As filed with the Securities and Exchange Commission on September 8, 2005
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.
-----------------
(Exact name of Registrant as specified in charter)
777 EAST WISCONSIN AVENUE, FLOOR 18
-----------------------------------
MILWAUKEE, WI 53202
-------------------
(Address of principal executive offices) (Zip code)
CHARLES M. WEBER
----------------
ROBERT W. BAIRD & CO. INCORPORATED
----------------------------------
777 EAST WISCONSIN AVENUE
-------------------------
MILWAUKEE, WI 53202
-------------------
(Name and address of agent for service)
1-866-442-2473
--------------
Registrant's telephone number, including area code
Date of fiscal year end: DECEMBER 31, 2005
-----------------
Date of reporting period: JUNE 30, 2005
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ITEM 1. REPORT TO STOCKHOLDERS.
- ------------------------------
(BAIRD FUNDS LOGO)
SEMI-ANNUAL REPORT
June 30, 2005
Baird Intermediate Bond Fund
Baird Aggregate Bond Fund
Baird Intermediate Municipal Bond Fund
Baird Core Plus Bond Fund
Baird Short-Term Bond Fund
TABLE OF CONTENTS
PAGE
BAIRD INTERMEDIATE BOND FUND 1
BAIRD AGGREGATE BOND FUND 13
BAIRD INTERMEDIATE MUNICIPAL BOND FUND 25
BAIRD CORE PLUS BOND FUND 30
BAIRD SHORT-TERM BOND FUND 38
ADDITIONAL INFORMATION ON FUND EXPENSES 46
STATEMENTS OF ASSETS AND LIABILITIES 48
STATEMENTS OF OPERATIONS 49
STATEMENTS OF CHANGES IN NET ASSETS 50
FINANCIAL HIGHLIGHTS 55
NOTES TO THE FINANCIAL STATEMENTS 64
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
BAIRD INTERMEDIATE BOND FUND
JUNE 30, 2005
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-rated debt
including government and corporate securities with maturities between one and
ten years.
PORTFOLIO CHARACTERISTICS
QUALITY DISTRIBUTION*<F1>
U.S. Treasury 14%
U.S. Gov't Agency 22%
Aaa 21%
Aa 4%
A 17%
Baa 21%
Below Baa 1%
SECTOR WEIGHTINGS
U.S. Treasury 13%
U.S. Gov't Agency 16%
Int'l 3%
Mortgage/CMOs 12%
Asset-Backed 10%
Industrials 16%
Utility 6%
Finance/Bank/Broker 18%
Cash 5%
Municipal 1%
NET ASSETS: $217,113,383 ANNUALIZED EXPENSE RATIO:
SEC 30-DAY YIELD:**<F2> Institutional Class: 0.30%
Institutional Class: 4.20% Investor Class: 0.55%***<F3>
Investor Class: 3.94% PORTFOLIO TURNOVER RATIO:****<F4> 29.1%
AVERAGE DURATION: 3.65 years TOTAL NUMBER OF HOLDINGS: 224
AVERAGE MATURITY: 5.02 years
*<F1> Credit ratings are provided by Moody's Investors Service.
**<F2> SEC yields are based on SEC guidelines and are calculated for the 30
days ended June 30, 2005.
***<F3> Includes 0.25% 12b-1 fee.
****<F4> Not Annualized.
BAIRD INTERMEDIATE BOND FUND
ANNUALIZED TOTAL RETURNS
For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1)<F5>
- ---------------------------------- -------- ----------------------
Baird Intermediate Bond Fund - Institutional Class Shares 5.55% 6.94%
Baird Intermediate Bond Fund - Investor Class Shares 5.32% 6.70%
Lehman Brothers Intermediate Government/Credit Bond Index(2)<F6> 4.80% 6.61%
(1)<F5> For the period September 29, 2000 (commencement of operations) to June
30, 2005.
(2)<F6> 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, 2005 (UNAUDITED)
Principal
Amount Value
--------- -----
LONG-TERM INVESTMENTS - 94.0%
ASSET-BACKED SECURITIES - 9.9%
$ 195,102 Amresco Residential
Securities Mortgage
Loan Trust,
Series 1998-1, Class A6,
6.51%, 08-25-2027 $ 194,659
617,680 Banc One Home
Equity Trust,
Series 1999-2, Class A7,
7.18%, 06-25-2029 630,992
1,150,000 Bayview Financial
Acquisition Trust
Series 2005-B, Class 1A2,
4.70%, 04-28-2039 1,147,570
1,350,000 Chase Funding
Mortgage Loan,
Series 2004-1, Class 1A3,
2.98%, 04-25-2026 1,334,054
865,500 Chemical Master
Credit Card Trust I,
Series 1996-3, Class A,
7.09%, 02-15-2009 890,838
101,048 CitiFinancial Mortgage
Securities, Inc.,
Series 2003-2, Class AF2,
2.13%, 05-25-2033 100,385
278,990 Contimortgage Home
Equity Loan Trust:
Series 1999-1, Class A7,
6.47%, 12-25-2013 280,035
Countrywide Asset-Backed
Certificates:
1,475,000 Series 2004-10, Class AF2,
3.32%, 05-25-2022 1,457,735
600,000 Series 2004-9, Class AF2,
3.34%, 09-25-2023 594,012
893,826 Countrywide Alternative
Loan Trust
Series 2005-5R, Class A2,
4.75%, 12-25-2018 894,928
1,500,000 Credit-Based Asset
Servicing and Securities
Series 2005-CB1, Class
AF4, 4.62%, 01-25-2035 1,502,978
Delta Funding Home
Equity Loan Trust:
403,905 Series 1997-2, Class A6,
7.04%, 06-25-2027 402,995
221,337 Series 1999-1, Class A6F,
6.34%, 12-15-2028 222,889
287,862 Series 1999-2, Class A7F,
7.03%, 08-15-2030 289,184
96,570 Equivantage Home
Equity Loan Trust,
Series 1996-3, Class A3,
7.70%, 09-25-2027 96,354
Green Tree Financial
Corporation:
747,106 Series 1998-4, Class A5,
6.18%, 04-01-2030 757,720
682,271 Series 1999-3, Class A5,
6.16%, 02-01-2031 692,313
230,364 IMC Home Equity
Loan Trust
Series 1998-1, Class A6,
7.02%, 06-20-2029 233,183
2,500,000 MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
3.34%, 08-16-2010 2,507,089
400,203 Mortgage Lenders
Network Home Equity
Loan Trust,
Series 1998-2, Class A1,
6.61%, 07-25-2029 403,841
2,000,000 New Century Home
Equity Loan Trust
3.56%, 11-25-2033 1,990,435
382,398 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11-15-2017 353,092
1,150,000 Renaissance Home
Equity Loan Trust,
Series 2004-3, Class AF2,
3.57%, 11-25-2034 1,136,620
Residential Asset
Mortgage Products, Inc.:
1,736,689 Series 2003-RS9, Class
AI3, 3.61%, 10-25-2028 1,728,790
783,803 Series 2003-RS6, Class
AI3, 3.08%, 12-25-2028 777,805
700,000 Residential Asset
Securities Corporation:
Series 2003-KS7, Class
AI3, 3.37%, 11-25-2028 696,225
54,480 Salomon Brothers
Mortgage Securities VII,
Series 1997-LB6, Class A6,
6.82%, 12-25-2027 54,648
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21,371,369
------------
FINANCIAL - 17.8%
325,000 Aetna, Inc.,
7.13%, 08-15-2006 335,491
Allfirst Financial, Inc.
Subordinated Notes:
1,300,000 7.20%, 07-01-2007 1,382,995
500,000 6.88%, 06-01-2009 537,688
American General Finance
Corporation Notes,
550,000 4.00%, 03-15-2011 531,079
589,000 American General Finance
Corporation Senior Notes,
8.45%, 10-15-2009 677,462
630,000 AmSouth Bancorporation
Subordinated Debentures,
6.75%, 11-01-2025 763,311
415,000 AmSouth Bank NA
Subordinated Notes,
6.45%, 02-01-2008 437,793
500,000 AMVESCAP PLC, Notes
5.38%, 02-27-2013 F<F10> 514,434
225,000 Bank of America
Corporation Subordinated
Notes, 10.20%, 07-15-2015 316,060
350,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08-15-2007 370,013
Bank One Corporation
Subordinated Notes,
750,000 10.00%, 08-15-2010 930,904
180,000 6.00%, 02-17-2009 189,716
480,000 Bankers Trust Corporation
Subordinated Notes,
7.38%, 05-01-2008 520,795
150,000 BSCH Issuances, Ltd.,
7.63%, 09-14-2010 F<F10> 172,911
800,000 CIT Group, Inc.
Senior Notes,
3.38%, 04-01-2009 773,061
300,000 CIT Group Company of
Canada, 5.20%, 06-01-2015
(Acquired 05-25-05,
Cost $299,151)*<F7> F<F10> 303,387
1,336,000 Comerica Incorporated
Subordinated Notes,
7.25%, 08-01-2007 1,413,054
800,000 Compass Bank
Subordinated Notes,
8.10%, 08-15-2009 916,187
1,000,000 Countrywide Home
Loans, Inc.:
5.50%, 02-01-2007 1,019,555
900,000 Credit Suisse First
Boston USA, Inc. Notes,
6.13%, 11-15-2011 978,996
475,000 Dime Capital Trust,
9.33%, 05-06-2027 527,427
494,646 First National Bank Chicago
Pass Thru Certificates,
8.08%, 01-05-2018 597,548
1,100,000 First National
Bank Omaha
Subordinated Notes,
7.32%, 12-01-2010 1,161,329
775,000 FMR Corporation
4.75%, 03-01-2013,
(Acquired 2-26-2003;
Cost $777,068)*<F7> 787,353
500,000 General Electric Capital
Corporation Notes,
6.00%, 06-15-2012 545,309
1,000,000 Genworth Financial
Inc. Notes,
5.75%, 06-15-2014 1,072,448
500,000 The Goldman Sachs
Group, Inc.,
5.15%, 01-15-2014 512,376
200,000 The Goldman Sachs
Group, Inc. Notes,
6.60%, 01-15-2012 222,283
830,000 Health Care Service
Corporation Notes,
7.75%, 06-15-2011
(Acquired 06-20-01;
Cost $497,765)*<F7> 963,690
1,200,000 Household Finance
Corporation Senior
Unsubordinated Notes,
6.40%, 06-17-2008 1,270,958
300,000 International Lease Finance
Corporation Notes,
5.70%, 07-03-2006 304,068
500,000 J.P. Morgan Chase &
Company Subordinated
Notes, 6.63%, 03-15-2012 556,632
1,550,000 KeyCorp Subordinated
Notes, 6.75%, 03-15-2006 1,577,987
700,000 Lehman Brothers
Holdings, Inc. Notes,
8.50%, 05-01-2007 753,662
600,000 Marsh & McLennan
Companies, Inc.
5.38%, 07-15-2014 597,659
600,000 MBNA Corporation Notes,
6.13%, 03-01-2013 653,834
750,000 Merrill Lynch & Co., Inc.
Senior Unsubordinated
Notes, 5.00%, 02-03-2014 768,362
1,000,000 Morgan Stanley Dean
Witter Debentures,
10.00%, 06-15-2008 1,162,251
300,000 Morgan Stanley
Unsubordinated Notes,
6.75%, 04-15-2011 332,171
196,000 National City Bank of
Kentucky Subordinated
Notes, 6.30%, 02-15-2011 216,051
500,000 Nationwide Life Global
Fund Notes, 5.35%,
02-15-2007 (Acquired
02-08-02; Cost $499,520)*<F7> 507,334
894,000 PNC Funding Corporation,
7.50%, 11-01-2009 1,002,983
1,200,000 Protective Life U.S.
Funding Notes,
5.88%, 08-15-2006
(Acquired 08-06-01
and 01-14-04;
Cost $699,160 and
$530,742, respectively)*<F7> 1,217,194
1,200,000 Rabobank Nederland
Senior Notes,
2.70%, 03-15-2007,
(Acquired 02-03-04;
Cost $1,199,760)*<F7> F<F10> 1,171,656
700,000 Residential Capital
Corporation Notes
6.38%, 02-30-2010
(Acquired 06-24-05;
Cost $701,960)*<F7> 703,368
805,000 SAFECO Corporation,
Notes 6.88%, 07-15-2007 843,964
546,000 SAFECO Corporation
Senior Notes,
7.25%, 09-01-2012 630,661
Santander Central
Hispano Issuances: F<F10>
325,000 7.00%, 04-01-2006 331,498
500,000 6.38%, 02-15-2011 549,121
575,000 Sanwa Bank Ltd. NY
Subordinated Notes,
7.40%, 06-15-2011 650,982
1,160,000 Transamerica Finance
Corporation Debentures,
0.00%, 03-01-2010^<F9> 911,963
350,000 UFJ Finance Aruba AEC,
6.75%, 07-15-2013 F<F10> 390,321
Union Planters Corporation
Subordinated Notes:
645,000 6.50%, 03-15-2008,
(Acquired 05-08-02,
02-12-03, and 05-08-03;
Cost $200,548, $75,169,
and $413,799, respectively)*<F7> 681,192
300,000 7.75%, 03-01-2011 348,700
500,000 Washington Mutual
Capital I
8.38%, 06-01-2027 557,729
500,000 Washington Mutual Bank
FA Subordinated Notes,
6.88%, 06-15-2011 557,528
------------
38,724,484
------------
INDUSTRIAL - 15.8%
450,000 Alcan Inc. Notes,
5.00%, 06-01-2015 452,073
30,365 America West Airlines
Pass Thru Certificates,
8.54%, 01-02-2006 28,103
810,000 Anthem, Inc.,
6.80%, 08-01-2012 913,993
375,000 AOL Time Warner, Inc.,
6.88%, 05-01-2012 423,158
225,000 Auburn Hills
Trust Debentures,
12.38%, 05-01-2020 340,656
300,000 Bellsouth Corporation
4.75%, 11-15-2012 301,575
575,000 British Telecom
PLC Notes,
8.38%, 12-15-2010 F<F10> 680,791
800,000 Bunge Ltd. Finance
Corporation Notes,
5.35%, 04-15-2014 828,853
1,000,000 Clear Channel
Communications, Inc.
Notes, 5.50%, 09-15-2014 948,458
125,000 Comcast Cable
Comm Holdings,
8.38%, 03-15-2013 152,418
Continental Airlines, Inc.
Pass Thru Certificates:
4,749 7.42%, 04-01-2007 4,236
142,401 6.54%, 09-15-2008 127,043
300,000 Continental Cablevision
Debentures,
9.50%, 08-01-2013 315,458
1,115,000 Cooper Cameron
Corporation Senior Notes,
2.65%, 04-15-2007 1,120,553
700,000 Cooper Industries, Inc.,
Notes 5.25%, 07-01-2007 712,793
Delta Air Lines, Inc.
Pass Thru Certificates,
26,000 7.78%, 11-18-2005 22,640
324,000 9.50%, 11-18-2008 264,060
1,000,000 Deutsche Telekom
International Finance BV,
8.50%, 06-15-2010 F<F10> 1,158,935
300,000 Dollar General Corporation,
8.63%, 06-15-2010 342,000
500,000 Fiserv, Inc. Notes,
4.00%, 04-15-2008 492,997
623,000 Ford Capital BV,
Debentures,
9.50%, 06-01-2010 F<F10> 643,803
300,000 Ford Motor Company
Debentures,
9.22%, 09-15-2021 282,588
500,000 General Electric
Company Notes,
5.00%, 02-01-2013 516,255
General Motors Acceptance
Corporation Notes,
1,025,000 7.75%, 01-19-2010 1,001,983
200,000 6.75%, 12-01-2014 178,935
550,000 General Motors Nova
Scotia Finance Company,
6.85%, 10-15-2008 F<F10> 518,436
950,000 Glencore Funding LLC,
6.00%, 04-15-2014,
(Acquired 03-31-04 and
02-02-05; Cost $794,280
and $146,738, respectively)*<F7> 910,952
Halliburton Company Notes:
425,000 5.63%, 12-01-2008 442,118
325,000 5.50%, 10-15-2010 340,837
650,000 Hanson Australia
Funding,
5.25%, 03-15-2013 F<F10> 666,730
400,000 Highmark, Inc. Notes,
6.80%, 08-15-2013,
(Acquired 08-14-03;
Cost $399,088)*<F7> 443,583
975,000 Hutchison Whampoa
International Ltd.,
6.25%, 01-24-2014,
(Acquired 11-19-03 and
02-08-05; Cost $749,228 and
$244,602, respectively)*<F7> F<F10> 1,048,110
1,000,000 Ingersoll-Rand Company
Debentures,
6.39%, 11-15-2027 F<F10> 1,190,824
105,000 International Paper
Company Notes,
7.63%, 01-15-2007 109,871
650,000 Laboratory Corporation
of America Holdings
Senior Notes,
5.50%, 02-01-2013 679,286
500,000 Limited Brands, Inc.
5.25%, 11-01-2014 483,163
350,000 Marathon Oil Corporation,
6.00%, 07-01-2012 378,759
500,000 Marathon Oil
Corporation Notes,
5.38%, 06-01-2007 509,932
900,000 The May Department
Stores Company Debentures,
8.85%, 03-01-2006 925,757
175,000 MeadWestvaco
Corporation Notes,
2.75%, 12-01-2005 174,146
Northwest Airlines, Inc.:
498,736 7.25%, 07-02-2014 335,993
235,707 6.26%, 11-20-2021 245,109
375,000 Park Place Entertainment
Senior Notes,
7.50%, 09-01-2009 413,438
700,000 PCCW Capital II Ltd.,
6.00%, 07-15-2013,
(Acquired 07-10-03;
Cost $696,731)*<F7> F<F10> 743,231
Qwest Capital Funding, Inc.:
350,000 7.00%, 08-03-2009 342,125
100,000 7.25%, 02-15-2011 95,750
1,000,000 Reed Elsevier Capital Notes,
4.63%, 06-15-2012 995,388
500,000 SBC Communications
Inc. Notes,
5.63%, 06-15-2016 527,195
650,000 Sealed Air Corporation
Senior Notes,
5.38%, 04-15-2008,
(Acquired 04-09-03;
Cost $646,490)*<F7> 665,644
239,199 Southwest Airlines Company
Pass Thru Certificates,
7.67%, 01-02-2014 269,394
875,000 Sprint Capital Corporation,
6.00%, 01-15-2007 896,653
380,000 Telus Corporation Notes,
6.50%, 06-01-2007 F<F10> 402,002
300,000 TCI Communications,
Inc. Debentures,
8.75%, 08-01-2015 384,834
1,360,000 Telecom Italia Capital
(Acquired 11-30-04;
Cost $1,318,262),
4.95%, 09-30-2014*<F7> F<F10> 1,346,597
200,000 Tele-Communications,
Inc. Debentures,
9.80%, 02-01-2012 254,740
513,000 Time Warner, Inc.
Debentures,
9.13%, 01-15-2013 648,254
Tyco International
Group SA: F
700,000 6.38%, 02-15-2006 709,363
400,000 6.38%, 10-15-2011 439,322
650,000 6.00%, 11-15-2013 706,871
257,967 Union Pacific Corporation
Pass Thru Certificates,
8.66%, 07-02-2011 285,369
United Air Lines, Inc.
Pass Thru Certificates:
245,275 7.76%, 10-01-2005, @<F8> 43,914
387,138 6.20%, 09-01-2008 368,382
300,000 10.02%, 03-22-2014, @<F8>, ^<F9> 141,675
1,000,000 Viacom Inc.,
7.70%, 07-30-2010 1,116,105
160,000 Weyerhaeuser
Company Notes,
5.95%, 11-01-2008 167,514
500,000 Willamette Industries, Inc.
Notes, 6.60%, 06-05-2012 544,411
325,000 Yosemite Security Trust
I,@<F8>,^<F9>, 8.25%, 11-15-2004
(Acquired 04-26-01;
Cost $325,599)*<F7> 142,188
------------
34,308,322
------------
UTILITIES - 6.0%
300,000 Baltimore Gas and Electric
Company Notes,
5.25%, 12-15-2006 304,501
750,000 Columbia Energy Group
Notes, Series E,
7.32%, 11-28-2010 757,646
800,000 Duke Capital LLC Notes,
5.67%, 08-15-2014 831,105
300,000 Edison Mission Energy
Senior Notes,
9.88%, 04-15-2011 351,375
300,000 Exelon Corporation
Senior Notes,
6.75%, 05-01-2011 333,161
400,000 Gulf States Utilities 1st
Mortgage, Series B,
6.77%, 08-01-2005 400,890
491,141 Kiowa Power Partners LLC,
4.81%, 12-30-2013
(Acquired 11-19-2004;
Cost $482,281)*<F7> 478,847
300,000 Korea Electric Power
Corporation,
6.75%, 08-01-2027 F<F10> 358,652
800,000 MidAmerican Energy
Holdings Company
Senior Notes,
4.63%, 10-01-2007 803,490
325,000 National Rural Utilities
Cooperative Finance
Collateral Trust,
3.88%, 02-15-2008 323,213
925,000 National Rural Utilities
Cooperative Finance
Corporation Notes,
5.75%, 08-28-2009 976,432
650,000 NiSource Finance
Corporation,
7.63%, 11-15-2005 658,525
375,000 ONEOK Inc Notes,
7.75%, 08-15-2006 389,390
800,000 ONEOK, Inc. Senior
Notes, 7.13%, 04-15-2011 901,265
800,000 Pacific Gas and Electric
Company 1st Mortgage,
4.80%, 03-01-2014 801,974
300,000 PPL Energy Supply, LLC
Senior Notes, Series A,
6.40%, 11-01-2011 328,541
175,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06-15-2011 190,750
PSE&G Power LLC:
275,000 7.75%, 04-15-2011 317,052
400,000 5.00%, 04-01-2014 403,521
841,986 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12-07-2022 1,125,938
350,000 Tristate Gen & Trans Assn,
6.04%, 01-31-2018
(Acquired 10-14-03;
Cost $350,000)*<F7> 363,745
900,000 Vectren Utility Holdings,
6.63%, 12-01-2011 993,522
600,000 The Williams Companies,
Inc. Notes,
8.13%, 03-15-2012 681,000
------------
13,074,535
------------
MORTGAGE-BACKED SECURITIES - 12.1%
542,176 Banc of America
Alternative Loan Trust
Series 2003-11, Class 4A1,
4.75%, 01-25-2019 539,778
Citicorp Mortgage
Securities, Inc.
