As filed with the Securities and Exchange Commission on September 5, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09997
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Baird Funds, Inc.
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(Exact name of registrant as specified in charter)
777 East Wisconsin Avenue, Floor 18
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Milwaukee, WI 53202
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(Address of principal executive offices) (Zip code)
Brett R. Meili
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Robert W. Baird Incorporated
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777 East Wisconsin Avenue
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Milwaukee, WI 53202
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(Name and address of agent for service)
1-866-442-2473
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Registrant's telephone number, including area code
Date of fiscal year end: 12/31/03
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Date of reporting period: 6/30/03
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Item 1. Report to Stockholders.
BAIRD/
FUNDS
SEMI-ANNUAL REPORT
- -------------------------------------
June 30, 2003
Baird Intermediate Bond Fund
Baird Aggregate Bond Fund
Baird Intermediate Municipal Bond Fund
Baird Core Plus Bond Fund
Table of Contents
2003 Bond Market Overview .....................................................2
Baird Intermediate Bond Fund ..................................................3
Baird Aggregate Bond Fund.....................................................12
Baird Intermediate Municipal Bond Fund .......................................20
Baird Core Plus Bond Fund ....................................................24
Statements of Assets and Liabilities .........................................30
Statements of Operations .....................................................31
Statements of Changes in Net Assets ..........................................32
Financial Highlights .........................................................36
Notes to the Financial Statements ............................................44
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Bond Market Overview - 1st Half of 2003
- --------------------------------------------------------------------------------
Yields March Lower
For the first half of 2003, yields marched lower across the yield curve by 20-30
basis points, touching 50-year lows and generating solid positive returns for
all sectors of the bond market (see table at bottom of page). Two-year Treasury
yields fell 30 basis points while 30-year yields fell 20 basis points, causing a
steep Treasury yield curve to steepen further (see chart and table below). The
difference between the 2-year T-note and 30-year T-bond yields increased to 326
basis points from 316 basis points at year-end.
Treasury Yields (source: Bloomberg)
[LINE GRAPH]
Maturity Dec 31, 2002 Jun 30, 2003 6 mo. change
- -------- ------------ ------------ ------------
1 1.22% 1.04% -0.18
2 1.60% 1.30% -0.30
3 1.96% 1.59% -0.37
5 2.73% 2.41% -0.32
7 3.38% 3.05% -0.33
10 3.81% 3.51% -0.30
15 4.51% 4.05% -0.46
20 4.83% 4.52% -0.31
25 4.93% 4.64% -0.29
30 4.76% 4.56% -0.20
Maturity
Corporate Bonds Lead
Yield spreads on corporate bonds continued to tighten during the first half of
the year (see below, left), making corporates the top performing investment
grade sector so far in 2003 with a return of +7.72% (see table at bottom). Lower
rated bonds outpaced higher rated issues with BBB's returning 10.16% and AAA's
returning just 4.17%. High yield bonds beat all other sectors returning an
impressive 18.49% for the first six months.
U.S. Corporate Bonds
Historical Spreads
- --------------------
[CHART]
Date All AA 10 Yr All A 10 Yr All BBB 10 Yr All BB 10 Yr
5/31/94 42.60 65.84 100.44 261.35
6/30/94 39.84 62.06 94.31 259.25
7/29/94 39.88 57.92 90.36 257.04
8/31/94 41.84 60.39 89.93 256.31
9/30/94 39.77 60.41 88.90 233.32
10/31/94 43.92 63.81 91.40 228.22
11/30/94 44.57 67.41 94.28 246.23
12/30/94 46.23 66.57 95.26 239.64
1/31/95 48.32 69.65 97.80 247.34
2/28/95 48.53 67.72 98.22 229.87
3/31/95 46.45 63.71 94.46 216.60
4/28/95 47.45 64.43 95.88 207.46
5/31/95 49.93 67.77 99.62 237.26
6/30/95 51.41 69.14 99.25 227.81
7/31/95 48.53 64.43 93.84 211.74
8/31/95 44.35 60.10 90.55 226.58
9/29/95 47.22 61.65 91.05 218.93
10/31/95 50.65 67.21 95.94 231.56
11/30/95 50.58 69.48 96.60 232.86
12/29/95 51.46 69.12 95.10 234.25
1/31/96 49.37 68.70 95.78 226.45
2/29/96 46.83 62.70 88.69 207.51
3/29/96 43.07 59.74 83.96 201.94
4/30/96 43.89 60.02 84.07 207.89
5/31/96 45.45 57.46 81.24 196.37
6/28/96 47.58 62.00 85.21 203.20
7/31/96 48.02 62.45 85.13 204.76
8/30/96 45.94 58.80 82.51 189.74
9/30/96 45.09 58.29 81.19 182.60
10/31/96 46.13 56.80 78.56 194.16
11/29/96 46.58 57.48 79.25 191.81
12/31/96 47.08 58.84 80.12 177.66
1/31/97 47.68 58.24 79.05 163.32
2/28/97 42.41 52.02 72.30 146.47
3/31/97 45.98 54.83 74.83 153.18
4/30/97 46.92 57.82 78.12 163.91
5/30/97 47.91 57.67 77.36 150.86
6/13/97 45.90 55.94 75.49 143.25
6/30/97 45.78 56.10 73.61 143.72
7/15/97 45.19 56.08 73.28 141.47
7/31/97 45.75 55.49 72.63 138.37
8/15/97 45.57 56.37 72.06 140.12
8/29/97 46.24 56.82 73.26 145.02
9/15/97 47.79 57.91 75.62 146.83
9/30/97 46.86 56.99 74.13 145.59
10/15/97 48.22 58.48 75.56 142.86
10/31/97 52.09 61.78 78.14 147.28
11/14/97 60.59 74.53 91.18 160.10
11/28/97 56.71 71.18 90.39 157.62
12/15/97 55.81 70.68 89.86 162.21
12/31/97 57.53 70.78 90.69 167.94
1/15/98 64.73 79.01 99.47 177.37
1/30/98 63.46 80.28 101.73 178.50
2/13/98 56.49 72.56 96.20 185.82
2/27/98 54.60 71.05 94.95 180.57
3/13/98 54.60 71.34 94.84 177.42
3/31/98 55.72 71.61 95.81 178.23
4/15/98 53.04 69.85 94.23 186.81
4/30/98 54.04 70.20 93.49 191.21
5/15/98 54.13 70.31 93.75 190.50
5/29/98 52.08 69.13 91.80 195.67
6/15/98 62.47 77.92 102.74 207.07
6/30/98 63.80 78.87 102.49 211.93
7/15/98 61.83 77.01 101.88 201.59
7/31/98 68.99 83.34 109.20 207.67
8/14/98 78.10 92.74 123.13 223.33
8/31/98 106.67 122.81 166.98 308.10
9/15/98 99.49 120.70 164.54 313.06
9/30/98 100.90 124.58 168.31 323.97
10/15/98 120.17 140.55 189.64 318.92
10/30/98 122.06 144.18 196.83 355.33
11/13/98 107.21 128.69 182.63 341.30
11/30/98 96.75 116.99 174.12 307.85
12/15/98 102.50 123.29 181.28 313.12
12/30/98 94.80 116.78 175.01 305.17
1/15/99 80.43 103.49 163.47 303.95
1/29/99 81.53 104.98 165.76 303.90
2/12/99 79.45 99.71 154.17 283.55
2/26/99 78.25 96.07 153.74 293.04
3/15/99 75.20 90.93 141.75 304.02
3/31/99 77.04 91.84 135.96 293.63
4/15/99 76.64 91.40 134.25 295.70
4/30/99 77.90 91.84 133.93 261.58
5/14/99 76.43 89.39 126.74 257.93
5/28/99 85.50 97.81 136.19 276.34
6/15/99 93.56 104.42 139.50 277.86
6/30/99 92.27 104.37 143.31 292.17
7/15/99 91.44 103.23 139.22 285.26
7/30/99 101.56 111.87 148.08 288.35
8/13/99 109.80 125.01 159.69 296.15
8/31/99 106.27 121.97 157.21 312.32
9/15/99 95.12 109.92 144.43 303.41
9/30/99 98.39 113.63 148.83 315.02
10/15/99 83.56 102.47 140.27 304.70
10/29/99 88.76 107.55 143.33 328.11
11/15/99 87.41 103.14 140.28 331.53
11/30/99 75.57 91.17 128.09 303.95
12/15/99 83.11 98.83 134.42 294.30
12/31/99 84.45 99.99 134.17 289.47
1/14/00 92.53 105.88 138.37 298.43
1/31/00 98.37 113.69 142.53 304.60
2/15/00 108.73 119.70 149.71 310.66
2/29/00 112.33 124.85 155.38 332.69
3/15/00 126.78 139.93 177.85 340.25
3/31/00 136.13 152.42 191.18 391.39
4/14/00 137.89 154.88 198.98 401.44
4/28/00 138.54 157.32 207.77 402.14
5/15/00 151.33 169.08 218.96 375.05
5/31/00 154.74 168.10 215.34 408.15
6/15/00 140.07 156.61 193.06 379.40
6/30/00 149.90 163.89 197.05 370.52
7/14/00 147.48 161.69 193.68 356.75
7/31/00 153.01 166.65 198.18 350.95
8/15/00 155.89 167.81 198.85 346.74
8/31/00 156.88 171.34 205.44 340.55
9/15/00 142.85 164.38 203.71 323.34
9/29/00 137.74 163.53 202.07 348.26
10/13/00 155.92 185.84 221.21 352.94
10/31/00 151.99 184.21 227.22 375.11
11/15/00 151.12 186.44 231.19 428.19
11/30/00 168.69 202.21 244.56 375.58
12/15/00 161.42 198.42 245.44 395.84
12/29/00 163.11 203.03 248.07 375.01
1/12/01 146.48 183.73 228.35 358.98
1/31/01 133.30 165.27 221.35 341.39
2/15/01 139.43 168.75 222.52 329.01
2/28/01 135.20 167.74 220.50 342.29
3/15/01 140.32 169.15 225.50 341.91
3/30/01 134.65 161.88 218.31 368.04
4/12/01 136.30 166.73 223.57 354.35
4/30/01 121.25 152.73 204.30 338.23
5/15/01 122.64 153.79 204.45 332.98
5/31/01 115.31 144.45 194.62 343.74
6/15/01 115.47 143.88 191.38 342.70
6/29/01 116.12 142.03 196.18 370.97
7/13/01 118.61 143.73 196.99 380.56
7/31/01 116.33 141.90 192.89 393.14
8/15/01 114.93 139.31 195.69 372.16
8/31/01 115.08 141.05 197.31 391.53
9/28/01 136.81 167.98 226.91 534.76
10/15/01 128.06 163.83 218.14 525.98
10/31/01 128.12 166.92 233.09 528.03
11/15/01 111.36 154.50 219.75 443.47
11/30/01 99.51 142.03 211.86 406.29
12/14/01 97.81 144.37 216.90 354.56
12/31/01 91.59 142.12 208.50 378.69
1/2/02 87.96 139.55 201.35 367.82
1/3/02 88.14 137.39 200.63 371.49
1/4/02 88.42 138.79 200.92 366.87
1/7/02 89.90 140.47 199.96 375.11
1/8/02 90.04 140.99 199.92 375.32
1/9/02 90.64 139.22 198.53 375.07
1/10/02 91.69 139.79 200.23 382.28
1/11/02 93.99 141.90 203.95 386.62
1/14/02 90.96 141.25 203.28 374.73
1/15/02 91.53 137.97 201.59 374.70
1/16/02 93.67 138.78 203.01 372.53
1/17/02 93.21 139.41 205.14 367.17
1/18/02 93.69 138.88 205.81 369.93
1/22/02 92.10 136.89 204.04 364.70
1/23/02 92.05 134.28 204.32 360.70
1/24/02 90.69 132.47 204.29 360.88
1/25/02 92.57 133.27 205.53 361.29
1/28/02 92.07 133.05 205.88 361.70
1/29/02 96.98 135.70 207.85 368.97
1/30/02 96.63 135.63 207.12 369.11
1/31/02 94.09 136.13 207.70 364.26
2/1/02 95.81 138.38 210.09 366.79
2/4/02 97.03 139.39 210.72 373.91
2/5/02 102.43 145.32 215.70 375.43
2/6/02 103.13 146.25 217.81 371.02
2/7/02 102.04 144.96 216.40 374.77
2/8/02 100.35 142.83 215.71 377.83
2/11/02 100.93 143.95 215.94 376.03
2/12/02 97.39 139.79 210.26 369.66
2/13/02 92.42 137.52 209.14 368.39
2/14/02 94.61 138.43 209.70 372.80
2/15/02 93.10 133.28 203.51 377.01
2/19/02 93.56 133.99 204.00 377.45
2/20/02 93.03 135.24 204.21 380.02
2/21/02 94.17 135.41 205.81 380.64
2/22/02 93.88 135.12 205.52 385.41
2/25/02 92.88 132.96 206.53 381.68
2/26/02 90.78 130.82 203.81 374.60
2/27/02 90.20 130.12 203.19 377.77
2/28/02 91.45 130.10 202.17 365.55
3/1/02 89.42 128.97 200.87 360.29
3/4/02 89.18 129.85 201.77 359.37
3/5/02 88.17 125.69 199.69 361.20
3/6/02 87.03 124.76 199.87 356.85
3/7/02 84.56 122.03 196.69 340.37
3/8/02 82.42 118.84 193.19 329.73
3/11/02 82.61 117.77 193.46 330.15
3/12/02 83.67 118.84 193.94 329.08
3/13/02 83.87 119.65 194.50 329.75
3/14/02 83.42 118.87 193.54 319.98
3/15/02 87.29 122.57 193.10 310.38
3/18/02 87.45 122.02 194.24 312.97
3/19/02 87.14 121.21 193.21 307.88
3/20/02 86.30 120.41 193.11 305.39
3/21/02 86.72 120.44 194.18 307.47
3/22/02 86.29 120.81 192.69 306.44
3/25/02 87.72 122.29 193.70 306.35
3/26/02 89.88 123.06 194.94 310.46
3/27/02 90.41 123.74 195.23 306.82
3/28/02 94.00 125.84 194.32 308.39
4/1/02 92.80 126.02 194.27 318.25
4/2/02 93.96 126.87 194.25 326.87
4/3/02 94.47 127.26 194.50 324.73
4/4/02 94.23 126.99 193.68 326.02
4/5/02 95.08 127.72 194.19 331.65
4/8/02 95.50 128.05 194.10 331.75
4/9/02 95.55 126.89 194.72 333.74
4/10/02 95.55 126.71 194.95 331.08
4/11/02 96.19 127.87 195.92 333.54
4/12/02 98.88 129.79 199.42 334.68
4/15/02 96.68 127.40 193.91 339.99
4/16/02 96.42 126.05 192.77 336.63
4/17/02 95.65 124.35 190.68 331.93
4/18/02 94.55 123.65 190.11 332.23
4/19/02 94.34 122.32 188.70 335.73
4/22/02 94.29 122.95 192.30 338.07
4/23/02 93.17 123.23 192.21 339.05
4/24/02 92.74 121.28 199.69 347.44
4/25/02 94.18 121.16 195.87 351.03
4/26/02 95.51 122.51 196.64 350.57
4/29/02 98.98 123.56 203.96 342.02
4/30/02 102.70 126.39 205.91 345.98
5/1/02 103.57 127.17 209.32 341.47
5/2/02 101.96 125.78 205.89 328.71
5/3/02 102.37 126.63 205.97 330.13
5/6/02 101.24 127.27 210.95 328.65
5/7/02 102.36 127.93 213.46 324.02
5/8/02 99.35 125.39 209.02 308.78
5/9/02 98.87 125.34 206.10 318.81
5/10/02 99.25 126.05 200.64 342.80
5/13/02 98.30 126.74 205.84 333.16
5/14/02 95.23 123.54 202.24 320.41
5/15/02 97.76 122.76 195.90 335.09
5/16/02 97.06 121.95 195.87 340.47
5/17/02 90.80 116.01 189.32 334.07
5/20/02 94.67 121.17 196.32 338.72
5/21/02 94.50 120.10 195.22 343.94
5/22/02 95.53 120.21 192.08 347.48
5/23/02 94.57 118.87 186.90 344.09
5/24/02 95.26 119.06 185.74 345.71
5/28/02 94.99 118.28 183.11 345.25
5/29/02 95.85 117.41 181.64 350.29
5/30/02 95.69 115.97 184.12 354.20
5/31/02 89.31 111.71 181.63 366.12
6/3/02 89.04 110.65 181.27 368.73
6/4/02 89.39 110.57 182.53 371.58
6/5/02 89.73 111.06 182.52 368.57
6/6/02 90.03 110.51 182.23 373.47
6/7/02 90.90 112.87 186.78 369.10
6/10/02 90.04 112.96 186.48 371.66
6/11/02 89.95 112.42 186.91 376.57
6/12/02 90.42 112.72 191.61 377.96
6/13/02 91.14 112.83 192.88 377.07
6/14/02 90.32 111.21 186.05 391.03
6/17/02 89.41 110.22 183.96 385.84
6/18/02 90.61 111.73 187.34 388.40
6/19/02 90.32 111.22 186.27 398.06
6/20/02 89.71 111.70 187.54 390.51
6/21/02 90.15 113.24 188.59 375.88
6/24/02 92.21 115.66 192.35 374.38
6/25/02 92.64 115.22 190.59 379.69
6/26/02 93.87 115.19 194.08 393.33
6/27/02 92.91 115.10 195.95 386.80
6/28/02 96.20 114.73 192.20 418.72
7/1/02 96.76 115.78 195.64 418.72
7/2/02 97.71 117.81 199.75 425.67
7/3/02 98.68 119.04 201.20 430.32
7/5/02 97.53 118.18 199.47 419.88
7/8/02 98.11 118.35 199.31 426.93
7/9/02 98.16 117.56 199.37 436.64
7/10/02 98.95 119.33 200.22 448.94
7/11/02 100.29 120.04 204.03 435.62
7/12/02 100.74 120.31 201.29 445.30
7/15/02 103.23 124.21 203.99 464.20
7/16/02 103.71 125.24 204.94 454.19
7/17/02 102.11 124.69 205.67 461.54
7/18/02 101.99 125.43 207.72 467.26
7/19/02 102.37 127.71 217.12 473.14
7/22/02 107.93 130.07 227.66 481.77
7/23/02 112.36 130.93 229.86 482.64
7/24/02 114.08 132.88 253.63 498.04
7/25/02 114.55 133.42 242.80 492.41
7/26/02 117.65 135.22 247.70 506.97
7/29/02 118.38 137.61 248.02 476.62
7/30/02 113.13 135.92 233.24 496.48
7/31/02 125.52 141.56 230.52 525.42
8/1/02 123.22 140.88 228.41 521.04
8/2/02 122.15 141.45 231.67 540.50
8/5/02 129.91 148.05 241.05 563.33
8/6/02 126.89 146.03 237.66 547.31
8/7/02 123.59 146.15 237.87 552.74
8/8/02 126.31 145.84 235.27 544.90
8/9/02 123.64 145.31 237.52 557.14
8/12/02 121.81 146.09 240.63 554.00
8/13/02 124.28 146.06 243.52 562.98
8/14/02 123.62 147.07 241.80 578.55
8/15/02 133.23 152.25 242.28 576.33
8/16/02 128.78 151.89 243.29 560.89
8/19/02 128.29 151.77 240.68 561.72
8/20/02 126.48 148.00 236.48 570.97
8/21/02 123.56 147.75 232.34 558.45
8/22/02 120.79 146.93 228.25 547.08
8/23/02 120.95 148.75 228.61 550.13
8/26/02 115.56 147.31 228.03 551.14
8/27/02 112.37 146.28 226.31 526.85
8/28/02 114.46 145.60 225.86 552.60
8/29/02 114.99 146.26 226.50 564.69
8/30/02 113.68 145.75 226.32 533.43
9/3/02 116.21 147.49 231.67 549.91
9/4/02 117.90 147.72 232.04 555.70
9/5/02 118.31 148.50 233.34 562.46
9/6/02 115.83 147.87 232.30 552.92
9/9/02 117.20 147.26 232.48 553.33
9/10/02 118.07 144.93 228.93 558.09
9/11/02 117.66 144.52 228.38 549.72
9/12/02 118.80 143.15 228.44 551.49
9/13/02 119.75 143.11 226.19 565.92
9/16/02 119.52 142.77 225.42 568.62
9/17/02 118.83 143.24 225.28 569.82
9/18/02 119.68 143.48 225.92 569.37
9/19/02 122.48 144.35 225.98 577.22
9/20/02 124.15 146.50 227.15 579.40
9/23/02 126.78 149.62 237.43 596.64
9/24/02 127.30 152.48 246.80 611.45
9/25/02 126.48 150.42 244.22 601.05
9/26/02 124.83 150.11 245.57 583.81
9/27/02 127.18 149.17 244.59 629.45
9/30/02 128.29 147.50 250.10 644.17
10/1/02 126.56 145.42 248.03 636.50
10/2/02 123.52 143.75 241.63 643.91
10/3/02 123.52 143.90 243.22 645.99
10/4/02 125.65 146.40 247.92 644.91
10/7/02 126.15 152.89 261.92 656.41
10/8/02 128.95 155.74 280.63 659.52
10/9/02 133.01 158.53 291.50 659.44
10/10/02 133.18 161.74 294.66 655.37
10/11/02 128.91 158.41 288.24 659.44
10/15/02 120.74 152.95 270.07 638.10
10/16/02 120.28 152.40 268.35 634.67
10/17/02 118.90 151.74 267.62 626.76
10/18/02 116.40 151.18 269.18 622.13
10/21/02 115.28 148.17 264.81 614.49
10/22/02 114.46 147.49 262.96 615.22
10/23/02 114.85 146.96 263.11 612.39
10/24/02 114.67 145.91 261.58 617.79
10/25/02 115.53 148.22 261.81 623.78
10/28/02 111.70 146.82 258.33 623.15
10/29/02 109.99 146.68 257.69 641.77
10/30/02 110.20 145.36 253.39 621.69
10/31/02 110.27 146.98 256.20 624.79
11/1/02 111.44 147.80 257.81 624.40
11/4/02 107.38 141.80 250.14 615.37
11/5/02 103.95 139.29 247.09 615.71
11/6/02 99.98 134.91 243.38 616.21
11/7/02 98.14 132.30 242.28 613.74
11/8/02 98.77 133.78 245.16 617.85
11/12/02 103.72 136.64 250.16 619.33
11/13/02 103.11 137.18 252.62 616.16
11/14/02 101.79 133.67 244.01 580.43
11/15/02 97.46 134.15 236.72 571.18
11/18/02 96.15 133.73 236.17 572.68
11/19/02 96.31 133.34 235.38 572.99
11/20/02 93.09 131.91 231.05 558.08
11/21/02 90.98 130.23 223.25 543.31
11/22/02 90.23 130.25 223.24 538.71
11/25/02 90.90 130.75 222.60 539.76
11/26/02 91.64 130.34 223.16 546.96
11/27/02 90.64 128.00 213.15 488.49
11/29/02 90.69 122.59 208.07 436.48
12/2/02 89.16 120.14 206.06 506.99
12/3/02 90.39 120.00 205.73 503.79
12/4/02 90.18 120.90 207.92 509.54
12/5/02 92.37 121.17 209.10 513.84
12/6/02 96.95 123.62 213.13 521.44
12/9/02 97.28 124.50 214.12 531.33
12/10/02 98.21 126.37 216.10 531.83
