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
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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
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(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, 2006
-----------------
Date of reporting period: JUNE 30, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
(BAIRD FUNDS LOGO)
SEMI-ANNUAL REPORT
June 30, 2006
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 15
BAIRD INTERMEDIATE MUNICIPAL BOND FUND 29
BAIRD CORE PLUS BOND FUND 36
BAIRD SHORT-TERM BOND FUND 43
ADDITIONAL INFORMATION ON FUND EXPENSES 53
STATEMENTS OF ASSETS AND LIABILITIES 55
STATEMENTS OF OPERATIONS 56
STATEMENTS OF CHANGES IN NET ASSETS 57
FINANCIAL HIGHLIGHTS 62
NOTES TO THE FINANCIAL STATEMENTS 71
ADDITIONAL INFORMATION 83
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
CAUTIONARY NOTE ON ANALYSES, OPINIONS AND OUTLOOKS: In this report we offer
- ---------------------------------------------------
analyses and opinions on the performance of individual securities, companies,
industries, sectors, markets, interest rates and governmental policies,
including predictions, forecasts and outlooks regarding possible future events.
These can generally be identified as such because the context of the statements
may include such words as "believe," "should," "will," "expects," "anticipates,"
"hopes" and words of similar effect. These statements reflect the portfolio
managers' good faith beliefs and judgments and involve risks and uncertainties,
including the risk that the portfolio managers' analyses, opinions and outlooks
are or will prove to be inaccurate. It is inherently difficult to correctly
assess and explain the performance of particular securities, sectors, markets,
interest rate movements, governmental actions or general economic trends and
conditions, and many unforeseen factors contribute to the performance of Baird
Funds. Investors are, therefore, cautioned not to place undue reliance on
subjective judgments contained in this report.
BAIRD INTERMEDIATE BOND FUND
JUNE 30, 2006
The Baird Intermediate Bond Fund seeks 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 9%
U.S. Gov't Agency 26%
AAA 21%
AA 5%
A 16%
BBB 20%
Below BBB 2%
Not Rated 1%
SECTOR WEIGHTINGS*<F1>
- ----------------------
Asset-Backed 7%
Financials 18%
Industrials 16%
Utilities 7%
Mortgage-Backed 15%
International 2%
Municipal 1%
U.S. Gov't Agency 20%
U.S. Treasuries 9%
Cash 5%
NET ASSETS: $282,092,667
SEC 30-DAY YIELD:**<F2>
Institutional Class: 5.42%
Investor Class: 5.18%
AVERAGE EFFECTIVE DURATION: 3.62 years
AVERAGE EFFECTIVE MATURITY: 4.74 years
ANNUALIZED EXPENSE RATIO:
Institutional Class: 0.30%
Investor Class: 0.55%***<F3>
PORTFOLIO TURNOVER RATIO:****<F4> 17.7%
TOTAL NUMBER OF HOLDINGS: 269
*<F1> Percentages shown are based on the Fund's total net assets.
**<F2> SEC yields are based on SEC guidelines and are calculated for the 30
days ended June 30, 2006.
***<F3> Includes 0.25% 12b-1 fee.
****<F4> Not annualized.
BAIRD INTERMEDIATE BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F5>
- ----------------------------------- -------- ---------- ----------------
Baird Intermediate Bond Fund -
Institutional Class Shares 0.09% 4.44% 5.73%
Baird Intermediate Bond Fund -
Investor Class Shares -0.17% 4.18% 5.48%
Lehman Brothers Intermediate
Government/Credit Bond Index(2)<F6> -0.18% 4.62% 5.40%
(1)<F5> For the period from September 29, 2000 (commencement of operations)
through June 30, 2006.
(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. This index does not reflect any deduction
for fees, expenses or taxes. A direct investment in an index is not
possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Principal
Amount Value
--------- -----
LONG-TERM INVESTMENTS - 94.5%
ASSET-BACKED SECURITIES - 8.1%
$ 3,000,000 American Express Credit
Account Master Trust,
Series 2004-5, Class A,
5.46%, 04/16/2012 $ 3,002,214
99,349 Amresco Residential
Securities Mortgage
Loan Trust,
Series 1998-1, Class A6,
6.51%, 08/25/2027 99,411
364,146 Banc One Home
Equity Trust,
Series 1999-2, Class A7,
7.18%, 06/25/2029 363,706
1,150,000 Bayview Financial
Acquisition Trust,
Series 2005-B, Class 1A2,
4.70%, 04/28/2039 1,132,802
668,513 Chase Funding
Mortgage Loan,
Series 2004-1, Class 1A3,
2.98%, 04/25/2026 662,752
CitiFinancial Mortgage
Securities, Inc.:
184,910 Series 2003-3, Class AF2,
3.08%, 08/25/2033 184,203
25,000 Series 2004-1, Class AF2,
2.65%, 04/25/2034 23,900
108,148 Contimortgage Home
Equity Trust:
Series 1999-1, Class A7,
6.47%, 12/25/2013 107,922
Countrywide Asset-Backed
Certificates:
2,000,000 Series 2006-S3, Class A2,
6.09%, 06/25/2021 2,000,938
2,200,000 Series 2005-12, Class 1
A2, 4.85%, 02/25/2036 2,164,875
1,500,000 Series 2006-9, Class
1AF3, 5.86%, 10/25/2046 1,497,891
1,500,000 Credit Based Asset
Servicing and Securities:
Series 2005-CB1, Class
AF4, 4.62%, 01/25/2035 1,479,811
50,000 Daimler Chrysler
Master Owner Trust,
Series 2004-A, Class A,
2.84%, 01/15/2009 50,009
Delta Funding Home
Equity Loan Trust:
117,840 Series 1997-2, Class A6,
7.04%, 06/25/2027 117,438
90,890 Series 1999-1, Class A6F,
6.34%, 12/15/2028 90,709
165,113 Series 1999-2, Class A7F,
7.03%, 08/15/2030 164,721
65,614 Equivantage Home
Equity Loan Trust,
Series 1996-3, Class A3,
7.70%, 09/25/2027 65,391
GMAC Mortgage
Corporation Loan Trust:
1,900,000 Series 2001-GH4, Class
A2, 4.39%, 12/25/2025 1,876,033
1,537,675 Series 2004-J4, Class A2,
5.50%, 09/25/2034 1,512,358
Green Tree Financial
Corporation:
1,106,943 Series 1998-3, Class A5,
6.22%, 03/012030 1,062,707
640,829 Series 1998-4, Class A5,
6.18%, 04/01/2030 612,702
317,229 Series 1999-3, Class A5,
6.16%, 02/01/2031 317,164
98,860 IMC Home Equity
Loan Trust,
Series 1998-1, Class A6,
6.52%, 06/20/2029 98,988
583,479 IMPAC Secured
Asset Corporation,
Series 2004-2, Class A3,
4.00%, 08/25/2034 578,189
2,550,000 MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
2.93%, 08/15/2010 2,554,892
753,172 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11/25/2033 749,707
292,128 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11/15/2017 251,496
39,047 Renaissance Home
Equity Loan Trust,
Series 2004-3, Class AF2,
3.57%, 11/25/2034 38,904
25,000 Residential Asset
Mortgage Products, Inc.,
Series 2003-RS7, Class
AI6, 5.34%, 08/25/2033 24,437
2,827 Salomon Brothers
Mortgage Securities VII,
Series 1997-LB6, Class
A6, 6.82%, 12/25/2027 2,815
------------
22,889,085
------------
FINANCIAL - 18.7%
Allfirst Financial, Inc.
Subordinated Notes:
1,325,000 7.20%, 07/01/2007 1,338,257
725,000 6.88%, 06/01/2009 744,890
550,000 American General Finance
Corporation Notes,
4.00%, 03/15/2011 507,976
589,000 American General Finance
Corporation Senior Notes,
8.45%, 10/15/2009 633,396
25,000 American General Finance,
4.63%, 09/01/2010 23,939
630,000 AmSouth Bancorporation
Subordinated Debentures,
6.75%, 11/01/2025 652,824
691,000 AmSouth Bank NA
Subordinated Notes,
6.45%, 02/01/2018 698,474
500,000 AMVESCAP PLC Notes,
5.38%, 02/27/2013 478,308
725,000 Banco Santander Chile SA,
7.00%, 07/18/2007 729,022
235,000 Bank of America
Corporation Subordinated
Notes, 10.20%, 07/15/2015 301,695
350,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08/15/2007 354,580
Bank One Corporation
Subordinated Notes,
180,000 6.00%, 02/17/2009 181,336
1,043,000 10.00%, 08/15/2010 1,190,718
1,120,000 BankAmerica Institutional,
8.07%, 12/31/2026
(Acquired 01/04/2006 &
06/01/2006; Cost $500,456
& $682,331 respectively)*<F9> 1,174,556
480,000 Bankers Trust Corporation
Subordinated Notes,
7.38%, 05/01/2008 494,589
1,500,000 Citigroup Capital II
7.75%, 12/01/2036 1,558,140
300,000 CIT Group Company
of Canada,
5.20%, 06/01/2015 F<F10> 280,981
825,000 CIT Group, Inc. Senior
Notes, 3.38%, 04/01/2009 777,269
200,000 CIT Group, Inc. Bonds,
5.40%, 01/30/2016 188,396
1,336,000 Comerica Incorporated
Subordinated Notes,
7.25%, 08/01/2007 1,354,004
800,000 Compass Bank
Subordinated Notes,
8.10%, 08/15/2009 857,128
260,000 Corestates Capital Trust I,
8.00%, 12/15/2026
(Acquired 11/29/2005,
Cost $276,398)*<F9> 271,745
Countrywide Home
Loans, Inc.:
1,000,000 5.50%, 02/01/2007 998,667
25,000 4.13%, 09/15/2009 23,775
650,000 4.00%, 03/22/2011 598,016
Credit Suisse First Boston
USA, Inc. Notes:
900,000 6.13%, 11/15/2011 912,037
25,000 5.50%, 08/15/2013 24,379
885,000 Dime Capital Trust,
9.33%, 05/06/2027 947,147
462,728 First National Bank of
Chicago Pass Thru
Certificates,
8.08%, 01/05/2018 511,638
1,100,000 First National Bank of
Omaha Subordinated
Notes, 7.32%, 12/01/2010 1,097,037
775,000 FMR Corporation Notes,
4.75%, 03/01/2013
(Acquired 02/26/2003,
Cost $777,379)*<F9> 733,415
725,000 General Electric Capital
Corporation Notes,
6.00%, 06/15/2012 733,328
1,000,000 Genworth Financial Inc.
Notes, 5.75%, 06/15/2014 985,481
1,250,000 Glencore Funding LLC,
6.00%, 04/15/2014
(Acquired 03/31/2004,
02/02/2005 & 04/26/2006; 1,141,606
Cost $794,280, $146,738
& $282,792 respectively)*<F9>
1,000,000 Great West Life &
Annuity Insurance,
7.15%, 05/16/2046
(Acquired 05/16/2006,
Cost $1,000,000)*<F9> 976,732
500,000 The Goldman Sachs
Group, Inc. Bonds,
5.15%, 01/15/2014 473,897
The Goldman Sachs
Group, Inc. Notes,
200,000 6.60%, 01/15/2012 206,412
25,000 4.75%, 07/15/2013 23,259
830,000 Health Care Service
Corporation Notes,
7.75%, 06/15/2011
(Acquired 06/20/2001
and 01/26/2005;
Cost $497,765 and
$373,500 respectively)*<F9> 892,745
400,000 Highmark, Inc. Notes,
6.80%, 08/15/2013
(Acquired 08/14/2003;
Cost $399,088)*<F9> 409,930
1,200,000 Household Finance
Corporation Senior
Unsubordinated Notes,
6.40%, 06/17/2008 1,215,962
25,000 HSBC Finance
Corporation Notes,
5.00%, 06/30/2015 23,071
300,000 International Lease
Finance Corporation Notes,
5.70%, 07/03/2006 300,000
500,000 J.P. Morgan Chase &
Company Subordinated
Notes, 6.63%, 03/15/2012 517,702
746,000 Lehman Brothers
Holdings, Inc. Notes,
8.50%, 08/01/2015 864,546
350,000 Lion Connecticut Holding,
7.13%, 08/15/2006 350,597
600,000 Marsh & McLennan
Companies, Inc.,
5.38%, 07/15/2014 558,649
600,000 MBNA Corporation Notes,
6.13%, 03/01/2013 608,818
900,000 Mellon Capital II, Series B,
8.00%, 01/15/2027 943,164
750,000 Merrill Lynch &
Co., Inc. Senior
Unsubordinated Notes,
5.00%, 02/03/2014 701,295
125,000 Met Life Global Funding
Senior Notes,
4.50%, 05/05/2010
(Acquired 08/04/2005;
Cost $123,925)*<F9> 119,585
1,000,000 Morgan Stanley Dean
Witter Debentures,
10.00%, 06/15/2008 1,080,355
25,000 Morgan Stanley
Subordinated Notes,
4.75%, 04/01/2014 22,920
300,000 Morgan Stanley
Unsubordinated Notes,
6.75%, 04/15/2011 311,468
1,230,000 National Australia Bank
Ltd. Subordinated Notes,
Series A, 8.60%,
05/19/2010 F<F10> 1,347,973
534,000 National City Bank of
Kentucky Subordinated
Notes, 6.30%, 02/15/2011 545,751
500,000 Nationwide Life Global
Fund Notes,
5.35%, 02/15/2007
(Acquired 02/08/2002;
Cost $499,520)*<F9> 499,123
1,100,000 Navigators Group Inc.
Senior Unsecured Notes,
7.00%, 05/01/2016 1,084,477
800,000 Phoenix Companies,
6.68%, 02/16/2008 801,919
1,244,000 PNC Funding Corporation,
7.50%, 11/01/2009 1,309,727
25,000 Protective Life
Corporation Senior Notes,
4.30%, 06/01/2013 22,762
500,000 Providian Capital I,
9.53%, 02/01/2027
(Acquired 06/30/2006,
Cost $531,235)*<F9> 530,981
1,200,000 Rabobank Nederland
Senior Notes,
2.70%, 03/15/2007
(Acquired 02/03/2004,
Cost $1,199,760)*<F9> F<F10> 1,173,898
700,000 Residential Capital
Corporation,
6.38%, 06/30/2010 690,474
805,000 SAFECO Corporation
Notes, 6.88%, 07/15/2007 813,217
546,000 SAFECO Corporation
Senior Notes,
7.25%, 09/01/2012 583,299
Santander Central
Hispano Insurances: F<F10>
150,000 7.63%, 09/14/2010 160,325
500,000 6.38%, 02/15/2011 511,518
SLM Corporation Notes:
1,516,000 4.50%, 07/26/2010 1,445,330
25,000 5.38%, 05/15/2014 23,955
1,000,000 St. Paul Travelers, Inc.
6.25%, 06/20/2016 995,708
1,255,000 Transamerica Finance
Corporation Debentures,
0.00%, 03/01/2010 ^<F8> 1,003,115
875,000 UFJ Bank Ltd/New York,
Subordinated Notes,
7.40%, 06/15/2011 928,605
350,000 UFJ Finance Aruba AEC,
6.75%, 07/15/2013 F<F10> 364,623
Union Planters
Corporation
Subordinated Notes:
300,000 7.75%, 03/01/2011 323,264
870,000 6.50%, 03/15/2018
(Acquired 05/08/2002,
09/22/2005, 02/12/2003
and 05/08/2003;
Cost $200,363, 880,547
$234,877, $73,378 and
$400,227 respectively)*<F9>
500,000 Washington Mutual Bank
Subordinated Notes,
6.88%, 06/15/2011 522,131
500,000 Washington Mutual
Capital I,
8.38%, 06/01/2027 528,373
Westdeutsche Landesbank
Subordinated Notes:
25,000 6.05%, 01/15/2009 25,215
1,495,000 4.80%, 07/15/2015 1,387,677
------------
52,603,843
------------
INDUSTRIAL - 15.2%
450,000 Alcan, Inc. Notes,
5.00%, 06/01/2015 F<F10> 415,771
910,000 Anthem, Inc.,
6.80%, 08/01/2012 947,483
225,000 Auburn Hills Trust
Debentures,
12.38%, 05/01/2020 317,586
300,000 Bellsouth Corporation,
4.75%, 11/15/2012 278,163
600,000 British Telecom PLC Notes,
8.38%, 12/15/2010 F<F10> 658,721
Bunge Ltd. Finance
Corporation Notes:
800,000 5.35%, 04/15/2014 745,204
585,000 5.10%, 07/15/2015 528,123
375,000 Caesars Entertainment
Senior Notes,
7.50%, 09/01/2009 389,332
1,000,000 Clear Channel
Communications Senior
Notes, 5.50%, 12/15/2016 869,409
125,000 Comcast Cable
Communication Holdings,
8.38%, 03/15/2013 138,830
Continental Airlines, Inc.
Pass Thru Certificates:
451 7.42%, 04/01/2007 436
61,583 6.54%, 03/15/2008 58,350
1,180,000 Cooper Cameron
Corporation Senior Notes,
2.65%, 04/15/2007 1,146,994
960,000 Cooper Industries, Inc.
Notes, 5.25%, 07/01/2007 951,322
1,281,000 COX Communications
Inc., 7.13%, 10/01/2012 1,324,968
1,000,000 D.R. Horton Inc.
Unsubordinated Notes,
6.50%, 04/15/2016 961,485
324,000 Delta Air Lines, Inc.
Pass Thru Certificates,
9.50%, 11/18/2008
(Acquired 11/24/2004,
Cost $324,000)*<F9> @<F7> ^<F8> 324,810
1,025,000 Deutsche Telekom
International Finance BV,
8.50%, 06/15/2010 1,100,409
300,000 Dollar General
Corporation,
8.63%, 06/15/2010 315,750
500,000 Fiserv, Inc. Notes,
4.00%, 04/15/2008 482,949
623,000 Ford Capital BV
Debentures,
9.50%, 06/01/2010 563,815
300,000 Ford Motor Company
Debentures,
9.22%, 09/15/2021 237,000
500,000 General Electric Company
Notes, 5.00%, 02/01/2013 478,920
General Motors Acceptance
Corporation Notes:
1,025,000 7.75%, 01/19/2010 1,019,714
200,000 6.75%, 12/01/2014 185,764
550,000 General Motors Nova
Scotia Finance Company,
6.85%, 10/15/2008 F<F10> 521,125
Halliburton
Company Notes:
475,000 5.63%, 12/01/2008 473,607
625,000 5.50%, 10/15/2010 619,091
650,000 Hanson Australia Funding,
5.25%, 03/15/2013 F<F10> 614,526
975,000 Hutchison Whampoa
International Limited,
6.25%, 01/24/2014
(Acquired 11/19/2003
and 02/08/2005;
Cost $749,228 and
$244,602 respectively)*<F9> F<F10> 970,966
1,000,000 Ingersoll-Rand Company
Debentures,
6.39%, 11/15/2027 F<F10> 1,059,384
530,000 International Paper
Company Notes:
7.63%, 01/15/2007 533,473
1,075,000 Johnson Controls Inc.
Senior Notes,
5.50%, 01/15/2016 1,019,975
675,000 Laboratory Corporation
of America Holdings,
5.50%, 02/01/2013 642,731
500,000 Limited Brands, Inc.,
5.25%, 11/01/2014 456,666
1,210,000 Marathon Oil
Corporation Debentures,
9.13%, 01/15/2013 1,411,011
500,000 Marathon Oil
Corporation Notes,
5.38%, 06/01/2007 498,467
350,000 Marathon Oil Corporation,
6.00%, 07/01/2012 351,384
500,000 New York Telephone
Company Debentures,
8.63%, 11/15/2010 538,916
1,000,000 Nextel Communications
Senior Notes,
6.88%, 10/31/2013 1,005,862
497,999 Northwest Airlines, Inc.:
7.25%, 01/02/2012
(Acquired 06/28/2001,
Cost $475,341) @<F7> ^<F8> 64,740
700,000 PCCW Capital II Ltd.,
6.00%, 07/15/2013
(Acquired 07/10/2003;
Cost $696,731)*<F9> F<F10> 663,919
600,000 Pearson Dollar Finance
PLC, 5.70%, 06/01/2014
(Acquired 09/28/2005,
Cost $618,138)*<F9> F<F10> 576,411
1,155,000 Plum Creek Timberlands,
5.88%, 11/15/2015 1,103,310
Qwest Capital Funding, Inc.,
350,000 7.00%, 08/03/2009 343,875
100,000 7.25%, 02/15/2011 97,250
1,000,000 Reed Elsevier Capital
Notes, 4.63%, 06/15/2012 926,382
500,000 SBC Communications,
Inc. Notes,
5.63%, 06/15/2016 473,943
650,000 Sealed Air Corporation
Senior Notes,
5.38%, 04/15/2008
(Acquired 04/09/2003;
Cost $646,490)*<F9> 644,473
224,954 Southwest Airlines
Company Pass Thru
Certificates,
Series 1996-A1,
7.67%, 01/02/2014 227,709
25,000 Sprint Capital Corporation:
7.63%, 01/30/2011 26,611
TCI Communications,
Inc. Debentures:
325,000 7.88%, 08/01/2013 350,108
300,000 8.75%, 08/01/2015 342,771
Telecom Italia Capital,
1,360,000 4.95%, 09/30/2014 F<F10> 1,217,550
1,400,000 Telefonica Emisiones,
S.A.U.
6.42%, 06/20/2016 F<F10> 1,397,095
380,000 Tele-Communications,
Inc. Debentures,
9.80%, 02/01/2012 438,368
380,000 Telus Corporation Notes,
7.50%, 06/01/2007 F<F10> 385,561
863,000 Time Warner Companies
Inc. Debentures,
9.13%, 01/15/2013 986,869
1,470,000 Transocean, Inc.
6.63%, 04/15/2011 1,503,969
275,000 Tribune Company,
5.25%, 08/15/2015 240,272
Tyco International
Group S.A.: F<F10>
425,000 6.38%, 10/15/2011 433,660
650,000 6.00%, 11/15/2013 643,952
208,758 Union Pacific Corporation
Pass Thru Certificates:
Series 1994-A6,
8.66%, 07/02/2011 216,162
United AirLines, Inc.
Pass Thru Certificates:
245,275 7.76%, 10/01/2005
(Acquired 12/08/2000,
Cost $ 245,275) @<F7> ^<F8> 202,060
942,920 6.20%, 09/01/2008
(Acquired 08/10/2001,
03/09/2006, 10/31/2005,
Cost $325,423, $230,569,
$375,535 respectively) 942,920
300,000 10.02%, 03/22/2014
(Acquired 01/03/2001,
Cost $322,008) @<F7> ^<F8> 126,000
1,025,000 Viacom, Inc.,
7.70%, 07/30/2010 1,090,405
Waste Management, Inc.
1,175,000 6.88%, 05/15/2009 1,208,106
25,000 5.00%, 03/15/2014 23,352
160,000 Weyerhaeuser Company
Notes, 5.95%, 11/01/2008 160,127
500,000 Willamette Industries, Inc.
Notes, 6.60%, 06/05/2012 510,684
325,000 Yosemite Securities Trust I,
8.25%, 11/15/2004
(Acquired 04/26/2001,
Cost $340,415)*<F9> @<F7> ^<F8> 200,688
------------
42,927,794
------------
UTILITIES - 6.1%
375,000 Baltimore Gas & Electric
Company Notes,
5.25%, 12/15/2006 374,062
1,650,000 Cilcorp Inc. Senior Notes,
8.70%, 10/15/2009 1,778,860
1,000,000 Dominion Resources
Inc., Series C,
5.15%, 07/15/2015 919,209
1,400,000 Duke Capital LLC Notes,
5.67%, 08/15/2014 1,353,309
600,000 Energy Transfer Partners,
5.65%, 08/01/2012 579,032
300,000 Exelon Corporation Senior
Notes, 6.75%, 05/01/2011 310,021
1,500,000 Kinder Morgan Finance
5.70%, 01/05/2016 1,302,410
440,660 Kiowa Power Partners
LLC, 4.81%, 12/30/2013
(Acquired 11/19/2004;
Cost $440,660)*<F9> 419,341
300,000 Korea Electric Power
Corporation:
6.75%, 08/01/2027 F<F10> 310,307
MidAmerican Energy
Holdings Company
Senior Notes,
800,000 4.63%, 10/01/2007 788,847
1,500,000 7.52%, 09/15/2008 1,551,232
25,000 National Rural Utilities,
4.38%, 10/01/2010 23,776
325,000 National Rural Utilities
Cooperative Finance
Collateral Trust,
3.88%, 02/15/2008 316,122
100,000 Nisource Finance
Corporation,
7.88%, 11/15/2010 106,983
1,050,000 ONEOK, Inc. Senior
Notes, 7.13%, 04/15/2011 1,086,851
388,000 PPL Energy Supply, LLC
Senior Notes,
6.40%, 11/01/2011 393,002
900,000 Progress Energy, Inc.
