-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCv2izWsCbjWLk6BEUOFxhqoX0wpb2aJoijkRsszA38gw1BCPodeqX7Cyu9CKf7W 7gJMzyaimVcXNQtSGvGsOQ== 0000898531-05-000319.txt : 20050908 0000898531-05-000319.hdr.sgml : 20050908 20050908155251 ACCESSION NUMBER: 0000898531-05-000319 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050908 DATE AS OF CHANGE: 20050908 EFFECTIVENESS DATE: 20050908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAIRD FUNDS INC CENTRAL INDEX KEY: 0001282693 IRS NUMBER: 000000000 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-09997 FILM NUMBER: 051075355 BUSINESS ADDRESS: STREET 1: 777 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 414-765-3500 MAIL ADDRESS: STREET 1: 777 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 N-CSRS 1 bfif_bef-ncsrse.txt As filed with the Securities and Exchange Commission on September 8, 2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-09997 --------- BAIRD FUNDS, INC. ----------------- (Exact name of Registrant as specified in charter) 777 EAST WISCONSIN AVENUE, FLOOR 18 ----------------------------------- MILWAUKEE, WI 53202 ------------------- (Address of principal executive offices) (Zip code) CHARLES M. WEBER ---------------- ROBERT W. BAIRD & CO. INCORPORATED ---------------------------------- 777 EAST WISCONSIN AVENUE ------------------------- MILWAUKEE, WI 53202 ------------------- (Name and address of agent for service) 1-866-442-2473 -------------- Registrant's telephone number, including area code Date of fiscal year end: DECEMBER 31, 2005 ----------------- Date of reporting period: JUNE 30, 2005 ------------- ITEM 1. REPORT TO STOCKHOLDERS. - ------------------------------ (BAIRD FUNDS LOGO) SEMI-ANNUAL REPORT June 30, 2005 Baird Intermediate Bond Fund Baird Aggregate Bond Fund Baird Intermediate Municipal Bond Fund Baird Core Plus Bond Fund Baird Short-Term Bond Fund TABLE OF CONTENTS PAGE BAIRD INTERMEDIATE BOND FUND 1 BAIRD AGGREGATE BOND FUND 13 BAIRD INTERMEDIATE MUNICIPAL BOND FUND 25 BAIRD CORE PLUS BOND FUND 30 BAIRD SHORT-TERM BOND FUND 38 ADDITIONAL INFORMATION ON FUND EXPENSES 46 STATEMENTS OF ASSETS AND LIABILITIES 48 STATEMENTS OF OPERATIONS 49 STATEMENTS OF CHANGES IN NET ASSETS 50 FINANCIAL HIGHLIGHTS 55 NOTES TO THE FINANCIAL STATEMENTS 64 This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. BAIRD INTERMEDIATE BOND FUND JUNE 30, 2005 The investment objective of the Baird Intermediate Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers Intermediate Government/Credit Bond Index. The Lehman Brothers Intermediate Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rated debt including government and corporate securities with maturities between one and ten years. PORTFOLIO CHARACTERISTICS QUALITY DISTRIBUTION* U.S. Treasury 14% U.S. Gov't Agency 22% Aaa 21% Aa 4% A 17% Baa 21% Below Baa 1% SECTOR WEIGHTINGS U.S. Treasury 13% U.S. Gov't Agency 16% Int'l 3% Mortgage/CMOs 12% Asset-Backed 10% Industrials 16% Utility 6% Finance/Bank/Broker 18% Cash 5% Municipal 1% NET ASSETS: $217,113,383 ANNUALIZED EXPENSE RATIO: SEC 30-DAY YIELD:** Institutional Class: 0.30% Institutional Class: 4.20% Investor Class: 0.55%*** Investor Class: 3.94% PORTFOLIO TURNOVER RATIO:**** 29.1% AVERAGE DURATION: 3.65 years TOTAL NUMBER OF HOLDINGS: 224 AVERAGE MATURITY: 5.02 years
* Credit ratings are provided by Moody's Investors Service. ** SEC yields are based on SEC guidelines and are calculated for the 30 days ended June 30, 2005. *** Includes 0.25% 12b-1 fee. **** Not Annualized. BAIRD INTERMEDIATE BOND FUND ANNUALIZED TOTAL RETURNS For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ---------------------- Baird Intermediate Bond Fund - Institutional Class Shares 5.55% 6.94% Baird Intermediate Bond Fund - Investor Class Shares 5.32% 6.70% Lehman Brothers Intermediate Government/Credit Bond Index(2) 4.80% 6.61%
(1) For the period September 29, 2000 (commencement of operations) to June 30, 2005. (2) The Lehman Brothers Intermediate Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and ten years. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Principal Amount Value --------- ----- LONG-TERM INVESTMENTS - 94.0% ASSET-BACKED SECURITIES - 9.9% $ 195,102 Amresco Residential Securities Mortgage Loan Trust, Series 1998-1, Class A6, 6.51%, 08-25-2027 $ 194,659 617,680 Banc One Home Equity Trust, Series 1999-2, Class A7, 7.18%, 06-25-2029 630,992 1,150,000 Bayview Financial Acquisition Trust Series 2005-B, Class 1A2, 4.70%, 04-28-2039 1,147,570 1,350,000 Chase Funding Mortgage Loan, Series 2004-1, Class 1A3, 2.98%, 04-25-2026 1,334,054 865,500 Chemical Master Credit Card Trust I, Series 1996-3, Class A, 7.09%, 02-15-2009 890,838 101,048 CitiFinancial Mortgage Securities, Inc., Series 2003-2, Class AF2, 2.13%, 05-25-2033 100,385 278,990 Contimortgage Home Equity Loan Trust: Series 1999-1, Class A7, 6.47%, 12-25-2013 280,035 Countrywide Asset-Backed Certificates: 1,475,000 Series 2004-10, Class AF2, 3.32%, 05-25-2022 1,457,735 600,000 Series 2004-9, Class AF2, 3.34%, 09-25-2023 594,012 893,826 Countrywide Alternative Loan Trust Series 2005-5R, Class A2, 4.75%, 12-25-2018 894,928 1,500,000 Credit-Based Asset Servicing and Securities Series 2005-CB1, Class AF4, 4.62%, 01-25-2035 1,502,978 Delta Funding Home Equity Loan Trust: 403,905 Series 1997-2, Class A6, 7.04%, 06-25-2027 402,995 221,337 Series 1999-1, Class A6F, 6.34%, 12-15-2028 222,889 287,862 Series 1999-2, Class A7F, 7.03%, 08-15-2030 289,184 96,570 Equivantage Home Equity Loan Trust, Series 1996-3, Class A3, 7.70%, 09-25-2027 96,354 Green Tree Financial Corporation: 747,106 Series 1998-4, Class A5, 6.18%, 04-01-2030 757,720 682,271 Series 1999-3, Class A5, 6.16%, 02-01-2031 692,313 230,364 IMC Home Equity Loan Trust Series 1998-1, Class A6, 7.02%, 06-20-2029 233,183 2,500,000 MBNA Credit Card Master Note Trust, Series 2003-A3, Class A3, 3.34%, 08-16-2010 2,507,089 400,203 Mortgage Lenders Network Home Equity Loan Trust, Series 1998-2, Class A1, 6.61%, 07-25-2029 403,841 2,000,000 New Century Home Equity Loan Trust 3.56%, 11-25-2033 1,990,435 382,398 Oakwood Mortgage Investors, Inc., Series 1999-B, Class A3, 6.45%, 11-15-2017 353,092 1,150,000 Renaissance Home Equity Loan Trust, Series 2004-3, Class AF2, 3.57%, 11-25-2034 1,136,620 Residential Asset Mortgage Products, Inc.: 1,736,689 Series 2003-RS9, Class AI3, 3.61%, 10-25-2028 1,728,790 783,803 Series 2003-RS6, Class AI3, 3.08%, 12-25-2028 777,805 700,000 Residential Asset Securities Corporation: Series 2003-KS7, Class AI3, 3.37%, 11-25-2028 696,225 54,480 Salomon Brothers Mortgage Securities VII, Series 1997-LB6, Class A6, 6.82%, 12-25-2027 54,648 ------------ 21,371,369 ------------ FINANCIAL - 17.8% 325,000 Aetna, Inc., 7.13%, 08-15-2006 335,491 Allfirst Financial, Inc. Subordinated Notes: 1,300,000 7.20%, 07-01-2007 1,382,995 500,000 6.88%, 06-01-2009 537,688 American General Finance Corporation Notes, 550,000 4.00%, 03-15-2011 531,079 589,000 American General Finance Corporation Senior Notes, 8.45%, 10-15-2009 677,462 630,000 AmSouth Bancorporation Subordinated Debentures, 6.75%, 11-01-2025 763,311 415,000 AmSouth Bank NA Subordinated Notes, 6.45%, 02-01-2008 437,793 500,000 AMVESCAP PLC, Notes 5.38%, 02-27-2013 F 514,434 225,000 Bank of America Corporation Subordinated Notes, 10.20%, 07-15-2015 316,060 350,000 Bank of Oklahoma Subordinated Notes, 7.13%, 08-15-2007 370,013 Bank One Corporation Subordinated Notes, 750,000 10.00%, 08-15-2010 930,904 180,000 6.00%, 02-17-2009 189,716 480,000 Bankers Trust Corporation Subordinated Notes, 7.38%, 05-01-2008 520,795 150,000 BSCH Issuances, Ltd., 7.63%, 09-14-2010 F 172,911 800,000 CIT Group, Inc. Senior Notes, 3.38%, 04-01-2009 773,061 300,000 CIT Group Company of Canada, 5.20%, 06-01-2015 (Acquired 05-25-05, Cost $299,151)* F 303,387 1,336,000 Comerica Incorporated Subordinated Notes, 7.25%, 08-01-2007 1,413,054 800,000 Compass Bank Subordinated Notes, 8.10%, 08-15-2009 916,187 1,000,000 Countrywide Home Loans, Inc.: 5.50%, 02-01-2007 1,019,555 900,000 Credit Suisse First Boston USA, Inc. Notes, 6.13%, 11-15-2011 978,996 475,000 Dime Capital Trust, 9.33%, 05-06-2027 527,427 494,646 First National Bank Chicago Pass Thru Certificates, 8.08%, 01-05-2018 597,548 1,100,000 First National Bank Omaha Subordinated Notes, 7.32%, 12-01-2010 1,161,329 775,000 FMR Corporation 4.75%, 03-01-2013, (Acquired 2-26-2003; Cost $777,068)* 787,353 500,000 General Electric Capital Corporation Notes, 6.00%, 06-15-2012 545,309 1,000,000 Genworth Financial Inc. Notes, 5.75%, 06-15-2014 1,072,448 500,000 The Goldman Sachs Group, Inc., 5.15%, 01-15-2014 512,376 200,000 The Goldman Sachs Group, Inc. Notes, 6.60%, 01-15-2012 222,283 830,000 Health Care Service Corporation Notes, 7.75%, 06-15-2011 (Acquired 06-20-01; Cost $497,765)* 963,690 1,200,000 Household Finance Corporation Senior Unsubordinated Notes, 6.40%, 06-17-2008 1,270,958 300,000 International Lease Finance Corporation Notes, 5.70%, 07-03-2006 304,068 500,000 J.P. Morgan Chase & Company Subordinated Notes, 6.63%, 03-15-2012 556,632 1,550,000 KeyCorp Subordinated Notes, 6.75%, 03-15-2006 1,577,987 700,000 Lehman Brothers Holdings, Inc. Notes, 8.50%, 05-01-2007 753,662 600,000 Marsh & McLennan Companies, Inc. 5.38%, 07-15-2014 597,659 600,000 MBNA Corporation Notes, 6.13%, 03-01-2013 653,834 750,000 Merrill Lynch & Co., Inc. Senior Unsubordinated Notes, 5.00%, 02-03-2014 768,362 1,000,000 Morgan Stanley Dean Witter Debentures, 10.00%, 06-15-2008 1,162,251 300,000 Morgan Stanley Unsubordinated Notes, 6.75%, 04-15-2011 332,171 196,000 National City Bank of Kentucky Subordinated Notes, 6.30%, 02-15-2011 216,051 500,000 Nationwide Life Global Fund Notes, 5.35%, 02-15-2007 (Acquired 02-08-02; Cost $499,520)* 507,334 894,000 PNC Funding Corporation, 7.50%, 11-01-2009 1,002,983 1,200,000 Protective Life U.S. Funding Notes, 5.88%, 08-15-2006 (Acquired 08-06-01 and 01-14-04; Cost $699,160 and $530,742, respectively)* 1,217,194 1,200,000 Rabobank Nederland Senior Notes, 2.70%, 03-15-2007, (Acquired 02-03-04; Cost $1,199,760)* F 1,171,656 700,000 Residential Capital Corporation Notes 6.38%, 02-30-2010 (Acquired 06-24-05; Cost $701,960)* 703,368 805,000 SAFECO Corporation, Notes 6.88%, 07-15-2007 843,964 546,000 SAFECO Corporation Senior Notes, 7.25%, 09-01-2012 630,661 Santander Central Hispano Issuances: F 325,000 7.00%, 04-01-2006 331,498 500,000 6.38%, 02-15-2011 549,121 575,000 Sanwa Bank Ltd. NY Subordinated Notes, 7.40%, 06-15-2011 650,982 1,160,000 Transamerica Finance Corporation Debentures, 0.00%, 03-01-2010^ 911,963 350,000 UFJ Finance Aruba AEC, 6.75%, 07-15-2013 F 390,321 Union Planters Corporation Subordinated Notes: 645,000 6.50%, 03-15-2008, (Acquired 05-08-02, 02-12-03, and 05-08-03; Cost $200,548, $75,169, and $413,799, respectively)* 681,192 300,000 7.75%, 03-01-2011 348,700 500,000 Washington Mutual Capital I 8.38%, 06-01-2027 557,729 500,000 Washington Mutual Bank FA Subordinated Notes, 6.88%, 06-15-2011 557,528 ------------ 38,724,484 ------------ INDUSTRIAL - 15.8% 450,000 Alcan Inc. Notes, 5.00%, 06-01-2015 452,073 30,365 America West Airlines Pass Thru Certificates, 8.54%, 01-02-2006 28,103 810,000 Anthem, Inc., 6.80%, 08-01-2012 913,993 375,000 AOL Time Warner, Inc., 6.88%, 05-01-2012 423,158 225,000 Auburn Hills Trust Debentures, 12.38%, 05-01-2020 340,656 300,000 Bellsouth Corporation 4.75%, 11-15-2012 301,575 575,000 British Telecom PLC Notes, 8.38%, 12-15-2010 F 680,791 800,000 Bunge Ltd. Finance Corporation Notes, 5.35%, 04-15-2014 828,853 1,000,000 Clear Channel Communications, Inc. Notes, 5.50%, 09-15-2014 948,458 125,000 Comcast Cable Comm Holdings, 8.38%, 03-15-2013 152,418 Continental Airlines, Inc. Pass