12/11/02 99.17 126.13 216.32 537.91
12/12/02 99.99 125.02 215.30 532.20
12/13/02 95.64 120.28 207.13 525.63
12/16/02 94.80 117.08 204.19 518.89
12/17/02 92.14 116.89 202.83 521.65
12/18/02 92.81 117.18 203.24 525.90
12/19/02 90.39 118.10 204.96 533.06
12/20/02 91.63 117.72 205.42 532.55
12/23/02 91.53 117.01 205.26 544.31
12/24/02 92.52 118.04 206.94 538.91
12/26/02 93.09 117.82 208.41 540.03
12/27/02 90.91 117.85 209.31 552.03
12/30/02 91.18 117.77 212.02 548.44
12/31/02 93.04 116.97 204.11 550.26
1/2/03 90.53 114.02 197.44 527.54
1/3/03 90.92 114.20 197.42 527.30
1/6/03 89.55 112.82 194.05 521.67
1/7/03 88.31 111.53 192.93 522.44
1/8/03 88.73 112.02 193.55 524.58
1/9/03 87.10 112.15 193.20 500.93
1/10/03 86.84 112.53 192.85 498.74
1/13/03 85.65 112.78 187.88 497.58
1/14/03 85.15 111.32 187.85 481.39
1/15/03 85.42 109.71 189.80 478.48
1/16/03 85.40 109.38 191.33 478.94
1/17/03 85.97 110.14 192.20 484.15
1/21/03 88.60 111.14 194.80 489.26
1/22/03 91.47 111.97 198.07 496.53
1/23/03 90.92 111.41 196.89 493.33
1/24/03 91.47 111.73 196.97 503.04
1/27/03 90.90 112.86 198.17 503.44
1/28/03 90.57 112.79 197.81 501.39
1/29/03 89.90 112.64 195.47 447.24
1/30/03 88.99 111.68 194.26 479.65
1/31/03 86.56 107.37 187.04 522.64
2/3/03 84.27 107.01 183.97 520.28
2/4/03 84.00 106.94 184.40 523.52
2/5/03 82.69 106.05 182.51 515.16
2/6/03 82.29 105.63 180.75 524.39
2/7/03 81.23 106.48 179.49 526.63
2/10/03 81.75 106.47 179.34 522.31
2/11/03 81.41 106.20 179.08 522.57
2/12/03 82.73 107.50 179.95 534.98
2/13/03 82.78 107.92 181.24 505.95
2/14/03 87.84 107.83 181.91 507.98
2/18/03 87.57 107.97 183.12 509.54
2/19/03 88.07 108.04 183.62 514.73
2/20/03 86.24 108.10 184.46 517.70
2/21/03 87.54 107.91 184.93 511.50
2/24/03 85.73 108.11 185.15 517.53
2/25/03 87.77 106.40 185.35 512.19
2/26/03 86.24 105.91 186.49 517.50
2/27/03 85.23 105.61 186.21 514.10
2/28/03 87.52 106.10 180.16 513.25
3/3/03 84.81 106.39 179.35 511.16
3/4/03 85.48 107.02 180.50 510.31
3/5/03 87.20 109.00 182.67 514.68
3/6/03 86.43 109.29 184.33 507.34
3/7/03 87.07 109.93 186.11 504.76
3/10/03 88.32 110.48 187.05 509.61
3/11/03 86.36 111.54 187.44 513.79
3/12/03 86.72 109.93 187.34 514.00
3/13/03 86.34 108.52 184.98 497.86
3/14/03 83.18 107.93 181.64 486.99
3/17/03 83.78 108.06 180.62 478.33
3/18/03 81.17 106.94 179.90 469.21
3/19/03 80.53 106.79 179.31 466.25
3/20/03 80.49 107.60 178.14 460.77
3/21/03 80.05 107.12 177.35 453.50
3/24/03 79.78 106.57 177.49 451.84
3/25/03 80.49 106.00 176.55 451.29
3/26/03 77.43 105.26 173.65 453.48
3/27/03 77.66 105.73 173.84 438.72
3/28/03 76.11 106.42 173.83 443.28
3/31/03 74.42 105.03 171.35 432.81
4/1/03 74.67 104.95 172.55 430.61
4/2/03 74.12 104.62 171.37 420.27
4/3/03 73.70 104.61 170.24 419.98
4/4/03 74.78 104.77 170.42 412.63
4/7/03 73.10 102.94 169.42 409.08
4/8/03 72.13 102.41 170.63 417.39
4/9/03 73.32 102.57 170.76 418.86
4/10/03 73.34 102.98 170.67 415.81
4/11/03 73.31 102.71 170.50 397.98
4/14/03 70.84 100.30 168.03 386.24
4/15/03 72.02 99.79 162.85 385.40
4/16/03 72.92 99.68 161.26 390.87
4/17/03 72.63 101.45 161.22 390.23
4/21/03 71.31 98.02 158.89 388.78
4/22/03 71.10 97.70 157.47 391.55
4/23/03 70.65 95.58 154.55 390.95
4/24/03 69.35 95.18 154.78 397.60
4/25/03 70.77 95.66 155.12 396.58
4/28/03 69.80 95.38 155.00 369.10
4/29/03 70.02 94.39 154.39 381.68
4/30/03 68.17 92.79 145.39 373.00
5/1/03 68.11 92.00 143.52 372.50
5/2/03 66.94 91.27 143.13 367.32
5/5/03 66.32 90.36 142.34 369.77
5/6/03 66.86 90.10 137.65 377.27
5/7/03 67.07 90.03 141.75 387.61
5/8/03 67.34 90.78 142.74 389.53
5/9/03 66.93 91.03 143.36 387.29
5/12/03 67.05 90.77 142.24 391.17
5/13/03 66.87 91.06 143.54 391.34
5/14/03 66.56 90.63 143.71 399.55
5/15/03 73.42 90.72 145.06 396.29
5/16/03 72.77 90.95 146.22 396.45
5/19/03 75.80 91.25 146.37 397.31
5/20/03 76.44 93.41 148.65 353.70
5/21/03 75.70 91.65 147.71 395.68
5/22/03 74.67 91.70 148.28 409.17
5/23/03 74.23 90.58 146.77 410.38
5/27/03 77.50 92.54 148.55 406.39
5/28/03 75.66 93.17 148.60 404.45
5/29/03 74.20 91.27 146.26 415.03
5/30/03 73.47 92.16 144.77 417.31
6/2/03 72.19 90.61 142.47 409.22
6/3/03 73.64 91.51 143.87 417.22
6/4/03 72.98 91.94 143.57 420.42
6/5/03 71.70 90.49 142.24 415.07
6/6/03 71.36 90.61 142.00 411.99
6/9/03 68.89 89.33 140.51 417.50
6/10/03 69.52 89.97 140.87 425.84
6/11/03 68.71 88.74 139.75 421.17
6/12/03 67.21 88.34 139.48 423.69
6/13/03 68.02 87.85 141.46 408.86
6/16/03 65.13 87.16 141.07 402.51
6/17/03 62.91 86.10 139.72 392.83
6/18/03 63.28 84.85 139.52 385.00
6/19/03 65.03 85.62 140.38 386.98
6/20/03 65.51 85.66 140.29 385.94
6/23/03 68.23 86.26 141.65 394.53
6/24/03 68.51 85.96 141.58 397.73
6/25/03 67.40 84.63 139.74 384.80
6/26/03 66.88 82.88 139.36 332.28
6/27/03 66.61 83.05 138.47 374.04
6/30/03 65.38 81.80 138.93 378.22
Lehman Brothers Mortgage Index
Historical Duration
- ------------------------------
[CHART]
Jan-85 5.74
Feb-85 5.52
Mar-85 5.54
Apr-85 5.50
May-85 5.59
Jun-85 5.42
Jul-85 5.24
Aug-85 5.15
Sep-85 4.95
Oct-85 4.83
Nov-85 4.79
Dec-85 4.99
Jan-86 5.06
Feb-86 5.23
Mar-86 5.13
Apr-86 4.77
May-86 3.87
Jun-86 3.59
Jul-86 3.41
Aug-86 3.52
Sep-86 3.51
Oct-86 3.68
Nov-86 4.17
Dec-86 4.20
Jan-87 4.45
Feb-87 4.59
Mar-87 4.63
Apr-87 4.47
May-87 4.21
Jun-87 4.26
Jul-87 4.24
Aug-87 4.65
Sep-87 4.80
Oct-87 5.12
Nov-87 5.35
Dec-87 5.51
Jan-88 5.77
Feb-88 5.84
Mar-88 5.79
Apr-88 5.27
May-88 4.93
Jun-88 4.81
Jul-88 4.88
Aug-88 4.79
Sep-88 4.94
Oct-88 5.04
Nov-88 5.03
Dec-88 5.11
Jan-89 4.52
Feb-89 4.65
Mar-89 4.81
Apr-89 4.72
May-89 4.60
Jun-89 4.38
Jul-89 4.19
Aug-89 4.35
Sep-89 4.28
Oct-89 4.07
Nov-89 4.03
Dec-89 4.11
Jan-90 4.32
Feb-90 4.44
Mar-90 4.54
Apr-90 4.72
May-90 4.54
Jun-90 4.37
Jul-90 4.23
Aug-90 4.50
Sep-90 4.50
Oct-90 4.43
Nov-90 4.12
Dec-90 4.04
Jan-91 3.96
Feb-91 4.00
Mar-91 4.05
Apr-91 4.07
May-91 4.12
Jun-91 4.26
Jul-91 4.36
Aug-91 4.11
Sep-91 3.78
Oct-91 3.75
Nov-91 3.78
Dec-91 2.41
Jan-92 3.58
Feb-92 3.47
Mar-92 3.98
Apr-92 4.05
May-92 3.53
Jun-92 3.40
Jul-92 3.05
Aug-92 2.77
Sep-92 2.78
Oct-92 3.57
Nov-92 3.68
Dec-92 3.44
Jan-93 3.01
Feb-93 2.56
Mar-93 2.56
Apr-93 2.66
May-93 2.76
Jun-93 2.32
Jul-93 2.47
Aug-93 2.16
Sep-93 2.33
Oct-93 2.80
Nov-93 3.43
Dec-93 3.47
Jan-94 3.35
Feb-94 3.47
Mar-94 4.35
Apr-94 4.74
May-94 4.83
Jun-94 4.74
Jul-94 4.60
Aug-94 4.10
Sep-94 4.35
Oct-94 4.43
Nov-94 4.45
Dec-94 4.40
Jan-95 4.24
Feb-95 4.50
Mar-95 4.46
Apr-95 4.28
May-95 3.50
Jun-95 3.47
Jul-95 3.60
Aug-95 3.48
Sep-95 3.32
Oct-95 3.20
Nov-95 2.91
Dec-95 2.57
Jan-96 2.63
Feb-96 3.48
Mar-96 3.86
Apr-96 4.19
May-96 4.36
Jun-96 4.20
Jul-96 4.07
Aug-96 4.21
Sep-96 4.02
Oct-96 3.62
Nov-96 3.18
Dec-96 3.66
Jan-97 3.66
Feb-97 3.72
Mar-97 3.99
Apr-97 3.84
May-97 3.78
Jun-97 3.60
Jul-97 2.94
Aug-97 3.35
Sep-97 3.02
Oct-97 2.64
Nov-97 2.62
Dec-97 2.40
Jan-98 2.09
Feb-98 2.32
Mar-98 2.46
Apr-98 2.48
May-98 2.35
Jun-98 2.27
Jul-98 2.43
Aug-98 2.06
Sep-98 1.37
Oct-98 2.23
Nov-98 2.21
Dec-98 1.95
Jan-99 1.86
Feb-99 2.82
Mar-99 2.94
Apr-99 3.04
May-99 3.60
Jun-99 3.81
Jul-99 4.15
Aug-99 4.31
Sep-99 4.15
Oct-99 4.04
Nov-99 4.17
Dec-99 4.27
Jan-00 4.36
Feb-00 4.17
Mar-00 4.03
Apr-00 4.25
May-00 4.37
Jun-00 4.11
Jul-00 4.11
Aug-00 3.94
Sep-00 3.84
Oct-00 3.75
Nov-00 3.45
Dec-00 3.00
Jan-01 2.71
Feb-01 2.68
Mar-01 2.84
Apr-01 3.30
May-01 3.40
Jun-01 3.56
Jul-01 3.05
Aug-01 2.90
Sep-01 2.62
Oct-01 1.46
Nov-01 2.60
Dec-01 3.10
Jan-02 3.16
Feb-02 2.90
Mar-02 3.51
Apr-02 3.03
May-02 2.83
Jun-02 2.60
Jul-02 2.03
Aug-02 1.40
Sep-02 0.91
Oct-02 1.08
Nov-02 1.63
Dec-02 0.94
Jan-03 1.20
Feb-03 0.81
Mar-03 1.11
Apr-03 1.03
May-03 0.58
Jun-03 1.02
Mortgage Issues Lag
Mortgage rates approached record lows in May and June, prompting record
refinancing activity on the part of consumers. This caused prepayments on
mortgage-backed securities (MBS) to accelerate greatly and durations of MBS
shortened dramatically (see chart above, right). As a result, the MBS sector
under-performed all other fixed income sectors, returning just 1.60% in the
first six months of the year (see below).
Total Returns of Selected Lehman Brothers Indices and Subsectors
Investment Grade Index/Sector 1st Qtr. 2003 2nd Qtr. 2003 2003 YTD
- ----------------------------- ------------- ------------- --------
LB Aggregate Index 1.39% 2.50% 3.93%
LB Gov't/Credit Index 1.65% 3.52% 5.23%
US Treasury Sector 0.99% 2.73% 3.75%
Gov't Agency Sector 1.20% 2.20% 3.43%
Corporate Sector 2.53% 5.06% 7.72%
AAA 1.50% 2.62% 4.17%
AA 1.99% 3.46% 5.51%
A 1.98% 4.48% 6.55%
BBB 3.40% 6.54% 10.16%
MBS Sector 0.92% 0.66% 1.60%
ABS Sector 1.51% 1.85% 3.39%
Non-Investment Grade Index/Sector
- ---------------------------------
High Yield 7.61% 10.11% 18.49%
Baird Intermediate Bond Fund
- --------------------------------------------------------------------------------
June 30, 2003
The investment objective of the Baird Intermediate Bond Fund is to seek an
annual rate of total return, before Fund expenses, greater than the annual rate
of total return of the Lehman Brothers Intermediate Government/Credit Bond
Index. The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged, market value weighted index of investment grade, fixed-rate debt
including government and corporate securities with maturities between one and
ten years.
Portfolio Characteristics
[PIE CHART]
Quality Distribution
U.S. Treasury 14% Sector Weightings
U.S. Gov't Agency 23% U.S. Treasury 14%
Aaa 17% U.S. Gov't Agency 14%
Aa 6% Mortgage/CMOs 10%
A 19% Int'l 2%
Baa 17% Asset-Backed 10%
Below Baa 4% Industrials 16%
Utility 6%
Finance/Bank/Broker 21%
Cash 6%
Municipal 1%
Net Assets: $ 140,926,602
SEC 30-Day Yield:** Portfolio Expense Ratio:
Institutional Class: 3.84% Institutional Class: 0.30%
Investor Class: 3.49% Investor Class: 0.55%*
Average Duration: 3.73 years Portfolio Turnover Ratio: 65.8%***
Average Maturity: 5.48 years Total Number of Holdings: 186
* Includes 0.25% 12b-1 fee.
** SEC yields are based on SEC guidelines and are calculated based on the 30
days ended June 30, 2003.
*** The portfolio turnover is a rolling 12 month calculation.
Annualized Total Returns
- -----------------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- -----------------------------------------------------------------------------------------
Baird Intermediate Bond Fund - Institutional Class Shares 10.07% 9.76%
Baird Intermediate Bond Fund - Investor Class Shares 9.69% 9.53%
Lehman Brothers Intermediate Government/Credit Bond Index(2) 10.84% 9.86%
- -----------------------------------------------------------------------------------------
(1) For the period September 29, 2000 (commencement of operations) to June 30,
2003.
(2) The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged, market value weighted index of investment grade, fixed-rate debt
including government and corporate securities with maturities between one
and ten years. The Index does not reflect any deduction for fees, expenses
or taxes. A direct investment in an index is not possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Asset-Backed Securities - 10.1%
AAMES Mortgage Trust,
$ 218,672 Series 1998-C, Class A6F, 6.13%, 09-15-2028 $ 230,956
Advanta Mortgage Loan Trust,
89,365 Series 1994-1, Class A1, 6.30%, 07-25-2025 89,306
AFC Home Equity Loan Trust,
189,438 Series 1997-2, Class 1A5, 6.97%, 06-25-2027 202,346
Amresco Residential Securities Mortgage Loan,
665,144 Series 1998-1, Class A6, 6.51%, 08-25-2027 705,735
BankAmerica Manufactured Housing Contract,
144,505 Series 1997-1, Class A7, 6.58%, 10-10-2019 148,110
Contimortgage Home Equity Loan Trust:
654,221 Series 1999-1, Class A7, 6.47%, 12-25-2013 695,066
1,000,000 Series 1998-2, Class A7, 6.57%, 03-15-2023 1,045,821
1,000,000 Series 1998-3, Class A17, 6.22%, 10-15-2029 1,056,839
Delta Funding Home Equity Loan Trust:
909,433 Series 1997-2, Class A6, 7.04%, 06-25-2027 952,949
475,999 Series 1999-1, Class A6F, 6.34%, 12-15-2028 505,170
592,767 Series 1999-2, Class A7F, 7.03%, 08-15-2030 642,802
EQCC Home Equity Loan Trust,
720,000 Series 1997-3, Class A9, 6.57%, 02-15-2029 746,767
Equivantage Home Equity Loan Trust,
103,753 Series 1996-3, Class A3, 7.70%, 09-25-2027 103,688
Green Tree Financial Corporation:
526,710 Series 1998-6, Class A5, 6.06%, 06-01-2030 531,258
500,000 Series 1999-3, Class A5, 6.16%, 02-01-2031 495,138
Green Tree Home Equity Loan Trust,
230,862 Series 1999-A, Class A5, 6.13%, 02-15-2019 234,081
Green Tree Home Improvement Loan Trust,
192,147 Series 1998-D, Class HEA6, 6.15%, 08-15-2029 193,763
IMC Home Equity Loan Trust:
185,523 Series 1997-7, Class A8, 6.65%, 02-20-2029 187,302
550,529 Series 1998-1, Class A6, 6.52%, 06-20-2029 586,429
MBNA Credit Card Master Note Trust,
2,500,000 Series 2003-A3, Class A3, 1.23%, 08-16-2010 2,503,545
Mortgage Lenders Network Home Equity Loan Trust,
734,196 Series 1998-2, Class A1, 6.61%, 07-25-2029 790,426
Oakwood Mortgage Investors Inc.,
683,425 Series 1999-B, Class A3, 6.45%, 11-15-2017 688,995
Residential Asset Securitization Trust,
339,396 Series 1998-KS2, Class AI9, 6.42%, 07-25-2029 339,165
Salomon Brothers Mortgage Securities VII,
511,800 Series 1997-LB6, Class A6, 6.82%, 12-25-2027 540,433
-----------
14,216,090
-----------
Financial - 21.6%
ABN-AMRO Bank Subordinated Notes,
500,000 8.25%, 08-01-2009 529,804
Aetna, Inc.,
325,000 7.13%, 08-15-2006 368,559
Allfirst Financial Subordinated Notes,
1,150,000 7.20%, 07-01-2007 1,299,984
American General Finance,
125,000 5.88%, 12-15-2005 136,340
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Financial - 21.6% (cont.)
Amsouth Bancorp Subordinated Debentures,
$ 630,000 6.75%, 11-01-2025 $ 715,757
Amsouth Bank NA Subordinated Notes,
120,000 6.45%, 02-01-2008 136,618
Anthem Inc.,
810,000 6.80%, 08-01-2012 945,641
Auburn Hills Trust Debentures,
225,000 12.38%, 05-01-2020 328,544
Bank of America Corporation Subordinated Notes,
75,000 10.20%, 07-15-2015 111,164
Bank of Boston Corporation Subordinated Notes,
150,000 6.63%, 02-01-2004 154,641
Bank of Oklahoma Subordinated Notes,
350,000 7.13%, 08-15-2007 402,795
Bank One Corporation Subordinated Notes,
750,000 10.00%, 08-15-2010 1,012,304
Comerica Inc. Subordinated Notes,
176,000 7.25%, 08-01-2007 203,339
Compass Bank Subordinated Notes,
800,000 8.10%, 08-15-2009 996,215
Countrywide Home Loan:
200,000 5.50%, 08-01-2006 218,592
1,000,000 5.50%, 02-01-2007 1,094,812
Credit Suisse Finance Broker USA, Inc. Notes,
900,000 6.13%, 11-15-2011 1,008,210
Dime Capital Trust,
175,000 9.33%, 05-06-2027 214,434
First National Bank Chicago Pass Thru Certificates,
500,000 8.08%, 01-05-2018 627,945
First National Bank Omaha Subordinated Notes,
100,000 7.32%, 12-01-2010 108,118
FMR Corp.,
775,000 4.75%, 03-01-2013,
(Acquired 02-26-03; Cost $777,312)* 819,228
Ford Capital BV Debentures,
623,000 9.50%, 06-01-2010 704,995
Ford Motor Credit Company Notes,
300,000 9.03%, 12-30-2009 316,104
General Electric Capital Corporation Notes,
500,000 6.00%, 06-15-2012 564,384
Goldman Sachs Group, Inc. Notes,
200,000 6.60%, 01-15-2012 232,396
Hartford Financial Services Group Senior Notes,
150,000 7.75%, 06-15-2005 166,397
Health Care Services Corporation Notes,
500,000 7.75%, 06-15-2011
(Acquired 06-20-01; Cost $497,765)* 596,304
Household Finance Corporation Senior
Unsubordinated Notes,
1,200,000 6.40%, 06-17-2008 1,369,822
ING Groep NV Notes,
400,000 8.50%, 02-15-2005 435,094
J.P. Morgan Chase & Company Subordinated Notes,
500,000 6.63%, 03-15-2012 576,835
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Financial - 21.6% (cont.)
Keycorp Subordinated Notes:
$ 750,000 8.00%, 07-01-2004 $ 797,085
300,000 6.75%, 03-15-2006 335,112
Lehman Brothers Holdings, Inc. Notes,
700,000 8.50%, 05-01-2007 837,900
Lehman Brothers, Inc. Senior Subordinated Debentures,
175,000 11.63%, 05-15-2005 204,966
MBNA Corp.,
750,000 6.13%, 03-01-2013 815,741
Morgan Stanley Dean Witter Debentures,
1,000,000 10.00%, 06-15-2008 1,304,362
National City Bank of Kentucky,
196,000 6.30%, 02-15-2011 223,104
National Rural Utilities:
325,000 3.88%, 02-15-2008 338,549
925,000 5.75%, 08-28-2009 1,023,778
Nationwide Life Global Fund Notes,
500,000 5.35%, 02-15-2007
(Acquired 02-08-02; Cost $499,520)* 540,684
Newcourt Credit Group,
240,000 6.88%, 02-16-2005 257,095
PNC Funding Corporation,
894,000 7.50%, 11-01-2009 1,088,602
Protective Life US Funding Notes,
700,000 5.88%, 08-15-2006,
(Acquired 08-06-01; Cost $699,160)* 775,669
Santander Financial Issuances:
325,000 7.00%, 04-01-2006 363,163
500,000 6.38%, 02-15-2011 572,149
Sanwa Bank Ltd. NY Subordinated Notes,
350,000 7.40%, 06-15-2011 392,445
Transamerica Finance Corporation Debentures,
1,160,000 0.00%, 03-01-2010 815,797
Union Planters Corporation Subordinated Notes:
645,000 6.50%, 03-15-2008 724,432
300,000 7.75%, 03-01-2011 363,903
USF&G Corporation Senior Notes,
395,000 7.13%, 06-01-2005 431,862
Wachovia Corporation Subordinated Notes,
1,200,000 8.00%, 08-15-2009 1,272,704
Washington Mutual Bank FA Notes,
500,000 6.88%, 06-15-2011 596,546
-----------
30,471,023
-----------
Industrial - 16.4%
America West Airlines Pass Thru Certificates,
237,485 8.54%, 01-02-2006 227,750
American Airline Pass Thru Certificates,
684,948 7.69%, 05-23-2008 123,131
AMVESCAP PLC,
500,000 5.38%, 02-27-2013 508,185
AOL Time Warner, Inc. Notes,
300,000 6.88%, 05-01-2012 342,485
British Telecom PLC Notes,
200,000 7.88%, 12-15-2005 227,768
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Industrial - 16.4% (cont.)
