (a)		1,690		—		—		1,690
Institutional International Growth		20,453		3,970		16,310		8,113
Institutional International Equity		987		137		3,013		(1,889	)
International Leaders (b)		488		1		—		489
International Small Cap Growth		3,936		567		8,279		(3,776	)
Emerging Markets Growth		19,326		537		20,495		(632	)
Emerging Markets Leaders		2,826		33		1,581		1,278
Emerging Markets Small Cap Growth (c)		1,173		—		—		1,173
Bond		2,035		290		604		1,721
Low Duration		7,207		231		2,321		5,117

	Shares
	For the Year Ended December 31, 2011
Fund	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Global Leaders (a)		—		—		—		—
Institutional International Growth		26,212		156		33,111		(6,743	)
Institutional International Equity		1,239		259		16,514		(15,016	)
International Leaders (b)		—		—		—		—
International Small Cap Growth		11,931		463		4,109		8,285
Emerging Markets Growth		22,569		7,644		34,501		(4,288	)
Emerging Markets Leaders		—		288		4,453		(4,165	)
Emerging Markets Small Cap Growth (c)		—		—		—		—
Bond		5,142		239		2,774		2,607
Low Duration		6,225		184		4,328		2,081

(a)

For the period from December 18, 2012 (Commencement of Operations) to December 31, 2012.

(b)

For the period from November 2, 2012 (Commencement of Operations) to December 31, 2012.

(c)

For the period from December 20, 2012 (Commencement of Operations) to December 31, 2012.

72 Annual Report

December 31, 2012

Financial Highlights

Global Leaders Fund


	Period Ended December 31,
	2012(a)
Net asset value, beginning of year	$	9.50
Income (loss) from investment operations:
Net investment income (loss) (b)		0.00	^
Net realized and unrealized gain (loss) on investments		(0.03	)

Total from investment operations		(0.03	)
Less distributions from:
Net investment income		—
Net realized gain		—

Total distributions		—

Net asset value, end of year	$	9.47

Total Return (%) *		(0.32	)
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.10
Expenses, before waivers and reimbursements		1.26
Net investment income (loss), net of waivers and reimbursements		(0.91	)
Net investment income (loss), before waivers and reimbursements		(1.07	)

Net assets at end of year (in thousands)	$	16,022
Portfolio turnover rate (%)		73

(a)

For the period December 19, 2012 (Commencement of Operations) to December 31, 2012.

(b)

Excludes $0.00 of PFIC mark-to-market which is treated as ordinary income for Federal tax purposes for 2012.

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.

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William Blair Funds 73

Financial Highlights

Institutional International Growth Fund


	Years Ended December 31,
	2012			2011			2010		2009		2008
Net asset value, beginning of year	$	12.39		$	14.37		$	12.20	$	8.66	$	19.20
Income (loss) from investment operations:
Net investment income (loss) (a)		0.23			0.21			0.14		0.10		0.25
Net realized and unrealized gain (loss) on investments		2.76			(2.17	)		2.31		3.61		(10.24	)

Total from investment operations		2.99			(1.96	)		2.45		3.71		(9.99	)
Less distributions from:
Net investment income		0.49			0.02			0.28		0.17		—
Net realized gain		—			—			—		—		0.55

Total distributions		0.49			0.02			0.28		0.17		0.55

Net asset value, end of year	$	14.89		$	12.39		$	14.37	$	12.20	$	8.66

Total Return (%)		24.11			(13.66	)		20.10		42.83		(51.99	)
Ratios to average daily net assets (%):
Expenses		0.98	��		0.99			0.99		1.01		0.98
Net investment income (loss)		1.64			1.51			1.12		0.95		1.68

Net assets at end of year (in thousands)	$	1,974,130		$	1,542,594		$	1,886,217	$	1,375,848	$	998,266
Portfolio turnover rate (%)		83			111			99		125		86

(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 2012, 2011, 2010, 2009, and 2008 respectively.