Thru Certificates: 4,749 7.42%, 04-01-2007 4,236 142,401 6.54%, 09-15-2008 127,043 300,000 Continental Cablevision Debentures, 9.50%, 08-01-2013 315,458 1,115,000 Cooper Cameron Corporation Senior Notes, 2.65%, 04-15-2007 1,120,553 700,000 Cooper Industries, Inc., Notes 5.25%, 07-01-2007 712,793 Delta Air Lines, Inc. Pass Thru Certificates, 26,000 7.78%, 11-18-2005 22,640 324,000 9.50%, 11-18-2008 264,060 1,000,000 Deutsche Telekom International Finance BV, 8.50%, 06-15-2010 F 1,158,935 300,000 Dollar General Corporation, 8.63%, 06-15-2010 342,000 500,000 Fiserv, Inc. Notes, 4.00%, 04-15-2008 492,997 623,000 Ford Capital BV, Debentures, 9.50%, 06-01-2010 F 643,803 300,000 Ford Motor Company Debentures, 9.22%, 09-15-2021 282,588 500,000 General Electric Company Notes, 5.00%, 02-01-2013 516,255 General Motors Acceptance Corporation Notes, 1,025,000 7.75%, 01-19-2010 1,001,983 200,000 6.75%, 12-01-2014 178,935 550,000 General Motors Nova Scotia Finance Company, 6.85%, 10-15-2008 F 518,436 950,000 Glencore Funding LLC, 6.00%, 04-15-2014, (Acquired 03-31-04 and 02-02-05; Cost $794,280 and $146,738, respectively)* 910,952 Halliburton Company Notes: 425,000 5.63%, 12-01-2008 442,118 325,000 5.50%, 10-15-2010 340,837 650,000 Hanson Australia Funding, 5.25%, 03-15-2013 F 666,730 400,000 Highmark, Inc. Notes, 6.80%, 08-15-2013, (Acquired 08-14-03; Cost $399,088)* 443,583 975,000 Hutchison Whampoa International Ltd., 6.25%, 01-24-2014, (Acquired 11-19-03 and 02-08-05; Cost $749,228 and $244,602, respectively)* F 1,048,110 1,000,000 Ingersoll-Rand Company Debentures, 6.39%, 11-15-2027 F 1,190,824 105,000 International Paper Company Notes, 7.63%, 01-15-2007 109,871 650,000 Laboratory Corporation of America Holdings Senior Notes, 5.50%, 02-01-2013 679,286 500,000 Limited Brands, Inc. 5.25%, 11-01-2014 483,163 350,000 Marathon Oil Corporation, 6.00%, 07-01-2012 378,759 500,000 Marathon Oil Corporation Notes, 5.38%, 06-01-2007 509,932 900,000 The May Department Stores Company Debentures, 8.85%, 03-01-2006 925,757 175,000 MeadWestvaco Corporation Notes, 2.75%, 12-01-2005 174,146 Northwest Airlines, Inc.: 498,736 7.25%, 07-02-2014 335,993 235,707 6.26%, 11-20-2021 245,109 375,000 Park Place Entertainment Senior Notes, 7.50%, 09-01-2009 413,438 700,000 PCCW Capital II Ltd., 6.00%, 07-15-2013, (Acquired 07-10-03; Cost $696,731)* F 743,231 Qwest Capital Funding, Inc.: 350,000 7.00%, 08-03-2009 342,125 100,000 7.25%, 02-15-2011 95,750 1,000,000 Reed Elsevier Capital Notes, 4.63%, 06-15-2012 995,388 500,000 SBC Communications Inc. Notes, 5.63%, 06-15-2016 527,195 650,000 Sealed Air Corporation Senior Notes, 5.38%, 04-15-2008, (Acquired 04-09-03; Cost $646,490)* 665,644 239,199 Southwest Airlines Company Pass Thru Certificates, 7.67%, 01-02-2014 269,394 875,000 Sprint Capital Corporation, 6.00%, 01-15-2007 896,653 380,000 Telus Corporation Notes, 6.50%, 06-01-2007 F 402,002 300,000 TCI Communications, Inc. Debentures, 8.75%, 08-01-2015 384,834 1,360,000 Telecom Italia Capital (Acquired 11-30-04; Cost $1,318,262), 4.95%, 09-30-2014* F 1,346,597 200,000 Tele-Communications, Inc. Debentures, 9.80%, 02-01-2012 254,740 513,000 Time Warner, Inc. Debentures, 9.13%, 01-15-2013 648,254 Tyco International Group SA: F 700,000 6.38%, 02-15-2006 709,363 400,000 6.38%, 10-15-2011 439,322 650,000 6.00%, 11-15-2013 706,871 257,967 Union Pacific Corporation Pass Thru Certificates, 8.66%, 07-02-2011 285,369 United Air Lines, Inc. Pass Thru Certificates: 245,275 7.76%, 10-01-2005, @ 43,914 387,138 6.20%, 09-01-2008 368,382 300,000 10.02%, 03-22-2014, @, ^ 141,675 1,000,000 Viacom Inc., 7.70%, 07-30-2010 1,116,105 160,000 Weyerhaeuser Company Notes, 5.95%, 11-01-2008 167,514 500,000 Willamette Industries, Inc. Notes, 6.60%, 06-05-2012 544,411 325,000 Yosemite Security Trust I,@,^, 8.25%, 11-15-2004 (Acquired 04-26-01; Cost $325,599)* 142,188 ------------ 34,308,322 ------------ UTILITIES - 6.0% 300,000 Baltimore Gas and Electric Company Notes, 5.25%, 12-15-2006 304,501 750,000 Columbia Energy Group Notes, Series E, 7.32%, 11-28-2010 757,646 800,000 Duke Capital LLC Notes, 5.67%, 08-15-2014 831,105 300,000 Edison Mission Energy Senior Notes, 9.88%, 04-15-2011 351,375 300,000 Exelon Corporation Senior Notes, 6.75%, 05-01-2011 333,161 400,000 Gulf States Utilities 1st Mortgage, Series B, 6.77%, 08-01-2005 400,890 491,141 Kiowa Power Partners LLC, 4.81%, 12-30-2013 (Acquired 11-19-2004; Cost $482,281)* 478,847 300,000 Korea Electric Power Corporation, 6.75%, 08-01-2027 F 358,652 800,000 MidAmerican Energy Holdings Company Senior Notes, 4.63%, 10-01-2007 803,490 325,000 National Rural Utilities Cooperative Finance Collateral Trust, 3.88%, 02-15-2008 323,213 925,000 National Rural Utilities Cooperative Finance Corporation Notes, 5.75%, 08-28-2009 976,432 650,000 NiSource Finance Corporation, 7.63%, 11-15-2005 658,525 375,000 ONEOK Inc Notes, 7.75%, 08-15-2006 389,390 800,000 ONEOK, Inc. Senior Notes, 7.13%, 04-15-2011 901,265 800,000 Pacific Gas and Electric Company 1st Mortgage, 4.80%, 03-01-2014 801,974 300,000 PPL Energy Supply, LLC Senior Notes, Series A, 6.40%, 11-01-2011 328,541 175,000 PSE&G Energy Holdings LLC Senior Notes, 8.50%, 06-15-2011 190,750 PSE&G Power LLC: 275,000 7.75%, 04-15-2011 317,052 400,000 5.00%, 04-01-2014 403,521 841,986 RGS (I&M) Funding Corporation Debentures, 9.82%, 12-07-2022 1,125,938 350,000 Tristate Gen & Trans Assn, 6.04%, 01-31-2018 (Acquired 10-14-03; Cost $350,000)* 363,745 900,000 Vectren Utility Holdings, 6.63%, 12-01-2011 993,522 600,000 The Williams Companies, Inc. Notes, 8.13%, 03-15-2012 681,000 ------------ 13,074,535 ------------ MORTGAGE-BACKED SECURITIES - 12.1% 542,176 Banc of America Alternative Loan Trust Series 2003-11, Class 4A1, 4.75%, 01-25-2019 539,778 Citicorp Mortgage Securities, Inc. 1,779,706 5.50%, 10-25-2014 1,820,131 1,768,387 5.50%, 05-25-2015 1,785,800 2,000,000 Countrywide Home Loans, Inc.: Series 2003-18, Class A3, 5.25%, 07-25-2033 2,016,188 907,384 Deutsche Mortgage Securities, Inc., Series 2004-1, Class 3A3, 3.69%, 12-25-2033 904,760 90,434 Federal Gold Loan Mortgage Corporation (FGLMC), 6.00%, 07-01-2028 93,004 Federal Home Loan Mortgage Corporation (FHLMC): 1,589,437 Series 2695, Class UA, 5.50%, 09-15-2014 1,638,493 974,434 Series R001, Class AE, 4.38%, 04-15-2015 974,983 41,838 Series 1094, Class K, 7.00%, 06-15-2021 41,861 22,867 Series 1101, Class M, 6.95%, 07-15-2021 22,908 217,020 Series 1136, Class H, 6.00%, 09-15-2021 216,737 84,499 Series 1280, Class B, 6.00%, 04-15-2022 84,388 94,337 Series 1395, Class G, 6.00%, 10-15-2022 94,821 1,350,000 Series 2592, Class PD, 5.00%, 07-15-2014 1,367,766 545,663 Series 2531, Class N, 4.00%, 07-15-2027 544,086 Federal National Mortgage Association (FNMA): 1,500,000 Series 2003-24, Class PC, 5.00%, 11-25-2015 1,520,449 142,783 Series 1991-137, Class H, 7.00%, 10-25-2021 150,906 385,524 Series 2003-25, Class PC, 4.50%, 02-25-2027 385,371 245,994 Series 1992-136, Class PK, 6.00%, 08-25-2022 254,757 155,589 Series 1993-32, Class H, 6.00%, 03-25-2023 159,409 56,750 Series 1998-66, Class C, 6.00%, 12-25-2028 58,961 1,625,000 Series 2002-77, Class QP, 5.00%, 09-25-2026 1,631,625 1,000,000 Series 2002-73, Class OC, 5.00%, 04-25-2014 1,009,997 400,000 Series 2002-94, Class BG, 5.00%, 04-25-2016 403,950 1,500,000 Series 2002-95, Class MD, 5.00%, 07-25-2026 1,506,733 GMAC Mortgage Corporation Loan Trust 1,900,000 4.39%, 12-25-2025 1,896,635 1,684,027 5.50%, 08-25-2014 1,714,410 Government National Mortgage Association (GNMA) 565,321 5.50%, 03-16-2013 582,012 805,366 6.00%, 02-20-2029 821,338 1,000,000 IMPAC Secured Assets Corporation, Series 2004-2, Class A3, 5.00%, 08-25-2034 999,117 1,053,408 Salomon Brothers Mortgage Securities VII, Series 2003-UP2, Class A2, 4.00%, 06-25-2033 1,042,405 ------------ 26,283,779 ------------ INTERNATIONAL (U.S. $ DENOMINATED) - 2.6% 725,000 Banco Santander Chile SA, 7.00%, 07-18-2007 F 759,612 275,000 Corp. Andina De Fomento Notes, 7.38%, 01-18-2011 F 310,557 450,000 Korea Development Bank Notes, 4.25%, 11-13-2007 F 449,730 700,000 Landeskreditbank Baden-Wuerttemberg Subordinated Notes, 6.35%, 04-01-2012 F 788,171 350,000 National Bank of Hungary Debentures, 8.88%, 11-01-2013 F 460,274 PEMEX Project Funding Master Trust: 275,000 6.13%, 08-15-2008 285,450 1,625,000 9.13%, 10-13-2010 1,902,875 Westdeutsche Landesbank Subordinated Notes, 650,000 6.05%, 01-15-2009 F 685,980 ------------ 5,642,649 ------------ TAXABLE MUNICIPAL BOND - 0.8% Tobacco Settlement Financing Corporation: 350,000 Series 2001-A, Class A, 5.92%, 06-01-2012 347,886 578,532 Series 2001-A, Class A, 6.36%, 05-15-2025 587,910 1,046,000 Toll Road Inv Part II, 0.00%, 02-15-2011, (Acquired 09-28-04; Cost $782,046)*^ 807,674 ------------ 1,743,470 ------------ U.S. GOVERNMENT AGENCY - 15.6% 26,450,000 Federal Home Loan Mortgage Corporation (FHLMC), 4.13%, 07-12-2010 26,536,571 6,450,000 Federal National Mortgage Association (FNMA), 7.25% , 01-15-2010 7,313,919 ------------ 33,850,490 ------------ U.S. TREASURY OBLIGATIONS - 13.4% U.S. Treasury Bonds: 350,000 9.88%, 11-15-2015 523,113 11,375,000 9.25%, 02-15-2016 16,480,419 U.S. Treasury Notes: 1,050,000 3.25%, 01-15-2009 1,035,029 8,975,000 6.00%, 08-15-2009 9,751,544 1,325,000 3.50%, 12-15-2009 1,312,526 ------------ 29,102,631 ------------ Total Long-Term Investments (Cost $201,627,658) 204,101,729 ------------ SHORT-TERM INVESTMENTS - 5.5% MONEY MARKET FUNDS - 5.5% 4,349,651 Investment Company Cash Reserve Portfolio - AIM Fund 4,349,651 7,611,679 SEI Daily Income Trust Government Fund 7,611,679 ------------ Total Short-Term Investments (Cost $11,961,330) 11,961,330 ------------ Total Investments (Cost $213,588,988) 99.5% 216,063,059 ------------ Other Assets less Liabilities 0.5% 1,050,324 ------------ TOTAL NET ASSETS 100.0% $217,113,383 ------------ ------------ * Unregistered security @ Security in default ^ Non-income producing security F Foreign security See notes to the financial statements BAIRD AGGREGATE BOND FUND JUNE 30, 2005 The investment objective of the Baird Aggregate Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers Aggregate Bond Index. The Lehman Brothers Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. PORTFOLIO CHARACTERISTICS QUALITY DISTRIBUTION* U.S. Treasury 13% U.S. Gov't Agency 30% Aaa 26% Aa 3% A 10% Baa 16% Below Baa 2% SECTOR WEIGHTINGS U.S. Treasury 13% U.S. Gov't Agency 4% Int'l 1% Mortgage/CMOs 32% Asset-Backed 16% Industrials 12% Utility 5% Finance/Bank/Broker 13% Cash 4% NET ASSETS: $140,845,948 ANNUALIZED EXPENSE RATIO: SEC 30-DAY YIELD:** Institutional Class: 0.30% Institutional Class: 4.43% Investor Class: 0.55%*** Investor Class: 4.18% PORTFOLIO TURNOVER RATIO:**** 26.5% AVERAGE DURATION: 9.16 years TOTAL NUMBER OF HOLDINGS: 242 AVERAGE MATURITY: 7.47 years
* Credit ratings are provided by Moody's Investors Service. ** SEC yields are based on SEC guidelines and are calculated for the 30 days ended June 30, 2005. *** Includes 0.25% 12b-1 fee. **** Not Annualized. BAIRD AGGREGATE BOND FUND ANNUALIZED TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ----------------------- BAIRD AGGREGATE BOND FUND - INSTITUTIONAL CLASS SHARES 7.88% 7.99% BAIRD AGGREGATE BOND FUND - INVESTOR CLASS SHARES 7.58% 7.78% LEHMAN BROTHERS AGGREGATE BOND INDEX(2) 6.80% 7.14%