Senior Notes,
6.85%, 04/15/2012 932,817
175,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06/15/2011 183,750
PSE&G Power LLC:
275,000 7.75%, 04/15/2011 294,335
425,000 5.00%, 04/01/2014 392,049
841,740 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12/07/2022 1,018,665
500,000 System Energy Resources
1st Mortgage,
4.88%, 10/01/2007 492,263
350,000 Tristate Gen & Trans Assn,
6.04%, 01/31/2018
(Acquired 10/14/2003;
Cost $350,000)*<F9> 343,311
Vectren Utility Holdings:
900,000 6.63%, 12/01/2011 925,147
525,000 5.25%, 08/01/2013 495,656
600,000 The Williams
Companies, Inc. Notes,
8.13%, 03/15/2012 622,500
------------
17,313,857
------------
MORTGAGE BACKED SECURITIES - 13.8%
Bank of America
Alternative Loan Trust:
466,102 Series 2003-11, Class 4A1,
4.75%, 01/25/2019 439,447
1,914,625 Series 2004-2, Class 5A1,
5.50%, 03/25/2019 1,888,652
1,722,559 Series 2004-11, Class 4A1,
5.50%, 12/25/2019 1,682,187
1,227,571 Bank of America Funding
Corporation Series 2003-3,
Class 1A41, 5.50%,
10/25/2033 1,176,731
Citicorp Mortgage
Securities, Inc.:
1,627,900 Series 2004-5, Class 1A25,
5.50%, 10/25/2014 1,595,838
1,629,309 Series 2004-4, Class A5,
5.50%, 06/25/2034 1,580,585
Countrywide Alternative
Loan Trust,
673,033 Series 2005-5R, Class A2,
4.75%, 12/25/2018 658,144
2,019,540 Series 2005-50CB, Class
4A1, 5.00%, 11/25/2020 1,978,896
100,000 Series 2004-18CB,
5.13%, 09/25/2034 99,072
1,903,486 Countrywide Home
Loans, Inc.,
Series 2003-18, Class A3,
5.25%, 07/25/2033 1,876,385
70,711 Federal Gold Loan
Mortgage (FGLMC)
Pass Thru Certificate,
6.00%, 07/01/2028 69,953
Federal Home Loan
Mortgage Corporation
(FHLMC):
1,878,920 Series 3033, Class LU,
5.50%, 03/15/2013 1,872,047
1,350,000 Series 2592, Class PD,
5.00%, 07/15/2014 1,332,029
1,453,540 Series 2695, Class UA,
5.50%, 09/15/2014 1,438,440
784,962 Series R001, Class AE,
4.38%, 04/15/2015 756,892
2,241,181 Series R003, Class VA,
5.50%, 08/15/2016 2,208,549
29,489 Series 1094, Class K,
7.00%, 06/15/2021 29,447
16,048 Series 1101, Class M,
6.95%, 07/15/2021 16,026
152,070 Series 1136, Class H,
6.00%, 09/15/2021 151,783
63,460 Series 1280, Class B,
6.00%, 04/15/2022 63,341
68,307 Series 1395, Class G,
6.00%, 10/15/2022 67,540
235,396 Series 2531, Class N,
4.00%, 07/15/2027 231,538
Federal National Mortgage
Association (FNMA):
996,751 Series 2002-73, Class OC,
5.00%, 04/25/2014 988,969
250,000 Series 2003-4, Class PC,
5.00%, 12/25/2014 247,108
1,500,000 Series 2003-24, Class PC,
5.00%, 11/25/2015 1,471,898
400,000 Series 2002-94, Class BG,
5.00%, 04/25/2016 395,557
50,000 Series 2003-35, Class TD,
5.00%, 12/25/2016 49,137
279,462 Series 1991-137, Class H,
7.00%, 10/25/2021 287,028
226,563 Series 1992-136, Class PK,
6.00%, 08/25/2022 226,871
117,075 Series 1993-32, Class H,
6.00%, 03/25/2023 115,668
835,548 Series 2002-95, Class MD,
5.00%, 07/25/2026 827,963
818,887 Series 2002-77, Class QP,
5.00%, 09/25/2026 811,368
106,296 Series 2003-25, Class PC,
4.50%, 02/25/2027 105,478
41,101 Series 1998-66, Class C,
6.00%, 12/25/2028 40,717
Government National
Mortgage Association
(GNMA):
504,869 Series 2003-111, Class VA,
5.50%, 03/16/2013 500,319
887,010 Series 2003-12, Class ON,
4.00%, 02/16/2028 877,883
604,777 Series 1999-4, Class ZB,
6.00%, 02/20/2029 601,992
J.P. Morgan Alternative
Loan Trust:
1,927,886 Series 2006-A1, Class
2A1, 5.80%, 03/25/2036 1,917,094
2,000,000 Series 2006-S2, Class A2,
5.81%, 05/25/2036 1,983,988
714,902 Master Alternative Loans
Trust, Series 2004-3, Class
1A1, 5.00%, 03/25/2019 682,287
739,866 Salomon Brothers
Mortgage Securities VII,
Series 2003-UP2, Class
A2, 4.00%, 06/25/2033 697,529
Washington Mutual,
3,976,000 Series 2004-CB3, Class
3A, 5.50%, 10/25/2019 3,893,582
944,187 Series 2004-CB4, Class
21A, 5.50%, 12/25/2019 934,362
------------
38,870,320
------------
INTERNATIONAL (U.S. $ DOMINATED) - 2.2%
25,000 Bayerische Landesbank,
5.65%, 02/01/2009 24,948
1,000,000 BOI Capital Funding
No. 2, 5.57%, 02/01/2049
(Acquired 01/20/2006,
Cost $1,000,000)*<F9> F<F10> 923,259
275,000 Corp Andina
De Fomento Notes,
7.38%, 01/18/2011 F<F10> 288,696
1,000,000 Export Import Bank Korea
5.13%, 02/14/2011 F<F10> 969,077
Korea Development
Bank Notes: F<F10>
450,000 4.25%, 11/13/2007 440,833
350,000 4.63%, 09/16/2010 333,852
700,000 Landesbank
Baden-Wurttemgerg
Subordinated Notes,
6.35%, 04/01/2012 F<F10> 735,395
350,000 National Bank of Hungary
Yankee Debentures,
8.88%, 11/01/2013 F<F10> 408,652
PEMEX Project Funding
Master Trust: F<F10>
275,000 6.13%, 08/15/2008 274,450
1,650,000 9.13%, 10/13/2010 1,806,750
------------
6,205,912
------------
MUNICIPAL BONDS - 0.8%
Tobacco Settlement
Financing Corporation:
275,000 Series 2001-A,Class A,
5.92%, 06/01/2012 273,633
1,262,188 Series 2001-A, Class A,
6.36%, 05/15/2025 1,258,023
1,046,000 Toll Road Inv. Part II,
0.00%, 02/15/2011
(Acquired 09/28/2004;
Cost $782,046)*<F9> ^<F8> 800,521
------------
2,332,177
------------
U.S. GOVERNMENT AGENCY ISSUES - 20.4%
26,075,000 Federal Home Loan
Mortgage Corporation
(FHLMC):
4.13%, 07/12/2010 24,804,496
Federal National Mortgage
Association (FNMA):
20,235,000 7.25%, 01/15/2010 21,383,538
1,000,000 6.63%, 11/15/2010 1,043,945
10,000,000 6.00%, 05/15/2011 10,215,530
------------
57,447,509
------------
U.S. TREASURY OBLIGATIONS - 9.2%
U.S. Treasury Bonds:
11,525,000 9.25%, 02/15/2016 15,043,271
8,175,000 9.13%, 05/15/2018 10,947,478
------------
25,990,749
------------
Total Long-Term
Investments
(Cost $274,278,979) 266,581,246
------------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 27.1%
(Cost $76,349,498)
(Please Refer to Note 6) 76,349,498
------------
SHORT-TERM INVESTMENTS - 2.3%
MONEY MARKET FUNDS - 2.3%
6,505,185 Short-Term Investment
Company Liquid Assets
Portfolio - AIM Fund 6,505,185
------------
Total Short-Term
Investments
(Cost $6,505,185) 6,505,185
------------
Total Investments
(Cost $357,133,662) -
123.9% 349,435,929
------------
Liabilities in Excess of
Other Assets - (23.9)% (67,343,262)
------------
TOTAL NET
ASSETS - 100.0% $282,092,667
------------
------------
@<F7> Security in Default
^<F8> Non-Income Producing Security
*<F9> Unregistered Security
F<F10> Foreign Security
See notes to the financial statements
BAIRD AGGREGATE BOND FUND
JUNE 30, 2006
The Baird Aggregate Bond Fund seeks 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 9%
U.S. Gov't Agency 30%
AAA 26%
AA 3%
A 12%
BBB 17%
Below BBB 2%
Not Rated 1%
SECTOR WEIGHTINGS*<F11>
- -----------------------
Asset-Backed 10%
Commercial Mortgage-Backed 3%
Financials 13%
Industrials 12%
Utilities 6%
Mortgage-Backed 34%
International 1%
Municipal 1%
U.S. Gov't Agency 8%
U.S. Treasuries 9%
Cash 3%
NET ASSETS: $236,178,329
SEC 30-DAY YIELD:**<F12>
Institutional Class: 5.46%
Investor Class: 5.20%
AVERAGE EFFECTIVE DURATION: 4.80 years
AVERAGE EFFECTIVE MATURITY: 7.28 years
ANNUALIZED EXPENSE RATIO:
Institutional Class: 0.30%
Investor Class: 0.55%***<F13>
PORTFOLIO TURNOVER RATIO:****<F14> 23.2%
TOTAL NUMBER OF HOLDINGS: 296
*<F11> Percentages shown are based on the Fund's total net assets.
**<F12> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2006.
***<F13> Includes 0.25% 12b-1 fee.
****<F14> Not annualized.
BAIRD AGGREGATE BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F15>
- ----------------------------------- -------- ---------- -----------------
Baird Aggregate Bond Fund -
Institutional Class Shares -0.52% 5.44% 6.48%
Baird Aggregate Bond Fund -
Investor Class Shares -0.76% 5.23% 6.26%
Lehman Brothers Aggregate
Bond Index(2)<F16> -0.81% 4.97% 5.71%
(1)<F15> For the period from September 29, 2000 (commencement of operations)
through June 30, 2006.
(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. This index does not reflect any
deduction for fees, expenses or taxes. A direct investment in an
index is not possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD AGGREGATE BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Principal
Amount Value
--------- -----
LONG-TERM INVESTMENTS - 96.6%
ASSET BACKED SECURITIES - 9.8%
$ 97,012 Advanta Mortgage Loan
Trust, Series 1999-2,
6.82%, 04/25/2014 $ 96,651
270,151 Banc One Home Equity
Trust, Series 1999-2,
Class A7, 7.18%,
06/25/2029 269,824
2,000,000 Bayview Financial
Acquisition Trust,
Series 2006-A, Class 1A2,
5.48%, 02/28/2041 1,974,805
50,839 Citifinancial Mortgage
Securities, Inc.,
Series 2003-2, Class AF3,
3.04%, 05/25/2033 49,333
Contimortgage Home
Equity Trust:
127,234 Series 1999-1, Class A7,
6.47%, 12/25/2013 126,967
9,755 Series 1997-2, Class A9,
7.09%, 04/15/2028 9,670
101,890 Series 1999-3, Class A8,
5.88%, 05/25/2029 102,142
Countrywide Asset-Backed
Certificates:
2,000,000 Series 2005-17, Class
1AF2, 5.36%, 03/25/2030 1,977,993
1,715,431 Series 2004-12, Class AF3,
4.02%, 12/25/2030 1,695,743
1,500,000 Series 2004-15, Class AF6,
4.61%, 04/25/2035 1,440,479
1,300,000 Series 2005-1, Class AF6,
5.03%, 06/25/2035 1,252,630
1,500,000 Series 2005-10, Class AF2,
4.49%, 02/25/2036 1,473,308
Credit Based Asset
Servicing and Securities:
1,000,000 Series 2005-CB1, Class
AF4, 4.62%, 01/25/2035 986,541
2,000,000 Series 2005-CB8, Class
AF2, 5.30%, 12/25/2035 1,977,665
875,000 Daimler Chrysler Master
Owner Trust,
Series 2004-A, Class A,
2.84%, 01/15/2009 875,156
69,473 Equivantage Home
Equity Loan Trust,
Series 1996-3, Class A3,
7.70%, 09/25/2027 69,237
GE Capital Mortgage
Services, Inc.:
7,958 Series 1997-H3, Class A6,
6.72%, 10/25/2027 7,931
19,089 Series 1997-HE4, Class
A7, 6.74%, 12/25/2027 19,024
173,042 Series 1999-HE1, Class
A7, 6.27%, 04/25/2029 172,838
400,000 GMAC Mortgage
Corporation Loan Trust,
Series 2004-GH1, Class
A2, 4.39%, 12/25/2025 394,954
Green Tree Financial
Corporation:
281,653 Series 1993-3, Class A7,
6.40%, 10/15/2018 282,873
236,070 Series 1993-4, Class A5,
7.05%, 01/15/2019 236,829
8,754 Series 1995-4, Class A5,
6.95%, 06/15/2025 8,798
5,964 Series 1997-1, Class A5,
6.86%, 03/15/2028 6,011
243,420 Series 1997-6, Class A8,
7.07%, 01/15/2029 246,580
1,057,369 Series 1998-4, Class A5,
6.18%, 04/01/2030 1,010,959
371,429 Household Automobile
Trust, Series 2003-1,
2.22%, 11/17/2009 364,413
34,485 IMC Home Equity Loan
Trust, Series 1997-5, Class
A10, 6.88%, 11/20/2028 34,392
313,822 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11/25/2033 312,378
146,064 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11/15/2017 125,748
RAAC Series:
582,342 Series 2004-SP1, Class
AI2, 4.38%, 01/25/2022 574,760
1,000,000 Series 2004-SP1, Class
AI4, 5.29%, 08/25/2027 965,201
Residential Asset Mortgage
Products, Inc.:
50,426 Series 2004-RS3, Class
AI2, 3.05%, 06/25/2029 50,177
1,630,000 Series 2003-RS7, Class
AI6, 5.34%, 08/25/2033 1,593,294
1,000,000 Series 2005-RS1, Class
AI6, 4.71%, 11/25/2034 936,072
Residential Asset
Securities Corporation:
620,934 Series 2004-KS7, Class
AI2, 3.51%, 05/25/2024 617,530
620,886 Series 2004-KS2, Class
AI3, 3.02%, 05/25/2029 615,051
249,246 Series 2003-KS5, Class
AI6, 3.62%, 07/25/2033 233,823
4,182 Salomon Brothers
Mortgage Securities VII,
Series 1997-LB6, Class
A6, 6.82%, 12/25/2027 4,163
------------
23,191,943
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 3.1%
1,400,000 First Union National Bank
Commercial Mortgage
Securities Inc.,
Series 2001-C4, Class A2,
6.22%, 12/12/2033 1,429,189
1,200,000 GE Capital Commercial
Mortgage Corporation,
Series 2002-3A, Class AR,
4.00%, 12/10/2037 1,154,282
2,500,000 GMAC Commercial
Mortgage Securities, Inc.,
Series 2003-C1, Class A2,
4.08%, 05/10/2036 2,262,611
800,000 Government National
Mortgage Association
(GNMA):
Series 2004-78, Class C,
4.66%, 04/16/2029 750,546
1,800,000 Wachovia Bank
Commercial Mortgage
Trust, Series 2003-C3,
Class A2, 4.87%,
02/15/2035 1,708,533
------------
7,305,161
------------
FINANCIAL - 15.3%
600,000 American General
Finance Corporation
Senior Notes,
8.45%, 10/15/2009 645,225
200,000 AmSouth Bancorporation
Subordinated Debentures,
6.75%, 11/01/2025 207,246
275,000 AMVESCAP PLC Notes,
5.38%, 02/27/2013 F<F20> 263,069
447,000 Associates Corporation
North America
Subordinated Debentures,
8.15%, 08/01/2009 477,400
300,000 BAC Capital Trust VI,
5.63%, 03/08/2035 257,086
1,015,000 Bank of America
Corporation
Subordinated Notes,
10.20%, 07/15/2015 1,303,066
400,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08/15/2007 405,234
909,000 Bank One Corporation
Subordinated Notes,
10.00%, 08/15/2010 1,037,740
330,000 Bankers Trust Corporation
Subordinated Notes,
7.25%, 10/15/2011 352,760
325,000 CIT Group Co.
of Canada,
5.20%, 06/01/2015 F<F20> 304,396
300,000 CIT Group, Inc.
Senior Notes,
7.75%, 04/02/2012 325,210
500,000 CIT Group, Inc. Bonds,
5.40%, 01/30/2016 470,990
590,000 Citigroup, Inc.
Subordinated Notes,
5.00%, 09/15/2014 552,221
1,181,000 Compass Bank
Subordinated Notes,
8.10%, 08/15/2009 1,265,335
Countrywide Home
Loans, Inc.:
175,000 5.63%, 07/15/2009 174,122
850,000 4.00%, 03/22/2011 782,021
375,000 Credit Suisse First
Boston USA, Inc. Notes,
6.13%, 11/15/2011 380,015
1,070,000 Dime Capital Trust,
9.33%, 05/06/2027 1,145,139
225,000 Dresdner Bank-New York
Subordinated Debentures,
7.25%, 09/15/2015 244,144
1,135,000 First Empire Capital Trust
I, 8.23%, 02/01/2027 1,191,868
625,000 First Empire Capital Trust
II, 8.28%, 06/01/2027 660,050
670,955 First National Bank
of Chicago Pass
Thru Certificates,
8.08%, 01/05/2018 741,875
1,025,000 First National Bank of
Omaha Subordinated
Notes, 7.32%,
12/01/2010 1,022,239
460,000 First Union Capital,
7.94%, 01/15/2027 482,130
250,000 FMR Corporation Notes,
4.75%, 03/01/2013
(Acquired 02/26/2003,
Cost $250,768)*<F19> 236,586
875,000 Glencore Funding LLC,
6.00%, 04/15/2014
(Acquired 03/31/2004,
02/02/2005 and
10/31/2005; Cost
$496,425, $122,281 and
$231,168 respectively)*<F19> 799,124
850,000 Goldman Sachs Capital I,
6.35%, 02/15/2034 792,424
150,000 The Goldman Sachs
Group, Inc. Notes,
6.60%, 01/15/2012 154,809
1,000,000 Great West Life &
Annuity Insurance,
7.15%, 05/16/2046
(Acquired 05/16/2006,
Cost $1,000,000)*<F19> 976,732
500,000 Health Care Service
Corporation Notes,
7.75%, 06/15/2011
(Acquired 06/20/2001
and 01/26/2005;
Cost $150,908 and
$345,000 respectively)*<F19> 537,798
275,000 Highmark, Inc. Notes,
6.80%, 08/15/2013
(Acquired 08/14/2003,
Cost $274,373)*<F19> 281,827
355,000 HSBC Bank PLC
Subordinated Notes,
6.95%, 03/15/2011 368,269
900,000 J.P. Morgan Chase &
Company Notes,
5.88%, 03/15/2035 798,632
1,150,000 Jefferies Group Inc.,
6.25%, 01/15/2036 1,049,557
KeyCorp Institution:
496,000 7.83%, 12/01/2026 518,150
750,000 8.25%, 12/15/2026 786,368
565,000 Liberty Mutual Insurance
Notes, 7.70%, 10/15/2097
(Acquired 03/26/2003,
Cost $361,510)*<F19> 534,822
300,000 Marsh & McLennan
Companies, Inc.,
5.38%, 07/15/2014 279,324
475,000 Morgan Stanley
Subordinated Notes,
4.75%, 04/01/2014 435,490
1,100,000 Navigators Group Inc.,
7.00%, 05/01/2016 1,084,477
600,000 Phoenix Companies,
6.68%, 02/16/2008 601,439
1,000,000 PNC Financial Services,
Series C, 8.88%,
03/15/2027 1,061,694
700,000 Republic New York
Corporation Debentures,
9.13%, 05/15/2021 865,176
400,000 Republic New York
Corporation Subordinated
Notes, 9.70%, 02/01/2009 437,986
1,200,000 Residential Capital
Corporation,
6.88%, 06/30/2015 1,194,828
350,000 Santander Central
Hispano Insurances:
7.63%, 09/14/2010 F<F20> 374,092
500,000 SLM Corporation Notes,
5.63%, 08/01/2033 446,803
1,000,000 St. Paul Travelers,
6.75%, 06/20/2036 987,329
1,000,000 Symetra Financial
Corporation Senior Notes,
6.13%, 04/01/2016
(Acquired 03/23/2006,
Cost $995,570)*<F19> 968,238
200,000 Transamerica Capital II:
7.65%, 12/01/2026
(Acquired 10/21/2003,
Cost $214,011)*<F19> 214,011
275,000 UFJ Bank Ltd/New York,
Subordinated Notes,
7.40%, 06/15/2011 291,847
225,000 UFJ Finance Aruba AEC,
6.75%, 07/15/2013 F<F20> 234,401
350,000 Union Planters
Corporation Subordinated
Notes, 7.75%, 03/01/2011 377,142
280,000 Washington Mutual
Capital I,
8.38%, 06/01/2027 295,889
200,000 Washington Mutual, Inc.
Subordinated Notes,
8.25%, 04/01/2010 214,454
1,534,000 Westdeutsche Landesbank
Subordinated Notes,
4.80%, 07/15/2015 1,423,877
750,000 Willis Group NA,
5.63%, 07/15/2015 696,515
1,000,000 Zurich Capital Trust I
8.38%, 06/01/2037
(Acquired 04/07/2006;
Cost $1,065,910)*<F19> 1,057,124
------------
36,067,815
------------
INDUSTRIAL - 10.4%
500,000 Alcan, Inc.,
5.75%, 06/01/2035 F<F20> 448,376
1,000,000 Ameritech
Capital Funding,
6.45%, 01/15/2018 977,060
AOL Time Warner, Inc.:
1,100,000 7.63%, 04/15/2031 1,184,397
175,000 7.70%, 05/01/2032 190,199
875,000 AT&T Wireless Services,
Inc. Senior Notes,
8.75%, 03/01/2031 1,072,771
441,000 Auburn Hills Trust
Debentures,
12.38%, 05/01/2020 622,468
450,000 British Telecom PLC,
8.88%, 12/15/2030 F<F20> 553,053
600,000 Bunge Ltd. Finance
Corporation Notes:
5.35%, 04/15/2014 558,903
275,000 Caesars Entertainment
Senior Notes,
7.50%, 09/01/2009 285,510
700,000 ConAgra Foods, Inc.
Subordinated Notes,
9.75%, 03/01/2021 864,217
Continental Airlines, Inc.
Pass Thru Certificates:
37,379 6.80%, 07/02/2007 36,240
48,112 6.54%, 03/15/2008 45,586
135,428 8.31%, 04/02/2011 128,363
483,775 6.90%, 01/02/2018 485,698
1,025,000 Cox Communications Inc.,
7.13%, 10/01/2012 1,060,181
1,000,000 D.R. Horton Inc.
Unsubordinated Notes,
6.50%, 04/15/2016 961,485
231,000 Delta Air Lines, Inc.
Pass Thru Certificates,
9.50%, 11/18/2008
(Acquired 11/24/2004,
Cost $231,000) @<F17> ^<F18> *<F19> 231,578
250,000 Deutsche Telekom
International Finance BV,
8.25%, 06/15/2030 F<F20> 288,638
152,977 FedEx Corporation
Pass Thru Certificates,
6.85%, 07/15/2020 159,720
475,000 Ford Capital BV
Debentures,
9.50%, 06/01/2010 429,875
403,000 Ford Motor Company
Debentures,
9.22%, 09/15/2021 318,370
General Motors Acceptance
Corporation Notes:
100,000 7.25%, 03/02/2011 96,951
150,000 6.75%, 12/01/2014 139,323
175,000 Hanson Australia Funding,
5.25%, 03/15/2013 F<F20> 165,449
625,000 Hutchison Whampoa
International Limited,
6.25%, 01/24/2014
(Acquired 06/02/2004
and 02/08/2005;
Cost $333,834 and
$298,958 respectively)*<F19> F<F20> 622,414
850,000 Johnson Controls Inc.,
Senior Notes,
6.00%, 01/15/2036 784,069
650,000 Knight-Ridder, Inc.,
5.75%, 09/01/2017 586,813
400,000 Laboratory Corporation
of America,
5.63%, 12/15/2015 382,629
100,000 Marathon Oil Corporation,
6.00%, 07/01/2012 100,395
487,500 The May Department
Stores Companies
Debentures,
9.75%, 02/15/2021 566,846
29,967 Northwest Airlines, Inc.
Pass Thru Certificates,
8.13%, 02/01/2014
(Acquired 10/07/2000,
Cost $28,918) @<F17> 25,322
444,642 Northwest Airlines, Inc.:
7.25%, 01/02/2012
(Acquired 06/28/2001,
Cost $424,412) @<F17> 57,803
320,000 Pactiv Corporation,
7.95%, 12/15/2025 337,992
400,000 PCCW Capital II Ltd.,
6.00%, 07/15/2013
(Acquired 07/10/2003,
Cost $398,132)*<F19> F<F20> 379,382
745,000 Plum Creek Timberlands,
5.88%, 11/15/2015 711,659
Qwest Capital
Funding, Inc.:
300,000 7.00%, 08/03/2009 294,750
200,000 7.25%, 02/15/2011 194,500
250,000 Sealed Air Corporation
Senior Notes,
5.38%, 04/15/2008
(Acquired 04/09/2003,
Cost $248,650)*<F19> 247,874
Sprint Capital
Corporation:
125,000 7.63%, 01/30/2011 133,053
200,000 8.75%, 03/15/2032 241,180
680,000 TCI Communications,
Inc. Debentures:
7.88%, 08/01/2013 732,534
1,000,000 Telecom Italia Capital,
4.95%, 09/30/2014 F<F20> 895,257
1,000,000 Teva Pharmaceutical
Finance LLC
5.55%, 02/01/2016 937,844
Tyco International
Group S.A.: F<F20>
175,000 6.38%, 10/15/2011 178,566
300,000 6.00%, 11/15/2013 297,209
United AirLines, Inc.
Pass Thru Certificates:
269,803 7.76%, 10/01/2005
(Acquired 09/28/2004,
Cost $22,658) @<F17> ^<F18> 222,266
1,037,212 6.20%, 09/01/2008 1,037,212
233,964 U.S. Airways Pass Thru
Certificate, Series 1998-1,
6.85%, 07/30/2019 236,889
1,000,000 Univision
Communication, Inc.,
3.50%, 10/15/2007 966,478
350,000 Vale Overseas Limited,
8.25%, 01/17/2034 F<F20> 377,563
675,000 Viacom, Inc.,
7.70%, 07/30/2010 718,072
1,000,000 Wal-Mart Stores:
5.25%, 09/01/2035 872,528
175,000 Waste Management
Inc. Notes,
7.00%, 10/15/2006 175,597
------------
24,619,107
------------
UTILITIES - 6.5%
475,000 Beaver Valley Funding
Corporation Debentures,
9.00%, 06/01/2017 528,095
1,000,000 Commonwealth
Edison Notes,
7.63%, 01/15/2007 1,008,337
500,000 Dominion Resources Inc.,
7.20%, 09/15/2014 525,328
1,000,000 Duke Capital LLC Notes,
5.67%, 08/15/2014 966,649
750,000 Energy Transfer Partners,
5.65%, 08/01/2012 723,791
300,000 Exelon Corporation
Senior Notes,
6.75%, 05/01/2011 310,022
1,200,000 GTE Corporation,
6.84%, 04/15/2018 1,221,291
600,000 Kinder Morgan Energy
Partners Senior Notes,
6.30%, 02/01/2009 602,681
900,000 Kinder Morgan Finance
5.70%, 01/05/2016 781,446
271,567 Kiowa Power Partners
LLC, 4.81%, 12/30/2013
(Acquired 11/19/2004;
Cost $271,567)*<F19> 258,428
Korea Electric Power
Corporation: F<F20>
100,000 7.75%, 04/01/2013 109,168
1,165,000 6.75%, 08/01/2027 1,205,024
750,000 MidAmerican Energy
Holdings Company
Senior Notes,
7.63%, 10/15/2007 766,045
425,000 ONEOK, Inc.