Coca-Cola Enterprises,
$ 300,000 4.38%, 09-15-2009 $ 319,269
Continental Airlines, Inc. Pass Thru Certificates:
1,000,000 7.43%, 09-15-2004 882,318
101,730 7.42%, 04-01-2007 86,477
435,218 6.54%, 09-15-2008 363,566
Continental Cablevision Debentures,
300,000 9.50%, 08-01-2013 345,322
Cooper Industries Ltd. Notes,
700,000 5.25%, 07-01-2007 758,324
Corp. Andina De Fomento Notes:
170,000 8.88%, 06-01-2005 186,741
275,000 7.38%, 01-18-2011 316,914
CSX Corporation Notes,
500,000 5.85%, 12-01-2003 509,022
Delta Air Lines Pass Thru Certificates,
350,000 7.78%, 11-18-2005 304,446
Deutsche Telekom International Finance Bonds,
350,000 8.50%, 06-15-2010 429,933
Dollar General Corporation,
300,000 8.63%, 06-15-2010 331,875
Fiserv Inc.,
500,000 4.00%, 04-15-2008,
(Acquired 04-08-03; Cost $499,595)* 514,901
Ford Motor Company Debentures,
300,000 9.22%, 09-15-2021 311,402
General Electric Company,
500,000 5.00%, 02-01-2013 528,128
General Motors Nova Financing,
500,000 6.85%, 10-15-2008 524,975
Georgia-Pacific Debentures,
300,000 9.88%, 11-01-2021 303,000
Halliburton Company,
425,000 5.63%, 12-01-2008 449,118
Hanson Australia Funding,
650,000 5.25%, 03-15-2013 665,835
Ingersoll-Rand Company Debentures,
1,000,000 6.39%, 11-15-2027 1,180,189
International Lease Finance Corporation Notes,
300,000 5.70%, 07-03-2006 323,899
ITT Corporation Debentures,
314,000 9.75%, 02-15-2021 327,724
Jones Intercable, Inc. Senior Notes,
1,202,000 8.88%, 04-01-2007 1,269,847
Korea Development Bank,
400,000 4.25%, 11-13-2027 413,003
Laboratory Corporation of America,
650,000 5.50%, 02-01-2013 695,921
Marathon Oil Corporation:
500,000 5.38%, 06-01-2007 547,244
350,000 6.00%, 07-01-2012 389,577
Masco Corporation Notes,
475,000 5.88%, 07-15-2012 527,501
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Industrial - 16.4% (cont.)
Norfolk Southern Corporation Senior Notes,
$ 475,000 8.38%, 05-15-2005 $ 527,824
Northwest Airlines, Inc. Pass Thru Certificates,
500,195 7.25%, 01-02-2012 327,853
Park Place Entertainment Senior Notes,
375,000 7.50%, 09-01-2009 410,625
PEMEX Project Fielding Master Trust:
275,000 6.13%, 08-15-2008,
(Acquired 01-31-03; Cost $274,802)* 294,250
700,000 9.13%, 10-13-2010 847,000
Qwest Capital Funding:
350,000 7.00%, 08-03-2009 287,875
100,000 7.25%, 02-15-2011 82,000
Sealed Air Corp.,
650,000 5.38%, 04-15-2008,
(Acquired 04-09-03; Cost $646,490)* 682,167
Southwest Airlines Company Pass Thru Certificates,
265,616 7.67%, 01-02-2014 301,800
Sprint Capital Corporation,
500,000 6.00%, 01-15-2007 537,326
Time Warner Inc.,
175,000 9.13%, 01-15-2013 224,132
Tyco International Group SA,
700,000 6.38%, 02-15-2006 729,750
Union PacificCorp Pass Thru Certificates,
318,774 8.66%, 07-02-2011 375,500
United Air Lines Pass Thru Certificates:
245,275 7.76%, 10-01-2005 41,846
400,000 6.20%, 09-01-2008 335,296
300,000 10.02%, 03-22-2014, @, ^ 77,214
Vectren Utility Holdings,
600,000 6.63%, 12-01-2011 691,469
Westvaco Corporation,
55,000 8.40%, 06-01-2007 64,576
Weyerhaeuser Company Notes,
300,000 5.95%, 11-01-2008 335,652
Willamette Industries Notes,
500,000 6.60%, 06-05-2012 557,932
Worldcom, Inc. Notes,@, ^
300,000 7.38%, 01-15-2049,
(Acquired 01-05-01; Cost $300,829)* 88,500
-----------
23,056,377
-----------
Utilities - 5.9%
Baltimore Gas & Electric Senior Notes,
300,000 5.25%, 12-15-2006 322,119
Conectiv, Inc. Notes,
450,000 6.73%, 06-01-2006 471,757
Edison Mission Senior Notes,
300,000 9.88%, 04-15-2011 277,500
Exelon Corporation Senior Notes,
300,000 6.75%, 05-01-2011 347,096
Gemstone Investors, Ltd.,
450,000 7.71%, 10-31-2004,
(Acquired 10-25-01; Cost $450,000)* 447,750
Gulf States Utilities 1st Mortgage,
400,000 6.77%, 08-01-2005 431,442
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Utilities - 5.9% (cont.)
Korea Electric Power Debentures,
$ 300,000 6.75%, 08-01-2027 315,483
Niagara Mohawk Power Senior Discount Notes:
211,707 7.38%, 07-01-2003 211,707
725,000 8.50%, 07-01-2010 760,090
Nisource Finance Corporation,
650,000 7.63%, 11-15-2005 710,678
NRG Energy, Inc. Bonds,@,^
300,000 8.00%, 11-01-2003 129,000
NRG Energy, Inc. Senior Notes,@,^
400,000 7.50%, 06-15-2007 170,000
Oneok, Inc. Senior Notes,
725,000 7.13%, 04-15-2011 796,246
PPL Energy Supply, LLC Senior Notes,
300,000 6.40%, 11-01-2011 333,042
PSEG Energy Holdings Senior Notes,
175,000 8.50%, 06-15-2011 188,125
PSEG Power Senior Notes,
275,000 7.75%, 04-15-2011 328,129
RGS (I&M) Funding Corp.,
843,383 9.82%, 12-07-2022 1,134,671
System Energy Resources,
159,959 7.43%, 01-15-2011 166,858
Utilicorp United, Inc. Senior Notes,
125,000 7.00%, 07-15-2004 118,281
Williams Companies, Inc. Notes,
600,000 8.13%, 03-15-2012 615,000
Yosemite Security Trust I Bonds,@,^
325,000 8.25%, 11-15-2004
(Acquired 04-26-01; Cost $331,401)* 87,750
-----------
8,362,724
-----------
Mortgage-Backed Securities - 10.1%
Federal Gold Loan Mortgage Corporation (FGLMC),
275,255 6.00%, 07-01-2028 285,779
Federal Home Loan Mortgage Corporation (FHLMC):
262,586 Series 2379, Class MD, 4.50%, 12-15-2008 263,185
1,398,882 Series 2418, Class MC, 6.00%, 09-15-2019 1,428,936
95,642 Series 1094, Class K, 7.00%, 06-15-2021 98,072
64,337 Series 1101, Class M, 6.95%, 07-15-2021 65,311
519,777 Series 1136, Class H, 6.00%, 09-15-2021 529,030
119,870 Series 1280, Class B, 6.00%, 04-15-2022 122,804
260,904 Series 1395, Class G, 6.00%, 10-15-2022 266,532
1,946,944 Series 2531, Class N, 4.00%, 07-15-2027 1,970,113
Federal National Mortgage Association (FNMA):
1,000,000 Series 2002-73, Class OC, 5.00%, 04-25-2014 1,034,917
1,601,829 Series 2002-46, Class D, 5.00%, 08-25-2016 1,646,724
2,000,000 Series 2001-42, Class AH, 5.50%, 05-25-2017 2,009,858
261,977 Series 1991-137, Class H, 7.00%, 10-25-2021 281,335
761,088 Series 1992-136, Class H-PK, 6.00%, 08-25-2022 796,037
434,558 Series 1993-32, Class H, 6.00%, 03-25-2023 447,906
500,000 Series 2003-25, Class PC, 4.50%, 02-25-2027 508,412
160,385 Series 1998-66, Class C, 6.00%, 12-25-2028 165,428
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.4%
Mortgage-Backed Securities - 10.1% (cont.)
GE Capital Mortgage Services, Inc.:
$ 500,000 Series 1993-18, Class A12, 6.00%, 02-25-2009 $ 500,735
Residential Accredit Loans, Inc.:
255,828 Series 1998-QS2, Class A7, 7.00%, 02-25-2028 260,295
559,837 Series 1998-QS4, Class AI5, 7.00%, 03-25-2028 574,310
Residential Funding Mortgage Security I:
280,604 Series 1997-S11, Class A7, 7.00%, 08-25-2012 280,178
549,239 Series 1996-S14, Class M1, 7.50%, 05-25-2026 555,490
Washington Mutual,
110,889 Series 1999-WM2, Class 2A, 6.88%, 06-15-2011 113,421
-----------
14,204,808
-----------
International (U.S. $ Denominated) - 1.8%
Landeskreditbank Baden-Wuerttemberg,
700,000 6.35%, 04-01-2012 807,047
National Bank Hungary Debentures,
350,000 8.88%, 11-01-2013 468,526
Westdeutsche Landesbank Subordinated Notes,
800,000 6.75%, 06-15-2005 871,246
350,000 6.05%, 01-15-2009 397,941
-----------
2,544,760
-----------
Municipal Bond - 0.6%
Tobacco Settlement Financing Corporation:
500,000 5.92%, 06-01-2012 488,165
380,864 6.36%, 05-15-2025 367,126
-----------
855,291
-----------
U.S. Government Agency - 13.9%
Federal Home Loan Mortgage Corporation (FHLMC),
15,625,000 6.63%, 09-15-2009 18,752,750
Soyland Power Cooperative U.S. Government Guarantee,
740,143 8.35%, 09-15-2009 800,590
-----------
19,553,340
-----------
U.S. Treasury Obligations - 14.0%
U.S. Treasury Bonds:
350,000 9.88%, 11-15-2015 556,199
4,525,000 9.25%, 02-15-2016 6,928,377
U.S. Treasury Notes:
8,675,000 6.13%, 08-15-2007 10,034,876
1,900,000 6.00%, 08-15-2009 2,241,183
-----------
19,760,635
-----------
Total Long-Term Investments (Cost $128,593,542) 133,025,048
------------
Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.1%
Investment Company - 4.8%
6,769,029 Investment Company Cash Reserve Portfolio - AIM Fund 6,769,029
See notes to the financial statements
Baird Intermediate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.1% (cont.)
Money Market Fund - 1.0%
1,453,776 SEI Daily Income Trust Government Fund $ 1,453,776
------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes# - 0.3%
$ 209,114 American4Family Financial Services, Inc., 0.85% 209,114
116,962 Wisconsin Corporation Central Credit Union, 0.70% 116,962
------------
326,076
------------
Total Short-Term Investments (Cost $8,548,881) 8,548,881
------------
Total Investments (Cost $137,142,423) 100.5% 141,573,929
------------
Liabilities, Less Other Assets (0.5%) (647,327)
------------
TOTAL NET ASSETS 100.0% $ 140,926,602
==============
* Unregistered security
@ Security in default
^ Non-income producing security
# Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 2003.
See notes to the financial statements
Baird Aggregate Bond Fund
June 30, 2003
The investment objective of the Baird Aggregate Bond Fund is to seek an annual
rate of total return, before Fund expenses, greater than the annual rate of
total return of the Lehman Brothers Aggregate Bond Index. The Lehman Brothers
Aggregate Bond Index is an unmanaged, market value weighted index of investment
grade, fixed-rate debt issues, including government, corporate, asset-backed,
and mortgage-backed securities, with maturities of at least one year.
Portfolio Characteristics
Quality Distribution Sector Weightings
U.S. Treasury 19% U.S. Treasury 19%
U.S. Gov't Agency 29% U.S. Gov't Agency 1%
Aaa 17% CMB 2%
Aa 4% Mortgage/CMOs 28%
A 9% Asset-Backed 13%
Baa 17% Industrials 13%
Below Baa 5% Utility 7%
Finance/Bank/Broker 14%
Cash 2%
Municipal 1%
Net Assets: $ 89,827,014
SEC 30-Day Yield:** Portfolio Expense Ratio:
Institutional Class: 4.47% Institutional Class: 0.30%
Investor Class: 4.15% Investor Class: 0.55%*
Average Duration: 3.95 years Portfolio Turnover Ratio: 80.5%***
Average Maturity: 6.98 years Total Number of Holdings: 187
* Includes 0.25% 12b-1 fee.
** SEC yields are based on SEC guidelines and are calculated based on the 30
days ended June 30, 2003.
*** The portfolio turnover is a rolling 12 month calculation.
Annualized Total Returns
- --------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- --------------------------------------------------------------------------------
Baird Aggregate Bond Fund - Institutional
Class Shares 11.16% 10.38%
Baird Aggregate Bond Fund - Investor Class Shares 10.92% 10.10%
Lehman Brothers Aggregate Bond Index(2) 10.40% 9.85%
- --------------------------------------------------------------------------------
(1) For the period September 29, 2000 (commencement of operations) to June 30,
2003.
(2) The Lehman Brothers Aggregate Bond Index is an unmanaged, market value
weighted index of investment grade, fixed-rate debt issues, including
government, corporate, asset-backed, and mortgage-backed securities, with
maturities of at least one year. The Index does not reflect any deduction
for fees, expenses or taxes. A direct investment in an index is not
possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird Aggregate Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- -------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
Asset-Backed Securities - 13.1%
Advanta Mortgage Loan Trust:
$ 99,879 Series 1994-1, Class A1, 6.30%, 07-25-2025 $ 99,813
250,668 Series 1999-2, Class A6, 6.82%, 05-25-2029 273,280
American General Mortgage Loan Trust,
800,000 Series 2003-1, Class A2, 2.54%, 04-25-2033 802,000
Contimortgage Home Equity Loan Trust:
769,671 Series 1999-1, Class A7, 6.47%, 12-25-2013 817,725
63,976 Series 1997-2, Class A9, 7.09%, 04-15-2028 63,956
78,068 Series 1997-3, Class A9, 7.12%, 08-15-2028 78,691
Conseco Finance,
437,000 Series 2002-C, Class AF3, 4.58%, 06-15-2032 449,907
Delta Funding Home Equity Loan Trust,
347,765 Series 1997-3, Class A6F, 6.86%, 10-25-2028 357,986
EQCC Home Equity Loan Trust,
94,378 Series 1996-4, Class A9, 6.89%, 01-15-2028 95,410
Equivantage Home Equity Loan Trust:
64,845 Series 1996-3, Class A3, 7.70%, 09-25-2027 64,805
442,822 Series 1997-3, Class A3, 7.05%, 10-25-2028 456,104
GE Capital Mortgage Services, Inc.:
93,257 Series 1997-HE3, Class A6, 6.72%, 10-25-2027 97,748
741,729 Series 1999-HE1, Class A7, 6.27%, 04-25-2029 781,978
GE Home Equity Loan Asset Backed Certificates,
186,103 Series 1991-1, Class B, 8.70%, 09-15-2011 186,597
Green Tree Financial Corporation:
333,255 Series 1993-3, Class A7, 6.40%, 10-15-2018 346,047
47,353 Series 1995-4, Class A5, 6.95%, 06-15-2025 47,956
11,239 Series 1997-1, Class A5, 6.86%, 03-15-2028 11,522
513,591 Series 1997-6, Class A8, 7.07%, 01-15-2029 532,281
IMC Home Equity Loan Trust,
75,404 Series 1997-5, Class A10, 6.88%, 11-20-2028 78,658
Indymac Home Equity Loan Asset Backed Trust,
508,320 Series 1998-A, Class AF6, 6.18%, 10-25-2029 517,111
MBNA Credit Card Master Note Trust,
1,300,000 Series 2003-A3, Class A3, 1.23%, 08-16-2010 1,301,843
The Money Store Home Equity Trust,
375,921 Series 1997-D, Class AF7, 6.49%, 12-15-2038 386,925
Oakwood Mortgage Investors Inc.,
341,713 Series 1999-B, Class A3, 6.45%, 11-15-2017 344,497
Residential Asset Mortgage Products, Inc.,
1,000,000 Series 2003-RS5, Class AI3, 2.59%, 10-25-2028 995,000
Residential Asset Securities Corporation:
74,667 Series 1998-KS2, Class AI9, 6.42%, 07-25-2029 74,616
85,659 Series 1999-KS1, Class AI8, 6.32%, 04-25-2030 90,982
833,878 Series 1999-KS2, Class AI9, 7.15%, 07-25-2030 892,181
Salomon Brothers Mortgage Securities VII,
725,050 Series 1997-LB6, Class A6, 6.82%, 12-25-2027 765,613
Saxon Asset Securities Trust,
704,062 Series 1999-2, class AF6, 6.42%, 03-25-2014 745,453
--------------
11,756,685
--------------
Commercial Mortgage-Backed Securities - 1.5%
GE Capital Commerical Mortgage Corporation,
900,000 Series 2002-#A, Class A2, 5.00%, 12-10-2037 959,740
GMAC Commercial Mortgage Securities Inc.,
400,000 Series 2003-C1, Class A2, 4.08%, 05-10-2036 398,201
--------------
1,357,941
--------------
See notes to the financial statements
Principal
Amount Value
- -------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
Financial - 13.8%
Aetna, Inc.,
$ 500,000 7.13%, 08-15-2006 $ 567,014
American General Finance Senior Notes,
400,000 8.45%, 10-15-2009 505,131
Amsouth Bancorp Subordinated Debentures,
200,000 6.75%, 11-01-2025 227,224
Anthem Inc.,
400,000 6.80%, 08-01-2012 466,983
AON Corporation Notes,
500,000 8.65%, 05-15-2005 555,910
Banc One Corporation Subordinated Notes,
87,000 10.00%, 08-15-2010 117,427
Bank of Oklahoma Subordinated Notes,
400,000 7.13%, 08-15-2007 460,337
Bankers Trust Corporation Subordinated Notes,
145,000 7.13%, 03-15-2006 163,243
BSCH Issuances, Ltd.,
350,000 7.63%, 09-14-2010 433,946
CIT Group, Inc. Senior Notes,
300,000 7.75%, 04-02-2012 357,706
Credit Suisse Finance Broker USA, Inc. Notes,
650,000 6.13%, 11-15-2011 728,152
Dime Capital Trust,
200,000 9.33%, 05-06-2027 245,068
First National Bank Chicago Pass Thru Certificates,
75,000 8.08%, 01-05-2018 94,192
First National Bank Omaha Subordinated Notes,
175,000 7.32%, 12-01-2010 189,206
First Union Corporation Subordinated Notes,
400,000 8.00%, 08-15-2009 424,235
FMR Corp.,
250,000 4.75%, 03-01-2013, (Acquired 02-26-03; Cost $250,746)* 264,267
Ford Capital BV Debentures,
450,000 9.50%, 06-01-2010 509,226
General Electric Capital Corporation Notes,
400,000 6.00%, 06-15-2012 451,507
Goldman Sachs Group, Inc. Notes,
150,000 6.60%, 01-15-2012 174,297
Health Care Services Corporation Notes,
200,000 7.75%,06-15-2011 (Acquired 6-20-01; Cost $199,106)* 238,522
Household Finance Corporation Notes:
150,000 6.88%, 03-01-2007 171,206
139,000 7.88%, 03-01-2007 163,828
Keycorp Institution,
300,000 7.83%, 12-01-2026 338,955
Lehman Brothers Holdings, Inc. Notes,
300,000 8.50%, 05-01-2007 359,100
Liberty Mutual Insurance,
565,000 7.70%, 10-15-2097, (Acquired 03-26-03; Cost $361,572)* 415,630
Lincoln National Corporation Debentures,
500,000 9.13%, 10-01-2024 561,256
MBNA Corp.,
425,000 6.13%, 03-01-2013 462,253
See notes to the financial statements
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS- 97.2%
Financial - 13.8% (cont.)
Morgan Stanley Dean Witter Unsubordinated Notes,
$ 300,000 6.75%, 04-15-2011 $ 350,904
NCNB Corporation Subordinated Notes,
150,000 10.20%, 07-15-2015 222,329
National Rural Utilities,
250,000 5.75%, 08-28-2009 276,697
New York Life Insurance,
200,000 5.88%, 05-15-2033, (Acquired 05-05-03; Cost $198,048)* 209,897
Sanwa Bank Ltd. NY Subordinated Notes,
275,000 7.40%, 06-15-2011 308,349
Transamerica Finance Corporation Debentures,
600,000 0.00%, 03-01-2010 421,964
Union Planters Corporation Subordinated Notes,
350,000 7.75%, 03-01-2011 424,553
USF&G Corporation Senior Notes,
300,000 7.13%, 06-01-2005 327,996
Washington Mutual Capital I,
150,000 8.38%, 06-01-2027 177,365
--------------
12,365,875
--------------
Industrial - 13.0%
AMVESCAP PLC,
275,000 5.38%, 02-27-2013 279,502
AOL Time Warner, Inc. Bonds,
275,000 7.63%, 04-15-2031 317,379
British Telecom PLC,
350,000 8.88%, 12-15-2030 477,598
Continental Airlines, Inc. Pass Thru Certificates:
171,120 6.80%, 07-02-2007 145,476
103,364 6.54%, 09-15-2008 86,347
526,293 6.90%, 01-02-2018 511,098
Continental Cablevision Debentures,
425,000 9.50%, 08-01-2013 489,207
Corp Andina De Fomento Notes:
150,000 8.88%, 06-01-2005 164,771
50,000 7.38%, 01-18-2011 57,621
Delta Air Lines Pass Thru Certificates,
250,000 7.78%, 11-18-2005 217,462
Deutsche Telekom International Finance,
250,000 8.25%, 06-15-2030 318,522
Duty Free International Inc. Notes,**
200,000 7.00%, 01-15-2004 100,000
Dynegy Holdings, Inc. Senior Notes,
325,000 7.45%, 07-15-2006 309,562
Fiserv Inc.,
350,000 4.00%, 04-15-2008, (Acquired 04-08-03; Cost $349,717)* 360,431
Ford Motor Company Debentures,
403,000 9.22%, 09-15-2021 418,317
Georgia-Pacific Debentures:
150,000 9.88%, 11-01-2021 151,500
100,000 9.63%, 03-15-2022 99,000
Hertz Corporation Senior Notes,
150,000 8.25%, 06-01-2005 158,348
Jones Intercable, Inc. Senior Notes,
775,000 8.88%, 04-01-2007 818,745
See notes to the financial statements
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
Industrial - 13.0% (cont.)
May Department Stores Co.,
$ 585,000 9.75%, 02-15-2021 $ 776,096
Northwest Airlines, Inc. Pass Thru Certificates:
35,244 8.13%, 02-01-2014 22,927
446,603 7.25%, 01-02-2012 292,726
184,553 8.07%, 10-01-2019 200,927
Park Place Entertainment Senior Notes,
275,000 7.50%, 09-01-2009 301,125
PEMEX Project Fielding Master Trust,
75,000 6.13%, 08-15-2008, (Acquired 01-31-03; Cost $74,946)* 80,250
450,000 9.13%, 10-13-2010 544,500
Pohang Iron & Steel Notes,
500,000 7.38%, 05-15-2005 545,219
Qwest Capital Funding:
300,000 7.00%, 08-03-2009 246,750
200,000 7.25%, 02-15-2011 164,000
Sealed Air Corp.:
250,000 5.38%, 04-15-2008, (Acquired 04-09-03; Cost $248,650)* 262,372
250,000 8.75%, 07-01-2008, (Acquired 03-27-03; Cost $273,685)* 295,689
Sprint Capital Corporation,
375,000 6.00%, 01-15-2007 402,995
Tenneco Packaging Debentures,
320,000 7.95%, 12-15-2025 397,781
Tyco International Group SA Notes,
400,000 6.38%, 10-15-2011 422,000
United Air Lines Pass Thru Certificates,
120,000 6.20%, 09-01-2008 100,589
US Airways Pass Thru Certificates,
368,699 6.85%, 01-30-2018 344,119
Vectren Utility Holdings,
500,000 6.63%, 12-01-2011 576,224
Weyerhaeuser Company Notes,
200,000 5.95%, 11-01-2008 223,768
--------------
11,680,943
--------------
Utilities - 6.6%
Calenergy Co., Inc. Senior Notes,
750,000 7.63%, 10-15-2007 876,224
Edison Mission Senior Notes,
250,000 9.88%, 04-15-2011 231,250
Exelon Corporation Senior Notes,
300,000 6.75%, 05-01-2011 347,096
Gemstone Investors, Ltd.,
300,000 7.71%, 10-31-2004, (Acquired 10-25-01; Cost $300,000)* 298,500
Korea Electric Power Debentures:
10,000 7.75%, 04-01-2013 12,406
300,000 6.75%, 08-01-2027 315,483
Niagara Mohawk Power Senior Discount Notes,
500,000 8.50%, 07-01-2010 524,200
Nisource Finance Corporation,
300,000 7.63%, 11-15-2005 328,005
NRG Energy Inc. Senior Notes,@,^
130,000 8.25%, 09-15-2010 55,900
PPL Energy Supply, LLC Senior Notes,
300,000 6.40%, 11-01-2011 333,042
See notes to the financial statements
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
Utilities - 6.6% (cont.)