(1) For the period September 29, 2000 (commencement of operations) to June 30, 2005. (2) The Lehman Brothers Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD AGGREGATE BOND FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Principal Amount Value - --------- ----- LONG-TERM INVESTMENTS - 95.6% ASSET-BACKED SECURITIES - 15.8% $ 225,000 Advanta Business Card Master Trust, Series 2003-B, Class A, 2.76%, 12-22-2008 $ 225,665 140,873 Advanta Mortgage Loan Trust, Series 1999-2, Class A6, 6.82%, 05-25-2029 142,686 443,957 Banc One Home Equity Trust, Series 1999-2, Class A7, 7.18%, 06-25-2029 453,526 590,879 Bear Stearns Asset Backed Securities Trust, Series 2003-AC1, Class A1, 4.10%, 05-25-2033 584,834 2,300,000 Chase Credit Card Master Trust 3.33%, 02-15-2011 2,307,139 Citifinancial Mortgage Securities, Inc.: 137,793 Series 2003-2, Class AF2, 2.13%, 05-25-2033 136,889 500,000 Series 2003-2, Class AF3, 3.04%, 05-25-2033 495,046 Contimortgage Home Equity Loan Trust: 328,224 Series 1999-1, Class A7, 6.47%, 12-25-2013 329,453 20,375 Series 1997-2, Class A9, 7.09%, 04-15-2028 20,545 5,194 Series 1997-3, Class A9, 7.12%, 08-15-2028 5,214 184,599 Series 1999-3, Class A8, 3.59%, 05-25-2029 185,014 Countrywide Asset-Backed Certificates: 1,500,000 Series 2004-15, Class AF6, 4.61%, 04-25-2035 1,515,007 1,300,000 Series 2005-1, Class AF6, 5.03%, 07-25-2035 1,327,081 1,000,000 Credit-Based Asset Servicing and Securities Series 2005-CB1, Class AF4, 4.62%, 01-25-2035 1,001,985 600,000 Daimler Chrysler Master Owner Trust, Series 2004-A, Class A, 2.84%, 01-15-2009 600,198 102,251 Equivantage Home Equity Loan Trust, Series 1996-3, Class A3, 7.70%, 09-25-2027 102,022 GE Capital Mortgage Services, Inc.: 29,464 Series 1997-HE3, Class A6, 6.72%, 10-25-2027 29,400 53,742 Series 1997-HE4, Class A7, 6.74%, 12-25-2028 53,621 314,736 Series 1999-HE1, Class A7, 6.27%, 04-25-2029 320,448 Green Tree Financial Corporation: 363,379 Series 1993-3, Class A7, 6.40%, 10-15-2018 370,484 303,348 Series 1993-4, Class A5, 7.05%, 01-15-2019 317,389 18,749 Series 1995-4, Class A5, 6.95%, 06-15-2025 19,213 7,438 Series 1997-1, Class A5, 6.86%, 03-15-2028 7,841 313,705 Series 1997-6, Class A8, 7.07%, 01-15-2029 331,592 410,908 Series 1998-4, Class A5, 6.18%, 04-01-2030 416,746 69,139 IMC Home Equity Loan Trust, Series 1997-5, Class A10, 6.88%, 11-20-2028 70,071 525,000 MBNA Credit Card Master Note Trust, Series 2003-A3, Class A3, 3.34%, 08-16-2010 526,489 1,250,000 New Century Home Equity Loan Trust, Series 2003-5, Class AI3, 3.56%, 11-25-2033 1,244,022 191,199 Oakwood Mortgage Investors, Inc., Series 1999-B, Class A3, 6.45%, 11-15-2017 176,546 750,000 RAAC Series, Series 2004-SP1, Class AI2, 4.38%, 01-25-2022 746,063 Residential Asset Mortgage Products, Inc.: 1,000,000 Series 2004-RS1, Class AI3, 3.41%, 06-25-2028 995,547 1,150,000 Series 2003-RS11, Class AI3, 3.56%, 08-25-2028 1,146,051 430,811 Series 2003-RS5, Class AI3, 2.59%, 10-25-2028 428,741 250,000 Series 2004-RS3, Class AI2, 3.05%, 06-25-2029 247,308 1,035,000 Series 2003-RS7, Class AI6, 5.34%, 08-25-2033 1,061,099 1,000,000 Series 2005-RS1, Class AI6, 4.71%, 01-25-2035 1,010,787 Residential Asset Securities Corporation: 1,000,000 Series 2004-KS7, Class AI2, 3.51%, 05-25-2024 991,309 1,250,000 Series 2004-KS2, Class AI3, 3.02%, 08-25-2029 1,231,959 202,336 Series 1999-KS1, Class AI8, 6.32%, 04-25-2030 202,666 486,588 Series 1999-KS2, Class AI9, 7.15%, 07-25-2030 488,306 250,000 Series 2003-KS5, Class AI6, 3.62%, 07-25-2033 241,009 77,180 Salomon Brothers Mortgage Securities VII, Series 1997-LB6, Class A6, 6.82%, 12-25-2027 77,419 ------------ 22,184,430 ------------ COMMERCIAL MORTGAGE-BACKED SECURITIES - 1.3% 1,025,000 GE Capital Commercial Mortgage Corporation: Series 2002-3A, Class A2, 5.00%, 12-10-2037 1,061,793 250,000 GMAC Commercial Mortgage Securities, Inc., Series 2003-C1, Class A2, 4.08%, 05-10-2036 244,323 550,000 Mach One Trust, Series 2004-1A, Class A2, 4.78%, 05-28-2040 (Acquired 07-12-04; Cost $555,349)* 556,787 ------------ 1,862,903 ------------ FINANCIAL - 13.5% 400,000 Allfirst Financial, Inc. Subordinated Notes, 7.20%, 07-01-2007 425,537 600,000 American General Finance Corporation Senior Notes, 8.45%, 10-15-2009 690,114 200,000 AmSouth Bancorporation Subordinated Debentures, 6.75%, 11-01-2025 242,321 275,000 AMVESCAP PLC, 5.38%, 02-27-2013 F 282,938 300,000 BAC Capital Trust VI, 5.63%, 03-08-2035 308,550 300,000 Bank of America Corporation Subordinated Notes, 10.20%, 07-15-2015 421,413 400,000 Bank of Oklahoma Subordinated Notes, 7.13%, 08-15-2007 422,872 219,000 Bank One Corporation Subordinated Notes, 10.00%, 08-15-2010 271,824 350,000 BSCH Issuances, Ltd., 7.63%, 09-14-2010 F 403,459 325,000 CIT Group Company of Canada, 5.20%, 06-01-2015 (Acquired 05-25-05; Cost $324,080)* F 328,669 300,000 CIT Group, Inc. Senior Notes, 7.75%, 04-02-2012 351,851 923,992 Citicorp Mortgage Securities, Inc. 5.25%, 05-25-2034 934,235 590,000 Citigroup Inc. Subordinated Notes, 5.00%, 09-15-2014 (Acquired 09-16-04; Cost $575,737)* 603,538 175,000 Countrywide Home Loans, Inc., 5.63%, 07-15-2009 182,417 375,000 Credit Suisse Finance Broker USA, Inc. Notes, 6.13%, 11-15-2011 407,915 1,070,000 Dime Capital Trust, 9.33%, 05-06-2027 1,188,098 175,000 Dresdner Bank - New York Subordinated Debentures, 7.25%, 09-15-2015 208,870 300,000 First Empire Capital Trust II, 8.28%, 06-01-2027 326,857 717,237 First National Bank Chicago Pass Thru Certificates, 8.08%, 01-05-2018 866,444 675,000 First National Bank Omaha Subordinated Notes, 7.32%, 12-01-2010 712,634 460,000 First Union Capital, 7.94%, 01-15-2027 499,254 250,000 FMR Corporation Notes, 4.75%, 03-01-2013, (Acquired 02-26-03; Cost $250,618)* 253,985 150,000 The Goldman Sachs Group, Inc. Notes, 6.60%, 01-15-2012 166,712 500,000 Health Care Service Corporation Notes, 7.75%, 06-15-2011 (Acquired 06-20-01 and 1-26-05; Cost $199,106 and $342,441, respectively)* 580,536 900,000 J.P. Morgan Chase & Company Notes, 5.88%, 03-15-2035 923,773 KeyCorp Institution: 300,000 7.83%, 12-01-2026 324,060 400,000 8.25%, 12-15-2026 435,368 565,000 Liberty Mutual Notes, 7.70%, 10-15-2097, (Acquired 03-26-03; Cost $361,573)* 623,734 300,000 Marsh & McLennan Companies, Inc. 5.38%, 07-15-2014 298,830 400,000 Morgan Stanley Subordinated Notes, 4.75%, 04-01-2014 394,068 700,000 Residential Capital Corporation, 6.88%, 06-30-2015, (Acquired 06-21-05; Cost $695,695)* 715,415 275,000 Sanwa Bank Ltd. NY Subordinated Notes, 7.40%, 06-15-2011 311,339 500,000 SLM Corporation Notes, 5.63%, 08-01-2033 538,791 200,000 Transamerica Capital II, 7.65%, 12-01-2026, (Acquired 10-21-03; Cost $216,762)* 240,312 600,000 Transamerica Finance Corporation Debentures, 0.00%, 03-01-2010^ 471,705 225,000 UFJ Finance Aruba AEC, 6.75%, 07-15-2013 F 250,920 350,000 Union Planters Corporation Subordinated Notes, 7.75%, 03-01-2011 406,817 280,000 Washington Mutual Capital I, 8.38%, 06-01-2027 312,328 701,749 Washington Mutual, Inc. Pass-Thru Certificates, 5.00%, 06-25-2019 707,038 200,000 Washington Mutual, Inc. Subordinated Notes, 8.25%, 04-01-2010 229,696 750,000 Willis Group NA, 5.63%, 07-15-2015 754,822 ------------ 19,020,059 ------------ INDUSTRIAL - 11.5% 500,000 Alcan Inc., 5.75%, 06-01-2035 F 508,600 AOL Time Warner, Inc.: 400,000 7.63%, 04-15-2031 499,556 175,000 7.70%, 05-01-2032 221,379 250,000 AT&T Wireless Services, Inc. Senior Notes, 8.75%, 03-01-2031 350,409 200,000 Auburn Hills Trust Debentures, 12.375%, 05-01-2020 302,805 450,000 British Telecom PLC, 8.88%, 12-15-2030 F 635,244 500,000 Bunge Ltd. Finance Corporation Notes, 5.35%, 04-15-2014 518,033 500,000 ConAgra Foods, Inc. Subordinated Notes, 9.75%, 03-01-2021 729,108 Continental Airlines, Inc. Pass Thru Certificates: 51,480 6.80%, 07-02-2007 44,456 111,251 6.54%, 09-15-2008 99,253 173,684 8.31%, 10-02-2012 137,221 502,857 6.90%, 01-02-2018 500,064 1,775,000 Continental Cablevision Debentures, 9.50%, 08-01-2013 1,866,457 231,000 Delta Air Lines, Inc. Pass Thru Certificates, 9.50%, 11-18-2008 (Acquired 11-24-04; Cost $231,000)* 188,265 19,000 Delta Air Lines, Inc. Pass Thru Certificates, 7.78%, 11-18-2005 16,545 250,000 Deutsche Telekom International Finance BV, 8.75%, 06-15-2030 F 338,495 4,577 Duty Free Promissory Note, 0.00%, 11-10-2013 (Acquired 11-10-03; Cost $1,602)*,**,^ 1,831 159,548 FedEx Corp. Pass Thru Certificates, 6.85%, 01-15-2019 178,359 475,000 Ford Capital BV Debentures, 9.50%, 06-01-2010 F 490,861 403,000 Ford Motor Company Debentures, 9.22%, 09-15-2021 379,610 General Motors Acceptance Corporation Notes, 100,000 7.25%, 03-02-2011 93,767 150,000 6.75%, 12-01-2014 134,201 625,000 Glencore Funding LLC, 6.00%, 04-15-2014, (Acquired 03-31-04 and 1-26-05; Cost $496,425 and $122,281, respectively )* 599,311 350,000 Halliburton Company Notes, 5.50%, 10-15-2010 367,056 100,000 Hanson Australia Funding, 5.25%, 03-15-2013 F 102,574 275,000 Highmark, Inc. Notes, 6.80%, 08-15-2013, (Acquired 08-14-03; Cost $274,373)* 304,963 625,000 Hutchison Whampoa International Ltd., 6.25%, 01-24-2014, (Acquired 06-02-04 and 2-8-05; Cost $335,195 and $298,122, respectively)* F 671,866 449,000 ICI North America Debentures, 8.88%, 11-15-2006 474,567 100,000 Marathon Oil Corporation, 6.00%, 07-01-2012 108,217 520,000 The May Department Stores Company Debentures, 9.75%, 02-15-2021 665,928 445,300 Northwest Airlines, Inc.: 7.25%, 07-02-2014 Series 2000-1, Class G, 8.07%, 04-01-2021 299,994 Northwest Airlines, Inc. Pass Thru Certificates, 30,975 8.13%, 02-01-2014 15,855 172,652 8.07%, 10-01-2019 188,646 275,000 Park Place Entertainment Senior Notes, 7.50%, 09-01-2009 303,188 400,000 PCCW Capital II Ltd., 6.00%, 07-15-2013, (Acquired 07-10-03; Cost $398,132)* F 424,704 Qwest Capital Funding, Inc.: 300,000 7.00%, 08-03-2009 293,250 200,000 7.25%, 02-15-2011 191,500 250,000 Sealed Air Corporation Senior Notes, 5.38%, 04-15-2008, (Acquired 04-09-03; Cost $248,650)* 256,017 Sprint Capital Corporation, 125,000 7.63%, 01-30-2011 142,760 200,000 8.75%, 03-15-2032 278,222 320,000 Tenneco Packaging Debentures, 7.95%, 12-15-2025 405,129 Tyco International Group SA: F 175,000 6.38%, 10-15-2011 192,203 300,000 6.00%, 11-15-2013 326,248 United Air Lines, Inc. Pass Thru Certificates: 269,803 7.76%, 10-01-2005, @ 48,305 116,141 6.20%, 09-01-2008 110,515 253,997 U.S. Airways Pass Thru Certificates, 6.85%, 01-30-2018 254,562 675,000 Viacom, Inc., 7.70%, 07-30-2010 753,371 195,000 The Walt Disney Company Notes, 5.62%, 12-01-2008 195,772 ------------ 16,209,242 ------------ UTILITIES - 4.9% 750,000 Calenergy Co., Inc. Senior Notes, 7.63%, 10-15-2007 801,574 200,000 Duke Capital LLC Notes, 5.67%, 08-15-2014 207,776 250,000 Edison Mission Energy Senior Notes, 9.88%, 04-15-2011 292,813 300,000 Exelon Corporation Senior Notes, 6.75%, 05-01-2011 333,160 289,369 Kiowa Power Partners, LLC, 4.81%, 12-30-2013 (Acquired 11-19-04; Cost $289,368)* 287,308 Korea Electric Power Corporation: F 100,000 7.75%, 04-01-2013 119,982 365,000 6.75%, 08-01-2027 436,360 425,000 ONEOK, Inc. Senior Notes, 7.13%, 04-15-2011 478,797 350,000 Pacific Gas & Electric Company, 6.05%, 03-01-2034 385,731 300,000 PPL Energy Supply LLC Senior Notes, 6.40%, 11-01-2011 328,541 175,000 PSE&G Energy Holdings LLC Senior Notes, 8.50%, 06-15-2011 190,750 PSE&G Power LLC: 250,000 7.75%, 04-15-2011 288,229 350,000 5.00%, 04-01-2014 353,081 544,815 RGS (I&M) Funding Corporation Debentures, 9.82%, 12-07-2022 728,548 200,000 Tristate Gen & Trans Assn, 6.04%, 01-31-2018 (Acquired 10-14-03; Cost $200,000)* 207,854 300,000 Utilicorp United, Inc. Senior Notes, 7.63%, 11-15-2009 309,750 500,000 Vectren Utility Holdings, 6.63%, 12-01-2011 551,956 550,000 The Williams Companies, Inc. Notes, 8.13%, 03-15-2012 624,250 ------------ 6,926,460 ------------ MORTGAGE-BACKED SECURITIES - 30.5% Bank of America Alternative Loan Trust, 978,528 Series 2003-4, Class 2A1, 5.00%, 06-25-2018 988,869 1,251,175 Series 2003-11, Class 4A1, 4.75%, 01-25-2019 1,245,641 1,643,823 Series 2005-2, Class 4A1, 5.50%, 03-25-2020 1,680,134 177,918 Deutsche Mortgage Securities, Inc., Series 2004-1, Class 3A3, 3.69%, 12-25-2033 177,404 Federal Gold