1,779,706 5.50%, 10-25-2014 1,820,131
1,768,387 5.50%, 05-25-2015 1,785,800
2,000,000 Countrywide Home
Loans, Inc.:
Series 2003-18, Class A3,
5.25%, 07-25-2033 2,016,188
907,384 Deutsche Mortgage
Securities, Inc.,
Series 2004-1, Class 3A3,
3.69%, 12-25-2033 904,760
90,434 Federal Gold Loan Mortgage
Corporation (FGLMC),
6.00%, 07-01-2028 93,004
Federal Home Loan Mortgage
Corporation (FHLMC):
1,589,437 Series 2695, Class UA,
5.50%, 09-15-2014 1,638,493
974,434 Series R001, Class AE,
4.38%, 04-15-2015 974,983
41,838 Series 1094, Class K,
7.00%, 06-15-2021 41,861
22,867 Series 1101, Class M,
6.95%, 07-15-2021 22,908
217,020 Series 1136, Class H,
6.00%, 09-15-2021 216,737
84,499 Series 1280, Class B,
6.00%, 04-15-2022 84,388
94,337 Series 1395, Class G,
6.00%, 10-15-2022 94,821
1,350,000 Series 2592, Class PD,
5.00%, 07-15-2014 1,367,766
545,663 Series 2531, Class N,
4.00%, 07-15-2027 544,086
Federal National Mortgage
Association (FNMA):
1,500,000 Series 2003-24, Class PC,
5.00%, 11-25-2015 1,520,449
142,783 Series 1991-137, Class H,
7.00%, 10-25-2021 150,906
385,524 Series 2003-25, Class PC,
4.50%, 02-25-2027 385,371
245,994 Series 1992-136, Class PK,
6.00%, 08-25-2022 254,757
155,589 Series 1993-32, Class H,
6.00%, 03-25-2023 159,409
56,750 Series 1998-66, Class C,
6.00%, 12-25-2028 58,961
1,625,000 Series 2002-77, Class QP,
5.00%, 09-25-2026 1,631,625
1,000,000 Series 2002-73, Class OC,
5.00%, 04-25-2014 1,009,997
400,000 Series 2002-94, Class BG,
5.00%, 04-25-2016 403,950
1,500,000 Series 2002-95, Class MD,
5.00%, 07-25-2026 1,506,733
GMAC Mortgage
Corporation Loan Trust
1,900,000 4.39%, 12-25-2025 1,896,635
1,684,027 5.50%, 08-25-2014 1,714,410
Government National
Mortgage Association
(GNMA)
565,321 5.50%, 03-16-2013 582,012
805,366 6.00%, 02-20-2029 821,338
1,000,000 IMPAC Secured Assets
Corporation,
Series 2004-2, Class A3,
5.00%, 08-25-2034 999,117
1,053,408 Salomon Brothers
Mortgage Securities VII,
Series 2003-UP2, Class
A2, 4.00%, 06-25-2033 1,042,405
------------
26,283,779
------------
INTERNATIONAL (U.S. $ DENOMINATED) - 2.6%
725,000 Banco Santander Chile SA,
7.00%, 07-18-2007 F<F10> 759,612
275,000 Corp. Andina De
Fomento Notes,
7.38%, 01-18-2011 F<F10> 310,557
450,000 Korea Development
Bank Notes,
4.25%, 11-13-2007 F<F10> 449,730
700,000 Landeskreditbank
Baden-Wuerttemberg
Subordinated Notes,
6.35%, 04-01-2012 F<F10> 788,171
350,000 National Bank of
Hungary Debentures,
8.88%, 11-01-2013 F<F10> 460,274
PEMEX Project Funding
Master Trust:
275,000 6.13%, 08-15-2008 285,450
1,625,000 9.13%, 10-13-2010 1,902,875
Westdeutsche Landesbank
Subordinated Notes,
650,000 6.05%, 01-15-2009 F<F10> 685,980
------------
5,642,649
------------
TAXABLE MUNICIPAL BOND - 0.8%
Tobacco Settlement
Financing Corporation:
350,000 Series 2001-A, Class A,
5.92%, 06-01-2012 347,886
578,532 Series 2001-A, Class A,
6.36%, 05-15-2025 587,910
1,046,000 Toll Road Inv Part II,
0.00%, 02-15-2011,
(Acquired 09-28-04;
Cost $782,046)*<F7>^<F9> 807,674
------------
1,743,470
------------
U.S. GOVERNMENT AGENCY - 15.6%
26,450,000 Federal Home Loan
Mortgage Corporation
(FHLMC),
4.13%, 07-12-2010 26,536,571
6,450,000 Federal National Mortgage
Association (FNMA),
7.25% , 01-15-2010 7,313,919
------------
33,850,490
------------
U.S. TREASURY OBLIGATIONS - 13.4%
U.S. Treasury Bonds:
350,000 9.88%, 11-15-2015 523,113
11,375,000 9.25%, 02-15-2016 16,480,419
U.S. Treasury Notes:
1,050,000 3.25%, 01-15-2009 1,035,029
8,975,000 6.00%, 08-15-2009 9,751,544
1,325,000 3.50%, 12-15-2009 1,312,526
------------
29,102,631
------------
Total Long-Term
Investments
(Cost $201,627,658) 204,101,729
------------
SHORT-TERM INVESTMENTS - 5.5%
MONEY MARKET FUNDS - 5.5%
4,349,651 Investment Company
Cash Reserve Portfolio -
AIM Fund 4,349,651
7,611,679 SEI Daily Income Trust
Government Fund 7,611,679
------------
Total Short-Term
Investments
(Cost $11,961,330) 11,961,330
------------
Total Investments
(Cost $213,588,988)
99.5% 216,063,059
------------
Other Assets less
Liabilities 0.5% 1,050,324
------------
TOTAL NET
ASSETS 100.0% $217,113,383
------------
------------
*<F7> Unregistered security
@<F8> Security in default
^<F9> Non-income producing security
F<F10> Foreign security
See notes to the financial statements
BAIRD AGGREGATE BOND FUND
JUNE 30, 2005
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*<F11>
U.S. Treasury 13%
U.S. Gov't Agency 30%
Aaa 26%
Aa 3%
A 10%
Baa 16%
Below Baa 2%
SECTOR WEIGHTINGS
U.S. Treasury 13%
U.S. Gov't Agency 4%
Int'l 1%
Mortgage/CMOs 32%
Asset-Backed 16%
Industrials 12%
Utility 5%
Finance/Bank/Broker 13%
Cash 4%
NET ASSETS: $140,845,948 ANNUALIZED EXPENSE RATIO:
SEC 30-DAY YIELD:**<F12> Institutional Class: 0.30%
Institutional Class: 4.43% Investor Class: 0.55%***<F13>
Investor Class: 4.18% PORTFOLIO TURNOVER RATIO:****<F14> 26.5%
AVERAGE DURATION: 9.16 years TOTAL NUMBER OF HOLDINGS: 242
AVERAGE MATURITY: 7.47 years
*<F11> Credit ratings are provided by Moody's Investors Service.
**<F12> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2005.
***<F13> Includes 0.25% 12b-1 fee.
****<F14> Not Annualized.
BAIRD AGGREGATE BOND FUND
ANNUALIZED TOTAL RETURNS
FOR THE PERIOD ENDED JUNE 30, 2005 ONE YEAR SINCE INCEPTION(1)<F15>
- ---------------------------------- -------- -----------------------
BAIRD AGGREGATE BOND FUND - INSTITUTIONAL CLASS SHARES 7.88% 7.99%
BAIRD AGGREGATE BOND FUND - INVESTOR CLASS SHARES 7.58% 7.78%
LEHMAN BROTHERS AGGREGATE BOND INDEX(2)<F16> 6.80% 7.14%
(1)<F15> For the period September 29, 2000 (commencement of operations) to June
30, 2005.
(2)<F16> 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, 2005 (UNAUDITED)
Principal
Amount Value
- --------- -----
LONG-TERM INVESTMENTS - 95.6%
ASSET-BACKED SECURITIES - 15.8%
$ 225,000 Advanta Business Card
Master Trust,
Series 2003-B, Class A,
2.76%, 12-22-2008 $ 225,665
140,873 Advanta Mortgage
Loan Trust,
Series 1999-2, Class A6,
6.82%, 05-25-2029 142,686
443,957 Banc One Home
Equity Trust,
Series 1999-2, Class A7,
7.18%, 06-25-2029 453,526
590,879 Bear Stearns Asset
Backed Securities Trust,
Series 2003-AC1, Class A1,
4.10%, 05-25-2033 584,834
2,300,000 Chase Credit Card
Master Trust
3.33%, 02-15-2011 2,307,139
Citifinancial Mortgage
Securities, Inc.:
137,793 Series 2003-2, Class AF2,
2.13%, 05-25-2033 136,889
500,000 Series 2003-2, Class AF3,
3.04%, 05-25-2033 495,046
Contimortgage Home
Equity Loan Trust:
328,224 Series 1999-1, Class A7,
6.47%, 12-25-2013 329,453
20,375 Series 1997-2, Class A9,
7.09%, 04-15-2028 20,545
5,194 Series 1997-3, Class A9,
7.12%, 08-15-2028 5,214
184,599 Series 1999-3, Class A8,
3.59%, 05-25-2029 185,014
Countrywide Asset-Backed
Certificates:
1,500,000 Series 2004-15, Class AF6,
4.61%, 04-25-2035 1,515,007
1,300,000 Series 2005-1, Class AF6,
5.03%, 07-25-2035 1,327,081
1,000,000 Credit-Based Asset
Servicing and Securities
Series 2005-CB1, Class AF4,
4.62%, 01-25-2035 1,001,985
600,000 Daimler Chrysler Master
Owner Trust,
Series 2004-A, Class A,
2.84%, 01-15-2009 600,198
102,251 Equivantage Home
Equity Loan Trust,
Series 1996-3, Class A3,
7.70%, 09-25-2027 102,022
GE Capital Mortgage
Services, Inc.:
29,464 Series 1997-HE3, Class A6,
6.72%, 10-25-2027 29,400
53,742 Series 1997-HE4, Class A7,
6.74%, 12-25-2028 53,621
314,736 Series 1999-HE1, Class A7,
6.27%, 04-25-2029 320,448
Green Tree Financial
Corporation:
363,379 Series 1993-3, Class A7,
6.40%, 10-15-2018 370,484
303,348 Series 1993-4, Class A5,
7.05%, 01-15-2019 317,389
18,749 Series 1995-4, Class A5,
6.95%, 06-15-2025 19,213
7,438 Series 1997-1, Class A5,
6.86%, 03-15-2028 7,841
313,705 Series 1997-6, Class A8,
7.07%, 01-15-2029 331,592
410,908 Series 1998-4, Class A5,
6.18%, 04-01-2030 416,746
69,139 IMC Home Equity
Loan Trust,
Series 1997-5, Class A10,
6.88%, 11-20-2028 70,071
525,000 MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
3.34%, 08-16-2010 526,489
1,250,000 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11-25-2033 1,244,022
191,199 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11-15-2017 176,546
750,000 RAAC Series,
Series 2004-SP1, Class AI2,
4.38%, 01-25-2022 746,063
Residential Asset
Mortgage Products, Inc.:
1,000,000 Series 2004-RS1, Class AI3,
3.41%, 06-25-2028 995,547
1,150,000 Series 2003-RS11, Class AI3,
3.56%, 08-25-2028 1,146,051
430,811 Series 2003-RS5, Class AI3,
2.59%, 10-25-2028 428,741
250,000 Series 2004-RS3, Class AI2,
3.05%, 06-25-2029 247,308
1,035,000 Series 2003-RS7, Class AI6,
5.34%, 08-25-2033 1,061,099
1,000,000 Series 2005-RS1,
Class AI6,
4.71%, 01-25-2035 1,010,787
Residential Asset
Securities Corporation:
1,000,000 Series 2004-KS7, Class AI2,
3.51%, 05-25-2024 991,309
1,250,000 Series 2004-KS2, Class AI3,
3.02%, 08-25-2029 1,231,959
202,336 Series 1999-KS1, Class AI8,
6.32%, 04-25-2030 202,666
486,588 Series 1999-KS2, Class AI9,
7.15%, 07-25-2030 488,306
250,000 Series 2003-KS5, Class AI6,
3.62%, 07-25-2033 241,009
77,180 Salomon Brothers
Mortgage Securities VII,
Series 1997-LB6, Class A6,
6.82%, 12-25-2027 77,419
------------
22,184,430
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 1.3%
1,025,000 GE Capital Commercial
Mortgage Corporation:
Series 2002-3A, Class A2,
5.00%, 12-10-2037 1,061,793
250,000 GMAC Commercial
Mortgage Securities, Inc.,
Series 2003-C1, Class A2,
4.08%, 05-10-2036 244,323
550,000 Mach One Trust,
Series 2004-1A, Class A2,
4.78%, 05-28-2040
(Acquired 07-12-04;
Cost $555,349)*<F17> 556,787
------------
1,862,903
------------
FINANCIAL - 13.5%
400,000 Allfirst Financial, Inc.
Subordinated Notes,
7.20%, 07-01-2007 425,537
600,000 American General Finance
Corporation Senior Notes,
8.45%, 10-15-2009 690,114
200,000 AmSouth Bancorporation
Subordinated Debentures,
6.75%, 11-01-2025 242,321
275,000 AMVESCAP PLC,
5.38%, 02-27-2013 F<F21> 282,938
300,000 BAC Capital Trust VI,
5.63%, 03-08-2035 308,550
300,000 Bank of America Corporation
Subordinated Notes,
10.20%, 07-15-2015 421,413
400,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08-15-2007 422,872
219,000 Bank One Corporation
Subordinated Notes,
10.00%, 08-15-2010 271,824
350,000 BSCH Issuances, Ltd.,
7.63%, 09-14-2010 F<F21> 403,459
325,000 CIT Group Company
of Canada,
5.20%, 06-01-2015
(Acquired 05-25-05;
Cost $324,080)*<F17> F<F21> 328,669
300,000 CIT Group, Inc.
Senior Notes,
7.75%, 04-02-2012 351,851
923,992 Citicorp Mortgage
Securities, Inc.
5.25%, 05-25-2034 934,235
590,000 Citigroup Inc.
Subordinated Notes,
5.00%, 09-15-2014
(Acquired 09-16-04;
Cost $575,737)*<F17> 603,538
175,000 Countrywide Home Loans,
Inc., 5.63%, 07-15-2009 182,417
375,000 Credit Suisse Finance
Broker USA, Inc. Notes,
6.13%, 11-15-2011 407,915
1,070,000 Dime Capital Trust,
9.33%, 05-06-2027 1,188,098
175,000 Dresdner Bank - New York
Subordinated Debentures,
7.25%, 09-15-2015 208,870
300,000 First Empire Capital
Trust II,
8.28%, 06-01-2027 326,857
717,237 First National
Bank Chicago
Pass Thru Certificates,
8.08%, 01-05-2018 866,444
675,000 First National
Bank Omaha
Subordinated Notes,
7.32%, 12-01-2010 712,634
460,000 First Union Capital,
7.94%, 01-15-2027 499,254
250,000 FMR Corporation Notes,
4.75%, 03-01-2013,
(Acquired 02-26-03;
Cost $250,618)*<F17> 253,985
150,000 The Goldman Sachs
Group, Inc. Notes,
6.60%, 01-15-2012 166,712
500,000 Health Care Service
Corporation Notes, 7.75%,
06-15-2011 (Acquired
06-20-01 and 1-26-05;
Cost $199,106 and
$342,441, respectively)*<F17> 580,536
900,000 J.P. Morgan Chase &
Company Notes,
5.88%, 03-15-2035 923,773
KeyCorp Institution:
300,000 7.83%, 12-01-2026 324,060
400,000 8.25%, 12-15-2026 435,368
565,000 Liberty Mutual Notes,
7.70%, 10-15-2097,
(Acquired 03-26-03;
Cost $361,573)*<F17> 623,734
300,000 Marsh & McLennan
Companies, Inc.
5.38%, 07-15-2014 298,830
400,000 Morgan Stanley
Subordinated Notes,
4.75%, 04-01-2014 394,068
700,000 Residential Capital
Corporation,
6.88%, 06-30-2015,
(Acquired 06-21-05;
Cost $695,695)*<F17> 715,415
275,000 Sanwa Bank Ltd. NY
Subordinated Notes,
7.40%, 06-15-2011 311,339
500,000 SLM Corporation Notes,
5.63%, 08-01-2033 538,791
200,000 Transamerica Capital II,
7.65%, 12-01-2026,
(Acquired 10-21-03;
Cost $216,762)*<F17> 240,312
600,000 Transamerica Finance
Corporation Debentures,
0.00%, 03-01-2010^<F20> 471,705
225,000 UFJ Finance Aruba AEC,
6.75%, 07-15-2013 F<F21> 250,920
350,000 Union Planters
Corporation
Subordinated Notes,
7.75%, 03-01-2011 406,817
280,000 Washington Mutual
Capital I,
8.38%, 06-01-2027 312,328
701,749 Washington Mutual, Inc.
Pass-Thru Certificates,
5.00%, 06-25-2019 707,038
200,000 Washington Mutual, Inc.
Subordinated Notes,
8.25%, 04-01-2010 229,696
750,000 Willis Group NA,
5.63%, 07-15-2015 754,822
------------
19,020,059
------------
INDUSTRIAL - 11.5%
500,000 Alcan Inc.,
5.75%, 06-01-2035 F<F21> 508,600
AOL Time Warner, Inc.:
400,000 7.63%, 04-15-2031 499,556
175,000 7.70%, 05-01-2032 221,379
250,000 AT&T Wireless Services,
Inc. Senior Notes,
8.75%, 03-01-2031 350,409
200,000 Auburn Hills Trust
Debentures,
12.375%, 05-01-2020 302,805
450,000 British Telecom PLC,
8.88%, 12-15-2030 F<F21> 635,244
500,000 Bunge Ltd. Finance
Corporation Notes,
5.35%, 04-15-2014 518,033
500,000 ConAgra Foods, Inc.
Subordinated Notes,
9.75%, 03-01-2021 729,108
Continental Airlines, Inc.
Pass Thru Certificates:
51,480 6.80%, 07-02-2007 44,456
111,251 6.54%, 09-15-2008 99,253
173,684 8.31%, 10-02-2012 137,221
502,857 6.90%, 01-02-2018 500,064
1,775,000 Continental Cablevision
Debentures,
9.50%, 08-01-2013 1,866,457
231,000 Delta Air Lines, Inc.
Pass Thru Certificates,
9.50%, 11-18-2008
(Acquired 11-24-04;
Cost $231,000)*<F17> 188,265
19,000 Delta Air Lines, Inc.
Pass Thru Certificates,
7.78%, 11-18-2005 16,545
250,000 Deutsche Telekom
International Finance BV,
8.75%, 06-15-2030 F<F21> 338,495
4,577 Duty Free Promissory Note,
0.00%, 11-10-2013
(Acquired 11-10-03;
Cost $1,602)*<F17>,**<F18>,^<F20> 1,831
159,548 FedEx Corp.
Pass Thru Certificates,
6.85%, 01-15-2019 178,359
475,000 Ford Capital BV
Debentures,
9.50%, 06-01-2010 F<F21> 490,861
403,000 Ford Motor Company
Debentures,
9.22%, 09-15-2021 379,610
General Motors Acceptance
Corporation Notes,
100,000 7.25%, 03-02-2011 93,767
150,000 6.75%, 12-01-2014 134,201
625,000 Glencore Funding LLC,
6.00%, 04-15-2014,
(Acquired 03-31-04 and
1-26-05; Cost $496,425
and $122,281, respectively )*<F17> 599,311
350,000 Halliburton
Company Notes,
5.50%, 10-15-2010 367,056
100,000 Hanson Australia
Funding,
5.25%, 03-15-2013 F<F21> 102,574
275,000 Highmark, Inc. Notes,
6.80%, 08-15-2013,
(Acquired 08-14-03;
Cost $274,373)*<F17> 304,963
625,000 Hutchison Whampoa
International Ltd.,
6.25%, 01-24-2014,
(Acquired 06-02-04 and
2-8-05; Cost $335,195
and $298,122, respectively)*<F17> F<F21> 671,866
449,000 ICI North America
Debentures,
8.88%, 11-15-2006 474,567
100,000 Marathon Oil Corporation,
6.00%, 07-01-2012 108,217
520,000 The May Department
Stores Company Debentures,
9.75%, 02-15-2021 665,928
445,300 Northwest Airlines, Inc.:
7.25%, 07-02-2014
Series 2000-1, Class G,
8.07%, 04-01-2021 299,994
Northwest Airlines, Inc.
Pass Thru Certificates,
30,975 8.13%, 02-01-2014 15,855
172,652 8.07%, 10-01-2019 188,646
275,000 Park Place Entertainment
Senior Notes,
7.50%, 09-01-2009 303,188
400,000 PCCW Capital II Ltd.,
6.00%, 07-15-2013,
(Acquired 07-10-03;
Cost $398,132)*<F17> F<F21> 424,704
Qwest Capital Funding, Inc.:
300,000 7.00%, 08-03-2009 293,250
200,000 7.25%, 02-15-2011 191,500
250,000 Sealed Air Corporation
Senior Notes,
5.38%, 04-15-2008,
(Acquired 04-09-03;
Cost $248,650)*<F17> 256,017
Sprint Capital Corporation,
125,000 7.63%, 01-30-2011 142,760
200,000 8.75%, 03-15-2032 278,222
320,000 Tenneco Packaging
Debentures,
7.95%, 12-15-2025 405,129
Tyco International
Group SA: F<F21>
175,000 6.38%, 10-15-2011 192,203
300,000 6.00%, 11-15-2013 326,248
United Air Lines, Inc.
Pass Thru Certificates:
269,803 7.76%, 10-01-2005, @<F19> 48,305
116,141 6.20%, 09-01-2008 110,515
253,997 U.S. Airways
Pass Thru Certificates,
6.85%, 01-30-2018 254,562
675,000 Viacom, Inc.,
7.70%, 07-30-2010 753,371
195,000 The Walt Disney
Company Notes,
5.62%, 12-01-2008 195,772
------------
16,209,242
------------
UTILITIES - 4.9%
750,000 Calenergy Co., Inc.
Senior Notes,
7.63%, 10-15-2007 801,574
200,000 Duke Capital LLC Notes,
5.67%, 08-15-2014 207,776
250,000 Edison Mission Energy
Senior Notes,
9.88%, 04-15-2011 292,813
300,000 Exelon Corporation
Senior Notes,
6.75%, 05-01-2011 333,160
289,369 Kiowa Power Partners, LLC,
4.81%, 12-30-2013
(Acquired 11-19-04;
Cost $289,368)*<F17> 287,308
Korea Electric Power
Corporation: F
100,000 7.75%, 04-01-2013 119,982
365,000 6.75%, 08-01-2027 436,360
425,000 ONEOK, Inc.
Senior Notes,
7.13%, 04-15-2011 478,797
350,000 Pacific Gas &
Electric Company,
6.05%, 03-01-2034 385,731
300,000 PPL Energy Supply LLC
Senior Notes,
6.40%, 11-01-2011 328,541
175,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06-15-2011 190,750
PSE&G Power LLC:
250,000 7.75%, 04-15-2011 288,229
350,000 5.00%, 04-01-2014 353,081
544,815 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12-07-2022 728,548
200,000 Tristate Gen & Trans Assn,
6.04%, 01-31-2018
(Acquired 10-14-03;
Cost $200,000)*<F17> 207,854
300,000 Utilicorp United, Inc.