PSEG Energy Holdings Senior Notes,
$ 175,000 8.50%, 06-15-2011 $ 188,125
PSEG Power Senior Notes,
250,000 7.75%, 04-15-2011 298,299
RGS (I&M) Funding Corp.,
545,718 9.82%, 12-07-2022 734,199
System Energy Resources,
358,528 7.43%, 01-15-2011 373,991
Utilicorp United, Inc. Senior Notes:
200,000 7.00%, 07-15-2004 189,250
300,000 7.63%, 11-15-2009 253,875
Williams Companies, Inc. Notes,
550,000 8.13%, 03-15-2012 563,750
--------------
5,923,595
--------------
Mortgage-Backed Securities - 28.4%
BA Mortgage Securities, Inc.,
103,530 Series 1998-2, Class 2A1, 6.50%, 06-25-2013 103,464
Federal Gold Loan Mortgage Corporation (FGLMC):
1,199,174 6.50%, 07-01-2014 1,260,527
664,578 6.00%, 05-01-2017 691,114
870,084 5.50%, 11-01-2022 901,056
367,006 6.00%, 07-01-2028 381,039
350,894 7.00%, 07-01-2028 368,495
924,961 6.50%, 09-01-2028 963,803
495,340 6.50%, 04-01-2029 515,989
213,098 6.50%, 05-01-2029 221,982
932,232 6.50%, 06-01-2029 971,092
Federal Home Loan Mortgage Corporation (FHLMC):
262,586 Series 2379, Class MD, 4.50%, 12-15-2008 263,185
668,974 Series 2512, Class HC, 4.25%, 12-15-2009 672,597
578,878 Series 2489, Class UA, 4.00%, 12-15-2012 581,431
939,207 Series 206, Class E, 0.00%, 07-15-2019 908,972
458,650 Series 2418, Class MC, 6.00%, 09-15-2019 468,504
198,781 Series 1074, Class I, 6.75%, 05-15-2021 203,368
135,479 Series 1081, Class K, 7.00%, 05-15-2021 136,770
135,273 Series 1101, Class M, 6.95%, 07-15-2021 137,321
213,261 Series 188, Class H, 7.00%, 09-15-2021 213,267
140,889 Series 1286, Class A, 6.00%, 05-15-2022 143,919
876,125 Series 2531, Class N, 4.00%, 07-15-2027 886,551
Federal National Mortgage Association (FNMA):
900,000 5.00%, 09-15-2015 934,744
966,879 5.50%, 03-01-2023 1,003,129
224,517 6.50%, 11-01-2027 234,596
452,311 6.50%, 07-01-2028 472,321
281,912 6.50%, 12-01-2028 294,383
737,306 6.50%, 02-01-2029 769,924
243,458 6.50%, 05-01-2031 253,885
797,507 5.50%, 01-01-2032 825,655
1,000,000 Series 2002-73, Class OC, 5.00%, 04-25-2014 1,034,917
150,000 Series 2002-70, Class PL, 5.00%, 04-25-2015 154,369
39,106 Series 1989-37, Class G, 8.00%, 07-25-2019 43,001
111,839 Series 1989-94, Class G, 7.50%, 12-25-2019 121,310
34,196 Series 1990-58, Class J, 7.00%, 05-25-2020 36,736
151,269 Series 1990-105, Class J, 6.50%, 09-25-2020 160,958
See notes to the financial statements
Principal
Amount Value
- -------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
Mortgage-Backed Securities - 28.4% (cont.)
Federal National Mortgage Association (FNMA): (cont.)
$ 152,835 Series 1990-108, Class G, 7.00%, 09-25-2020 $ 164,493
141,561 Series 1991-1, Class C, 7.00%, 01-25-2021 152,011
334,652 Series 1991-86, Class Z, 6.50%, 07-25-2021 357,770
146,720 Series G92-30, Class Z, 7.00%, 06-25-2022 158,462
114,960 Series 1992-150, Class MA, 5.50%, 09-25-2022 118,408
247,831 Series 1993-21, Class J, 7.00%, 09-25-2022 251,119
750,000 Series 2003-31, Class KG, 4.50%, 12-25-2028 763,847
665,598 Series 1998-66, Class C, 6.00%, 12-25-2028 686,527
618,218 Series 2003-44, Class AB, 3.75%, 05-25-2033 625,068
Government National Mortgage Association (GNMA):
459,916 6.50%, 08-15-2027 484,579
1,014,249 6.50%, 11-15-2027 1,068,638
395,088 6.50%, 05-15-2029 415,439
438,737 6.50%, 06-15-2029 461,327
412,370 7.00%, 11-15-2029 435,860
377,661 7.00%, 09-20-2029 397,522
Residential Accredit Loans, Inc.:
206,342 Series 1997-QS8, Class A10, 7.50%, 08-25-2027 209,064
249,089 Series 1997-QS9, Class A8, 7.25%, 09-25-2027 250,999
559,837 Series 1998-QS4, Class AI5, 7.00%, 03-25-2028 574,310
Residential Asset Securities Corporation,
186,850 Series 1998-A8, Class A8, 6.75%, 08-25-2028 191,129
Residential Funding Mortgage Security,
274,647 Series 1996-S14, Class M1, 7.50%, 05-25-2026 277,773
Wells Fargo Mortgage Backed Securities Trust,
161,971 Series 2001-29, Class A1, 6.00%, 12-25-2016 165,492
--------------
25,544,211
--------------
International (U.S. $ Denominated) - 0.2%
National Bank Hungary Debentures,
110,000 8.88%, 11-01-2013 147,251
--------------
Municipal Bond - 0.3%
Tobacco Settlement Financing Corporation:
55,000 Series 2001-A, Class A, 5.92%, 06-01-2012 53,698
209,475 Series 2001-A, Class A, 6.36%, 05-15-2025 201,919
--------------
255,617
--------------
U.S. Government Agency - 1.3%
Federal Home Loan Mortgage Corporation (FHLMC),
335,000 6.63%, 09-15-2009 402,059
Soyland Power Cooperative U.S. Government Guarantee,
743,862 8.35%, 09-15-2009 804,613
--------------
1,206,672
--------------
U.S. Treasury Obligations - 19.0%
U.S. Treasury Bonds:
5,075,000 9.25%, 02-15-2016 7,770,500
3,525,000 6.25%, 08-15-2023 4,317,850
See notes to the financial statements
Principal
Amount Value
- -------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 97.2%
U.S. Treasury Obligations - 19.0% (cont.)
U.S. Treasury Notes:
$2,800,000 6.13%, 08-15-2007 $ 3,238,922
1,500,000 6.00%, 08-15-2009 1,769,355
-------------
17,096,627
-------------
Total Long-Term Investments (Cost $83,398,000) 87,335,417
-------------
Shares Value
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.1%
Investment Company - 0.6%
561,448 Investment Company Cash Reserve Portfolio - AIM Fund 561,448
-------------
Money Market Fund - 0.1%
94,548 SEI Daily Income Trust Government Fund 94,548
--------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------
Discount Note - 1.1%
$1,000,000 Federal National Mortgage Association (FNMA)
Discount Note, 0.00% 999,508
--------------
Variable Rate Demand Notes# - 0.3%
90,000 American Family Financial Services, Inc., 0.85% 90,000
134,966 Wisconsin Corporation Central Credit Union, 0.70% 134,966
--------------
224,966
--------------
Total Short-Term Investments (Cost $1,880,470) 1,880,470
--------------
Total Investments (Cost $85,278,470) 99.3% 89,215,887
--------------
Other Assets, less Liabilities 0.7% 611,127
--------------
TOTAL NET ASSETS 100.0% $ 89,827,014
==============
*Unregistered security
** Fair valued security
@ Security in default
^ Non-income producing security
# Variable rate demand notes are considered short-term
obligations and are payable on demand. Interest rates
change periodically on specified dates. The rates
listed are as of June 30, 2003.
See notes to the financial statements
Baird Intermediate Municipal Bond Fund
June 30, 2003
The primary investment objective of the Baird Intermediate Municipal Bond Fund
is to provide current income that is substantially exempt from federal income
tax. A secondary objective is to provide total return with relatively low
volatility of principal. The Intermediate Municipal Bond Fund strives to achieve
an annual rate of return, before Fund expenses, greater than the annual rate of
the total return of the Lehman Brothers 10-Year General Obligation Bond Index.
The Lehman Brothers 10-Year General Obligation Bond Index is an unmanaged,
market value weighted index of bond prices compiled by Lehman Brothers. The
index is comprised of investment grade state and local general obligation bonds
that have been issued as part of an offering of at least $50 million; have a
minimum amount outstanding of at least $5 million; have been issued within the
last five years; and have a maturity of eight to twelve years.
Portfolio Characteristics
Quality Distribution Sector Weightings
Aaa 95% Pre-refunded ETM 81%
Aa 4% Insured 12%
A 1% Cash 1%
Revenue 1%
General Obligation 5%
Net Assets: $ 32,506,283
SEC 30-Day Yield:** Portfolio Expense Ratio:
Institutional Class: 3.22% Institutional Class: 0.30%
Investor Class: 2.92% Investor Class: 0.55%*
Average Duration: 5.91 years Portfolio Turnover Ratio: 27.5%***
Average Maturity: 7.32 years Total Number of Holdings: 37
* Includes 0.25% 12b-1 fee.
** SEC yields are based on SEC guidelines and are calculated based on the 30
days ended June 30, 2003.
*** The portfolio turnover is a rolling 12 month calculation.
Annualized Total Returns
- --------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- --------------------------------------------------------------------------------
Baird Intermediate Municipal Bond Fund -
Institutional Class Shares 9.64% 8.77%
Baird Intermediate Municipal Bond Fund -
Investor Class Shares 9.36% 8.46%
Lehman Brothers 10-Year General Obligation
Bond Index(2) 9.48% 7.59%
- --------------------------------------------------------------------------------
(1) For the period March 30, 2001 (commencement of operations) to June 30,
2003.
(2) The Lehman Brothers 10-Year General Obligation Bond Index is an unmanaged,
market value weighted index of bond prices compiled by Lehman Brothers. The
index is comprised of investment grade state and local general obligation
bonds that have been issued as part of an offering of at least $50 million;
have a minimum amount outstanding of at least $5 million; have been issued
within the last five years; and have a maturity of eight to twelve years.
The Index does not reflect any deduction for fees, expenses or taxes. A
direct investment in an index is not possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird Intermediate Municipal Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 97.6%
Alabama - 1.4%
Mobile Alabama, ETM
$ 400,000 6.20%, 02-15-2007 $ 458,020
-------------
Arkansas - 0.5%
Pulaski County, Arkansas Residential Housing Facilities, ETM
145,000 7.25%, 06-01-2010 173,819
-------------
California - 3.4%
Golden State Tobacco Securitization Corporation
500,000 6.25%, 06-01-2033 448,600
Santa Rosa California Hospital Revenue, ETM
495,000 10.30%, 03-01-2011 661,865
-------------
1,110,465
-------------
Colorado - 0.4%
Colorado Springs Colorado Utilities Revenue, ETM
120,000 5.80%, 11-15-2010 139,314
-------------
Delaware - 5.8%
Delaware State Economic Development Authority Revenue, ETM
1,500,000 6.75%, 01-01-2013 1,880,370
-------------
Florida - 3.1%
Jacksonville Florida Health Facility Authority Hospital Revenue, ETM
300,000 11.50%, 10-01-2012 498,201
Orange County Florida Health Revenue, ETM
405,000 8.75%, 10-01-2009 492,035
-------------
990,236
-------------
Georgia - 3.2%
Fulton County Georgia Hospital Authority Revenue, ETM
560,000 7.88%, 10-01-2013 745,298
Georgia State,
250,000 5.50%, 07-01-2012 296,620
-------------
1,041,918
-------------
Illinois - 9.2%
Illinois State, ETM
2,500,000 6.00%, 01-01-2014 2,981,850
-------------
Indiana - 2.9%
Baugo Indiana School Building Corporation,
745,000 5.50%, 01-15-2012 866,897
Indiana Toll Road Commission, ETM
50,000 9.00%, 01-01-2015 72,140
-------------
939,037
-------------
Iowa - 2.3%
Muscatine Iowa Electric Revenue, ETM
630,000 6.70%, 01-01-2013 761,368
-------------
Louisiana - 5.3%
Denhan Springs-Livingston Housing and Mortgage Finance Authority, ETM
545,000 7.20%, 08-01-2010 696,368
Jefferson Parish LA Home Mortgage Authority, ETM
820,000 7.10%, 08-01-2010 1,039,096
-------------
1,735,464
-------------
See notes to the financial statements
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 97.6% (cont.)
Minnesota - 2.3%
Western Minnesota Municipal Power Agency, ETM
$ 620,000 6.38%, 01-01-2016 $ 747,664
-------------
Mississippi - 3.1%
Mississippi Housing Financial Corporation, ETM
400,000 0.00%, 06-01-2015 248,724
Mississippi State, ETM
635,000 6.20%, 02-01-2008 742,226
-------------
990,950
-------------
New Jersey - 1.8%
New Jersey State Turnpike Authority, ETM
527,000 6.75%, 01-01-2009 594,893
-------------
New York - 3.4%
Triborough Bridge & Tunnel Authority, ETM
1,000,000 5.25%, 01-01-2014 1,113,960
-------------
Ohio - 0.7%
Miamisburg Ohio Water Revenue, ETM
175,000 7.00%, 11-15-2016 218,342
-------------
Oklahoma - 9.3%
Tulsa County Oklahoma Home Financing Authority Single Family
Mortgage Revenue, ETM
2,360,000 6.90%, 08-01-2011 3,025,591
-------------
Pennsylvania - 9.9%
Philadelphia Pennsylvania Gas Works, ETM
600,000 7.00%, 05-15-2020 782,034
Pittsburgh Pennsylvania Water & Sewer Authority, ETM
1,310,000 7.25%, 09-01-2014 1,670,695
Wilson Pennsylvania Area School District,
1,000,000 0.00%, 05-15-2011 757,530
-------------
3,210,259
-------------
South Carolina - 1.1%
Greenville South Carolina Waterworks Revenue, ETM
285,000 7.00%, 02-01-2010 357,615
-------------
South Dakota - 2.7%
Heartland Consumers Power District, ETM
705,000 7.00%, 01-01-2016 878,903
-------------
Tennessee - 7.2%
Metropolitan Government Nashville & Davidson County Tennessee H&E,ETM
750,000 6.10%, 07-01-2010 852,487
Metropolitan Government Nashville & Davidson County Tennessee Water
& Sewer Revenue, ETM
1,160,000 6.50%, 12-01-2014 1,484,846
-------------
2,337,333
-------------
See notes to the financial statements
Principal
Amount Value
- -----------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 97.6% (cont.)
Texas - 9.0%
Houston Texas Sewer System Revenue, ETM
$ 575,000 9.38%, 10-01-2013 $ 828,408
Sam Rayburn Texas Municipal Power Agency, ETM
665,000 6.00%, 09-01-2010 782,379
Texas Public Building Authority Building Revenue, ETM
150,000 7.13%, 08-01-2011 186,399
University Houston Texas,
1,000,000 5.25%, 02-15-2012 1,144,730
-------------
2,941,916
-------------
Utah - 2.5%
Salt Lake City Utah Hospital Revenue, ETM
605,000 8.13%, 05-15-2015 824,688
-------------
Washington - 7.1%
Clark County School District No. 037,
1,025,000 5.13%, 12-01-2011 1,172,826
Washington State,
1,000,000 5.00%, 09-01-2013 1,124,590
-------------
2,297,416
-------------
Total Long-Term Securities (Cost $30,006,606) 31,751,391
-------------
See notes to the financial statements
Shares Value
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 0.9%
Investment Company - 0.9%
284,634 Tax Free Investments Company Cash Reserve Portfolio - AIM Fund 284,634
-------------
Total Short-Term Investment (Cost $284,634) 284,634
-------------
Total Investments (Cost $30,291,240) 98.5% 32,036,025
-------------
Other Assets, less Liabilities 1.5% 470,258
-------------
TOTAL NET ASSETS 100.0% $ 32,506,283
=============
ETM Escrowed to maturity
See notes to the financial statements
Baird Core Plus Bond Fund
June 30, 2003
The investment objective of the Baird Core Plus Bond Fund is to provide an
annual rate of total return, before Fund expenses, greater than the annual rate
of total return of the Lehman Brothers U.S. Universal Bond Index. The Lehman
Brothers U.S. Universal Bond Index is an unmanaged, market value weighted index
of fixed income securities issued in U.S. dollars, including government and
investment grade debt, non-investment grade debt, asset-backed and
mortgage-backed securities, Eurobonds, 144A securities and emerging market debt.
Portfolio Characteristics
Quality Distribution Sector Weightings
U.S. Treasury 16% U.S. Treasury 16%
U.S. Gov't Agency 33% U.S. Gov't Agency 2%
Aaa 13% CMB 2%
Aa 4% Mortgage/CMOs 26%
A 6% Asset-Backed 10%
Baa 21% Industrials 21%
Below Baa 7% Utility 6%
Finance/Bank/Broker 10%
Cash 6%
Municipal 1%
Net Assets: $ 48,428,533
SEC 30-Day Yield:** Portfolio Expense Ratio:
Institutional Class: 5.53% Institutional Class: 0.30%
Investor Class: 5.17% Investor Class: 0.55%*
Average Duration: 4.06 years Portfolio Turnover Ratio: 126.0%***
Average Maturity: 7.34 years Total Number of Holdings: 105
* Includes 0.25% 12b-1 fee.
** SEC yields are based on SEC guidelines and are calculated based on the 30
days ended June 30, 2003.
*** The portfolio turnover is a rolling 12 month calculation.
Annualized Total Returns
- --------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- --------------------------------------------------------------------------------
Baird Core Plus Bond Fund - Institutional
Class Shares 12.00% 9.59%
Baird Core Plus Bond Fund - Investor Class Shares 11.75% 9.35%
Lehman Brothers U.S. Universal Bond Index(2) 11.51% 9.76%
- --------------------------------------------------------------------------------
(1) For the period September 29, 2000 (commencement of operations) to June 30,
2003.
(2) The Lehman Brothers U.S. Universal Bond Index is an unmanaged, market value
weighted index of fixed income securities issued in U.S. dollars, including
government and investment grade debt, non-investment grade debt,
asset-backed and mortgage- backed securities, Eurobonds, 144A securities
and emerging market debt. The Index does not reflect any deduction for
fees, expenses or taxes. A direct investment in an index is not possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird Core Plus Bond Fund
Schedule of Investments June 30, 2003 (unaudited)
Principal
Amount Value
- --------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 92.8%
Asset Backed Securities - 10.2%
Advanta Mortgage Loan Trust,
$ 478,943 Series 1997-2, Class M1, 7.55%, 06-25-2027 $ 489,371
American General Mortgage Loan Trust,
450,000 Series 2003-1, Class A2, 2.54%, 04-25-2033 451,125
Contimortgage Home Equity Loan Trust,
500,000 Series 1998-2, Class A7, 6.57%, 03-15-2023 522,910
Green Tree Financial Corporation:
89,908 Series 1997-1, Class A5, 6.86%, 03-15-2028 92,179
378,326 Series 1998-4, Class A5, 6.18%, 04-01-2030 359,434
Green Tree Home Improvement Loan Trust,
106,748 Series 1998-D, Class HEA6, 6.15%, 08-15-2029 107,646
MBNA Credit Card Master Note Trust,
1,400,000 Series 2003-A3, Class A3, 1.23%, 08-16-2010 1,401,985
Oakwood Mortgage Investors Inc.,
195,264 Series 1999-B, Class A3, 6.45%, 11-15-2017 196,856
Residential Asset Mortgage Products, Inc.,
400,000 Series 2003-RS5, Class AI3, 2.59%, 10-25-2028 398,000
Residential Asset Securities Corporation:
450,000 Series 2003-KS2, Class AI3, 2.66%, 11-25-2028 452,155
450,000 Series 2003-KS5, Class AI6, 3.62%, 07-25-2031 447,750
---------------
4,919,411
---------------
Commercial Mortgage-Backed Securities - 1.7%
First Union National Bank Commercial Mortgage
725,000 Series 2001-C4, Class A2, 6.22%, 12-12-2033 833,260
---------------
Financial - 10.0%
Allfirst Financial Subordinated Notes,
500,000 7.20%, 07-01-2007 565,211
Associated P&C Holdings
150,000 6.75%, 07-15-2003, (Acquired 03-11-03; Cost $150,320)* 150,208
Credit Suisse Finance Broker USA, Inc. Notes,
350,000 6.13%, 11-15-2011 392,082
First National Bank Omaha Subordinated Notes,
350,000 7.32%, 12-01-2010 378,412
First Union Capital,
250,000 7.94%, 01-15-2027 290,685
Ford Motor Company Debentures,
400,000 9.22%, 09-15-2021 415,203
Household Finance Corp.
200,000 6.40%, 06-17-2008 228,304
Liberty Mutual Insurance,
375,000 7.70%, 10-15-2097, (Acquired 03-26-03; Cost $239,982)* 275,860
MBNA Corp.,
250,000 6.13%, 03-01-2013 271,914
National Rural Utilities
335,000 6.00%, 01-15-2004 343,520
NCNB Corporation Subordinated Notes,
300,000 10.20%, 07-15-2015 444,658
New York Life Insurance,
100,000 5.88%, 05-15-2033, (Acquired 05-05-03; Cost $99,024)* 104,948
Sanwa Bank Ltd NY Subordinated Notes,
400,000 7.40%, 06-15-2011 448,508
See notes to the financial statements
Principal
Amount Value
- --------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 92.8% (cont.)
Financial - 10.0% (cont.)
Washington Mutual Capital I,
$ 338,000 8.38%, 06-01-2027 $ 399,662
Wharf International Finance LTD,
100,000 7.63%, 03-13-2007 114,246
---------------
4,823,421
---------------
Industrial - 21.0%
America West Airlines Pass Thru Certificates,
313,304 8.54%, 01-02-2006 300,462
AMVESCAP PLC,
175,000 5.38%, 02-27-2013 177,865
AOL Time Warner, Inc. Bonds,
300,000 7.63%, 04-15-2031 346,232
Atlas Air, Inc. Pass Thru Certificates,
659,837 8.71%, 01-02-2019 585,341
Burlington Northern Santa Fe Pass Thru Certificates,
82,065 7.42%, 03-23-2010 92,947
Continental Airlines, Inc. Pass Thru Certificates:
300,000 7.43%, 09-15-2004 264,696
78,254 7.42%, 04-01-2007 66,521
148,304 6.80%, 07-02-2007 126,079
80,642 6.90%, 01-02-2018 78,313
Continental Cablevision Debentures,
400,000 9.50%, 08-01-2013 460,430
Corp. Andina De Fomento Notes,
450,000 7.38%, 01-18-2011 518,587
Delta Air Lines Pass Thru Certificates,
500,000 7.78%, 11-18-2005 434,924
Deutsche Telekom International Finance,
100,000 8.75%, 06-15-2030 127,409
Duty Free International Inc. Notes,**
825,000 7.00%, 01-15-2004 412,500
Dynegy Holdings, Inc. Senior Notes,
300,000 7.45%, 07-15-2006 285,750
Fiserv Inc.,
200,000 4.00%, 04-15-2008, (Acquired 04-08-03; Cost $199,838)* 205,961
General Electric Company,
200,000 5.00%, 02-01-2013 211,251
Georgia-Pacific Debentures:
275,000 9.88%, 11-01-2021 277,750
200,000 9.63%, 03-15-2022 198,000
100,000 9.50%, 05-15-2022 98,500
Hanson Australia Funding,
200,000 5.25%, 03-15-2013 204,872
Laboratory Corporation of America,
200,000 5.50%, 02-01-2013 214,129
May Department Stores Co.,
315,000 9.75%, 02-15-2021 417,898
Northop Grumman Corporation Debentures,
300,000 9.38%, 10-15-2024 335,780
Northwest Airlines, Inc. Pass Thru Certificates:
535,923 7.25%, 01-02-2012 351,271
105,195 8.07%, 10-01-2019 114,528
See notes to the financial statements
Principal
Amount Value
- --------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 92.8% (cont.)