Loan Mortgage Corporation (FGLMC): 1,061,910 5.50%, 07-01-2023 1,084,288 98,253 7.00%, 07-01-2028 103,614 286,953 6.50%, 04-01-2029 298,055 Federal Home Loan Mortgage Corporation (FHLMC): 497,461 6.50%, 07-01-2014 517,675 345,587 6.00%, 05-01-2017 357,352 1,226,432 5.50%, 11-01-2022 1,252,532 640,190 Series 2695, Class UA, 5.50%, 09-15-2014 659,948 270,052 Series 141, Class D, 5.00%, 05-15-2021 269,536 245,814 Series 1081, Class K, 7.00%, 05-15-2021 245,955 97,549 Series 1101, Class M, 6.95%, 07-15-2021 97,730 331,408 Series 188, Class H, 7.00%, 09-15-2021 330,825 181,490 Series 1286, Class A, 6.00%, 05-15-2022 181,253 82,050 Series 1074, Class I, 6.75%, 05-15-2021 81,943 407,236 Series 206, Class E, 0.00%, 07-15-2019 403,458 203,652 Series 2141, Class N, 5.55%, 11-15-2027 205,766 1,150,000 Series 2539, Class QB, 5.00%, 09-15-2015 1,164,020 245,548 Series 2531, Class N, 4.00%, 07-15-2027 244,838 250,000 Series 2533, Class PC, 5.00%, 10-15-2017 251,644 900,358 Series 2857, Class VA, 5.00%, 09-15-2015 913,439 575,000 Series 2664, Class LG, 5.50%, 07-15-2028 587,050 Federal National Mortgage Association (FNMA): 814,731 5.50%, 12-01-2016 836,973 651,722 5.00%, 06-01-2018 659,858 711,503 5.00%, 10-01-2017 720,313 789,747 5.00%, 11-01-2017 799,526 1,223,263 5.00%, 12-01-2017 1,238,410 876,504 5.00%, 10-01-2018 887,010 1,261,364 5.50%, 01-01-2023 1,287,880 1,159,525 5.50%, 07-01-2023 1,183,660 203,410 5.00%, 10-01-2023 205,061 241,010 6.50%, 02-01-2029 250,280 360,405 5.50%, 01-01-2032 365,822 1,204,061 5.50%, 07-01-2033 1,221,637 739,561 5.00%, 11-01-2033 740,599 1,275,979 5.50%, 03-01-2035 1,294,205 1,000,000 Series 2002-73, Class OC, 5.00%, 04-25-2014 1,009,997 1,175,000 Series 2002-82, Class XC, 5.00%, 05-25-2014 1,187,486 525,000 Series 2003-4, Class PC, 5.00%, 12-25-2014 530,616 471,720 Series 2002-70, Class PL, 5.00%, 04-25-2015 473,602 1,000,000 Series 2003-27, Class OJ, 5.00%, 07-25-2015 1,013,595 1,150,000 Series 2002-94, Class MC, 5.00%, 08-25-2015 1,165,046 500,000 Series 2003-24, Class PC, 5.00%, 11-25-2015 506,816 1,000,000 Series 2003-18, Class GB, 5.00%, 03-25-2016 1,011,714 165,919 Series 2002-56, Class MC, 5.50%, 09-25-2017 169,714 105,698 Series 1989-37, Class G, 8.00%, 07-25-2019 110,207 142,647 Series 1989-94, Class G, 7.50%, 12-25-2019 151,973 14,293 Series 1990-58, Class J, 7.00%, 05-25-2020 15,093 175,057 Series 1990-105, Class J, 6.50%, 09-25-2020 183,338 62,754 Series 1990-108, Class G, 7.00%, 09-25-2020 65,360 56,597 Series 1991-1, Class G, 7.00%, 01-25-2021 59,493 158,272 Series 1991-86, Class Z, 6.50%, 07-25-2021 165,893 534,845 Series 2003-28, Class KA, 4.25%, 03-25-2022 521,917 64,685 Series G92-30, Class Z, 7.00%, 06-25-2022 67,029 111,478 Series 1992-150, Class MA, 5.50%, 09-25-2022 114,411 191,442 Series 1993-58, Class H, 5.50%, 04-25-2023 196,220 1,125,000 Series 2003-17, Class QR, 4.50%, 11-25-2025 1,125,964 1,250,000 Series 2003-31, Class KG, 4.50%, 12-25-2028 1,259,876 235,511 Series 1998-66, Class C, 6.00%, 12-25-2028 244,688 192,492 Series 2003-44, Class AB, 3.75%, 05-25-2033 189,113 Government National Mortgage Association (GNMA): 850,000 4.49%, 04-16-2023 850,262 178,176 4.00%, 02-16-2026 177,808 149,280 6.50%, 08-15-2027 156,464 337,337 6.00%, 09-16-2028 338,251 118,247 6.00%, 12-20-2028 121,979 800,000 4.66%, 04-16-2029 805,250 279,286 6.50%, 06-15-2029 292,279 112,846 7.00%, 11-15-2029 119,572 977,879 6.00%, 11-20-2033 1,007,295 190,063 IMPAC CMB Trust, Series 2004-4, Class 2A2, 5.25%, 09-25-2034 190,074 1,105,229 Residential Accredit Loans, Inc., Series 2004-QS6, Class A1, 5.00%, 05-25-2019 1,110,061 800,000 Residential Funding Mortgage Security I, Series 2003-S11, Class A2, 4.00%, 06-25-2018 763,363 351,136 Salomon Brothers Mortgage Securities VII, Series 2003-UP2, Class A2, 4.00%, 06-25-2033 347,468 125,000 Structured Asset Securities Corporation, Series 2004-16XS, Class A2, 4.91%, 08-25-2034 124,614 ------------ 42,978,104 ------------ INTERNATIONAL (U.S. $ DENOMINATED) - 1.3% 50,000 Corp. Andina De Fomento Notes: 7.38%, 01-18-2011 F 56,465 125,000 Hydro-Quebec, 11.75%, 02-01-2012 F 177,744 175,000 Landesbank Baden-Wurttemberg Subordinated Notes, 6.35%, 04-01-2012 F 197,043 110,000 National Bank of Hungary Debentures, 8.88%, 11-01-2013 F 144,657 PEMEX Project Funding Master Trust: 75,000 6.13%, 08-15-2008 77,850 450,000 9.13%, 10-13-2010 526,950 United Mexican States Notes, F 150,000 9.88%, 02-01-2010 181,425 400,000 7.50%, 04-08-2033 459,000 ------------ 1,821,134 ------------ TAXABLE MUNICIPAL BOND - 0.3% Tobacco Settlement Financing Corporation: 180,000 Series 2001-A, Class A, 5.92%, 06-01-2012 178,913 263,232 Series 2001-A, Class A, 6.36%, 05-15-2025 267,499 ------------ 446,412 ------------ U.S. GOVERNMENT AGENCY - 3.7% 4,525,000 Federal National Mortgage Association (FNMA): 7.25%, 01-15-2010 5,131,083 ------------ 5,131,083 ------------ U.S. TREASURY OBLIGATIONS - 12.8% U.S. Treasury Bonds: 5,925,000 9.25%, 02-15-2016 8,584,306 7,600,000 6.25%, 08-15-2023 9,471,204 ------------ 18,055,510 ------------ Total Long-Term Investments (Cost $131,603,650) 134,635,337 ------------ SHORT-TERM INVESTMENTS - 3.9% MONEY MARKET FUNDS - 3.9% 5,366,673 Investment Company Cash Reserve Portfolio - AIM Fund 5,366,673 195,345 SEI Daily Income Trust Government Fund 195,345 ------------ 5,562,018 ------------ Total Short-Term Investments (Cost $5,562,018) 5,562,018 ------------ Total Investments (Cost $137,165,668) 99.5% 140,197,355 ------------ Other Assets Less Liabilities 0.5% 648,593 ------------ TOTAL NET ASSETS 100.0% $140,845,948 ------------ ------------ * Unregistered security ** Fair valued security @ Security in default ^ Non-income producing security F Foreign security See notes to the financial statements BAIRD INTERMEDIATE MUNICIPAL BOND FUND JUNE 30, 2005 The primary investment objective of the Baird Intermediate Municipal Bond Fund is to provide current income that is substantially exempt from federal income tax. A secondary objective is to provide total return with relatively low volatility of principal. The Intermediate Municipal Bond Fund strives to achieve an annual rate of return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers 10-Year General Obligation Bond Index. The Lehman Brothers 10-Year General Obligation Bond Index is an unmanaged, market value weighted index of bond prices compiled by Lehman Brothers. This index is comprised of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of eight to twelve years. PORTFOLIO CHARACTERISTICS QUALITY DISTRIBUTION* Aaa 94% Aa 5% Baa 1% SECTOR WEIGHTINGS Pre-refunded ETM 70% Insured 19% General Obligation 8% Cash 2% Revenue 1% NET ASSETS: $46,241,314 ANNUALIZED EXPENSE RATIO: SEC 30-DAY YIELD:** Institutional Class: 0.30% Institutional Class: 3.49% Investor Class: 0.55%*** Investor Class: 3.24% PORTFOLIO TURNOVER RATIO:**** 8.0% AVERAGE DURATION: 5.08 years TOTAL NUMBER OF HOLDINGS: 45 AVERAGE MATURITY: 6.11 years
* Credit ratings are provided by Moody's Investors Service. ** SEC yields are based on SEC guidelines and are calculated for the 30 days ended June 30, 2005. *** Includes 0.25% 12b-1 fee. **** Not Annualized. BAIRD INTERMEDIATE MUNICIPAL BOND FUND ANNUALIZED TOTAL RETURNS For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ----------------------- Baird Intermediate Municipal Bond Fund - Institutional Class Shares 5.73% 5.77% Baird Intermediate Municipal Bond Fund - Investor Class Shares 5.46% 5.51% Lehman Brothers 10-Year General Obligation Bond Index(2) 7.86% 5.94%
(1) For the period March 30, 2001 (commencement of operations) to June 30, 2005. (2) The Lehman Brothers 10-Year General Obligation Bond Index is an unmanaged, market value weighted index of bond prices compiled by Lehman Brothers. The index is comprised of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of eight to twelve years. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD INTERMEDIATE MUNICIPAL BOND FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Principal Amount Value - --------- ----- MUNICIPAL BONDS - 96.1% ALABAMA - 1.0% Mobile Alabama, ETM $ 460,000 6.20%, 02-15-2007 $ 481,891 ----------- CALIFORNIA - 2.2% Golden State Tobacco Securitization Corporation 500,000 6.25%, 06-01-2033 544,845 Santa Rosa California Hospital Revenue, ETM 400,000 10.30%, 03-01-2011 490,236 ----------- 1,035,081 ----------- COLORADO - 6.1% Adams County Colorado Single Family Mortgage Revenue Pre-refunded to 08-01-2012 2,000,000 8.88%, 08-01-2012 2,665,060 Colorado Springs Colorado Utilities Revenue, ETM 120,000 5.80%, 11-15-2010 128,969 ----------- 2,794,029 ----------- DELAWARE - 3.8% Delaware State Economic Development Authority Revenue, ETM 1,500,000 6.75%, 01-01-2013 1,765,605 ----------- FLORIDA - 1.8% Jacksonville Florida Health Facility Authority Hospital Revenue, ETM 300,000 11.50%, 10-01-2012 455,427 Orange County Florida Health Revenue, ETM 325,000 8.75%, 10-01-2009 365,336 ----------- 820,763 ----------- GEORGIA - 2.8% Fulton County Georgia Hospital Authority Revenue, ETM 1,020,000 7.88%, 10-01-2013 1,270,747 ----------- ILLINOIS - 6.1% Chicago Illinois Metropolitan Water Reclamation District General Obligation, ETM 1,440,000 7.00%, 12-01-2010 1,720,512 Lake County Community High School District No 128 1,000,000 5.00%, 01-01-2013 1,100,110 ----------- 2,820,622 ----------- INDIANA - 2.4% Baugo Indiana School Building Corporation (AMBAC Insured) 745,000 5.50%, 01-15-2012 837,708 Indiana Toll Road Commission, ETM 215,000 9.00%, 01-01-2015 289,641 ----------- 1,127,349 ----------- IOWA - 3.9% Des Moines Iowa Metropolitan Wastewater Reclamation Authority, (MBIA Insured) 1,010,000 5.00%, 06-01-2015 1,118,474 Muscatine Iowa Electric Revenue, ETM 585,000 6.70%, 01-01-2013 662,793 ----------- 1,781,267 ----------- LOUISIANA - 6.6% Denham Springs-Livingston Housing and Mortgage Finance Authority, ETM 745,000 7.20%, 08-01-2010 885,716 Houma-Terrebonne Public Trust Financing Authority, ETM 400,000 7.30%, 04-01-2010 470,436 Jefferson Parish Louisiana Home Mortgage Authority, ETM 1,450,000 7.10%, 08-01-2010 1,704,895 ----------- 3,061,047 ----------- MINNESOTA - 1.7% Western Minnesota Municipal Power Agency, ETM 695,000 6.38%, 01-01-2016 797,652 ----------- MISSISSIPPI - 2.3% Mississippi Housing Financial Corporation, ETM 600,000 0.00%, 06-01-2015 396,030 Mississippi State, ETM 615,000 6.20%, 02-01-2008 661,476 ----------- 1,057,506 ----------- NEW JERSEY - 2.6% New Jersey State Transit Trust, Pre-refunded to 06-15-2009 400,000 5.00%, 06-15-2017 430,296 New Jersey State Turnpike Authority, ETM 577,000 6.75%, 01-01-2009 591,413 130,000 6.50%, 01-01-2016 156,927 ----------- 1,178,636 ----------- NEW YORK - 2.3% Triborough Bridge & Tunnel Authority, ETM 1,000,000 5.25%, 01-01-2014 1,076,040 ----------- OHIO - 0.4% Miamisburg Ohio Water Revenue, ETM 160,000 7.00%, 11-15-2016 192,163 ----------- OKLAHOMA - 6.2% Tulsa County Oklahoma Home Financing Authority Single Family Mortgage Revenue, ETM 2,360,000 6.90%, 08-01-2011 2,843,942 ----------- PENNSYLVANIA - 7.9% Philadelphia Pennsylvania Gas Works, ETM 850,000 7.00%, 05-15-2020 1,055,709 Pittsburgh Pennsylvania Water & Sewer Authority, ETM 1,515,000 7.25%, 09-01-2014 1,789,942 Wilson Pennsylvania Area School District, (AMBAC Insured) 1,000,000 0.00%, 05-15-2011 807,180 ----------- 3,652,831 ----------- SOUTH CAROLINA - 0.7% Greenville South Carolina Waterworks Revenue, ETM 285,000 7.00%, 02-01-2010 333,199 ----------- SOUTH DAKOTA - 1.9% Heartland Consumers Power District, ETM 755,000 7.00%, 01-01-2016 893,693 ----------- TENNESSEE - 5.5% Metropolitan Government Nashville & Davidson County Tennessee H&E, ETM 605,000 6.10%, 07-01-2010 648,887 Metropolitan Government Nashville & Davidson