Senior Notes,
7.63%, 11-15-2009 309,750
500,000 Vectren Utility Holdings,
6.63%, 12-01-2011 551,956
550,000 The Williams Companies,
Inc. Notes,
8.13%, 03-15-2012 624,250
------------
6,926,460
------------
MORTGAGE-BACKED SECURITIES - 30.5%
Bank of America
Alternative Loan Trust,
978,528 Series 2003-4, Class 2A1,
5.00%, 06-25-2018 988,869
1,251,175 Series 2003-11, Class 4A1,
4.75%, 01-25-2019 1,245,641
1,643,823 Series 2005-2, Class 4A1,
5.50%, 03-25-2020 1,680,134
177,918 Deutsche Mortgage
Securities, Inc.,
Series 2004-1, Class 3A3,
3.69%, 12-25-2033 177,404
Federal Gold Loan Mortgage
Corporation (FGLMC):
1,061,910 5.50%, 07-01-2023 1,084,288
98,253 7.00%, 07-01-2028 103,614
286,953 6.50%, 04-01-2029 298,055
Federal Home Loan Mortgage
Corporation (FHLMC):
497,461 6.50%, 07-01-2014 517,675
345,587 6.00%, 05-01-2017 357,352
1,226,432 5.50%, 11-01-2022 1,252,532
640,190 Series 2695, Class UA,
5.50%, 09-15-2014 659,948
270,052 Series 141, Class D,
5.00%, 05-15-2021 269,536
245,814 Series 1081, Class K,
7.00%, 05-15-2021 245,955
97,549 Series 1101, Class M,
6.95%, 07-15-2021 97,730
331,408 Series 188, Class H,
7.00%, 09-15-2021 330,825
181,490 Series 1286, Class A,
6.00%, 05-15-2022 181,253
82,050 Series 1074, Class I,
6.75%, 05-15-2021 81,943
407,236 Series 206, Class E,
0.00%, 07-15-2019 403,458
203,652 Series 2141, Class N,
5.55%, 11-15-2027 205,766
1,150,000 Series 2539, Class QB,
5.00%, 09-15-2015 1,164,020
245,548 Series 2531, Class N,
4.00%, 07-15-2027 244,838
250,000 Series 2533, Class PC,
5.00%, 10-15-2017 251,644
900,358 Series 2857, Class VA,
5.00%, 09-15-2015 913,439
575,000 Series 2664, Class LG,
5.50%, 07-15-2028 587,050
Federal National Mortgage
Association (FNMA):
814,731 5.50%, 12-01-2016 836,973
651,722 5.00%, 06-01-2018 659,858
711,503 5.00%, 10-01-2017 720,313
789,747 5.00%, 11-01-2017 799,526
1,223,263 5.00%, 12-01-2017 1,238,410
876,504 5.00%, 10-01-2018 887,010
1,261,364 5.50%, 01-01-2023 1,287,880
1,159,525 5.50%, 07-01-2023 1,183,660
203,410 5.00%, 10-01-2023 205,061
241,010 6.50%, 02-01-2029 250,280
360,405 5.50%, 01-01-2032 365,822
1,204,061 5.50%, 07-01-2033 1,221,637
739,561 5.00%, 11-01-2033 740,599
1,275,979 5.50%, 03-01-2035 1,294,205
1,000,000 Series 2002-73, Class OC,
5.00%, 04-25-2014 1,009,997
1,175,000 Series 2002-82, Class XC,
5.00%, 05-25-2014 1,187,486
525,000 Series 2003-4, Class PC,
5.00%, 12-25-2014 530,616
471,720 Series 2002-70, Class PL,
5.00%, 04-25-2015 473,602
1,000,000 Series 2003-27, Class OJ,
5.00%, 07-25-2015 1,013,595
1,150,000 Series 2002-94, Class MC,
5.00%, 08-25-2015 1,165,046
500,000 Series 2003-24, Class PC,
5.00%, 11-25-2015 506,816
1,000,000 Series 2003-18, Class GB,
5.00%, 03-25-2016 1,011,714
165,919 Series 2002-56, Class MC,
5.50%, 09-25-2017 169,714
105,698 Series 1989-37, Class G,
8.00%, 07-25-2019 110,207
142,647 Series 1989-94, Class G,
7.50%, 12-25-2019 151,973
14,293 Series 1990-58, Class J,
7.00%, 05-25-2020 15,093
175,057 Series 1990-105, Class J,
6.50%, 09-25-2020 183,338
62,754 Series 1990-108, Class G,
7.00%, 09-25-2020 65,360
56,597 Series 1991-1, Class G,
7.00%, 01-25-2021 59,493
158,272 Series 1991-86, Class Z,
6.50%, 07-25-2021 165,893
534,845 Series 2003-28, Class KA,
4.25%, 03-25-2022 521,917
64,685 Series G92-30, Class Z,
7.00%, 06-25-2022 67,029
111,478 Series 1992-150, Class MA,
5.50%, 09-25-2022 114,411
191,442 Series 1993-58, Class H,
5.50%, 04-25-2023 196,220
1,125,000 Series 2003-17, Class QR,
4.50%, 11-25-2025 1,125,964
1,250,000 Series 2003-31, Class KG,
4.50%, 12-25-2028 1,259,876
235,511 Series 1998-66, Class C,
6.00%, 12-25-2028 244,688
192,492 Series 2003-44, Class AB,
3.75%, 05-25-2033 189,113
Government National
Mortgage Association
(GNMA):
850,000 4.49%, 04-16-2023 850,262
178,176 4.00%, 02-16-2026 177,808
149,280 6.50%, 08-15-2027 156,464
337,337 6.00%, 09-16-2028 338,251
118,247 6.00%, 12-20-2028 121,979
800,000 4.66%, 04-16-2029 805,250
279,286 6.50%, 06-15-2029 292,279
112,846 7.00%, 11-15-2029 119,572
977,879 6.00%, 11-20-2033 1,007,295
190,063 IMPAC CMB Trust,
Series 2004-4, Class 2A2,
5.25%, 09-25-2034 190,074
1,105,229 Residential Accredit
Loans, Inc.,
Series 2004-QS6, Class A1,
5.00%, 05-25-2019 1,110,061
800,000 Residential Funding
Mortgage Security I,
Series 2003-S11, Class A2,
4.00%, 06-25-2018 763,363
351,136 Salomon Brothers Mortgage
Securities VII,
Series 2003-UP2, Class A2,
4.00%, 06-25-2033 347,468
125,000 Structured Asset
Securities Corporation,
Series 2004-16XS,
Class A2,
4.91%, 08-25-2034 124,614
------------
42,978,104
------------
INTERNATIONAL (U.S. $ DENOMINATED) - 1.3%
50,000 Corp. Andina De
Fomento Notes:
7.38%, 01-18-2011 F<F21> 56,465
125,000 Hydro-Quebec,
11.75%, 02-01-2012 F<F21> 177,744
175,000 Landesbank
Baden-Wurttemberg
Subordinated Notes,
6.35%, 04-01-2012 F<F21> 197,043
110,000 National Bank of Hungary
Debentures,
8.88%, 11-01-2013 F<F21> 144,657
PEMEX Project Funding
Master Trust:
75,000 6.13%, 08-15-2008 77,850
450,000 9.13%, 10-13-2010 526,950
United Mexican
States Notes, F<F21>
150,000 9.88%, 02-01-2010 181,425
400,000 7.50%, 04-08-2033 459,000
------------
1,821,134
------------
TAXABLE MUNICIPAL BOND - 0.3%
Tobacco Settlement
Financing Corporation:
180,000 Series 2001-A, Class A,
5.92%, 06-01-2012 178,913
263,232 Series 2001-A, Class A,
6.36%, 05-15-2025 267,499
------------
446,412
------------
U.S. GOVERNMENT AGENCY - 3.7%
4,525,000 Federal National
Mortgage Association
(FNMA):
7.25%, 01-15-2010 5,131,083
------------
5,131,083
------------
U.S. TREASURY OBLIGATIONS - 12.8%
U.S. Treasury Bonds:
5,925,000 9.25%, 02-15-2016 8,584,306
7,600,000 6.25%, 08-15-2023 9,471,204
------------
18,055,510
------------
Total Long-Term
Investments
(Cost $131,603,650) 134,635,337
------------
SHORT-TERM INVESTMENTS - 3.9%
MONEY MARKET FUNDS - 3.9%
5,366,673 Investment Company
Cash Reserve Portfolio -
AIM Fund 5,366,673
195,345 SEI Daily Income Trust
Government Fund 195,345
------------
5,562,018
------------
Total Short-Term
Investments
(Cost $5,562,018) 5,562,018
------------
Total Investments
(Cost $137,165,668)
99.5% 140,197,355
------------
Other Assets Less
Liabilities 0.5% 648,593
------------
TOTAL NET
ASSETS 100.0% $140,845,948
------------
------------
*<F17> Unregistered security
**<F18> Fair valued security
@<F19> Security in default
^<F20> Non-income producing security
F<F21> Foreign security
See notes to the financial statements
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
JUNE 30, 2005
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 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.
PORTFOLIO CHARACTERISTICS
QUALITY DISTRIBUTION*<F22>
Aaa 94%
Aa 5%
Baa 1%
SECTOR WEIGHTINGS
Pre-refunded ETM 70%
Insured 19%
General Obligation 8%
Cash 2%
Revenue 1%
NET ASSETS: $46,241,314 ANNUALIZED EXPENSE RATIO:
SEC 30-DAY YIELD:**<F23> Institutional Class: 0.30%
Institutional Class: 3.49% Investor Class: 0.55%***<F24>
Investor Class: 3.24% PORTFOLIO TURNOVER RATIO:****<F25> 8.0%
AVERAGE DURATION: 5.08 years TOTAL NUMBER OF HOLDINGS: 45
AVERAGE MATURITY: 6.11 years
*<F22> Credit ratings are provided by Moody's Investors Service.
**<F23> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2005.
***<F24> Includes 0.25% 12b-1 fee.
****<F25> Not Annualized.
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
ANNUALIZED TOTAL RETURNS
For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1)<F26>
- ---------------------------------- -------- -----------------------
Baird Intermediate Municipal Bond Fund - Institutional Class Shares 5.73% 5.77%
Baird Intermediate Municipal Bond Fund - Investor Class Shares 5.46% 5.51%
Lehman Brothers 10-Year General Obligation Bond Index(2)<F27> 7.86% 5.94%
(1)<F26> For the period March 30, 2001 (commencement of operations) to June 30,
2005.
(2)<F27> 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, 2005 (UNAUDITED)
Principal
Amount Value
- --------- -----
MUNICIPAL BONDS - 96.1%
ALABAMA - 1.0%
Mobile Alabama, ETM
$ 460,000 6.20%, 02-15-2007 $ 481,891
-----------
CALIFORNIA - 2.2%
Golden State Tobacco
Securitization Corporation
500,000 6.25%, 06-01-2033 544,845
Santa Rosa California
Hospital Revenue, ETM
400,000 10.30%, 03-01-2011 490,236
-----------
1,035,081
-----------
COLORADO - 6.1%
Adams County Colorado
Single Family Mortgage
Revenue Pre-refunded
to 08-01-2012
2,000,000 8.88%, 08-01-2012 2,665,060
Colorado Springs Colorado
Utilities Revenue, ETM
120,000 5.80%, 11-15-2010 128,969
-----------
2,794,029
-----------
DELAWARE - 3.8%
Delaware State Economic
Development Authority
Revenue, ETM
1,500,000 6.75%, 01-01-2013 1,765,605
-----------
FLORIDA - 1.8%
Jacksonville Florida Health
Facility Authority Hospital
Revenue, ETM
300,000 11.50%, 10-01-2012 455,427
Orange County Florida
Health Revenue, ETM
325,000 8.75%, 10-01-2009 365,336
-----------
820,763
-----------
GEORGIA - 2.8%
Fulton County Georgia
Hospital Authority
Revenue, ETM
1,020,000 7.88%, 10-01-2013 1,270,747
-----------
ILLINOIS - 6.1%
Chicago Illinois
Metropolitan Water
Reclamation District
General Obligation, ETM
1,440,000 7.00%, 12-01-2010 1,720,512
Lake County Community
High School District
No 128
1,000,000 5.00%, 01-01-2013 1,100,110
-----------
2,820,622
-----------
INDIANA - 2.4%
Baugo Indiana School
Building Corporation
(AMBAC Insured)
745,000 5.50%, 01-15-2012 837,708
Indiana Toll Road
Commission, ETM
215,000 9.00%, 01-01-2015 289,641
-----------
1,127,349
-----------
IOWA - 3.9%
Des Moines Iowa
Metropolitan Wastewater
Reclamation Authority,
(MBIA Insured)
1,010,000 5.00%, 06-01-2015 1,118,474
Muscatine Iowa Electric
Revenue, ETM
585,000 6.70%, 01-01-2013 662,793
-----------
1,781,267
-----------
LOUISIANA - 6.6%
Denham Springs-Livingston
Housing and Mortgage
Finance Authority, ETM
745,000 7.20%, 08-01-2010 885,716
Houma-Terrebonne
Public Trust Financing
Authority, ETM
400,000 7.30%, 04-01-2010 470,436
Jefferson Parish Louisiana
Home Mortgage
Authority, ETM
1,450,000 7.10%, 08-01-2010 1,704,895
-----------
3,061,047
-----------
MINNESOTA - 1.7%
Western Minnesota
Municipal Power
Agency, ETM
695,000 6.38%, 01-01-2016 797,652
-----------
MISSISSIPPI - 2.3%
Mississippi Housing
Financial Corporation, ETM
600,000 0.00%, 06-01-2015 396,030
Mississippi State, ETM
615,000 6.20%, 02-01-2008 661,476
-----------
1,057,506
-----------
NEW JERSEY - 2.6%
New Jersey State Transit
Trust, Pre-refunded
to 06-15-2009
400,000 5.00%, 06-15-2017 430,296
New Jersey State Turnpike
Authority, ETM
577,000 6.75%, 01-01-2009 591,413
130,000 6.50%, 01-01-2016 156,927
-----------
1,178,636
-----------
NEW YORK - 2.3%
Triborough Bridge &
Tunnel Authority, ETM
1,000,000 5.25%, 01-01-2014 1,076,040
-----------
OHIO - 0.4%
Miamisburg Ohio Water
Revenue, ETM
160,000 7.00%, 11-15-2016 192,163
-----------
OKLAHOMA - 6.2%
Tulsa County Oklahoma
Home Financing Authority
Single Family Mortgage
Revenue, ETM
2,360,000 6.90%, 08-01-2011 2,843,942
-----------
PENNSYLVANIA - 7.9%
Philadelphia Pennsylvania
Gas Works, ETM
850,000 7.00%, 05-15-2020 1,055,709
Pittsburgh Pennsylvania
Water & Sewer
Authority, ETM
1,515,000 7.25%, 09-01-2014 1,789,942
Wilson Pennsylvania Area
School District,
(AMBAC Insured)
1,000,000 0.00%, 05-15-2011 807,180
-----------
3,652,831
-----------
SOUTH CAROLINA - 0.7%
Greenville South
Carolina Waterworks
Revenue, ETM
285,000 7.00%, 02-01-2010 333,199
-----------
SOUTH DAKOTA - 1.9%
Heartland Consumers
Power District, ETM
755,000 7.00%, 01-01-2016 893,693
-----------
TENNESSEE - 5.5%
Metropolitan Government
Nashville & Davidson County
Tennessee H&E, ETM
605,000 6.10%, 07-01-2010 648,887
Metropolitan Government
Nashville & Davidson County
Tennessee Water & Sewer
Revenue, ETM
1,545,000 6.50%, 12-01-2014 1,877,051
-----------
2,525,938
-----------
TEXAS - 21.5%
Barbers Hill Texas
Independent School District
General Obligation
(PSF Guaranteed)
1,125,000 5.00%, 02-15-2017 1,237,534
Bell County Texas General
Obligation (FSA Insured)
1,195,000 5.00%, 02-15-2012 1,309,493
Houston Texas Sewer
System Revenue, ETM
1,920,000 9.38%, 10-01-2013 2,549,280
Lufkin Texas Independent
School District
(PSF Guaranteed)
1,735,000 5.00%, 08-15-2015 1,920,714
Sam Rayburn Texas Municipal
Power Agency, ETM
730,000 6.00%, 09-01-2010 808,088
Socorro Texas Independent
School District
(PSF Guaranteed)
575,000 5.25%, 08-15-2012 641,648
Texas Public Building
Authority Revenue, ETM
300,000 7.13%, 08-01-2011 350,136
University of Houston
Texas (FSA Insured)
1,000,000 5.25%, 02-15-2012 1,112,390
-----------
9,929,283
-----------
UTAH - 1.6%
Salt Lake City Utah
Hospital Revenue, ETM
605,000 8.13%, 05-15-2015 758,513
-----------
WASHINGTON - 4.8%
Clark County School
District No. 037
1,025,000 5.13%, 12-01-2011 1,124,702
Washington State
(FGIC Insured)
1,000,000 5.00%, 09-01-2013 1,095,470
-----------
2,220,172
-----------
Total Municipal Bonds
(Cost $43,655,728) 44,417,969
-----------
Shares
------
SHORT TERM INVESTMENTS - 4.8%
MONEY MARKET FUND - 4.8%
2,226,780 Tax Free Investment
Company Cash Reserve
Portfolio - AIM Fund 2,226,780
-----------
Total Short-Term
Investment
(Cost $2,226,780) 2,226,780
-----------
Total Investments
(Cost $45,882,508)
100.9% 46,644,749
-----------
Liabilities less
Other Assets (0.9)% (403,435)
-----------
TOTAL NET
ASSETS 100.0% $46,241,314
-----------
-----------
ETM - Escrowed to Maturity
See notes to the financial statements
BAIRD CORE PLUS BOND FUND
JUNE 30, 2005
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 U.S. government and
investment grade debt, non-investment grade debt, asset-backed and mortgage-
backed securities, Eurobonds, 144A securities and emerging market debt with
maturities of at least one year.
PORTFOLIO CHARACTERISTICS
QUALITY DISTRIBUTION*<F28>
U.S. Treasury 12%
U.S. Gov't Agency 34%
Aaa 14%
Aa 1%
A 8%
Baa 24%
Below Baa 4%
Not Rated 3%
SECTOR WEIGHTINGS
U.S. Treasury 12%
U.S. Gov't Agency 6%
Mortgage/CMOs 31%
Asset-Backed 11%
Industrials 21%
Utility 5%
Finance/Bank/Broker 9%
Cash 3%
Municipal 1%
Int'l 1%
NET ASSETS: $33,139,915 ANNUALIZED EXPENSE RATIO:
SEC 30-DAY YIELD:**<F29> Institutional Class: 0.30%
Institutional Class: 4.95% Investor Class: 0.55%***<F30>
Investor Class: 4.71% PORTFOLIO TURNOVER RATIO:****<F31> 19.7%
AVERAGE DURATION: 4.21 years TOTAL NUMBER OF HOLDINGS: 126
AVERAGE MATURITY: 8.16 years
*<F28> Credit ratings are provided by Moody's Investors Service.
**<F29> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2005.
***<F30> Includes 0.25% 12b-1 fee.
****<F31> Not Annualized.
BAIRD CORE PLUS BOND FUND
ANNUALIZED TOTAL RETURNS
For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1)<F32>
- ---------------------------------- -------- -----------------------
Baird Core Plus Bond Fund - Institutional Class Shares 8.70% 7.97%
Baird Core Plus Bond Fund - Investor Class Shares 8.34% 7.68%
Lehman Brothers U.S. Universal Bond Index(2)<F33> 7.43% 7.38%
(1)<F32> For the period September 29, 2000 (commencement of operations) to June
30, 2005.
(2)<F33> 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 U.S. government and investment grade debt, non-
investment grade debt, asset-backed and mortgage-backed securities,
Eurobonds, 144A securities and emerging market debt 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 CORE PLUS BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED)
Principal
Amount Value
- --------- -----
LONG-TERM INVESTMENTS - 96.3%
ASSET-BACKED SECURITIES - 10.7%
$ 131,307 Bear Stearns Asset Backed
Securities Trust,
Series 2003-AC1, Class A1,
4.10%, 05-25-2033 $ 129,963
600,000 Chase Credit Card
Master Trust,
Series 2003-6, Class A,
3.33%, 02-15-2011 601,862
140,000 GMAC Mortgage
Corporation Loan Trust
Series 2004-HE5, Class A3,
3.97%, 09-25-2034 138,916
Green Tree Financial
Corporation:
59,503 Series 1997-1, Class A5,
6.86%, 03-15-2028 62,730
494,958 Series 1998-4, Class A5,
6.18%, 04-01-2030 501,990
MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
3.07%, 08-16-2010
300,000 Series 2003-A9, Class A9,
3.22%, 02-15-2011 301,094
New Century Home
Equity Loan Trust,
300,000 Series 2003-5, Class AI3,
3.56%, 11-25-2033 298,565
109,257 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11-15-2017 100,883
Residential Asset
Mortgage Products, Inc.:
400,000 Series 2003-RS11, Class AI3,
3.56%, 08-25-2028 398,626
172,324 Series 2003-RS5, Class
AI3, 2.59%, 10-25-2028 171,496
300,000 Series 2003-RS10, Class
AI7, 4.85%, 11-25-2033 304,265
Residential Asset Securities
Corporation:
92,471 Series 2003-KS2, Class AI3,
2.66%, 11-25-2028 92,151
450,000 Series 2003-KS5, Class AI6,
3.62%, 07-25-2031 433,817
-----------
3,536,358
-----------
COMMERCIAL MORTGAGE-BACKED SECURITIES -1.4%
300,000 GE Capital Commercial
Mortgage Corporation,
Series 2002-3A, Class A2,
4.99%, 12-10-2037 310,769
150,000 Mach One Trust,
Series 2004-1A, Class A2,
4.78%, 05-28-2040
(Acquired 07-12-04,
Cost $151,459)*<F34> 151,851
-----------
462,620
-----------
FINANCIAL - 9.1%
175,000 AMVESCAP, Inc.
Senior Notes,
5.90%, 01-15-2007 F<F37> 179,611
200,000 American General Finance
Senior Notes,
8.45%, 10-15-2009 230,038
175,000 CIT Group, Inc.
Senior Notes,
3.38%, 04-01-2009 169,107
100,000 Banco Santander
Chile SA,
7.38%, 07-18-2012 F<F37> 115,254
100,000 Countrywide Home
Loans, Inc.,
6.25%, 04-15-2009 106,050
350,000 First National Bank Omaha
Subordinated Notes,
7.32%, 12-01-2010 369,514
250,000 First Union Capital,
7.94%, 01-15-2027 271,334
375,000 Liberty Mutual Insurance
Notes, 7.70%, 10-15-2097,
(Acquired 03-26-03;
Cost $239,982)*<F34> 413,983
100,000 Marsh & McLennan
Companies, Inc.
5.38%, 07-15-2014 99,610
50,000 Met Life Global
Funding I Notes,
4.75%, 06-20-2007,
(Acquired 09-15-04;
Cost $51,534)*<F34> 50,682
175,000 PNC Funding Corporation
6.13%, 02-15-2009 185,853
100,000 Residential Capital
Corporation
6.38%, 06-30-2010
(Acquired 06-24-05;
Cost $100,280)*<F34> 100,481
100,000 Transamerica Capital II,
7.65%, 12-01-2026,
(Acquired 10-21-03;
Cost $108,381)*<F34> 120,156
457,000 Washington Mutual
Capital I,
8.38%, 06-01-2027 509,764
100,000 Wharf International
Finance LTD,
7.63%, 03-13-2007 F<F37> 105,301
-----------
3,026,738
-----------
INDUSTRIAL - 20.8%
40,059 America West Airlines
Pass Thru Certificates,
8.54%, 01-02-2006 37,075
300,000 AOL Time Warner, Inc.,
7.63%, 04-15-2031 374,667
100,000 AT&T Wireless Services Inc.,
8.75%, 03-01-2031 140,164
603,520 Atlas Air, Inc.
Pass Thru Certificates,
8.71%, 01-02-2019 627,450
75,000 Best Foods Notes,
Series C, 6.15%, 01-15-2006 75,740
150,000 Bunge Ltd. Finance
Corporation Notes,
5.35%, 04-15-2014 155,410
61,778 The Burlington Northern
Santa Fe Railway Company
Pass Thru Certificates,
7.42%, 03-23-2010 65,265
Continental Airlines, Inc.
Pass Thru Certificates:
3,653 7.42%, 04-01-2007 3,259
78,936 6.80%, 07-02-2007 68,165
77,050 6.90%, 01-02-2018 76,623
Continental Cablevision
Debentures,
400,000 9.50%, 08-01-2013 420,610
100,000 Cox Communications,
Inc. Notes,
7.88%, 08-15-2009 112,047
462,000 Delta Air Lines, Inc.,
9.50%, 11-18-2008
(Acquired 01-24-04;
Cost $462,000)*<F34> 376,530
38,000 Delta Air Lines, Inc.
Pass Thru Certificates,
7.78%, 11-18-2005 33,089
100,000 Deutsche Telekom
International Finance BV,
8.75%, 06-15-2030 F<F37> 135,398
250,000 Dollar General Corporation,
8.62%, 06-15-2010 285,000
18,881 Duty Free Promissory Note,
0.00%, 11-10-2013
(Acquired 11-10-03;
Cost $6,608),*<F34>,**<F35>,^<F36> 7,553
400,000 Ford Motor Company
Debentures,
9.22%, 09-15-2021 376,784
General Motors Acceptance
Corporation,
75,000 6.75%, 01-15-2006 75,592
150,000 6.75%, 12-01-2014 134,201
175,000 General Motors Nova Scotia
Finance Company,
6.85%, 1-15-2008 F<F37> 165,957
150,000 Glencore Funding LLC,
6.00%, 04-15-2014,
(Acquired 03-31-04;
Cost $148,928)*<F34> 143,835
100,000 Health Care Services
Corporation
7.75%, 06-15-2011
(Acquired 01-26-05;
Cost $115,000)*<F34> 116,107
100,000 Halliburton
Company Notes,
5.50%, 10-15-2010 104,873
150,000 Hutchison Whampoa
International Limited
6.25%, 01-24-2014
(Acquired 6-23-05,
Cost $161,474)*<F34> F<F37> 161,248
280,000 The May Department
Stores Company Debentures,
9.75%, 02-15-2021 358,576
534,360 Northwest Airlines, Inc.,
7.25%, 07-02-2014 359,993
98,412 Northwest Airlines, Inc.
Pass Thru Certificates,
8.07%, 10-01-2019 107,528
200,000 PCCW Capital II Ltd.,
6.00%, 07-15-2013,
(Acquired 07-10-03;
Cost $199,066)*<F34> F<F37> 212,352
273,370 Southwest Airlines Co.
Pass Through Certificates,
7.67%, 01-02-2014 307,880
100,000 Sprint Capital Corporation,
8.75%, 03-15-2032 139,111
250,000 Sungard Data
Systems Inc. Notes,
3.75%, 01-15-2009 227,749
50,000 Tyco International
Group SA,
6.00%, 11-15-2013 F<F37> 54,375
653,295 United Air Lines, Inc.
Pass Thru Certificates,
6.20%, 09-01-2008 621,646
83,000 Univision Communication
Inc., 3.50%, 10-15-2007 81,178
150,000 Viacom, Inc.