Industrial - 21.0% (cont.)
PEMEX Project Fielding Master Trust Company Guarantee,
$ 400,000 9.13%, 10-13-2010 $ 484,000
Sealed Air Corp.:
100,000 5.38%, 04-15-2008, (Acquired 04-09-03; Cost $99,460)* 104,949
180,000 8.75%, 07-01-2008, (Acquired 03-27-03; Cost $197,053)* 212,896
Southwest Airlines Pass Through Certificates,
303,561 7.67%, 01-02-2014 344,915
Sprint Capital Corporation,
400,000 6.00%, 01-15-2007 429,861
Sunoco, Inc. Debentures,
325,000 9.38%, 06-01-2016 371,478
TCI Communications, Inc. Debentures,
500,000 7.88%, 08-01-2013 605,608
Tyco International Group SA Notes,
350,000 6.38%, 10-15-2011 369,250
United Air Lines Pass Thru Certificates,
400,000 6.20%, 09-01-2008 335,296
---------------
10,166,249
---------------
Utilities - 6.1%
Edison Mission Senior Notes,
300,000 9.88%, 04-15-2011 277,500
Gemstone Investors, Ltd.,
350,000 7.71%, 10-31-2004, (Acquired 10-25-01; Cost $350,000)* 348,250
Nisource Finance Corporation,
300,000 7.63%, 11-15-2005 328,005
Oneok, Inc. Senior Notes,
400,000 7.13%, 04-15-2011 439,308
PPL Energy Supply, LLC Senior Notes,
400,000 6.40%, 11-01-2011 444,056
PSEG Energy Holdings Senior Notes,
200,000 8.50%, 06-15-2011 215,000
PSEG Power Senior Notes,
350,000 7.75%, 04-15-2011 417,619
RGS (I&M) Funding Corp.,
297,665 9.82%, 12-07-2022 400,472
Utilicorp United, Inc. Senior Notes,
100,000 7.00%, 07-15-2004 94,625
---------------
2,964,835
---------------
Mortgage-Backed Securities - 25.9%
Federal Gold Loan Mortgage Corporation (FGLMC):
407,809 6.00%, 05-01-2017 424,093
653,353 6.50%, 12-01-2028 680,789
424,186 6.50%, 09-01-2028 441,999
899,112 6.50%, 04-01-2029 936,592
487,057 6.50%, 05-01-2029 507,360
497,190 6.50%, 06-01-2029 517,916
Federal Home Loan Mortgage Corporation (FHLMC):
103,773 Series 1053, Class G, 7.00%, 03-15-2021 104,774
159,797 Series 1122, Class G, 7.00%, 08-15-2021 163,318
See notes to the financial statements
Principal
Amount Value
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 92.8% (cont.)
Mortgage-Backed Securities - 25.9% (cont.)
Federal Home Loan Mortgage Corporation (FHLMC): (cont.)
$ 778,778 Series 2531, Class N, 4.00%, 07-15-2027 $ 788,045
750,000 Series 2141, Class N, 5.55%, 11-15-2027 771,917
Federal National Mortgage Association (FNMA):
705,146 5.00%, 02-01-2018 729,487
315,818 6.50%, 09-01-2028 329,790
512,234 6.50%, 02-01-2029 534,895
717,756 5.50%, 01-01-2032 743,090
150,000 Series 2002-70, Class PL, 5.00%, 04-25-2015 154,369
450,000 Series 2539, Class QB, 5.00%, 09-15-2015 467,372
55,920 Series 1989-94, Class G, 7.50%, 12-25-2019 60,655
74,583 Series 1990-15, Class J, 7.00%, 02-25-2020 79,358
125,328 Series 1990-76, Class G, 7.00%, 7-25-2020 131,466
63,025 Series 1991-21, Class J, 7.00%, 03-25-2021 67,969
298,759 Series 1993-32, Class H, 6.00%, 03-25-2023 307,935
680,895 Series 1993-58, Class H, 5.50%, 04-25-2023 707,726
450,000 Series 2003-31, Class KG, 4.50%, 12-25-2028 458,308
296,633 Series 2003-44, Class AB, 3.75%, 05-25-2033 299,920
Government National Mortgage Association (GNMA):
517,307 6.50%, 08-15-2027 545,047
775,387 6.00%, 12-20-2028 809,333
356,510 6.50%, 01-20-2029 372,915
352,360 6.50%, 02-20-2029 368,574
---------------
12,505,012
---------------
Municipal Bond - 0.5%
Tobacco Settlement Financing Corporation,
266,605 Series 2001-A, Class A, 6.36%, 05-15-2025 256,988
---------------
U.S. Government Agency Issue - 1.8%
Federal Home Loan Mortgage Corporation (FHLMC),
730,000 6.63%, 09-15-2009 876,128
---------------
U.S. Treasury Obligations - 15.6%
U.S. Treasury Bonds:
2,050,000 9.25%, 02-15-2016 3,138,823
1,850,000 6.25%, 08-15-2023 2,266,106
U.S. Treasury Notes:
1,325,000 3.00%, 11-15-2007 1,366,716
675,000 6.00%, 08-15-2009 796,210
---------------
7,567,855
---------------
Total Long-Term Securities (Cost $43,918,459) 44,913,159
---------------
Shares Value
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.0%
Investment Company - 0.7%
342,060 Investment Company Cash Reserve Portfolio - AIM Fund $ 342,060
---------------
See notes to the financial statements
Principal
Amount Value
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.0% (cont.)
Discount Note - 4.9%
$2,400,000 Federal National Mortgage Association (FNMA) Discount Note, 0.00% $ 2,398,820
Variable Rate Demand Notes# 0.4%
95,708 American Family Financial Services, Inc., 0.85% 95,708
84,704 Wisconsin Corporation Central Credit Union, 0.70% 84,704
---------------
180,412
---------------
Total Short-Term Investments (Cost $2,921,292) 2,921,292
---------------
Total Investments (Cost $46,839,751) 98.8% 47,834,451
---------------
Other Assets, less Liabilities 1.2% 594,082
---------------
TOTAL NET ASSETS 100.0% $ 48,428,533
===============
* Unregistered security
** Fair valued security
# Variable rate demand notes are considered short-term
obligations and are payable on demand. Interest rates
change periodically on specified dates. The rates listed
are as of June 30, 2003.
See notes to the financial statements
Baird Funds, Inc.
Statements of Assets and Liabilities June 30, 2003 (unaudited)
Baird
Intermediate
Baird Baird Municipal Baird
Intermediate Aggregate Bond Core Plus
Bond Fund Bond Fund Fund Bond Fund
------------------------------------------------------------
ASSETS:
Investments, at value $ 141,573,929 $ 89,215,887 $ 32,036,025 $ 47,834,451
(cost $137,142,423, $85,278,470,
$30,291,240, $46,839,751
respectively)
Receivable for investments sold 1,002,800 651,820 - 350,980
Interest receivable 1,917,499 1,061,926 596,900 629,624
Receivable for Fund shares sold 105,525 29,340 - 4,602
---------------- -------------- -------------- -------------
Total assets 144,599,753 90,958,973 32,632,925 48,819,657
---------------- -------------- -------------- -------------
LIABILITIES:
Bank overdraft 6,753 - - -
Payable for securities purchased 3,630,966 955,689 118,383 347,641
Payable for Fund shares purchased 425 154,760 - 31,448
Payable to Advisor and Distributor 35,007 21,510 8,259 12,035
---------------- -------------- -------------- -------------
Total liabilities 3,673,151 1,131,959 126,642 391,124
---------------- -------------- -------------- -------------
NET ASSETS $ 140,926,602 $ 89,827,014 $ 32,506,283 $ 48,428,533
================ ============== ============== =============
NET ASSETS CONSIST OF:
Capital stock $ 134,393,836 $ 84,936,936 $ 30,595,110 $ 45,921,544
Accumulated undistributed net
investment income 99,763 71,020 20,469 39,761
Accumulated net realized gain
on investments sold 2,001,497 881,641 145,919 1,472,528
Net unrealized appreciation
on investments 4,431,506 3,937,417 1,744,785 994,700
---------------- -------------- -------------- -------------
NET ASSETS $ 140,926,602 $ 89,827,014 $ 32,506,283 $ 48,428,533
================ ============== ============== =============
INSTITUTIONAL CLASS SHARES
Net Assets $ 139,641,658 $ 88,882,425 $ 31,520,652 $ 48,196,162
Shares outstanding
($0.01 par value, unlimited
shares authorized) 12,506,622 8,064,919 2,844,040 4,440,174
Net asset value, offering and
redemption price per share $ 11.17 $ 11.02 $ 11.08 $ 10.85
================ ============== ============== =============
INVESTOR CLASS SHARES
Net Assets $ 1,284,944 $ 944,589 $ 985,631 $ 232,371
Shares outstanding
($0.01 par value, unlimited
shares authorized) 112,143 84,460 87,573 20,978
Net asset value, offering and
redemption price per share $ 11.46 $ 11.18 $ 11.25 $ 11.08
================ ============== ============== =============
See notes to the financial statements
Baird Funds, Inc.
Statements of Operations
Six months ended June 30, 2003 (unaudited)
Baird
Intermediate
Baird Baird Municipal Baird
Intermediate Aggregate Bond Core Plus
Bond Fund Bond Fund Fund Bond Fund
---------------------------------------------------
INVESTMENT INCOME:
Interest income $ 3,605,975 $ 2,407,174 $ 661,964 $ 1,330,028
------------ ------------ ------------ ------------
Total investment income 3,605,975 2,407,174 661,964 1,330,028
------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fee 185,052 107,207 39,977 62,092
Administration fee 37,011 21,442 7,995 12,418
Distribution expense -
Investor Class Shares 1,410 1,128 1,023 294
------------ ------------ ------------ ------------
Total expenses 223,473 129,777 48,995 74,804
------------ ------------ ------------ ------------
NET INVESTMENT INCOME 3,382,502 2,277,397 612,969 1,255,224
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments 2,047,699 839,497 144,319 1,472,334
Change in unrealized appreciation
on investments 2,078,748 1,668,208 514,474 351,515
------------ ------------ ------------ ------------
Net realized and unrealized gain
on investments 4,126,447 2,507,705 658,793 1,823,849
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
------------ ------------ ------------ ------------
FROM OPERATIONS $ 7,508,949 $ 4,785,102 $ 1,271,762 $ 3,079,073
============ ============ ============ ============
See notes to the financial statements
Baird Funds, Inc.
Statements of Changes in Net Assets
Baird Intermediate Bond Fund
---------------------------------
Six months ended Year ended
June 30, 2003 December 31,
(unaudited) 2002
--------------- --------------
OPERATIONS:
Net investment income $ 3,382,502 $ 6,043,311
Net realized gain on investments 2,047,699 10,437
Change in unrealized appreciation on investments 2,078,748 3,392,135
--------------- --------------
Net increase in net assets resulting from operations 7,508,949 9,445,883
--------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,327,139 72,757,418
Shares issued to holders in reinvestment of dividends 2,829,333 5,419,971
Cost of shares redeemed (33,801,711) (24,889,295)
--------------- --------------
Net increase (decrease) in net assets resulting from
capital share transactions (10,645,239) 53,288,094
--------------- --------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (3,278,026) (6,039,040)
From realized gains - (158,637)
--------------- --------------
(3,278,026) (6,197,677)
--------------- --------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income (22,583) (42,898)
From realized gains - (1,196)
--------------- --------------
(22,583) (44,094)
--------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,436,899) 56,492,206
NET ASSETS:
Beginning of period 147,363,501 90,871,295
--------------- --------------
End of period (including undistributed
net investment income of $99,763
and $17,870, respectively) $ 140,926,602 $ 147,363,501
=============== ==============
See notes to the financial statements
Baird Funds, Inc.
Statements of Changes in Net Assets
Baird Aggregate Bond Fund
------------------------------
Six months ended Year ended
June 30, 2003 December 31,
(unaudited) 2002
---------------- ------------
OPERATIONS:
Net investment income $ 2,277,397 $ 5,128,841
Net realized gain on investments 839,497 178,651
Change in unrealized appreciation on investments 1,668,208 1,793,364
---------------- -------------
Net increase in net assets resulting from operations 4,785,102 7,100,856
---------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 12,828,513 19,283,461
Shares issued to holders in reinvestment of dividends 1,874,452 4,474,044
Cost of shares redeemed (16,138,591) (20,113,617)
---------------- -------------
Net increase (decrease) in net assets resulting from
capital share transactions (1,435,626) 3,643,888
---------------- -------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (2,193,577) (5,196,705)
From realized gains - (389,330)
---------------- -------------
(2,193,577) (5,586,035)
---------------- -------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income (21,542) (21,628)
From realized gains - (3,698)
---------------- -------------
(21,542) (25,326)
---------------- -------------
TOTAL INCREASE IN NET ASSETS 1,134,357 5,133,383
NET ASSETS:
Beginning of period 88,692,657 83,559,274
---------------- -------------
End of period (including undistributed net investment
income of $71,020 and $8,742, respectively) $ 89,827,014 $ 88,692,657
================ =============
See notes to the financial statements
Baird Funds, Inc.
Statements of Changes in Net Assets
Baird Intermediate Municipal Bond Fund
--------------------------------------
Six months ended
June 30, 2003 Year ended
(unaudited) December 31, 2002
-------------- ---------------
OPERATIONS:
Net investment income $ 612,969 $ 771,580
Net realized gain on investments 144,319 12,917
Change in unrealized appreciation on investments 514,474 1,233,006
-------------- ---------------
Net increase in net assets resulting from operations 1,271,762 2,017,503
-------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 559,520 19,006,017
Shares issued to holders in reinvestment of dividends 557,103 614,857
Cost of shares redeemed (1,213,488) (3,954,182)
-------------- ---------------
Net increase (decrease) in net assets resulting from
capital share transactions (96,865) 15,666,692
-------------- ---------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (582,625) (798,038)
From realized gains - (11,070)
-------------- ---------------
(582,625) (809,108)
-------------- ---------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income (13,704) (19,906)
From realized gains - (247)
-------------- ---------------
(13,704) (20,153)
-------------- ---------------
TOTAL INCREASE IN NET ASSETS 578,568 16,854,934
NET ASSETS:
Beginning of period 31,927,715 15,072,781
-------------- ---------------
End of period (including undistributed net investment
income of $20,469 and $3,829, respectively) $ 32,506,283 $ 31,927,715
============== ===============
See notes to the financial statements
Baird Funds, Inc.
Statements of Changes in Net Assets
Baird Core Plus Bond Fund
-----------------------------------
Six months ended Year ended
June 30, 2003 December 31,
(unaudited) 2002
--------------- ---------------
OPERATIONS:
Net investment income $ 1,255,224 $ 3,459,119
Net realized gain (loss) on investments 1,472,334 (11,979)
Change in unrealized appreciation on investments 351,515 87,938
--------------- ---------------
Net increase in net assets resulting from operations 3,079,073 3,535,078
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,784,557 14,614,327
Shares issued to holders in reinvestment of dividends 680,222 2,585,078
Cost of shares redeemed (10,411,567) (32,033,440)
--------------- ---------------
Net decrease in net assets resulting from
capital share transactions (7,946,788) (14,834,035)
--------------- ---------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (1,216,506) (3,428,087)
From realized gains - (181,952)
--------------- ---------------
(1,216,506) (3,610,039)
--------------- ---------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income (5,195) (12,350)
From realized gains - (1,058)
--------------- ---------------
(5,195) (13,408)
--------------- ---------------
TOTAL DECREASE IN NET ASSETS (6,089,416) (14,922,404)
NET ASSETS:
Beginning of period 54,517,949 69,440,353
--------------- ---------------
End of period (including undistributed net investment
income of $39,761 and $6,238, respectively) $ 48,428,533 $ 54,517,949
=============== ===============
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Intermediate Bond Fund
----------------------------------------------------------------
Institutional
Class Shares
Institutional Institutional Institutional September 29,
Class Shares Class Shares Class Shares 2000(1)
Six months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
---------------- -------------- ------------- -------------
Per Share Data:
Net asset value, beginning of period $10.86 $10.60 $10.55 $10.00
---------------- -------------- ------------ -------------
Income from investment operations:
Net investment income 0.25 0.56 0.62(6) 0.13
Net realized and unrealized gains on
investments 0.30 0.27 0.08(7) 0.53
---------------- -------------- ------------ -------------
Total from investment operations 0.55 0.83 0.70 0.66
---------------- -------------- ------------ -------------
Less distributions:
Dividends from net investment income (0.24) (0.56) (0.62) (0.11)
Distributions from net realized gains 0.00 (0.01) (0.03) (0.00)(5)
---------------- -------------- ------------ -------------
Total distributions (0.24) (0.57) (0.65) (0.11)
---------------- -------------- ------------ -------------
Net asset value, end of period $11.17 $10.86 $10.60 $10.55
================ ============== ============ =============
Total return 5.15%(2) 8.02% 6.68% 6.63% (2)
Supplemental data and ratios:
Net assets, end of period $139,641,658 $146,236,339 $89,682,104 $9,769,062
Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30% (3)
Ratio of net investment income to
average net assets 4.57%(3) 5.20% 5.71% 6.73% (3)
Portfolio turnover rate (4) 32.2% 41.1% 79.5% 102.5%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
(6) Calculated using average shares outstanding during the period.
(7) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Intermediate Bond Fund
-------------------------------------------------------------
Investor Class
Shares
Investor Class Investor Class Investor Class September 29,
Shares Six Shares Shares 2000 (1)
months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
--------------- ------------- -------------- --------------
Per Share Data:
Net asset value, beginning of period $11.13 $10.71 $10.56 $10.00
--------------- ------------ -------------- --------------
Income from investment operations:
Net investment income 0.24 0.54(6) 0.59(6) 0.13
Net realized and unrealized gains on
investments 0.31 0.27 0.08(7) 0.53
--------------- ------------ -------------- --------------
Total from investment operations 0.55 0.81 0.67 0.66
--------------- ------------ -------------- --------------
Less distributions:
Dividends from net investment income (0.22) (0.38) (0.49) (0.10)
Distributions from net realized gains 0.00 (0.01) (0.03) (0.00)(5)
--------------- ------------ -------------- --------------
Total distributions (0.22) (0.39) (0.52) (0.10)
--------------- ------------ -------------- --------------
Net asset value, end of period $11.46 $11.13 $10.71 $10.56
=============== ============ ============== ==============
Total return 5.02%(2) 7.74% 6.43% 6.68%(2)
Supplemental data and ratios:
Net assets, end of period $1,284,944 $1,127,162 $1,189,191 $351,262
Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55%(3)
Ratio of net investment income to average
net assets 4.32%(3) 4.95% 5.46% 6.48%(3)
Portfolio turnover rate (4) 32.2% 41.1% 79.5% 102.5%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
(6) Calculated using average shares outstanding during the period.
(7) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Aggregate Bond Fund
----------------------------------------------------------------
Institutional
Class Shares
Institutional Institutional Institutional September 29,
Class Shares Class Shares Class Shares 2000(1)
Six months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
---------------- -------------- ------------- -------------
Per Share Data:
Net asset value, beginning of period $10.69 $10.51 $10.42 $10.00
-------------- --------------- --------------- --------------
Income from investment operations:
Net investment income 0.29 0.62 0.68 0.16
Net realized and unrealized gains on
investments 0.32 0.23 0.17 0.42
-------------- --------------- --------------- --------------
Total from investment operations 0.61 0.85 0.85 0.58
-------------- --------------- --------------- --------------
Less distributions:
Dividends from net investment income (0.28) (0.62) (0.67) (0.16)
Distributions from net realized gains 0.00 (0.05) (0.09) (0.00)(5)
-------------- --------------- --------------- --------------
Total distributions (0.28) (0.67) (0.76) (0.16)
-------------- --------------- --------------- --------------
Net asset value, end of period $11.02 $10.69 $10.51 $10.42
============== =============== =============== ==============
Total return 5.75%(2) 8.30% 8.33% 5.78%(2)
Supplemental data and ratios:
Net assets, end of period $88,882,425 $87,847,176 $83,392,652 $35,975,190
Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30%(3)
Ratio of net investment income to
average net assets 5.31%(3) 5.75% 6.33% 6.85%(3)
Portfolio turnover rate (4) 53.9% 51.2% 79.2% 14.7%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Aggregate Bond Fund
-------------------------------------------------------------
Investor Class
Shares
Investor Class Investor Class Investor Class September 29,
Shares Six Shares Shares 2000 (1)
months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
--------------- ------------- -------------- --------------
Per Share Data:
Net asset value, beginning of period $10.84 $10.57 $10.43 $10.00
--------------- ------------- -------------- --------------
Income from investment operations:
Net investment income 0.28 0.60(6) 0.65(6) 0.15
Net realized and unrealized gains on
investments 0.32 0.23 0.17 0.42
--------------- ------------- -------------- --------------
Total from investment operations 0.60 0.83 0.82 0.57
--------------- ------------- -------------- --------------
Less distributions:
Dividends from net investment income (0.26) (0.51) (0.59) (0.14)
Distributions from net realized gains 0.00 (0.05) (0.09) (0.00)(5)
---------------- --------------------------------------------
Total distributions (0.26) (0.56) (0.68) (0.14)
--------------- ------------- -------------- --------------
Net asset value, end of period $11.18 $10.84 $10.57 $10.43
=============== ============= ============== ==============
Total return 5.58%(2) 8.08% 7.98% 5.77%(2)
Supplemental data and ratios:
Net assets, end of period $944,589 $845,481 $166,622 $13,223
Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55%(3)
Ratio of net investment income to
average net assets 5.06%(3) 5.50% 6.08% 6.60%(3)
Portfolio turnover rate (4) 53.9% 51.2% 79.2% 14.7%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
(6) Calculated using average shares outstanding during the period.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Intermediate Municipal Bond Fund
--------------------------------------------------
Institutional
Class Shares
Institutional Institutional March 30,
Class Shares Class Shares 2001(1)
Six months ended Year ended through
June 30, 2003 December 31, December 31,
(unaudited) 2002 2001
---------------- -------------- -------------
Per Share Data:
Net asset value, beginning of period $10.86 $10.25 $10.00
---------------- -------------- ---------------
Income from investment operations:
Net investment income 0.21 0.43(5) 0.34(5)
Net realized and unrealized gains on
investments 0.21 0.64 0.17(6)
---------------- -------------- ---------------
Total from investment operations 0.42 1.07 0.51
---------------- -------------- ---------------
Less distributions:
Dividends from net investment income (0.20) (0.46) (0.25)
Distributions from net realized gains 0.00 (0.00)(7) (0.01)
---------------- -------------- ---------------
Total distributions (0.20) (0.46) (0.26)
---------------- -------------- ---------------
Net asset value, end of period $11.08 $10.86 $10.25
================ ============== ===============
Total return 3.94%(2) 10.72% 5.02%(2)
Supplemental data and ratios:
Net assets, end of period $31,520,652 $31,221,508 $14,448,572
Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30%(3)
Ratio of net investment income to
average net assets 3.84%(3) 4.11% 4.32%(3)
Portfolio turnover rate (4) 13.6% 32.6% 14.8%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Calculated using average shares outstanding during the period.