Senior Notes,
7.13%, 04/15/2011 439,916
850,000 Pacific Gas & Electric
Company 1st Mortgage,
6.05%, 03/01/2034 802,243
300,000 PPL Energy Supply,
LLC Senior Notes,
6.40%, 11/01/2011 303,868
175,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06/15/2011 183,750
250,000 PSE&G Power LLC:
350,000 7.75%, 04/15/2011 267,577
5.00%, 04/01/2014 322,864
544,655 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12/07/2022 659,136
1,063,616 System Energy Resources,
5.13%, 01/15/2014
(Acquired 06/27/2006,
Cost $1,012,700)*<F19> 1,023,145
1,000,000 System Energy Resources
1st Mortgage,
4.88%, 10/01/2007 984,526
200,000 Tristate Gen & Trans
Assn, Series 2003,
6.04%, 01/31/2018
(Acquired 10/14/2003;
Cost $200,000)*<F19> 196,178
500,000 Vectren Utility Holdings,
6.63%, 12/01/2011 513,971
550,000 The Williams
Companies, Inc. Notes,
8.13%, 03/15/2012 570,625
------------
15,274,104
------------
MORTGAGE BACKED SECURITIES - 33.6%
Bank of America
Alternative Loan Trust:
780,653 Series 2003-4, Class 2A1,
5.00%, 06/25/2018 758,114
1,075,619 Series 2003-11, Class 4A1,
4.75%, 01/25/2019 1,014,108
655,542 Series 2004-6, Class 4A1,
5.00%, 07/25/2019 631,096
748,939 Series 2004-11, Class 4A1,
5.50%, 12/25/2019 731,386
1,363,419 Series 2005-2, Class 4A1,
5.50%, 03/25/2020 1,343,764
1,481,871 Series 2005-2, Class 1CB2,
5.50%, 03/25/2035 1,458,472
1,578,751 Series 2005-9, Class 1CB3,
5.50%, 10/25/2035 1,554,041
944,219 Series 2005-11, Class
1CB4, 5.50%, 12/25/2035 928,930
2,000,000 Series 2006-5, Class CB7,
6.00%, 06/25/2036 1,983,125
1,235,226 Chase Mortgage
Finance Corporation,
Series 2003-S13, Class A11,
5.50%, 11/25/2033 1,210,317
849,898 Citicorp Mortgage
Securities, Inc.,
Series 2004-3, Class A2,
5.25%, 05/25/2034 825,005
1,500,000 Countrywide Alternative
Loan Trust,
Series 2005-10CB,
Class 1A6, 5.50%,
05/25/2035 1,457,250
1,081,454 Countrywide Home
Loans, Inc.,
Series 2003-39, Class A5,
5.00%, 05/25/2012 1,055,921
1,727,565 CS First Boston
Mortgage Securities Corp.,
Series 2004-4, Class 2A5,
5.50%, 06/25/2015 1,700,104
1,582,871 Federal Gold Loan
Mortgage Corporation
(FGLMC):
6.50%, 06/01/2029 1,600,185
Federal Home Loan
Mortgage Corporation
(FHLMC):
348,000 6.50%, 07/01/2014 351,984
269,248 6.00%, 05/01/2017 269,751
994,822 5.50%, 11/01/2022 968,382
872,569 5.50%, 07/01/2023 849,565
933,340 Series 3124, Class VP,
6.00%, 06/15/2014 938,680
585,454 Series 2695, Class UA,
5.50%, 09/15/2014 579,372
784,962 Series R001, Class AE,
4.38%, 04/15/2015 756,892
967,065 Series 2539, Class QB,
5.00%, 09/15/2015 956,143
831,211 Series 2857, Class VA,
5.00%, 09/15/2015 808,376
1,970,054 Series R007, Class AC,
5.88%, 05/15/2016 1,963,446
1,907,388 Series R003, Class VA,
5.50%, 08/15/2016 1,879,616
1,944,129 Series 3097, Class MC,
6.00%, 11/15/2016 1,949,191
166,440 Series 2533, Class PC,
5.00%, 10/15/2017 165,710
309,697 Series 206, Class E,
0.00%, 07/15/2019 ^<F18> 305,787
170,274 Series 141, Class D,
5.00%, 05/15/2021 169,167
126,807 Series 1074, Class I,
6.75%, 05/15/2021 126,568
188,174 Series 1081, Class K,
7.00%, 05/15/2021 187,923
68,463 Series 1101, Class M,
6.95%, 07/15/2021 68,368
137,552 Series 163, Class F,
7.83%, 07/15/2021 136,860
269,032 Series 188, Class H,
7.00%, 09/15/2021 267,504
135,464 Series 1286, Class A,
6.00%, 05/15/2022 135,209
105,928 Series 2531, Class N,
4.00%, 07/15/2027 104,192
97,862 Series 2141, Class N,
5.55%, 11/15/2027 97,478
1,075,000 Series 2664, Class LG,
5.50%, 07/15/2028 1,060,986
Federal National Mortgage
Association (FNMA):
1,751,128 5.50%, 07/01/2015 1,724,362
631,465 5.50%, 12/01/2016 620,907
569,858 5.00%, 10/01/2017 550,085
637,148 5.00%, 11/01/2017 615,041
989,241 5.00%, 12/01/2017 954,917
2,944,762 5.00%, 02/01/2018 2,842,585
539,591 5.00%, 06/01/2018 520,930
710,389 5.00%, 10/01/2018 685,707
1,020,414 5.50%, 01/01/2023 993,567
935,374 5.50%, 07/01/2023 910,672
171,984 5.00%, 10/01/2023 163,527
290,425 5.50%, 01/01/2032 280,235
847,040 6.00%, 03/01/2033 836,834
975,886 5.50%, 07/01/2033 941,437
621,962 5.00%, 11/01/2033 584,210
2,206,226 5.50%, 11/01/2033 2,128,347
1,190,230 6.00%, 11/01/2034 1,173,837
2,510,444 5.50%, 02/01/2035 2,417,689
947,312 5.50%, 03/01/2035 910,530
2,441,016 5.00%, 11/01/2035 2,283,265
996,751 Series 2002-73, Class OC,
5.00%, 04/25/2014 988,969
1,175,000 Series 2002-82, Class XC,
5.00%, 05/25/2014 1,163,843
525,000 Series 2003-4, Class PC,
5.00%, 12/25/2014 518,928
106,617 Series 2002-70, Class PL,
5.00%, 04/25/2015 106,177
1,000,000 Series 2003-27, Class OJ,
5.00%, 07/25/2015 981,323
1,150,000 Series 2002-94, Class MC,
5.00%, 08/25/2015 1,130,726
500,000 Series 2003-24, Class PC,
5.00%, 11/25/2015 490,633
2,200,000 Series 2002-74, Class TD,
5.00%, 12/25/2015 2,153,596
1,000,000 Series 2003-18, Class GB,
5.00%, 03/25/2016 986,703
128,004 Series 2002-56, Class MC,
5.50%, 09/25/2017 126,989
74,695 Series 1989-37, Class G,
8.00%, 07/25/2019 78,830
123,697 Series 1989-94, Class G,
7.50%, 12/25/2019 128,686
29,967 Series 1990-58, Class J,
7.00%, 05/25/2020 30,792
128,984 Series 1990-105, Class J,
6.50%, 09/25/2020 131,080
49,768 Series 1990-108, Class G,
7.00%, 09/25/2020 50,345
48,136 Series 1991-1, Class G,
7.00%, 01/25/2021 49,487
119,659 Series 1991-86, Class Z,
6.50%, 07/25/2021 119,810
416,754 Series 2003-28, Class KA,
4.25%, 03/25/2022 397,530
48,725 Series G92-30, Class Z,
7.00%, 06/25/2022 49,778
82,214 Series 1992-150, Class MA,
5.50%, 09/25/2022 81,332
140,575 Series 1993-58, Class H,
5.50%, 04/25/2023 138,816
1,125,000 Series 2003-17, Class QR,
4.50%, 11/25/2025 1,107,959
1,089,573 Series 2003-31, Class KG,
4.50%, 12/25/2028 1,072,352
170,570 Series 1998-66, Class C,
6.00%, 12/25/2028 168,975
132,347 Series 2003-44, Class AB,
3.75%, 05/25/2033 121,184
1,714,674 First Horizon Alternative
Mortgage Securities,
Series 2005-FA7, Class 2A1,
5.00%, 09/25/2020 1,680,451
Government National
Mortgage Association
(GNMA):
87,158 6.00%, 12/20/2028 86,504
710,360 6.00%, 11/20/2033 703,838
14,357 Series 2003-1, Class QK,
4.00%, 02/16/2026 14,317
9,096 Series 2001-61, Class EA,
6.00%, 09/16/2028 9,078
134,091 Impac CMB Trust,
Series 2004-4, Class 2A2,
5.25%, 09/25/2034 128,663
1,927,886 J.P. Morgan Alternative
Loan Trust,
Series 2006-A1, Class 2A1,
5.80%, 03/25/2036 1,917,094
1,246,846 Master Alternative Loans
Trust, Series 2003-5,
Class 6A1, 6.00%,
08/25/2033 1,228,924
1,031,168 Residential Accredit
Loans, Inc.,
Series 2004-QS6, Class A1,
5.00%, 05/25/2019 1,000,154
800,000 Residential Funding
Mortgage Security I,
Series 2003-S11, Class A2,
4.00%, 06/25/2018 726,975
561,065 Salomon Brothers
Mortgage Securities VII,
Series 2003-UP2, Class A2,
4.00%, 06/25/2033 528,960
Structured Asset
Securities Corporation:
1,230,140 Series 2004-11XS, Class
1A3A, 4.76%, 06/25/2034 1,218,134
56,304 Series 2004-16XS, Class
A2, 4.91%, 08/25/2034 55,961
Washington Mutual, Inc.
Pass-Thru Certificates,
1,096,663 Series 2004-CB1,
5.00%, 06/25/2019 1,045,600
1,251,048 Series 2004-CB4, Class
21A, 5.50%, 12/25/2019 1,238,030
------------
79,445,178
------------
INTERNATIONAL (U.S. $ DOMINATED) - 0.8%
50,000 Corp Andina
De Fomento Notes,
7.38%, 01/18/2011 F<F20> 52,490
175,000 Landesbank
Baden-Wurttemgerg
Subordinated Notes,
6.35%, 04/01/2012 F<F20> 183,849
510,000 National Bank of Hungary
Yankee Debentures,
8.88%, 11/01/2013 F<F20> 595,464
PEMEX Project Funding
Master Trust: F<F20>
75,000 6.13%, 08/15/2008 74,850
450,000 9.13%, 10/13/2010 492,750
United Mexican States
Notes: F<F20>
150,000 9.88%, 02/01/2010 168,750
400,000 7.50%, 04/08/2033 425,000
------------
1,993,153
------------
MUNICIPAL BONDS - 0.8%
1,000,000 Cuyahoga County Ohio
Industrial Development
Revenue,
9.13%, 10/01/2023 1,160,670
Tobacco Settlement
Financing Corporation:
140,000 Series 2001-A, Class A,
5.92%, 06/01/2012 139,304
584,672 Series 2001-A, Class A,
6.36%, 05/15/2025 582,742
------------
1,882,716
------------
U.S. GOVERNMENT AGENCY ISSUES - 7.7%
Federal National Mortgage
Association (FNMA):
8,700,000 7.25%, 01/15/2010 9,193,812
6,300,000 6.63%, 11/15/2010 6,576,853
2,634,474 5.50%, 09/01/2034 2,537,137
------------
18,307,802
------------
U.S. TREASURY OBLIGATIONS - 8.6%
18,325,000 U.S. Treasury Bonds
6.25%, 08/15/2023 20,210,477
------------
Total Long-Term
Investments
(Cost $235,182,458) 228,297,456
------------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 16.8%
(Cost $39,582,381)
(Please Refer to Note 6) 39,582,381
------------
SHORT-TERM INVESTMENTS - 4.3%
MONEY MARKET FUNDS - 4.3%
$10,115,168 Short-Term Investment
Company Liquid Assets
Portfolio - AIM Fund 10,115,168
------------
Total Short-Term
Investments
(Cost $10,115,168) 10,115,168
------------
Total Investments
(Cost $284,880,007) -
117.7% 277,995,005
------------
Liabilities in Excess of
Other Assets - (17.7)% (41,816,676)
------------
TOTAL NET
ASSETS - 100.0% $236,178,329
------------
------------
@<F17> Security in Default
^<F18> Non Income Producing
*<F19> Unregistered Security
F<F20> Foreign Security
See notes to the financial statements
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
JUNE 30, 2006
The Baird Intermediate Municipal Bond Fund seeks current income that is
substantially exempt from federal income tax. A secondary objective is to
provide total return with relatively low volatility of principal.
PORTFOLIO CHARACTERISTICS
QUALITY DISTRIBUTION*<F21>
- --------------------------
AAA 94%
AA 5%
BBB 1%
SECTOR WEIGHTINGS*<F21>
- -----------------------
Pre-refunded ETM 58%
Insured 32%
General Obligation 3%
Cash 6%
Revenue 1%
NET ASSETS: $75,164,019
SEC 30-DAY YIELD:**<F22>
Institutional Class: 3.95%
Investor Class: 3.71%
AVERAGE EFFECTIVE DURATION: 4.74 years
AVERAGE EFFECTIVE MATURITY: 6.37 years
ANNUALIZED EXPENSE RATIO:
Institutional Class: 0.30%
Investor Class: 0.55%***<F23>
PORTFOLIO TURNOVER RATIO:****<F24> 4.97%
TOTAL NUMBER OF HOLDINGS: 66
*<F21> Percentages shown are based on the Fund's total net assets.
**<F22> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2006.
***<F23> Includes 0.25% 12b-1 fee.
****<F24> Not annualized.
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F25>
- ----------------------------------- -------- ---------- -----------------
Baird Intermediate Municipal Bond
Fund - Institutional Class Shares -0.17% 4.40% 4.61%
Baird Intermediate Municipal Bond
Fund - Investor Class Shares -0.33% 4.15% 4.37%
Lehman Brothers 7-Year General
Obligation Bond Index(2)<F26> 0.25% 4.50% 4.41%
Lehman Brothers 10-Year General
Obligation Bond Index(3)<F27> -0.06% 4.96% 4.77%
(1)<F25> For the period from March 30, 2001 (commencement of operations)
through June 30, 2006.
(2)<F26> The Lehman Brothers 7-Year General Obligation Bond Index is an
unmanaged, market value weighted index 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 six to eight years. This index does
not reflect any deduction for fees, expenses or taxes. A direct
investment in an index is not possible. The Lehman Brothers 7-Year
General Obligation Bond Index has been selected to replace the Lehman
Brothers 10-Year General Obligation Bond Index as the Fund's benchmark
beginning in 2006 because the average maturity of the bonds owned by
the Fund are closer to the maturity of the bonds in the Lehman
Brothers 7-Year General Obligation Bond Index (6-8 years) than the
maturity of the bonds in the Lehman Brothers 10-Year General
Obligation Bond Index (8-12 years).
(3)<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. This index does not reflect
any deduction for fees, expenses or taxes. A direct investment in an
index is not possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Principal
Amount Value
--------- -----
MUNICIPAL BONDS - 93.0%
ALABAMA - 0.6%
$ 460,000 Mobile Alabama, 6.20%,
02/15/2007 (ETM) $ 465,805
-----------
ARIZONA - 2.1%
1,415,000 Arizona Health Facilities
Authority Hospital
Revenue, 6.38%,
12/01/2037 (Pre-refunded
to 12/01/2012) 1,604,667
-----------
ARKANSAS - 0.9%
690,000 Springdale Arkansas Sales
& Use Tax Revenue,
4.00%, 07/01/2016
(MBIA Insured) 682,396
-----------
CALIFORNIA - 1.3%
500,000 Golden State Tobacco
Securitization Corporation,
6.25%, 06/01/2033 544,585
350,000 Santa Rosa California
Hospital Revenue, 10.30%,
03/01/2011 (ETM) 406,644
-----------
951,229
-----------
COLORADO - 3.5%
2,000,000 Adams County Colorado
Single Family Mortgage
Revenue, 8.88%,
08/01/2012 (Pre-refunded
to 08/01/2012) 2,488,980
110,000 Colorado Springs Colorado
Utilities Revenue, 5.80%,
11/15/2010 (ETM) 114,081
-----------
2,603,061
-----------
DELAWARE - 2.2%
1,500,000 Delaware State Economic
Development Authority
Revenue, 6.75%,
01/01/2013 (ETM) 1,662,405
-----------
FLORIDA - 5.2%
300,000 Jacksonville Florida Health
Facility Authority Hospital
Revenue, 11.50%,
10/01/2012 (ETM) 420,828
270,000 Orange County Florida
Health Revenue, 8.75%,
10/01/2009 (ETM) 291,349
1,000,000 Orlando Florida Utilities
Commission Water &
Electric Revenue, 6.75%,
10/01/2017 (ETM) 1,163,810
2,000,000 Sarasota County Florida
Public Hospital Board
Revenue, 3.68%,
07/01/2037 2,000,000
-----------
3,875,987
-----------
GEORGIA - 1.6%
1,020,000 Fulton County Georgia
Hospital Authority
Revenue, 7.88%,
10/01/2013 (ETM) 1,194,451
-----------
HAWAII - 4.6%
3,245,000 Honolulu Hawaii City
& County, 5.25%,
03/01/2017 (Pre-refunded
to 03/01/2013) 3,467,996
-----------
ILLINOIS - 9.4%
1,500,000 Chicago Illinois Board of
Education Dedicated
Revenue, 3.65%,
03/01/2012 (CIFG
Insured) 1,500,000
1,440,000 Chicago Illinois
Metropolitan Water
Reclamation District
General Obligation,
7.00%, 12/01/2010 (ETM) 1,618,301
1,000,000 Chicago Illinois General
Obligation Project and
Refunding, 5.00%,
01/01/2017 (FSA Insured) 1,050,080
1,430,000 Cook County Illinois
School District No. 100,
8.10%, 12/01/2016 (ETM) 1,881,837
1,000,000 Lake County Community
High School District No.
128, 5.00%, 01/01/2013 1,050,800
-----------
7,101,018
-----------
INDIANA - 0.5%
285,000 Indiana Toll Road
Commission, 9.00%,
01/01/2015 (ETM) 360,895
-----------
IOWA - 2.2%
1,010,000 Des Moines Iowa
Metropolitan Wastewater
Reclamation Authority,
5.00%, 06/01/2015
(MBIA Insured) 1,065,216
530,000 Muscatine Iowa Electric
Revenue, 6.70%,
01/01/2013 (ETM) 573,561
-----------
1,638,777
-----------
LOUISIANA - 5.4%
745,000 Denham Springs-Livingston
Housing and Mortgage
Finance Authority, 7.20%,
08/01/2010 (ETM) 833,387
1,000,000 Houma-Terrebonne Public
Trust Financing Authority
Single Family Mortgage
Revenue, 7.30%,
04/01/2011 (ETM) 1,134,090
400,000 Houma-Terrebonne
Public Trust Financing
Authority, 7.30%,
04/01/2010 (ETM) 443,740
1,450,000 Jefferson Parish Louisiana
Home Mortgage
Authority, 7.10%,
08/01/2010 (ETM) 1,622,405
-----------
4,033,622
-----------
MINNESOTA - 0.9%
645,000 Western Minnesota
Municipal Power Agency,
6.38%, 01/01/2016 (ETM) 706,069
-----------
MISSISSIPPI - 1.4%
600,000 Mississippi Housing
Financial Corporation,
0.00%, 06/01/2015 (ETM)^<F28> 402,678
605,000 Mississippi State,
6.20%, 02/01/2008 (ETM) 623,114
-----------
1,025,792
-----------
NEVADA - 2.8%
1,965,000 Reno Nevada Capital
Improvement Revenue,
5.50%, 06/01/2019
(Pre-refunded to
06/01/2012) 2,117,464
-----------
NEW JERSEY - 2.8%
400,000 New Jersey State
Transit Trust, 5.00%,
06/15/2017 (Pre-refunded
to 06/15/2009) 411,660
1,000,000 New Jersey State
Transportation Trust
Fund Authority, 6.00%,
12/15/2017 (Pre-refunded
12/15/2011) 1,099,470
422,000 New Jersey State Turnpike
Authority: (ETM),
130,000 6.75%, 01/01/2009 425,566
6.50%, 01/01/2016 148,225
-----------
2,084,921
-----------
NEW YORK - 1.7%
1,000,000 New York New York,
5.00%, 03/01/2016
(FGIC Insured) 1,045,660
235,000 TSASC Inc. New York,
4.75%, 06/01/2022 232,681
-----------
1,278,341
-----------
NORTH CAROLINA - 0.4%
225,000 North Carolina Eastern
Municipal Power Agency
Power Systems
Revenue, 6.40%,
01/01/2021 (ETM) 263,138
-----------
OHIO - 0.2%
160,000 Miamisburg Ohio Water
Revenue, 7.00%,
11/15/2016 (ETM) 181,803
-----------
OKLAHOMA - 3.6%
2,360,000 Tulsa County Oklahoma
Home Financing
Authority Single Family
Mortgage Revenue, 6.90%,
08/01/2011 (ETM) 2,676,924
-----------
PENNSYLVANIA - 4.4%
815,000 Philadelphia Pennsylvania
Gas Works, 7.00%,
05/15/2020 (ETM) 952,580
1,405,000 Pittsburgh Pennsylvania
Water & Sewer
Authority, 7.25%,
09/01/2014 (ETM) 1,568,093
1,000,000 Wilson Pennsylvania
Area School District,
0.00%, 05/15/2011
(AMBAC Insured)^<F28> 813,270
-----------
3,333,943
-----------
SOUTH CAROLINA - 0.4%
285,000 Greenville South
Carolina Waterworks
Revenue, 7.00%,
02/01/2010 (ETM) 314,064
-----------
SOUTH DAKOTA - 1.1%
715,000 Heartland Consumers
Power District, 7.00%,
01/01/2016 (ETM) 804,926
-----------
TENNESSEE - 3.1%
520,000 Metropolitan Government
Nashville & Davidson
County Tennessee
H&E, 6.10%,
07/01/2010 (ETM) 539,380
1,545,000 Metropolitan Government
Nashville & Davidson
County Tennessee Water
& Sewer Revenue, 6.50%,
12/01/2014 (ETM) 1,770,014
-----------
2,309,394
-----------
TEXAS - 27.0%
1,125,000 Barbers Hill Texas
Independent School
District General
Obligation,
5.00%, 02/15/2017
(PSF Guaranteed) 1,173,701
1,195,000 Bell County Texas General
Obligation, 5.00%,
02/15/2012 (FSA Insured) 1,252,623
1,000,000 Copperas Cove Texas
Independent School
District, 5.00%,
08/15/2016
(PSF Guaranteed) 1,049,180
1,500,000 Cypress-Fairbanks Texas
Independent School
District, 5.00%,
02/15/2017
(PSF Guaranteed) 1,571,040
1,920,000 Houston Texas Sewer
System Revenue, 9.38%,
10/01/2013 (ETM) 2,367,129
1,315,000 La Porte Texas Independent
School District,
5.00%, 02/15/2018
(MBIA Insured) 1,366,193
1,735,000 Lufkin Texas Independent
School District,
5.00%, 08/15/2015
(PSF Guaranteed) 1,820,952
1,265,000 Mission Consolidation
Independent School
District,
5.00%, 02/15/2019 1,300,572
1,295,000 Rockwall Texas
Independent School
District,
5.00%, 02/15/2015
(PSF Guaranteed) 1,362,443
775,000 Sam Rayburn Texas
Municipal Power Agency,
6.00%, 09/01/2010 (ETM) 822,438
2,000,000 San Antonio Texas
Independent School
District,
5.00%, 08/15/2017
(PSF Guaranteed) 2,090,700
575,000 Socorro Texas Independent
School District,
5.25%, 08/15/2012
(PSF Guaranteed) 611,024
345,000 Texas Public Building
Authority Revenue,
7.13%, 08/01/2011 (ETM) 379,676
1,900,000 Trinity River Authority
Texas Revenue,
5.50%, 02/01/2021
(MBIA Insured) 2,056,332
1,000,000 University of Houston
Texas 5.25%, 02/15/2012
(FSA Insured) 1,059,620
-----------
20,283,623
-----------
UTAH - 0.9%
605,000 Salt Lake City Utah
Hospital Revenue, 8.13%,
05/15/2015 (ETM) 708,497
-----------
WASHINGTON - 2.8%
1,025,000 Clark County School
District No. 037,
5.13%, 12/01/2011 1,075,922
1,000,000 Washington State
5.00%, 09/01/2013
(FGIC Insured) 1,045,130
-----------
2,121,052
-----------
Total Municipal Bonds
(Cost $71,197,800) 69,852,260
-----------
SHORT-TERM INVESTMENTS - 7.2%
VARIABLE RATE DEMAND NOTES - 7.2%
1,883,778 First American Tax Free
Obligations Fund 1,883,778
3,543,587 Tax Free Investment
Company Cash Reserve
Portfolio - AIM Fund 3,543,587
-----------
Total Short-Term
Investments
(Cost $5,427,365) 5,427,365
-----------
Total Investments
(Cost $76,625,165) -
100.2% 75,279,625
-----------
Liabilities in Excess of
Other Assets - (0.2)% (115,606)
-----------
TOTAL NET
ASSETS - 100.0% $75,164,019
-----------
-----------
ETM - Escrow to maturity
^<F28> Non-income Producing Security
See notes to the financial statements
BAIRD CORE PLUS BOND FUND
JUNE 30, 2006
The Baird Core Plus Bond Fund seeks 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*<F29>
- --------------------------
U.S. Treasury 19%
U.S. Gov't Agency 29%
AAA 12%
A 5%
BBB 24%
Below Baa 8%
Not Rated 3%
SECTOR WEIGHTINGS*<F29>
- -----------------------
Asset-Backed 8%
Financials 8%
Industrials 21%
Utilities 7%
Mortgage-Backed 28%
International 1%
Municipal 1%
U.S. Gov't Agency 2%
U.S. Treasuries 19%
Cash 5%
NET ASSETS: $31,045,423
SEC 30-DAY YIELD:**<F30>
Institutional Class: 5.60%
Investor Class: 5.39%
AVERAGE EFFECTIVE DURATION: 4.80 years
AVERAGE EFFECTIVE MATURITY: 8.17 years
ANNUALIZED EXPENSE RATIO:
Institutional Class: 0.30%
Investor Class: 0.55%***<F31>
PORTFOLIO TURNOVER RATIO:****<F32> 36.0%
TOTAL NUMBER OF HOLDINGS: 121
*<F29> Percentages shown are based on the Fund's total net assets.
**<F30> SEC yields are based on SEC guidelines and are calculated for the
30 days ended June 30, 2006.
***<F31> Includes 0.25% 12b-1 fee.
****<F32> Not annualized.
BAIRD CORE PLUS BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F33>
- ----------------------------------- -------- ---------- -----------------
Baird Core Plus Bond Fund -
Institutional Class Shares -0.29% 5.56% 6.50%
Baird Core Plus Bond Fund -
Investor Class Shares -0.43% 5.31% 6.23%
Lehman Brothers U.S.
Universal Bond Index(2)<F34> -0.26% 5.39% 6.01%
(1)<F33> For the period from September 29, 2000 (commencement of operations)
through June 30, 2006.
(2)<F34> 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. This index does not reflect any deduction for
fees, expenses or taxes. A direct investment in an index is not
possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD CORE PLUS BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Principal
Amount Value
--------- -----
LONG-TERM INVESTMENTS - 94.6%
ASSET BACKED SECURITIES - 7.5%
$ 300,000 Countrywide Asset-Backed
Certificates, Series
2006-10, Class 1AF3,
5.97%, 09/25/2046 $ 300,141
140,000 GMAC Mortgage
Corporation Loan Trust,
Series 2004-HE5, Class A3,
3.97%, 09/25/2034 137,769
Green Tree Financial
Corporation:
47,709 Series 1997-1, Class A5,
6.86%, 03/15/2028 48,091
424,549 Series 1998-4, Class A5,
6.18%, 04/01/2030 405,915
75,317 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11/25/2033 74,971
83,465 Oakwood Mortgage
Investors, Inc.,
Series 1999-B, Class A3,
6.45%, 11/15/2017 71,856
300,000 Renaissance Home
Equity Loan Trust, Series
2006-2, Class AF3,
5.80%, 08/25/2036 300,000
300,000 Residential Asset Mortgage
Products, Inc.:
Series 2003-RS10, Class
AI7, 4.85%, 11/25/2033 292,003
450,000 Residential Asset
Securities Corporation:
Series 2003-KS5, Class AI6,
3.62%, 07/25/2033 422,154
300,000 Structured Asset
Securities Corporation,
Series 2005-7XS, Class
1A4B, 5.44%, 04/25/2035 290,642
-----------
2,343,542
-----------
FINANCIAL - 7.6%
175,000 AMVESCAP, Inc. Senior
Notes, 5.90%, 01/15/2007 175,116
350,000 First National Bank of
Omaha Subordinated Notes,
7.32%, 12/01/2010 349,057
250,000 First Union Capital,
7.94%, 01/15/2027 262,027
Glencore Funding LLC,
150,000 6.00%, 04/15/2014
(Acquired 03/31/2004,
Cost $148,928)*<F37> 136,993
30,000 Goldman Sachs Group LP 33,025
8.00%, 03/01/2013
(Acquired 05/19/2006,
Cost $33,031)*<F37>
100,000 Health Care Service
Corporation Notes,
7.75%, 06/15/2011
(Acquired 01/26/2005;
Cost $115,000)*<F37> 107,560
375,000 Liberty Mutual Insurance
Notes, 7.70%, 10/15/2097
(Acquired 03/26/2003;
Cost $239,982)*<F37> 354,970
100,000 Marsh & McLennan
Companies, Inc.,
5.38%, 07/15/2014 93,108
50,000 Met Life Global Funding I
Notes, 4.75%, 06/20/2007
(Acquired 09/15/2004,
Cost $51,556)*<F37> 49,357
100,000 Principal Financial Group
(AU) Senior Notes,
8.20%, 08/15/2009
(Acquired 09/16/2005,
Cost $112,015)*<F37> F<F38> 106,684
100,000 Residential Capital
Corporation,
6.38%, 06/30/2010 98,639
100,000 Transamerica Capital II:
7.65%, 12/01/2026
(Acquired 10/21/2003,
Cost $108,381)*<F37> 107,006
457,000 Washington Mutual
Capital I,
8.38%, 06/01/2027 482,933
-----------
2,356,475
-----------
INDUSTRIAL - 21.0%
100,000 AT&T Wireless Services,
Inc. Senior Notes,
8.75%, 03/01/2031 122,602
533,341 Atlas Air, Inc.