7.70%, 07-30-2010 167,416
-----------
6,910,446
-----------
UTILITIES - 5.4%
25,000 Devon Energy Corporation
Debentures,
10.25%, 11-01-2005 25,474
300,000 Edison Mission Energy
Senior Notes,
9.88%, 04-15-2011 351,375
98,228 Kiowa Power Partners, LLC,
4.81%, 12-30-2013
(Acquired 11-19-04;
Cost $100,000)*<F34> 97,529
400,000 ONEOK, Inc. Senior Notes,
7.13%, 04-15-2011 450,632
50,000 Pacific Gas and Electric
Company 1st Mortgage,
6.05%, 03-01-2034 55,104
200,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06-15-2011 218,000
50,000 PSI Energy, Inc. Debentures,
7.85%, 10-15-2007 53,842
297,172 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12-07-2022 397,390
100,000 Tristate Gen & Trans Assn,
6.04%, 01-31-2018
(Acquired 10-14-03;
Cost $100,000)*<F34> 103,927
50,000 Williams Cos Inc. Notes,
7.13%, 09-01-2011 54,000
-----------
1,807,273
-----------
MORTGAGE-BACKED SECURITIES - 29.6%
290,086 Bank of America
Alternative Loan Trust
Series 2005-2, Class 4A1,
5.50%, 03-25-2020 296,494
Federal Gold Loan Mortgage
Corporation (FGLMC):
155,514 6.00%, 05-01-2017 160,808
121,583 6.50%, 09-01-2028 126,333
198,536 6.50%, 12-01-2028 206,292
145,740 6.50%, 05-01-2029 151,379
143,797 6.50%, 06-01-2029 149,361
Federal Home Loan Mortgage
Corporation (FHLMC):
400,000 Series 2567, Class OD,
5.00%, 08-15-2015 405,449
450,000 Series 2539, Class QB,
5.00%, 09-15-2015 455,486
38,828 Series 1053, Class G,
7.00%, 03-15-2021 38,849
288,509 Series 2804, Class VC,
5.00%, 07-15-2021 291,775
66,389 Series 1122, Class G,
7.00%, 08-15-2021 66,303
250,000 Series 2598, Class QC,
4.50%, 06-15-2027 249,176
292,330 Series R001, Class AE,
4.38%, 04-15-2015 292,495
218,265 Series 2531, Class N,
4.00%, 07-15-2027 217,634
Federal National Mortgage
Association (FNMA):
416,528 5.00%, 02-01-2018 421,686
292,168 5.00%, 10-01-2018 295,670
289,336 5.00%, 11-01-2018 292,804
222,347 5.50%, 03-01-2023 226,975
265,034 5.50%, 07-01-2023 270,551
146,361 7.00%, 12-15-2021 146,640
98,187 6.50%, 09-01-2028 98,848
167,439 6.50%, 02-01-2029 173,879
324,364 5.50%, 01-01-2032 329,239
400,000 Series 2002-82, Class XC,
5.00%, 05-25-2014 404,251
450,000 Series 2002-74, Class TC,
5.00%, 03-25-2015 454,288
171,535 Series 2002-70, Class PL,
5.00%, 04-25-2015 172,219
350,000 Series 2002-57, Class PE,
5.50%, 09-25-2015 355,989
300,000 Series 2003-16, Class PC,
5.00%, 10-25-2015 304,007
27,432 Series 1989-94, Class G,
7.50%, 12-25-2019 29,225
38,172 Series 1990-15, Class J,
7.00%, 02-25-2020 39,727
106,776 Series 1990-76, Class G,
7.00%, 07-25-2020 112,850
24,893 Series 1991-21, Class J,
7.00%, 03-25-2021 25,937
83,393 Series 1992-129, Class L,
6.00%, 07-25-2022 86,358
179,900 Series 1993-32, Class H,
6.00%, 03-25-2023 184,316
229,731 Series 1993-58, Class H,
5.50%, 04-25-2023 235,464
450,000 Series 2003-31, Class KG,
4.50%, 12-25-2028 453,555
92,361 Series 2003-44, Class AB,
3.75%, 05-25-2033 90,740
Government National
Mortgage Association
(GNMA):
250,000 4.49%, 04-16-2023 250,077
167,940 6.50%, 08-15-2027 176,022
273,446 6.00%, 12-20-2028 282,077
102,654 6.50%, 01-20-2029 106,932
96,457 6.50%, 02-20-2029 100,476
30,000 4.66%, 04-16-2029 301,969
260,768 6.00%, 11-20-2033 268,612
-----------
9,799,217
-----------
INTERNATIONAL (U.S. $ DENOMINATED) - 1.4%
400,000 PEMEX Project Funding
Master Trust,
9.13%, 10-13-2010 468,400
-----------
TAXABLE MUNICIPAL BOND - 0.6%
202,486 Tobacco Settlement
Financing Corporation,
Series 2001-A, Class A,
6.36%, 05-15-2025 205,768
-----------
U.S. GOVERNMENT AGENCY - 5.4%
1,575,000 Federal National Mortgage
Association (FNMA):
7.25%, 01-15-2010 1,785,957
-----------
U.S. TREASURY OBLIGATIONS - 11.9%
U.S. Treasury Bonds:
500,000 9.25%, 02-15-2016 724,414
2,575,000 6.25%, 08-15-2023 3,208,993
-----------
3,933,407
-----------
Total Long-Term
Investments
(Cost $31,204,618) 31,936,184
-----------
SHORT-TERM INVESTMENTS - 3.1%
MONEY MARKET FUNDS - 3.1%
847,958 Investment Company
Cash Reserve Portfolio-
AIM Fund 847,958
173,194 SEI Daily Income Trust
Government Fund 173,194
-----------
1,021,152
-----------
Total Short-Term
Investments
(Cost $1,021,152) 1,021,152
-----------
Total Investments
(Cost $32,225,770)
99.4% 32,957,336
-----------
Other Assets Less
Liabilities 0.6% 182,579
-----------
TOTAL NET
ASSETS 100.0% $33,139,915
-----------
-----------
*<F34> Unregistered security
**<F35> Fair valued security
^<F36> Non-income producing security
F<F37> Foreign security
See notes to the financial statements
BAIRD SHORT-TERM BOND FUND
JUNE 30, 2005
The investment objective of the Baird Short-Term Bond Fund is to seek an annual
rate of total return, before Fund expenses, greater than the annual rate of
return of the Lehman Brothers 1-3 Year Government/Credit Bond Index. The Lehman
Brothers 1-3 Year 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 three years.
PORTFOLIO CHARACTERISTICS
QUALITY DISTRIBUTION*<F38>
U.S. Treasury 14%
U.S. Gov't Agency 26%
Aaa 21%
Aa 4%
A 11%
Baa 24%
SECTOR WEIGHTINGS
U.S. Treasury 14%
U.S. Gov't Agency 24%
Mortgage/CMOs 5%
Asset-Backed 13%
Industrials 15%
Utility 9%
Finance/Bank/Broker 15%
Cash 4%
Municipal 1%
NET ASSETS: $69,922,402 ANNUALIZED EXPENSE RATIO:
SEC 30-DAY YIELD:**<F39> Institutional Class: 0.30%
Institutional Class: 3.65% PORTFOLIO TURNOVER RATIO:***<F40> 11.7%
AVERAGE DURATION: 1.77 years TOTAL NUMBER OF HOLDINGS: 129
AVERAGE MATURITY: 1.93 years
*<F38> Credit ratings are provided by Moody's Investors Service.
**<F39> SEC yields are based on SEC guidelines and are calculated for the 30
days ended June 30, 2005.
***<F40> Not Annualized.
BAIRD SHORT-TERM BOND FUND
TOTAL RETURNS
For the Period Ended June 30, 2005 SINCE INCEPTION(1)<F41>
- ---------------------------------- -----------------------
Baird Short-Term Bond Fund - Institutional Class 1.13%
Lehman Brothers 1-3 Year Government/Credit Bond Index(2)<F42> 1.00%
(1)<F41> For the period August 31, 2004 (commencement of operations) to June
30, 2005.
(2)<F42> The Lehman Brothers 1-3 Year 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 three 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 TOTAL RETURNS FOR THE PERIOD AUGUST 31,
2004 THROUGH JUNE 30, 2005. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS
AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. 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 RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
BAIRD SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED)
Principal
Amount Value
- --------- -----
LONG-TERM INVESTMENTS - 95.7%
ASSET-BACKED SECURITIES - 13.2%
$ 150,000 Advanta Business
Card Master Trust
Series 2003-B, Class A,
3.61%, 12-22-2008 $ 150,443
44,374 Americredit Automobile
Receivables Trust,
Series 2001-B, Class A4,
5.37%, 06-12-2008 44,547
400,000 AESOP Funding II LLC
Series 2005-1A, Class A1,
3.95%, 04-20-2008 398,402
500,000 Bayview Financial
Acquisition Trust
Series 2005-B, Class 1A2,
4.70%, 04-28-2039 498,943
250,000 Capital One Multi-Asset
Execution Trust
Series 2003-A1, Class A1,
3.61%, 01-15-09 250,694
120,000 Chase Manhattan
Auto Owner Trust,
Series 2003-C, Class A4,
2.94%, 06-15-2010 117,921
Chemical Master
Credit Card Trust I:
475,000 Series 1996-3, Class A,
7.09%, 02-15-2009 488,906
850,370 Series 1996-2, Class A,
5.98%, 09-15-2008 859,776
Citifinancial Mortgage
Securities:
281,710 Series 2003-2, Class AF2,
2.13%, 05-25-2033 279,861
385,000 Series 2003-3, Class AF2,
3.08%, 8-25-2033 381,581
400,000 CNH Equipment Trust
Series 2005-A, Class A3,
4.02%, 4-15-2009 399,995
Countrywide Asset-Backed
Certificates:
330,000 Series 2004-10, Class AF2,
3.32%, 05-25-2022 326,137
400,000 Series 2004-9, Class AF2,
3.34%, 09-25-2023 396,008
105,000 Series 2004-7, Class AF2,
3.32%, 12-25-2023 103,906
500,000 Ford Credit Auto Owner
Trust, Series 2005-B,
Class A4, 01-15-2010 503,671
175,000 Household
Automobile Trust,
2.22%, 11-17-2009 171,206
300,000 MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
3.34%, 08-16-2010 300,851
750,000 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11-25-2033 746,413
500,000 Renaissance Home
Equity Loan Trust,
Series 2004-3, Class AF2,
3.57%, 11-25-2034 494,182
Residential Asset
Mortgage Products, Inc.
168,707 Series 2003-RS9, Class AI3,
3.61%, 10-25-2028 167,940
140,000 Series 2063-RS7, Class AI6,
5.34%, 08-25-2033 143,530
Residential Asset
Securities Corporation:
437,597 Series 2003-KS5, Class AI3,
2.28% 07-25-2028 431,111
1,000,000 Series 2003-KS2, Class AI3,
3.02%, 05-25-2029 985,568
600,000 Residential Funding
Mortgage Securities
Series 2003-HS3, Class AI2,
3.15%, 07-25-2018 591,515
-----------
9,233,107
-----------
FINANCIAL - 14.9%
380,000 Allfirst Financial Inc.
Subordinated Notes,
7.20%, 07-01-2007 404,260
140,000 American General
Finance Corporation Notes,
4.50%, 11-15-2007 140,296
304,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08-15-2007 321,383
251,000 Bank United Notes,
8.00%, 03-15-2009 281,892
200,000 Bankers Trust Corp. Notes,
7.38%, 05-01-2008 216,998
110,000 BB&T Corporation
Subordinated Notes,
7.25%, 06-15-2007 116,328
400,000 Bear Stearns & Co. Inc.
Notes, 7.80%, 08-15-2007 428,447
500,000 Capital One Bank Notes,
4.88%, 05-15-2008 507,461
100,000 Chubb Corporation
Senior Notes,
7.13%, 12-15-2007 106,875
210,000 CIT Group Inc. Senior
Notes, 5.50%, 11-30-2007 215,888
200,000 Citicorp Subordinated Notes,
7.00%, 07-01-2007 211,734
250,000 Citifinancial Debentures
10.00%, 05-15-2009 300,360
675,000 Comerica Inc. Subordinated
Notes, 7.25%, 08-01-2007 713,931
537,000 Credit Suisse First Boston
USA Inc. Senior Notes,
6.50%, 06-01-2008 569,317
200,000 Franchise Finance
Corporation Notes,
7.07%, 01-15-2008 215,007
75,000 Heller Financial Inc. Notes,
6.38%, 03-15-2006 76,265
400,000 HSBC Finance Corporation
Notes, 6.88%, 03-1-2007 416,774
500,000 ING Security Life
Institutional Funding Notes,
2.70%, 02-15-2007
(Acquired 05-26-05,
Cost $488,370)*<F43> 486,798
200,000 J.P. Morgan & Co.
Incorporated Subordinated
Notes, 6.70%, 11-01-2007 210,503
KeyCorp Subordinated Notes,
200,000 7.50%, 06-15-2006 206,024
100,000 6.75%, 03-15-2006 101,806
Lehman Brothers Holdings
Inc. Notes,
203,000 8.50%, 05-01-2007 218,562
400,000 3.5%, 08-07-2008 391,708
500,000 MBNA Corporation Notes,
6.25%, 01-17-2007 515,902
200,000 Morgan Stanley Group,
Inc. Debentures,
8.33%, 01-15-2007 212,769
180,000 Merrill Lynch & Co. Notes,
7.00%, 01-15-2007 187,869
200,000 Met life Global Funding
4.75%, 06-20-2007
(Acquired 02-11-05;
Cost $203,862)*<F43> 202,727
150,000 Principal Life Global,
5.13%, 06-28-2007
(Acquired 12-28-04;
Cost $154,880)*<F43> 152,321
125,000 Protective Life US Funding
Notes, 5.88%, 08-15-2006
(Acquired 1-18-05
Cost $129,410)*<F43> 126,791
300,000 Reliastar Financial Notes,
8.00%, 10-30-2005 314,085
155,000 Republic New York
Corporation Subordinated
Notes, 9.70%, 02-01-2009 182,217
487,000 SAFECO Corporation Notes,
6.88%, 07-15-2007 510,572
300,000 Santander Financial
Issuances,
7.25%, 05-30-2006 F<F45> 308,279
200,000 Transamerica Corporation
Debentures,
9.38%, 03-01-2008 224,148
162,000 Washington Mutual, Inc.
Notes, 7.50%, 08-15-2006 167,685
250,000 Wells Fargo & Company
Subordinated Notes,
6.25%, 04-15-2008 263,445
200,000 Westdeutsche Landesbank
Subordinated Notes,
6.05%, 01-15-2009 211,071
-----------
10,438,498
-----------
INDUSTRIAL -14.7%
300,000 British Telecommunications
PLC Notes,
7.88%, 12-15-2005 F<F45> 305,234
300,000 Caremark RX Inc. Senior
Notes, 7.38%, 10-01-2006 309,942
500,000 Clear Channel
Communication Senior
Notes, 3.13%, 02-01-2007 486,921
200,000 Comcast Cable
Communications, Inc.
Notes, 6.20%, 11-15-2008 211,509
300,000 Conagra Foods Inc. Notes,
6.00%, 9-15-2006 305,109
386,000 Cooper Cameron
Corporation Senior Notes,
2.65%, 04-15-2007 374,488
279,000 Devon Energy Corporation
Debentures,
10.125%, 11-15-2009 337,748
175,000 Export-Import BK
Korea Notes,
4.63%, 3-16-2010 F<F45> 176,038
300,000 Ford Motor Credit
Company Senior Notes,
4.95%, 01-15-2008 286,176
200,000 France Telecom SA Notes,
7.20%, 03-01-2006 F<F45> 204,381
General Motors Acceptance
Corporation Notes:
200,000 6.75%, 01-15-2006 201,578
200,000 6.13%, 09-15-2006 200,143
250,000 6.13%, 08-28-2007 247,429
225,000 Halliburton Company Notes,
5.63%, 12-01-2008 234,062
260,000 Harrahs Operating
Company Inc.
7.13%, 06-01-2007 272,862
310,000 The Hertz Corporation
Senior Notes,
6.50%, 05-15-2006 310,135
700,000 ICI North America
Debentures,
8.88%, 11-15-2006 739,859
International Paper
Company Notes:
500,000 7.00%, 08-15-2006 512,682
250,000 7.63%, 01-15-2007 261,598
463,000 Marathon Oil Corporation
Notes, 6.85%, 03-01-2008 491,980
200,000 MeadWestvaco Corporation
Notes, 2.75%, 12-01-2005 199,024
686,000 Telus Corporation Notes,
7.50%, 06-01-2007 F<F45> 725,720
255,000 Time Warner Cos., Inc.,
8.18%, 08-15-2007 274,321
600,000 Tyco International
Group SA,
6.38%, 02-15-2006 F<F45> 608,026
217,000 Union Pacific Corp.,
6.40%, 02-01-2006 219,696
600,000 Univision Communication Inc.
3.5%, 10-15-2007 586,827
500,000 Viacom Inc.,
5.63%, 05-01-2007 510,529
634,000 Waste Management Inc.
Notes, 7.00%, 10-15-2006 655,362
-----------
10,249,379
-----------
UTILITIES - 8.4%
300,000 Baltimore Gas & Electric,
5.25%, 12-15-2006 304,501
306,000 Bell Telephone Co.
Debentures Pennsylvania
7.38%, 7-15-2007 322,144
189,000 FPL Group Capital Inc.
Notes, 7.63%, 9-15-2006 196,733
175,000 Gulf States Utilities 1st
Mortgage Notes,
6.77%, 08-01-2005 175,389
220,000 Indiana Michigan Power
Company Senior Notes,
Series C, 6.13%, 12-15-2006 226,028
111,000 Jersey Central Power & Light
Company 1st Mortgage,
6.85%, 11-27-2006 114,824
MidAmerican Energy
Holdings Company
Senior Notes,
200,000 4.63%, 10-01-2007 200,872
575,000 7.63% 10-15-2007 614,540
360,000 Nisource Finance Corp.,
7.63%, 11-15-2005 364,722
500,000 ONEOK, Inc.,
7.75%, 08-15-2006 519,186
220,000 PanEnergy Corporation
Notes, 7.00%, 10-15-2006 226,308
475,000 Pepco Holdings, Inc. Notes,
3.75%, 02-15-2006 474,236
500,000 Progress Energy, Inc.
Senior Notes,
6.75%, 03-01-2006 508,527
300,000 PSEG Power LLC
6.88%, 04-15-2006 306,227
200,000 Public Service Electric
& Gas Co. Notes,
6.25%, 01-01-2007 206,473
402,000 Southwestern Bell
Telephone Company Notes,
6.63%, 07-15-2007 419,816
Sprint Capital
Corporation Notes:
175,000 6.00%, 01-15-2007 179,331
500,000 6.38%, 05-01-2009 532,127
-----------
5,891,984
-----------
INTERNATIONAL (U.S. $ DENOMINATED) - 0.3%
200,000 PEMEX Project Funding
Master Trust,
6.13%, 08-15-2008 207,600
-----------
MORTGAGE-BACKED SECURITIES - 5.2%
1,500,410 Bank of America
Alternative Loan Trust,
Series 2003-4, Class 2A1,
5.00%, 06-25-2018 1,516,266
Citicorp Mortgage
Securities, Inc.,
314,449 Series 2003-11, Class 2A8,
5.50%, 12-25-2033 319,022
279,037 Series 2004-4, Class A2,
5.25%, 05-25-2015 278,461
Fannie Mae
475,000 Series 2003-24, Class LC,
5.00%, 12-25-2015 481,334
250,000 Series 2002-94, Class BG,
5.00%, 4-25-2016 252,469
Federal Home Loan
Mortgage Corporation
(FHLMC)
211,584 Series 2548, Class HA,
4.5%, 1-15-2010 212,038
252,293 Series 2835, Class VK,
5.50%, 11-15-2012 257,499
277,531 Series 2789, Class VM,
5.50%, 4-15-2015 284,980
-----------
3,602,069
-----------
U.S. GOVERNMENT AGENCY ISSUE - 23.5%
Federal Home Loan
Bank (FHLB):
1,000,000 4.70%, 10-07-2010 1,000,127
Federal Home Loan
Mortgage Corporation
(FHLMC)
700,000 6.63%, 09-15-2009 770,680
Federal National
Mortgage Association
(FNMA) Notes,
11,675,000 2.38%, 02-15-2007 11,418,524
2,425,000 5.75%, 2-15-2008 2,538,742
750,000 Government Backed
Trust, Series T-1,
0.00%, 11-15-2006^<F44> 712,208
-----------
16,440,281
-----------
U.S. TREASURY OBLIGATIONS - 14.1%
U.S. Treasury Note,
4,000,000 3.38%, 02-28-2007 3,982,500
3,850,000 3.25%, 08-15-2008 3,802,025
2,075,000 3.00%, 12-31-2006 2,055,952
-----------
9,840,477
-----------
MUNICIPAL BONDS - 1.4%
300,000 Erie, Pennsylvania
General Obligation
5.64%, 11-15-007 306,207
450,000 New Jersey Economic
Development Authority,
ETM 0.00%, 02-15-2007^<F44> 422,298
231,413 Tobacco Settlement
Financial Corp.,
Series 2001-A, Class A,
6.36%, 05-15-2025 235,164
-----------
963,669
-----------
Total Long-Term
Investments
(Cost $67,157,914) 66,867,064
-----------
SHORT-TERM INVESTMENTS - 3.8%
MONEY MARKET FUNDS - 3.1%
1,531,353 Investment Company
Cash Reserve Portfolio -
AIM Fund 1,531,353
658,528 SEI Daily Income Trust
Government Fund 658,528
-----------
2,189,881
-----------
Principal
Amount
- ---------
VARIABLE RATE DEMAND NOTES#<F46> - 0.7%
$ 378,436 American Family
Demand Note, 2.47% 378,436
110,000 Wisconsin Corporate
Center Credit Union,
2.52% 110,000
-----------
488,436
-----------
Total Short-Term
Investments
(Cost $2,678,317) 2,678,317
-----------
Total Investments
(Cost $69,836,231)
99.5% 69,545,381
-----------
Other Assets less
Liabilities 0.5% 377,021
-----------
TOTAL NET
ASSETS 100.0% $69,922,402
-----------
-----------
*<F43> Unregistered security
^<F44> Non-income producing security
F<F45> Foreign security
ETM Escrowed to maturity
#<F46> 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, 2005.
See notes to the financial statements
BAIRD FUNDS, INC.
ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2005 (UNAUDITED)
EXAMPLE
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemption fees; and exchange fees; and (2)
ongoing costs, including management fees; distribution and/or service (12b-1)
fees; interest expense and other fund expenses.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in each Fund and to compare these costs with the ongoing costs of
investing in other mutual funds. The Example is based on an investment of
$1,000 invested at the beginning of the period and held for the entire period
(1/1/05 - 6/30/05).
ACTUAL EXPENSES
The fourth and fifth columns of the table below provide information about
account values based on actual returns and actual expenses. Although the Funds
do not charge any sales loads, redemption fees, or other transaction fees, you
will be assessed fees for outgoing wire transfers, returned checks and stop
payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC,
the Fund's transfer agent. If you request that a redemption be made by wire
transfer, currently the Fund's transfer agent charges a $15.00 fee. You may use
the information in these columns, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the fifth column entitled "Expenses
Paid During Period'' to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The sixth and seventh columns of the table below provide information about
hypothetical account values and hypothetical expenses based on the Funds' actual
expense ratios and an assumed rate of return of 5% per year before expenses,
which is not the Funds' actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Funds and other mutual funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other mutual funds. Please note that
the expenses shown in the table are meant to highlight your ongoing costs only
and do not reflect any transactional costs. Therefore, the seventh column of
the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different mutual funds. In
addition, if these transactional costs were included, your costs could have been
higher.