(6) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
(7) Amount is less than $0.01.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Intermediate Municipal Bond Fund
------------------------------------------------
Investor Class
Shares
Investor Class Investor Class March 30,
Shares Six Shares 2001 (1)
months ended Year ended through
June 30, 2003 December 31, December 31,
(unaudited) 2002 2001
--------------- ------------- --------------
Per Share Data:
Net asset value, beginning of period $11.02 $10.27 $10.00
---------------- ------------ --------------
Income from investment operations:
Net investment income 0.19 0.41(5) 0.31(5)
Net realized and unrealized gains on
investments 0.22 0.64 0.17(6)
---------------- ------------ --------------
Total from investment operations 0.41 1.05 0.48
---------------- ------------ --------------
Less distributions:
Dividends from net investment income (0.18) (0.30) (0.20)
Distributions from net realized gains 0.00 (0.00)(7) (0.01)
---------------- ------------ --------------
Total distributions (0.18) (0.30) (0.21)
---------------- ------------ --------------
Net asset value, end of period $11.25 $11.02 $10.27
================ ============ ==============
Total return 3.79%(2) 10.46% 4.74%(2)
Supplemental data and ratios:
Net assets, end of period $985,631 $706,207 $624,209
Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55%(3)
Ratio of net investment income to
average net assets 3.59%(3) 3.86% 4.07%(3)
Portfolio turnover rate(4) 13.6% 32.6% 14.8%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Calculated using average shares outstanding during the period.
(6) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
(7) Amount is less than $0.01.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Core Plus Bond Fund
----------------------------------------------------------------
Institutional
Class Shares
Institutional Institutional Institutional September 29,
Class Shares Class Shares Class Shares 2000(1)
Six months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
---------------- -------------- ------------- -------------
Per Share Data:
Net asset value, beginning of period $10.45 $10.42 $10.45 $10.00
---------------- -------------- -------------- ------------
Income from investment operations:
Net investment income 0.27 0.62 0.65 0.14
Net realized and unrealized gains on
investments 0.39 0.07 0.05 0.45
---------------- -------------- -------------- ------------
Total from investment operations 0.66 0.69 0.70 0.59
---------------- -------------- -------------- ------------
Less distributions:
Dividends from net investment income (0.26) (0.62) (0.66) (0.14)
Distributions from net realized gains 0.00 (0.04) (0.07) (0.00)(5)
---------------- -------------- -------------- ------------
Total distributions (0.26) (0.66) (0.73) (0.14)
---------------- -------------- -------------- ------------
Net asset value, end of period $10.85 $10.45 $10.42 $10.45
================ ============== ============== ============
Total return 6.39%(2) 6.90% 6.84% 5.89%(2)
Supplemental data and ratios:
Net assets, end of period $48,196,162 $54,221,923 $69,182,002 $40,083,054
Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30%(3)
Ratio of net investment income to
average net assets 5.06%(3) 6.03% 6.25% 6.68%(3)
Portfolio turnover rate (4) 66.2% 66.8% 47.0% 11.8%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird Core Plus Bond Fund
-------------------------------------------------------------
Investor Class
Shares
Investor Class Investor Class Investor Class September 29,
Shares Six Shares Shares 2000 (1)
months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
--------------- ------------- -------------- --------------
Per Share Data:
Net asset value, beginning of period $10.65 $10.49 $10.45 $10.00
------------- ------------ ------------- --------------
Income from investment operations:
Net investment income 0.26 0.60(6) 0.64(6) 0.12
Net realized and unrealized gains on
investments 0.41 0.07 0.05 0.45
------------- ------------ ------------- --------------
Total from investment operations 0.67 0.67 0.69 0.57
------------- ------------ ------------- --------------
Less distributions:
Dividends from net investment income (0.24) (0.47) (0.58) (0.12)
Distributions from net realized gains 0.00 (0.04) (0.07) (0.00)(5)
------------- ------------ ------------- --------------
Total distributions (0.24) (0.51) (0.65) (0.12)
------------- ------------ ------------- --------------
Net asset value, end of period $11.08 $10.65 $10.49 $10.45
============= ============ ============= ==============
Total return 6.35%(2) 6.58% 6.70% 5.73%(2)
Supplemental data and ratios:
Net assets, end of period $232,371 $296,026 $258,351 $13,222
Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55%(3)
Ratio of net investment income to
average net assets 4.81%(3) 5.78% 6.00% 6.43%(3)
Portfolio turnover rate (4) 66.2% 66.8% 47.0% 11.8%
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5) Amount is less than $0.01.
(6) Calculated using average shares outstanding during the period.
See notes to the financial statements
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Baird Funds, Inc. (the "Corporation") was incorporated on June 9, 2000 as a
Wisconsin Corporation and is registered as an open-end investment management
company under the Investment Company Act of 1940, as amended (the "1940 Act").
The accompanying financial statements include the Baird Intermediate Bond Fund,
Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund and Baird Core
Plus Bond Fund (each a "Fund" and collectively the "Funds"), four of the seven
portfolios comprising the Corporation and each a diversified fund. One
additional series, the Baird Short-Term Bond Fund, is not presently being
offered to investors.
The Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus
Bond Fund commenced operations with the sale of both Institutional and Investor
class shares on September 29, 2000. The Baird Intermediate Municipal Bond Fund
commenced operations with the sale of both Institutional and Investor class
shares on March 30, 2001. The Institutional Class Shares are not subject to a
distribution and service (12b-1) fee, while the Investor Class Shares are
subject to a distribution and service (12b-1) fee up to 0.25%.
The investment objective of the Baird Intermediate Bond Fund is to seek an
annual rate of total return, before Fund expenses, greater than the annual rate
of total return of the Lehman Brothers Intermediate Government/Credit Bond
Index. The Lehman Brothers Intermediate Government/Credit Bond Index is an
unmanaged, market value weighted index of investment grade, fixed-rate debt
including government and corporate securities with maturities between one and
ten years.
The investment objective of the Baird Aggregate Bond Fund is to seek an annual
rate of total return, before Fund expenses, greater than the annual rate of
total return of the Lehman Brothers Aggregate Bond Index. The Lehman Brothers
Aggregate Bond Index is an unmanaged, market value weighted index of investment
grade, fixed-rate debt issues, including government, corporate, asset-backed,
and mortgage-backed securities, with maturities of at least one year.
The primary investment objective of the Baird Intermediate Municipal Bond Fund
is to provide current income that is substantially exempt from federal income
tax. A secondary objective is to provide total return with relatively low
volatility of principal. The Fund strives to achieve an annual rate of return,
before Fund expenses, greater than the annual rate of total return of the Lehman
Brothers 10-Year General Obligation Bond Index. The Lehman Brothers 10-Year
General Obligation Bond Index is an unmanaged, market value weighted index of
bond prices compiled by Lehman Brothers. This index is comprised of investment
grade state and local general obligation bonds that have been issued as part of
an offering of at least $50 million; have a minimum amount outstanding of at
least $5 million; have been issued within the last five years; and have a
maturity of eight to twelve years.
Prior to December 30, 2002, the investment objective of the Baird Core Plus Bond
Fund was to provide an annual rate of total return, before Fund expenses,
greater than the annual rate of total return of the Lehman Brothers
Government/Credit Bond Index. The Lehman Brothers Government/Credit Bond Index
is an unmanaged market value weighted performance benchmark for government and
corporate fixed-rate debt issues with maturities between one and thirty years or
more. At a meeting held on December 30, 2002, the shareholders of the Baird Core
Plus Bond Fund approved a change in the Fund's investment objective so that
instead of seeking to outperform the Government/Credit Bond Index, the Fund will
seek to outperform the Lehman Brothers U.S. Universal Bond Index (the "Universal
Bond Index") before Fund expenses. The Lehman Brothers U.S. Universal Bond Index
is an unmanaged, market value weighted index of fixed income securities issued
in U.S. dollars, including government and investment grade debt, non-investment
grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A
securities and emerging market debt. In conjunction with the change in
investment objective, the name of the Fund was changed from the Baird Core Bond
Fund to the Baird Core Plus Bond Fund. The shares of the Fund at the meeting
held on December 30, 2002 were voted as follows: 3,679,855.100 for the change,
50,222.240 against the change and 1,028,086.331 abstained (unaudited).
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
a) Investment Valuation - Debt securities are valued at the latest bid price.
Common stocks that are listed on a securities exchange are valued at the
last quoted sales price on the day the valuation is made. Securities traded
on NASDAQ are valued at the NASDAQ official closing price on the day the
valuation is made. Price information on listed stocks is taken from the
exchange where the security is primarily traded. If such securities were
not traded on the valuation date they are valued at the average of the
current bid and asked price. Unlisted equity securities for which market
quotations are readily available are valued at the latest quoted bid price.
Investments in open-end mutual funds are valued at the net asset value on
the day the valuation is made. Other assets and securities for which no
quotations are readily available are valued at fair value as determined in
good faith by management in accordance with procedures approved by the
Board of Directors.
b) Unregistered Securities - Three of the Funds own certain investment
securities which are unregistered and thus restricted to resale. These
securities are valued by the Funds after giving due consideration to
pertinent factors including recent private sales, market conditions and the
issuer's financial performance. Where future disposition of these
securities requires registration under the Securities Act of 1933, the
Funds have the right to include these securities in such registration,
generally without costs to the Funds. The Funds have no right to require
registration of unregistered securities. The value of such securities for
the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core
Plus Bond Fund was $4,847,203 (3.44% of net assets), $2,425,558 (2.70% of
net assets) and $1,403,070 (2.90% of net assets), respectively, at June 30,
2003.
c) Foreign Securities - Investing in securities of foreign companies and
foreign governments involves special risks and consideration not typically
associated with investing in U.S. companies and the U.S. government. These
risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies and the
U.S. government.
d) Federal Income Taxes - The Funds intend to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is recorded.
e) Distributions to Shareholders - Dividends from net investment income are
declared and paid monthly. Distributions of net realized capital gains, if
any, will be declared and paid at least annually.
f) Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
g) Other - Investment and shareholder transactions are recorded on trade date.
The Funds determine the gain or loss realized from investment transactions
by comparing the original cost of the security lot sold with the net sales
proceeds. Dividend income is recognized on the ex-dividend date or as soon
as information is available to the Funds, and interest income is recognized
on an accrual basis. Premiums and discounts on the purchase of securities
are amortized using the interest method. Generally accepted accounting
principles require that permanent financial reporting and tax differences
be reclassified in the capital accounts. Subscriptions in-kind are included
in proceeds from shares sold.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund:
BAIRD INTERMEDIATE BOND FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
--------------------------- --------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------- ------------- -------------
Shares sold $ 20,132,839 1,835,878 Shares sold $ 194,300 16,999
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 2,813,129 256,203 dividends 16,204 1,437
Shares redeemed (33,716,040) (3,053,091) Shares redeemed (85,671) (7,560)
------------- ------------- ------------- ------------
Net Decrease $(10,770,072) (961,010) Net Increase $ 124,833 10,876
============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 13,467,632 Beginning of period 101,267
------------- -------------
End of period 12,506,622 End of period 112,143
============= =============
Year Ended Year Ended
December 31, 2002 December 31, 2002
---------------------------- ----------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------- ------------- -------------
Shares sold $ 72,426,596 6,772,682 Shares sold $ 330,822 30,694
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 5,385,313 504,042 dividends 34,658 3,209
Shares redeemed (24,413,576) (2,272,314) Shares redeemed (475,719) (43,697)
------------- ------------- ------------- -------------
Net Increase $ 53,398,333 5,004,410 Net Decrease $ (110,239) (9,794)
============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 8,463,222 Beginning of period 111,061
------------- -------------
End of period 13,467,632 End of period 101,267
============= =============
BAIRD AGGREGATE BOND FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
---------------------------- --------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------- ------------ ------------
Shares sold $ 12,739,767 1,158,131 Shares sold $ 88,746 8,137
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 1,856,855 171,176 dividends 17,597 1,599
Shares redeemed (16,102,014) (1,484,147) Shares redeemed (36,577) (3,296)
-------------- ----------- ------------- ------------
Net Decrease $(1,505,392) (154,840) Net Increase $ 69,766 6,440
=============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 8,219,759 Beginning of period 78,020
------------- ------------
End of period 8,064,919 End of period 84,460
============= =============
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS (cont.)
Year Ended Year Ended
December 31, 2002 December 31, 2002
--------------------------- ----------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
------------- ------------- ------------- -------------
Shares sold $ 18,588,606 1,756,712 Shares sold $ 694,855 64,941
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 4,456,325 422,385 dividends 17,719 1,650
Shares redeemed (20,067,579) (1,894,427) Shares redeemed (46,038) (4,333)
------------- ------------ ------------- -------------
Net Increase $ 2,977,352 284,670 Net Increase $ 666,536 62,258
============= =============
Shares Outstanding: Shares Outstanding:
Beginning of period 7,935,089 Beginning of period 15,762
------------- -------------
End of period 8,219,759 End of period 78,020
============= =============
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
--------------------------- --------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
------------- ------------- ------------- ------------
Shares sold $ 134,516 12,302 Shares sold $ 425,004 38,264
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 545,470 49,842 dividends 11,633 1,047
Shares redeemed (1,039,539) (94,192) Shares redeemed (173,949) (15,842)
------------- ------------- ------------- ------------
Net Decrease $ (359,553) (32,048) Net Increase $ 262,688 23,469
============= =============
Shares Outstanding: Shares Outstanding:
Beginning of period 2,876,088 Beginning of period 64,104
------------- ------------
End of period 2,844,040 End of period 87,573
============= ============
Year Ended Year Ended
December 31, 2002 December 31, 2002
---------------------------- ----------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
------------- ------------ -------------- ------------
Shares sold $ 18,541,000 1,741,855 Shares sold $ 465,017 43,033
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 595,558 56,402 dividends 19,299 1,829
Shares redeemed (3,504,170) (331,901) Shares redeemed (450,012) (41,514)
------------- ------------- --------------- ------------
Net Increase $ 15,632,388 1,466,356 Net Increase $ 34,304 3,348
============= ===============
Shares Outstanding: Shares Outstanding:
Beginning of period 1,409,732 Beginning of period 60,756
------------- -------------
End of period 2,876,088 End of period 64,104
============= =============
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD CORE PLUS BOND FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
---------------------------- --------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ----------- ------------- -----------
Shares sold $ 1,767,874 166,043 Shares sold $ 16,683 1,510
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 677,554 63,847 dividends 2,668 247
Shares redeemed (10,319,738) (977,428) Shares redeemed (91,829) (8,565)
-------------- ------------- ------------ ------------
Net Decrease $ (7,874,310) (747,538) Net Decrease $ (72,478) (6,808)
================ =============
Shares Outstanding: Shares Outstanding:
Beginning of period 5,187,712 Beginning of period 27,786
------------- ------------
End of period 4,440,174 End of period 20,978
============= ============
Year Ended Year Ended
December 31, 2002 December 31, 2002
--------------------------- ---------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------- ------------- -------------
Shares sold $ 14,591,327 1,402,586 Shares sold $ 23,000 2,237
Shares issued through Shares issued through
reinvestment of reinvestment of
dividends 2,575,585 250,196 dividends 9,493 912
Shares redeemed (32,033,440) (3,102,403) Shares redeemed - -
-------------- ------------- ------------- -------------
Net Decrease $(14,866,528) (1,449,621) Net Increase $ 32,493 3,149
============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 6,637,333 Beginning of period 24,637
------------- -------------
End of period 5,187,712 End of period 27,786
============= =============
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the period ended June 30, 2003, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Baird Intermediate Baird Aggregate Baird Intermediate Baird Core Plus
Bond Fund Bond Fund Municipal Bond Fund Bond Fund
--------- --------- ------------------- ---------
Purchases:
U.S. Government $ 25,883,213 $ 29,436,681 $ - $ 13,909,980
Other $ 19,477,888 $ 15,229,678 $ 4,446,578 $ 15,995,826
Sales:
U.S. Government $ 47,220,757 $ 27,600,557 $ - $ 29,567,465
Other $ 10,542,291 $ 18,541,179 $ 4,294,428 $ 9,912,134
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
At June 30, 2003, gross unrealized appreciation and depreciation of investments
and distributable ordinary income and long-term capital gains for federal tax
purposes were as follows:
Cost for Tax Basis Tax Basis Tax Basis Net Distributable
Federal Gross Gross Unrealized Distributable Long-Term
Income Tax Unrealized Unrealized Appreciation Ordinary Capital
Purposes Appreciation Depreciation (Depreciation) Income Gains
-------- ------------ ------------ -------------- ------ -----
Baird Intermediate $ 137,142,423 $ 7,041,651 $ 2,610,145 $ 4,431,506 $ 205,061 $ 2,047,699
Bond Fund
Baird Aggregate $ 85,278,470 $ 4,676,406 $ 738,989 $ 3,937,417 $ 71,020 $ 882,545
Bond Fund
Baird Intermediate $ 30,291,240 $ 2,764,427 $ 1,019,642 $ 1,744,785 $ 20,469 $ 145,919
Municipal
Bond Fund
Baird Core Plus $ 46,839,751 $ 2,028,946 $ 1,034,246 $ 994,700 $ 39,761 $ 1,472,528
Bond Fund
Undistributed income or net realized gains for financial statement purposes may
differ from federal income tax purposes due to differences in the recognition
and characterization of income, expense and capital gain items for financial
statement and tax purposes.
The tax components of dividends paid during the period ended June 30, 2003 were:
Ordinary Long-Term
Income Capital Gains
Distributions Distributions
Baird Intermediate Bond Fund $3,300,609 $ -
Baird Aggregate Bond Fund $2,215,119 $ -
Baird Intermediate Municipal $ 596,329 $ -
Bond Fund
Baird Core Plus Bond Fund $1,221,701 $ -
Under the current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended December 31, 2002, the Baird Intermediate Bond Fund elected
to defer capital losses occurring between November 1, 2002 and December 31, 2002
in the amount of $151,500.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Robert W.
Baird & Co. Incorporated (the "Advisor"). Pursuant to the advisory agreement
with the Funds, the Advisor is entitled to receive a fee, calculated daily and
payable monthly, at the annual rate of 0.25% for the Baird Intermediate Bond
Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund and
Baird Core Plus Bond Fund as applied to the respective Fund's average daily net
assets. Certain officers of the Advisor are also officers of the Funds.
The Funds have entered into an Administration Agreement with the Advisor. Under
the Administration Agreement, the Advisor assumes and pays all expenses of the
applicable Fund other than the investment advisory fees and fees under the 12b-1
plan. Pursuant to the Administration Agreement with the Funds, the Advisor is
entitled to receive a fee, calculated daily and payable monthly, at the annual
rate of 0.05% for the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund,
Baird Intermediate Municipal Bond Fund and Baird Core Plus Bond Fund as applied
to the respective Fund's average daily net assets.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS (cont.)
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and
accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for
the Funds.
Robert W. Baird & Co. Incorporated (the "Distributor") is the sole distributor
of the Funds pursuant to a distribution agreement.
6. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended. The
Plan allows the Funds to compensate the Distributor for a portion of the costs
incurred in distributing the Funds' Investor Class Shares, including amounts
paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average
daily net assets of the Funds' Investor Class Shares. The Baird Intermediate
Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund and
Baird Core Plus Bond Fund incurred $1,410, $1,128, $1,023 and $294,
respectively, in fees pursuant to the Plan for the period ended June 30, 2003.
BAIRD FUNDS, INC.
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-866-44BAIRD
Board of Directors Legal Counsel
G. Frederick Kasten, Jr. (Chairman) Godfrey & Kahn, S.C.
780 North Water Street
John W. Feldt Milwaukee, Wisconsin 53202
George C. Kaiser -------------------------------------
Stephen A. Roell Independent Accountants
- ------------------------------------------ PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Investment Advisor Milwaukee, Wisconsin 53202
Robert W. Baird & Co. Incorporated -------------------------------------
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Distributor
- ------------------------------------------ Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Administrator, Transfer Agent and Dividend Milwaukee, Wisconsin 53202
- - Disbursing Agent
-------------------------------------
U.S. Bancorp Fund Services, LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, WI 53202
- ------------------------------------------
Custodian
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
[LOGO]
Baird/FUNDS
Semi-Annual Report
------------------
June 30, 2003
Baird LargeCap Fund
Baird MidCap Fund
Table of Contents
Economic and Stock Market Commentary......................................... 2
Baird LargeCap Fund........................................................ 4
Baird MidCap Fund ......................................................... 9
Statements of Assets and Liabilities ...................................... 14
Statements of Operations .................................................... 15
Statements of Changes in Net Assets ....................................... 16
Financial Highlights ...................................................... 18
Notes to the Financial Statements ............................................22
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Economic and Stock Market Commentary
- --------------------------------------------------------------------------------
Although 2003 got off to a difficult start for stock market investors, a quick
end to major combat in Iraq, lower interest rates and new tax cuts ignited a
broad market rally. For the first six months of 2003, the Standard & Poor's 500
Index gained +11.77% and the Dow Jones Industrial Average advanced +9.16%. The
last time these market benchmarks posted positive first-half returns was 1999.
The rally in stock prices offers hope that policymakers' efforts to stimulate
economic growth will be successful. Although we believe the probability of
success is high, the timing and intensity of the economy's improvement is still
in question. There is little doubt, however, that the level of stimulus brought
to bear on the U.S. economy is extraordinary. Despite the recent run up in
longer-term interest rates, borrowing costs are still at historically low
levels. Although home sales and mortgage refinancing activity will most likely
slow from recent record levels, low rates have allowed consumers to reduce debt
service, increase savings and cash-out home equity for other purchases.
Corporate bond yields remain at historically low levels, allowing creditworthy
businesses to lower their debt costs and finance new projects.
The tax cut signed into law on May 29th is very "front-end-loaded" with much of
the $350 billion package impacting the economy almost immediately. The
acceleration of tax rate reductions originally scheduled for 2004 and 2006, a
top rate of 15% for dividends and long-term capital gains, rebate checks for
families and new incentives for businesses to invest in plant and equipment
should aid economic growth by increasing consumers' after-tax disposable income
and lowering businesses' cost of capital. Finally, the recent decline in the
foreign exchange rate of the U.S. dollar completes the economic stimulus
"trifecta". By lowering the cost of U.S. goods to foreign buyers, a cheaper
dollar should stimulate demand for U.S. exports. Further, a lower dollar
increases the value of profits earned by U.S. companies on their overseas
operations. In sum, virtually all the policy "levers" that can be pulled to
accelerate the U.S. economy are now engaged.
The only sources of stimulus missing from the current environment are a
sustained drop in energy prices and what economist John Maynard Keynes called
"animal spirits", the appetite for entrepreneurial risk-taking essential to a
capitalist system. Economic participants - including consumers, corporate CEO's
and government policymakers - require a confident optimism in order to save,
spend and invest for future growth. Our initial success in Iraq, the absence of
new "shocks" to the economy and the improved performance of U.S. financial
markets are important positive contributors in this respect. Indeed, this may be
an instance where the stock market not only anticipates an improved economy, but
also leads to economic improvement by boosting confidence and initiating a
virtuous circle of self-reinforcing growth.
While it is easy to presume stronger economic growth is a fait accompli, risks
to the U.S. economic recovery remain. Underlying economic imbalances may require
several quarters of above-trend growth before they abate. These imbalances
include high debt levels and significant excess capacity. The "bubble" years of
the late 1990's led to over-investment in everything from fiber optic networks
to power generation plants. Much of that investment was financed with debt.
Although the value of these investments has declined, the debt used to finance
them still needs to be repaid. For consumers, although low interest rates keep
the cost of servicing debt low, record housing market activity has pushed
consumer indebtedness to historically high levels. Add the increase in public
sector debt due to record budget deficits and it is easy to see how the ratio of
total debt to economic activity (as measured by U.S. Gross Domestic Product) has
risen to an unprecedented 170%. However, it should be noted that historically,
this debt measure rises to its cyclical peak at the trough of the business
cycle.
Since the bursting of the stock market bubble in 2000, U.S. economic growth has
averaged well below the 3% annual rate many economists estimate is the economy's
long-term potential. With recent growth below potential, an "output gap" has
been created. Until this gap is closed, excess capacity and high debt levels put
downward pressure on prices as businesses compete aggressively for survival.
While lower prices for goods and services due to productivity gains and new
competition benefits the economy by increasing demand, persistent price declines
could lead to falling incomes and declining asset values. This situation could
be dangerous, especially in an economy with sizeable debt leverage. Productivity
gains in a robust economy help keep inflation pressures at bay, but they raise
the "hurdle rate" for a sluggish economy by requiring higher rates of growth
before employment trends turn positive.