Pass Thru Certificates,
8.71%, 07/02/2021 553,341
Bunge Ltd. Finance
Corporation Notes:
150,000 5.35%, 04/15/2014 139,726
100,000 5.10%, 07/15/2015 90,277
375,000 Clear Channel
Communications,
4.50%, 01/15/2010 353,274
Continental Airlines, Inc.
Pass Thru Certificates:
347 7.42%, 04/01/2007 336
57,314 6.80%, 07/02/2007 55,568
154,775 8.31%, 04/02/2011 146,700
74,127 6.90%, 01/02/2018 74,422
100,000 Cox Communications Inc.
Notes, 7.88%, 08/15/2009 105,062
462,000 Delta Air Lines, Inc.
Pass Thru Certificates,
9.50%, 11/18/2008
(Acquired 11/24/2004,
Cost $462,000)*<F37> ^<F36> @<F35> 463,155
100,000 Deutsche Telekom
International Finance BV,
8.25%, 06/15/2030 F<F38> 115,455
250,000 Dollar General Corporation,
8.63%, 06/15/2010 263,125
400,000 Ford Motor Company
Debentures,
9.22%, 09/15/2021 316,000
General Motors Acceptance
Corporation Notes:
75,000 7.75%, 01/19/2010 74,613
150,000 6.75%, 12/01/2014 139,323
175,000 General Motors Nova
Scotia Finance Company,
6.85%, 10/15/2008 165,813
150,000 Hutchison Whampoa
International Limited,
6.25%, 01/24/2014
(Acquired 06/23/2005;
Cost $161,474)*<F37> F<F38> 149,379
250,000 Marathon Oil Corporation
Debentures,
9.13%, 01/15/2013 291,531
262,500 The May Department
Stores Companies
Debentures,
9.75%, 02/15/2021 305,225
533,570 Northwest Airlines, Inc.,
7.25%, 01/02/2012 69,364
200,000 PCCW Capital II Ltd.,
6.00%, 07/15/2013
(Acquired 07/10/2003,
Cost $199,066)*<F37> F<F38> 189,691
100,000 Sprint Capital Corporation:
8.75%, 03/15/2032 120,590
250,000 Sungard Data Systems Inc.
Notes, 3.75%, 01/15/2009 231,563
175,000 TCI Communications,
Inc. Debentures:
7.88%, 08/01/2013 188,520
200,000 Telefonica Emisiones,
S.A.U.
6.42%, 06/20/2016 F<F38> 199,585
300,000 Time Warner, Inc.,
7.63%, 04/15/2031 323,017
25,000 Time Warner
Entertainment Senior
Notes, 8.88%, 10/01/2012 28,111
50,000 Tyco International Group
S.A., 6.00%, 11/15/2013 F<F38> 49,535
530,392 United AirLines, Inc.
Pass Thru Certificates,
6.20%, 09/01/2008 530,392
158,000 Univision Communication,
Inc., 3.50%, 10/15/2007 152,704
100,000 Vale Overseas Limited,
8.25%, 01/17/2034 107,875
150,000 Viacom, Inc.,
7.70%, 07/30/2010 159,572
150,000 Viacom, Inc. Senior Notes,
6.25%, 04/30/2016
(Acquired 04/05/2006,
Cost $149,342)*<F37> 145,612
100,000 Wharf International
Finance Ltd,
7.63%, 03/13/2007 F<F38> 101,218
-----------
6,522,276
-----------
UTILITIES - 6.5%
150,000 Energy Transfer Partners,
5.65%, 08/01/2012 144,758
350,000 Kinder Morgan Energy
Partners Senior Notes,
5.35%, 08/15/2007 345,609
88,132 Kiowa Power Partners LLC,
4.81%, 12/30/2013
(Acquired 11/19/2004;
Cost $88,132)*<F37> 83,868
400,000 ONEOK, Inc. Senior
Notes, 7.13%, 04/15/2011 414,039
50,000 Pacific Gas & Electric
Company 1st Mortgage,
6.05%, 03/01/2034 47,191
200,000 PSE&G Energy Holdings
LLC Senior Notes,
8.50%, 06/15/2011 210,000
50,000 PSI Energy, Inc.
Debentures,
7.85%, 10/15/2007 51,215
297,085 RGS (I&M) Funding
Corporation Debentures,
9.82%, 12/07/2022 359,529
100,000 Tristate Gen & Trans Assn,
6.04%, 01/31/2018
(Acquired 10/14/2003;
Cost $100,000)*<F37> 98,089
Williams Cos. Inc. Notes,
50,000 7.13%, 09/01/2011 50,000
200,000 7.88%, 09/01/2021 203,000
-----------
2,007,298
-----------
MORTGAGE BACKED SECURITIES - 28.6%
240,603 Bank of America
Alternative Loan Trust:
Series 2005-2, Class 4A1,
5.50%, 03/25/2020 237,135
Federal Gold Loan
Mortgage Corporation
(FGLMC):
121,162 6.00%, 05/01/2017 121,388
286,304 5.00%, 12/01/2020 275,649
90,319 6.50%, 09/01/2028 91,297
149,269 6.50%, 12/01/2028 150,885
108,002 6.50%, 05/01/2029 109,183
108,652 6.50%, 06/01/2029 109,840
Federal Home Loan
Mortgage Corporation
(FHLMC):
235,489 Series R001, Class AE,
4.38%, 04/15/2015 227,068
400,000 Series 2567, Class OD,
5.00%, 08/15/2015 394,694
378,417 Series 2539, Class QB,
5.00%, 09/15/2015 374,143
393,380 Series 3122, Class VA,
6.00%, 01/15/2017 394,228
24,474 Series 1053, Class G,
7.00%, 03/15/2021 24,440
53,408 Series 136, Class E,
6.00%, 04/15/2021 53,205
300,000 Series 2673, Class NC,
5.50%, 05/15/2021 294,978
276,430 Series 2804, Class VC,
5.00%, 07/15/2021 262,484
50,736 Series 1122, Class G,
7.00%, 08/15/2021 50,641
112,253 Series 1186, Class I,
7.00%, 12/15/2021 114,215
250,000 Series 2598, Class QC,
4.50%, 06/15/2027 243,363
94,158 Series 2531, Class N,
4.00%, 07/15/2027 92,615
Federal National Mortgage
Association (FNMA):
337,171 5.00%, 02/01/2018 325,472
236,796 5.00%, 10/01/2018 228,569
235,258 5.00%, 11/01/2018 227,084
181,226 5.50%, 03/01/2023 176,440
317,691 5.50%, 07/01/2023 309,301
71,328 6.50%, 09/01/2028 72,060
124,287 6.50%, 02/01/2029 125,562
261,382 5.50%, 01/01/2032 252,212
257,165 5.50%, 02/01/2035 247,663
283,159 5.50%, 02/01/2035 272,697
295,043 5.50%, 04/01/2036 283,587
400,000 Series 2002-82, Class XC,
5.00%, 05/25/2014 396,202
38,770 Series 2002-70, Class PL,
5.00%, 04/25/2015 38,610
300,000 Series 2003-16, Class PC,
5.00%, 10/25/2015 294,678
23,788 Series 1989-94, Class G,
7.50%, 12/25/2019 24,747
29,577 Series 1990-15, Class J,
7.00%, 02/25/2020 30,259
80,721 Series 1990-76, Class G,
7.00%, 07/25/2020 80,964
18,402 Series 1991-21, Class J,
7.00%, 03/25/2021 18,837
427,190 Series 1992-129, Class L,
6.00%, 07/25/2022 427,777
135,368 Series 1993-32, Class H,
6.00%, 03/25/2023 133,742
168,690 Series 1993-58, Class H,
5.50%, 04/25/2023 166,579
356,587 Series 2003-31, Class KG,
4.50%, 12/25/2028 350,952
63,503 Series 2003-44, Class AB,
3.75%, 05/25/2033 58,146
Government National
Mortgage Association
(GNMA):
201,553 6.00%, 12/20/2028 200,040
73,802 6.50%, 01/20/2029 74,652
189,429 6.00%, 11/20/2033 187,690
245,591 Master Alternative Loans
Trust, Series 2003-5, Class
6A1, 6.00%, 08/25/2033 242,061
-----------
8,868,034
-----------
INTERNATIONAL (U.S. $ DOMINATED) - 1.4%
400,000 PEMEX Project Funding
Master Trust:
9.13%, 10/13/2010 F<F38> 438,000
-----------
TAXABLE MUNICIPAL BONDS - 1.0%
326,212 Tobacco Settlement
Financing Corporation:
6.36%, 05/15/2025 325,135
-----------
U.S. GOVERNMENT AGENCY ISSUES - 1.8%
525,000 Federal National Mortgage
Association (FNMA),
7.25%, 01/15/2010 554,799
-----------
U.S. TREASURY OBLIGATIONS - 19.2%
U.S. Treasury Bonds:
225,000 9.25%, 02/15/2016 293,686
1,800,000 9.13%, 05/15/2018 2,410,454
2,950,000 6.25%, 08/15/2023 3,253,529
-----------
5,957,669
-----------
Total Long-Term
Investments
(Cost $30,333,955) 29,373,228
-----------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 25.0%
(Cost $7,759,174)
(Please Refer to Note 6) 7,759,174
-----------
SHORT-TERM INVESTMENTS - 4.4%
MONEY MARKET FUNDS - 4.4%
1,368,199 Short-Term Investment
Company Liquid Asset
Portfolio - AIM Fund 1,368,199
-----------
Total Short-Term
Investments
(Cost $1,368,199) 1,368,199
-----------
Total Investments
(Cost $39,461,328) -
124.0% 38,500,601
-----------
Liabilities in Excess of
Other Assets - (24.0)% (7,455,178)
-----------
TOTAL NET
ASSETS - 100.0% $31,045,423
-----------
-----------
@<F35> Security in Default
^<F36> Non Income Producing
*<F37> Unregistered Security
F<F38> Foreign Securities
See notes to the financial statements
BAIRD SHORT-TERM BOND FUND
JUNE 30, 2006
The Baird Short-Term Bond Fund seeks 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*<F39>
- --------------------------
U.S. Treasury 7%
U.S. Gov't Agency 28%
AAA 21%
AA 6%
A 14%
BBB 23%
Below BBB 1%
SECTOR WEIGHTINGS*<F39>
- -----------------------
Asset-Backed 10%
Financials 20%
Industrials 16%
Utilities 6%
Mortgage-Backed 16%
International 1%
Municipal 2%
U.S. Gov't Agency 20%
U.S. Treasuries 7%
Cash 2%
NET ASSETS: $128,135,573
SEC 30-DAY YIELD:**<F40>
Institutional Class: 5.32%
AVERAGE EFFECTIVE DURATION: 1.78 years
AVERAGE EFFECTIVE MATURITY: 2.00 years
ANNUALIZED EXPENSE RATIO:
Institutional Class: 0.30%
PORTFOLIO TURNOVER RATIO:***<F41> 16.5%
TOTAL NUMBER OF HOLDINGS: 174
*<F39> Percentages shown are based on the Fund's total net assets.
**<F40> SEC yields are based on SEC guidelines and are calculated for the 30
days ended June 30, 2006.
***<F41> Not annualized.
BAIRD SHORT-TERM BOND FUND
AVERAGE ANNUAL TOTAL RETURNS
For the Periods Ended June 30, 2006 ONE YEAR SINCE INCEPTION(1)<F42>
- ----------------------------------- -------- -----------------------
Baird Short-Term Bond Fund -
Institutional Class 2.13% 1.78%
Lehman Brothers 1-3 Year
Government/Credit Bond Index(2)<F43> 1.92% 1.60%
(1)<F42> For the period from August 31, 2004 (commencement of operations) to
June 30, 2006.
(2)<F43> 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. This index does not reflect any
deduction for fees, expenses or taxes. A direct investment in an
index is not possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Principal
Amount Value
--------- -----
LONG-TERM INVESTMENTS - 95.4%
ASSET BACKED SECURITIES - 8.5%
$ 400,000 AESOP Funding II LLC,
Series 2005-1A, Class A1,
3.95%, 04/20/2008 $ 388,831
500,000 Bayview Financial
Acquisition Trust,
Series 2005-B, Class 1A2,
4.70%, 04/28/2039 492,523
120,000 Chase Manhattan
Auto Owner Trust,
Series 2003-C, Class A4,
2.94%, 06/15/2010 117,158
CitiFinancial Mortgage
Securities, Inc.:
35,595 Series 2003-3, Class AF2,
3.08%, 08/25/2033 35,459
1,000,000 Series 2004-1, Class AF2,
2.65%, 04/25/2034 955,995
400,000 CNH Equipment Trust,
Series 2005-A, Class A3,
4.02%, 04/15/2009 394,606
Countrywide Asset-Backed
Certificates:
1,153,000 Series 2005-12, Class 1A2,
4.85%, 02/25/2036 1,134,591
1,000,000 Series 2005-10, Class AF2,
4.49%, 02/25/2036 982,205
725,000 Series 2005-13, Class AF2,
5.29%, 04/25/2036 718,267
211,557 Educational Enhancement
Funding Corporation,
6.72%, 06/01/2025 210,505
500,000 Ford Credit
Auto Owner Trust,
Series 2005-B, Class A4,
4.38%, 01/15/2010 489,351
976,715 Green Tree Financial
Corporation,
Series 1998-3, Class A5,
6.22%, 03/012030 937,683
138,298 Household Automobile
Trust, Series 2003-1,
2.22%, 11/17/2009 135,686
300,000 MBNA Credit Card
Master Note Trust,
Series 2003-A3, Class A3,
2.93%, 08/15/2010 300,576
914,545 Merrill Lynch Mortgage
Investors Inc., Series
2005-A8, Class A1C1,
5.25%, 08/25/2036 900,271
188,293 New Century Home
Equity Loan Trust,
Series 2003-5, Class AI3,
3.56%, 11/25/2033 187,427
16,977 Renaissance Home
Equity Loan Trust,
Series 2004-3, Class AF2,
3.57%, 11/25/2034 16,915
Residential Asset Mortgage
Products, Inc.:
700,000 Series 2004-RS12, Class
AI3, 3.98%, 04/25/2029 690,552
410,000 Series 2003-RS7, Class
AI6, 5.34%, 08/25/2033 400,767
Residential Asset
Securities Corporation:
214,146 Series 2003-KS9, Class
AI3, 3.25%, 12/25/2028 212,590
496,709 Series 2004-KS2, Class
AI3, 3.02%, 05/25/2029 492,041
183,840 Series 2003-KS10, Class
AI3, 3.25%, 05/25/2029 183,057
118,229 Series 2004-KS4, Class
AI3, 3.08%, 08/25/2029 115,908
344,771 Residential Funding
Mortgage Securities,
Series 2003-HS3, Class
AI2, 3.15%, 07/25/2018 338,280
------------
10,831,244
------------
FINANCIAL - 19.6%
880,000 ABN-AMRO Bank NV,
7.00%, 04/01/2008 897,155
250,000 Ahmanson Capital Trust I
Bonds, 8.36%, 12/01/2026
(Acquired 08/25/2005,
Cost $270,190)*<F45> 261,509
905,000 Allfirst Financial, Inc.
Subordinated Notes:
7.20%, 07/01/2007 914,055
140,000 American General Finance
Corporation Notes,
4.50%, 11/15/2007 137,896
594,000 Bank of Oklahoma
Subordinated Notes,
7.13%, 08/15/2007 601,773
251,000 Bank United Notes,
8.00%, 03/15/2009 263,832
472,000 Bankers Trust Corporation
Subordinated Notes,
7.38%, 05/01/2008 486,345
110,000 BB&T Corporation
Subordinated Notes,
7.25%, 06/15/2007 111,385
623,000 Block Financial
Corporation Notes,
8.50%, 04/15/2007 634,292
1,100,000 BNY Capital I
Notes, Series B,
7.97%, 12/31/2026 1,152,585
500,000 Capital One Bank Notes,
4.88%, 05/15/2008 492,593
450,000 Caremark RX Inc. Senior
Notes, 7.38%, 10/01/2006 451,573
100,000 Chubb Corporation Senior
Notes, 7.13%, 12/15/2007 101,815
210,000 CIT Group Inc. Senior
Notes, 5.50%, 11/30/2007 209,306
848,000 Citicorp Capital II Notes,
8.02%, 02/15/2027 890,701
200,000 Citicorp Subordinated
Notes, 7.00%, 07/01/2007 202,097
375,000 Citifinancial Debentures,
10.00%, 05/15/2009 416,880
675,000 Comerica Incorporated
Subordinated Notes,
7.25%, 08/01/2007 684,096
550,000 Compass Bank
Subordinated Notes,
8.10%, 08/15/2009 589,276
388,000 Corestates Capital Trust I,
8.00%, 12/15/2026
(Acquired 01/26/2006 &
06/05/2006, Cost $211,938
& $196,930 respectively)*<F45> 405,527
500,000 Countrywide Home Loans
Notes, 4.13%, 09/15/2009 475,499
537,000 Credit Suisse First Boston
USA Inc. Senior Notes,
6.50%, 06/01/2008 543,957
500,000 Executive Risk Capital
Trust, 8.68%, 02/01/2027 526,401
200,000 Franchise Finance
Corporation Notes,
7.07%, 01/15/2008 204,042
273,000 The Goldman Sachs
Group, Inc. Senior
Unsubordinated Notes,
7.80%, 01/28/2010 290,430
400,000 HSBC Finance
Corporation Notes,
6.88%, 03/01/2007 402,546
500,000 ING Security Life
Institutional Funding
Notes, 2.70%, 02/15/2007
(Acquired 05/26/2005;
Cost $488,370)*<F45> 489,877
200,000 J.P. Morgan &
Company Incorporated
Subordinated Notes,
6.70%, 11/01/2007 202,187
575,000 Key Bank NA
Subordinated Notes,
6.50%, 10/15/2027 583,020
400,000 Lehman Brothers
Holdings, Inc. Notes,
3.50%, 08/07/2008 382,890
1,335,000 MBNA Capital Series A,
8.28%, 12/01/2026 1,399,571
500,000 MBNA Corporation Notes,
6.25%, 01/17/2007 501,607
250,000 Mellon Capital I Series A,
7.72%, 12/01/2026 261,115
180,000 Merrill Lynch & Co, Inc.,
7.00%, 01/15/2007 181,344
200,000 Met Life Global Funding I
Notes, 4.75%, 06/20/2007
(Acquired 02/11/2005;
Cost $203,862)*<F45> 197,428
200,000 Morgan Stanley Group,
Inc. Debentures,
8.33%, 01/15/2007 202,728
720,000 NB Capital Trust IV,
8.25%, 04/15/2027 757,301
625,000 New York Life
Global Funding,
3.88%, 01/15/2009
(Acquired 01/23/2006,
Cost $608,075)*<F45> 598,878
700,000 Phoenix Companies,
6.68%, 02/16/2008 701,679
633,000 PNC Financial Services
Subordinated Notes,
9.65%, 06/15/2009 698,002
180,000 PNC Funding Corporation,
6.13%, 02/15/2009 181,852
Principal Life Global:
150,000 5.13%, 06/28/2007
(Acquired 12/28/2004,
Cost $154,880)*<F45> 148,981
275,000 3.63%, 04/30/2008
(Acquired 08/17/2005,
Cost $268,452)*<F45> 264,993
1,050,000 Providian Capital I,
9.53%, 02/01/2027
(Acquired 10/19/2005 and
10/20/2005, Cost $438,724
and $712,517 respectively)*<F45> 1,115,061
300,000 Reliastar Financial Notes,
8.00%, 10/30/2006 302,115
155,000 Republic New York
Corporation
Subordinated Notes,
9.70%, 02/01/2009 169,720
487,000 SAFECO Corporation
Senior Notes,
6.88%, 07/15/2007 491,971
200,000 Transamerica Corporation
Debentures,
9.38%, 03/01/2008 209,657
1,000,000 Unitrin, Inc. Senior Notes,
5.75%, 07/01/2007 995,669
162,000 Washington Mutual, Inc.
Notes, 7.50%, 08/15/2006 162,339
313,000 Wells Fargo & Company
Subordinated Notes,
6.25%, 04/15/2008 315,756
211,000 Westdeutsche Landesbank
Subordinated Notes,
4.80%, 07/15/2015 195,853
1,000,000 Zurich Capital Trust I
8.38%, 06/01/2037
(Acquired 04/06/2006;
Cost $1,065,970)*<F45> 1,057,124
------------
25,116,284
------------
INDUSTRIAL - 16.1%
306,000 Bell Telephone Co.
Pennsylvania Debentures,
7.38%, 07/15/2007 310,379
150,000 BellSouth
Telecommunication
Debentures,
5.88%, 01/15/2009 150,150
1,000,000 Bunge Limited
Finance Corporation,
4.38%, 12/15/2008 964,676
700,000 Cadbury Schweppes
U.S. Finance Notes,
3.88%, 10/01/2008
(Acquired 08/30/2005,
Cost $685,461)*<F45> 671,156
55,000 Cendant Corporation
Senior Notes
6.25%, 01/15/2008 55,494
405,000 Centex Corporation
Subordinated Debentures,
8.75%, 03/01/2007 410,672
500,000 Clear Channel
Communication Senior
Notes, 3.13%, 02/01/2007 491,965
200,000 Comcast Cable
Communications, Inc.
Notes, 6.20%, 11/15/2008 201,980
386,000 Cooper Cameron
Corporation Senior Notes,
2.65%, 04/15/2007 375,203
479,000 Devon Energy
Corporation Debentures,
10.13%, 11/15/2009 536,062
1,000,000 Donnelley (R.R.) & Sons
Notes, 3.75%, 04/01/2009 941,899
1,000,000 FMC Corporation Notes,
7.00%, 05/15/2008 1,017,368
1,000,000 Fiserv Inc.,
3.00%, 06/27/2008 944,347
300,000 Ford Motor Credit
Company Senior Notes,
4.95%, 01/15/2008 282,408
General Motors Acceptance
Corporation Notes:
200,000 6.13%, 09/15/2006 199,705
250,000 6.13%, 08/28/2007 247,385
Halliburton
Company Notes:
225,000 5.63%, 12/01/2008 224,340
250,000 5.50%, 10/15/2010 247,636
260,000 Harrahs Operating
Company Inc.,
7.13%, 06/01/2007 262,329
International Paper
Company Notes:
500,000 7.00%, 08/15/2006 500,917
250,000 7.63%, 01/15/2007 251,638
500,000 6.50%, 11/15/2007 503,471
1,000,000 John Deere Capital
Corporation Senior Notes,
4.88%, 03/16/2009 980,393
600,000 Johnson Controls
Inc. Notes,
6.30%, 02/01/2008 603,328
310,000 Marathon Oil
Corporation Notes:
463,000 5.38%, 06/01/2007 309,049
6.85%, 03/01/2008 471,500
450,000 News America Holdings,
7.38%, 10/17/2008 465,248
402,000 Southwestern
Bell Telephone
Company Notes,
6.63%, 07/15/2007 405,115
Sprint Capital
Corporation Notes:
175,000 6.00%, 01/15/2007 175,235
500,000 6.38%, 05/01/2009 507,833
1,000,000 Telecom Italia Capital,
4.00%, 11/15/2008 F<F46> 959,289
773,000 Telus Corporation Notes,
7.50%, 06/01/2007 F<F46> 784,313
255,000 Time Warner
Companies, Inc.,
8.18%, 08/15/2007 261,612
750,000 Time Warner Companies,
Inc. Debentures,
7.48%, 01/15/2008 767,978
785,767 United AirLines, Inc.
Pass Thru Certificates:
Series 2001-1,
6.20%, 09/01/2008 785,767
1,050,000 Univision
Communication, Inc.,
3.50%, 10/15/2007 1,014,802
500,000 Viacom, Inc.,
5.63%, 05/01/2007 499,457
784,000 Waste Management Inc.
Notes, 7.00%, 10/15/2006 786,676
1,000,000 Wharf International
Finance Ltd,
7.63%, 03/13/2007 F<F46> 1,012,179
------------
20,580,954
------------
UTILITIES - 5.9%
Baltimore Gas & Electric
Company Notes,
300,000 5.25%, 12/15/2006 299,250
1,000,000 5.78%, 10/01/2008 997,757
705,000 Cilcorp Inc. Senior Notes,
8.70%, 10/15/2009 760,058
1,000,000 Commonwealth Edison
Notes, 7.63%, 01/15/2007 1,008,337
189,000 FPL Group Capital, Inc.