ACTUAL VS. HYPOTHETICAL RETURNS
For the Six Months Ended June 30, 2005
HYPOTHETICAL (5% RETURN
ACTUAL BEFORE EXPENSES)
-------------------------- --------------------------
FUND'S BEGINNING ENDING EXPENSES ENDING EXPENSES
ANNUALIZED ACCOUNT ACCOUNT PAID ACCOUNT PAID
EXPENSE VALUE VALUE DURING VALUE DURING
RATIO(1)<F47> 1/1/05 6/30/05 PERIOD(1)<F47> 6/30/05 PERIOD(1)<F47>
------------- --------- ------- -------------- ------- --------------
BAIRD INTERMEDIATE BOND FUND
Institutional Class 0.30% $1,000.00 $1,017.30 $1.52 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $1,016.50 $2.79 $1,022.07 $2.76
BAIRD AGGREGATE BOND FUND
Institutional Class 0.30% $1,000.00 $1,028.90 $1.53 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $1,028.00 $2.80 $1,022.07 $2.76
BAIRD INTERMEDIATE MUNICIPAL
BOND FUND
Institutional Class 0.30% $1,000.00 $1,013.50 $1.52 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $1,016.50 $2.79 $1,022.07 $2.76
BAIRD CORE PLUS BOND FUND
Institutional Class 0.30% $1,000.00 $1,028.00 $1.53 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $1,026.10 $2.80 $1,022.07 $2.76
BAIRD SHORT-TERM BOND FUND
Institutional Class 0.30% $1,000.00 $1,010.30 $1.01 $1,023.31 $1.51
(1)<F47> Expenses are equal to the Fund's annualized expense ratio multiplied
by the average account value over the period, multiplied by 181 days
and divided by 365 to reflect the one-half year period.
BAIRD FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED)
BAIRD
BAIRD BAIRD INTERMEDIATE BAIRD BAIRD
INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
------------ --------- ------------ --------- ----------
ASSETS:
Investments, at value $216,063,059 $140,197,355 $46,644,749 $32,957,336 $69,545,381
(cost $213,588,988, $137,165,668,
$45,882,508, and $32,225,770
and $69,836,231, respectively)
Cash 17,155 523,775 -- 1,182 2,094
Interest receivable 2,527,092 1,546,118 811,246 410,437 774,249
Receivable for investments sold 8,859 5,316 -- -- 218,234
Receivable for Fund shares sold 1,542,020 14,267 42,921 245,213 755,732
------------ ------------ ----------- ----------- -----------
Total assets 220,158,185 142,286,831 47,498,916 33,614,168 71,295,690
------------ ------------ ----------- ----------- -----------
LIABILITIES:
Payable for securities purchased 2,737,905 1,254,557 1,241,090 431,531 1,348,816
Payable for Fund shares purchased 253,000 142,871 1,684 -- 8,820
Payable to Advisor and Distributor 53,897 34,960 14,828 7,680 15,652
Other liabilities -- 8,495 -- 35,042 --
------------ ------------ ----------- ----------- -----------
Total liabilities 3,044,802 1,440,883 1,257,602 474,253 1,373,288
------------ ------------ ----------- ----------- -----------
NET ASSETS $217,113,383 $140,845,948 $46,241,314 $33,139,915 $69,922,402
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
NET ASSETS CONSIST OF:
Capital stock $215,871,500 $137,649,230 $45,568,024 $32,370,331 $70,233,198
Accumulated undistributed net
investment income 158,605 105,109 87,074 27,534 37,960
Accumulated net realized gain (loss)
on investments sold (1,390,793) 59,922 (176,025) 10,484 (57,906)
Net unrealized appreciation/depreciation
on investments 2,474,071 3,031,687 762,241 731,566 (290,850)
------------ ------------ ----------- ----------- -----------
NET ASSETS $217,113,383 $140,845,948 $46,241,314 $33,139,915 $69,922,402
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
INSTITUTIONAL CLASS SHARES
Net Assets $214,063,531 $139,945,318 $44,095,850 $32,748,400 $69,922,402
Shares outstanding ($0.01 par value,
unlimited shares authorized) 19,856,104 12,956,412 4,098,820 3,149,951 7,071,921
Net asset value, offering and
redemption price per share $ 10.78 $ 10.80 $ 10.76 $ 10.40 $ 9.89
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
INVESTOR CLASS SHARES
Net Assets $ 3,049,852 $ 900,630 $ 2,145,464 $ 391,515 $ --
Shares outstanding ($0.01 par value,
unlimited shares authorized) 274,980 81,743 195,998 36,783 --
Net asset value, offering and
redemption price per share $ 11.09 $ 11.02 $ 10.95 $ 10.64 $ --
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
BAIRD
BAIRD BAIRD INTERMEDIATE BAIRD BAIRD
INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
------------ --------- ------------ --------- ----------
INVESTMENT INCOME:
Interest income $4,748,557 $3,126,756 $932,758 $816,418 $809,917
---------- ---------- -------- -------- --------
Total investment income 4,748,557 3,126,756 932,758 816,418 809,917
---------- ---------- -------- -------- --------
EXPENSES:
Investment advisory fee 257,899 162,536 55,776 39,742 58,427
Administration fee 51,580 32,507 11,155 7,948 11,685
Distribution expense -
Investor Class Shares 3,692 1,145 4,082 180 --
---------- ---------- -------- -------- --------
Total expenses 313,171 196,188 71,013 47,870 70,112
---------- ---------- -------- -------- --------
NET INVESTMENT INCOME 4,435,386 2,930,568 861,745 768,548 739,805
---------- ---------- -------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (536,265) 217,585 (150,652) 41,794 (46,995)
Change in unrealized appreciation/
depreciation on investments (134,393) 613,253 (126,260) 61,541 (82,768)
---------- ---------- -------- -------- --------
Net realized and unrealized
gain (loss) on investments (670,658) 830,838 (276,912) 103,335 (129,763)
---------- ---------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,764,728 $3,761,406 $584,833 $871,883 $610,042
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD INTERMEDIATE BOND FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 4,435,386 $ 7,270,283
Net realized loss on investments (536,265) (599,286)
Change in unrealized appreciation/depreciation on investments (134,393) (282,245)
------------ ------------
Net increase in net assets resulting from operations 3,764,728 6,388,752
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 32,847,927 67,465,697
Shares issued to holders in reinvestment of dividends 4,149,035 6,659,149
Cost of shares redeemed (13,657,854) (29,883,566)
------------ ------------
Net increase in net assets resulting from
capital share transactions 23,339,108 44,241,280
------------ ------------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (4,506,860) (7,099,177)
From realized gains -- (27,024)
------------ ------------
(4,506,860) (7,126,201)
------------ ------------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (59,620) (85,930)
From realized gains -- (377)
------------ ------------
(59,620) (86,307)
------------ ------------
TOTAL INCREASE IN NET ASSETS 22,537,356 43,417,524
NET ASSETS:
Beginning of period 194,576,027 151,158,503
------------ ------------
End of period (including undistributed net investment
income of $158,605 and $223,829, respectively) $217,113,383 $194,576,027
------------ ------------
------------ ------------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD AGGREGATE BOND FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 2,930,568 $ 4,787,456
Net realized gain on investments 217,585 425,360
Change in unrealized appreciation/depreciation on investments 613,253 42,347
------------ ------------
Net increase in net assets resulting from operations 3,761,406 5,255,163
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 25,136,087 49,052,903
Shares issued to holders in reinvestment of dividends 2,748,698 4,563,691
Cost of shares redeemed (3,862,852) (29,904,273)
------------ ------------
Net increase in net assets resulting from
capital share transactions 24,021,933 23,712,321
------------ ------------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (3,009,126) (4,819,107)
From realized gains -- (311,207)
------------ ------------
(3,009,126) (5,130,314)
------------ ------------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (19,985) (13,976)
From realized gains -- (1,852)
------------ ------------
(19,985) (15,828)
------------ ------------
TOTAL INCREASE IN NET ASSETS 24,754,228 23,821,342
NET ASSETS:
Beginning of period 116,091,720 92,270,378
------------ ------------
End of period (including undistributed net investment
income (loss) of $105,109 and $134,477, respectively) $140,845,948 $116,091,720
------------ ------------
------------ ------------
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, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 861,745 $ 1,357,546
Net realized loss on investments (150,652) (24,020)
Change in unrealized appreciation/depreciation on investments (126,260) (508,690)
----------- -----------
Net increase in net assets resulting from operations 584,833 824,836
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 12,811,485 16,224,440
Shares issued to holders in reinvestment of dividends 661,887 1,121,415
Cost of shares redeemed (8,508,521) (6,337,831)
----------- -----------
Net increase in net assets resulting from
capital share transactions 4,964,851 11,008,024
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (760,734) (1,230,984)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (48,613) (91,886)
----------- -----------
TOTAL INCREASE IN NET ASSETS 4,740,337 10,509,990
NET ASSETS:
Beginning of period 41,500,977 30,990,987
----------- -----------
End of period (including undistributed net investment
income of $87,074 and $34,676, respectively) $46,241,314 $41,500,977
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD CORE PLUS BOND FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 768,548 $ 1,651,430
Net realized gain on investments 41,794 944,452
Change in unrealized appreciation/depreciation on investments 61,541 (365,553)
----------- -----------
Net increase in net assets resulting from operations 871,883 2,230,329
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,978,896 2,987,818
Shares issued to holders in reinvestment of dividends 441,958 1,182,113
Cost of shares redeemed (2,948,809) (14,342,365)
----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions 472,045 (10,172,434)
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (822,043) (1,712,108)
From realized gains -- (550,721)
----------- -----------
(822,043) (2,262,829)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (3,458) (5,608)
From realized gains -- (2,085)
----------- -----------
(3,458) (7,693)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 518,427 (10,212,627)
NET ASSETS:
Beginning of period 32,621,488 42,834,115
----------- -----------
End of period (including undistributed net investment
income of $27,534 and $44,701, respectively) $33,139,915 $32,621,488
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD SHORT-TERM BOND FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 739,805 $ 243,185
Net realized loss on investments (46,995) (8,613)
Change in unrealized appreciation/depreciation on investments (82,768) (208,082)
----------- -----------
Net increase in net assets resulting from operations 610,042 26,490
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 42,529,994 33,919,057
Shares issued to holders in reinvestment of dividends 627,010 158,249
Cost of shares redeemed (5,102,091) (1,899,021)
----------- -----------
Net increase in net assets resulting from
capital share transactions 38,054,913 32,178,285
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (715,553) (231,775)
----------- -----------
TOTAL INCREASE IN NET ASSETS 37,949,402 31,973,000
NET ASSETS:
Beginning of period 31,973,000 --
----------- -----------
End of period (including undistributed net investment
income of $37,960 and $12,668, respectively) $69,922,402 $31,973,000
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD INTERMEDIATE BOND FUND
----------------------------------------------------------------------------------------------
Institutional Institutional
Class Shares Institutional Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F48> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.83 $ 10.88 $ 10.86 $ 10.60 $ 10.55 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.23(6) 0.47(6) 0.49 0.56 0.62(6) 0.13
<F53> <F53> <F53>
Net realized and unrealized
gains (losses) on investments (0.05) (0.05) 0.14 0.27 0.08(7) 0.53
<F54>
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.18 0.42 0.63 0.83 0.70 0.66
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from net
investment income (0.23) (0.47) (0.49) (0.56) (0.62) (0.11)
Distributions from
net realized gains -- (0.00)(5) (0.12) (0.01) (0.03) (0.00)(5)
<F52> <F52>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.23) (0.47) (0.61) (0.57) (0.65) (0.11)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.78 $ 10.83 $ 10.88 $ 10.86 $ 10.60 $ 10.55
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 1.73%(2) 3.91% 5.89% 8.02% 6.68% 6.63%(2)
<F49> <F49>
Supplemental data and ratios:
Net assets, end of period $214,063,531 $191,563,699 $149,836,855 $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% 0.30% 0.30%(3)
<F50> <F50>
Ratio of net investment income
to average net assets 4.34%(3) 4.32% 4.39% 5.20% 5.71% 6.73%(3)
<F50> <F50>
Portfolio turnover rate(4)<F51> 29.1%(2) 44.8% 64.4% 41.1% 79.5% 102.5%(2)
<F49> <F49>
(1)<F48> Commencement of operations.
(2)<F49> Not annualized.
(3)<F50> Annualized.
(4)<F51> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F52> Amount is less than $0.01.
(6)<F53> Calculated using average shares outstanding during the period.
(7)<F54> 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 Investor
Class Shares Investor Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F55> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 11.13 $ 11.17 $ 11.13 $ 10.71 $ 10.56 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.22(6) 0.45(6) 0.48 0.54(6) 0.59(6) 0.13
<F60> <F60> <F60> <F60>
Net realized and unrealized
gains (losses) on investments (0.04) (0.05) 0.14 0.27 0.08(7) 0.53
<F61>
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.18 0.40 0.62 0.81 0.67 0.66
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from
net investment income (0.22) (0.44) (0.46) (0.38) (0.49) (0.10)
Distributions from
net realized gains -- (0.00)(5) (0.12) (0.01) (0.03) (0.00)(5)
<F59> <F59>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.22) (0.44) (0.58) (0.39) (0.52) (0.10)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 11.09 $ 11.13 $ 11.17 $ 11.13 $ 10.71 $ 10.56
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 1.65%(2) 3.65% 5.61% 7.74% 6.43% 6.68%(2)
<F56> <F56>
Supplemental data and ratios:
Net assets, end of period $ 3,049,852 $ 3,012,328 $ 1,321,648 $ 1,127,162 $ 1,189,191 $ 351,262
Ratio of expenses
to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3)
<F57> <F57>
Ratio of net investment income
to average net assets 4.00%(3) 4.07% 4.14% 4.95% 5.46% 6.48%(3)
<F57> <F57>
Portfolio turnover rate(4)<F58> 29.1%(2) 44.8% 64.4% 41.1% 79.5% 102.5%(2)
<F56> <F56>
(1)<F55> Commencement of operations.
(2)<F56> Not annualized.
(3)<F57> Annualized.
(4)<F58> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F59> Amount is less than $0.01.
(6)<F60> Calculated using average shares outstanding during the period.
(7)<F61> 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 Institutional
Class Shares Institutional Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F62> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.74 $ 10.71 $ 10.69 $ 10.51 $ 10.42 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.25(6) 0.49(6) 0.56 0.62 0.68 0.16
<F67> <F67>
Net realized and unrealized
gains on investments 0.06 0.07 0.20 0.23 0.17 0.42
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.31 0.56 0.76 0.85 0.85 0.58
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from
net investment income (0.25) (0.50) (0.56) (0.62) (0.67) (0.16)
Distributions from
net realized gains -- (0.03) (0.18) (0.05) (0.09) (0.00)(5)
<F66>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.25) (0.53) (0.74) (0.67) (0.76) (0.16)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.80 $ 10.74 $ 10.71 $ 10.69 $ 10.51 $ 10.42
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 2.89%(2) 5.30% 7.19% 8.30% 8.33% 5.78%(2)
<F63> <F63>
Supplemental data and ratios:
Net assets, end of period $139,945,518 $115,382,862 $ 91,550,534 $ 87,847,176 $83,392,652 $35,975,190
Ratio of expenses
to average net assets 0.27%(3) 0.30% 0.30% 0.30% 0.30% 0.30%(3)
<F64> <F64>
Ratio of net investment income
to average net assets 4.59%(3) 4.58% 4.85% 5.75% 6.33% 6.85%(3)
<F64> <F64>
Portfolio turnover rate(4)<F65> 26.5%(2) 72.6% 106.7% 51.2% 79.2% 14.7%(2)
<F63> <F63>
(1)<F62> Commencement of operations.
(2)<F63> Not annualized.
(3)<F64> Annualized.
(4)<F65> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F66> Amount is less than $0.01.
(6)<F67> Calculated using average shares outstanding throughout the period.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD AGGREGATE BOND FUND
----------------------------------------------------------------------------------------------
Investor Investor
Class Shares Investor Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F68> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.95 $ 10.88 $ 10.84 $ 10.57 $ 10.43 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.24(6) 0.48(6) 0.55 0.60(6) 0.65(6) 0.15
<F73> <F73> <F73> <F73>
Net realized and unrealized
gains on investments 0.06 0.07 0.19 0.23 0.17 0.42
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.30 0.55 0.74 0.83 0.82 0.57
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from
net investment income (0.23) (0.45) (0.52) (0.51) (0.59) (0.14)
Distributions from
net realized gains -- (0.03) (0.18) (0.05) (0.09) (0.00)(5)
<F72>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.23) (0.48) (0.70) (0.56) (0.68) (0.14)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 11.02 $ 10.95 $ 10.88 $ 10.84 $ 10.57 $ 10.43
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 2.80%(2) 5.20% 6.95% 8.08% 7.98% 5.77%(2)
<F69> <F69>
Supplemental data and ratios:
Net assets, end of period $ 900,630 $ 708,858 $ 719,844 $ 845,481 $ 166,622 $ 13,223
Ratio of expenses
to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3)
<F70> <F70>
Ratio of net investment income
to average net assets 4.34%(3) 4.33% 4.60% 5.50% 6.08% 6.60%(3)
<F70> <F70>
Portfolio turnover rate(4)<F71> 26.5%(2) 72.6% 106.7% 51.2% 79.2% 14.7%(2)
<F69> <F69>
(1)<F68> Commencement of operations.
(2)<F69> Not annualized.
(3)<F70> Annualized.
(4)<F71> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F72> Amount is less than $0.01.
(6)<F73> 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 Institutional
Class Shares Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares March 30,
Ended Year ended Year ended Year ended 2001(1)<F74> through
June 30, 2005 December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001
------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value, beginning of period $ 10.81 $ 10.91 $ 10.86 $ 10.25 $ 10.00
------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.21(5) 0.40(5) 0.42(5) 0.43(5) 0.34(5)
<F78> <F78> <F78> <F78> <F78>
Net realized and unrealized
gains (losses) on investments (0.07) (0.11) 0.10 0.64 0.17(6)
<F79>
------------ ------------ ------------ ----------- ----------
Total from investment operations 0.14 0.29 0.52 1.07 0.51
------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from net investment income (0.19) (0.39) (0.43) (0.46) (0.25)
Distributions from net realized gains -- -- (0.04) (0.00)(7) (0.01)
<F80>
------------ ------------ ------------ ----------- ----------
Total distributions (0.19) (0.39) (0.47) (0.46) (0.26)
------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.76 $ 10.81 $ 10.91 $ 10.86 $ 10.25
------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ----------- ----------
Total return 1.35%(2) 2.69% 4.91% 10.72% 5.02%(2)
<F75> <F75>
Supplemental data and ratios:
Net assets, end of period $ 44,095,850 $ 36,889,211 $ 30,234,195 $31,221,508 $14,448,572
Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30% 0.30%(3)
<F76> <F76>
Ratio of net investment income
to average net assets 3.86%(3) 3.70% 3.88% 4.11% 4.32%(3)
<F76> <F76>
Portfolio turnover rate(4)<F77> 8.0%(2) 4.2% 17.7% 32.6% 14.8%(2)
<F75> <F75>
(1)<F74> Commencement of operations.
(2)<F75> Not annualized.
(3)<F76> Annualized.
(4)<F77> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F78> Calculated using average shares outstanding during the period.
(6)<F79> 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)<F80> Amount is less than $0.01.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
-------------------------------------------------------------------------------
Investor Investor
Class Shares Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares March 30,
Ended Year ended Year ended Year ended 2001(1)<F81> through
June 30, 2005 December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001
------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value, beginning of period $ 10.99 $ 11.09 $ 11.02 $ 10.27 $ 10.00
------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.20(5) 0.38(5) 0.40(5) 0.41(5) 0.31(5)
<F85> <F85> <F85> <F85> <F85>
Net realized and unrealized
gains (losses) on investments (0.06) (0.12) 0.10 0.64 0.17(6)
<F86>
------------ ------------ ------------ ----------- ----------
Total from investment operations 0.14 0.26 0.50 1.05 0.48
------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from net investment income (0.18) (0.36) (0.39) (0.30) (0.20)
Distributions from net realized gains -- -- (0.04) (0.00)(7) (0.01)
<F87>
------------ ------------ ------------ ----------- ----------
Total distributions (0.18) (0.36) (0.43) (0.30) (0.21)
------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.95 $ 10.99 $ 11.09 $ 11.02 $ 10.27
------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ----------- ----------
Total return 1.27%(2) 2.40% 4.69% 10.46% 4.74%(2)
<F82> <F82>
Supplemental data and ratios:
Net assets, end of period $ 2,145,464 $ 4,611,766 $ 756,792 $ 706,207 $ 624,209
Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55%(3)
<F83> <F83>
Ratio of net investment income
to average net assets 3.61%(3) 3.45% 3.63% 3.86% 4.07%(3)
<F83> <F83>
Portfolio turnover rate(4)<F84> 8.0%(2) 4.2% 17.7% 32.6% 14.8%(2)
<F82> <F82>
(1)<F81> Commencement of operations.
(2)<F82> Not annualized.
(3)<F83> Annualized.
(4)<F84> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F85> Calculated using average shares outstanding during the period.
(6)<F86> 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)<F87> Amount is less than $0.01.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD CORE PLUS BOND FUND
----------------------------------------------------------------------------------------------
Institutional Institutional
Class Shares Institutional Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F88> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.38 $ 10.45 $ 10.45 $ 10.42 $ 10.45 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.26(6) 0.54 0.56 0.62 0.65 0.14
<F93>
Net realized and unrealized
gains on investments 0.03 0.10 0.36 0.07 0.05 0.45
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.29 0.64 0.92 0.69 0.70 0.59
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from
net investment income (0.27) (0.53) (0.56) (0.62) (0.66) (0.14)
Distributions from
net realized gains -- (0.18) (0.36) (0.04) (0.07) (0.00)(5)
<F92>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.27) (0.71) (0.92) (0.66) (0.73) (0.14)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.40 $ 10.38 $ 10.45 $ 10.45 $ 10.42 $ 10.45
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 2.80%(2) 6.29% 8.94% 6.90% 6.84% 5.89%(2)
<F89> <F89>
Supplemental data and ratios:
Net assets, end of period $ 32,748,400 $ 32,495,641 $ 42,709,634 $ 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% 0.30% 0.30%(3)
<F90> <F90>
Ratio of net investment income
to average net assets 5.06%(3) 4.85% 4.56% 6.03% 6.25% 6.68%(3)
<F90> <F90>
Portfolio turnover rate(4)<F91> 19.7%(2) 52.5% 103.1% 66.8% 47.0% 11.8%(2)
<F89> <F89>
(1)<F88> Commencement of operations.
(2)<F89> Not annualized.
(3)<F90> Annualized.
(4)<F91> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F92> Amount is less than $0.01.
(6)<F93> Calculated using average shares outstanding during the period.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD CORE PLUS BOND FUND
----------------------------------------------------------------------------------------------
Investor Investor
Class Shares Investor Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F94> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------- ------------- ------------- ------------- --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.62 $ 10.67 $ 10.65 $ 10.49 $ 10.45 $ 10.00
------------ ------------ ------------ ------------ ----------- ----------
Income from investment operations:
Net investment income 0.25(6) 0.53 0.53(6) 0.60(6) 0.64(6) 0.12
<F99> <F99> <F99> <F99>
Net realized and unrealized
gains on investments 0.02 0.10 0.37 0.07 0.05 0.45
------------ ------------ ------------ ------------ ----------- ----------
Total from investment operations 0.27 0.63 0.90 0.67 0.69 0.57
------------ ------------ ------------ ------------ ----------- ----------
Less distributions:
Dividends from
net investment income (0.25) (0.50) (0.52) (0.47) (0.58) (0.12)
Distributions from
net realized gains -- (0.18) (0.36) (0.04) (0.07) (0.00)(5)
<F98>
------------ ------------ ------------ ------------ ----------- ----------
Total distributions (0.25) (0.68) (0.88) (0.51) (0.65) (0.12)
------------ ------------ ------------ ------------ ----------- ----------
Net asset value, end of period $ 10.64 $ 10.62 $ 10.67 $ 10.65 $ 10.49 $ 10.45
------------ ------------ ------------ ------------ ----------- ----------
------------ ------------ ------------ ------------ ----------- ----------
Total return 2.61%(2) 6.09% 8.60% 6.58% 6.70% 5.73%(2)
<F95> <F95>
Supplemental data and ratios:
Net assets, end of period $ 391,515 $ 125,847 $ 124,481 $ 296,026 $ 258,351 $ 13,222
Ratio of expenses
to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3)
<F96> <F96>
Ratio of net investment income
to average net assets 4.81%(3) 4.60% 4.31% 5.78% 6.00% 6.43%(3)
<F96> <F96>
Portfolio turnover rate(4)<F97> 19.7%(2) 52.5% 103.1% 66.8% 47.0% 11.8%(2)
<F95> <F95>
(1)<F94> Commencement of operations.
(2)<F95> Not annualized.
(3)<F96> Annualized.
(4)<F97> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F98> Amount is less than $0.01.