County Tennessee Water & Sewer Revenue, ETM 1,545,000 6.50%, 12-01-2014 1,877,051 ----------- 2,525,938 ----------- TEXAS - 21.5% Barbers Hill Texas Independent School District General Obligation (PSF Guaranteed) 1,125,000 5.00%, 02-15-2017 1,237,534 Bell County Texas General Obligation (FSA Insured) 1,195,000 5.00%, 02-15-2012 1,309,493 Houston Texas Sewer System Revenue, ETM 1,920,000 9.38%, 10-01-2013 2,549,280 Lufkin Texas Independent School District (PSF Guaranteed) 1,735,000 5.00%, 08-15-2015 1,920,714 Sam Rayburn Texas Municipal Power Agency, ETM 730,000 6.00%, 09-01-2010 808,088 Socorro Texas Independent School District (PSF Guaranteed) 575,000 5.25%, 08-15-2012 641,648 Texas Public Building Authority Revenue, ETM 300,000 7.13%, 08-01-2011 350,136 University of Houston Texas (FSA Insured) 1,000,000 5.25%, 02-15-2012 1,112,390 ----------- 9,929,283 ----------- UTAH - 1.6% Salt Lake City Utah Hospital Revenue, ETM 605,000 8.13%, 05-15-2015 758,513 ----------- WASHINGTON - 4.8% Clark County School District No. 037 1,025,000 5.13%, 12-01-2011 1,124,702 Washington State (FGIC Insured) 1,000,000 5.00%, 09-01-2013 1,095,470 ----------- 2,220,172 ----------- Total Municipal Bonds (Cost $43,655,728) 44,417,969 ----------- Shares ------ SHORT TERM INVESTMENTS - 4.8% MONEY MARKET FUND - 4.8% 2,226,780 Tax Free Investment Company Cash Reserve Portfolio - AIM Fund 2,226,780 ----------- Total Short-Term Investment (Cost $2,226,780) 2,226,780 ----------- Total Investments (Cost $45,882,508) 100.9% 46,644,749 ----------- Liabilities less Other Assets (0.9)% (403,435) ----------- TOTAL NET ASSETS 100.0% $46,241,314 ----------- ----------- ETM - Escrowed to Maturity See notes to the financial statements BAIRD CORE PLUS BOND FUND JUNE 30, 2005 The investment objective of the Baird Core Plus Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers U.S. Universal Bond Index. The Lehman Brothers U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage- backed securities, Eurobonds, 144A securities and emerging market debt with maturities of at least one year. PORTFOLIO CHARACTERISTICS QUALITY DISTRIBUTION* U.S. Treasury 12% U.S. Gov't Agency 34% Aaa 14% Aa 1% A 8% Baa 24% Below Baa 4% Not Rated 3% SECTOR WEIGHTINGS U.S. Treasury 12% U.S. Gov't Agency 6% Mortgage/CMOs 31% Asset-Backed 11% Industrials 21% Utility 5% Finance/Bank/Broker 9% Cash 3% Municipal 1% Int'l 1% NET ASSETS: $33,139,915 ANNUALIZED EXPENSE RATIO: SEC 30-DAY YIELD:** Institutional Class: 0.30% Institutional Class: 4.95% Investor Class: 0.55%*** Investor Class: 4.71% PORTFOLIO TURNOVER RATIO:**** 19.7% AVERAGE DURATION: 4.21 years TOTAL NUMBER OF HOLDINGS: 126 AVERAGE MATURITY: 8.16 years
* Credit ratings are provided by Moody's Investors Service. ** SEC yields are based on SEC guidelines and are calculated for the 30 days ended June 30, 2005. *** Includes 0.25% 12b-1 fee. **** Not Annualized. BAIRD CORE PLUS BOND FUND ANNUALIZED TOTAL RETURNS For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ----------------------- Baird Core Plus Bond Fund - Institutional Class Shares 8.70% 7.97% Baird Core Plus Bond Fund - Investor Class Shares 8.34% 7.68% Lehman Brothers U.S. Universal Bond Index(2) 7.43% 7.38%
(1) For the period September 29, 2000 (commencement of operations) to June 30, 2005. (2) The Lehman Brothers U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non- investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt with maturities of at least one year. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD CORE PLUS BOND FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Principal Amount Value - --------- ----- LONG-TERM INVESTMENTS - 96.3% ASSET-BACKED SECURITIES - 10.7% $ 131,307 Bear Stearns Asset Backed Securities Trust, Series 2003-AC1, Class A1, 4.10%, 05-25-2033 $ 129,963 600,000 Chase Credit Card Master Trust, Series 2003-6, Class A, 3.33%, 02-15-2011 601,862 140,000 GMAC Mortgage Corporation Loan Trust Series 2004-HE5, Class A3, 3.97%, 09-25-2034 138,916 Green Tree Financial Corporation: 59,503 Series 1997-1, Class A5, 6.86%, 03-15-2028 62,730 494,958 Series 1998-4, Class A5, 6.18%, 04-01-2030 501,990 MBNA Credit Card Master Note Trust, Series 2003-A3, Class A3, 3.07%, 08-16-2010 300,000 Series 2003-A9, Class A9, 3.22%, 02-15-2011 301,094 New Century Home Equity Loan Trust, 300,000 Series 2003-5, Class AI3, 3.56%, 11-25-2033 298,565 109,257 Oakwood Mortgage Investors, Inc., Series 1999-B, Class A3, 6.45%, 11-15-2017 100,883 Residential Asset Mortgage Products, Inc.: 400,000 Series 2003-RS11, Class AI3, 3.56%, 08-25-2028 398,626 172,324 Series 2003-RS5, Class AI3, 2.59%, 10-25-2028 171,496 300,000 Series 2003-RS10, Class AI7, 4.85%, 11-25-2033 304,265 Residential Asset Securities Corporation: 92,471 Series 2003-KS2, Class AI3, 2.66%, 11-25-2028 92,151 450,000 Series 2003-KS5, Class AI6, 3.62%, 07-25-2031 433,817 ----------- 3,536,358 ----------- COMMERCIAL MORTGAGE-BACKED SECURITIES -1.4% 300,000 GE Capital Commercial Mortgage Corporation, Series 2002-3A, Class A2, 4.99%, 12-10-2037 310,769 150,000 Mach One Trust, Series 2004-1A, Class A2, 4.78%, 05-28-2040 (Acquired 07-12-04, Cost $151,459)* 151,851 ----------- 462,620 ----------- FINANCIAL - 9.1% 175,000 AMVESCAP, Inc. Senior Notes, 5.90%, 01-15-2007 F 179,611 200,000 American General Finance Senior Notes, 8.45%, 10-15-2009 230,038 175,000 CIT Group, Inc. Senior Notes, 3.38%, 04-01-2009 169,107 100,000 Banco Santander Chile SA, 7.38%, 07-18-2012 F 115,254 100,000 Countrywide Home Loans, Inc., 6.25%, 04-15-2009 106,050 350,000 First National Bank Omaha Subordinated Notes, 7.32%, 12-01-2010 369,514 250,000 First Union Capital, 7.94%, 01-15-2027 271,334 375,000 Liberty Mutual Insurance Notes, 7.70%, 10-15-2097, (Acquired 03-26-03; Cost $239,982)* 413,983 100,000 Marsh & McLennan Companies, Inc. 5.38%, 07-15-2014 99,610 50,000 Met Life Global Funding I Notes, 4.75%, 06-20-2007, (Acquired 09-15-04; Cost $51,534)* 50,682 175,000 PNC Funding Corporation 6.13%, 02-15-2009 185,853 100,000 Residential Capital Corporation 6.38%, 06-30-2010 (Acquired 06-24-05; Cost $100,280)* 100,481 100,000 Transamerica Capital II, 7.65%, 12-01-2026, (Acquired 10-21-03; Cost $108,381)* 120,156 457,000 Washington Mutual Capital I, 8.38%, 06-01-2027 509,764 100,000 Wharf International Finance LTD, 7.63%, 03-13-2007 F 105,301 ----------- 3,026,738 ----------- INDUSTRIAL - 20.8% 40,059 America West Airlines Pass Thru Certificates, 8.54%, 01-02-2006 37,075 300,000 AOL Time Warner, Inc., 7.63%, 04-15-2031 374,667 100,000 AT&T Wireless Services Inc., 8.75%, 03-01-2031 140,164 603,520 Atlas Air, Inc. Pass Thru Certificates, 8.71%, 01-02-2019 627,450 75,000 Best Foods Notes, Series C, 6.15%, 01-15-2006 75,740 150,000 Bunge Ltd. Finance Corporation Notes, 5.35%, 04-15-2014 155,410 61,778 The Burlington Northern Santa Fe Railway Company Pass Thru Certificates, 7.42%, 03-23-2010 65,265 Continental Airlines, Inc. Pass Thru Certificates: 3,653 7.42%, 04-01-2007 3,259 78,936 6.80%, 07-02-2007 68,165 77,050 6.90%, 01-02-2018 76,623 Continental Cablevision Debentures, 400,000 9.50%, 08-01-2013 420,610 100,000 Cox Communications, Inc. Notes, 7.88%, 08-15-2009 112,047 462,000 Delta Air Lines, Inc., 9.50%, 11-18-2008 (Acquired 01-24-04; Cost $462,000)* 376,530 38,000 Delta Air Lines, Inc. Pass Thru Certificates, 7.78%, 11-18-2005 33,089 100,000 Deutsche Telekom International Finance BV, 8.75%, 06-15-2030 F 135,398 250,000 Dollar General Corporation, 8.62%, 06-15-2010 285,000 18,881 Duty Free Promissory Note, 0.00%, 11-10-2013 (Acquired 11-10-03; Cost $6,608),*,**,^ 7,553 400,000 Ford Motor Company Debentures, 9.22%, 09-15-2021 376,784 General Motors Acceptance Corporation, 75,000 6.75%, 01-15-2006 75,592 150,000 6.75%, 12-01-2014 134,201 175,000 General Motors Nova Scotia Finance Company, 6.85%, 1-15-2008 F 165,957 150,000 Glencore Funding LLC, 6.00%, 04-15-2014, (Acquired 03-31-04; Cost $148,928)* 143,835 100,000 Health Care Services Corporation 7.75%, 06-15-2011 (Acquired 01-26-05; Cost $115,000)* 116,107 100,000 Halliburton Company Notes, 5.50%, 10-15-2010 104,873 150,000 Hutchison Whampoa International Limited 6.25%, 01-24-2014 (Acquired 6-23-05, Cost $161,474)* F 161,248 280,000 The May Department Stores Company Debentures, 9.75%, 02-15-2021 358,576 534,360 Northwest Airlines, Inc., 7.25%, 07-02-2014 359,993 98,412 Northwest Airlines, Inc. Pass Thru Certificates, 8.07%, 10-01-2019 107,528 200,000 PCCW Capital II Ltd., 6.00%, 07-15-2013, (Acquired 07-10-03; Cost $199,066)* F 212,352 273,370 Southwest Airlines Co. Pass Through Certificates, 7.67%, 01-02-2014 307,880 100,000 Sprint Capital Corporation, 8.75%, 03-15-2032 139,111 250,000 Sungard Data Systems Inc. Notes, 3.75%, 01-15-2009 227,749 50,000 Tyco International Group SA, 6.00%, 11-15-2013 F 54,375 653,295 United Air Lines, Inc. Pass Thru Certificates, 6.20%, 09-01-2008 621,646 83,000 Univision Communication Inc., 3.50%, 10-15-2007 81,178 150,000 Viacom, Inc. 7.70%, 07-30-2010 167,416 ----------- 6,910,446 ----------- UTILITIES - 5.4% 25,000 Devon Energy Corporation Debentures, 10.25%, 11-01-2005 25,474 300,000 Edison Mission Energy Senior Notes, 9.88%, 04-15-2011 351,375 98,228 Kiowa Power Partners, LLC, 4.81%, 12-30-2013 (Acquired 11-19-04; Cost $100,000)* 97,529 400,000 ONEOK, Inc. Senior Notes, 7.13%, 04-15-2011 450,632 50,000 Pacific Gas and Electric Company 1st Mortgage, 6.05%, 03-01-2034 55,104 200,000 PSE&G Energy Holdings LLC Senior Notes, 8.50%, 06-15-2011 218,000 50,000 PSI Energy, Inc. Debentures, 7.85%, 10-15-2007 53,842 297,172 RGS (I&M) Funding Corporation Debentures, 9.82%, 12-07-2022 397,390 100,000 Tristate Gen & Trans Assn, 6.04%, 01-31-2018 (Acquired 10-14-03; Cost $100,000)* 103,927 50,000 Williams Cos Inc. Notes, 7.13%, 09-01-2011 54,000 ----------- 1,807,273 ----------- MORTGAGE-BACKED SECURITIES - 29.6% 290,086 Bank of America Alternative Loan Trust Series 2005-2, Class 4A1, 5.50%, 03-25-2020 296,494 Federal Gold Loan Mortgage Corporation (FGLMC): 155,514 6.00%, 05-01-2017 160,808 121,583 6.50%, 09-01-2028 126,333 198,536 6.50%, 12-01-2028 206,292 145,740 6.50%, 05-01-2029 151,379 143,797 6.50%, 06-01-2029 149,361 Federal Home Loan Mortgage Corporation (FHLMC): 400,000 Series 2567, Class OD, 5.00%, 08-15-2015 405,449 450,000 Series 2539, Class QB, 5.00%, 09-15-2015 455,486 38,828 Series 1053, Class G, 7.00%, 03-15-2021 38,849 288,509 Series 2804, Class VC, 5.00%, 07-15-2021 291,775 66,389 Series 1122, Class G, 7.00%, 08-15-2021 66,303 250,000 Series 2598, Class QC, 4.50%, 06-15-2027 249,176 292,330 Series R001, Class AE, 4.38%, 04-15-2015 292,495 218,265 Series 2531, Class N, 4.00%, 07-15-2027 217,634 Federal National Mortgage Association (FNMA): 416,528 5.00%, 02-01-2018 421,686 292,168 5.00%, 10-01-2018 295,670 289,336 5.00%, 11-01-2018 292,804 222,347 5.50%, 03-01-2023 226,975 265,034 5.50%, 07-01-2023 270,551 146,361 7.00%, 12-15-2021 146,640 98,187 6.50%, 09-01-2028 98,848 167,439 6.50%, 02-01-2029 173,879 324,364 5.50%, 01-01-2032 329,239 400,000 Series 2002-82, Class XC, 5.00%, 05-25-2014 404,251 450,000 Series 2002-74, Class TC, 5.00%, 03-25-2015 454,288 171,535 Series 2002-70, Class PL, 5.00%, 04-25-2015 172,219 350,000 Series 2002-57, Class PE, 5.50%, 09-25-2015 355,989 300,000 Series 2003-16, Class PC, 5.00%, 10-25-2015 304,007 27,432 Series 1989-94, Class G, 7.50%, 12-25-2019 29,225 38,172 Series 1990-15, Class J, 7.00%, 02-25-2020 39,727 106,776 Series 1990-76, Class G, 7.00%, 07-25-2020 112,850 24,893 Series 1991-21, Class J, 7.00%, 03-25-2021 25,937 83,393 Series 1992-129, Class L, 6.00%, 07-25-2022 86,358 179,900 Series 1993-32, Class H, 6.00%, 03-25-2023 184,316 229,731 Series 1993-58, Class H, 5.50%, 04-25-2023 235,464 