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

74 Annual Report

December 31, 2012

Financial Highlights

Institutional International Equity Fund


	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	9.27	$	10.78		$	9.84	$	7.44	$	15.03
Income (loss) from investment operations:
Net investment income (loss) (a)		0.13		0.16			0.10		0.09		0.15
Net realized and unrealized gain (loss) on investments		1.57		(1.47	)		0.99		2.38		(7.60	)

Total from investment operations		1.70		(1.31	)		1.09		2.47		(7.45	)
Less distributions from:
Net investment income		0.15		0.20			0.15		0.07		—
Net realized gain		—		—			—		—		0.14

Total distributions		0.15		0.20			0.15		0.07		0.14

Net asset value, end of year	$	10.82	$	9.27		$	10.78	$	9.84	$	7.44

Total Return (%)		18.31		(12.12	)		11.12		33.27		(49.57	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10		1.10			1.07		1.09		1.05
Expenses, before waivers and reimbursements		1.16		1.10			1.07		1.09		1.05
Net investment income (loss), net of waivers and reimbursements		1.28		1.48			0.97		1.04		1.26
Net investment income (loss), before waivers and reimbursements		1.22		1.48			0.97		1.04		1.26

Net assets at end of year (in thousands)	$	109,690	$	111,474		$	291,468	$	365,271	$	360,451
Portfolio turnover rate (%)		86		91			73		78		91

(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 2012, 2011, 2010, 2009, and 2008 respectively.

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

December 31, 2012

William Blair Funds 75

Financial Highlights

International Leaders Fund


	Period Ended December 31,
	2012(a)
Net asset value, beginning of year	$	10.24
Income (loss) from investment operations:
Net investment income (loss) (b)		0.00	^
Net realized and unrealized gain (loss) on investments		0.58

Total from investment operations		0.58
Less distributions from:
Net investment income		0.02
Net realized gain		—

Total distributions		0.02

Net asset value, end of year	$	10.80

Total Return (%) *		5.67
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.05
Expenses, before waivers and reimbursements		1.84
Net investment income (loss), net of waivers and reimbursements		0.01
Net investment income (loss), before waivers and reimbursements		(0.78	)

Net assets at end of year (in thousands)	$	5,286
Portfolio turnover rate (%) *		16

(a)

For the period November 2, 2012 (Commencement of Operations) to December 31, 2012.

(b)

Excludes $0.00 of PFIC mark-to-market which is treated as ordinary income for Federal tax purposes for the year 2012.

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.

76 Annual Report

December 31, 2012

Financial Highlights

International Small Cap Growth Fund


	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	11.51	$	13.24		$	10.53	$	6.69	$	14.04
Income (loss) from investment operations:
Net investment income (loss) (a)		0.15		0.14			0.09		0.04		0.03
Net realized and unrealized gain (loss) on investments		2.31		(1.68	)		2.69		3.83		(7.26	)

Total from investment operations		2.46		(1.54	)		2.78		3.87		(7.23	)
Less distributions from:
Net investment income		0.33		0.19			0.07		0.03		—
Net realized gain		—		—			—		—		0.12

Total distributions		0.33		0.19			0.07		0.03		0.12

Net asset value, end of year	$	13.64	$	11.51		$	13.24	$	10.53	$	6.69

Total Return (%)		21.36		(11.60	)		26.40		57.84		(51.53	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.08		1.08			1.08		1.13		1.14
Expenses, before waivers and reimbursements		1.08		1.08			1.08		1.13		1.11
Net investment income (loss), net of waivers and reimbursements		1.14		1.10			0.77		0.48		0.28
Net investment income (loss), before waivers and reimbursements		1.14		1.10			0.77		0.48		0.31

Net assets at end of year (in thousands)	$	345,180	$	334,656		$	275,356	$	165,436	$	191,173
Portfolio turnover rate (%)		76		85			85		136		78

(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 2012, 2011, 2010, 2009, and 2008 respectively.

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

December 31, 2012

William Blair Funds 77

Financial Highlights

Emerging Markets Growth Fund


	Years Ended December 31,
	2012		2011			2010		2009		2008
Net asset value, beginning of year	$	11.32	$	15.96		$	13.03	$	7.56	$	22.07
Income (loss) from investment operations:
Net investment income (loss) (a)		0.14		0.14			0.06		0.06		0.17
Net realized and unrealized gain (loss) on investments		2.27		(2.87	)		3.05		5.55		(13.74	)

Total from investment operations		2.41		(2.73	)		3.11		5.61		(13.57	)
Less distributions from:
Net investment income		0.14		0.08			0.18		0.14		—
Net realized gain		—		1.83			—		—		0.94

Total distributions		0.14		1.91			0.18		0.14		0.94

Net asset value, end of year	$	13.59	$	11.32		$	15.96	$	13.03	$	7.56

Total Return (%)		21.28		(16.82	)		23.91		74.33		(61.51	)
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.20		1.19			1.17		1.22		1.22
Expenses, before waivers and reimbursements		1.20		1.19			1.17		1.22		1.20
Net investment income (loss), net of waivers and reimbursements		1.12		0.93			0.43		0.54		1.08
Net investment income (loss), before waivers and reimbursements		1.12		0.93			0.43		0.54		1.10

Net assets at end of year (in thousands)	$	802,571	$	675,633		$	1,021,456	$	830,660	$	299,739
Portfolio turnover rate (%)		90		104			121		113		118

(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 2012, 2011, 2010, 2009, and 2008 respectively.