(6)<F99> Calculated using average shares outstanding during the period.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD SHORT-TERM BOND FUND
--------------------------------------------
Institutional Institutional
Class Shares Class Shares
Six Months Ended August 31, 2004(1)<F1>
June 30, 2005 through
(unaudited) December 31, 2004
---------------- ----------------------
Per Share Data:
Net asset value, beginning of period $ 9.93 $ 10.00
----------- -----------
Income from investment operations:
Net investment income 0.17(5)<F5> 0.08
Net realized and unrealized
gains (losses) on investments (0.07) (0.07)
----------- -----------
Total from investment operations 0.10 0.01
----------- -----------
Less distributions:
Dividends from net investment income (0.14) (0.08)
Distributions from net realized gains -- --
----------- -----------
Total distributions (0.14) (0.08)
----------- -----------
Net asset value, end of period $ 9.89 $ 9.93
----------- -----------
----------- -----------
Total return 1.03%(2)<F2> 0.10%(2)<F2>
Supplemental data and ratios:
Net assets, end of period $69,922,402 $31,973,000
Ratio of expenses to average net assets(3)<F3> 0.30% 0.30%
Ratio of net investment income
to average net assets(3)<F3> 3.45% 2.60%
Portfolio turnover rate(4)<F4> 11.7%(2)<F2> 16.7%(2)<F2>
(1)<F1> Commencement of operations.
(2)<F2> Not annualized.
(3)<F3> Annualized.
(4)<F4> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(5)<F5> Calculated using average shares outstanding during the period.
See notes to the financial statements
BAIRD FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 (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, Baird Core
Plus Bond Fund and Baird Short-Term Bond Fund (each, a "Fund" and collectively,
the "Funds"), five of the eight portfolios comprising the Corporation and each a
diversified fund.
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 Baird Short-Term Bond Fund commenced operations
with the sale of Institutional Class Shares on August 31, 2004. 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.
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 U.S. government and
investment grade debt, non-investment grade debt, asset-backed and mortgage-
backed securities, Eurobonds, 144A securities and emerging market debt with
maturities of at least one year.
The investment objective of the Baird Short-Term 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 1-3 Year Government/Credit Bond Index. The
Lehman Brothers 1-3 Year 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 three years.
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 - Each Fund's portfolio securities and other assets
for which market quotations are readily available are valued at market
value. Common stocks that are listed on a securities exchange are valued at
the last quoted sales price. Securities traded on NASDAQ are valued at the
NASDAQ official closing price. 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. Market quotations for most debt securities are not readily
available. As a result, debt securities are stated at fair value as
provided by an independent pricing service, which uses valuation methods
such as matrix pricing and other analytical pricing models, as well as
market transactions and dealer quotations. 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. In determining fair value, the
valuation committee takes into account all relevant factors and available
information. Consequently, the price of the security used by a Fund to
calculate its NAV may differ from quoted or published prices for the same
security. Fair value pricing involves subjective judgments and it is
possible that the fair value determined for a security is materially
different from the value that could be realized upon the sale of that
security or from the values that other mutual funds may determine.
b) Unregistered Securities - Four 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, Baird Core
Plus Bond Fund and Baird Short-Term Bond Fund was $13,285,745 (6.12% of net
assets), $6,845,095 (4.86% of net assets), $2,056,234 (6.20% of net assets)
and $968,637 (1.39% of net assets), respectively, at June 30, 2005.
Restricted securities may be deemed to be liquid as determined by Robert W.
Baird & Co. Incorporated (the "Advisor") based on several factors.
c) Foreign Securities - The Funds may invest in U.S. dollar-denominated debt
obligations of foreign companies and foreign governments. 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 currency rate
fluctuations, political and economic instability and differences in
financial reporting standards and less strict regulation of securities
markets. 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. Occasionally, events that affect these values and exchange
rates may occur after the close of the exchange on which such securities
are traded. If such events materially affect the value of a Fund's
securities, these securities may be valued at their fair value pursuant to
procedures adopted by the Board of Directors.
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) Allocation of Income and Expenses - Each Fund in the series is charged for
those expenses directly attributable to the portfolio. Expenses directly
attributable to a class of shares, such as Rule 12b-1 distribution fees,
are charged to that class of shares. Income, expenses and realized and
unrealized gains and losses are allocated to the classes based on their
respective net assets. Expenses that are not directly attributable to a
Fund are allocated among the Funds in the series in proportion to their
assets.
f) Distributions to Shareholders - Dividends from net investment income are
declared and paid monthly. Distributions of net realized capital gains, if
any, are declared and paid at least annually.
g) 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.
h) 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 and
interest income is recognized on an accrual basis. Premiums and discounts
on the purchase of securities are amortized/accreted using the effective
interest method. Accounting principles generally accepted in the United
States of America require that permanent financial reporting and tax
differences be reclassified in the capital accounts.
i) Guarantees and Indemnifications - In the normal course of business, the
Funds enter into contracts with service providers that contain general
indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown and would involve future claims against the Funds
that have not yet occurred. Based on experience, the Funds would expect
the risk of loss to be remote.
3. CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund:
BAIRD INTERMEDIATE BOND FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 32,697,337 3,035,917 Shares sold $ 150,590 13,588
Shares issued through Shares issued through
reinvestment of dividends 4,099,907 382,235 reinvestment of dividends 49,128 4,453
Shares redeemed (13,506,425) (1,256,011) Shares redeemed (151,429) (13,666)
------------ ---------- ---------- -------
Net Increase $ 23,290,819 2,162,141 Net Increase $ 48,289 4,375
------------ ----------
------------ ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 17,693,963 Beginning of period 270,605
---------- -------
End of period 19,856,104 End of period 274,980
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 65,558,500 6,038,526 Shares sold $1,907,197 170,365
Shares issued through Shares issued through
reinvestment of dividends 6,589,217 608,839 reinvestment of dividends 69,932 6,291
Shares redeemed (29,612,681) (2,727,641) Shares redeemed (270,885) (24,345)
------------ ---------- ---------- -------
Net Increase $ 42,535,036 3,919,724 Net Increase $1,706,244 152,311
------------ ----------
------------ ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 13,774,239 Beginning of period 118,294
---------- -------
End of period 17,693,963 End of period 270,605
---------- -------
---------- -------
BAIRD AGGREGATE BOND FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 24,775,971 2,301,797 Shares sold $ 360,116 33,118
Shares issued through Shares issued through
reinvestment of dividends 2,733,888 255,300 reinvestment of dividends 14,810 1,356
Shares redeemed (3,670,512) (342,314) Shares redeemed (192,340) (17,452)
------------ ---------- ---------- -------
Net Increase $ 23,839,347 2,214,783 Net Increase $ 182,586 17,022
------------ ----------
------------ ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 10,741,629 Beginning of period 64,721
---------- -------
End of period 12,956,412 End of period 81,743
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 48,367,650 4,492,828 Shares sold $ 685,253 62,158
Shares issued through Shares issued through
reinvestment of dividends 4,549,171 425,224 reinvestment of dividends 14,520 1,326
Shares redeemed (29,182,312) (2,725,437) Shares redeemed (721,961) (64,948)
------------ ---------- ---------- -------
Net Increase $ 23,734,509 2,192,615 Net Decrease $ (22,188) (1,464)
------------ ----------
------------ ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 8,549,014 Beginning of period 66,185
---------- -------
End of period 10,741,629 End of period 64,721
---------- -------
---------- -------
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 11,894,135 1,107,409 Shares sold $ 917,350 83,576
Shares issued through Shares issued through
reinvestment of dividends 633,349 59,036 reinvestment of dividends 28,538 2,614
Shares redeemed (5,135,641) (481,117) Shares redeemed (3,372,880) (309,674)
------------ ---------- ----------- -------
Net Increase $ 7,391,843 685,328 Net Decrease $(2,426,992) (223,484)
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,413,492 Beginning of period 419,482
---------- -------
End of period 4,098,820 End of period 195,998
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 11,175,557 1,016,975 Shares sold $ 5,048,883 456,491
Shares issued through Shares issued through
reinvestment of dividends 1,044,261 96,858 reinvestment of dividends 77,154 7,040
Shares redeemed (5,105,189) (471,111) Shares redeemed (1,232,642) (112,263)
------------ ---------- ----------- -------
Net Increase $ 7,114,629 642,722 Net Increase $ 3,893,395 351,268
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 2,770,770 Beginning of period 68,214
---------- -------
End of period 3,413,492 End of period 419,482
---------- -------
---------- -------
BAIRD CORE PLUS BOND FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 2,705,996 260,469 Shares sold $ 272,900 25,685
Shares issued through Shares issued through
reinvestment of dividends 439,543 42,575 reinvestment of dividends 2,415 228
Shares redeemed (2,938,434) (283,805) Shares redeemed (10,375) (978)
------------ ---------- ----------- -------
Net Increase $ 207,105 19,239 Net Increase $ 264,940 24,935
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,130,712 Beginning of period 11,848
---------- -------
End of period 3,149,951 End of period 36,783
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 2,974,318 282,586 Shares sold $ 13,500 1,261
Shares issued through Shares issued through
reinvestment of dividends 1,177,007 113,096 reinvestment of dividends 5,106 480
Shares redeemed (14,326,134) (1,353,665) Shares redeemed (16,231) (1,555)
------------ ---------- ----------- -------
Net Decrease $(10,174,809) (957,983) Net Increase $ 2,375 186
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 4,088,695 Beginning of period 11,662
---------- -------
End of period 3,130,712 End of period 11,848
---------- -------
---------- -------
BAIRD SHORT-TERM BOND FUND
August 31, 2004(1)<F6>
Six Months Ended through
June 30, 2005 December 31, 2004
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INSTITUTIONAL CLASS SHARES $ Shares
------------ ---------- ---------- -------
Shares sold $ 42,529,994 4,304,043 Shares sold $33,919,057 3,395,735
Shares issued through Shares issued through
reinvestment of dividends 627,010 63,489 reinvestment of dividends 158,249 15,909
Shares redeemed (5,102,091) (516,020) Shares redeemed (1,899,021) (191,235)
------------ ---------- ----------- ---------
Net Increase $ 38,054,913 3,851,512 Net Increase $32,178,285 3,220,409
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,220,409 Beginning of period --
---------- ---------
End of period 7,071,921 End of period 3,220,409
---------- ---------
---------- ---------
(1)<F6> Commencement of operations.
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the period ended June 30, purchases and sales of investment securities
(excluding short-term investments) were as follows:
Baird
Baird Baird Intermediate Baird Baird
Intermediate Aggregate Municipal Core Plus Short-Term
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
------------ --------- ------------ --------- ----------
Purchases:
U.S. Government $28,421,365 $24,933,116 $ -- $3,137,664 $12,085,730
Other $45,705,292 $31,002,212 $9,609,588 $4,008,604 $29,761,145
Sales:
U.S. Government $43,718,411 $21,601,062 $ -- $2,341,122 $ 4,205,055
Other $14,286,739 $11,001,983 $3,421,845 $3,657,427 $ 857,920
At December 31, 2004, gross unrealized appreciation and depreciation of
investments and distributable ordinary income and long-term capital gains for
federal tax purposes were as follows:
INTERMEDIATE
INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
------------ --------- ------------ --------- ----------
Cost of Investments $195,269,862 $112,589,326 $41,732,095 $31,951,080 $31,788,368
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Gross unrealized appreciation $ 4,213,676 $ 3,005,210 $ 1,088,345 $ 1,036,941 $ 2,448
Gross unrealized depreciation (1,742,121) (717,587) (199,844) (380,105) (211,093)
------------ ------------ ----------- ----------- -----------
Net unrealized appreciation/depreciation $ 2,471,555 $ 2,287,623 $ 888,501 $ 656,836 $ (208,645)
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Undistributed ordinary income $ 223,829 $ 134,477 $ 34,676 $ 44,709 $ 12,668
Undistributed long-term capital gain -- 42,323 -- 21,657 --
------------ ------------ ----------- ----------- -----------
Total distributable earnings $ 223,829 $ 176,800 $ 34,676 $ 66,366 $ 12,668
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Other accumulated gains (losses) $ (651,749) $ -- $ (25,373) $ -- $ (9,308)
------------ ------------ ----------- ----------- -----------
Total accumulated earnings (losses) $ 2,043,635 $ 2,464,423 $ 897,804 $ 723,202 $ (205,285)
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
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 periods ended June 30, 2005 and
December 31, 2004 were:
2005 2004
-------------------------------- ---------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
------------- ------------- ------------- -------------
Baird Intermediate Bond Fund $4,566,480 $ -- $7,212,508 $ --
Baird Aggregate Bond Fund $3,029,111 $ -- $5,007,328 $138,814
Baird Intermediate Municipal Bond Fund $ -- $ -- $ 8,850 $ --
Baird Core Plus Bond Fund $ 825,501 $ -- $1,816,264 $454,258
Baird Short-Term Bond Fund $ 715,553 $ -- $ 231,775 $ --
For the periods ended June 30, 2005 and December 31, 2004, distributions of
$809,347 and $1,314,020, respectively, from the Baird Intermediate Municipal
Bond Fund were tax-exempt.
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, 2004, the Baird Intermediate Bond Fund, Baird
Intermediate Municipal Bond Fund and Baird Short-Term Bond Fund elected to defer
capital losses occurring between November 1, 2004 and December 31, 2004 in the
amount of $166,180, $18,747 and $1,158, respectively.
At December 31, 2004, the Baird Intermediate Bond Fund, Baird Intermediate
Municipal Bond Fund, and Baird Short-Term Bond Fund had accumulated net realized
capital loss carryovers of $485,569, $6,626 and $8,150, respectively, expiring
in 2012. To the extent these Funds realize future net capital gains, those
gains will be offset by any unused capital loss carryforward.
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 Investment Advisory
Agreement, 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, Baird
Core Plus Bond Fund and Baird Short-Term 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, 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, Baird Core Plus Bond Fund and Baird Short-Term
Bond Fund as applied to the respective Fund's average daily net assets.
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 1940 Act. 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 $3,692, $1,145, $4,082 and $180, respectively, in fees pursuant to the
Plan during the six months ended June 30, 2005.
PROXY VOTING
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds'
website at http://www.bairdfunds.com; and by accessing the SEC's website at
http://www.sec.gov.
Each Fund's proxy voting record, if applicable, is available without charge,
upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds'
website at http://www.bairdfunds.com; and by accessing the SEC's website at
http://www.sec.gov. The Funds generally do not vote proxies because the
securities held in their portfolios, consisting of bonds and other fixed-income
securities, are not entitled to vote.
PORTFOLIO HOLDINGS DISCLOSURE
The Funds file a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q
are available on the SEC website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Information on
the operation of the Public Reference Room may be obtained by calling
1-800-732-0330.
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
G. Frederick Kasten, Jr. (Chairman)
John W. Feldt
George C. Kaiser
Frederick P. Stratton, Jr.
INVESTMENT ADVISOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND -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
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Milwaukee, Wisconsin 53202
DISTRIBUTOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(BAIRD FUNDS LOGO)
SEMI-ANNUAL REPORT
June 30, 2005
Baird LargeCap Fund
Baird MidCap Fund
Baird SmallCap Fund
TABLE OF CONTENTS
PAGE
BAIRD LARGECAP FUND 1
BAIRD MIDCAP FUND 5
BAIRD SMALLCAP FUND 9
ADDITIONAL INFORMATION ON FUND EXPENSES 13
STATEMENTS OF ASSETS AND LIABILITIES 15
STATEMENTS OF OPERATIONS 16
STATEMENTS OF CHANGES IN NET ASSETS 17
FINANCIAL HIGHLIGHTS 20
NOTES TO THE FINANCIAL STATEMENTS 26
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
BAIRD LARGECAP FUND
A June 30, 2005 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") and the
Russell 1000 Growth Index is shown below.
TOP 10 HOLDINGS*<F7>
General Electric Company 3.6%
Sysco Corporation 3.6%
Best Buy Company, Inc. 3.5%
Medtronic, Inc. 3.4%
Teva Pharmaceutical Industries Ltd. 3.3%
Target Corporation 3.3%
Genentech, Inc. 3.2%
Exxon Mobil Corporation 3.2%
Illinois Tool Works, Inc. 3.0%
Emerson Electric Company 3.0%
NET ASSETS: $66,252,321
PORTFOLIO TURNOVER RATIO: 16.8%
NUMBER OF EQUITY HOLDINGS: 39
PORTFOLIO EXPENSE RATIO:***<F9>
INSTITUTIONAL CLASS: 0.75%
INVESTOR CLASS: 1.00%****<F10>
EQUITY SECTOR ANALYSIS**<F8>
LargeCap Fund S&P 500 Russell 1000 Growth
------------- ------- -------------------
Consumer Discretionary 18.6% 11.4% 15.4%
Consumer Staples 14.2% 10.1% 12.5%
Energy 6.3% 8.8% 3.0%
Financials 6.4% 20.3% 6.2%
Health Care 22.5% 13.4% 19.8%
Industrials 12.0% 11.2% 14.0%
Information Technology 17.8% 15.1% 26.1%
Materials 2.4% 2.9% 2.0%
Telecommunication Services 0.0% 3.2% 0.6%
Utilities 0.0% 3.5% 0.6%
*<F7> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security.
**<F8> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2005.
***<F9> The Advisor has contractually agreed to limit the Fund's total
annual fund operating expenses to 0.75% of average daily net assets
for the Institutional Class shares and 1.00% of average daily net
assets for the Investor Class shares, at least through December 31,
2005.
****<F10> Includes 0.25% 12b-1 fee.
BAIRD LARGECAP FUND
ANNUALIZED TOTAL RETURNS
For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1)<F11>
- ---------------------------------- -------- -----------------------
Baird LargeCap Fund - Institutional Class Shares 2.73% -4.21%
Baird LargeCap Fund - Investor Class Shares 2.38% -4.50%
S&P 500 Index(2)<F12> 6.32% -2.30%
Russell 1000 Growth Index(3)<F13> 1.68% -9.83%
(1)<F11> For the period September 29, 2000 (commencement of operations) to June
30, 2005.
(2)<F12> 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.
(3)<F13> The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 Index, which represents approximately
92% of the total market capitalization of the Russell 3000 Index. The
Russell 1000 Growth Index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted
growth rates. The Russell 3000 Index is comprised of the 3,000
largest U.S. domiciled publicly-traded common stocks by market
capitalization representing approximately 98% of the U.S. publicly
traded equity market. These indices do 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 LARGECAP FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 97.4%
AIR FREIGHT & LOGISTICS - 2.1%
20,457 United Parcel
Service, Inc. - Class B $ 1,414,806
-----------
BEVERAGES - 2.5%
31,100 PepsiCo, Inc. 1,677,223
BIOTECHNOLOGY - 6.1%
31,464 Amgen, Inc.*<F14> 1,902,314
26,700 Genentech, Inc.*<F14> 2,143,476
-----------
4,045,790
-----------
CHEMICALS - 2.3%
32,500 Praxair, Inc. 1,514,500
-----------
COMMERCIAL BANKS - 2.5%
26,802 Wells Fargo & Company 1,650,467
-----------
COMMUNICATIONS EQUIPMENT - 2.1%
71,400 Cisco Systems, Inc.*<F14> 1,364,454
-----------
COMPUTERS & PERIPHERALS - 3.9%
44,200 Dell, Inc.*<F14> 1,746,342
11,700 International Business
Machines Corporation 868,140
-----------
2,614,482
-----------
DIVERSIFIED FINANCIAL SERVICES - 1.6%
22,196 Citigroup, Inc. 1,026,121
-----------
ELECTRICAL EQUIPMENT - 3.0%
31,600 Emerson Electric Company 1,979,108
-----------
FOOD & STAPLES RETAILING - 8.7%
65,000 Sysco Corporation 2,352,350
34,400 Walgreen Company 1,582,056
38,250 Wal-Mart Stores, Inc. 1,843,650
-----------
5,778,056
-----------
HEALTH CARE EQUIPMENT & SUPPLIES - 6.3%
43,700 Medtronic, Inc. 2,263,223
24,800 Zimmer Holdings, Inc.*<F14> 1,889,016
-----------
4,152,239
-----------
HEALTH CARE PROVIDERS & SERVICES - 2.1%
31,800 Caremark Rx, Inc.*<F14> 1,415,736
-----------
HOTELS RESTAURANTS & LEISURE - 2.0%
26,200 Starbucks Corporation*<F14> 1,353,492
-----------
HOUSEHOLD PRODUCTS - 2.5%
31,800 Procter &
Gamble Company 1,677,450
-----------
INDUSTRIAL CONGLOMERATES - 3.6%
68,000 General Electric Company 2,356,200
-----------
INSURANCE - 2.2%
34,000 AFLAC, Incorporated 1,471,520
-----------
INTERNET & CATALOG RETAIL - 2.1%
41,200 eBay, Inc.*<F14> 1,360,012
-----------
IT SERVICES - 2.1%
32,920 Fiserv, Inc.*<F14> 1,413,914
-----------
MACHINERY - 3.0%
25,100 Illinois Tool Works, Inc. 1,999,968
-----------
MEDIA - 2.2%
33,400 The McGraw-Hill
Companies, Inc. 1,477,950
-----------
MULTILINE RETAIL - 3.3%
39,700 Target Corporation 2,160,077
-----------
OFFICE ELECTRONICS - 1.5%
23,000 Zebra Technologies
Corporation - Class A*<F14> 1,007,170
-----------
OIL & GAS - 6.1%
30,000 Apache Corporation 1,938,000
36,400 Exxon Mobil Corporation 2,091,908
-----------
4,029,908
-----------
PHARMACEUTICALS - 7.4%
37,500 Abbott Laboratories 1,837,875
13,000 Johnson & Johnson 845,000
70,500 Teva Pharmaceutical
Industries Ltd.- ADR F<F15> 2,195,370
-----------
4,878,245
-----------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.5%
46,968 Intel Corporation 1,223,986
28,000 Maxim Integrated
Products, Inc. 1,069,880
-----------
2,293,866
-----------
SOFTWARE - 4.2%
17,100 Electronic Arts, Inc.*<F14> 968,031
73,000 Microsoft Corp. 1,813,320
-----------
2,781,351
-----------
SPECIALTY RETAIL - 8.5%
33,350 Best Buy Co, Inc. 2,286,143
41,856 Home Depot, Inc. 1,628,198
80,250 Staples, Inc. 1,710,930
-----------
5,625,271
-----------
Total Common Stocks
(Cost $56,915,842) 64,519,376
-----------
SHORT TERM INVESTMENTS - 3.6%
INVESTMENT COMPANIES - 3.3%
2,177,318 SEI Daily Income
Trust Government
Fund - Class B 2,177,318
-----------
Principal
Amount
- ---------
VARIABLE RATE DEMAND NOTES#<F16> - 0.3%
$243,637 American Family Financial
Services, Inc. 2.95% 243,637
-----------
Total Short-Term
Investments
(Cost $2,420,955) 2,420,955
-----------
Total Investments
(Cost $59,336,797)
101.0% 66,940,331
-----------
Liabilities in Excess of
Other Assets (1.0)% (688,010)
-----------
TOTAL NET
ASSETS 100.0% $66,252,321
-----------
-----------
ADR - American Depository Receipt
*<F14> Non Income Producing
F<F15> Foreign security
#<F16> 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, 2005.
See notes to the financial statements
BAIRD MIDCAP FUND
A June 30, 2005 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")
and the Russell Midcap Growth Index is shown below.
TOP 10 HOLDINGS*<F17>
Microchip Technology Incorporated 3.4%
ResMed, Inc. 3.3%
Wintrust Financial Corporation 3.2%
Pentair, Inc. 3.2%
Pharmaceutical Product Development, Inc. 3.1%
CDW Corporation 3.1%
Cooper Cameron Corporation 3.0%
Medicis Pharmaceutical
Corporation - Class A 2.8%
Zebra Technologies Corporation - Class A 2.8%
Applebees International, Inc. 2.8%
NET ASSETS: $103,933,092
PORTFOLIO TURNOVER RATIO: 34.7%
NUMBER OF EQUITY HOLDINGS: 41
PORTFOLIO EXPENSE RATIO:***<F19>
INSTITUTIONAL CLASS: 0.85%
INVESTOR CLASS: 1.10%****<F20>
EQUITY SECTOR ANALYSIS**<F18>
MidCap Fund S&P 400 Russell Midcap Growth
----------- ------- ---------------------
Consumer Discretionary 22.6% 19.6% 25.0%
Consumer Staples 2.6% 4.6% 2.7%
Energy 7.0% 8.6% 8.5%
Financials 15.2% 17.7% 8.7%
Health Care 18.1% 12.0% 16.8%
Industrials 15.2% 11.3% 12.3%
Information Technology 19.3% 13.9% 21.1%
Materials 0.0% 4.2% 2.5%
Telecommunication Services 0.0% 0.5% 1.5%
Utilities 0.0% 7.6% 1.0%
*<F17> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security.