Notes, 7.63%, 09/15/2006 189,667
220,000 Indiana Michigan Power
Company Senior
Notes, Series C,
6.13%, 12/15/2006 220,285
211,000 Jersey Central Power
& Light Company
1st Mortgage,
6.85%, 11/27/2006 211,803
1,000,000 Kinder Morgan Energy
Partners Senior Notes,
6.30%, 02/01/2009 1,004,469
MidAmerican Energy
Holdings Company
Senior Notes,
200,000 4.63%, 10/01/2007 197,212
575,000 7.63%, 10/15/2007 587,302
500,000 7.52%, 09/15/2008 517,078
245,000 PanEnergy Corporation
Notes, 7.00%, 10/15/2006 245,323
200,000 Public Service Electric
& Gas Co. Notes,
6.25%, 01/01/2007 200,674
250,000 Sempra Energy Senior
Notes, 4.62%, 05/17/2007 247,564
860,000 System Energy Resources
1st Mortgage,
4.88%, 10/01/2007 846,692
------------
7,533,471
------------
MORTGAGE BACKED SECURITIES - 15.6%
1,197,001 Bank of America
Alternative Loan Trust:
Series 2003-4, Class 2A1,
5.00%, 06/25/2018 1,162,441
Citicorp Mortgage
Securities, Inc.,
289,038 Series 2003-11, Class 2A8,
5.50%, 12/25/2033 283,224
849,898 Series 2004-3, Class A2,
5.25%, 05/25/2034 825,005
492,469 Series 2004-4, Class A2,
5.25%, 06/25/2034 474,734
1,835,945 Countrywide Alternative
Loan Trust, Series
2005-50CB, Class 4A1,
5.00%, 11/25/2020 1,798,997
2,000,000 Deutsche Alternative
Securities Inc. Mortgage,
Series 2005-4, Class A2,
5.05%, 09/25/2035 1,972,701
Federal Home Loan
Mortgage Corporation
(FHLMC):
139,547 Series 2548, Class HA,
4.50%, 01/15/2010 136,926
223,638 Series 2835, Class VK,
5.50%, 11/15/2012 221,547
687,821 Series 3033, Class LU,
5.50%, 03/15/2013 685,306
1,171,556 Series 3124, Class VP,
6.00%, 06/15/2014 1,178,260
200,000 Series 2592, Class PD,
5.00%, 07/15/2014 197,338
340,761 Series 2789, Class VM,
5.50%, 04/15/2015 336,845
1,000,000 Series 2390, Class PW,
6.00%, 04/15/2015 1,002,797
334,234 Series 2541, Class JB,
5.00%, 02/15/2016 329,968
Federal National Mortgage
Association (FNMA):
833,048 5.50%, 07/01/2015 820,314
200,000 Series 2003-4, Class PC,
5.00%, 12/25/2014 197,687
821,596 Series 2002-74, Class TC,
5.00%, 03/25/2015 813,027
315,004 Series 2002-70, Class PL,
5.00%, 04/25/2015 313,706
1,175,000 Series 2003-24, Class LC,
5.00%, 12/25/2015 1,154,537
250,000 Series 2002-94, Class BG,
5.00%, 04/25/2016 247,223
314,957 Series 2002-77, Class QP,
5.00%, 09/25/2026 312,065
600,372 Series 2004-W6, Class 1A4,
5.50%, 07/25/2034 594,735
1,000,000 Series 2004-W10, Class
A24, 5.00%, 08/25/2034 974,589
2,000,000 J.P. Morgan Alternative
Loan Trust:
Series 2006-S2, Class A2,
5.81%, 05/25/2036 1,983,987
1,200,000 Residential Accredit Loans
Inc., Series 2003-QS17,
Class CB3, 5.50%,
09/25/2033 1,190,344
786,823 Washington Mutual, Inc.,
Series 2004-CB4, Class
21A, 5.50%, 12/25/2019 778,635
------------
19,986,938
------------
INTERNATIONAL (U.S. $ DOMINATED) - 0.7%
175,000 Export-Import Bank
Korea Notes, 4.63%,
03/16/2010 F<F46> 167,452
600,000 Korea Development
Bank Notes,
3.88%, 03/02/2009 F<F46> 571,304
200,000 PEMEX Project Funding
Master Trust:
6.13%, 08/15/2008 F<F46> 199,600
------------
938,356
------------
TAXABLE MUNICIPAL BONDS - 1.8%
190,000 Erie, Pennsylvania
General Obligation,
5.60%, 11/15/2007 190,065
450,000 New Jersey Economic
Development Authority,
0.00%, 02/15/2007 ^<F44> ETM 435,361
605,000 Redding California
Redevelopment Agency
Tax Allocation,
6.00%, 09/01/2010 610,814
1,104,101 Tobacco Settlement
Financing Corporation,
Series 2001-A, Class A,
6.36%, 05/15/2025 1,100,458
------------
2,336,698
------------
U.S. GOVERNMENT AGENCY ISSUES - 20.2%
1,000,000 Federal Home
Loan Bank (FHLB),
4.70%, 10/07/2010 967,251
Federal National Mortgage
Association (FNMA):
9,675,000 2.38%, 02/15/2007 9,490,169
500,000 6.00%, 05/15/2008 504,537
10,850,000 7.25%, 01/15/2010 11,465,846
2,700,000 6.00%, 05/15/2011 2,758,193
750,000 Government Backed
Trusts, Series T-1
0.00%, 11/15/2006 ^<F44> 736,092
------------
25,922,088
------------
U.S. TREASURY OBLIGATIONS - 7.0%
U.S. Treasury Note:
3,800,000 3.00%, 12/31/2006 3,757,398
5,025,000 6.00%, 08/15/2009 5,150,429
------------
8,907,827
------------
Total Long-Term
Investments
(Cost $123,857,918) 122,153,860
------------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 28.8%
(Cost $36,943,281)
(Please Refer to Note 6) 36,943,281
------------
SHORT-TERM INVESTMENTS - 3.4%
MONEY MARKET FUNDS -3.4%
4,343,531 Short-Term Investment
Company Liquid Asset
Portfolio - AIM Fund 4,343,531
------------
Total Short-Term
Investments
(Cost $4,343,531) 4,343,531
------------
Total Investments
(Cost $165,144,730) -
127.6% 163,440,672
------------
Liabilities in Excess of
Other Assets - (27.6)% (35,305,099)
------------
TOTAL NET
ASSETS - 100.00% $128,135,573
------------
------------
^<F44> Non-Income Producing Security
*<F45> Unregistered Security
F<F46> Foreign Security
ETM Escrow to Maturity
See notes to the financial statements
BAIRD FUNDS, INC.
ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2006 (UNAUDITED)
EXAMPLE
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemption fees; and exchange fees; and (2)
ongoing costs, such as management fees; distribution and/or service (12b-1)
fees; and other fund 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 Funds' transfer agent. If
you request that a redemption be made by wire transfer, currently the Funds'
transfer agent charges a $15.00 fee.
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
(1/1/06 - 6/30/06).
ACTUAL EXPENSES
The third and fourth columns of the table below provide information about
account values based on actual returns and actual expenses. 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 fourth column entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fifth and sixth 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 sixth column of the
table (entitled "Expenses Paid During Period") 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, 2006
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> 1/1/06 6/30/06 PERIOD(1)<F47> 6/30/06 PERIOD(1)<F47>
------------- --------- ------- -------------- ------- --------------
BAIRD INTERMEDIATE BOND FUND
Institutional Class 0.30% $1,000.00 $1,000.50 $1.49 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $ 999.20 $2.73 $1,022.07 $2.76
BAIRD AGGREGATE BOND FUND
Institutional Class 0.30% $1,000.00 $ 995.30 $1.48 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $ 995.00 $2.72 $1,022.07 $2.76
BAIRD INTERMEDIATE MUNICIPAL
BOND FUND
Institutional Class 0.30% $1,000.00 $ 998.50 $1.49 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $ 998.20 $2.72 $1,022.07 $2.76
BAIRD CORE PLUS BOND FUND
Institutional Class 0.30% $1,000.00 $1,002.70 $1.49 $1,023.31 $1.51
Investor Class 0.55% $1,000.00 $1,002.30 $2.73 $1,022.07 $2.76
BAIRD SHORT-TERM BOND FUND
Institutional Class 0.30% $1,000.00 $1,013.10 $1.50 $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, 2006 (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 (cost $312,878,806;
$261,936,665; $76,625,165; $34,963,839
& $143,731,104 respectively) $305,181,073 $255,051,663 $75,279,625 $34,003,112 $142,027,046
Repurchase agreements
(cost $44,254,856; $22,943,342; $0;
$4,497,489; & $21,413,626 respectively) 44,254,856 22,943,342 -- 4,497,489 21,413,626
Interest receivable 4,061,504 2,787,011 1,132,973 387,296 1,663,452
Receivable for investments sold 11,951 -- -- 284,160 --
Receivable for Fund shares sold 21,521,184 138,778 136,327 11,097 473,364
------------ ------------ ----------- ----------- ------------
Total assets 375,030,568 280,920,794 76,548,925 39,183,154 165,577,488
------------ ------------ ----------- ----------- ------------
LIABILITIES:
Payable for collateral
received for securities loaned 76,349,498 39,582,381 0 7,759,174 36,943,281
Payable for securities purchased 16,511,927 535,271 1,362,654 -- 424,025
Payable for Fund shares repurchased -- 4,546,528 -- 35,363 42,865
Payable to Advisor and Distributor 65,044 59,217 22,252 7,800 31,744
Payable to the Custodian 11,432 10,573 -- 300,352 --
Other liabilities -- 8,495 -- 35,042 --
------------ ------------ ----------- ----------- ------------
Total liabilities 92,937,901 44,742,465 1,384,906 8,137,731 37,441,915
------------ ------------ ----------- ----------- ------------
NET ASSETS $282,092,667 $236,178,329 $75,164,019 $31,045,423 $128,135,573
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
NET ASSETS CONSIST OF:
Capital stock $291,538,491 $243,586,524 $76,687,652 $32,027,438 $130,073,450
Accumulated undistributed
net investment income 290,315 235,231 53,312 33,150 101,986
Accumulated net realized gain (loss)
on investments sold (2,038,406) (758,424) (231,405) (54,438) (335,805)
Net unrealized appreciation (depreciation)
on investments (7,697,733) (6,885,002) (1,345,540) (960,727) (1,704,058)
------------ ------------ ----------- ----------- ------------
NET ASSETS $282,092,667 $236,178,329 $75,164,019 $31,045,423 $128,135,573
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
INSTITUTIONAL CLASS SHARES
Net Assets $280,422,343 $235,042,958 $74,047,017 $30,748,218 $128,135,573
Shares outstanding ($0.01 par value,
unlimited shares authorized) 27,199,573 22,945,566 7,144,776 3,131,988 13,178,894
Net asset value, offering and
redemption price per share $ 10.31 $ 10.24 $ 10.36 $ 9.82 $ 9.72
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
INVESTOR CLASS SHARES
Net Assets $ 1,670,324 $ 1,135,371 $ 1,117,002 $ 297,205
Shares outstanding
($0.01 par value, unlimited shares authorized) 157,267 108,557 105,826 29,525
Net asset value, offering and
redemption price per share $ 10.62 $ 10.46 $ 10.56 $ 10.07
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2006 (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 $ 6,404,987 $ 6,240,576 $ 1,340,738 $ 839,547 $2,578,968
Income from securities lending 15,544 10,357 -- 1,396 6,954
----------- ----------- ----------- --------- ----------
Total investment income 6,420,531 6,250,933 1,340,738 840,943 2,585,922
----------- ----------- ----------- --------- ----------
EXPENSES:
Investment advisory fee 312,892 292,617 83,378 36,337 140,885
Administration fee 62,578 58,524 16,676 7,268 28,177
Distribution expense - Investor Class Shares 2,828 1,550 1,654 416 --
----------- ----------- ----------- --------- ----------
Total expenses 378,298 352,691 101,708 44,021 169,062
----------- ----------- ----------- --------- ----------
NET INVESTMENT INCOME 6,042,233 5,898,242 1,239,030 796,922 2,416,860
----------- ----------- ----------- --------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (457,872) (616,273) 3,729 13,074 (199,471)
Change in unrealized appreciation/
depreciation on investments (5,510,887) (6,298,277) (1,386,957) (692,649) (698,497)
----------- ----------- ----------- --------- ----------
Net realized and unrealized
loss on investments (5,968,759) (6,914,550) (1,383,228) (679,575) (897,968)
----------- ----------- ----------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 73,474 $(1,016,308) $ (144,198) $ 117,347 $1,518,892
----------- ----------- ----------- --------- ----------
----------- ----------- ----------- --------- ----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD INTERMEDIATE BOND FUND
-----------------------------------
Period Ended
June 30, 2006 Year Ended
(unaudited) December 31, 2005
------------- -----------------
OPERATIONS:
Net investment income $ 6,042,233 $ 9,443,219
Net realized loss on investments (457,872) (687,811)
Change in unrealized appreciation/depreciation on investments (5,510,887) (4,795,310)
------------ ------------
Net increase in net assets resulting from operations 73,474 3,960,098
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 65,350,439 71,651,001
Shares issued to holders in reinvestment of dividends 5,207,530 8,680,587
Cost of shares redeemed (17,229,103) (34,654,355)
------------ ------------
Net increase in net assets resulting
from capital share transactions 53,328,866 45,677,233
------------ ------------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (5,892,657) (9,464,170)
------------ ------------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (47,482) (118,722)
------------ ------------
TOTAL INCREASE IN NET ASSETS 47,462,201 40,054,439
NET ASSETS:
Beginning of period 234,630,466 194,576,027
------------ ------------
End of period (including undistributed net investment
income of $256,474 and $154,379, respectively) $282,092,667 $234,630,466
------------ ------------
------------ ------------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD AGGREGATE BOND FUND
-----------------------------------
Period Ended
June 30, 2006 Year Ended
(unaudited) December 31, 2005
------------- -----------------
OPERATIONS:
Net investment income $ 5,898,242 $ 6,761,559
Net realized gain (loss) on investments (616,273) 294,456
Change in unrealized appreciation/depreciation on investments (6,298,277) (3,005,159)
------------ ------------
Net increase (decrease) in net assets resulting from operations (1,016,308) 4,050,856
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 42,244,532 119,986,464
Shares issued to holders in reinvestment of dividends 5,076,691 6,520,179
Cost of shares redeemed (32,839,887) (11,028,752)
------------ ------------
Net increase in net assets resulting
from capital share transactions 14,481,336 115,477,891
------------ ------------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (5,681,829) (7,004,294)
From realized gains -- (149,762)
------------ ------------
Total Distributions (5,681,829) (7,154,056)
------------ ------------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (27,195) (43,249)
From realized gains -- (837)
------------ ------------
Total Distributions (27,195) (44,086)
------------ ------------
TOTAL INCREASE IN NET ASSETS 7,756,004 112,330,605
NET ASSETS:
Beginning of period 228,422,325 116,091,720
------------ ------------
End of period (including undistributed net investment
income (loss) of $18,641 and $10,472, respectively) $236,178,329 $228,422,325
------------ ------------
------------ ------------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------
Period Ended
June 30, 2006 Year Ended
(unaudited) December 31, 2005
------------- ----------------
OPERATIONS:
Net investment income $ 1,239,030 $ 1,726,837
Net realized gain (loss) on investments 3,729 (209,761)
Change in unrealized appreciation/depreciation on investments (1,386,957) (847,084)
----------- -----------
Net increase in net assets resulting from operations (144,198) 669,992
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 26,750,499 29,861,346
Shares issued to holders in reinvestment of dividends 973,662 1,440,536
Cost of shares redeemed (6,534,601) (16,406,963)
----------- -----------
Net increase in net assets resulting
from capital share transactions 21,189,560 14,894,919
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (1,183,763) (1,658,407)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (21,094) (83,967)
----------- -----------
TOTAL INCREASE IN NET ASSETS 19,840,505 13,822,537
NET ASSETS:
Beginning of period 55,323,514 41,500,977
----------- -----------
End of period (including undistributed net investment
income of $53,312 and $19,139, respectively) $75,164,019 $55,323,514
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD CORE PLUS BOND FUND
-----------------------------------
Period Ended
June 30, 2006 Year Ended
(unaudited) December 31, 2005
------------- -----------------
OPERATIONS:
Net investment income $ 796,922 $ 1,595,244
Net realized gain on investments 13,074 22,747
Change in unrealized appreciation/depreciation on investments (692,649) (938,103)
----------- -----------
Net increase in net assets resulting from operations 117,347 679,888
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 14,054,945 4,215,390
Shares issued to holders in reinvestment of dividends 527,885 936,473
Cost of shares redeemed (15,503,836) (4,100,728)
Other capital contributions 72 --
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions (920,934) 1,051,135
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (766,166) (1,692,217)
From realized gains -- (21,380)
----------- -----------
Total Distributions (766,166) (1,713,597)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income (7,992) (15,455)
From realized gains -- (291)
----------- -----------
Total Distributions (7,992) (15,746)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,577,745) 1,680
NET ASSETS:
Beginning of period 32,623,168 32,621,488
----------- -----------
End of period (including undistributed net investment
income of $22,765 and $0, respectively) $31,045,423 $32,623,168
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD SHORT-TERM BOND FUND
------------------------------------
Period Ended
June 30, 2006 Year Ended
(unaudited) December 31, 2005
------------- -----------------
OPERATIONS:
Net investment income $ 2,416,860 $ 2,344,937
Net realized loss on investments (199,471) (162,401)
Change in unrealized appreciation/depreciation on investments (698,497) (797,479)
------------ -----------
Net increase in net assets resulting from operations 1,518,892 1,385,057
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 48,730,394 81,066,185
Shares issued to holders in reinvestment of dividends 2,282,162 2,142,819
Cost of shares redeemed (19,125,617) (17,200,778)
------------ -----------
Net increase in net assets resulting
from capital share transactions 31,886,939 66,008,226
------------ -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income (2,328,226) (2,308,315)
------------ -----------
TOTAL INCREASE IN NET ASSETS 31,077,605 65,084,968
NET ASSETS:
Beginning of period 97,057,968 31,973,000
------------ -----------
End of period (including undistributed net investment
income of $124,119 and $40,220, respectively) $128,135,573 $97,057,968
------------ -----------
------------ -----------
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD INTERMEDIATE BOND FUND - INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.55 $ 10.83 $ 10.88 $ 10.86 $ 10.60 $ 10.55
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.25(3) 0.46 0.47(3) 0.49 0.56 0.62(3)
<F50> <F50> <F50>
Net realized and unrealized
gains (losses) on investments (0.25) (0.27) (0.05) 0.14 0.27 0.08(4)
<F51>
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.00 0.19 0.42 0.63 0.83 0.70
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.24) (0.47) (0.47) (0.49) (0.56) (0.62)
Distributions from
net realized gains -- -- (0.00)(2) (0.12) (0.01) (0.03)
<F49>
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.24) (0.47) (0.47) (0.61) (0.57) (0.65)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.31 $ 10.55 $ 10.83 $ 10.88 $ 10.86 $ 10.60
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return 0.05%(5) 1.77% 3.91% 5.89% 8.02% 6.68%
<F52>
Supplemental data and ratios:
Net assets, end of period $280,422,343 $231,800,807 $191,563,699 $149,836,855 $146,236,339 $ 89,682,104
Ratio of expenses
to average net assets 0.30%(6) 0.30% 0.30% 0.30% 0.30% 0.30%
<F53>
Ratio of net investment income
to average net assets 4.83%(6) 4.34% 4.32% 4.39% 5.20% 5.71%
<F53>
Portfolio turnover rate(1)<F48> 17.7%(5) 42.1% 44.8% 64.4% 41.1% 79.5%
<F52>
(1)<F48> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F49> Amount is less than $0.01.
(3)<F50> Calculated using average shares outstanding during the period.
(4)<F51> 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.
(5)<F52> Not annualized.
(6)<F53> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD INTERMEDIATE BOND FUND - INVESTOR CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.86 $ 11.13 $ 11.17 $ 11.13 $ 10.71 $ 10.56
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.24(3) 0.45 0.45(3) 0.48 0.54(3) 0.59(3)
<F56> <F56> <F56> <F56>
Net realized and unrealized
gains (losses) on investments (0.25) (0.28) (0.05) 0.14 0.27 0.08(4)
<F57>
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations (0.01) 0.17 0.40 0.62 0.81 0.67
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.23) (0.44) (0.44) (0.46) (0.38) (0.49)
Distributions from
net realized gains -- -- (0.00)(2) (0.12) (0.01) (0.03)
<F55>
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.23) (0.44) (0.44) (0.58) (0.39) (0.52)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.62 $ 10.86 $ 11.13 $ 11.17 $ 11.13 $ 10.71
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return (0.08)%(5) 1.56% 3.65% 5.61% 7.74% 6.43%
<F58>
Supplemental data and ratios:
Net assets, end of period $ 1,670,324 $ 2,829,659 $ 3,012,328 $ 1,321,648 $ 1,127,162 $ 1,189,191
Ratio of expenses
to average net assets 0.55%(6) 0.55% 0.55% 0.55% 0.55% 0.55%
<F59>
Ratio of net investment income
to average net assets 4.58%(6) 4.09% 4.07% 4.14% 4.95% 5.46%
<F59>
Portfolio turnover rate(1)<F54> 17.7%(5) 42.1% 44.8% 64.4% 41.1% 79.5%
<F58>
(1)<F54> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F55> Amount is less than $0.01.
(3)<F56> Calculated using average shares outstanding during the period.
(4)<F57> 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.
(5)<F58> Not annualized.
(6)<F59> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD AGGREGATE BOND FUND - INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.54 $ 10.74 $ 10.71 $ 10.69 $ 10.51 $ 10.42
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.26(2) 0.49(2) 0.49(2) 0.56 0.62 0.68
<F61> <F61> <F61>
Net realized and unrealized
gains (losses) on investments (0.31) (0.19) 0.07 0.20 0.23 0.17
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations (0.05) 0.30 0.56 0.76 0.85 0.85
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.25) (0.49) (0.50) (0.56) (0.62) (0.67)
Distributions from
net realized gains -- (0.01) (0.03) (0.18) (0.05) (0.09)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.25) (0.50) (0.53) (0.74) (0.67) (0.76)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.24 $ 10.54 $ 10.74 $ 10.71 $ 10.69 $ 10.51
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return (0.47)%(3) 2.85% 5.30% 7.19% 8.30% 8.33%
<F62>
Supplemental data and ratios:
Net assets, end of period $235,042,958 $227,132,399 $115,382,862 $ 91,550,534 $ 87,847,176 $ 83,392,652
Ratio of expenses
to average net assets 0.30%(4) 0.30% 0.30% 0.30% 0.30% 0.30%
<F63>
Ratio of net investment income
to average net assets 5.04%(4) 4.56% 4.58% 4.85% 5.75% 6.33%
<F63>
Portfolio turnover rate(1)<F60> 23.2%(3) 46.0% 72.6% 106.7% 51.2% 79.2%
<F62>
(1)<F60> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F61> Calculated using average shares outstanding throughout the period.
(3)<F62> Not annualized.
(4)<F63> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD AGGREGATE BOND FUND - INVESTOR CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.75 $ 10.95 $ 10.88 $ 10.84 $ 10.57 $ 10.43
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.25(2) 0.47(2) 0.48(2) 0.55 0.60(2) 0.65(2)
<F65> <F65> <F65> <F65> <F65>
Net realized and unrealized
gains (losses) on investments (0.30) (0.19) 0.07 0.19 0.23 0.17
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations (0.05) 0.28 0.55 0.74 0.83 0.82
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.24) (0.47) (0.45) (0.52) (0.51) (0.59)
Distributions from
net realized gains -- (0.01) (0.03) (0.18) (0.05) (0.09)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.24) (0.48) (0.48) (0.70) (0.56) (0.68)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.46 $ 10.75 $ 10.95 $ 10.88 $ 10.84 $ 10.57
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return (0.50)%(3) 2.54% 5.20% 6.95% 8.08% 7.98%
<F66>
Supplemental data and ratios:
Net assets, end of period $ 1,135,371 $ 1,289,926 $ 708,858 $ 719,844 $ 845,481 $ 166,622
Ratio of expenses
to average net assets 0.55%(4) 0.55% 0.55% 0.55% 0.55% 0.55%
<F67>
Ratio of net investment income
to average net assets 4.79%(4) 4.31% 4.33% 4.60% 5.50% 6.08%
<F67>
Portfolio turnover rate(1)<F64> 23.2%(3) 46.0% 72.6% 106.7% 51.2% 79.2%
<F66>
(1)<F64> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F65> Calculated using average shares outstanding during the period.
(3)<F66> Not annualized.
(4)<F67> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD INTERMEDIATE MUNICIPAL BOND FUND - INSTITUTIONAL CLASS
---------------------------------------------------------------------------------------
March 30,
Six Months 2001(1)<F68>
Ended through
June 30, 2006 Year Ended December 31, December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.56 $ 10.81 $ 10.91 $ 10.86 $ 10.25 $ 10.00
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.19(2) 0.39(2) 0.40(2) 0.42(2) 0.43(2) 0.34(2)
<F69> <F69> <F69> <F69> <F69> <F69>
Net realized and unrealized
gains (losses) on investments (0.21) (0.25) (0.11) 0.10 0.64 0.17(3)
<F70>
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations (0.02) 0.14 0.29 0.52 1.07 0.51
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.18) (0.39) (0.39) (0.43) (0.46) (0.25)
Distributions from
net realized gains -- -- -- (0.04) (0.00)(4) (0.01)
<F71>
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.18) (0.39) (0.39) (0.47) (0.46) (0.26)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.36 $ 10.56 $ 10.81 $ 10.91 $ 10.86 $ 10.25
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return (0.15)%(5) 1.33% 2.69% 4.91% 10.72% 5.02%(5)
<F72> <F72>
Supplemental data and ratios:
Net assets, end of period $ 74,047,017 $ 53,831,848 $ 36,889,211 $ 30,234,195 $ 31,221,508 $ 14,448,572
Ratio of expenses
to average net assets 0.30%(6) 0.30% 0.30% 0.30% 0.30% 0.30%(6)
<F73> <F73>
Ratio of net investment income
to average net assets 3.72%(6) 3.64% 3.70% 3.88% 4.11% 4.32%(6)
<F73> <F73>
Portfolio turnover rate(7)<F74> 5.0%(5) 13.7% 4.2% 17.7% 32.6% 14.8%(5)
<F72> <F72>
(1)<F68> Commencement of operations.
(2)<F69> Calculated using average shares outstanding during the period.
(3)<F70> 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.
(4)<F71> Amount is less than $0.01.
(5)<F72> Not annualized.
(6)<F73> Annualized.
(7)<F74> 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 INTERMEDIATE MUNICIPAL BOND FUND - INVESTOR CLASS
---------------------------------------------------------------------------------------
March 30,
Six Months 2001(1)<F75>
Ended Year Ended December 31, through
June 30, 2006 --------------------------------------------------- December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------------
Per Share Data:
Net asset value,
beginning of period $ 10.75 $ 10.99 $ 11.09 $ 11.02 $ 10.27 $ 10.00
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.18(2) 0.37(2) 0.38(2) 0.40(2) 0.41(2) 0.31(2)
<F76> <F76> <F76> <F76> <F76> <F76>
Net realized and unrealized
gains (losses) on investments (0.20) (0.25) (0.12) 0.10 0.64 0.17(3)
<F77>
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations (0.02) 0.12 0.26 0.50 1.05 0.48
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.17) (0.36) (0.36) (0.39) (0.30) (0.20)
Distributions from
net realized gains -- -- -- (0.04) (0.00)(4) (0.01)
<F78>
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.17) (0.36) (0.36) (0.43) (0.30) (0.21)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.56 $ 10.75 $ 10.99 $ 11.09 $ 11.02 $ 10.27
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return (0.18)%(5) 1.13% 2.40% 4.69% 10.46% 4.74%(5)
<F79> <F79>
Supplemental data and ratios:
Net assets, end of period $ 1,117,002 $ 1,491,666 $ 4,611,766 $ 756,792 $ 706,207 $ 624,209
Ratio of expenses
to average net assets 0.55%(6) 0.55% 0.55% 0.55% 0.55% 0.55%(6)
<F80> <F80>
Ratio of net investment income
to average net assets 3.47%(6) 3.39% 3.45% 3.63% 3.86% 4.07%(6)
<F80> <F80>
Portfolio turnover rate(7)<F81> 5.0%(5) 13.7% 4.2% 17.7% 32.6% 14.8%(5)
<F79> <F79>
(1)<F75> Commencement of operations.
(2)<F76> Calculated using average shares outstanding during the period.
(3)<F77> 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.
(4)<F78> Amount is less than $0.01.
(5)<F79> Not annualized.
(6)<F80> Annualized.