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

78 Annual Report

December 31, 2012

Financial Highlights

Emerging Markets Leaders Fund


	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) (c)		0.08		0.09			0.04		0.04		0.04
Net realized and unrealized gain (loss) on investments		1.52		(2.10	)		1.97		3.73		(5.26	)

Total from investment operations		1.60		(2.01	)		2.01		3.77		(5.22	)
Less distributions from:
Net investment income		0.07		0.06			0.03		0.12		0.00	^
Net realized gain		—		0.63			0.06		—		—
Return of capital		—		0.00	^		—		—		—

Total distributions		0.07		0.69			0.09		0.12		0.00	^

Net asset value, end of year	$	9.18	$	7.65		$	10.35	$	8.43	$	4.78

Total Return (%) *		20.97		(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		1.59		1.41			1.35		1.36		1.41
Net investment income (loss), net of waivers and reimbursements		0.90		0.90			0.50		0.58		0.70
Net investment income (loss), before waivers and reimbursements		0.56		0.74			0.41		0.47		0.54

Net assets at end of year (in thousands)	$	43,102	$	26,166		$	78,516	$	106,313	$	43,762
Portfolio turnover rate (%) *		94		142			176		176		151

(a)

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

(b)

Excludes $0.00, $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 2012, 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.

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

December 31, 2012

William Blair Funds 79

Financial Highlights

Emerging Markets Small Cap Growth Fund


	Period Ended December 31,
	2012(a)
Net asset value, beginning of year	$	12.79
Income (loss) from investment operations:
Net investment income (loss)		0.00	^
Net realized and unrealized gain (loss) on investments		0.21

Total from investment operations		0.21
Less distributions from:
Net investment income		—
Net realized gain		—
Return of capital		—

Total distributions		—

Net asset value, end of year	$	13.00

Total Return (%) *		1.64
Ratios to average daily net assets (%): **
Expenses, net of waivers and reimbursements		1.25
Expenses, before waivers and reimbursements		2.32
Net investment income (loss), net of waivers and reimbursements		(0.87	)
Net investment income (loss), before waivers and reimbursements		(1.93	)

Net assets at end of year (in thousands)	$	15,242
Portfolio turnover rate (%) *		78

(a)

For the period December 20, 2012 (Commencement of Operations) to December 31, 2012.

(b)

Excludes $0.00 of PFIC mark-to-market which is treated as ordinary income for Federal tax purposes for the year 2012.

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.

80 Annual Report

December 31, 2012

Financial Highlights

Bond Fund


	Years Ended December 31,
	2012		2011		2010		2009		2008
Net asset value, beginning of year	$	10.80	$	10.58	$	10.30	$	9.72	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.40		0.45		0.48		0.51		0.50
Net realized and unrealized gain (loss) on investments		0.51		0.36		0.34		0.58		(0.31	)

Total from investment operations		0.91		0.81		0.82		1.09		0.19
Less distributions from:
Net investment income		0.48		0.50		0.51		0.51		0.47
Net realized gain		0.07		0.09		0.03		—		—

Total distributions		0.55		0.59		0.54		0.51		0.47

Net asset value, end of year	$	11.16	$	10.80	$	10.58	$	10.30	$	9.72

Total Return (%)		8.61		7.88		8.06		11.47		1.95
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.35		0.35		0.35		0.34		0.35
Expenses, before waivers and reimbursements		0.38		0.39		0.40		0.43		0.56
Net investment income (loss), net of waivers and reimbursements		3.60		4.24		4.54		5.07		5.04
Net investment income (loss), before waivers and reimbursements		3.57		4.20		4.49		4.98		4.83

Net assets at end of year (in thousands)	$	91,039	$	69,447	$	40,490	$	16,226	$	10,443
Portfolio turnover rate (%)		25		28		25		29		52

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

December 31, 2012

William Blair Funds 81

Financial Highlights

Low Duration Fund


	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)		0.17		0.18		0.16		0.01
Net realized and unrealized gain (loss) on investments		0.12		0.03		0.05		(0.07	)

Total from investment operations		0.29		0.21		0.21		(0.06	)
Less distributions from:
Net investment income		0.29		0.28		0.24		0.01
Net realized gain		—		—		—		—

Total distributions		0.29		0.28		0.24		0.01

Net asset value, end of year	$	9.83	$	9.83	$	9.90	$	9.93

Total Return (%) *		3.01		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		1.68		1.81		1.61		1.54
Net investment income (loss), before waivers and reimbursements		1.67		1.79		1.53		1.30

Net assets at end of year (in thousands)	$	118,401	$	68,059	$	47,965	$	13,500
Portfolio turnover rate (%) *		20		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.