**<F18> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2005.
***<F19> The Advisor has contractually agreed to limit the Fund's total
annual fund operating expenses to 0.85% of average daily net assets
for the Institutional Class shares and 1.10% of average daily net
assets for the Investor Class shares, at least through December 31,
2005.
****<F20> Includes 0.25% 12b-1 fee.
BAIRD MIDCAP FUND
ANNUALIZED TOTAL RETURNS
For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1)<F21>
- ---------------------------------- -------- -----------------------
Baird MidCap Fund - Institutional Class Shares 2.78% 1.45%
Baird MidCap Fund - Investor Class Shares 2.61% 1.24%
S&P MidCap 400 Index(2)<F22> 14.03% 7.21%
Russell Midcap Growth Index(3)<F23> 10.86% -1.22%
(1)<F21> For the period December 29, 2000 (commencement of operations) to June
30, 2005.
(2)<F22> 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.
(3)<F23> The Russell Midcap Index consists of the 800 smallest companies in the
Russell 1000 Index, which represent approximately 24% of the total
market capitalization of the Russell 1000 Index. The Russell Midcap
Growth Index measures the performance of those companies in the
Russell Midcap Index with higher price-to-book ratios and higher
forecasted growth rates. These indices do 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, 2005 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 94.6%
AIR FREIGHT & LOGISTICS - 2.3%
40,495 C.H. Robinson
Worldwide, Inc. $ 2,356,809
------------
AUTO COMPONENTS - 2.4%
57,055 Autoliv, Inc. 2,499,009
------------
CAPITAL MARKETS - 4.1%
82,728 Eaton Vance Corporation 1,978,027
21,645 Legg Mason, Inc. 2,253,461
------------
4,231,488
------------
COMMERCIAL BANKS - 10.3%
99,832 Amegy
Bancorporation, Inc. 2,234,240
74,485 East West Bancorp, Inc. 2,501,951
101,669 TCF Financial
Corporation 2,631,194
64,094 Wintrust Financial
Corporation 3,355,321
------------
10,722,706
------------
COMMERCIAL SERVICES & SUPPLIES - 1.7%
34,641 Stericycle, Inc.*<F24> 1,743,135
------------
ELECTRICAL EQUIPMENT - 4.9%
51,561 Rockwell
Automation, Inc. 2,511,536
35,672 Roper Industries, Inc. 2,545,911
------------
5,057,447
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.8%
56,582 CDW Corporation 3,230,266
184,557 Symbol Technologies, Inc. 1,821,578
------------
5,051,844
------------
ENERGY EQUIPMENT & SERVICES - 5.5%
50,665 Cooper Cameron
Corporation*<F24> 3,143,763
41,417 Smith International, Inc. 2,638,263
------------
5,782,026
------------
FOOD & STAPLES RETAILING - 2.5%
84,740 United Natural
Foods, Inc.*<F24> 2,573,554
------------
HEALTH CARE EQUIPMENT & SUPPLIES - 9.3%
127,012 Cytyc Corporation*<F24> 2,801,885
42,621 Gen-Probe, Incorporated*<F24> 1,544,159
52,304 ResMed, Inc.*<F24> 3,451,541
50,593 Varian Medical
Systems, Inc.*<F24> 1,888,636
------------
9,686,221
------------
HEALTH CARE PROVIDERS & SERVICES - 5.0%
42,615 Patterson
Companies, Inc.*<F24> 1,921,084
69,095 Pharmaceutical Product
Development, Inc.*<F24> 3,237,792
------------
5,158,876
------------
HOTELS RESTAURANTS & LEISURE - 6.8%
107,693 Applebees
International, Inc. 2,852,787
57,430 The Cheesecake Factory
Incorporated*<F24> 1,994,544
37,114 PF Chang's China
Bistro, Inc.*<F24> 2,188,984
------------
7,036,315
------------
HOUSEHOLD DURABLES - 1.7%
22,115 Harman International
Industries, Incorporated 1,799,276
------------
IT SERVICES - 5.8%
69,990 Alliance Data Systems
Corporation*<F24> 2,838,794
21,933 Global Payments, Inc. 1,487,058
55,242 Iron Mountain,
Incorporated*<F24> 1,713,607
------------
6,039,459
------------
MACHINERY - 3.2%
76,915 Pentair, Inc. 3,292,731
------------
MEDIA - 1.8%
37,429 Pixar*<F24> 1,873,322
------------
OFFICE ELECTRONICS - 2.8%
65,963 Zebra Technologies
Corporation - Class A*<F24> 2,888,520
------------
OIL & GAS - 1.0%
31,194 XTO Energy, Inc. 1,060,284
------------
PHARMACEUTICALS - 2.8%
91,484 Medicis Pharmaceutical
Corporation - Class A 2,902,787
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.4%
119,600 Microchip Technology
Incorporated 3,542,552
------------
SOFTWARE - 1.4%
90,975 Activision, Inc.*<F24> 1,502,907
------------
SPECIALTY RETAIL - 8.7%
58,053 Dick's Sporting
Goods, Inc.*<F24> 2,240,265
61,355 PETCO Animal
Supplies, Inc.*<F24> 1,798,929
49,190 Tractor Supply Company*<F24> 2,415,229
64,635 Williams-Sonoma, Inc.*<F24> 2,557,607
------------
9,012,030
------------
TRADING COMPANIES & DISTRIBUTORS - 2.4%
41,217 Fastenal Company 2,524,953
------------
Total Common Stocks
(Cost $89,635,104) 98,338,251
------------
SHORT TERM INVESTMENTS - 5.3%
INVESTMENT COMPANIES - 4.5%
4,668,302 SEI Daily Income
Trust Government
Fund - Class B 4,668,302
------------
Principal
Amount
- ---------
VARIABLE RATE DEMAND NOTES#<F25> - 0.8%
$606,944 American Family
Financial Services,
Inc., 2.95% 606,944
186,907 Wisconsin Corporate
Central Credit
Union, 3.00% 186,907
------------
793,851
------------
Total Short-Term
Investments
(Cost $5,462,153) 5,462,153
------------
Total Investments
(Cost $95,097,257)
99.9% 103,800,404
------------
Other Assets in Excess
of Liabilities 0.1% 132,688
------------
TOTAL NET
ASSETS 100.0% $103,933,092
------------
------------
*<F24> Non Income Producing
#<F25> 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, 2005.
See notes to the financial statements
BAIRD SMALLCAP FUND
A June 30, 2005 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Standard & Poor's Small Cap 600 Index (the "S&P 600 Index") and
the Russell 2000 Growth Index is shown below.
TOP 10 HOLDINGS*<F26>
Amegy Bancorporation, Inc. 3.2%
Gulfmark Offshore, Inc. 3.2%
United Surgical Partners International, Inc. 3.1%
Insight Enterprises, Inc. 3.1%
Wintrust Financial Corporation 3.1%
Providence Service Corporation 3.1%
United Natural Foods, Inc. 3.0%
SRA International Inc. - Class A 2.9%
Fred's, Inc. 2.9%
AC Moore Arts & Crafts, Inc. 2.8%
NET ASSETS: $28,174,404
PORTFOLIO TURNOVER RATIO: 29.1%
NUMBER OF EQUITY HOLDINGS: 41
PORTFOLIO EXPENSE RATIO:***<F28>
INSTITUTIONAL CLASS: 0.95%
INVESTOR CLASS: 1.20%****<F29>
EQUITY SECTOR ANALYSIS**<F27>
SmallCap Fund S&P 600 Russell 2000 Growth
------------- ------- -------------------
Consumer Discretionary 21.7% 18.0% 16.5%
Consumer Staples 3.0% 3.8% 2.5%
Energy 6.0% 7.2% 5.8%
Financials 10.9% 15.3% 10.4%
Health Care 20.7% 13.0% 21.0%
Industrials 15.7% 17.6% 14.4%
Information Technology 22.0% 14.8% 24.8%
Materials 0.0% 5.4% 3.5%
Telecommunication Services 0.0% 0.3% 0.8%
Utilities 0.0% 4.6% 0.3%
*<F26> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security.
**<F27> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2005.
***<F28> The Advisor has contractually agreed to limit the Fund's total
annual fund operating expenses to 0.95% of average daily net assets
for the Institutional Class shares and 1.20% of average daily net
assets for the Investor Class shares, at least through December 31,
2005.
****<F29> Includes 0.25% 12b-1 fee.
BAIRD SMALLCAP FUND
ANNUALIZED TOTAL RETURNS
ONE YEAR AND
For the Period Ended June 30, 2005 SINCE INCEPTION(1)<F30>
- ---------------------------------- -----------------------
Baird SmallCap Fund - Institutional Class Shares 8.10%
Baird SmallCap Fund - Investor Class Shares 7.80%
S&P Small Cap 600 Index(2)<F31> 13.45%
Russell 2000 Growth Index(3)<F32> 4.29%
(1)<F30> For the period June 30, 2004 (commencement of operations) through June
30, 2005.
(2)<F31> The Standard & Poor's Small Cap 600 Index is an unmanaged, market-
value weighted index of 600 small-capitalization common stocks chosen
by Standard & Poor's on the basis of market size, liquidity and
industry characteristics. The Index does not reflect any deduction
for fees, expenses or taxes. A direct investment in an index is not
possible.
(3)<F32> The Russell 2000 Index consists of the 2,000 smallest U.S. domiciled
publicly-traded common stocks that are included in the Russell 3000
Index. These common stocks represent approximately 8% of the U.S.
Equity market. The Russell 2000 Growth Index measures the performance
of those Russell 2000 companies with higher price-to-book and higher
forecasted growth rates. These indices do 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 SMALLCAP FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 96.7%
AIRLINES - 2.1%
31,973 SkyWest, Inc. $ 581,269
-----------
COMMERCIAL BANKS - 10.6%
40,507 Amegy
Bancorporation, Inc. 906,547
28,458 Boston Private Financial
Holdings, Inc. 717,141
14,683 East West Bancorp, Inc. 493,202
16,432 Wintrust Financial
Corporation 860,215
-----------
2,977,105
-----------
COMMERCIAL SERVICES & SUPPLIES - 6.7%
24,084 Brady Corporation -
Class A 746,604
13,357 G & K Services, Inc. 503,960
31,971 Marlin Business
Services, Inc.*<F33> 642,617
-----------
1,893,181
-----------
COMMUNICATIONS EQUIPMENT - 2.5%
116,075 Westell Technologies,
Inc. - Class A*<F33> 694,129
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.9%
45,777 Plexus Corporation*<F33> 651,407
17,289 ScanSource, Inc.*<F33> 742,389
-----------
1,393,796
-----------
ENERGY EQUIPMENT & SERVICES - 5.8%
32,849 GulfMark Offshore, Inc.*<F33> 897,106
19,036 Oceaneering
International, Inc.*<F33> 735,742
-----------
1,632,848
-----------
FOOD & STAPLES RETAILING - 2.9%
27,149 United Natural Foods, Inc.*<F33> 824,515
-----------
HEALTH CARE EQUIPMENT & SUPPLIES - 4.6%
25,612 Molecular Devices
Corporation*<F33> 553,987
27,364 Wright Medical
Group, Inc.*<F33> 730,619
-----------
1,284,606
-----------
HEALTH CARE PROVIDERS & SERVICES - 11.2%
18,601 Computer Programs
& Systems, Inc. 693,259
36,135 PAREXEL International
Corporation*<F33> 717,280
34,596 Providence Service
Corporation*<F33> 859,018
16,872 United Surgical Partners
International, Inc.*<F33> 878,694
-----------
3,148,251
-----------
HOTELS RESTAURANTS & LEISURE - 6.5%
17,945 Buffalo Wild Wings, Inc.*<F33> 559,884
12,710 PF Chang's China
Bistro, Inc.*<F33> 749,636
8,327 Red Robin Gourmet
Burgers Inc.*<F33> 516,107
-----------
1,825,627
-----------
INTERNET & CATALOG RETAIL - 3.1%
42,925 Insight Enterprises, Inc.*<F33> 866,227
-----------
IT SERVICES - 6.9%
39,865 Covansys Corporation*<F33> 512,265
30,659 Open Solutions Inc.*<F33> 622,685
23,642 SRA International,
Inc. - Class A*<F33> 820,850
-----------
1,955,800
-----------
MACHINERY - 3.8%
13,581 Bucyrus International,
Inc. - Class A 515,806
16,574 Nordson Corporation 568,157
-----------
1,083,963
-----------
MULTILINE RETAIL - 2.9%
49,275 Fred's, Inc. 816,980
-----------
PHARMACEUTICALS - 4.3%
37,672 Noven
Pharmaceuticals, Inc.*<F33> 658,507
31,099 Salix
Pharmaceuticals, Ltd.*<F33> 549,208
-----------
1,207,715
-----------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.3%
14,024 Varian Semiconductor
Equipment Associates, Inc.*<F33> 518,888
30,659 Zoran Corporation*<F33> 407,458
-----------
926,346
-----------
SOFTWARE - 3.6%
15,229 Kronos Incorporated*<F33> 615,099
14,024 THQ Inc.*<F33> 410,483
-----------
1,025,582
-----------
SPECIALTY RETAIL - 8.5%
24,522 AC Moore Arts
& Crafts, Inc.*<F33> 775,140
36,795 Gander Mountain
Company*<F33> 419,463
14,705 Hibbett Sporting
Goods, Inc.*<F33> 556,437
12,928 Tractor Supply Company*<F33> 634,765
-----------
2,385,805
-----------
TRADING COMPANIES & DISTRIBUTORS - 2.5%
16,652 Watsco, Inc. 709,375
-----------
Total Common Stocks
(Cost $24,945,203) 27,233,120
-----------
SHORT TERM INVESTMENTS - 2.4%
MONEY MARKET FUNDS - 2.0%
561,509 SEI Daily Income
Trust Government
Fund - Class B 561,509
-----------
Principal
Amount
- ---------
VARIABLE RATE DEMAND NOTES#<F34> - 0.4%
$70,000 American Family Financial
Services, Inc., 2.95% 70,000
60,000 Wisconsin Corporate
Central Credit
Union, 3.00% 60,000
-----------
130,000
-----------
Total Short Term
Investments
(Cost $691,509) 691,509
-----------
Total Investments
(Cost $25,636,712)
99.1% 27,924,629
-----------
Other Assets in Excess
of Liabilities 0.9% 249,775
-----------
TOTAL NET
ASSETS 100.0% $28,174,404
-----------
-----------
*<F33> Non Income Producing
#<F34> 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, 2005.
See notes to the financial statements
BAIRD FUNDS, INC.
ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2005 (UNAUDITED)
EXAMPLE
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemption fees; and exchange fees; and (2)
ongoing costs, including management fees; distribution and/or service (12b-1)
fees; interest expense and other fund expenses.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in each Fund and to compare these costs with the ongoing costs of
investing in other mutual funds. The Example is based on an investment of
$1,000 invested at the beginning of the period and held for the entire period
(1/1/05 - 6/30/05).
ACTUAL EXPENSES
The fourth and fifth columns of the table below provide information about
account values based on actual returns and actual expenses. Although the Funds
do not charge any sales loads, redemption fees, or other transaction fees, you
will be assessed fees for outgoing wire transfers, returned checks and stop
payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC,
the Fund's transfer agent. If you request that a redemption be made by wire
transfer, currently the Fund's transfer agent charges a $15.00 fee. You may use
the information in these columns, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the fifth column entitled "Expenses
Paid During Period'' to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The sixth and seventh columns of the table below provide information about
hypothetical account values and hypothetical expenses based on the Funds' actual
expense ratios and an assumed rate of return of 5% per year before expenses,
which is not the Funds' actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Funds and other mutual funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other mutual funds. Please note that
the expenses shown in the table are meant to highlight your ongoing costs only
and do not reflect any transactional costs. Therefore, the seventh column of
the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different mutual funds. In
addition, if these transactional costs were included, your costs could have been
higher.
ACTUAL VS. HYPOTHETICAL RETURNS
For the Six Months Ended June 30, 2005
HYPOTHETICAL (5% RETURN
ACTUAL BEFORE EXPENSES)
------------------------- --------------------------
FUND'S BEGINNING ENDING EXPENSES ENDING EXPENSES
ANNUALIZED ACCOUNT ACCOUNT PAID ACCOUNT PAID
EXPENSE VALUE VALUE DURING VALUE DURING
RATIO(1)<F35> 1/1/05 6/30/05 PERIOD(1)<F35> 6/30/05 PERIOD(1)<F35>
------------- --------- ------- -------------- ------- --------------
BAIRD LARGECAP FUND
Institutional Class 0.75% $1,000.00 $988.90 $3.70 $1,021.08 $3.76
Investor Class 1.00% $1,000.00 $986.40 $4.93 $1,019.84 $5.01
BAIRD MIDCAP FUND
Institutional Class 0.85% $1,000.00 $976.20 $4.16 $1,020.58 $4.26
Investor Class 1.10% $1,000.00 $975.00 $5.39 $1,019.34 $5.51
BAIRD SMALLCAP FUND
Institutional Class 0.95% $1,000.00 $997.20 $4.70 $1,020.08 $4.76
Investor Class 1.20% $1,000.00 $995.40 $5.94 $1,018.84 $6.01
(1)<F35> Expenses are equal to the Fund's annualized expense ratio multiplied
by the average account value over the period, multiplied by 181 days
and divided by 365 to reflect the one-half year period.
BAIRD FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED)
BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP
FUND FUND FUND
-------------- ------------ --------------
ASSETS:
Investments, at value (cost $59,336,797; $66,940,331 $103,800,403 $27,924,629
$95,097,257; and $25,636,712, respectively)
Dividends receivable 39,613 20,880 959
Interest receivable 5,585 7,317 2,191
Receivable for fund shares sold -- 139,941 263,299
Other assets 34,289 48,772 27,414
----------- ------------ -----------
Total assets 67,019,818 104,017,313 28,218,492
----------- ------------ -----------
LIABILITIES:
Payable to Advisor and Distributor 29,915 48,263 18,315
Payable for securities purchased 638,632 -- --
Payable for Fund shares purchased 65,205 -- --
Accrued expenses and other liabilities 33,745 35,958 25,773
----------- ------------ -----------
Total liabilities 767,497 84,221 44,088
----------- ------------ -----------
NET ASSETS $66,252,321 $103,933,092 $28,174,404
----------- ------------ -----------
----------- ------------ -----------
NET ASSETS CONSIST OF:
Capital stock $68,800,912 $ 94,726,413 $26,352,548
Accumulated undistributed net investment income 176,667 -- --
Accumulated net realized gain (loss) on investments sold (10,328,792) 503,533 (466,061)
Net unrealized appreciation on investments 7,603,534 8,703,146 2,287,917
----------- ------------ -----------
NET ASSETS $66,252,321 $103,933,092 $28,174,404
----------- ------------ -----------
----------- ------------ -----------
INSTITUTIONAL CLASS SHARES
Net Assets $63,774,217 $ 99,655,073 $27,945,017
Shares outstanding
($0.01 par value, unlimited shares authorized) 7,933,111 9,355,523 2,585,408
Net asset value, offering and redemption price per share $ 8.04 $ 10.65 $ 10.81
----------- ------------ -----------
----------- ------------ -----------
INVESTOR CLASS SHARES
Net Assets $ 2,478,104 $ 4,278,019 $ 229,387
Shares outstanding
($0.01 par value, unlimited shares authorized) 310,353 405,544 21,273
Net asset value, offering and redemption price per share $ 7.98 $ 10.55 $ 10.78
----------- ------------ -----------
----------- ------------ -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP
FUND FUND FUND
-------------- ------------ --------------
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld
of $1,762, $0, $0, respectively) $ 389,553 $ 270,023 $ 30,665
Interest 34,649 28,781 7,983
----------- ----------- --------
Total investment income 424,202 298,804 38,648
----------- ----------- --------
EXPENSES:
Investment advisory fees 212,670 357,830 83,202
Administration fees 19,982 29,725 5,200
Shareholder servicing fees 13,114 14,968 9,831
Fund accounting fees 15,293 14,756 14,143
Professional fees 14,362 15,973 9,086
Federal and state registration 9,602 10,618 7,236
Directors fees 3,311 4,427 724
Custody fees 1,776 3,663 2,982
Reports to shareholders 1,878 1,710 690
Distribution fees - Investor Class Shares 2,934 5,129 209
Miscellaneous 2,093 2,666 454
----------- ----------- --------
297,015 461,465 133,757
Expense reimbursement by Advisor (48,693) (50,795) (40,558)
----------- ----------- --------
Total expenses 248,322 410,670 93,199
----------- ----------- --------
NET INVESTMENT INCOME (LOSS) 175,880 (111,866) (54,551)
----------- ----------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments (1,669,009) 591,902 (262,973)
Change in unrealized appreciation/depreciation
on investments 717,634 (2,777,114) 694,351
----------- ----------- --------
Net realized and unrealized gain (loss) on investments (951,375) (2,185,212) 431,378
----------- ----------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (775,495) $(2,297,078) $376,827
----------- ----------- --------
----------- ----------- --------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD LARGECAP FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment income $ 175,880 $ 443,344
Net realized loss on investments (1,669,009) (696,191)
Change in unrealized appreciation/depreciation
on investments 717,634 3,517,047
----------- -----------
Net increase (decrease) in net assets resulting from operations (775,495) 3,264,200
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,479,662 6,437,380
Shares issued to holders in reinvestment of dividends -- 439,027
Cost of shares redeemed (3,106,039) (3,421,800)
----------- -----------
Net increase in net assets resulting from
capital share transactions 373,623 3,454,607
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income -- (431,568)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income -- (10,989)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (401,872) 6,276,250
NET ASSETS:
Beginning of period 66,654,193 60,377,943
----------- -----------
End of period (including undistributed net investment income
of $176,667 and $787, respectively) $66,252,321 $66,654,193
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD MIDCAP FUND
------------------------------------
Six Months Ended
June 30, 2005 Year Ended
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment loss $ (111,866) $ (258,644)
Net realized gain on investments 591,902 1,764,507
Change in unrealized appreciation/depreciation
on investments (2,777,114) 6,685,264
------------ -----------
Net increase (decrease) in net assets resulting from operations (2,297,078) 8,191,127
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 19,780,714 56,415,797
Shares issued to holders in reinvestment of dividends -- 149,585
Cost of shares redeemed (3,972,270) (3,773,365)
------------ -----------
Net increase in net assets resulting from
capital share transactions 15,808,444 52,792,017
------------ -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net realized gains -- (143,452)
------------ -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net realized gains -- (6,831)
------------ -----------
TOTAL INCREASE IN NET ASSETS 13,511,366 60,832,861
NET ASSETS:
Beginning of period 90,421,726 29,588,865
------------ -----------
End of period $103,933,092 $90,421,726
------------ -----------
------------ -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD SMALLCAP FUND
---------------------------------------
Six Months Ended June 30, 2004(1)<F36>
June 30, 2005 through
(unaudited) December 31, 2004
---------------- -----------------
OPERATIONS:
Net investment loss $ (54,551) $ (50,298)
Net realized loss on investments (262,973) (203,088)
Change in unrealized appreciation/depreciation
on investments 694,351 1,593,566
----------- -----------
Net increase in net assets resulting from operations 376,827 1,340,180
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 12,221,611 17,042,209
Cost of shares redeemed (1,823,480) (982,943)
----------- -----------
Net increase in net assets resulting from
capital share transactions 10,398,131 16,059,266
----------- -----------
TOTAL INCREASE IN NET ASSETS 10,774,958 17,399,446
NET ASSETS:
Beginning of period 17,399,446 --
----------- -----------
End of period $28,174,404 $17,399,446
----------- -----------
----------- -----------
(1)<F36> Commencement of operations.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD LARGECAP FUND
---------------------------------------------------------------------------------------------
Institutional Institutional
Class Shares Institutional Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F37> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------ ------------ ------------ ------------ --------------------
Per Share Data:
Net asset value,
beginning of period $ 8.13 $ 7.78 $ 6.41 $ 8.63 $ 9.58 $ 10.00
----------- ----------- ----------- ----------- ----------- ----------
Income from investment operations:
Net investment income 0.02(2) 0.06(2) 0.02 0.02 0.01 0.00(3)
<F38> <F38> <F39>
Net realized and unrealized
gains (losses) on investments (0.11) 0.35 1.37 (2.22) (0.95) (0.42)
----------- ----------- ----------- ----------- ----------- ----------
Total from investment operations (0.09) 0.41 1.39 (2.20) (0.94) (0.42)
----------- ----------- ----------- ----------- ----------- ----------
Less distributions:
Dividends from
net investment income -- (0.06) (0.02) (0.02) (0.01) (0.00)(3)
<F39>
Distributions from
net realized gains -- -- -- -- -- (0.00)(3)
<F39>
----------- ----------- ----------- ----------- ----------- ----------
Total distributions -- (0.06) (0.02) (0.02) (0.01) (0.00)
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $ 8.04 $ 8.13 $ 7.78 $ 6.41 $ 8.63 $ 9.58
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Total return (1.11%)(4) 5.21% 21.75% (25.53%) (9.84%) (4.15%)(4)
<F40> <F40>
Supplemental data and ratios:
Net assets, end of period $63,774,217 $64,754,140 $59,743,783 $48,900,767 $51,446,666 $9,623,337
Ratio of expenses
to average net assets(6)<F42> 0.75%(5) 0.75% 0.75% 0.75% 0.75% 0.85%(5)
<F41> <F41>
Ratio of net investment income
to average net assets(6)<F42> 0.55%(5) 0.72% 0.34% 0.23% 0.12% 0.13%(5)
<F41> <F41>
Portfolio turnover rate(7)<F43> 16.8%(4) 23.2% 24.8% 16.2% 9.0% 4.4%(4)
<F40> <F40>
(1)<F37> Commencement of operations.