450,000 Series 2003-31, Class KG, 4.50%, 12-25-2028 453,555 92,361 Series 2003-44, Class AB, 3.75%, 05-25-2033 90,740 Government National Mortgage Association (GNMA): 250,000 4.49%, 04-16-2023 250,077 167,940 6.50%, 08-15-2027 176,022 273,446 6.00%, 12-20-2028 282,077 102,654 6.50%, 01-20-2029 106,932 96,457 6.50%, 02-20-2029 100,476 30,000 4.66%, 04-16-2029 301,969 260,768 6.00%, 11-20-2033 268,612 ----------- 9,799,217 ----------- INTERNATIONAL (U.S. $ DENOMINATED) - 1.4% 400,000 PEMEX Project Funding Master Trust, 9.13%, 10-13-2010 468,400 ----------- TAXABLE MUNICIPAL BOND - 0.6% 202,486 Tobacco Settlement Financing Corporation, Series 2001-A, Class A, 6.36%, 05-15-2025 205,768 ----------- U.S. GOVERNMENT AGENCY - 5.4% 1,575,000 Federal National Mortgage Association (FNMA): 7.25%, 01-15-2010 1,785,957 ----------- U.S. TREASURY OBLIGATIONS - 11.9% U.S. Treasury Bonds: 500,000 9.25%, 02-15-2016 724,414 2,575,000 6.25%, 08-15-2023 3,208,993 ----------- 3,933,407 ----------- Total Long-Term Investments (Cost $31,204,618) 31,936,184 ----------- SHORT-TERM INVESTMENTS - 3.1% MONEY MARKET FUNDS - 3.1% 847,958 Investment Company Cash Reserve Portfolio- AIM Fund 847,958 173,194 SEI Daily Income Trust Government Fund 173,194 ----------- 1,021,152 ----------- Total Short-Term Investments (Cost $1,021,152) 1,021,152 ----------- Total Investments (Cost $32,225,770) 99.4% 32,957,336 ----------- Other Assets Less Liabilities 0.6% 182,579 ----------- TOTAL NET ASSETS 100.0% $33,139,915 ----------- ----------- * Unregistered security ** Fair valued security ^ Non-income producing security F Foreign security See notes to the financial statements BAIRD SHORT-TERM BOND FUND JUNE 30, 2005 The investment objective of the Baird Short-Term Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of return of the Lehman Brothers 1-3 Year Government/Credit Bond Index. The Lehman Brothers 1-3 Year Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed rate debt including government and corporate securities with maturities between one and three years. PORTFOLIO CHARACTERISTICS QUALITY DISTRIBUTION* U.S. Treasury 14% U.S. Gov't Agency 26% Aaa 21% Aa 4% A 11% Baa 24% SECTOR WEIGHTINGS U.S. Treasury 14% U.S. Gov't Agency 24% Mortgage/CMOs 5% Asset-Backed 13% Industrials 15% Utility 9% Finance/Bank/Broker 15% Cash 4% Municipal 1% NET ASSETS: $69,922,402 ANNUALIZED EXPENSE RATIO: SEC 30-DAY YIELD:** Institutional Class: 0.30% Institutional Class: 3.65% PORTFOLIO TURNOVER RATIO:*** 11.7% AVERAGE DURATION: 1.77 years TOTAL NUMBER OF HOLDINGS: 129 AVERAGE MATURITY: 1.93 years
* Credit ratings are provided by Moody's Investors Service. ** SEC yields are based on SEC guidelines and are calculated for the 30 days ended June 30, 2005. *** Not Annualized. BAIRD SHORT-TERM BOND FUND TOTAL RETURNS For the Period Ended June 30, 2005 SINCE INCEPTION(1) - ---------------------------------- ----------------------- Baird Short-Term Bond Fund - Institutional Class 1.13% Lehman Brothers 1-3 Year Government/Credit Bond Index(2) 1.00%
(1) For the period August 31, 2004 (commencement of operations) to June 30, 2005. (2) The Lehman Brothers 1-3 Year Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and three years. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS FOR THE PERIOD AUGUST 31, 2004 THROUGH JUNE 30, 2005. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Principal Amount Value - --------- ----- LONG-TERM INVESTMENTS - 95.7% ASSET-BACKED SECURITIES - 13.2% $ 150,000 Advanta Business Card Master Trust Series 2003-B, Class A, 3.61%, 12-22-2008 $ 150,443 44,374 Americredit Automobile Receivables Trust, Series 2001-B, Class A4, 5.37%, 06-12-2008 44,547 400,000 AESOP Funding II LLC Series 2005-1A, Class A1, 3.95%, 04-20-2008 398,402 500,000 Bayview Financial Acquisition Trust Series 2005-B, Class 1A2, 4.70%, 04-28-2039 498,943 250,000 Capital One Multi-Asset Execution Trust Series 2003-A1, Class A1, 3.61%, 01-15-09 250,694 120,000 Chase Manhattan Auto Owner Trust, Series 2003-C, Class A4, 2.94%, 06-15-2010 117,921 Chemical Master Credit Card Trust I: 475,000 Series 1996-3, Class A, 7.09%, 02-15-2009 488,906 850,370 Series 1996-2, Class A, 5.98%, 09-15-2008 859,776 Citifinancial Mortgage Securities: 281,710 Series 2003-2, Class AF2, 2.13%, 05-25-2033 279,861 385,000 Series 2003-3, Class AF2, 3.08%, 8-25-2033 381,581 400,000 CNH Equipment Trust Series 2005-A, Class A3, 4.02%, 4-15-2009 399,995 Countrywide Asset-Backed Certificates: 330,000 Series 2004-10, Class AF2, 3.32%, 05-25-2022 326,137 400,000 Series 2004-9, Class AF2, 3.34%, 09-25-2023 396,008 105,000 Series 2004-7, Class AF2, 3.32%, 12-25-2023 103,906 500,000 Ford Credit Auto Owner Trust, Series 2005-B, Class A4, 01-15-2010 503,671 175,000 Household Automobile Trust, 2.22%, 11-17-2009 171,206 300,000 MBNA Credit Card Master Note Trust, Series 2003-A3, Class A3, 3.34%, 08-16-2010 300,851 750,000 New Century Home Equity Loan Trust, Series 2003-5, Class AI3, 3.56%, 11-25-2033 746,413 500,000 Renaissance Home Equity Loan Trust, Series 2004-3, Class AF2, 3.57%, 11-25-2034 494,182 Residential Asset Mortgage Products, Inc. 168,707 Series 2003-RS9, Class AI3, 3.61%, 10-25-2028 167,940 140,000 Series 2063-RS7, Class AI6, 5.34%, 08-25-2033 143,530 Residential Asset Securities Corporation: 437,597 Series 2003-KS5, Class AI3, 2.28% 07-25-2028 431,111 1,000,000 Series 2003-KS2, Class AI3, 3.02%, 05-25-2029 985,568 600,000 Residential Funding Mortgage Securities Series 2003-HS3, Class AI2, 3.15%, 07-25-2018 591,515 ----------- 9,233,107 ----------- FINANCIAL - 14.9% 380,000 Allfirst Financial Inc. Subordinated Notes, 7.20%, 07-01-2007 404,260 140,000 American General Finance Corporation Notes, 4.50%, 11-15-2007 140,296 304,000 Bank of Oklahoma Subordinated Notes, 7.13%, 08-15-2007 321,383 251,000 Bank United Notes, 8.00%, 03-15-2009 281,892 200,000 Bankers Trust Corp. Notes, 7.38%, 05-01-2008 216,998 110,000 BB&T Corporation Subordinated Notes, 7.25%, 06-15-2007 116,328 400,000 Bear Stearns & Co. Inc. Notes, 7.80%, 08-15-2007 428,447 500,000 Capital One Bank Notes, 4.88%, 05-15-2008 507,461 100,000 Chubb Corporation Senior Notes, 7.13%, 12-15-2007 106,875 210,000 CIT Group Inc. Senior Notes, 5.50%, 11-30-2007 215,888 200,000 Citicorp Subordinated Notes, 7.00%, 07-01-2007 211,734 250,000 Citifinancial Debentures 10.00%, 05-15-2009 300,360 675,000 Comerica Inc. Subordinated Notes, 7.25%, 08-01-2007 713,931 537,000 Credit Suisse First Boston USA Inc. Senior Notes, 6.50%, 06-01-2008 569,317 200,000 Franchise Finance Corporation Notes, 7.07%, 01-15-2008 215,007 75,000 Heller Financial Inc. Notes, 6.38%, 03-15-2006 76,265 400,000 HSBC Finance Corporation Notes, 6.88%, 03-1-2007 416,774 500,000 ING Security Life Institutional Funding Notes, 2.70%, 02-15-2007 (Acquired 05-26-05, Cost $488,370)* 486,798 200,000 J.P. Morgan & Co. Incorporated Subordinated Notes, 6.70%, 11-01-2007 210,503 KeyCorp Subordinated Notes, 200,000 7.50%, 06-15-2006 206,024 100,000 6.75%, 03-15-2006 101,806 Lehman Brothers Holdings Inc. Notes, 203,000 8.50%, 05-01-2007 218,562 400,000 3.5%, 08-07-2008 391,708 500,000 MBNA Corporation Notes, 6.25%, 01-17-2007 515,902 200,000 Morgan Stanley Group, Inc. Debentures, 8.33%, 01-15-2007 212,769 180,000 Merrill Lynch & Co. Notes, 7.00%, 01-15-2007 187,869 200,000 Met life Global Funding 4.75%, 06-20-2007 (Acquired 02-11-05; Cost $203,862)* 202,727 150,000 Principal Life Global, 5.13%, 06-28-2007 (Acquired 12-28-04; Cost $154,880)* 152,321 125,000 Protective Life US Funding Notes, 5.88%, 08-15-2006 (Acquired 1-18-05 Cost $129,410)* 126,791 300,000 Reliastar Financial Notes, 8.00%, 10-30-2005 314,085 155,000 Republic New York Corporation Subordinated Notes, 9.70%, 02-01-2009 182,217 487,000 SAFECO Corporation Notes, 6.88%, 07-15-2007 510,572 300,000 Santander Financial Issuances, 7.25%, 05-30-2006 F 308,279 200,000 Transamerica Corporation Debentures, 9.38%, 03-01-2008 224,148 162,000 Washington Mutual, Inc. Notes, 7.50%, 08-15-2006 167,685 250,000 Wells Fargo & Company Subordinated Notes, 6.25%, 04-15-2008 263,445 200,000 Westdeutsche Landesbank Subordinated Notes, 6.05%, 01-15-2009 211,071 ----------- 10,438,498 ----------- INDUSTRIAL -14.7% 300,000 British Telecommunications PLC Notes, 7.88%, 12-15-2005 F 305,234 300,000 Caremark RX Inc. Senior Notes, 7.38%, 10-01-2006 309,942 500,000 Clear Channel Communication Senior Notes, 3.13%, 02-01-2007 486,921 200,000 Comcast Cable Communications, Inc. Notes, 6.20%, 11-15-2008 211,509 300,000 Conagra Foods Inc. Notes, 6.00%, 9-15-2006 305,109 386,000 Cooper Cameron Corporation Senior Notes, 2.65%, 04-15-2007 374,488 279,000 Devon Energy Corporation Debentures, 10.125%, 11-15-2009 337,748 175,000 Export-Import BK Korea Notes, 4.63%, 3-16-2010 F 176,038 300,000 Ford Motor Credit Company Senior Notes, 4.95%, 01-15-2008 286,176 200,000 France Telecom SA Notes, 7.20%, 03-01-2006 F 204,381 General Motors Acceptance Corporation Notes: 200,000 6.75%, 01-15-2006 201,578 200,000 6.13%, 09-15-2006 200,143 250,000 6.13%, 08-28-2007 247,429 225,000 Halliburton Company Notes, 5.63%, 12-01-2008 234,062 260,000 Harrahs Operating Company Inc. 7.13%, 06-01-2007 272,862 310,000 The Hertz Corporation Senior Notes, 6.50%, 05-15-2006 310,135 700,000 ICI North America Debentures, 8.88%, 11-15-2006 739,859 International Paper Company Notes: 500,000 7.00%, 08-15-2006 512,682 250,000 7.63%, 01-15-2007 261,598 463,000 Marathon Oil Corporation Notes, 6.85%, 03-01-2008 491,980 200,000 MeadWestvaco Corporation Notes, 2.75%, 12-01-2005 199,024 686,000 Telus Corporation Notes, 7.50%, 06-01-2007 F 725,720 255,000 Time Warner Cos., Inc., 8.18%, 08-15-2007 274,321 600,000 Tyco International Group SA, 6.38%, 02-15-2006 F 608,026 217,000 Union Pacific Corp., 6.40%, 02-01-2006 219,696 600,000 Univision Communication Inc. 3.5%, 10-15-2007 586,827 500,000 Viacom Inc., 5.63%, 05-01-2007 510,529 634,000 Waste Management Inc. Notes, 7.00%, 10-15-2006 655,362 ----------- 10,249,379 ----------- UTILITIES - 8.4% 300,000 Baltimore Gas & Electric, 5.25%, 12-15-2006 304,501 306,000 Bell Telephone Co. Debentures Pennsylvania 7.38%, 7-15-2007 322,144 189,000 FPL Group Capital Inc. Notes, 7.63%, 9-15-2006 196,733 175,000 Gulf States Utilities 1st Mortgage Notes, 6.77%, 08-01-2005 175,389 220,000 Indiana Michigan Power Company Senior Notes, Series C, 6.13%, 12-15-2006 226,028 111,000 Jersey Central Power & Light Company 1st Mortgage, 6.85%, 11-27-2006 114,824 MidAmerican Energy Holdings Company Senior Notes, 200,000 4.63%, 10-01-2007 200,872 575,000 7.63% 10-15-2007 614,540 360,000 Nisource Finance Corp., 7.63%, 11-15-2005 364,722 500,000 ONEOK, Inc., 7.75%, 08-15-2006 519,186 220,000 PanEnergy Corporation Notes, 7.00%, 10-15-2006 226,308 475,000 Pepco Holdings, Inc. Notes, 3.75%, 02-15-2006 474,236 500,000 Progress Energy, Inc. Senior Notes, 6.75%, 03-01-2006 508,527 300,000 PSEG Power LLC 6.88%, 04-15-2006 306,227 200,000 Public Service Electric & Gas Co. Notes, 6.25%, 01-01-2007 206,473 402,000 Southwestern Bell Telephone Company Notes, 6.63%, 07-15-2007 419,816 Sprint Capital Corporation Notes: 175,000 6.00%, 01-15-2007 179,331 500,000 6.38%, 05-01-2009 532,127 ----------- 5,891,984 ----------- INTERNATIONAL (U.S. $ DENOMINATED) - 0.3% 200,000 PEMEX Project Funding Master Trust, 6.13%, 08-15-2008 207,600 ----------- MORTGAGE-BACKED SECURITIES - 5.2% 1,500,410 Bank of America Alternative Loan Trust, Series 2003-4, Class 2A1, 5.00%, 06-25-2018 1,516,266 Citicorp Mortgage Securities, Inc., 314,449 Series 2003-11, Class 2A8, 5.50%, 12-25-2033 319,022 279,037 Series 2004-4, Class A2, 5.25%, 05-25-2015 278,461 Fannie Mae 475,000 Series 2003-24, Class LC, 5.00%, 12-25-2015 481,334 250,000 Series 2002-94, Class