(7)<F81> 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 CORE PLUS BOND FUND - INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.06 $ 10.38 $ 10.45 $ 10.45 $ 10.42 $ 10.45
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.27(2) 0.51(2) 0.54 0.56 0.62 0.65
<F83> <F83>
Net realized and unrealized
gains (losses) on investments (0.25) (0.28) 0.10 0.36 0.07 0.05
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.02 0.23 0.64 0.92 0.69 0.70
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.26) (0.54) (0.53) (0.56) (0.62) (0.66)
Distributions from
net realized gains -- (0.01) (0.18) (0.36) (0.04) (0.07)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.26) (0.55) (0.71) (0.92) (0.66) (0.73)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 9.82 $ 10.06 $ 10.38 $ 10.45 $ 10.45 $ 10.42
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return 0.27%(3) 2.23% 6.29% 8.94% 6.90% 6.84%
<F84>
Supplemental data and ratios:
Net assets, end of period $ 30,748,218 $ 32,173,459 $ 32,495,641 $ 42,709,634 $ 54,221,923 $ 69,182,002
Ratio of expenses
to average net assets 0.30%(4) 0.30% 0.30% 0.30% 0.30% 0.30%
<F85>
Ratio of net investment income
to average net assets 5.49%(4) 4.92% 4.85% 4.56% 6.03% 6.25%
<F85>
Portfolio turnover rate(1)<F82> 36.0%(3) 37.6% 52.5% 103.1% 66.8% 47.0%
<F84>
(1)<F82> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F83> Calculated using average shares outstanding during the period.
(3)<F84> Not annualized.
(4)<F85> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD CORE PLUS BOND FUND - INVESTOR CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
----------- ------ ------ ------ ------ ------
Per Share Data:
Net asset value,
beginning of period $ 10.30 $ 10.62 $ 10.67 $ 10.65 $ 10.49 $ 10.45
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.26(2) 0.49(2) 0.53 0.53(2) 0.60(2) 0.64(2)
<F87> <F87> <F87> <F87> <F87>
Net realized and unrealized
gains (losses) on investments (0.24) (0.29) 0.10 0.37 0.07 0.05
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations 0.02 0.20 0.63 0.90 0.67 0.69
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends from
net investment income (0.25) (0.51) (0.50) (0.52) (0.47) (0.58)
Distributions from
net realized gains -- (0.01) (0.18) (0.36) (0.04) (0.07)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions (0.25) (0.52) (0.68) (0.88) (0.51) (0.65)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.07 $ 10.30 $ 10.62 $ 10.67 $ 10.65 $ 10.49
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total return 0.23%(3) 1.93% 6.09% 8.60% 6.58% 6.70%
<F88>
Supplemental data and ratios:
Net assets, end of period $ 297,205 $ 449,709 $ 125,847 $ 124,481 $ 296,026 $ 258,351
Ratio of expenses
to average net assets 0.55%(4) 0.55% 0.55% 0.55% 0.55% 0.55%
<F89>
Ratio of net investment income
to average net assets 5.24%(4) 4.67% 4.60% 4.31% 5.78% 6.00%
<F89>
Portfolio turnover rate(1)<F86> 36.0%(3) 37.6% 52.5% 103.1% 66.8% 47.0%
<F88>
(1)<F86> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(2)<F87> Calculated using average shares outstanding during the period.
(3)<F88> Not annualized.
(4)<F89> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD SHORT-TERM BOND FUND -
INSTITUTIONAL CLASS
-------------------------------------------------------
Six Months August 31,
Ended Year Ended 2004(1)<F90>
June 30, 2006 December 31, through
(Unaudited) 2005 December 31, 2004
------------- ------------ -----------------
Per Share Data:
Net asset value,
beginning of period $ 9.79 $ 9.93 $ 10.00
------------ ------------ ------------
Income from investment operations:
Net investment income 0.20 0.33 0.08
Net realized and unrealized
losses on investments (0.07) (0.15) (0.07)
------------ ------------ ------------
Total from investment operations 0.13 0.18 0.01
------------ ------------ ------------
Less distributions:
Dividends from net investment income (0.20) (0.32) (0.08)
------------ ------------ ------------
Net asset value, end of period $ 9.72 $ 9.79 $ 9.93
------------ ------------ ------------
------------ ------------ ------------
Total return 1.31%(2) 1.85% 0.10%(2)
<F91> <F91>
Supplemental data and ratios:
Net assets, end of period $128,135,573 $ 97,057,968 $ 31,973,000
Ratio of expenses
to average net assets 0.30%(3) 0.30% 0.30%(3)
<F92> <F92>
Ratio of net investment income
to average net assets 4.29%(3) 3.52% 2.60%(3)
<F92> <F92>
Portfolio turnover rate(4)<F93> 16.5%(2) 31.8% 16.7%(2)
<F91> <F91>
(1)<F90> Commencement of operations.
(2)<F91> Not annualized.
(3)<F92> Annualized.
(4)<F93> 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, 2006 (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, each of
which is diversified within the meaning of the 1940 Act. Robert W. Baird & Co.
Incorporated ("Baird" or the "Advisor") serves as investment advisor to the
Funds.
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 provide 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 provide 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 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 provide 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 - Because market quotations for most debt securities
are not readily available, debt securities are stated at fair value as
furnished by an independent pricing service, which uses valuation methods
such as matrix pricing and other analytical pricing models, as well as on
market transactions and dealer quotations. Debt securities purchased with
a remaining maturity of 60 days or less are valued at acquisition cost,
plus or minus any amortized discount or premium. Investments in mutual
funds are valued at their stated net asset 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. Securities that were not traded on the
valuation date, as well as stocks that are not listed on an exchange or
traded on NASDAQ, are valued at the average of the current bid and asked
price. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the
Advisor in accordance with procedures approved by the Corporation's Board
of Directors. In accordance with such procedures, the Advisor may use
broker quotes or, if the broker quotes are unavailable or deemed to be
unreliable, fair value will be determined by a valuation committee of the
Advisor. 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 there is no single standard for
determining a security's fair value. As a result, different mutual funds
could reasonably arrive at a different fair value for the same security.
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. The value of such securities for the Baird
Intermediate Bond, Baird Aggregate Bond, Baird Core Plus Bond and Baird
Short-Term Bond Funds were $14,164,343 (5.02% of net assets), $8,826,587
(3.74% of net assets), $2,025,389 (6.52% of net assets) and $5,210,534
(4.07% of net assets), respectively, at June 30, 2006. Restricted
securities may be deemed to be liquid as determined by the Advisor based on
several factors. These securities generally consist of securities issued
pursuant to Rule 144A under the Securities Act of 1933.
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.
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Funds' tax
returns to determine whether the tax positions are "more likely than not"
of being sustained by the applicable tax authority. A tax position that
meets the more-likely-than-not threshold is measured to determine the
amount of benefit or expense to recognize in the financial statements.
Adoption of FIN 48 is required for fiscal years beginning after December
15, 2006 and is to be applied to all open tax years as of the effective
date. At this time, management is evaluating the implications of FIN 48
and whether it will have any impact on the Funds' financial statements.
e) Allocation of Income and Expenses - Each Fund is charged for those expenses
directly attributable to it. 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 for
the past two fiscal periods:
BAIRD INTERMEDIATE BOND FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 65,342,439 6,269,085 Shares sold $ 8,000 742
Shares issued through Shares issued through
reinvestment of dividends 5,171,539 497,371 reinvestment of dividends 35,991 3,355
Shares redeemed (16,075,848) (1,537,148) Shares redeemed (1,153,255) (107,361)
------------ ---------- ----------- --------
Net Increase $ 54,438,130 5,229,308 Net Decrease $(1,109,264) (103,264)
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 21,970,265 Beginning of period 260,531
---------- --------
End of period 27,199,573 End of period 157,267
---------- --------
---------- --------
Year Ended Year Ended
December 31, 2005 December 31, 2005
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 71,323,424 6,670,157 Shares sold $ 327,577 29,867
Shares issued through Shares issued through
reinvestment of dividends 8,583,507 804,972 reinvestment of dividends 97,080 8,844
Shares redeemed (34,120,091) (3,198,827) Shares redeemed (534,264) (48,785)
------------ ---------- ----------- -------
Net Increase $ 45,786,840 4,276,302 Net Decrease $ (109,607) (10,074)
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 17,693,963 Beginning of period 270,605
---------- -------
End of period 21,970,265 End of period 260,531
---------- -------
---------- -------
BAIRD AGGREGATE BOND FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 41,969,433 4,036,210 Shares sold $ 275,099 25,902
Shares issued through Shares issued through
reinvestment of dividends 5,052,234 488,129 reinvestment of dividends 24,457 2,312
Shares redeemed (32,421,100) (3,133,190) Shares redeemed (418,787) (39,605)
------------ ---------- --------- -------
Net Increase $ 14,600,567 1,391,149 Net Decrease $(119,231) (11,391)
------------ ---------
------------ ---------
Shares Outstanding: Shares Outstanding:
Beginning of period 21,554,417 Beginning of period 119,948
---------- -------
End of period 22,945,566 End of period 108,557
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2005 December 31, 2005
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $119,199,176 11,216,865 Shares sold $ 787,288 72,544
Shares issued through Shares issued through
reinvestment of dividends 6,483,075 609,270 reinvestment of dividends 37,104 3,418
Shares redeemed (10,800,456) (1,013,347) Shares redeemed (228,296) (20,735)
------------ ---------- --------- -------
Net Increase $114,881,795 10,812,788 Net Increase $ 596,096 55,227
------------ ---------
------------ ---------
Shares Outstanding: Shares Outstanding:
Beginning of period 10,741,629 Beginning of period 64,721
---------- -------
End of period 21,554,417 End of period 119,948
---------- -------
---------- -------
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 26,658,849 2,536,984 Shares sold $ 91,650 8,500
Shares issued through Shares issued through
reinvestment of dividends 959,545 91,671 reinvestment of dividends 14,117 1,322
Shares redeemed (6,078,219) (579,854) Shares redeemed (456,382) (42,696)
------------ --------- ----------- -------
Net Increase $ 21,540,175 2,048,801 Net Decrease $ (350,615) (32,874)
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 5,095,975 Beginning of period 138,700
--------- -------
End of period 7,144,776 End of period 105,826
--------- -------
--------- -------
Year Ended Year Ended
December 31, 2005 December 31, 2005
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 28,720,646 2,699,678 Shares sold $ 1,140,700 104,296
Shares issued through Shares issued through
reinvestment of dividends 1,391,125 130,582 reinvestment of dividends 49,411 4,548
Shares redeemed (12,175,572) (1,147,777) Shares redeemed (4,231,391) (389,626)
------------ ---------- ----------- --------
Net Increase $ 17,936,199 1,682,483 Net Decrease $(3,041,280) (280,782)
------------ -----------
------------ -----------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,413,492 Beginning of period 419,482
---------- --------
End of period 5,095,975 End of period 138,700
---------- --------
---------- --------
BAIRD CORE PLUS BOND FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 13,999,114 1,419,751 Shares sold $ 55,831 5,471
Shares issued through Shares issued through
reinvestment of dividends 521,157 52,666 reinvestment of dividends 6,728 662
Shares redeemed (15,295,890) (1,540,165) Shares redeemed (207,946) (20,272)
Other capital Other capital
contributions(1)<F94> 71 -- contributions(1)<F94> 1 --
------------ ---------- --------- -------
Net Decrease $ (775,548) (67,748) Net Decrease $(145,386) (14,139)
------------ ---------
------------ ---------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,199,736 Beginning of period 43,664
---------- -------
End of period 3,131,988 End of period 29,525
---------- -------
---------- -------
Year Ended Year Ended
December 31, 2005 December 31, 2005
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 3,826,490 370,555 Shares sold $ 388,900 36,683
Shares issued through Shares issued through
reinvestment of dividends 923,131 90,264 reinvestment of dividends 13,342 1,281
Shares redeemed (4,036,994) (391,795) Shares redeemed (63,734) (6,148)
------------ --------- --------- -------
Net Increase $ 712,627 69,024 Net Increase $ 338,508 31,816
------------ ---------
------------ ---------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,130,712 Beginning of period 11,848
--------- -------
End of period 3,199,736 End of period 43,664
--------- -------
--------- -------
(1)<F94> Reimbursement for NAV Break.
BAIRD SHORT-TERM BOND FUND
Six Months Ended Year Ended
June 30, 2006 December 31, 2005
---------------------------- ---------------------------
INSTITUTIONAL CLASS SHARES $ Shares INSTITUTIONAL CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $ 48,730,394 4,991,915 Shares sold $ 81,066,185 8,221,158
Shares issued through Shares issued through
reinvestment of dividends 2,282,162 234,287 reinvestment of dividends 2,142,819 217,900
Shares redeemed (19,125,617) (1,960,131) Shares redeemed (17,200,778) (1,746,644)
------------ ---------- ------------ ----------
Net Increase $ 31,886,939 3,266,071 Net Increase $ 66,008,226 6,692,414
------------ ------------
------------ ------------
Shares Outstanding: Shares Outstanding:
Beginning of period 9,912,823 Beginning of period 3,220,409
---------- ----------
End of period 13,178,894 End of period 9,912,823
---------- ----------
---------- ----------
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the period ended June 30, 2006, 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 $33,158,253 $17,042,863 $ -- $5,619,795 $ 9,988,187
Other $56,225,246 $51,442,298 $22,176,776 $4,150,926 $35,930,144
Sales:
U.S. Government $23,089,075 $36,122,313 $ -- $5,812,589 $ 6,357,764
Other $19,710,624 $15,654,196 $ 3,117,925 $5,542,303 $10,715,319
At December 31, 2005, 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 $239,607,514 $227,139,832 $53,915,238 $32,740,923 $98,961,175
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Gross unrealized appreciation $ 2,412,159 $ 2,579,325 $ 457,271 $ 839,033 $ 30,812
Gross unrealized depreciation (4,645,163) (3,366,537) (421,253) (1,136,777) (1,047,015)
------------ ------------ ----------- ----------- -----------
Net unrealized appreciation/depreciation $ (2,233,004) $ (787,212) $ 36,018 $ (297,744) $(1,016,203)
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Undistributed ordinary income $ 154,379 $ 10,472 $ 19,139 $ -- $ 40,220
Undistributed long-term capital gain -- 121,173 -- -- --
------------ ------------ ----------- ----------- -----------
Total distributable earnings $ 154,379 $ 131,645 $ 19,139 $ -- $ 40,220
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
Other accumulated gains (losses) $ (1,500,534) $ (27,296) $ (229,735) $ (27,460) $ (152,560)
------------ ------------ ----------- ----------- -----------
Total accumulated earnings (losses) $ (3,579,159) $ (682,863) $ (174,578) $ (325,204) $(1,128,543)
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
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, 2006 and
December 31, 2005 were:
2006 2005
--------------------------------- ---------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
------------- ------------- ------------- -------------
Baird Intermediate Bond Fund $5,940,139 $ -- $9,582,892 $ --
Baird Aggregate Bond Fund $5,709,024 $ -- $7,047,543 $ 150,599
Baird Intermediate Municipal Bond Fund $ -- $ -- $ -- $ --
Baird Core Plus Bond Fund $ 774,158 $ -- $1,707,672 $ 21,671
Baird Short-Term Bond Fund $2,328,226 $ -- $2,308,315 $ --
For the periods ended June 30, 2006 and December 31, 2005, distributions of
$1,204,857 and $1,742,374, 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, 2005, the Baird Intermediate Bond, Baird
Aggregate Bond Fund, Baird Intermediate Municipal Bond, Baird Core Plus Bond
Fund and Baird Short-Term Bond Funds elected to defer capital losses occurring
between November 1, 2005 and December 31, 2005 in the amount of $79,987,
$24,385, $38,449, $21,481 and $85,220, respectively.
At December 31, 2005, the Baird Intermediate Bond, Baird Intermediate Municipal
Bond, Baird Core Plus Bond and Baird Short-Term Bond Funds had accumulated net
realized capital loss carryovers of $1,423,683, $191,286, $5,975 and $67,340,
respectively. With respect to the Baird Intermediate Bond Fund, $485,569 of the
capital loss carryover expires in 2012 and $938,114 expires in 2013. With
respect to the Baird Intermediate Municipal Bond Fund, $6,626 of the capital
loss carryover expires in 2012 and $184,660 in 2013. With respect to the Baird
Core Plus Bond Fund, $5,975 of the capital loss carryover expires in 2013. With
respect to the Baird Short-Term Bond Fund, $8,150 of the capital loss carryover
expires in 2012 and $59,190 expires in 2013. 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 Baird for the
provision of investment advisory services. 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 Baird. 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.
Baird (the "Distributor") is the distributor of the Funds pursuant to a
distribution agreement.
6. SECURITIES LENDING
Each Fund may lend up to one-third of its total assets (including such loans) to
borrowers under terms of participation in a securities lending program
administered by U.S. Bancorp Asset Management, an affiliate of the Funds'
custodian, transfer agent and administrator. The securities lending agreement
requires that loans are collateralized at all times in an amount equal to at
least 102% of the market value of any loaned securities at the time of the loan,
plus accrued interest.
The Funds receive compensation in the form of fees and earn interest on the cash
collateral. The amount of fees depends on a number of factors including the
type of security, length of the loan and credit standing of the borrower. Each
Fund continues to receive interest payments or dividends on the securities
loaned during the borrowing period. Each Fund has the right under the terms of
the securities lending agreement to recover the securities from the borrower on
demand.
As of June 30, 2006, the Baird Intermediate Bond Fund, Baird Aggregate Bond
Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund had loaned
securities that were collateralized by cash equivalents. The cash collateral is
invested by the custodian with the approval of the Advisor. Although the cash
collateral is generally invested in readily marketable, high quality, short-term
obligations, such investments are subject to risk of payment delays or default
on the part of the issuer or counterparty or otherwise may not generate
sufficient interest to support the costs associated with securities lending. A
Fund could also experience delays in recovering its securities and possible loss
of income or value if the borrower fails to return the borrowed securities,
although this risk is mitigated by the collateral and by contract with the
securities lending agent.
As of June 30, 2006, the market value of the securities on loan and payable on
collateral due to broker were as follows:
MARKET VALUE OF PAYABLE ON COLLATERAL
SECURITIES ON LOAN DUE TO BROKER
------------------ ---------------------
Baird Intermediate Bond Fund $74,677,374 $76,349,498
Baird Aggregate Bond Fund 38,850,075 39,582,381
Baird Core Plus Bond Fund 7,591,608 7,759,174
Baird Short-Term Bond Fund 36,014,146 36,943,281
Individual reinvested cash collateral jointly pooled with collateral received by
other Baird Funds as of June 30, 2006 is as follows:
INTERMEDIATE AGGREGATE CORE PLUS SHORT-TERM OTHER
BOND FUND BOND FUND BOND FUND BOND FUND BAIRD FUNDS TOTAL
------------ --------- --------- ---------- ----------- -----
Concord Minutemen Capital
Company Interest Bearing
Commercial Paper $ 3,817,925 $ 1,979,352 $ 388,004 $ 1,847,382 $ 3,967,337 $ 12,000,000
Duke Funding High Grade
Discount Commercial Paper 3,499,764 1,814,406 355,671 1,693,433 3,636,726 11,000,000
Laguna ABS CDO Discount
Commercial Paper 3,181,604 1,649,460 323,337 1,539,485 3,306,114 10,000,000
Lakeside Funding LLC Interest
Bearing Commercial Paper 2,545,283 1,319,568 258,670 1,231,588 2,644,891 8,000,000
Federated Prime
Obligations Fund 278,604 144,439 28,314 134,808 289,507 875,672
Rams Funding LLC Discount
Commercial Paper 3,499,764 1,814,406 355,671 1,693,433 3,636,726 11,000,000
Thornburg Mortgage Capital
Discount Commercial Paper 3,499,764 1,814,406 355,671 1,693,433 3,636,726 11,000,000
CS First Boston
Repurchase Agreement(1)<F95> 7,954,010 4,123,651 808,342 3,848,712 8,265,285 25,000,000
Lehman Brothers
Repurchase Agreement(2)<F96> 11,135,614 5,773,111 1,131,679 5,388,197 11,571,399 35,000,000
Merrill Lynch Premier
Institutional Fund 30,561 15,844 3,106 14,787 31,756 96,054
Morgan Stanley
Repurchase Agreement(3)<F97> 25,134,671 13,030,736 2,554,362 12,161,930 26,118,301 79,000,000
Antalis Fund 3,181,604 1,649,460 323,337 1,539,485 3,306,114 10,000,000
Fenway Fund 3,499,764 1,814,406 355,671 1,693,433 3,636,726 11,000,000
Morton International Inc.
Short-Term Loan Notes 1,590,802 824,730 161,668 769,742 1,653,058 5,000,000
Stratford Receivables Co.,
LLC Liquidity Notes 3,499,764 1,814,406 355,671 1,693,433 3,636,726 11,000,000
----------- ----------- ---------- ----------- ----------- ------------
$76,349,498 $39,582,381 $7,759,174 $36,943,281 $79,337,392 $239,971,726
----------- ----------- ---------- ----------- ----------- ------------
----------- ----------- ---------- ----------- ----------- ------------
(1)<F95> (Dated 06/30/06), 5.36%, Due 07/03/06 (Repurchase Proceeds
$25,011,019), (Collateralized by Agency Mortgage-Backed Securities)
(2)<F96> (Dated 06/30/06), 5.43%, Due 07/03/06 (Repurchase Proceeds
$35,015,621), (Collateralized by Various Corporate Bonds)
(3)<F97> (Dated 06/30/06), 5.39%, Due 07/03/06 (Repurchase Proceeds
$79,034,998), (Collateralized by Agency Mortgage-Backed Securities)
7. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Plan allows the Funds to
compensate the Distributor for 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, Baird Aggregate Bond, Baird
Intermediate Municipal Bond and Baird Core Plus Bond Funds incurred $2,828,
$1,550, $1,654 and $416, respectively, in fees pursuant to the Plan during the
period ending June 30, 2006.
ADDITIONAL INFORMATION
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 www.bairdfunds.com; and by accessing the SEC's website at
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 www.bairdfunds.com; and by accessing the SEC's website at
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 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. The Funds' Forms N-Q may also be obtained by calling toll-free
1-866-44BAIRD.
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 AND DISTRIBUTOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADMINISTRATOR AND TRANSFER 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
Grant Thornton LLP
175 West Jackson Boulevard, 20th Floor
Chicago, Illinois 60604
(BAIRD FUNDS LOGO)
SEMI-ANNUAL REPORT
June 30, 2006
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
ADDITIONAL INFORMATION 35
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
CAUTIONARY NOTE ON ANALYSES, OPINIONS AND OUTLOOKS: In this report we offer
- ---------------------------------------------------
analyses and opinions on the performance of individual securities, companies,
industries, sectors, markets, interest rates and governmental policies,
including predictions, forecasts and outlooks regarding possible future events.
These can generally be identified as such because the context of the statements
may include such words as "believe," "should," "will," "expects," "anticipates,"
"hopes" and words of similar effect. These statements reflect the portfolio
managers' good faith beliefs and judgments and involve risks and uncertainties,
including the risk that the portfolio managers' analyses, opinions and outlooks
are or will prove to be inaccurate. It is inherently difficult to correctly
assess and explain the performance of particular securities, sectors, markets,
interest rate movements, governmental actions or general economic trends and
conditions, and many unforeseen factors contribute to the performance of Baird
Funds. Investors are, therefore, cautioned not to place undue reliance on
subjective judgments contained in this report.
BAIRD LARGECAP FUND
A June 30, 2006 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Russell 1000 Growth Index and the S&P 500 Index is shown below.
TOP 10 HOLDINGS*<F98>
Genentech, Inc. 3.8%
Illinois Tool Works, Inc. 3.6%
General Electric Company 3.5%
Emerson Electric Company 3.4%
Best Buy Co., Inc. 2.9%
Exxon Mobil Corporation 2.8%
Medtronic, Inc. 2.8%
PepsiCo, Inc. 2.8%
Staples, Inc. 2.7%
Proctor & Gamble Company 2.7%
NET ASSETS: $25,803,138
PORTFOLIO TURNOVER RATIO: 26.0%#<F3>
NUMBER OF EQUITY HOLDINGS: 42
ANNUALIZED PORTFOLIO EXPENSE RATIO:***<F1>
INSTITUTIONAL CLASS: 0.75%
INVESTOR CLASS: 1.00%****<F2>
EQUITY SECTOR ANALYSIS**<F99>
Russell 1000
LargeCap Fund Growth Index S&P 500 Index
------------- ------------ -------------
Consumer Discretionary 13.1% 13.9% 10.2%
Consumer Staples 10.8% 12.3% 9.6%
Energy 6.7% 4.1% 10.2%
Financials 10.3% 6.8% 21.4%
Health Care 18.0% 18.6% 12.3%
Industrials 15.9% 15.6% 11.7%
Information Technology 22.6% 25.2% 14.9%
Materials 2.6% 2.2% 3.1%
Telecommunication Services 0.0% 0.6% 3.3%
Utilities 0.0% 0.7% 3.4%
*<F98> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security. Percentages shown relate to the Fund's total net assets
as of June 30, 2006.
**<F99> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2006, and may not add up to 100% due to
rounding.
***<F1> 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 April 30,
2007.
****<F2> Includes 0.25% 12b-1 fee.
#<F3> Not annualized.
BAIRD LARGECAP FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F4>
- ----------------------------------- -------- ---------- ----------------
Baird LargeCap Fund -
Institutional Class Shares 1.53% -0.98% -3.23%
Baird LargeCap Fund -
Investor Class Shares 1.41% -1.23% -3.49%
Russell 1000 Growth Index(2)<F5> 6.12% -0.76% -7.24%
S&P 500 Index(3)<F6> 8.63% 2.49% -0.48%
(1)<F4> For the period from September 29, 2000 (commencement of operations)
through June 30, 2006.
(2)<F5> 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 1000 Index consists 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, which in turn is comprised of the 3,000 largest U.S.
domiciled publicly traded common stocks by market capitalization.
These indices do not reflect any deduction for fees, expenses or
taxes. A direct investment in an index is not possible. The Russell
1000 Growth Index has been selected to replace the S&P 500 Index as
the Fund's primary benchmark beginning in 2006 because the Russell
1000 Growth Index more accurately represents the performance of
growth-style stocks in which the Fund invests.