82 Annual Report

December 31, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of

William Blair Funds

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Global Leaders Fund (formerly known as Global Growth Fund), Institutional International Growth Fund, Institutional International Equity Fund, International Leaders Fund, International Small Cap Growth Fund, Emerging Markets Growth Fund, Emerging Markets Leaders Fund (formerly known as Emerging Leaders Growth Fund), Emerging Markets Small Cap Growth Fund, Bond Fund, and Low Duration Fund (collectively, the “Funds”) (ten of the Funds constituting William Blair Funds) as of December 31, 2012, and the related statements of operations, statements of changes in net assets, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

LOGO

Chicago, Illinois

April 22, 2013

December 31, 2012

William Blair Funds 83


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*	Chairman of the Board of Trustees and President	Trustee since 2002; Chairman since 2010 Since 2007	Partner, William Blair & Company, L.L.C.; Limited Partner, WBC Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	25	Chairman, William Blair SICAV; Director, William Blair CLS Ltd.; Director, William Blair MAS Ltd.; 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.; Limited Partner, WBC Holdings, L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	25	Director, William Blair SICAV; Director, William Blair CLS Ltd.; Director, William Blair MAS Ltd.;
Non-Interested Trustees
Vann A. Avedisian, 1964	Trustee	Since 2012	Principal, Highgate Holdings since 2009; formerly, co-founder and Managing Director, Oxford Capital Partners, Inc. from 1994 to 2006	25	Potbelly Sandwich Works, LLC

Phillip O. Peterson, 1944	Trustee	Since 2007	Retired; formerly, President, Strong Mutual Funds, 2004 to 2005; formerly, Partner, KPMG LLP	25	The Hartford Group of Mutual Funds (87 portfolios); Symetra Mutual Funds Trust (variable annuity funds) (14 portfolios)

Donald J. Reaves, 1946	Trustee	Since 2004	Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002 to 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)

84 Annual Report

December 31, 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)	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 (2005-2009)		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

December 31, 2012

William Blair Funds 85


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 Management (2004-2009)	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

86 Annual Report

December 31, 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
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. (since 2008); prior thereto, Associate Counsel and Chief Compliance Officer, Calamos Investments (2006-2008)	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. (since 2008); prior thereto, Associate, Bell, Boyd & Lloyd, LLP (2006-2008)	N/A

John M. Raczek, 1970	Assistant Treasurer	Since 2010	Associate, William Blair & Company, L.L.C. (since 2009); prior thereto, Manager, Calamos Investments (2003-2009)	N/A

(1)

(2)

In November 2008, all partners of William Blair & Company, L.L.C. also became limited partners in WBC Holdings, L.P.

December 31, 2012

William Blair Funds 87

Approval of the Management Agreement for the William Blair International Leaders Fund

88 Annual Report

December 31, 2012

(unaudited)

Proxy Voting

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds 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.

Shareholder Meeting Results

1.	Election of Trustees to the Board of Trustees of the Trust. (“Number of Votes” represents all series of the Trust.)


	Number of Votes:
Trustee	For	Withhold
Vann A. Avedisian	1,644,687,158.154	12,090,164.011
Phillip O. Peterson	1,644,159,693.572	12,617,628.593
Lisa A. Pollina*	1,644,478,204.339	12,299,117.826
Donald J. Reaves	1,642,694,755.277	14,082,566.888
Donald L. Seeley	1,644,312,102.168	12,465,219.997
Michelle R. Seitz	1,640,209,136.710	16,568,185.455
Thomas J. Skelly	1,643,851,882.961	12,925,439.204
Richard W. Smirl	1,640,721,918.768	16,055,403.397

Ms. Pollina resigned from the Board of Trustees on October 23, 2012.