BG, 5.00%, 4-25-2016 252,469 Federal Home Loan Mortgage Corporation (FHLMC) 211,584 Series 2548, Class HA, 4.5%, 1-15-2010 212,038 252,293 Series 2835, Class VK, 5.50%, 11-15-2012 257,499 277,531 Series 2789, Class VM, 5.50%, 4-15-2015 284,980 ----------- 3,602,069 ----------- U.S. GOVERNMENT AGENCY ISSUE - 23.5% Federal Home Loan Bank (FHLB): 1,000,000 4.70%, 10-07-2010 1,000,127 Federal Home Loan Mortgage Corporation (FHLMC) 700,000 6.63%, 09-15-2009 770,680 Federal National Mortgage Association (FNMA) Notes, 11,675,000 2.38%, 02-15-2007 11,418,524 2,425,000 5.75%, 2-15-2008 2,538,742 750,000 Government Backed Trust, Series T-1, 0.00%, 11-15-2006^ 712,208 ----------- 16,440,281 ----------- U.S. TREASURY OBLIGATIONS - 14.1% U.S. Treasury Note, 4,000,000 3.38%, 02-28-2007 3,982,500 3,850,000 3.25%, 08-15-2008 3,802,025 2,075,000 3.00%, 12-31-2006 2,055,952 ----------- 9,840,477 ----------- MUNICIPAL BONDS - 1.4% 300,000 Erie, Pennsylvania General Obligation 5.64%, 11-15-007 306,207 450,000 New Jersey Economic Development Authority, ETM 0.00%, 02-15-2007^ 422,298 231,413 Tobacco Settlement Financial Corp., Series 2001-A, Class A, 6.36%, 05-15-2025 235,164 ----------- 963,669 ----------- Total Long-Term Investments (Cost $67,157,914) 66,867,064 ----------- SHORT-TERM INVESTMENTS - 3.8% MONEY MARKET FUNDS - 3.1% 1,531,353 Investment Company Cash Reserve Portfolio - AIM Fund 1,531,353 658,528 SEI Daily Income Trust Government Fund 658,528 ----------- 2,189,881 ----------- Principal Amount - --------- VARIABLE RATE DEMAND NOTES# - 0.7% $ 378,436 American Family Demand Note, 2.47% 378,436 110,000 Wisconsin Corporate Center Credit Union, 2.52% 110,000 ----------- 488,436 ----------- Total Short-Term Investments (Cost $2,678,317) 2,678,317 ----------- Total Investments (Cost $69,836,231) 99.5% 69,545,381 ----------- Other Assets less Liabilities 0.5% 377,021 ----------- TOTAL NET ASSETS 100.0% $69,922,402 ----------- ----------- * Unregistered security ^ Non-income producing security F Foreign security ETM Escrowed to maturity # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of June 30, 2005. See notes to the financial statements BAIRD FUNDS, INC. ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2005 (UNAUDITED) EXAMPLE As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; interest expense and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (1/1/05 - 6/30/05). ACTUAL EXPENSES The fourth and fifth columns of the table below provide information about account values based on actual returns and actual expenses. Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund's transfer agent. If you request that a redemption be made by wire transfer, currently the Fund's transfer agent charges a $15.00 fee. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fifth column entitled "Expenses Paid During Period'' to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The sixth and seventh columns of the table below provide information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the seventh column of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher. ACTUAL VS. HYPOTHETICAL RETURNS For the Six Months Ended June 30, 2005 HYPOTHETICAL (5% RETURN ACTUAL BEFORE EXPENSES) -------------------------- -------------------------- FUND'S BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT ACCOUNT PAID ACCOUNT PAID EXPENSE VALUE VALUE DURING VALUE DURING RATIO(1) 1/1/05 6/30/05 PERIOD(1) 6/30/05 PERIOD(1) ------------- --------- ------- -------------- ------- -------------- BAIRD INTERMEDIATE BOND FUND Institutional Class 0.30% $1,000.00 $1,017.30 $1.52 $1,023.31 $1.51 Investor Class 0.55% $1,000.00 $1,016.50 $2.79 $1,022.07 $2.76 BAIRD AGGREGATE BOND FUND Institutional Class 0.30% $1,000.00 $1,028.90 $1.53 $1,023.31 $1.51 Investor Class 0.55% $1,000.00 $1,028.00 $2.80 $1,022.07 $2.76 BAIRD INTERMEDIATE MUNICIPAL BOND FUND Institutional Class 0.30% $1,000.00 $1,013.50 $1.52 $1,023.31 $1.51 Investor Class 0.55% $1,000.00 $1,016.50 $2.79 $1,022.07 $2.76 BAIRD CORE PLUS BOND FUND Institutional Class 0.30% $1,000.00 $1,028.00 $1.53 $1,023.31 $1.51 Investor Class 0.55% $1,000.00 $1,026.10 $2.80 $1,022.07 $2.76 BAIRD SHORT-TERM BOND FUND Institutional Class 0.30% $1,000.00 $1,010.30 $1.01 $1,023.31 $1.51
(1) Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days and divided by 365 to reflect the one-half year period. BAIRD FUNDS, INC. STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED) BAIRD BAIRD BAIRD INTERMEDIATE BAIRD BAIRD INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND ------------ --------- ------------ --------- ---------- ASSETS: Investments, at value $216,063,059 $140,197,355 $46,644,749 $32,957,336 $69,545,381 (cost $213,588,988, $137,165,668, $45,882,508, and $32,225,770 and $69,836,231, respectively) Cash 17,155 523,775 -- 1,182 2,094 Interest receivable 2,527,092 1,546,118 811,246 410,437 774,249 Receivable for investments sold 8,859 5,316 -- -- 218,234 Receivable for Fund shares sold 1,542,020 14,267 42,921 245,213 755,732 ------------ ------------ ----------- ----------- ----------- Total assets 220,158,185 142,286,831 47,498,916 33,614,168 71,295,690 ------------ ------------ ----------- ----------- ----------- LIABILITIES: Payable for securities purchased 2,737,905 1,254,557 1,241,090 431,531 1,348,816 Payable for Fund shares purchased 253,000 142,871 1,684 -- 8,820 Payable to Advisor and Distributor 53,897 34,960 14,828 7,680 15,652 Other liabilities -- 8,495 -- 35,042 -- ------------ ------------ ----------- ----------- ----------- Total liabilities 3,044,802 1,440,883 1,257,602 474,253 1,373,288 ------------ ------------ ----------- ----------- ----------- NET ASSETS $217,113,383 $140,845,948 $46,241,314 $33,139,915 $69,922,402 ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- NET ASSETS CONSIST OF: Capital stock $215,871,500 $137,649,230 $45,568,024 $32,370,331 $70,233,198 Accumulated undistributed net investment income 158,605 105,109 87,074 27,534 37,960 Accumulated net realized gain (loss) on investments sold (1,390,793) 59,922 (176,025) 10,484 (57,906) Net unrealized appreciation/depreciation on investments 2,474,071 3,031,687 762,241 731,566 (290,850) ------------ ------------ ----------- ----------- ----------- NET ASSETS $217,113,383 $140,845,948 $46,241,314 $33,139,915 $69,922,402 ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- INSTITUTIONAL CLASS SHARES Net Assets $214,063,531 $139,945,318 $44,095,850 $32,748,400 $69,922,402 Shares outstanding ($0.01 par value, unlimited shares authorized) 19,856,104 12,956,412 4,098,820 3,149,951 7,071,921 Net asset value, offering and redemption price per share $ 10.78 $ 10.80 $ 10.76 $ 10.40 $ 9.89 ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- INVESTOR CLASS SHARES Net Assets $ 3,049,852 $ 900,630 $ 2,145,464 $ 391,515 $ -- Shares outstanding ($0.01 par value, unlimited shares authorized) 274,980 81,743 195,998 36,783 -- Net asset value, offering and redemption price per share $ 11.09 $ 11.02 $ 10.95 $ 10.64 $ -- ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED) BAIRD BAIRD BAIRD INTERMEDIATE BAIRD BAIRD INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND ------------ --------- ------------ --------- ---------- INVESTMENT INCOME: Interest income $4,748,557 $3,126,756 $932,758 $816,418 $809,917 ---------- ---------- -------- -------- -------- Total investment income 4,748,557 3,126,756 932,758 816,418 809,917 ---------- ---------- -------- -------- -------- EXPENSES: Investment advisory fee 257,899 162,536 55,776 39,742 58,427 Administration fee 51,580 32,507 11,155 7,948 11,685 Distribution expense - Investor Class Shares 3,692 1,145 4,082 180 -- ---------- ---------- -------- -------- -------- Total expenses 313,171 196,188 71,013 47,870 70,112 ---------- ---------- -------- -------- -------- NET INVESTMENT INCOME 4,435,386 2,930,568 861,745 768,548 739,805 ---------- ---------- -------- -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments (536,265) 217,585 (150,652) 41,794 (46,995) Change in unrealized appreciation/ depreciation on investments (134,393) 613,253 (126,260) 61,541 (82,768) ---------- ---------- -------- -------- -------- Net realized and unrealized gain (loss) on investments (670,658) 830,838 (276,912) 103,335 (129,763) ---------- ---------- -------- -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,764,728 $3,761,406 $584,833 $871,883 $610,042 ---------- ---------- -------- -------- -------- ---------- ---------- -------- -------- --------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD INTERMEDIATE BOND FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 4,435,386 $ 7,270,283 Net realized loss on investments (536,265) (599,286) Change in unrealized appreciation/depreciation on investments (134,393) (282,245) ------------ ------------ Net increase in net assets resulting from operations 3,764,728 6,388,752 ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 32,847,927 67,465,697 Shares issued to holders in reinvestment of dividends 4,149,035 6,659,149 Cost of shares redeemed (13,657,854) (29,883,566) ------------ ------------ Net increase in net assets resulting from capital share transactions 23,339,108 44,241,280 ------------ ------------ DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income (4,506,860) (7,099,177) From realized gains -- (27,024) ------------ ------------ (4,506,860) (7,126,201) ------------ ------------ DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net investment income (59,620) (85,930) From realized gains -- (377) ------------ ------------ (59,620) (86,307) ------------ ------------ TOTAL INCREASE IN NET ASSETS 22,537,356 43,417,524 NET ASSETS: Beginning of period 194,576,027 151,158,503 ------------ ------------ End of period (including undistributed net investment income of $158,605 and $223,829, respectively) $217,113,383 $194,576,027 ------------ ------------ ------------ ------------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD AGGREGATE BOND FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 2,930,568 $ 4,787,456 Net realized gain on investments 217,585 425,360 Change in unrealized appreciation/depreciation on investments 613,253 42,347 ------------ ------------ Net increase in net assets resulting from operations 3,761,406 5,255,163 ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 25,136,087 49,052,903 Shares issued to holders in reinvestment of dividends 2,748,698 4,563,691 Cost of shares redeemed (3,862,852) (29,904,273) ------------ ------------ Net increase in net assets resulting from capital share transactions 24,021,933 23,712,321 ------------ ------------ DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income (3,009,126) (4,819,107) From realized gains -- (311,207) ------------ ------------ (3,009,126) (5,130,314) ------------ ------------ DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net investment income (19,985) (13,976) From realized gains -- (1,852) ------------ ------------ (19,985) (15,828) ------------ ------------ TOTAL INCREASE IN NET ASSETS 24,754,228 23,821,342 NET ASSETS: Beginning of period 116,091,720 92,270,378 ------------ ------------ End of period (including undistributed net investment income (loss) of $105,109 and $134,477, respectively) $140,845,948 $116,091,720 ------------ ------------ ------------ ------------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD INTERMEDIATE MUNICIPAL BOND FUND -------------------------------------- Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 861,745 $ 1,357,546 Net realized loss on investments (150,652) (24,020) Change in unrealized appreciation/depreciation on investments (126,260) (508,690) ----------- ----------- Net