(3)<F6> 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. This
index does not reflect any deduction for fees, expenses or taxes. A
direct investment in an index is not possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD LARGECAP FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 97.0%
AIR FREIGHT & LOGISTICS - 2.4%
7,417 United Parcel
Service, Inc. - Class B $ 610,642
-----------
BEVERAGES - 2.7%
11,800 PepsiCo, Inc. 708,472
-----------
BIOTECHNOLOGY - 6.1%
9,434 Amgen, Inc.*<F7> 615,380
11,870 Genentech, Inc.*<F7> 970,966
-----------
1,586,346
-----------
CAPITAL MARKETS - 1.5%
3,900 Legg Mason, Inc. 388,128
-----------
CHEMICALS - 2.6%
12,280 Praxair, Inc. 663,120
-----------
COMMERCIAL BANKS - 1.5%
5,882 Wells Fargo & Company 394,564
-----------
COMMUNICATIONS EQUIPMENT - 6.5%
29,680 Cisco Systems, Inc.*<F7> 579,650
21,700 Corning Incorporated*<F7> 524,923
14,380 QUALCOMM Inc. 576,207
-----------
1,680,780
-----------
COMPUTERS & PERIPHERALS - 1.5%
6,700 Apple Computer, Inc.*<F7> 382,704
-----------
CONSUMER FINANCE - 2.5%
7,400 Capital One
Financial Corporation 632,330
-----------
DIVERSIFIED FINANCIAL SERVICES - 2.0%
10,676 Citigroup, Inc. 515,010
-----------
ELECTRICAL EQUIPMENT - 3.3%
10,300 Emerson Electric Company 863,243
-----------
ENERGY EQUIPMENT & SERVICES - 2.2%
15,150 BJ Services Company 564,489
-----------
FOOD & STAPLES RETAILING - 5.0%
21,300 Sysco Corporation 650,928
14,200 Walgreen Company 636,728
-----------
1,287,656
-----------
HEALTH CARE EQUIPMENT & SUPPLIES - 5.0%
15,265 Medtronic, Inc. 716,234
10,050 Zimmer Holdings, Inc.*<F7> 570,036
-----------
1,286,270
-----------
HEALTH CARE PROVIDERS & SERVICES - 2.6%
13,240 Caremark Rx, Inc.*<F7> 660,279
-----------
HOTELS RESTAURANTS & LEISURE - 2.1%
14,000 Starbucks Corporation*<F7> 528,640
-----------
HOUSEHOLD PRODUCTS - 2.7%
12,650 Procter &
Gamble Company 703,340
-----------
INDUSTRIAL CONGLOMERATES - 3.5%
27,040 General Electric Company 891,238
-----------
INSURANCE - 2.5%
14,040 AFLAC, Incorporated 650,754
-----------
INTERNET SOFTWARE & SERVICES - 2.2%
17,300 Yahoo!, Inc.*<F7> 570,900
-----------
IT SERVICES - 2.1%
14,200 Paychex, Inc. 553,516
-----------
MACHINERY - 5.2%
19,460 Illinois Tool Works, Inc. 924,350
8,200 ITT Industries, Inc. 405,900
-----------
1,330,250
-----------
MULTILINE RETAIL - 5.0%
11,200 Kohl's Corporation.*<F7> 662,144
13,080 Target Corporation 639,220
-----------
1,301,364
-----------
OIL & GAS - 4.3%
5,680 Apache Corporation 387,660
11,810 Exxon Mobil Corporation 724,543
-----------
1,112,203
-----------
PHARMACEUTICALS - 3.8%
9,000 Abbott Laboratories 392,490
11,010 Novartis AG - ADR F<F8> 593,659
-----------
986,149
-----------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.9%
15,160 Maxim Integrated
Products, Inc. 486,788
17,500 Texas Instruments
Incorporated*<F7> 530,075
-----------
1,016,863
-----------
SOFTWARE - 5.6%
9,500 Electronic Arts Inc.*<F7> 408,880
29,670 Microsoft Corporation 691,311
22,720 Symantec Corporation*<F7> 353,069
-----------
1,453,260
-----------
SPECIALTY RETAIL - 5.6%
13,480 Best Buy Co., Inc. 739,243
29,000 Staples, Inc. 705,280
-----------
1,444,523
-----------
TRADING COMPANIES & DISTRIBUTORS - 1.1%
6,800 Fastenal Company 273,972
-----------
Total Common Stocks
(Cost $21,377,239) 25,041,005
-----------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 44.8%
(Cost $11,549,584)
(Please Refer to Note 6) 11,549,584
-----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 2.1%
MONEY MARKET FUNDS - 2.1%
$540,958 Short-Term Investment
Company Liquid Assets
Portfolio - AIM Fund 540,958
-----------
Total Short-Term
Investments
(Cost $540,958) 540,958
-----------
Total Investments
(Cost $33,467,781) -
143.9% 37,131,547
-----------
Liabilities in Excess of
Other Assets - (43.9)% (11,328,409)
-----------
TOTAL NET
ASSETS - 100.0% $25,803,138
-----------
-----------
ADR - American Depository Receipt
*<F7> Non Income Producing
F<F8> Foreign Security
See notes to the financial statements
BAIRD MIDCAP FUND
A June 30, 2006 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Russell Midcap Growth Index and the S&P MidCap 400 Index is
shown below.
TOP 10 HOLDINGS*<F9>
Smith International, Inc. 3.2%
United Natural Foods, Inc. 3.2%
Dick's Sporting Goods, Inc. 3.0%
Alliance Data Systems Corporation 2.8%
ResMed, Inc. 2.8%
Harman International
Industries, Incorporated 2.8%
Wintrust Financial Corporation 2.7%
Cameron International Corporation 2.7%
Brady Corporation - Class A 2.7%
Zions Bancorporation 2.6%
NET ASSETS: $96,936,555
PORTFOLIO TURNOVER RATIO: 41.7%#<F13>
NUMBER OF EQUITY HOLDINGS: 45
ANNUALIZED PORTFOLIO EXPENSE RATIO:***<F11>
INSTITUTIONAL CLASS: 0.85%
INVESTOR CLASS: 1.10%****<F12>
EQUITY SECTOR ANALYSIS**<F10>
Russell Midcap
MidCap Fund Growth Index S&P 400 Index
----------- -------------- -------------
Consumer Discretionary 20.1% 20.8% 14.3%
Consumer Staples 3.3% 2.5% 1.9%
Energy 10.0% 10.9% 10.5%
Financials 12.8% 9.4% 17.5%
Health Care 15.8% 15.8% 10.3%
Industrials 17.0% 14.3% 16.3%
Information Technology 21.0% 20.7% 15.8%
Materials 0.0% 3.3% 5.0%
Telecommunication Services 0.0% 1.4% 0.5%
Utilities 0.0% 1.0% 7.9%
*<F9> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security. Percentages shown relate to the Fund's total net assets
as of June 30, 2006.
**<F10> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2006, and may not add up to 100% due to
rounding.
***<F11> 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 April 30,
2007.
****<F12> Includes 0.25% 12b-1 fee.
#<F13> Not annualized.
BAIRD MIDCAP FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR FIVE YEARS INCEPTION(1)<F14>
- ----------------------------------- -------- ---------- -----------------
Baird MidCap Fund -
Institutional Class Shares 12.13% 4.98% 3.31%
Baird MidCap Fund -
Investor Class Shares 11.76% 4.74% 3.07%
Russell Midcap Growth Index(2)<F15> 13.04% 4.76% 1.23%
S&P MidCap 400 Index(3)<F16> 12.98% 9.30% 8.24%
(1)<F14> For the period from December 29, 2000 (commencement of operations)
through June 30, 2006.
(2)<F15> The Russell Midcap Growth Index measures the performance of those
Russell Midcap Index companies with higher price-to-book ratios and
higher forecasted growth rates. 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 1000 Index consists of the largest companies
in the Russell 3000 Index, which in turn is comprised of the 3,000
largest U.S. domiciled publicly traded common stocks by market
capitalization. These indices do not reflect any deduction for fees,
expenses or taxes. A direct investment in an index is not possible.
The Russell MidCap Growth Index has been selected to replace the S&P
MidCap 400 Index as the Fund's primary benchmark beginning in 2006
because the Russell MidCap Growth Index more accurately reflects the
performance of the growth-style stocks in which the Fund invests.
(3)<F16> 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. This index
does not reflect any deduction for fees, expenses or taxes. A direct
investment in an index is not possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD MIDCAP FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 98.2%
AIR FREIGHT & LOGISTICS - 1.6%
29,315 C.H. Robinson
Worldwide, Inc. $ 1,562,489
------------
AUTO COMPONENTS - 4.1%
35,413 Autoliv, Inc. 2,003,313
139,987 Gentex Corporation 1,959,818
------------
3,963,131
------------
CAPITAL MARKETS - 4.8%
89,055 Eaton Vance Corporation 2,222,813
53,395 Investors Financial
Services Corporation 2,397,435
------------
4,620,248
------------
COMMERCIAL BANKS - 7.8%
63,332 East West Bancorp, Inc. 2,400,916
52,081 Wintrust Financial
Corporation 2,648,319
32,020 Zions Bancorporation 2,495,639
------------
7,544,874
------------
COMMERCIAL SERVICES & SUPPLIES - 4.8%
71,340 Brady Corporation -
Class A 2,628,166
31,272 Stericycle, Inc.*<F17> 2,035,807
------------
4,663,973
------------
COMMUNICATIONS EQUIPMENT - 1.8%
132,078 Tellabs, Inc.*<F17> 1,757,958
------------
COMPUTERS & PERIPHERALS - 1.4%
41,975 Avid Technology, Inc.*<F17> 1,399,027
------------
ELECTRICAL EQUIPMENT - 4.0%
30,335 Rockwell Automation, Inc. 2,184,424
37,231 Roper Industries, Inc. 1,740,549
------------
3,924,973
------------
ENERGY EQUIPMENT & SERVICES - 9.8%
52,049 BJ Services Company 1,939,346
55,413 Cameron International
Corporation*<F17> 2,647,079
62,851 Patterson-UTI
Energy, Inc. 1,779,312
70,450 Smith International, Inc. 3,132,911
------------
9,498,648
------------
FOOD & STAPLES RETAILING - 3.2%
94,263 United Natural
Foods, Inc.*<F17> 3,112,564
------------
HEALTH CARE EQUIPMENT & SUPPLIES - 10.5%
83,411 Cytyc Corporation*<F17> 2,115,303
36,413 Gen-Probe, Incorporated*<F17> 1,965,574
45,200 Kyphon Inc.*<F17> 1,733,872
58,112 ResMed, Inc.*<F17> 2,728,358
33,499 Varian Medical
Systems, Inc.*<F17> 1,586,178
------------
10,129,285
------------
HEALTH CARE PROVIDERS & SERVICES - 1.8%
51,260 Patterson
Companies, Inc.*<F17> 1,790,512
------------
HOTELS RESTAURANTS & LEISURE - 3.8%
67,953 The Cheesecake
Factory Incorporated*<F17> 1,831,333
49,599 PF Chang's China
Bistro, Inc.*<F17> 1,885,754
------------
3,717,087
------------
HOUSEHOLD DURABLES - 2.8%
31,464 Harman International
Industries, Incorporated 2,686,082
------------
INTERNET SOFTWARE & SERVICES - 2.1%
44,902 NAVTEQ*<F17> 2,006,221
------------
IT SERVICES - 7.4%
48,898 Alliance Data
Systems Corporation*<F17> 2,876,180
30,698 Cognizant Technology
Solutions Corporation*<F17> 2,068,124
46,398 Global Payments, Inc. 2,252,623
------------
7,196,927
------------
LIFE SCIENCES TOOLS & SERVICES - 2.0%
55,013 Pharmaceutical Product
Development, Inc. 1,932,057
------------
MACHINERY - 4.5%
46,951 Joy Global Inc. 2,445,678
40,250 Oshkosh Truck
Corporation 1,912,680
------------
4,358,358
------------
OFFICE ELECTRONICS - 2.0%
56,096 Zebra Technologies
Corporation - Class A*<F17> 1,916,239
------------
PHARMACEUTICALS - 1.2%
48,533 Medicis Pharmaceutical
Corporation - Class A 1,164,792
------------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.7%
48,220 Cree, Inc.*<F17> 1,145,707
72,461 Microchip Technology
Incorporated 2,431,067
------------
3,576,774
------------
SOFTWARE - 2.2%
187,678 Activision, Inc.*<F17> 2,135,776
------------
SPECIALTY RETAIL - 9.1%
65,615 Chico's FAS, Inc.*<F17> 1,770,292
72,715 Dick's Sporting
Goods, Inc.*<F17> 2,879,514
41,829 Tractor Supply Company*<F17> 2,311,889
54,917 Williams-Sonoma, Inc.*<F17> 1,869,924
------------
8,831,619
------------
TRADING COMPANIES & DISTRIBUTORS - 1.8%
43,031 Fastenal Company 1,733,719
------------
Total Common Stocks
(Cost $83,954,516) 95,223,333
------------
COLLATERAL POOL INVESTMENT
FOR SECURITIES ON LOAN - 44.3%
(Cost $42,950,013)
(Please Refer to Note 6) 42,950,013
------------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 0.8%
MONEY MARKET FUNDS - 0.8%
$768,011 Short-Term Investment
Company Liquid Assets
Portfolio - AIM Fund 768,011
------------
Total Short-Term
Investments
(Cost $768,011) 768,011
------------
Total Investments
(Cost $127,672,540) -
143.3% 138,941,357
------------
Liabilities in Excess of
Other Assets - (43.3)% (42,004,802)
------------
TOTAL NET
ASSETS - 100.0% $ 96,936,555
------------
------------
*<F17> Non Income Producing
See notes to the financial statements
BAIRD SMALLCAP FUND
A June 30, 2006 summary of the Fund's top 10 holdings and equity sector analysis
compared to the Russell 2000 Growth Index and the S&P 600 Index is shown below.
TOP 10 HOLDINGS*<F18>
Oceaneering International, Inc. 3.3%
Brady Corporation - Class A 3.1%
United Community Banks, Inc. 2.9%
Wintrust Financial Corporation 2.8%
Boston Private Financial Holdings, Inc. 2.7%
United Surgical Partners International, Inc. 2.7%
RSA Security Inc. 2.6%
Healthways, Inc. 2.6%
ScanSource, Inc. 2.6%
Providence Service Corporation 2.6%
NET ASSETS: $61,419,955
PORTFOLIO TURNOVER RATIO: 29.4%#<F22>
NUMBER OF EQUITY HOLDINGS: 44
ANNUALIZED PORTFOLIO EXPENSE RATIO:***<F20>
INSTITUTIONAL CLASS: 0.95%
INVESTOR CLASS: 1.20%****<F21>
EQUITY SECTOR ANALYSIS**<F19>
Russell 2000
SmallCap Fund Growth Index S&P 600 Index
------------- ------------ -------------
Consumer Discretionary 12.6% 14.0% 15.2%
Consumer Staples 4.5% 2.6% 4.0%
Energy 9.1% 8.8% 8.9%
Financials 13.2% 9.9% 15.9%
Health Care 19.8% 18.9% 12.0%
Industrials 15.9% 15.8% 17.7%
Information Technology 24.9% 24.9% 16.2%
Materials 0.0% 3.9% 5.3%
Telecommunication Services 0.0% 0.8% 0.2%
Utilities 0.0% 0.4% 4.7%
*<F18> The Fund's portfolio composition is subject to change and there is
no assurance that the Fund will continue to hold any particular
security. Percentages shown relate to the Fund's total net assets
as of June 30, 2006.
**<F19> Percentages shown in parentheses relate to the Fund's total equity
investments as of June 30, 2006, and may not add up to 100% due to
rounding.
***<F20> 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 April 30,
2007.
****<F21> Includes 0.25% 12b-1 fee.
#<F22> Not annualized.
BAIRD SMALLCAP FUND
AVERAGE ANNUAL TOTAL RETURNS
SINCE
For the Periods Ended June 30, 2006 ONE YEAR INCEPTION(1)<F23>
- ----------------------------------- -------- -----------------
Baird SmallCap Fund - Institutional Class Shares 7.59% 7.84%
Baird SmallCap Fund - Investor Class Shares 7.33% 7.56%
Russell 2000 Growth Index(2)<F24> 14.58% 9.31%
S&P SmallCap 600 Index(3)<F25> 13.92% 13.69%
(1)<F23> For the period from June 30, 2004 (commencement of operations)
through June 30, 2006.
(2)<F24> The Russell 2000 Growth Index measures the performance of those
Russell 2000 Index companies with higher price-to-book and higher
forecasted growth rates. 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. These indices do not
reflect any deduction for fees, expenses or taxes. A direct
investment in an index is not possible. The Russell 2000 Growth
Index has been selected to replace the S&P SmallCap 600 as the
Fund's primary benchmark beginning in 2006 because the Russell 2000
Growth Index more accurately reflects the performance of the growth-
style stocks in which the Fund invests.
(3)<F25> The S&P SmallCap 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. This index does not reflect any deduction for
fees, expenses or taxes. A direct investment in an index is not
possible.
THE RETURNS SHOWN IN THE TABLE ABOVE 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.
FOR INFORMATION ABOUT THE PERFORMANCE OF THE FUND AS OF THE MOST RECENT MONTH-
END, PLEASE CALL 1-866-44BAIRD OR VISIT WWW.BAIRDFUNDS.COM.
BAIRD SMALLCAP FUND
SCHEDULE OF INVESTMENTS JUNE 30, 2006 (UNAUDITED)
Shares Value
------ -----
COMMON STOCKS - 98.3%
AIRLINES - 1.8%
44,817 SkyWest, Inc. $ 1,111,462
-----------
AUTO COMPONENTS - 1.8%
59,900 LKQ Corporation*<F26> 1,138,100
-----------
BIOTECHNOLOGY - 2.2%
59,457 PRA International*<F26> 1,324,107
-----------
COMMERCIAL BANKS - 10.5%
59,455 Boston Private Financial
Holdings, Inc. 1,658,795
40,919 Pinnacle Financial
Partners, Inc.*<F26> 1,245,165
58,545 United Community
Banks, Inc. 1,782,110
34,299 Wintrust Financial
Corporation 1,744,104
-----------
6,430,174
-----------
COMMERCIAL SERVICES & SUPPLIES - 5.6%
52,136 Brady Corporation -
Class A 1,920,690
66,775 Marlin Business
Services Corporation*<F26> 1,506,444
-----------
3,427,134
-----------
COMMUNICATIONS EQUIPMENT - 1.9%
95,143 Tekelec*<F26> 1,175,016
-----------
DIVERSIFIED FINANCIAL SERVICES - 2.5%
55,787 Heartland Payment
Systems, Inc.*<F26> 1,555,342
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 6.9%
57,621 Argon ST, Inc.*<F26> 1,534,447
56,247 DTS, Inc.*<F26> 1,095,692
54,891 ScanSource, Inc.*<F26> 1,609,404
-----------
4,239,543
-----------
ENERGY EQUIPMENT & SERVICES - 8.9%
31,554 Dawson Geophysical
Company*<F26> 970,917
138,540 Grey Wolf, Inc.*<F26> 1,066,758
53,955 GulfMark Offshore, Inc.*<F26> 1,393,658
44,830 Oceaneering
International, Inc.*<F26> 2,055,455
-----------
5,486,788
-----------
FOOD PRODUCTS - 1.9%
27,441 Central Garden &
Pet Company*<F26> 1,181,335
-----------
FOOD & STAPLES RETAILING - 2.5%
46,642 United Natural
Foods, Inc.*<F26> 1,540,119
-----------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.6%
25,147 Kyphon Inc.*<F26> 964,639
-----------
HEALTH CARE PROVIDERS & SERVICES - 12.1%
74,104 Allscripts Healthcare
Solutions, Inc.*<F26> 1,300,525
31,105 Computer Programs &
Systems, Inc. 1,242,956
30,638 Healthways, Inc.*<F26> 1,612,784
58,989 Providence Service
Corporation*<F26> 1,606,270
55,109 United Surgical Partners
International, Inc.*<F26> 1,657,128
-----------
7,419,663
-----------
HOTELS RESTAURANTS & LEISURE - 4.1%
26,523 PF Chang's China
Bistro, Inc.*<F26> 1,008,404
35,216 Red Robin Gourmet
Burgers Inc.*<F26> 1,498,793
-----------
2,507,197
-----------
IT SERVICES - 4.9%
50,766 Forrester Research, Inc.*<F26> 1,420,433
59,905 SRA International, Inc. -
Class A*<F26> 1,595,270
-----------
3,015,703
-----------
LEISURE EQUIPMENT & PRODUCTS - 2.1%
32,930 RC2 Corporation*<F26> 1,273,074
-----------
MACHINERY - 2.5%
29,900 Bucyrus International,
Inc. - Class A 1,509,950
-----------
PHARMACEUTICALS - 3.6%
66,778 MGI Pharma, Inc.*<F26> 1,435,727
64,951 Salix Pharmaceuticals, Ltd.*<F26> 798,897
-----------
2,234,624
-----------
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 2.0%
37,511 Varian Semiconductor
Equipment Associates, Inc.*<F26> 1,223,234
-----------
SOFTWARE - 8.8%
40,924 Kronos Incorporated*<F26> 1,481,858
51,232 Open Solutions Inc.*<F26> 1,363,283
59,442 RSA Security Inc.*<F26> 1,616,228
43,900 THQ Inc.*<F26> 948,240
-----------
5,409,609
-----------
SPECIALTY RETAIL - 4.4%
46,058 Hibbett Sporting
Goods, Inc.*<F26> 1,100,786
28,829 Tractor Supply Company*<F26> 1,593,379
-----------
2,694,165
-----------
TRADING COMPANIES & DISTRIBUTORS - 5.7%
43,227 Applied Industrial
Technologies, Inc. 1,050,849
58,316 Beacon Roofing
Supply, Inc.*<F26> 1,283,535
19,515 Watsco, Inc. 1,167,387
-----------
3,501,771
-----------
Total Common Stocks
(Cost $56,321,928) 60,362,749
-----------
COLLATERAL POOL INVESTMENT FOR SECURITIES ON LOAN - 40.4%
(Cost $24,837,793)
(Please Refer to Note 6) 24,837,793
-----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 1.7%
MONEY MARKET FUNDS - 1.7%
1,025,018 Short-Term Investment
Company Liquid Assets
Portfolio - AIM Fund 1,025,018
-----------
Total Short-Term
Investments
(Cost $1,025,018) 1,025,018
-----------
Total Investments
(Cost $82,184,739) -
140.4% 86,225,560
-----------
Liabilities in Excess of
Other Assets - (40.4)% (24,805,605)
-----------
TOTAL NET
ASSETS - 100.0% $61,419,955
-----------
-----------
*<F26> Non Income Producing
See notes to the financial statements
BAIRD FUNDS, INC.
ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2006 (UNAUDITED)
EXAMPLE
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction
costs, which may include sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemption fees; and exchange fees; and (2)
ongoing costs, such as management fees; distribution and/or service (12b-1)
fees; and other fund 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.
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
(1/1/06 - 6/30/06).
ACTUAL EXPENSES
The third and fourth columns of the table below provide information about
account values based on actual returns and actual expenses. 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 fourth column entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fifth and sixth 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 sixth column of the
table (entitled "Expenses Paid During Period") 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, 2006
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)<F27> 1/1/06 6/30/06 PERIOD(1)<F27> 6/30/06 PERIOD(1)<F27>
------------- --------- ------- -------------- ------- --------------
BAIRD LARGECAP FUND
Institutional Class 0.75% $1,000.00 $ 971.20 $3.67 $1,021.08 $3.76
Investor Class 1.00% $1,000.00 $ 969.80 $4.88 $1,019.84 $5.01
BAIRD MIDCAP FUND
Institutional Class 0.85% $1,000.00 $1,036.90 $4.29 $1,020.58 $4.26
Investor Class 1.10% $1,000.00 $1,035.50 $5.55 $1,019.34 $5.51
BAIRD SMALLCAP FUND
Institutional Class 0.95% $1,000.00 $1,038.40 $4.80 $1,020.08 $4.76
Investor Class 1.20% $1,000.00 $1,036.70 $6.06 $1,018.84 $6.01
(1)<F27> 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, 2006 (UNAUDITED)
BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP
FUND FUND FUND
-------------- ------------ --------------
ASSETS:
Investments, at value (cost $26,773,234; $30,436,999 $114,046,018 $71,828,702
$102,777,201; and $67,787,881, respectively)
Repurchase agreement (cost $6,694,547; 6,694,547 24,895,339 14,396,858
$24,895,339; and $14,396,858, respectively)
Dividends receivable 14,033 13,638 5,942
Interest receivable 2,218 9,888 6,759
Receivable for investments sold 698,693 959,170 --
Receivable for fund shares sold 64,474 41,323 168,922
Other assets 15,308 20,481 17,511
----------- ------------ -----------
Total assets 37,926,272 139,985,857 86,424,694
----------- ------------ -----------
LIABILITIES:
Payable for collateral received for securities loaned 11,549,584 42,950,013 24,837,793
Payable to Advisor and Distributor 5,439 52,057 24,315
Payable for securities purchased 532,929 -- --
Payable for fund shares repurchased -- -- 87,071
Accrued expenses and other liabilities 35,182 47,232 55,560
----------- ------------ -----------
Total liabilities 12,123,134 43,094,302 25,004,739
----------- ------------ -----------
NET ASSETS $25,803,138 $ 96,936,555 $61,419,955
----------- ------------ -----------
----------- ------------ -----------
NET ASSETS CONSIST OF:
Capital stock $26,610,598 $ 80,283,066 $56,711,918
Accumulated undistributed net investment income 81,521 -- --
Accumulated net realized gain (loss) on investments sold (4,552,746) 5,384,672 667,216
Net unrealized appreciation on investments 3,663,765 11,268,817 4,040,821
----------- ------------ -----------
NET ASSETS $25,803,138 $ 96,936,555 $61,419,955
----------- ------------ -----------
----------- ------------ -----------
INSTITUTIONAL CLASS SHARES
Net Assets $24,064,777 $ 91,787,568 $56,313,394
Shares outstanding
($0.01 par value, unlimited shares authorized) 2,975,379 7,963,132 4,843,286
Net asset value, offering and redemption price per share $ 8.09 $ 11.53 $ 11.63
----------- ------------ -----------
INVESTOR CLASS SHARES
Net Assets $ 1,738,361 $ 5,148,987 $ 5,106,561
Shares outstanding
($0.01 par value, unlimited shares authorized) 216,272 452,511 441,429
Net asset value, offering and redemption price per share $ 8.04 $ 11.38 $ 11.57
----------- ------------ -----------
----------- ------------ -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF OPERATIONS PERIOD ENDED JUNE 30, 2006 (UNAUDITED)
BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP
FUND FUND FUND
-------------- ------------ --------------
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld
of $2,160, $0, $0, respectively) $ 175,238 $ 219,924 $ 72,852
Interest 12,125 69,149 46,147
Income from securities lending 882 5,370 3,976
----------- ----------- ----------
Total investment income 188,245 294,443 122,975
----------- ----------- ----------
EXPENSES:
Investment advisory fees 90,259 348,841 241,516
Administration fees 6,840 20,915 12,909
Shareholder servicing fees 9,218 11,048 36,091
Fund accounting fees 12,644 18,607 15,788
Professional fees 13,515 12,675 15,425
Federal and state registration 13,684 14,204 16,644
Directors fees 4,032 3,892 3,972
Custody fees 2,997 10,872 5,288
Reports to shareholders 1,322 2,842 4,515
Distribution fees - Investor Class Shares 2,615 6,407 4,699
Miscellaneous expenses 1,066 2,917 1,629
----------- ----------- ----------
Total expenses 158,192 453,220 358,476
Expense reimbursement by Advisor (51,433) (51,460) (83,847)
----------- ----------- ----------
Total expenses 106,759 401,760 274,629
----------- ----------- ----------
NET INVESTMENT INCOME (LOSS) 81,486 (107,317) (151,654)
----------- ----------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,031,455 4,285,077 1,492,446
Change in unrealized appreciation/depreciation
on investments (2,862,084) (1,542,211) 238,070
----------- ----------- ----------
Net realized and unrealized gain (loss) on investments (830,629) 2,742,866 1,730,516
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (749,143) $ 2,635,549 $1,578,862
----------- ----------- ----------
----------- ----------- ----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD LARGECAP FUND
------------------------------------
Six Months Ended
June 30, 2006 Year Ended
(Unaudited) December 31, 2005
---------------- -----------------
OPERATIONS:
Net investment income $ 81,486 $ 273,336
Net realized gain on investments 2,031,455 2,075,582
Change in unrealized appreciation/depreciation
on investments (2,862,084) (360,051)
----------- -----------
Net increase (decrease) in net assets resulting from operations (749,143) 1,988,867
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,306,296 4,077,942
Shares issued to holders in reinvestment of dividends -- 269,481
Cost of shares redeemed (5,530,166) (42,940,244)
----------- -----------
Net decrease in net assets resulting from
capital share transactions (3,223,870) (38,592,821)
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income -- (258,497)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income -- (15,591)
----------- -----------
TOTAL DECREASE IN NET ASSETS (3,973,013) (36,878,042)
NET ASSETS:
Beginning of period 29,776,151 66,654,193
----------- -----------
End of period (including undistributed net investment income
of $81,521 and $35, respectively) $25,803,138 $29,776,151
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD MIDCAP FUND
------------------------------------
Six Months Ended
June 30, 2006 Year Ended
(Unaudited) December 31, 2005
---------------- -----------------
OPERATIONS:
Net investment loss $ (107,317) $ (214,719)
Net realized gain on investments 4,285,077 4,534,559
Change in unrealized appreciation/depreciation
on investments (1,542,211) 1,330,768
----------- -----------
Net increase in net assets resulting from operations 2,635,549 5,650,608
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 21,645,931 22,919,718
Shares issued to holders in reinvestment of dividends -- 2,763,152
Cost of shares redeemed (17,522,541) (28,445,712)
----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions 4,123,390 (2,762,842)
----------- -----------
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net realized gains -- (2,976,399)
----------- -----------
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net realized gains -- (155,477)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 6,758,939 (244,110)
NET ASSETS:
Beginning of period 90,177,616 90,421,726
----------- -----------
End of period $96,936,555 $90,177,616
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
BAIRD SMALLCAP FUND
------------------------------------
Six Months Ended
June 30, 2006 Year Ended
(Unaudited) December 31, 2005
---------------- -----------------
OPERATIONS:
Net investment loss $ (151,654) $ (169,732)
Net realized gain (loss) on investments 1,492,446 (622,142)
Change in unrealized appreciation/depreciation
on investments 238,070 2,209,185
----------- -----------
Net increase in net assets resulting from operations 1,578,862 1,417,311
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,158,398 33,342,662
Cost of shares redeemed (7,690,965) (4,785,759)
----------- -----------
Net increase in net assets resulting from
capital share transactions 12,467,433 28,556,903
----------- -----------
TOTAL INCREASE IN NET ASSETS 14,046,295 29,974,214
NET ASSETS:
Beginning of period 47,373,660 17,399,446
----------- -----------
End of period $61,419,955 $47,373,660
----------- -----------
----------- -----------
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD LARGECAP FUND - INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
------------- ---- ---- ---- ---- ----
Per Share Data:
Net asset value,
beginning of period $ 8.33 $ 8.13 $ 7.78 $ 6.41 $ 8.63 $ 9.58
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.03 0.04(1) 0.06(1) 0.02 0.02 0.01
<F28> <F28>
Net realized and unrealized
gains (losses) on investments (0.27) 0.24 0.35 1.37 (2.22) (0.95)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.24) 0.28 0.41 1.39 (2.20) (0.94)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income -- (0.08) (0.06) (0.02) (0.02) (0.01)
Distributions from net realized gains -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions -- (0.08) (0.06) (0.02) (0.02) (0.01)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 8.09 $ 8.33 $ 8.13 $ 7.78 $ 6.41 $ 8.63
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total return (2.88)%(3) 3.39% 5.21% 21.75% (25.53)% (9.84)%
<F30>
Supplemental data and ratios:
Net assets, end of period $24,064,777 $27,375,626 $64,754,140 $59,743,783 $48,900,767 $51,446,666
Ratio of expenses
to average net assets 0.75%(4) 0.75% 0.75% 0.75% 0.75% 0.75%
<F31>
Ratio of expenses to average
net assets (before waivers) 1.12%(4) 0.93% 0.93% 0.95% 0.95% 1.06%
<F31>
Ratio of net investment income
to average net assets 0.61%(4) 0.46% 0.72% 0.34% 0.23% 0.12%
<F31>
Ratio of net investment income (loss)
to average net assets (before waivers) 0.24%(4) 0.28% 0.54% 0.14% 0.03% (0.19)%
<F31>
Portfolio turnover rate(2)<F29> 26.0%(3) 28.6% 23.2% 24.8% 16.2% 9.0%
<F30>
(1)<F28> Calculated using average shares outstanding during the period.