(2)<F38> Calculated using average shares outstanding during the period.
(3)<F39> Amount is less than $0.01.
(4)<F40> Not annualized.
(5)<F41> Annualized.
(6)<F42> Without fees reimbursed, ratios of net expenses to average net assets
for the periods ended June 30, 2005, December 31, 2004, December 31,
2003, December 31, 2002, December 31, 2001 and December 31, 2000 would
have been 0.90%, 0.93%, 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 0.40%, 0.54%, 0.14%, 0.03%, (0.19%) and (1.97%),
respectively.
(7)<F43> 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 Investor
Class Shares Investor Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares September 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F44> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------ ------------ ------------ ------------ --------------------
Per Share Data:
Net asset value,
beginning of period $ 8.09 $ 7.75 $ 6.40 $ 8.61 $ 9.57 $ 10.00
----------- ----------- ----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (loss) 0.01(2) 0.04(2) 0.01 (0.00)(3) (0.01) (0.00)(3)
<F45> <F45> <F46> <F46>
Net realized and unrealized
gains (losses) on investments (0.12) 0.35 1.35 (2.21) (0.95) (0.43)
----------- ----------- ----------- ----------- ----------- ----------
Total from investment operations (0.11) 0.39 1.36 (2.21) (0.96) (0.43)
----------- ----------- ----------- ----------- ----------- ----------
Less distributions:
Dividends from
net investment income -- (0.05) (0.01) (0.00)(3) -- --
<F46>
Distributions from
net realized gains -- -- -- -- -- (0.00)(3)
<F46>
----------- ----------- ----------- ----------- ----------- ----------
Total distributions -- (0.05) (0.01) (0.00) -- (0.00)
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $ 7.98 $ 8.09 $ 7.75 $ 6.40 $ 8.61 $ 9.57
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Total return (1.36%)(4) 5.00% 21.20% (25.65%) (10.03%) (4.28%)(4)
<F47> <F47>
Supplemental data and ratios:
Net assets, end of period $ 2,478,104 $ 1,900,053 $ 634,160 $ 647,018 $ 615,533 $ 42,288
Ratio of expenses
to average net assets(6)<F49> 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.10%(5)
<F48> <F48>
Ratio of net investment income (loss)
to average net assets(6)<F49> 0.30%(5) 0.47% 0.09% (0.02%) (0.13%) (0.12%)(5)
<F48> <F48>
Portfolio turnover rate(7)<F50> 16.8%(4) 23.2% 24.8% 16.2% 9.0% 4.4%(4)
<F47> <F47>
(1)<F44> Commencement of operations.
(2)<F45> Calculated using average shares outstanding during the period.
(3)<F46> Amount is less than $0.01.
(4)<F47> Not annualized.
(5)<F48> Annualized.
(6)<F49> Without fees reimbursed, ratios of net expenses to average net assets
for the periods ended June 30, 2005, December 31, 2004, December 31,
2003, December 31, 2002, December 31, 2001 and December 31, 2000 would
have been 1.15%, 1.18%, 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 0.15%, 0.29%, (0.11%), (0.22%), (0.44%) and (2.22%),
respectively.
(7)<F50> 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 Institutional
Class Shares Institutional Institutional Institutional Institutional Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares December 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F51> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------ ------------ ------------ ------------ --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.91 $ 9.72 $ 7.66 $ 9.11 $ 9.70 $ 10.00
----------- ----------- ----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (0.01)(2) (0.04)(2) (0.07) (0.07)(2) (0.06)(2) (0.00)(3)
<F52> <F52> <F52> <F52> <F53>
Net realized and unrealized
gains (losses) on investments (0.25) 1.25 2.13 (1.38) (0.53) (0.30)
----------- ----------- ----------- ----------- ----------- ----------
Total from investment operations (0.26) 1.21 2.06 (1.45) (0.59) (0.30)
----------- ----------- ----------- ----------- ----------- ----------
Less distributions:
Distributions from
net realized gains -- (0.02) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $ 10.65 $ 10.91 $ 9.72 $ 7.66 $ 9.11 $ 9.70
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Total return (2.38%)(4) 12.44% 26.89% (15.92%) (6.08%) (3.00%)(4)
<F54> <F54>
Supplemental data and ratios:
Net assets, end of period $99,655,073 $86,476,869 $28,629,656 $ 20,864,264 $13,049,574 $7,853,228
Ratio of expenses
to average net assets(6)<F56> 0.85%(5) 0.85% 1.20% 1.25% 1.25% 1.25%(5)
<F55> <F55>
Ratio of net investment loss
to average net assets(6)<F56> (0.22%)(5) (0.43%) (0.81%) (0.84%) (0.67%) (1.25%)(5)
<F55> <F55>
Portfolio turnover rate(7)<F57> 34.7%(4) 77.9% 81.8% 55.4% 73.6% 0.0%
<F54>
(1)<F51> Commencement of operations.
(2)<F52> Calculated using average shares outstanding during the period.
(3)<F53> Amount is less than $0.01.
(4)<F54> Not annualized.
(5)<F55> Annualized.
(6)<F56> Without fees reimbursed, ratios of net expenses to average net assets
for the periods ended June 30, 2005, December 31 2004, December 31,
2003, December 31, 2002, December 31, 2001 and December 31, 2000 would
have been 0.96%, 1.05%, 1.20%, 1.39%, 2.06% and 2.78%, respectively;
and the ratios of net investment loss to average net assets would have
been (0.33%), (0.63%), (0.81%), (0.98%), (1.48%) and (2.78%),
respectively.
(7)<F57> 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 Investor
Class Shares Investor Investor Investor Investor Class Shares
Six Months Class Shares Class Shares Class Shares Class Shares December 29,
Ended Year Ended Year Ended Year Ended Year Ended 2000(1)<F58> through
June 30, 2005 December 31, December 31, December 31, December 31, December 31,
(unaudited) 2004 2003 2002 2001 2000
------------- ------------ ------------ ------------ ------------ --------------------
Per Share Data:
Net asset value,
beginning of period $ 10.82 $ 9.65 $ 7.63 $ 9.09 $ 9.70 $ 10.00
----------- ----------- ----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (0.02) (0.07)(2) (0.09) (0.09)(2) (0.08)(2) (0.00)(3)
<F59> <F59> <F59> <F60>
Net realized and unrealized
gains (losses) on investments (0.25) 1.26 2.11 (1.37) (0.53) (0.30)
----------- ----------- ----------- ----------- ----------- ----------
Total from investment operations (0.27) 1.19 2.02 (1.46) (0.61) (0.30)
----------- ----------- ----------- ----------- ----------- ----------
Less distributions:
Distributions from
net realized gains -- (0.02) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $ 10.55 $ 10.82 $ 9.65 $ 7.63 $ 9.09 $ 9.70
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Total return (2.50%)(4) 12.32% 26.47% (16.06%) (6.29%) (3.00%)(4)
<F61> <F61>
Supplemental data and ratios:
Net assets, end of period $ 4,278,019 $ 3,944,857 $ 959,209 $ 801,703 $ 1,050,356 $ 10
Ratio of expenses
to average net assets(6)<F63> 1.10%(5) 1.10% 1.45% 1.50% 1.50% 1.50%(5)
<F62> <F62>
Ratio of net investment loss
to average net assets(6)<F63> (0.47%)(5) (0.68%) (1.06%) (1.09%) (0.92%) (1.50%)(5)
<F62> <F62>
Portfolio turnover rate(7)<F64> 34.7%(4) 77.9% 81.8% 55.4% 73.6% 0.0%
<F61>
(1)<F58> Commencement of operations.
(2)<F59> Calculated using average shares outstanding during the period.
(3)<F60> Amount is less than $0.01.
(4)<F61> Not annualized.
(5)<F62> Annualized.
(6)<F63> Without fees reimbursed, ratios of net expenses to average net assets
for the periods ended June 30, 2005, December 31, 2004, December 31,
2003, December 31, 2002, December 31, 2001 and December 31, 2000 would
have been 1.21%, 1.30%, 1.45%, 1.64%, 2.31% and 3.03%, respectively;
and the ratios of net investment loss to average net assets would have
been (0.58%), (0.88%), (1.06%), (1.23%), (1.73%) and (3.03%),
respectively.
(7)<F64> 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 SMALLCAP FUND
-----------------------------------------
Institutional Institutional
Class Shares Class Shares
Six Months Ended June 30, 2004(1)<F65>
June 30, 2005 through
(unaudited) December 31, 2004
---------------- ---------------------
Per Share Data:
Net asset value, beginning of period $ 10.84 $ 10.00
----------- -----------
Income from investment operations:
Net investment loss(2)<F66> (0.03) (0.03)
Net realized and unrealized gains (losses) on investments (0.00) 0.87
----------- -----------
Total from investment operations (0.03) 0.84
----------- -----------
Net asset value, end of period $ 10.81 $ 10.84
----------- -----------
----------- -----------
Total return(3)<F67> (0.28%) 8.40%
Supplemental data and ratios:
Net assets, end of period $27,945,017 $17,331,262
Ratio of expenses to average net assets(5)<F69> 0.95%(4)<F68> 0.95%(4)<F68>
Ratio of net investment loss to average net assets(5)<F69> (0.55%)(4)<F68> (0.65%)(4)<F68>
Portfolio turnover rate(3)<F67>(6)<F70> 29.1% 34.7%
(1)<F65> Commencement of operations.
(2)<F66> Calculated using average shares outstanding during the period.
(3)<F67> Not annualized.
(4)<F68> Annualized.
(5)<F69> Without fees reimbursed, ratio of net expenses to average net assets
for the period ended June 30, 2005 and December 31, 2004 would have
been 1.36% and 1.89%, respectively; and the ratio of net investment
loss to average net assets would have been (0.96%) and (1.59%),
respectively.
(6)<F70> 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 SMALLCAP FUND
-----------------------------------------
Investor Investor
Class Shares Class Shares
Six Months Ended June 30, 2004(1)<F71>
June 30, 2005 through
(unaudited) December 31, 2004
---------------- ---------------------
Per Share Data:
Net asset value, beginning of period $ 10.83 $ 10.00
----------- -----------
Income from investment operations:
Net investment loss(2)<F72> (0.04) (0.05)
Net realized and unrealized gains (losses) on investments (0.01) 0.88
----------- -----------
Total from investment operations (0.05) 0.83
----------- -----------
Net asset value, end of period $ 10.78 $ 10.83
----------- -----------
----------- -----------
Total return(3)<F73> (0.46%) 8.30%
Supplemental data and ratios:
Net assets, end of period $ 229,387 $ 68,184
Ratio of expenses to average net assets(5)<F75> 1.20%(4)<F74> 1.20%(4)<F74>
Ratio of net investment loss to average net assets(5)<F75> (0.80%)(4)<F74> (0.90%)(4)<F74>
Portfolio turnover rate(3)<F73>(6)<F76> 29.1% 34.7%
(1)<F71> Commencement of operations.
(2)<F72> Calculated using average shares outstanding during the period.
(3)<F73> Not annualized.
(4)<F74> Annualized.
(5)<F75> Without fees reimbursed, ratio of net expenses to average net assets
for the period ended June 30, 2005 and December 31, 2004 would have
been 1.61% and 2.14%, respectively; and the ratio of net investment
loss to average net assets would have been (1.21%) and (1.84%),
respectively.
(6)<F76> 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.
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 (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, the Baird
MidCap Fund and the Baird SmallCap Fund (each a "Fund" and collectively the
"Funds"), three of the eight portfolios comprising the Corporation. Pursuant to
the 1940 Act, the Funds are "diversified" series of the Corporation.
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 Baird SmallCap Fund commenced operations with the sale of
both Institutional and Investor Class Shares on June 30, 2004. 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.
The investment objective of the Baird SmallCap Fund is to seek long-term growth
of capital through investments in equity securities of small-capitalization
companies.
On June 30, 2005, one shareholder related to the investment advisor held
approximately 51% of the Baird LargeCap Fund and one shareholder related to the
investment advisor held 57% of the Baird SmallCap 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. Securities traded on
NASDAQ are valued at the NASDAQ official closing price. 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. 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. In determining fair value, the valuation committee takes into
account all relevant factors and available information. Consequently, the
price of the security used by a Fund to calculate its NAV may differ from
quoted or published prices for the same security. Fair value pricing
involves subjective judgments and it is possible that the fair value
determined for a security is materially different from the value that could
be realized upon the sale of that security or from the values that other
mutual funds may determine.
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.
d) Distributions to Shareholders - Dividends from net investment income are
declared and paid annually. Distributions of net realized gains, if any,
are declared and paid at least annually.
e) Allocation of Income and Expenses - Each Fund in the series is charged for
those expenses directly attributable to the portfolio. Expenses directly
attributable to a class of shares, such as Rule 12b-1 distribution fees,
are charged to that class of shares. Income, expenses, and realized and
unrealized gains and losses are allocated to the classes based on their
respective net assets. Expenses that are not directly attributable to a
Fund are allocated among the Funds in the series in proportion to their
assets.
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 and
interest income is recognized on an accrual basis. Accounting principles
generally accepted in the United States of America require that permanent
financial reporting and tax differences be reclassified in the capital
accounts.
h) Guarantees and Indemnifications - In the normal course of business, the
Funds enter into contracts with service providers that contain general
indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown and this would involve future claims against the
Funds that have not yet occurred. Based on experience, the Funds would
expect the risk of loss to be remote.
3. CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund:
BAIRD LARGECAP FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
--------------------------- -------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $ 2,795,071 351,080 Shares sold $ 684,591 86,057
Shares issued through Shares issued through
reinvestment of dividends -- -- reinvestment of dividends -- --
Shares redeemed (3,021,524) (378,768) Shares redeemed (84,515) (10,568)
----------- --------- ---------- -------
Net Decrease $ (226,453) (27,688) Net Increase $ 600,076 75,489
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,960,799 Beginning of period 234,864
--------- -------
End of period 7,933,111 End of period 310,353
--------- -------
--------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
--------------------------- -------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $ 5,204,938 657,907 Shares sold $1,232,442 156,739
Shares issued through Shares issued through
reinvestment of dividends 428,099 52,721 reinvestment of dividends 10,928 1,354
Shares redeemed (3,382,487) (430,488) Shares redeemed (39,313) (5,082)
----------- --------- ---------- -------
Net Increase $ 2,250,550 280,140 Net Increase $1,204,057 153,011
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,680,659 Beginning of period 81,853
--------- -------
End of period 7,960,799 End of period 234,864
--------- -------
--------- -------
BAIRD MIDCAP FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
--------------------------- -------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $18,888,664 1,766,101 Shares sold $ 892,050 83,465
Shares issued through Shares issued through
reinvestment of dividends -- -- reinvestment of dividends -- --
Shares redeemed (3,530,515) (334,715) Shares redeemed (441,755) (42,615)
----------- --------- ---------- -------
Net Increase $15,358,149 1,431,386 Net Increase $ 450,295 40,850
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,924,137 Beginning of period 364,694
--------- -------
End of period 9,355,523 End of period 405,544
--------- -------
--------- -------
Year Ended Year Ended
December 31, 2004 December 31, 2004
--------------------------- -------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $53,356,727 5,302,856 Shares sold $3,059,070 299,099
Shares issued through Shares issued through
reinvestment of dividends 142,982 13,214 reinvestment of dividends 6,603 615
Shares redeemed (3,419,077) (337,955) Shares redeemed (354,288) (34,372)
----------- --------- ---------- -------
Net Increase $50,080,632 4,978,115 Net Increase $2,711,385 265,342
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 2,946,022 Beginning of period 99,352
--------- -------
End of period 7,924,137 End of period 364,694
--------- -------
--------- -------
BAIRD SMALLCAP FUND
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2005
--------------------------- -------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $11,885,101 1,160,741 Shares sold $ 336,510 15,512
Shares redeemed (1,818,120) (173,803) Shares redeemed (5,360) (535)
----------- --------- ---------- -------
Net Increase $10,066,981 986,938 Net Increase $ 331,150 14,977
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 1,598,470 Beginning of period 6,296
--------- -------
End of period 2,585,408 End of period 21,273
--------- -------
--------- -------
June 30, 2004(1)<F77> through June 30, 2004(1)<F77> through
December 31, 2004 December 31, 2004
----------------------------- -----------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
----------- --------- ---------- -------
Shares sold $16,977,724 1,699,415 Shares sold $ 64,485 6,296
Shares redeemed (982,943) (100,945) Shares redeemed -- --
----------- --------- ---------- -------
Net Increase $15,994,781 1,598,470 Net Increase $ 64,485 6,296
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period -- Beginning of period --
--------- -------
End of period 1,598,470 End of period 6,296
--------- -------
--------- -------
(1)<F77> Commencement of operations.
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the period ended June 30, 2005, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Baird Baird Baird
LargeCap Fund MidCap Fund SmallCap Fund
------------- ------------ -------------
Purchases: $12,822,415 $44,314,789 $15,540,182
Sales: $10,595,790 $32,568,471 $ 5,685,582
At December 31, 2004, accumulated earnings/losses on a tax basis were as
follows:
LARGECAP MIDCAP SMALLCAP
FUND FUND FUND
-------- ------ --------
Cost of Investments $59,865,853 $82,628,748 $16,126,782
----------- ----------- -----------
----------- ----------- -----------
Gross unrealized appreciation 9,615,738 12,085,890 2,038,830
Gross unrealized depreciation (2,787,706) (629,780) (451,647)
----------- ----------- -----------
Net unrealized appreciation/(depreciation) $ 6,828,032 $11,456,110 $ 1,587,183
----------- ----------- -----------
----------- ----------- -----------
Undistributed ordinary income 787 -- --
Undistributed long-term capital gain -- -- --
----------- ----------- -----------
Total distributable earnings $ 787 $ -- $ --
----------- ----------- -----------
----------- ----------- -----------
Other accumulated gains (losses) $(8,601,915) $ (64,219) $ (196,705)
----------- ----------- -----------
Total accumulated earnings/(losses) $(1,773,096) $11,391,891 $ 1,390,478
----------- ----------- -----------
----------- ----------- -----------
Undistributed income or net realized gains for financial statement purposes may
differ from amounts recognized for federal income tax purposes due to
differences in the recognition and characterization of income, expense and
capital gain items.
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, 2004, the Baird MidCap Fund and the Baird
SmallCap Fund elected to defer capital losses occurring between November 1, 2004
and December 31, 2004 in the amounts of $64,219 and $5,827, respectively.
At December 31, 2004, the Baird LargeCap Fund had accumulated net realized
capital loss carryovers of $1,167,011 that expire in 2012, $3,094,411 that
expire in 2011, $4,188,556 that expire in 2010 and $151,937 that expire in 2009.
At December 31, 2004, the Baird SmallCap Fund had accumulated net realized
capital loss carryover of $190,878 expiring in 2012. To the extent the Funds
realize future net capital gains, taxable distributions to shareholders will be
offset by any unused capital loss carryover.
During the six months ended June 30, 2005, the Funds made no distributions.
During the period ended December 31, 2004, the Funds paid the following
dividends:
ORDINARY INCOME DIVIDENDS NET LONG-TERM CAPITAL GAINS
------------------------- ---------------------------
Baird LargeCap Fund $442,557 --
Baird MidCap Fund -- $150,283
Baird SmallCap Fund -- --
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 Investment Advisory
Agreement, 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, 0.75%
for the Baird MidCap Fund and 0.85% for the Baird SmallCap 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, 2005 and through December 31, 2005, the
Advisor has contractually 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 0.85% 1.10%
Baird SmallCap Fund 0.95% 1.20%
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
June 30, December 31,
---------------- ----------------------------------
YEAR ENDED: 2005 2004 2003 2002
REIMBURSED / ABSORBED EXPENSES SUBJECT
TO RECOVERY BY ADVISOR UNTIL: 2008 2007 2006 2005
BAIRD LARGECAP FUND $48,693 $114,127 $108,138 $91,116
BAIRD MIDCAP FUND $50,795 $116,179 $ 1,122 $21,503
BAIRD SMALLCAP FUND $40,558 $ 72,320 -- --
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.
No commissions were earned by the Distributor for services rendered as a
registered broker-dealer in securities transactions for the Baird LargeCap Fund,
Baird MidCap Fund and Baird SmallCap Fund for the period ended June 30, 2005.
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 1940 Act. 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, Baird MidCap Fund and Baird
SmallCap Fund incurred $2,934, $5,129 and $209, respectively, in fees pursuant
to the Plan during the six months ended June 30, 2005.
PROXY VOTING
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds'
website at http://www.bairdfunds.com; and by accessing the SEC's website at
http://www.sec.gov.
Information regarding how each Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is available
without charge, upon request, by calling toll free, 1-866-44BAIRD, or by
accessing the Funds' website at http://www.bairdfunds.com; and by accessing the
SEC's website at http://www.sec.gov.
PORTFOLIO HOLDINGS DISCLOSURE
The Funds file a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q
are available on the SEC website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Information on
the operation of the Public Reference Room may be obtained by calling
1-800-732-0330.
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
G. Frederick Kasten, Jr. (Chairman)
John W. Feldt
George C. Kaiser
Frederick P. Stratton, Jr.
INVESTMENT ADVISOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND -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
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Milwaukee, Wisconsin 53202
DISTRIBUTOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ITEM 2. CODE OF ETHICS.
- -----------------------
Not applicable - only required for annual reports on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
Not applicable - only required for annual reports on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not applicable - only required for annual reports on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable because the Registrant is not a "listed issuer" within the
meaning of Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6. SCHEDULE OF INVESTMENTS.
- --------------------------------
Schedule of Investments is included as part of the semi-annual reports to
shareholders filed under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable because the Registrant is not a closed-end management investment
company.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
- ------------------------------------------------------------------------
Not applicable because the Registrant is not a closed-end management investment
company.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- ---------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASERS.
- ----------------------------------
Not applicable because the Registrant is not a closed-end management investment
company.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's board of directors.
ITEM 11. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) Disclosure Controls and Procedures. The Registrant's management, with the
----------------------------------
participation of its principal executive and principal financial officers,
has evaluated the effectiveness of the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940), as of a date within 90 days prior to the filing date of this Form N-
CSR. Based on such evaluation, the Registrant's principal executive and
principal financial officers have concluded that the design and operation
of the Registrant's disclosure controls and procedures are effective in
providing reasonable assurance that the information required to be
disclosed on Form N-CSR is recorded, processed, summarized and reported
within the applicable time periods.
(b) Changes in Internal Control Over Financial Reporting. There were no
----------------------------------------------------
changes in the Registrant's internal control over financial reporting (as
defined in Rule 30a-3(d) under the Investment Company Act of 1940) that
occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
- -----------------
(a) (1) Any code of ethics or amendment thereto, that is subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy Item 2 requirements through filing an exhibit. Not Applicable.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the registrant to 10 or more persons. Not applicable.
(b) 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.
Baird Funds, Inc.
By: /s/ Mary Ellen Stanek
----------------------------
Mary Ellen Stanek, President
Date: September 1, 2005
---------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Mary Ellen Stanek
----------------------------
Mary Ellen Stanek, President
Date: September 1, 2005
---------------------------
By: /s/ Leonard Rush
-----------------------
Leonard Rush, Treasurer
Date: September 1, 2005
---------------------