The past several months witnessed a tremendous improvement in many economic
variables. Corporate profits and stock prices are generally up while
geopolitical risks have, for the moment, declined. However, energy prices remain
"sticky", interest rates have risen from their recent historic lows, employment
trends are weak, state and local governments are under pressure to raise taxes
or reduce services and the economy has yet to exhibit evidence of a meaningful
acceleration in growth. While we believe the odds greatly favor an eventual pick
up in activity, the consequences of renewed weakness argue for a measured
approach to the stock market. With most stock market valuation benchmarks (e.g.
dividend yields, price-to-earnings and price-to-sales ratios) at the upper end
of their historical
Economic and Stock Market Commentary
- --------------------------------------------------------------------------------
ranges over the past 50 years, stock prices may be vulnerable to disappointment
should the hoped for acceleration in economic growth come later or prove weaker
than currently expected. However, positive sales and earnings growth momentum
along with lots of cash on the sidelines can result in stock valuations
remaining elevated for an extended period of time while economic imbalances are
resolved.
Inflation-adjusted economic growth for the first six months of 2003 was less
than +2% at an annualized rate. Most economists expect growth to approach +4% in
the second half, taking the rise in inflation-adjusted gross domestic product
(real GDP) for full-year 2003 to +2% to +3%. We anticipate a +1% to +2% gain in
the Consumer Price Index for the year. We anticipate the Federal Reserve will
keep short-term interest rates low until the economy demonstrates sustainable,
above-trend growth. Steady improvement in economic and corporate profit growth,
we believe, will give the stock market an upward bias. However, the stock market
as a whole is likely to remain volatile, given the downside risk to share values
should efforts to reaccelerate economic growth fail.
Baird Equity Funds Investment Management Team
Robinson Bosworth III, Managing Director and Senior Portfolio Manager
J. Bary Morgan, CFA, Managing Director and Senior Portfolio Manager
David W. Bowman, CFA, Senior Vice-President and Senior Portfolio Manager
Charles F. Severson, CFA, Senior Vice-President and Senior Portfolio Manager
Joel D. Vrabel, CFA, Senior Vice-President and Senior Portfolio Manager
Baird LargeCap Fund
- --------------------------------------------------------------------------------
Stocks that suffered the sharpest declines during the bear market led the rally
in share prices during the first six months of 2003. Not surprisingly, an
improved economic outlook was most positive for the stocks of the most
speculative companies, as investors increased their appetite for risk. Indeed,
Standard & Poor's 500 ("S&P 500") Index stocks rated C or lower by Standard &
Poor's Quality Ranking System provided average six-month price returns of
+29.19% while higher quality stocks (companies rated in the A category) returned
+8.50%. The Fund's emphasis on high quality companies caused its return to lag
the performance of the broad market during the rally. Specifically, the Baird
LargeCap Fund's +9.05% total return for Institutional Class shares (+8.59% for
Investor Class shares) trailed the +11.77% total return for the Fund's
benchmark, the S&P 500 Index.
The Fund's sector weightings proved to be a modest positive for relative
performance with a lack of exposure to the under performing energy,
telecommunications and materials sectors complemented by above benchmark
exposure to the better performing consumer discretionary, health care and
technology sectors. Stock selection provided mixed results during the first half
of the year with strong price performance delivered by core retail holdings Best
Buy (+82%) and Home Depot (+38%) as well as core technology holdings Intel
(+34%) and Cisco Systems (+28%). The Fund's newest health care holdings also
made strong positive contributions with Genentech shares climbing 103% and Teva
Pharmaceutical Industries shares gaining 32% since their respective portfolio
debuts. Offsetting these positives were below market returns from many higher
quality core portfolio holdings such as Sysco (+1%), Medtronic (+5%) and
Wal-Mart (+6%) along with disappointing results from holdings in core portfolio
companies American International Group (-5%), Johnson & Johnson (-4%), Kohl's
(-8%) and Automatic Data Processing (-14%).
Fund activity during the first six months of 2003 included a reduction in
portfolio holdings in Automatic Data Processing ("ADP"), Best Buy, Fiserv,
Genentech, Kimberly Clark, Eli Lilly and Merck. Best Buy, Fiserv, Genentech and
Eli Lilly were trimmed based on our analysis of their valuations while ADP,
Kimberly Clark and Merck were reduced due to their size in the portfolio and/or
decelerating earnings growth. Portfolio positions eliminated during the period
include Applied Materials and Electronic Data Systems ("EDS"). Excess capacity
in the semiconductor manufacturing industry continues to depress the demand for
Applied Material's products. Further, the company could lose market share as
large customers such as Intel look to protect proprietary research by broadening
the number of equipment manufacturers they use. EDS's competitive position has
been compromised by the financial difficulties of several large clients (e.g.,
WorldCom and US Air). This has forced the company to restructure internally and
work aggressively to preserve balance sheet liquidity. As a result, we believe
the company is vulnerable to competition and is likely to lose market share.
Sale proceeds were used to add to portfolio holdings in IBM, Kohl's Department
Stores and Sysco and to initiate positions in Teva Pharmaceutical Industries,
SunGard Data Systems, Genentech and Dell.
Dell is the world's largest direct marketer of technology products, including
personal computers, storage and networking equipment and handheld devices. The
company continues to take market share while maintaining industry-leading
margins and providing customers with high quality service.
Genentech is a pioneer in the use of human genetic information for drug
research. A diversified product line of ten protein-based drugs marketed in four
large and growing therapeutic categories (oncology, cardiology, endocrinology
and pulmonary), a strong pipeline of new products and a proven marketing and
commercialization strategy should allow Genentech to provide sustainable,
above-average earnings growth.
SunGard provides integrated software and processing solutions for financial
institutions as well as disaster recovery services for information-dependent
enterprises. SunGard maintained rising earnings and strengthened its competitive
position during the recent downturn in technology spending by increasing its
product offerings and winning market share from smaller competitors. We believe
SunGard's growth can accelerate as corporate profits rise and technology
spending picks up.
Teva is a leading worldwide manufacturer and marketer of generic drugs. The use
of generic drugs is growing as major branded drugs lose patent protection and
cost containment pressures favor the use of generics when appropriate. Based on
the strength of its generic and specialty drug businesses, we anticipate Teva
will grow at a meaningfully faster rate than most large pharmaceutical
companies.
The Fund's focus on high quality growth companies proved to be a performance
liability during the recent stock market rally. The most badly beaten down
stocks recovered sharply, feeding a speculative urge among investors and
fostering a trading mentality. As investors shift their focus from short-term
speculative opportunities to long-term investment merit, we anticipate relative
price performance will favor the shares of higher quality, predictable growth
companies.
Baird LargeCap Fund
- --------------------------------------------------------------------------------
A June 30, 2003 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Standard & Poor's 500 Index (the "S&P 500 Index") is shown
below.
Top 10 Holdings* Equity Sector Analysis**
(BAR CHART) LargeCap S&P 500
Medtronic, Inc. 4.4% Consumer Discretionary 11.8% 11.1%
Citigroup, Inc. 4.0% Consumer Staples 12.0% 11.7%
Wal-Mart Stores, Inc. 3.7% Energy 0.0% 5.8%
American International Group, Inc. 3.6% Financials 16.1% 20.5%
Kohl's Corporation 3.6% Health Care 24.9% 14.8%
Microsoft Corporation 3.4% Industrials 9.5% 10.4%
General Electric Company 3.2% Information Technology 25.7% 16.2%
Home Depot, Inc. 3.2% Materials 0.0% 2.7%
Cardinal Health, Inc. 3.1% Telecommunication Services 0.0% 3.9%
Sysco Corporation 3.1% Utilities 0.0% 3.0%
Net Assets: $54,998,154
Portfolio Turnover Ratio: 8.89%
Number of Equity Holdings: 38
Portfolio Expense Ratio:
INSTITUTIONAL CLASS: 0.75%
INVESTOR CLASS: 1.00% ***
* The Fund's portfolio composition is subject to change and there is no
assurance that the Fund will continue to hold any particular security.
** As of 6/30/03, based on equity sector values.
*** Includes 0.25% 12b-1 fee.
Annualized Total Returns
- --------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- --------------------------------------------------------------------------------
Baird LargeCap Fund - Institutional Class Shares -0.87% -12.08%
Baird LargeCap Fund - Investor Class Shares -1.40% -12.38%
S&P 500 Index(2) 0.25% -11.83%
- --------------------------------------------------------------------------------
(1) For the period September 29, 2000 (commencement of operations) to June
30, 2003.
(2) The S&P 500 Index is an unmanaged, market value weighted index of 500
stocks chosen by Standard & Poor's on the basis of market size,
liquidity and industry group representation. The S&P 500 Index is one
of the most widely used benchmarks of U.S. equity performance.
The Index does not reflect any deduction for fees, expenses or taxes.
A direct investment in an index is not possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird Large Cap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------- ------------------
COMMON STOCKS - 97.1%
Air Freight & Logistics - 1.5%
12,657 United Parcel Service, Inc. - Class B $ 806,251
----------------
Banks - 5.4%
27,919 Fifth Third Bancorp 1,603,109
26,802 Wells Fargo & Company 1,350,821
----------------
2,953,930
----------------
Biotechnology - 4.6%
24,564 Amgen, Inc.* 1,632,032
12,200 Genentech, Inc.* 879,864
----------------
2,511,896
----------------
Commercial Services & Supplies - 7.7%
27,914 Automatic Data Processing, Inc. 945,168
34,000 Cintas Corporation 1,204,620
45,420 Fiserv, Inc.* 1,617,406
16,800 Paychex, Inc. 493,752
----------------
4,260,946
----------------
Communications Equipment - 3.6%
59,910 Cisco Systems, Inc.* 1,005,889
58,000 Nokia Oyj-ADR f 952,940
----------------
1,958,829
----------------
Computers & Peripherals - 5.1%
38,000 Dell Computer Corporation* 1,209,920
19,000 International Business Machines Corporation 1,567,500
----------------
2,777,420
----------------
Diversified Financials - 6.7%
50,996 Citigroup, Inc. 2,182,629
38,000 State Street Corporation 1,497,200
----------------
3,679,829
----------------
Electrical Equipment - 2.3%
24,563 Emerson Electric Company 1,255,169
----------------
Electronic Equipment & Instruments - 1.6%
39,454 Molex, Inc. - Class A 907,837
----------------
Food & Drug Retailing - 5.9%
56,117 Sysco Corporation 1,685,755
51,738 Walgreen Company 1,557,314
----------------
3,243,069
----------------
Health Care Equipment & Supplies - 4.4%
50,989 Medtronic, Inc. 2,445,942
----------------
See notes to the financial statements
Baird Large Cap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.1% (cont.)
Health Care Providers & Services 3.1%
26,550 Cardinal Health, Inc. $ 1,707,165
----------------
Household Products - 2.0%
21,600 Kimberly-Clark Corporation 1,126,224
----------------
Industrial Conglomerates - 3.2%
62,000 General Electric Company 1,778,160
----------------
Information Technology Consulting
& Services - 1.9%
40,000 SunGard Data Systems Inc.* 1,036,400
----------------
Insurance - 3.6%
35,600 American International Group, Inc. 1,964,408
----------------
Media - 1.9%
23,076 New York Times Company - Class A 1,049,958
----------------
Multiline Retail - 7.3%
38,000 Kohl's Corporation* 1,952,440
38,250 Wal-Mart Stores, Inc. 2,052,878
----------------
4,005,318
----------------
Pharmaceuticals - 12.1%
16,800 Eli Lilly and Company 1,158,696
29,034 Johnson & Johnson 1,501,058
17,656 Merck & Company, Inc. 1,069,071
48,014 Pfizer, Inc. 1,639,678
22,300 Teva Pharmaceutical Industries Ltd.-ADR (f) 1,269,539
----------------
6,638,042
----------------
Semiconductor Equipment & Products - 2.2%
58,068 Intel Corporation 1,206,885
----------------
Software - 5.0%
73,000 Microsoft Corporation 1,871,720
73,694 Oracle Corporation* 885,065
----------------
2,756,785
----------------
Specialty Retail - 6.0%
34,850 Best Buy Company, Inc.* 1,530,612
53,587 Home Depot, Inc. 1,774,801
----------------
3,305,413
----------------
Total Common Stocks (Cost $57,614,227) 53,375,876
----------------
See notes to the financial statements
Baird Large Cap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.8%
Money Market Fund - 2.5%
1,369,969 SEI Daily Income Trust Government Fund - Class B $ 1,369,969
----------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes# - 0.3%
$ 55,202 American Family Financial Services, Inc., 0.85% 55,202
138,845 Wisconsin Corporation Central Credit Union, 0.70% 138,845
----------------
194,047
----------------
Total Short-Term Investments (Cost $1,564,016) 1,564,016
----------------
Total Investments (Cost $59,178,243) 99.9% 54,939,892
----------------
Other Assets Less Liabilities 0.1% 58,262
----------------
TOTAL NET ASSETS 100.0% $54,998,154
================
ADR - American Depository Receipt
* Non Income Producing
f Foreign
# Variable rate demand notes are considered
short-term obligations and are payable on
demand. Interest rates change periodically
on specified dates. The rates listed are as
of June 30, 2003.
See notes to the financial statements
Baird MidCap Fund
- --------------------------------------------------------------------------------
A decidedly better operating environment and improving investor confidence
combined to drive the prices of many mid cap companies higher during the first
half of 2003. Additionally, a quick end to major combat in Iraq, lower interest
rates and new tax cuts improved investor psychology during the period.
We believe that corporate profits, taken as a whole, are on the rise due in part
to the significant corporate restructurings during the past three years coupled
with accommodative actions of the Federal Reserve and Federal Government. We
anticipate that the resumption of economic growth, and importantly profits
growth, is therefore likely in the ensuing months. Given our belief that
earnings growth is the ultimate driver of stock prices, the current environment
should be regarded as welcome relief to investors.
During the first six months, the fund's sector weights proved to have a slight
negative impact on performance. Lack of exposure to basic materials and
utilities coupled with an under-weight position in energy hurt results.
Generally, those sectors do not have the fundamental characteristics that we
desire, so it is not unusual for the fund to lag the benchmark when heavily
regulated and deep cyclical companies outperform. Additionally, sectors less
sensitive to an economic rebound, such as healthcare and the consumer areas,
lagged during the period. Those areas have been mainstays of the fund, as we
have identified companies possessing desirable characteristics such as
consistent revenue and earnings growth, and clean balance sheets for long-term
investment.
Stock selection was somewhat mixed during the first half of 2003. During that
period, the for profit education sector, represented in the fund by Career
Education (+71%) and Apollo Group (+40%) showed strong price gains. Given State
budget problems, we expect those companies to continue to perform well. Results
of the education stocks offset declines in Consumer companies such as Whole
Foods Markets (-10%) and Harley Davidson (-4%). In the technology area, the
first six months produced solid gains by Zebra Technologies (+31%), Electronic
Arts (+48%) and Novellus (+30%) which offset disappointing healthcare stocks
Accredo Health (-39%), Charles River Labs (-16%) and King Pharmaceutical (-14%).
A combination of price targets being achieved and a desire to add to faster
growing companies lead us to trim several stocks in the financial sector,
including Legg Mason, TCF Financial, MGIC Investment Corp and Charter One
Financial. Two positions in the Energy Services sector, Smith International and
Cooper Cameron, were established during the period. Both companies are expected
to benefit from an anticipated upswing in drilling activity. In the healthcare
sector, new positions were established in Health Management Associates ("HMA"),
a rural hospital company, and Sicor, a generic pharmaceutical maker, replacing
King Pharmaceutical and Accredo. King Pharmaceutical was eliminated due to
potential generic competition for its most important drug and Accredo was sold
because of industry pricing pressures and a lack of new products. It is our
opinion that HMA and Sicor offer better earnings growth potential and further
diversify the fund's Healthcare sector holdings.
It is our expectation that any sustained recovery in the economy will result in
an improving labor market. New hiring activity should benefit fund companies
such as Hewitt Associates, a human resource consulting firm, Paychex, a payroll
processing company and Cintas, the nation's largest uniform rental company.
While these companies have disappointed investors thus far in 2003, we believe
that their industry position and opportunities for future growth will reward
investors in the coming years.
There was also a decided shift in sentiment toward lower quality issues during
the first half of 2003. Mid Cap companies with quality ratings of "B+" or better
by Standard and Poor's ("S&P") averaged a low teens return in the first six
months compared with a better than 20% average return for companies rated "B" or
lower by S&P. That type of market environment is challenging for our strategy of
identifying high quality investment candidates. We remain confident that our
investment process of purchasing profitable, well-financed companies will
provide solid long-term investment results.
Baird MidCap Fund
- --------------------------------------------------------------------------------
A June 30, 2003 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Standard & Poor's MidCap 400 Index (the "S&P MidCap 400 Index")
is shown below.
Top 10 Holdings* Equity Sector Analysis**
(BAR CHART) MidCap S&P 400
Midcap SPDR Trust Series 1 3.4% Consumer Discretionary 16.1% 16.2%
Performance Food Group Company 3.3% Consumer Staples 5.0% 5.0%
Michaels Stores, Inc. 3.3% Energy 2.5% 6.9%
Charles River Laboratories International, Inc. 3.2% Financials 12.2% 19.9%
Fiserv, Inc. 3.0% Health Care 18.4% 14.1%
Zebra Technologies Corporation - Class A 3.0% Industrials 13.9% 11.3%
Express Scripts, Inc. 2.9% Information Technology 28.3% 14.9%
Gentex Corporation 2.9% Materials 0.0% 4.2%
Patterson Dental Company 2.7% Telecommunication Services 0.0% 0.6%
Microchip Technology, Inc. 2.6% Utilities 0.0% 6.9%
Other Hldgs 3.6% 0.0%
Net Assets: $25,617,285
Portfolio Turnover Ratio: 35.29%
Number of Equity Holdings: 43
Portfolio Expense Ratio:
INSTITUTIONAL CLASS: 1.25%
INVESTOR CLASS: 1.50% ***
* The Fund's portfolio composition is subject to change and there is no
assurance that the Fund will continue to hold any particular security.
** As of 6/30/03, based on equity sector values.
*** Includes 0.25% 12b-1 fee.
Annualized Total Returns
- --------------------------------------------------------------------------------
For the Period Ending June 30, 2003 One Year Since Inception(1)
- --------------------------------------------------------------------------------
Baird MidCap Fund - Institutional Class Shares -2.23% -7.00%
Baird MidCap Fund - Investor Class Shares -2.47% -7.18%
S&P MidCap 400 Index(2) -0.73% -2.54%
- --------------------------------------------------------------------------------
(1) For the period December 29, 2000 (commencement of operations) to June 30,
2003.
(2) The S&P MidCap 400 Index is an unmanaged, market value weighted index of
400 mid-cap stocks chosen by Standard & Poor's on the basis of market size,
liquidity and industry group representation. The Index does not reflect any
deduction for fees, expenses or taxes. A direct investment in an index is
not possible.
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares. The returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Baird MidCap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
COMMON STOCKS - 91.7%
Automobile Components - 4.7%
24,233 Gentex Corporation* $ 742,741
5,395 Johnson Controls, Inc. 461,812
---------------------
1,204,553
---------------------
Banks - 3.3%
13,838 Charter One Financial, Inc. 431,469
10,405 TCF Financial Corporation 414,535
---------------------
846,004
---------------------
Biotechnology - 3.2%
25,123 Charles River Laboratories International, Inc.* 808,458
---------------------
Commercial Services & Supplies - 20.5%
12,538 Affiliated Computer Services, Inc.* 573,363
9,671 Apollo Group, Inc.* 597,668
8,980 Career Education Corporation* 613,334
14,251 Cintas Corporation 504,913
21,678 Fiserv, Inc.* 771,953
18,622 Hewitt Associates, Inc.* 438,548
12,847 Iron Mountain Incorporated* 476,495
21,166 Paychex, Inc. 622,069
17,377 Stericycle, Inc.* 666,582
---------------------
5,264,925
---------------------
Communications Equipment - 3.0%
12,700 Avocent Corporation* 379,603
16,656 Emulex Corporation* 379,257
---------------------
758,860
---------------------
Diversified Financials - 6.8%
18,962 Eaton Vance Corporation 599,199
22,584 Investors Financial Services Corporation 653,807
7,424 Legg Mason, Inc. 482,189
---------------------
1,735,195
---------------------
Energy Equipment & Services - 2.4%
6,270 Cooper Cameron Corporation* 315,883
8,255 Smith International, Inc.* 303,289
---------------------
619,172
---------------------
Food & Drug Retailing - 4.8%
23,186 Performance Food Group Company* 857,882
7,644 Whole Foods Market, Inc.* 363,319
---------------------
1,221,201
---------------------
See notes to the financial statements
Baird MidCap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS - 91.7% (cont.)
Health Care Equipment & Supplies - 2.0%
9,089 Varian Medical Systems, Inc.* $ 523,254
---------------------
Health Care Providers & Services - 7.8%
11,012 Express Scripts, Inc.* 750,908
30,931 Health Management Associates, Inc. 570,677
15,160 Patterson Dental Company* 687,961
---------------------
2,009,546
---------------------
Hotels, Restaurants & Leisure - 4.1%
15,501 Applebee's International, Inc. 487,196
22,402 Starbucks Corporation* 549,969
---------------------
1,037,165
---------------------
Insurance - 1.5%
8,200 MGIC Investment Corporation 382,448
---------------------
Media - 1.5%
8,523 New York Times Company - Class A 387,797
---------------------
Office Electronics - 3.0%
10,075 Zebra Technologies Corporation - Class A* 758,144
---------------------
Pharmaceuticals - 4.4%
14,083 Biovail Corporation (f) * 662,746
22,935 SICOR Inc.* 466,498
---------------------
1,129,244
---------------------
Semiconductor Equipment & Products - 4.9%
27,218 Microchip Technology, Inc. 673,645
15,981 Novellus Systems, Inc.* 585,240
---------------------
1,258,885
---------------------
Software - 4.2%
7,060 Electronic Arts, Inc.* 521,734
12,513 Intuit Inc.* 557,955
---------------------
1,079,689
---------------------
Specialty Retail - 7.4%
11,877 Bed Bath & Beyond, Inc.* 461,065
13,109 CDW Computer Centers, Inc.* 600,785
21,928 Michaels Stores, Inc. 834,580
---------------------
1,896,430
---------------------
Trading Companies & Distributors - 2.2%
16,781 Fastenal Company 569,547
---------------------
Total Common Stocks (Cost $21,352,509) 23,490,517
---------------------
See notes to the financial statements
Baird MidCap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
EXCHANGE-TRADED FUND - 3.4%
10,000 Midcap SPDR Trust Series 1 $ 877,200
---------------------
Total Exchange-Traded Fund (Cost $902,625) 877,200
---------------------
SHORT-TERM INVESTMENTS - 5.0%
Money Market Fund - 2.8%
718,610 SEI Daily Income Trust Government Fund - Class B 718,610
---------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Variable Rate Demand Notes# - 2.2%
$390,119 American Family Financial Services, Inc., 0.85% 390,119
181,933 Wisconsin Corporation Central Credit Union, 0.70% 181,933
---------------------
572,052
---------------------
Total Short-Term Investments (Cost $1,290,662) 1,290,662
---------------------
Total Investments (Cost $23,545,796) 100.1% 25,658,379
---------------------
Liabilities, Less Other Assets (0.1%) (41,094)
---------------------
TOTAL NET ASSETS 100.0% $ 25,617,285
=====================
* Non Income Producing
f Foreign
# Variable rate demand notes are considered short-term
obligations and are payable on demand. Interest rates change
periodically on specified dates. The rates listed are as of
June 30, 2003.