(2)<F29> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(3)<F30> Not annualized.
(4)<F31> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD LARGECAP FUND - INVESTOR CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
------------- ---- ---- ---- ---- ----
Per Share Data:
Net asset value,
beginning of period $ 8.29 $ 8.09 $ 7.75 $ 6.40 $ 8.61 $ 9.57
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) 0.02 0.02(1) 0.04(1) 0.01 (0.00)(2) (0.01)
<F32> <F32> <F33>
Net realized and unrealized
gains (losses) on investments (0.27) 0.23 0.35 1.35 (2.21) (0.95)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.25) 0.25 0.39 1.36 (2.21) (0.96)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from
net investment income -- (0.05) (0.05) (0.01) (0.00)(2) --
<F33>
Distributions from
net realized gains -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions -- (0.05) (0.05) (0.01) (0.00) --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 8.04 $ 8.29 $ 8.09 $ 7.75 $ 6.40 $ 8.61
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total return (3.02)%(4) 3.15% 5.00% 21.20% (25.65)% (10.03)%
<F35>
Supplemental data and ratios:
Net assets, end of period $ 1,738,361 $ 2,400,525 $ 1,900,053 $ 634,160 $ 647,018 $ 615,533
Ratio of expenses
to average net assets 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.00%
<F36>
Ratio of expenses to average
net assets (before waivers) 1.37%(5) 1.18% 1.18% 1.20% 1.20% 1.31%
<F36>
Ratio of net investment income (loss)
to average net assets 0.36%(5) 0.21% 0.47% 0.09% (0.02)% (0.13)%
<F36>
Ratio of net investment income (loss)
to average net assets (before waivers) (0.01)%(5) 0.03% 0.29% (0.11)% (0.22)% (0.44)%
<F36>
Portfolio turnover rate(3)<F34> 26.0%(4) 28.6% 23.2% 24.8% 16.2% 9.0%
<F35>
(1)<F32> Calculated using average shares outstanding during the period.
(2)<F33> Amount is less than $0.01.
(3)<F34> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(4)<F35> Not annualized.
(5)<F36> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD MIDCAP FUND - INSTITUTIONAL CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
------------- ---- ---- ---- ---- ----
Per Share Data:
Net asset value,
beginning of period $ 11.12 $ 10.91 $ 9.72 $ 7.66 $ 9.11 $ 9.70
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (0.01)(1) (0.02)(1) (0.04)(1) (0.07) (0.07)(1) (0.06)(1)
<F37> <F37> <F37> <F37> <F37>
Net realized and unrealized
gains (losses) on investments 0.42 0.63 1.25 2.13 (1.38) (0.53)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.41 0.61 1.21 2.06 (1.45) (0.59)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Distributions from
net realized gains -- (0.40) (0.02) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 11.53 $ 11.12 $ 10.91 $ 9.72 $ 7.66 $ 9.11
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total return 3.69%(3) 5.56% 12.44% 26.89% (15.92)% (6.08)%
<F39>
Supplemental data and ratios:
Net assets, end of period $91,787,568 $85,670,669 $86,476,869 $28,629,656 $20,864,264 $13,049,574
Ratio of expenses
to average net assets 0.85%(4) 0.85% 0.85% 1.20% 1.25% 1.25%
<F40>
Ratio of expenses to average
net assets (before waivers) 0.96%(4) 0.98% 1.05% 1.20% 1.39% 2.06%
<F40>
Ratio of net investment loss
to average net assets (0.22)%(4) (0.21)% (0.43)% (0.81)% (0.84)% (0.67)%
<F40>
Ratio of net investment loss
to average net assets (before waivers) (0.33)%(4) (0.34)% (0.63)% (0.81)% (0.98)% (1.48)%
<F40>
Portfolio turnover rate(2)<F38> 41.7%(3) 77.4% 77.9% 81.8% 55.4% 73.6%
<F39>
(1)<F37> Calculated using average shares outstanding during the period.
(2)<F38> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(3)<F39> Not annualized.
(4)<F40> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD MIDCAP FUND - INVESTOR CLASS
------------------------------------------------------------------------------------
Six Months
Ended
June 30, 2006 Year Ended December 31,
(Unaudited) 2005 2004 2003 2002 2001
------------- ---- ---- ---- ---- ----
Per Share Data:
Net asset value,
beginning of period $ 10.99 $ 10.82 $ 9.65 $ 7.63 $ 9.09 $ 9.70
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (0.03)(1) (0.05)(1) (0.07)(1) (0.09) (0.09)(1) (0.08)(1)
<F41> <F41> <F41> <F41> <F41>
Net realized and unrealized
gains (losses) on investments 0.42 0.62 1.26 2.11 (1.37) (0.53)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.39 0.57 1.19 2.02 (1.46) (0.61)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions:
Distributions from
net realized gains -- (0.40) (0.02) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 11.38 $ 10.99 $ 10.82 $ 9.65 $ 7.63 $ 9.09
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total return 3.55%(3) 5.24% 12.32% 26.47% (16.06)% (6.29)%
<F43>
Supplemental data and ratios:
Net assets, end of period $ 5,148,987 $ 4,506,947 $ 3,944,857 $ 959,209 $ 801,703 $1,050,356
Ratio of expenses
to average net assets 1.10%(4) 1.10% 1.10% 1.45% 1.50% 1.50%
<F44>
Ratio of expenses to average
net assets (before waivers) 1.21%(4) 1.23% 1.30% 1.45% 1.64% 2.31%
<F44>
Ratio of net investment loss
to average net assets (0.47)%(4) (0.46)% (0.68)% (1.06)% (1.09)% (0.92)%
<F44>
Ratio of net investment loss
to average net assets (before waivers) (0.58)%(4) (0.59)% (0.88)% (1.06)% (1.23)% (1.73)%
<F44>
Portfolio turnover rate(2)<F42> 41.7%(3) 77.4% 77.9% 81.8% 55.4% 73.6%
<F43>
(1)<F41> Calculated using average shares outstanding during the period.
(2)<F42> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(3)<F43> Not annualized.
(4)<F44> Annualized.
See notes to the financial statements
BAIRD FUNDS, INC.
FINANCIAL HIGHLIGHTS
BAIRD SMALLCAP FUND - INSTITUTIONAL CLASS
-------------------------------------------------------
Six Months June 30,
Ended Year Ended 2004(1)<F45>
June 30, 2006 December 31, through
(Unaudited) 2005 December 31, 2004
------------- ----------- -----------------
Per Share Data:
Net asset value, beginning of period $ 11.20 $ 10.84 $ 10.00
----------- ----------- -----------
Income from investment operations:
Net investment loss(2)<F46> (0.03)(2) (0.06) (0.03)
<F46>
Net realized and unrealized gains on investments 0.46 0.42 0.87
----------- ----------- -----------
Total from investment operations 0.43 0.36 0.84
----------- ----------- -----------
Net asset value, end of period $ 11.63 $ 11.20 $ 10.84
----------- ----------- -----------
----------- ----------- -----------
Total return 3.84%(3) 3.32% 8.40%(3)
<F47> <F47>
Supplemental data and ratios:
Net assets, end of period $56,313,394 $45,010,093 $17,331,262
Ratio of expenses to average net assets 0.95%(4) 0.95% 0.95%(4)
<F48> <F48>
Ratio of expenses to average net assets (before waivers) 1.25%(4) 1.31% 1.89%(4)
<F48> <F48>
Ratio of net investment loss to average net assets (0.51)%(4) (0.57)% (0.65)%(4)
<F48> <F48>
Ratio of net investment loss to average net assets (before waivers) (0.81)%(4) (0.93)% (1.59)%(4)
<F48> <F48>
Portfolio turnover rate(5)<F49> 29.4%(3) 56.4% 34.7%(3)
<F47> <F47>
(1)<F45> Commencement of operations.
(2)<F46> Calculated using average shares outstanding during the period.
(3)<F47> Not annualized.
(4)<F48> Annualized.
(5)<F49> 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 CLASS
-------------------------------------------------------
Six Months June 30,
Ended Year Ended 2004(1)<F50>
June 30, 2006 December 31, through
(Unaudited) 2005 December 31, 2004
------------- ----------- -----------------
Per Share Data:
Net asset value, beginning of period $ 11.16 $ 10.83 $ 10.00
----------- ----------- -----------
Income from investment operations:
Net investment loss(2)<F51> (0.04)(2) (0.09) (0.05)
<F51>
Net realized and unrealized gains on investments 0.45 0.42 0.88
----------- ----------- -----------
Total from investment operations 0.41 0.33 0.83
----------- ----------- -----------
Net asset value, end of period $ 11.57 $ 11.16 $ 10.83
----------- ----------- -----------
----------- ----------- -----------
Total return 3.67%(3) 3.05% 8.30%(3)
<F52> <F52>
Supplemental data and ratios:
Net assets, end of period $ 5,106,561 $ 2,363,567 $ 68,184
Ratio of expenses to average net assets 1.20%(4) 1.20% 1.20%(4)
<F53> <F53>
Ratio of expenses to average net assets (before waivers) 1.50%(4) 1.56% 2.14%(4)
<F53> <F53>
Ratio of net investment loss to average net assets (0.76)%(4) (0.82)% (0.90)%(4)
<F53> <F53>
Ratio of net investment loss to average net assets (before waivers) (1.06)%(4) (1.18)% (1.84)%(4)
<F53> <F53>
Portfolio turnover rate(5)<F54> 29.4%(3) 56.4% 34.7%(3)
<F52> <F52>
(1)<F50> Commencement of operations.
(2)<F51> Calculated using average shares outstanding during the period.
(3)<F52> Not annualized.
(4)<F53> Annualized.
(5)<F54> 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, 2006 (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 investment
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
investment advisor to the Funds is Robert W. Baird & Co. Incorporated ("Baird"
or the "Advisor").
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 long-term growth of
capital through investments in equity securities of large-capitalization
companies.
The investment objective of the Baird MidCap Fund is long-term growth of capital
through investments in equity securities of mid-capitalization companies.
The investment objective of the Baird SmallCap Fund is long-term growth of
capital through investments in equity securities of small-capitalization
companies.
On June 30, 2006, one shareholder related to the Advisor held approximately 68%
of the Baird LargeCap 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. Securities that were not traded on the valuation date, as well as
stocks that are not listed on an exchange or traded on NASDAQ, are valued
at the average of the current bid and asked price. Because market
quotations for most debt securities are not readily available, debt
securities are stated at fair value as furnished 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. Debt securities purchased with a remaining maturity of 60 days
or less are valued at acquisition cost plus or minus any amortized discount
or premium. Investments in mutual funds are valued at their stated 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
the Advisor in accordance with procedures approved by the Corporation's
Board of Directors. In accordance with such procedures, the Advisor may
use broker quotes or, if the broker quotes are unavailable or deemed to be
unreliable, fair value will be determined by a valuation committee of the
Advisor. 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 there is no single standard for
determining a security's fair value. As a result, different mutual funds
could reasonably arrive at a different fair value for the same security.
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. Occasionally, events that affect those 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.
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.
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Funds' tax
returns to determine whether the tax positions are "more likely than not"
of being sustained by the applicable tax authority. A tax position that
meets the more-likely-than-not threshold is measured to determine the
amount of benefit or expense to recognize in the financial statements.
Adoption of FIN 48 is required for fiscal years beginning after December
15, 2006 and is to be applied to all open tax years as of the effective
date. At this time, management is evaluating the implications of FIN 48
and whether it will have any impact on the Funds' financial statements.
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 is charged for those expenses
directly attributable to it. 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 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 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 for
the past two fiscal periods:
BAIRD LARGECAP FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $1,967,367 235,146 Shares sold $ 338,929 40,479
Shares redeemed (4,579,195) (547,162) Shares redeemed (950,971) (113,936)
----------- --------- ---------- --------
Net Decrease $(2,611,828) (312,016) Net Decrease $ (612,042) (73,457)
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 3,287,395 Beginning of period 289,729
--------- --------
End of period 2,975,379 End of period 216,272
--------- --------
--------- --------
Year Ended Year Ended
December 31, 2005 December 31, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $3,287,419 410,040 Shares sold $ 790,523 98,881
Shares issued through Shares issued through
reinvestment of dividends 253,910 30,227 reinvestment of dividends 15,571 1,863
Shares redeemed (42,566,187) (5,113,671) Shares redeemed (374,057) (45,879)
------------ ---------- ---------- --------
Net Decrease $(39,024,858) (4,673,404) Net Increase $ 432,037 54,865
------------ ----------
------------ ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,960,799 Beginning of period 234,864
---------- --------
End of period 3,287,395 End of period 289,729
---------- --------
---------- --------
BAIRD MIDCAP FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $20,446,655 1,672,110 Shares sold $1,199,276 100,881
Shares redeemed (16,846,290) (1,411,023) Shares redeemed (676,251) (58,297)
----------- ---------- ---------- --------
Net Increase $ 3,600,365 261,087 Net Increase $ 523,025 42,584
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,702,045 Beginning of period 409,927
---------- --------
End of period 7,963,132 End of period 452,511
---------- --------
---------- --------
Year Ended Year Ended
December 31, 2005 December 31, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $21,848,259 2,032,237 Shares sold $1,071,459 99,399
Shares issued through Shares issued through
reinvestment of dividends 2,612,352 234,082 reinvestment of dividends 150,800 13,672
Shares redeemed (27,724,642) (2,488,411) Shares redeemed (721,070) (67,838)
----------- ---------- ---------- --------
Net Decrease $(3,264,031) (222,092) Net Increase $ 501,189 45,233
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 7,924,137 Beginning of period 364,694
---------- --------
End of period 7,702,045 End of period 409,927
---------- --------
---------- --------
BAIRD SMALLCAP FUND
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2006
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $17,183,485 1,457,518 Shares sold $2,974,913 253,736
Shares redeemed (7,407,836) (632,618) Shares redeemed (283,129) (24,135)
----------- --------- ---------- --------
Net Increase $ 9,775,649 824,900 Net Increase $2,691,784 229,601
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 4,018,386 Beginning of period 211,828
--------- --------
End of period 4,843,286 End of period 441,429
--------- --------
--------- --------
Year Ended Year Ended
December 31, 2005 December 31, 2005
-------------------------- --------------------------
INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares
---------- ---------- ---------- ----------
Shares sold $30,846,152 2,842,497 Shares sold $2,496,510 225,110
Shares redeemed (4,571,120) (422,581) Shares redeemed (214,639) (19,578)
----------- --------- ---------- --------
Net Increase $26,275,032 2,419,916 Net Increase $2,281,871 205,532
----------- ----------
----------- ----------
Shares Outstanding: Shares Outstanding:
Beginning of period 1,598,470 Beginning of period 6,296
--------- --------
End of period 4,018,386 End of period 211,828
--------- --------
--------- --------
4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the six month period ended June 30, 2006, purchases and sales of
investment securities (excluding short-term investments) were as follows:
Baird Baird Baird
LargeCap Fund MidCap Fund SmallCap Fund
------------- ----------- -------------
Purchases: $ 7,138,522 $41,841,148 $28,942,239
Sales: $10,728,479 $37,797,392 $16,336,852
At December 31, 2005, accumulated earnings/losses on a tax basis were as
follows:
LARGECAP MIDCAP SMALLCAP
FUND FUND FUND
-------- ------ --------
Cost of Investments $23,018,742 $77,466,370 $43,511,561
----------- ----------- -----------
----------- ----------- -----------
Gross unrealized appreciation $ 6,813,854 $15,186,002 $ 5,745,436
Gross unrealized depreciation (328,525) (2,484,446) (2,074,028)
----------- ----------- -----------
Net unrealized appreciation/(depreciation) $ 6,485,329 $12,701,556 $ 3,671,408
----------- ----------- -----------
----------- ----------- -----------
Undistributed ordinary income $ 35 $ 355,507 $ --
Undistributed long-term capital gain -- 853,560 --
----------- ----------- -----------
Total distributable earnings $ 35 $ 1,209,067 $ --
----------- ----------- -----------
----------- ----------- -----------
Other accumulated gains/(losses) $(6,543,681) $ -- $ (693,887)
----------- ----------- -----------
Total accumulated earnings/(losses) $ (58,317) $13,910,623 $ 2,977,521
----------- ----------- -----------
----------- ----------- -----------
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, 2005, the Baird SmallCap Fund elected to defer
capital losses occurring between November 1, 2005 and December 31, 2005 in the
amount of $147,920.
At December 31, 2005, 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 and $2,282,259 that expire in 2010. At December 31, 2005, the
Baird SmallCap Fund had accumulated net realized capital loss carryovers of
$190,878 expiring in 2012 and $355,089 that expire in 2013. To the extent the
Funds realize future net capital gains, taxable distributions to shareholders
will be offset by any unused capital loss carryovers. During the year ended
December 31, 2005, the Baird LargeCap Fund utilized $2,058,234 in capital loss
carryovers from previous years.
During the six months ended June 30, 2006, the Funds have not made any capital
gain distributions or income dividends.
During the year ended December 31, 2005, the Funds paid the following dividends:
ORDINARY INCOME DIVIDENDS NET LONG-TERM CAPITAL GAINS
------------------------- ---------------------------
Baird LargeCap Fund $274,088 --
Baird MidCap Fund 674,962 $2,456,914
Baird SmallCap Fund -- --
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Baird for the
provision of investment advisory services. 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, 2006 and through April 30, 2007, 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 percentages of average daily net
assets:
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 its
total annual 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 Fiscal Period Ended December 31,
June 30, ----------------------------------
2006 2005 2004 2003
---------- ---- ---- ----
REIMBURSED / ABSORBED EXPENSES SUBJECT
TO RECOVERY BY ADVISOR UNTIL: 2009 2008 2007 2006
BAIRD LARGECAP FUND $51,433 $109,024 $114,127 $108,138
BAIRD MIDCAP FUND $51,460 $129,774 $116,179 $ 1,122
BAIRD SMALLCAP FUND $83,847 $104,335 $ 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 six months ended June 30,
2006.
6. SECURITIES LENDING
Each Fund may lend up to one-third of its total assets (including such loans) to
borrowers under terms of participation in a securities lending program
administered by U.S. Bancorp Asset Management, an affiliate of the Funds'
custodian, transfer agent and administrator. The securities lending agreement
requires that loans are collateralized at all times in an amount equal to at
least 102% of the market value of any loaned securities at the time of the loan,
plus accrued interest.
The Funds receive compensation in the form of fees and earn interest on the cash
collateral. The amount of fees depends on a number of factors including the
type of security, length of the loan and credit standing of the borrower. Each
Fund continues to receive interest payments or dividends on the securities
loaned during the borrowing period. Each Fund has the right under the terms of
the securities lending agreement to recover the securities from the borrower on
demand.
As of June 30, 2006, the Baird LargeCap, Baird MidCap and Baird SmallCap Funds
had loaned securities that were collateralized by cash equivalents. The cash
collateral is invested by the custodian with the approval of the Advisor.
Although the cash collateral is generally invested in readily marketable, high
quality, short-term obligations, such investments are subject to risk of payment
delays or default on the part of the issuer or counterparty or otherwise may not
generate sufficient interest to support the costs associated with securities
lending. A Fund could also experience delays in recovering its securities and
possible loss of income or value if the borrower fails to return the borrowed
securities, although this risk is mitigated by the collateral and by contract
with the securities lending agent.
As of June 30, 2006, the market value of the securities on loan and payable on
collateral due to broker were as follows:
MARKET VALUE OF PAYABLE ON COLLATERAL
SECURITIES ON LOAN DUE TO BROKER
------------------ ---------------------
Baird LargeCap Fund $11,141,746 $11,549,584
Baird MidCap Fund 41,585,079 42,950,013
Baird SmallCap Fund 23,841,730 24,837,793
Individual reinvested cash collateral jointly pooled with collateral received by
other Baird Funds as of June 30, 2006 is as follows:
LARGECAP MIDCAP SMALLCAP OTHER
FUND FUND FUND BAIRD FUNDS TOTAL
-------- ------ -------- ----------- -----
Concord Minutemen
Capital Company Interest
Bearing Commercial Paper $ 577,547 $ 2,147,754 $ 1,242,036 $ 8,032,663 $ 12,000,000
Duke Funding High Grade
Discount Commercial Paper 529,418 1,968,774 1,138,533 7,363,275 11,000,000
Laguna ABS CDO
Discount Commercial Paper 481,289 1,789,795 1,035,030 6,693,886 10,000,000
Lakeside Funding LLC Interest
Bearing Commercial Paper 385,032 1,431,836 828,024 5,355,108 8,000,000
Federated Prime Obligations Fund 42,145 156,727 90,635 586,165 875,672
Rams Funding LLC Discount
Commercial Paper 529,418 1,968,774 1,138,533 7,363,275 11,000,000
Thornburg Mortgage Capital
Discount Commercial Paper 529,418 1,968,774 1,138,533 7,363,275 11,000,000
CS First Boston
Repurchase Agreement(1)<F55> 1,203,224 4,474,487 2,587,575 16,734,714 25,000,000
Lehman Brothers
Repurchase Agreement(2)<F56> 1,684,513 6,264,282 3,622,605 23,428,600 35,000,000
Merrill Lynch Premier
Institutional Fund 4,623 17,192 9,942 64,297 96,054
Morgan Stanley
Repurchase Agreement(3)<F57> 3,802,187 14,139,378 8,176,736 52,881,699 79,000,000
Antalis U.S. Funding Corporation
Discount Commercial Paper 481,289 1,789,795 1,035,030 6,693,886 10,000,000
Fenway Funding LLC
Liquidity Notes 529,418 1,968,774 1,138,533 7,363,275 11,000,000
Morton International Inc.
Short-Term Loan Notes 240,645 894,897 517,515 3,346,943 5,000,000
Stratford Receivables Co., LLC
Liquidity Notes 529,418 1,968,774 1,138,533 7,363,275 11,000,000
----------- ----------- ----------- ------------ ------------
$11,549,584 $42,950,013 $24,837,793 $160,634,336 $239,971,726
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
(1)<F55> (Dated 06/30/06), 5.36%, Due 07/03/06 (Repurchase Proceeds
$25,011,019), (Collateralized by Agency Mortgage-Backed Securities)
(2)<F56> (Dated 06/30/06), 5.43%, Due 07/03/06 (Repurchase Proceeds
$35,015,621), (Collateralized by Various Corporate Bonds)
(3)<F57> (Dated 06/30/06), 5.39%, Due 07/03/06 (Repurchase Proceeds
$79,034,998), (Collateralized by Agency Mortgage-Backed Securities)
7. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Plan allows the Funds to
compensate the Distributor for 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 $2,615, $6,407 and $4,699, respectively, in fees pursuant
to the Plan during the six months ended June 30, 2006.
ADDITIONAL INFORMATION
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 www.bairdfunds.com; and by accessing the SEC's website at
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 www.bairdfunds.com; and by accessing the SEC's
website at 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 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. The Funds' Forms N-Q may also be obtained by calling toll-free
1-866-44BAIRD.
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 AND DISTRIBUTOR
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADMINISTRATOR AND TRANSFER 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
Grant Thornton LLP
175 West Jackson Boulevard, 20th Floor
Chicago, Illinois 60604
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) 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 (the "Act")), 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 period.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
- -----------------
(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 because the
Registrant is not a closed-end management investment company.
(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, 2006
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, 2006
By: /s/ Leonard Rush
----------------------------
Leonard Rush, Treasurer
Date: September 1, 2006