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, 2012:

Bond

$1,934,272

The following table provides the percentage of the 2012 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	%		65.16	%
Institutional International Equity		0.00	%		100.00	%
International Leaders		0.42	%		92.76	%
International Small Cap Growth		0.00	%		78.98	%
Emerging Markets Growth		0.27	%		100.00	%
Emerging Markets Leaders		0.00	%		100.00	%
Bond		0.00	%		0.00	%
Low Duration . . . . . . . . . . . . . . . . . .		0.00	%		0.00	%

In January 2013, 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 2012.

December 31, 2012

William Blair Funds 89

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

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.

90 Annual Report

December 31, 2012

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 Page 89 for a detailed explanation of the information presented in these charts.


Expense Example	Beginning Account Value 7/1/2012		Ending Account Value 12/31/2012		Expenses Paid During the Period(a)		Annualized Expense Ratio
Global Leaders Fund
Institutional Class—actual return (b)	$	1,000.00	$	990.60	$	5.50		1.10	%
Institutional Class—hypothetical 5% return (6 month period)		1,000.00		1,019.61		5.58		1.10
Institutional International Growth Fund
Institutional Class—actual return		1,000.00		1,149.23		5.37		0.99
Institutional Class—hypothetical 5% return		1,000.00		1,020.14		5.05		0.99
Institutional International Equity Fund
Class I—actual return		1,000.00		1,127.14		5.88		1.10
Institutional Class—hypothetical 5% return		1,000.00		1,019.61		5.58		1.10
International Leaders Fund
Class I—actual return (c)		1,000.00		1,056.70		5.43		1.05
Institutional Class—hypothetical 5% return (6 month period)		1,000.00		1,019.86		5.33		1.05
International Small Cap Growth Fund
Institutional Class—actual return		1,000.00		1,140.31		5.78		1.08
Institutional Class—hypothetical 5% return		1,000.00		1,019.73		5.46		1.08
Emerging Markets Growth Fund
Institutional Class—actual return		1,000.00		1,129.97		6.48		1.21
Institutional Class—hypothetical 5% return		1,000.00		1,019.05		6.14		1.21
Emerging Markets Leaders Fund
Institutional Class—actual return		1,000.00		1,129.96		6.69		1.25
Institutional Class—hypothetical 5% return		1,000.00		1,018.85		6.34		1.25
Emerging Markets Small Cap Growth Fund
Institutional Class—actual return (d)		1,000.00		1,016.40		6.34		1.25
Institutional Class—hypothetical 5% return (6 month period)		1,000.00		1,018.85		6.34		1.25
Bond Fund
Institutional Class—actual return		1,000.00		1,044.23		1.80		0.35
Institutional Class—hypothetical 5% return		1,000.00		1,023.38		1.78		0.35
Low Duration Fund
Institutional Class—actual return		1,000.00		1,000.00		2.01		0.40
Institutional Class—hypothetical 5% return		1,000.00		1,023.13		2.03		0.40

(a)

(b)

For the period December 18, 2012 (Commencement of Operations) to December 31, 2012.

(c)

For the period November 2, 2012 (Commencement of Operations) to December 31, 2012.

(d)

For the period December 20, 2012 (Commencement of Operations) to December 31, 2012.

December 31, 2012

William Blair Funds 91

BOARD OF TRUSTEES

Vann A. Avedisian

Principal, Highgate Holdings

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, 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)

92 Annual Report

December 31, 2012

William Blair Funds


GLOBAL EQUITY		FIXED-INCOME
Global Leaders Fund - Institutional Class Shares		Bond Fund - Institutional Class Shares
INTERNATIONAL EQUITY		Low Duration Fund - Institutional Class Shares
Institutional International Growth Fund
Institutional International Equity Fund
International Leaders Fund - Institutional Class Shares
International Small Cap Growth Fund - Institutional Class Shares
Emerging Markets Growth Fund - Institutional Class Shares
Emerging Markets Leaders Fund - Institutional Class Shares
Emerging Markets Small Cap Growth Fund - Institutional Class Shares

+1 800 742 7272

williamblairfunds.com

222 West Adams Street

Chicago, Illinois 60606

00093591

Item 2.

Code of Ethics

As of the end of the period covered by this Form N-CSR, the Registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. Such code of ethics is posted on the Registrant’s website: www.williamblairfunds.com. There were no amendments to or waivers of the code of ethics during the period covered by this report.

Item 3.

Audit Committee Financial Expert

The Registrant’s Board of Trustees has determined that the Registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. Mr. Phillip O. Peterson, the Registrant’s audit committee financial expert, is “independent” for purposes of Item 3 to Form N-CSR.