See notes to the financial statements
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Baird LargeCap Baird MidCap
Fund Fund
-------------------------------
ASSETS:
Investments, at value $ 54,939,892 $ 25,658,379
(cost $59,178,243 and $23,545,796,
respectively)
Dividends receivable 47,472 2,801
Interest receivable 1,409 979
Receivable for fund shares sold 64,126 40,691
Other assets 7,203 5,530
-------------- --------------
Total assets 55,060,102 25,708,380
-------------- --------------
LIABILITIES:
Payable to Advisor and Distributor 21,967 64,443
Accrued expenses and other liabilities 39,981 26,652
-------------- --------------
Total liabilities 61,948 91,095
-------------- --------------
NET ASSETS $ 54,998,154 $ 25,617,285
============== ==============
NET ASSETS CONSIST OF:
Capital stock $ 65,833,929 $ 26,941,961
Accumulated undistributed net
investment income (loss) 99,716 (83,191)
Accumulated net realized loss
on investments sold (6,697,140) (3,354,068)
Net unrealized appreciation (depreciation)
on investments (4,238,351) 2,112,583
-------------- --------------
NET ASSETS $ 54,998,154 $ 25,617,285
============== ==============
INSTITUTIONAL CLASS SHARES
Net Assets $ 54,428,236 $ 24,703,522
Shares outstanding
($0.01 par value, unlimited shares
authorized) 7,789,127 2,960,937
Net asset value, offering and
redemption price per share $ 6.99 $ 8.34
============== ==============
INVESTOR CLASS SHARES
Net Assets $ 569,918 $ 913,763
Shares outstanding
($0.01 par value, unlimited shares
authorized) 81,958 110,145
Net asset value, offering and
redemption price per share $ 6.95 $ 8.30
============== ==============
See notes to the financial statements
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations Six months ended June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
Baird Baird
LargeCap Fund MidCap Fund
-------------------------------
INVESTMENT INCOME:
Dividends $ 272,917 $ 44,044
Interest 14,640 5,838
-------------- --------------
Total investment income 287,557 49,882
-------------- --------------
EXPENSES:
Investment advisory fees 163,366 83,812
Administration fees 17,440 7,400
Shareholder servicing fees 15,981 14,124
Fund accounting fees 16,036 13,656
Professional fees 7,781 3,985
Federal and state registration 5,533 4,503
Directors fees 2,896 1,086
Custody fees 3,004 2,405
Miscellaneous 1,629 845
Reports to shareholders 5,581 2,272
Distribution fees
- Investor Class Shares 698 1,035
-------------- --------------
239,945 135,123
Expense reimbursement by Advisor (50,748) (2,050)
-------------- --------------
Total expenses 189,197 133,073
-------------- --------------
NET INVESTMENT INCOME (LOSS) 98,360 (83,191)
-------------- --------------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments (1,832,577) (168,987)
Change in unrealized appreciation
on investments 6,170,025 2,291,803
-------------- --------------
Net realized and unrealized
gain on invest 4,337,448 2,122,816
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,435,808 $ 2,039,625
============== ==============
See notes to the finacial statements
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Baird LargeCap Fund
-----------------------------------
Six months ended
June 30, 2003 Year Ended
(unaudited) December 31, 2002
-------------- ------------------
OPERATIONS:
Net investment income $ 98,360 $ 102,008
Net realized loss on investments (1,832,577) (4,699,997)
Change in unrealized appreciation
(depreciation) on investments 6,170,025 (9,008,476)
-------------- --------------
Net increase (decrease) in net assets
resulting from operations 4,435,808 (13,606,465)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,451,747 16,377,188
Shares issued to holders in reinvestment
of dividends - 100,103
Cost of shares redeemed (2,437,186) (5,284,507)
-------------- --------------
Net increase in net assets resulting from
capital share transactions 1,014,561 11,192,784
-------------- --------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income - (100,610)
From net realized gains - -
-------------------------------
- (100,610)
-------------------------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income - (123)
From net realized gains - -
-------------------------------
- (123)
-------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 5,450,369 (2,514,414)
NET ASSETS:
Beginning of period 49,547,785 52,062,199
-------------------------------
End of period (including undistributed
net investment income of $99,716 and $ 54,998,154 $ 49,547,785
$1,356, respectively) ===============================
See notes to the financial statements
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Baird MidCap Fund
-----------------------------------
Six months
ended
June 30, 2003 Year Ended
(unaudited) December 31, 2002
-------------- ------------------
OPERATIONS:
Net investment loss $ (83,191) $ (128,527)
Net realized loss on investments (168,987) (1,970,892)
Change in unrealized appreciation
(depreciation) on investments 2,291,803 (558,454)
-------------- ------------------
Net increase (decrease) in net assets
resulting from operations 2,039,625 (2,657,873)
-------------- ------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,820,342 13,171,369
Shares issued to holders in reinvestment
of dividends - -
Cost of shares redeemed (908,649) (2,947,459)
-------------- -----------------
Net increase in net assets resulting from
capital share transactions 1,911,693 10,223,910
-------------- ------------------
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOL
From net investment income - -
From net realized gains - -
-------------- ------------------
- -
-------------- ------------------
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS:
From net investment income - -
From net realized gains - -
-------------- ------------------
- -
-------------- ------------------
TOTAL INCREASE IN NET ASSETS 3,951,318 7,566,037
NET ASSETS:
Beginning of period 21,665,967 14,099,930
-------------- ------------------
End of period $ 25,617,285 $ 21,665,967
============== ==================
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird LargeCap Fund
----------------------------------------------------------------
Institutional
Class Shares
Institutional Institutional Institutional September 29,
Class Shares Class Shares Class Shares 2000(1)
Six months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
---------------- -------------- ------------- -------------
Per Share Data:
Net asset value, beginning of period $6.41 $8.63 $9.58 $10.00
---------------- -------------- -------------- -------------
Income from investment operations:
Net investment income 0.01 0.02 0.01 0.00(2)
Net realized and unrealized gain
(losses) on investments 0.57 (2.22) (0.95) (0.42)
---------------- -------------- -------------- -------------
Total from investment operations 0.58 (2.20) (0.94) (0.42)
---------------- -------------- -------------- -------------
Less distributions:
Dividends from net investment income - (0.02) (0.01) (0.00)(2)
Distributions from net realized gains - - - (0.00)(2)
---------------- -------------- -------------- -------------
Total distributions - (0.02) (0.01) (0.00)
---------------- -------------- -------------- -------------
Net asset value, end of period $6.99 $6.41 $8.63 $9.58
================ ============== ============== =============
Total return 9.05%(3) (25.53%) (9.84%) (4.15%)(3)
Supplemental data and ratios:
Net assets, end of period $54,428,236 $48,900,767 $51,446,666 $9,623,337
Ratio of expenses to average net assets(5) 0.75%(4) 0.75% 0.75% 0.85%(4)
Ratio of net investment income to
average net assets(5) 0.39%(4) 0.23% 0.12% 0.13%(4)
Portfolio turnover rate(6) 8.89% 16.17% 9.00% 4.38%
(1) Commencement of operations.
(2) Amount is less than $0.01.
(3) Not annualized.
(4) Annualized.
(5) Without fees waived, ratios of net expenses to average net assets for the
periods ended June 30, 2003, December 31, 2002, December 31, 2001 and
December 31, 2000 would have been 0.95%, 0.95%, 1.06% and 2.94%,
respectively; and the ratios of net investment income (loss) to average net
assets would have been 0.19%, 0.03%, (0.19%) and (1.97%), respectively.
(6) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird LargeCap Fund
-------------------------------------------------------------
Investor Class
Shares
Investor Class Investor Class Investor Class September 29,
Shares Six Shares Shares 2000 (1)
months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
--------------- ------------- -------------- --------------
Per Share Data:
Net asset value, beginning of period $6.40 $8.61 $9.57 $10.00
-------------- ----------- ------------- ------------
Income from investment operations:
Net investment loss 0.00 (0.00)(2) (0.01) (0.00)(2)
Net realized and unrealized gain
(losses) on investments 0.55 (2.21) (0.95) (0.43)
-------------- ----------- ------------- ------------
Total from investment operations 0.55 (2.21) (0.96) (0.43)
-------------- ----------- ------------- ------------
Less distributions:
Dividends from net investment income - (0.00)(2) - -
Distributions from net realized gains - - - (0.00)(2)
-------------- ----------- ------------- ------------
Total distributions 0.00 (0.00) - (0.00)
-------------- ----------- ------------- ------------
Net asset value, end of period $6.95 $6.40 $8.61 $9.57
============== =========== ============= ============
Total return 8.59%(3) (25.65%) (10.03%) (4.28%)(3)
Supplemental data and ratios:
Net assets, end of period $569,918 $647,018 $615,533 $42,288
Ratio of expenses to average net assets (5) 1.00%(4) 1.00% 1.00% 1.10% (4)
Ratio of net investment income to average
net assets (5) 0.14%(4) (0.02%) (0.13%) (0.12%)(4)
Portfolio turnover rate (6) 8.89% 16.17% 9.00% 4.38%
(1) Commencement of operations.
(2) Amount is less than $0.01.
(3) Not annualized.
(4) Annualized.
(5) Without fees waived, ratios of net expenses to average net assets for the
periods ended June 30, 2003, December 31, 2002, December 31, 2001 and
December 31, 2000 would have been 1.20%, 1.20%, 1.31% and 3.19%,
respectively; and the ratios of net investment income (loss) to average net
assets would have been (0.06%), (0.22%), (0.44%) and (2.22%), respectively.
(6) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird MidCap Fund
----------------------------------------------------------------
Institutional
Class Shares
Institutional Institutional Institutional December 29,
Class Shares Class Shares Class Shares 2000(1)
Six months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
---------------- -------------- ------------- -------------
Per Share Data:
Net asset value, beginning of period $7.66 $9.11 $9.70 $10.00
-------------- -------------- ------------ --------------
Income from investment operations:
Net investment loss (0.03) (0.07)(2) (0.06)(2) (0.00)(3)
Net realized and unrealized income
(losses) on investments 0.71 (1.38) (0.53) (0.30)
-------------- -------------- ------------ --------------
Total from investment operations 0.68 (1.45) (0.59) (0.30)
-------------- -------------- ------------ --------------
Less distributions:
Dividends from net investment income - - - -
Distributions from net realized gains - - - -
-------------- -------------- ------------ --------------
Total distributions - - - -
-------------- -------------- ------------ --------------
Net asset value, end of period $8.34 $7.66 $9.11 $9.70
============== ============== ============ ==============
Total return 8.88%(4) (15.92%) (6.08%) (3.00%)(4)
Supplemental data and ratios:
Net assets, end of period $24,703,522 $20,864,264 $13,049,574 $7,853,228
Ratio of expenses to average net assets (6) 1.12% (5) 1.25% 1.25% 1.25%(5)
Ratio of net investment loss to average
net assets (6) (0.70%)(5) (0.84%) (0.67%) (1.25%)(5)
Portfolio turnover rate (7) 35.29% 55.40% 73.62% 0%
(1) Commencement of operations.
(2) Calculated using average shares outstanding during the period.
(3) Amount is less than $0.01.
(4) Not annualized.
(5) Annualized.
(6) Without fees waived, ratios of net expenses to average net assets for the
periods ended June 30, 2003, December 31, 2002, December 31, 2001 and
December 31, 2000 would have been 1.14%, 1.39%, 2.06% and 2.78%,
respectively; and the ratios of net investment loss to average net assets
would have been (0.72%), (0.98%), (1.48%) and (2.78%), respectively.
(7) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to the financial statements
Baird Funds, Inc.
Financial Highlights
Baird MidCap Fund
-------------------------------------------------------------
Investor Class
Shares
Investor Class Investor Class Investor Class December 29,
Shares Six Shares Shares 2000 (1)
months ended Year ended Year ended through
June 30, 2003 December 31, December 31, December 31,
(unaudited) 2002 2001 2000
--------------- ------------- -------------- --------------
Per Share Data:
Net asset value, beginning of period $7.63 $9.09 $9.70 $10.00
--------------- ------------- ------------- ------------
Income from investment operations:
Net investment loss (0.04)(2) (0.09)(2) (0.08)(2) (0.00)(3)
Net realized and unrealized income
(losses) on investments 0.71 (1.37) (0.53) (0.30)
--------------- ------------- ------------- ------------
Total from investment operations 0.67 (1.46) (0.61) (0.30)
--------------- ------------- ------------- ------------
Less distributions:
Dividends from net investment income - - - -
Distributions from net realized gains - - - -
--------------- ------------ ------------- -----------
Total distributions - - - -
--------------- ------------- ------------- ------------
Net asset value, end of period $8.30 $7.63 $9.09 $9.70
=============== ============= ============= ============
Total return 8.78%(4) (16.06%) (6.29%) (3.00%)(4)
Supplemental data and ratios:
Net assets, end of period $913,763 $801,703 $1,050,356 $10
Ratio of expenses to average net assets(6) 1.37%(5) 1.50% 1.50% 1.50%(5)
Ratio of net investment loss to average
net assets (6) (0.95%)(5) (1.09%) (0.92%) (1.50%)(5)
Portfolio turnover rate (7) 35.29% 55.40% 73.62% 0%
(1) Commencement of operations.
(2) Calculated using average shares outstanding during the period.
(3) Amount is less than $0.01.
(4) Not annualized.
(5) Annualized.
(6) Without fees waived, ratios of net expenses to average net assets for the
periods ended June 30, 2003, December 31, 2002, December 31, 2001 and
December 31, 2000 would have been 1.39%, 1.64%, 2.31% and 3.03%,
respectively; and the ratios of net investment loss to average net assets
would have been (0.97%), (1.23%), (1.73%) and (3.03%), respectively.
(7) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Baird Funds, Inc. (the "Corporation") was incorporated on June 9, 2000 as a
Wisconsin Corporation and is registered as an open-end management company under
the Investment Company Act of 1940, as amended (the "1940 Act"). The
accompanying financial statements include the Baird LargeCap Fund and the Baird
MidCap Fund (each a "Fund" and collectively the "Funds"), two of the seven
portfolios comprising the Corporation. Pursuant to the 1940 Act, the Funds are
"diversified" series of the Corporation. The Baird Short-Term Bond Fund is not
presently being offered to investors.
The Baird LargeCap Fund commenced operations with the sale of both Institutional
and Investor Class Shares on September 29, 2000. The Baird MidCap Fund commenced
operations with the sale of both Institutional and Investor Class Shares on
December 29, 2000. The Institutional Class Shares are not subject to a
distribution and service (12b-1) fee, while the Investor Class Shares are
subject to a distribution and service (12b-1) fee up to 0.25%.
The investment objective of the Baird LargeCap Fund is to seek long-term growth
of capital through investments in equity securities of large-capitalization
companies.
The investment objective of the Baird MidCap Fund is to seek long-term growth of
capital through investments in equity securities of mid-capitalization
companies.
On June 30, 2003, one shareholder related to the investment advisor held
approximately 55% of the Institutional Class Shares of the Baird LargeCap Fund
and one shareholder related to the investment advisor held approximately 65% of
the Institutional Class Shares of the Baird MidCap Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America.
a) Investment Valuation - Common stocks that are listed on a securities
exchange are valued at the last quoted sales price on the day the valuation
is made. Securities traded on NASDAQ are valued at the NASDAQ official
closing price on the day the valuation is made. Price information on listed
stocks is taken from the exchange where the security is primarily traded.
If such securities were not traded on the valuation date they are valued at
the average of the current bid and asked price. Unlisted equity securities
for which market quotations are readily available are valued at the latest
quoted bid price. Debt securities are valued at the latest bid price.
Investments in open-end mutual funds are valued at the net asset value on
the day the valuation is made. Other assets and securities for which no
quotations are readily available are valued at fair value as determined in
good faith by management in accordance with procedures approved by the
Board of Directors.
b) Foreign Securities - Investing in securities of foreign companies and
foreign governments involves special risks and consideration not typically
associated with investing in U.S. companies and the U.S. government. These
risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies and the
U.S. government.
c) Federal Income Taxes - The Funds intend to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is recorded.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
d) Distributions to Shareholders - Dividends from net investment income are
declared and paid annually. Distributions of net realized gains, if any,
will be declared and paid at least annually.
e) Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
f) Other - Investment and shareholder transactions are recorded on trade date.
The Funds determine the gain or loss realized from investment transactions
by comparing the original cost of the security lot sold with the net sales
proceeds. Dividend income is recognized on the ex-dividend date or as soon
as information is available to the Funds and interest income is recognized
on an accrual basis. Generally accepted accounting principles require that
permanent financial reporting and tax differences be reclassified in the
capital accounts.
3. CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund:
BAIRD LARGECAP FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
--------------------------- ------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------ ------------ ----------
Shares sold $ 3,356,747 516,187 Shares sold $ 95,000 14,522
Shares redeemed (2,225,686) (352,839) Shares redeemed (211,500) (33,674)
------------ ------------ ------------ ----------
Net Increase $ 1,131,061 163,348 Net Decrease $(116,500) (19,152)
============== ============
Shares Outstanding: Shares Outstanding:
Beginning of period 7,625,779 Beginning of period 101,110
------------ ----------
End of period 7,789,127 End of period 81,958
============ ==========
Year Ended Year Ended
December 31, 2002 December 31, 2002
--------------------------- ------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------ ------------- ---------
Shares sold $ 16,127,835 2,383,970 Shares sold $249,353 35,023
Shares issued through Shares issued through
reinvestment of dividends 99,982 15,477 reinvestment of dividends 121 19
Shares redeemed (5,251,605) (736,052) Shares redeemed (32,902) (5,415)
------------- ------------ ------------ ---------
Net Increase $ 10,976,212 1,663,395 Net Increase $216,572 29,627
============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 5,962,384 Beginning of period 71,483
------------ ---------
End of period 7,625,779 End of period 101,110
============ =========
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD MIDCAP FUND
Period Ended Period Ended
June 30, 2003 June 30, 2003
--------------------------- ------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------ ------------ ----------
Shares sold $ 2,723,399 348,808 Shares sold $ 96,943 12,205
Shares redeemed (856,077) (110,514) Shares redeemed ,(52,572) (7,099)
------------ ------------ ------------ ----------
Net Increase $ 1,867,322 238,294 Net Increase $ 44,371 5,106
============== ============
Shares Outstanding: Shares Outstanding:
Beginning of period 2,722,643 Beginning of period 105,039
------------ ----------
End of period 2,960,937 End of period 110,145
============ ==========
Year Ended Year Ended
December 31, 2002 December 31, 2002
--------------------------- ------------------------
Institutional Class Shares $ Shares Investor Class Shares $ Shares
-------------- ------------ ------------- ---------
Shares sold $ 13,055,395 1,621,440 Shares sold $115,974 14,460
Shares redeemed (2,736,555) (331,959) Shares redeemed (210,904) (24,942)
------------- ------------ ------------ ---------
Net Increase $ 10,318,840 1,289,481 Net Increase $(94,930) (10,482)
============== =============
Shares Outstanding: Shares Outstanding:
Beginning of period 1,433,162 Beginning of period 115,521
------------ ---------
End of period 2,722,643 End of period 105,039
============ =========
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the period ended June 30, 2003, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Baird Baird
LargeCap Fund MidCap Fund
--------------- --------------
Purchases: $7,577,629 $9,151,807
Sales: $4,209,641 $7,614,740
At June 30, 2003, gross unrealized appreciation and depreciation of investments
and distributable ordinary income and long-term capital gains for federal tax
purposes were as follows:
Cost for Tax Basis Tax Basis Tax Basis Net Distributable
Federal Gross Gross Unrealized Distributable Long-Term
Income Tax Unrealized Unrealized Appreciation Ordinary Capital
Purposes Appreciation Depreciation (Depreciation) Income Gains
-------- ------------ ------------ -------------- ------ -----
Baird LargeCap Fund $59,178,243 $3,282,671 ($7,521,022) ($4,238,351) $99,716 -
Baird MidCap Fund $23,545,796 $3,050,683 ($938,100) $2,112,583 - -
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION(cont.)
Undistributed income or net realized gains for financial statement purposes may
differ from federal income tax purposes due to differences in the recognition
and characterization of income, expense and capital gain items for financial
statement and tax purposes.
Under the current tax law, capital losses realized after October 31, may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended December 31, 2002, the Baird LargeCap Fund elected to defer
capital losses occurring between November 1, 2002 and December 31, 2002 in the
amount of $516,163.
At December 31, 2002, the Baird LargeCap Fund and Baird MidCap Fund had
accumulated net realized capital loss carryovers of $4,188,556 and $2,546,738,
respectively that expire in 2010 and $151,937 and $615,557, respectively that
expire in 2009. To the extent the Funds realize future net capital gains,
taxable distributions to shareholders will be offset by any unused capital loss
carryover.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Robert W.
Baird & Co. Incorporated (the "Advisor"). Pursuant to the advisory agreement
with the Funds, the Advisor is entitled to receive a fee, calculated daily and
payable monthly, at the annual rate of 0.65% for the Baird LargeCap Fund and
0.75% for the Baird MidCap Fund as applied to the respective Fund's average
daily net assets. Certain officers of the Advisor are also officers of the
Funds.
For the six months ended June 30, 2003 and through December 31, 2003, the
Advisor agreed to waive its investment advisory fee and/or reimburse the Funds'
operating expenses (exclusive of brokerage, interest, taxes, and extraordinary
expenses) to the extent necessary to ensure that each Fund's operating expenses
do not exceed the following amounts:
Institutional Class Shares Investor Class Shares
Baird LargeCap Fund 0.75% 1.00%
Baird MidCap Fund 1.25% 1.50%
To the extent that the Advisor reimburses or absorbs fees and expenses, it may
seek payment of such amounts for three years after the year in which expenses
were reimbursed or absorbed. A Fund will make no such payment, however, if the
total annual Fund operating expenses exceed the expense limits in effect at the
time the expenses were reimbursed or at the time these payments are proposed.
Six months ended Year ended
June 30, December 31,
------------------- ---------------------------------
Year ended: 2003 2002 2001 2000
Reimbursed / Absorbed Expenses Subject to
Recovery by Advisor Until: 2006 2005 2004 2003
Baird LargeCap Fund $ 50,748 $ 91,116 $ 128,541 $50,141
Baird MidCap Fund $ 2,050 $ 21,503 $ 67,451 $ 986
During the period prior to commencement of operations, the Advisor absorbed
$7,405 and $6,837 of organizational expenses of the Baird LargeCap Fund and
Baird MidCap Fund, respectively. These reimbursed/absorbed expenses are subject
to recovery by the Advisor until December 31, 2003.
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and
accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for
the Funds.
Robert W. Baird & Co. Incorporated (the "Distributor") is the sole distributor
of the Funds pursuant to a distribution agreement.
Baird Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Financial Statements June 30, 2003 (unaudited)
- --------------------------------------------------------------------------------
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS (cont.)
No commissions were earned by the Distributor for services rendered as a
registered broker-dealer in securities transactions for the Baird LargeCap Fund
and Baird MidCap Fund for the period ended June 30, 2003.
6. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended. The
Plan allows the Funds to compensate the Distributor for a portion of the costs
incurred in distributing the Funds' Investor Class Shares, including amounts
paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average
daily net assets of the Funds' Investor Class Shares. The Baird LargeCap Fund
and the Baird MidCap Fund incurred $698 and $1,035, respectively, in fees
pursuant to the Plan for the period ended June 30, 2003.
BAIRD FUNDS, INC.
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-866-44BAIRD
Board of Directors Legal Counsel
G. Frederick Kasten, Jr. (Chairman)
Godfrey & Kahn, S.C. 780 North Water
Street
John W. Feldt Milwaukee, Wisconsin 53202
George C. Kaiser ------------------------------------
Stephen A. Roell Independent Accountants
- ------------------------------------------ PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Investment Advisor Milwaukee, Wisconsin 53202
Robert W. Baird & Co. Incorporated ------------------------------------
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Distributor
- ------------------------------------------ Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Administrator, Transfer Agent and Dividend Milwaukee, Wisconsin 53202
- - Disbursing Agent
------------------------------------
U.S. Bancorp Fund Services, LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, WI 53202
- ------------------------------------------
Custodian
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Item 2. Code of Ethics.
Not applicable to semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable to semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable to semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) Based on their evaluation of the Registrant's Disclosure Controls and
Procedures as of a date within 90 days of the Filing Date, the Registrant's
President, Treasurer, and CFO have determined that the Disclosure Controls
and Procedures (as defined in Rule 30a-2(c) under the Act) are designed to
ensure that information required to be disclosed by the Registrant is
recorded, processed, summarized and reported by the filing Date, and that
information required to be disclosed in the report is communicated to the
Registrant's management, as appropriate, to allow timely decisions
regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation, and there were no corrective actions with
regard to significant deficiencies and material weaknesses.
Item 10. Exhibits.
(a) Any code of ethics or amendment thereto. Not applicable to annual reports
for periods ending before July 15, 2003.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Baird Funds, Inc.
By (Signature and Title) /s/ Mary Ellen Stanek
---------------------
Mary Ellen Stanek, President
Date August 28, 2003
-------------------------------------
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.
(Registrant) Baird Funds, Inc.
By (Signature and Title) /s/ Leonard Rush
---------------------
Leonard Rush, Treasurer
Date August 28, 2003
-------------------------------------