An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an “audit committee financial expert.” Further, the designation of a person as an “audit committee financial expert” does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the “audit committee financial expert” designation. Similarly, the designation of a person as an “audit committee financial expert” does not affect the duties, obligations, or liability of any other member of the audit committee or Board of Trustees.

Item 4.

Principal Accountant Fees and Services

Audit Fees

For the fiscal years ended December 31, 2011 and 2012, Ernst & Young, LLP, the Registrant’s principal accountant (“E&Y”), billed the Registrant $559,500 and $693,000, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

Audit-Related Fees

For the fiscal years ended December 31, 2011 and 2012, E&Y billed the Registrant $8,000 and $30,000, respectively, for assurance and related services that are reasonably related to the performance of the audit of the Registrant’s financial statements and that are not reported above, such as reviewing prospectuses and SEC filings. For the fiscal years ended December 31, 2011 and 2012, E&Y provided no audit-related services to William Blair & Company L.L.C., the Registrant’s investment advisor (“William Blair”) or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Tax Fees

For the fiscal years ended December 31, 2011 and 2012, E&Y billed the Registrant $138,500 and $176,400, respectively, for professional services rendered for tax compliance, tax advice and tax planning. Such services consisted of preparation of tax returns, year-end distribution review, qualifying dividend income analysis and computation of foreign tax credit pass-through. For the fiscal years ended December 31, 2011 and 2012, E&Y did not bill William Blair and its control affiliates for any services that were for engagements directly related to the Registrant’s operations and financial reporting.

All Other Fees

For the fiscal years ended December 31, 2011 and 2012, E&Y did not bill the Registrant for products and services other than the services reported above. For the fiscal years ended December 31, 2011 and 2012, E&Y provided no other services to William Blair or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Audit Committee Pre-Approval Policies and Procedures

Pursuant to Registrant’s Audit Committee Charter (the “Charter”), the Audit Committee is responsible for pre-approving any engagement of the principal accountant to provide non-prohibited services to the Registrant, including the fees and other compensation to be paid to the principal accountant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. Pursuant to the Charter, the Audit Committee is also responsible for pre-approving any engagement of the principal accountant, including the fees and other compensation to be paid to the principal accountant, to provide non-audit services to the Registrant’s investment advisor (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant), if the engagement relates directly to the operations and financial reporting of the Registrant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. The Chair of the Audit Committee may grant the pre-approval referenced above for non-prohibited and non-audit services. All such delegated pre-approvals will be presented to the Audit Committee no later than the next Audit Committee meeting.

Non-Audit Fees

For the fiscal years ended December 31, 2011 and 2012, E&Y billed the Registrant $138,500 and $176,400, respectively, in non-audit fees (tax services). For the same periods, E&Y billed William Blair and its control affiliates $119,000 and $115,000 (Custodian SSAE 16 Report), respectively, in non-audit fees. The Registrant’s Audit Committee has considered whether the provision of non-audit services that were rendered to William Blair or any of its control affiliates that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining E&Y’s independence.

Item 5.

Audit Committee of Listed Registrants

Not Applicable to this Registrant, insofar as the Registrant is not a listed company.

Item 6.

Schedule of Investments

See Schedule of Investments in Item 1

Item 7.

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 8.

Portfolio Managers of Closed Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 9.

Purchase of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 10.

Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees since the Registrant last provided disclosure in response to this item.

Item 11.

Controls and Procedures

(a) The Registrant’s principal executive and principal financial officer, or persons performing similar functions, have concluded that the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3 (b) under the 1940 Act (17 CFR 270.30a-3(b) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the final quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12.

Exhibits

12. (a) (1) Code of Ethics

Not applicable because it is posted on Registrant’s website.

12. (a) (2) (1)

Certification of Principal Executive Officer Required by Rule 30a-2(a) of the Investment Company Act

12. (a) (2) (2)

Certification of Principal Financial Officer Required by Rule 30a-2(a) of the Investment Company Act.

12. (a) (3)

Not applicable to this Registrant.

12. (b)

Certification of Chief Executive Officer and Certification of Chief Financial Officer Required by Rule 30a-2(b) of the Investment Company Act

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		William Blair Funds

		/s/ Michelle R. Seitz
By:		Michelle R. Seitz
		President (Chief Executive Officer)

Date: April 22, 2013

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: April 22, 2013


		/s/ Colette M. Garavalia

By:

Colette M. Garavalia

Treasurer

(Chief Financial Officer)

Date: April 22, 2013

William Blair Funds N-CSR/ACertified annual shareholder report (management investment company) (amended)