increase in net assets resulting from operations 584,833 824,836 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 12,811,485 16,224,440 Shares issued to holders in reinvestment of dividends 661,887 1,121,415 Cost of shares redeemed (8,508,521) (6,337,831) ----------- ----------- Net increase in net assets resulting from capital share transactions 4,964,851 11,008,024 ----------- ----------- DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income (760,734) (1,230,984) ----------- ----------- DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net investment income (48,613) (91,886) ----------- ----------- TOTAL INCREASE IN NET ASSETS 4,740,337 10,509,990 NET ASSETS: Beginning of period 41,500,977 30,990,987 ----------- ----------- End of period (including undistributed net investment income of $87,074 and $34,676, respectively) $46,241,314 $41,500,977 ----------- ----------- ----------- -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD CORE PLUS BOND FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 768,548 $ 1,651,430 Net realized gain on investments 41,794 944,452 Change in unrealized appreciation/depreciation on investments 61,541 (365,553) ----------- ----------- Net increase in net assets resulting from operations 871,883 2,230,329 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 2,978,896 2,987,818 Shares issued to holders in reinvestment of dividends 441,958 1,182,113 Cost of shares redeemed (2,948,809) (14,342,365) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions 472,045 (10,172,434) ----------- ----------- DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income (822,043) (1,712,108) From realized gains -- (550,721) ----------- ----------- (822,043) (2,262,829) ----------- ----------- DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net investment income (3,458) (5,608) From realized gains -- (2,085) ----------- ----------- (3,458) (7,693) ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 518,427 (10,212,627) NET ASSETS: Beginning of period 32,621,488 42,834,115 ----------- ----------- End of period (including undistributed net investment income of $27,534 and $44,701, respectively) $33,139,915 $32,621,488 ----------- ----------- ----------- -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD SHORT-TERM BOND FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 739,805 $ 243,185 Net realized loss on investments (46,995) (8,613) Change in unrealized appreciation/depreciation on investments (82,768) (208,082) ----------- ----------- Net increase in net assets resulting from operations 610,042 26,490 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 42,529,994 33,919,057 Shares issued to holders in reinvestment of dividends 627,010 158,249 Cost of shares redeemed (5,102,091) (1,899,021) ----------- ----------- Net increase in net assets resulting from capital share transactions 38,054,913 32,178,285 ----------- ----------- DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income (715,553) (231,775) ----------- ----------- TOTAL INCREASE IN NET ASSETS 37,949,402 31,973,000 NET ASSETS: Beginning of period 31,973,000 -- ----------- ----------- End of period (including undistributed net investment income of $37,960 and $12,668, respectively) $69,922,402 $31,973,000 ----------- ----------- ----------- -----------
See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD INTERMEDIATE BOND FUND ---------------------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.83 $ 10.88 $ 10.86 $ 10.60 $ 10.55 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.23(6) 0.47(6) 0.49 0.56 0.62(6) 0.13 Net realized and unrealized gains (losses) on investments (0.05) (0.05) 0.14 0.27 0.08(7) 0.53 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.18 0.42 0.63 0.83 0.70 0.66 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.23) (0.47) (0.49) (0.56) (0.62) (0.11) Distributions from net realized gains -- (0.00)(5) (0.12) (0.01) (0.03) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.23) (0.47) (0.61) (0.57) (0.65) (0.11) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.78 $ 10.83 $ 10.88 $ 10.86 $ 10.60 $ 10.55 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 1.73%(2) 3.91% 5.89% 8.02% 6.68% 6.63%(2) Supplemental data and ratios: Net assets, end of period $214,063,531 $191,563,699 $149,836,855 $146,236,339 $89,682,104 $9,769,062 Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30% 0.30% 0.30%(3) Ratio of net investment income to average net assets 4.34%(3) 4.32% 4.39% 5.20% 5.71% 6.73%(3) Portfolio turnover rate(4) 29.1%(2) 44.8% 64.4% 41.1% 79.5% 102.5%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding during the period. (7) The amount shown may not correlate with the aggregate gains and losses of portfolio securities due to the timing of subscriptions and redemptions of Fund shares. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD INTERMEDIATE BOND FUND ---------------------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 11.13 $ 11.17 $ 11.13 $ 10.71 $ 10.56 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.22(6) 0.45(6) 0.48 0.54(6) 0.59(6) 0.13 Net realized and unrealized gains (losses) on investments (0.04) (0.05) 0.14 0.27 0.08(7) 0.53 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.18 0.40 0.62 0.81 0.67 0.66 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.22) (0.44) (0.46) (0.38) (0.49) (0.10) Distributions from net realized gains -- (0.00)(5) (0.12) (0.01) (0.03) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.22) (0.44) (0.58) (0.39) (0.52) (0.10) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 11.09 $ 11.13 $ 11.17 $ 11.13 $ 10.71 $ 10.56 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 1.65%(2) 3.65% 5.61% 7.74% 6.43% 6.68%(2) Supplemental data and ratios: Net assets, end of period $ 3,049,852 $ 3,012,328 $ 1,321,648 $ 1,127,162 $ 1,189,191 $ 351,262 Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3) Ratio of net investment income to average net assets 4.00%(3) 4.07% 4.14% 4.95% 5.46% 6.48%(3) Portfolio turnover rate(4) 29.1%(2) 44.8% 64.4% 41.1% 79.5% 102.5%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding during the period. (7) The amount shown may not correlate with the aggregate gains and losses of portfolio securities due to the timing of subscriptions and redemptions of Fund shares. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD AGGREGATE BOND FUND ---------------------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.74 $ 10.71 $ 10.69 $ 10.51 $ 10.42 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.25(6) 0.49(6) 0.56 0.62 0.68 0.16 Net realized and unrealized gains on investments 0.06 0.07 0.20 0.23 0.17 0.42 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.31 0.56 0.76 0.85 0.85 0.58 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.25) (0.50) (0.56) (0.62) (0.67) (0.16) Distributions from net realized gains -- (0.03) (0.18) (0.05) (0.09) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.25) (0.53) (0.74) (0.67) (0.76) (0.16) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.80 $ 10.74 $ 10.71 $ 10.69 $ 10.51 $ 10.42 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 2.89%(2) 5.30% 7.19% 8.30% 8.33% 5.78%(2) Supplemental data and ratios: Net assets, end of period $139,945,518 $115,382,862 $ 91,550,534 $ 87,847,176 $83,392,652 $35,975,190 Ratio of expenses to average net assets 0.27%(3) 0.30% 0.30% 0.30% 0.30% 0.30%(3) Ratio of net investment income to average net assets 4.59%(3) 4.58% 4.85% 5.75% 6.33% 6.85%(3) Portfolio turnover rate(4) 26.5%(2) 72.6% 106.7% 51.2% 79.2% 14.7%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding throughout the period. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD AGGREGATE BOND FUND ---------------------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.95 $ 10.88 $ 10.84 $ 10.57 $ 10.43 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.24(6) 0.48(6) 0.55 0.60(6) 0.65(6) 0.15 Net realized and unrealized gains on investments 0.06 0.07 0.19 0.23 0.17 0.42 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.30 0.55 0.74 0.83 0.82 0.57 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.23) (0.45) (0.52) (0.51) (0.59) (0.14) Distributions from net realized gains -- (0.03) (0.18) (0.05) (0.09) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.23) (0.48) (0.70) (0.56) (0.68) (0.14) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 11.02 $ 10.95 $ 10.88 $ 10.84 $ 10.57 $ 10.43 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 2.80%(2) 5.20% 6.95% 8.08% 7.98% 5.77%(2) Supplemental data and ratios: Net assets, end of period $ 900,630 $ 708,858 $ 719,844 $ 845,481 $ 166,622 $ 13,223 Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3) Ratio of net investment income to average net assets 4.34%(3) 4.33% 4.60% 5.50% 6.08% 6.60%(3) Portfolio turnover rate(4) 26.5%(2) 72.6% 106.7% 51.2% 79.2% 14.7%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding during the period. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD INTERMEDIATE MUNICIPAL BOND FUND ------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares March 30, Ended Year ended Year ended Year ended 2001(1) through June 30, 2005 December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.81 $ 10.91 $ 10.86 $ 10.25 $ 10.00 ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.21(5) 0.40(5) 0.42(5) 0.43(5) 0.34(5) Net realized and unrealized gains (losses) on investments (0.07) (0.11) 0.10 0.64 0.17(6) ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.14 0.29 0.52 1.07 0.51 ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.19) (0.39) (0.43) (0.46) (0.25) Distributions from net realized gains -- -- (0.04) (0.00)(7) (0.01) ------------ ------------ ------------ ----------- ---------- Total distributions (0.19) (0.39) (0.47) (0.46) (0.26) ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.76 $ 10.81 $ 10.91 $ 10.86 $ 10.25 ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ----------- ---------- Total return 1.35%(2) 2.69% 4.91% 10.72% 5.02%(2) Supplemental data and ratios: Net assets, end of period $ 44,095,850 $ 36,889,211 $ 30,234,195 $31,221,508 $14,448,572 Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30% 0.30%(3) Ratio of net investment income to average net assets 3.86%(3) 3.70% 3.88% 4.11% 4.32%(3) Portfolio turnover rate(4) 8.0%(2) 4.2% 17.7% 32.6% 14.8%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Calculated using average shares outstanding during the period. (6) The amount shown may not correlate with the aggregate gains and losses of portfolio securities due to the timing of subscriptions and redemptions of Fund shares. (7) Amount is less than $0.01. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD INTERMEDIATE MUNICIPAL BOND FUND ------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares March 30, Ended Year ended Year ended Year ended 2001(1) through June 30, 2005 December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.99 $ 11.09 $ 11.02 $ 10.27 $ 10.00 ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.20(5) 0.38(5) 0.40(5) 0.41(5) 0.31(5) Net realized and unrealized gains (losses) on investments (0.06) (0.12) 0.10 0.64 0.17(6) ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.14 0.26 0.50 1.05 0.48 ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.18) (0.36) (0.39) (0.30) (0.20) Distributions from net realized gains -- -- (0.04) (0.00)(7) (0.01) ------------ ------------ ------------ ----------- ---------- Total distributions (0.18) (0.36) (0.43) (0.30) (0.21) ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.95 $ 10.99 $ 11.09 $ 11.02 $ 10.27 ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ----------- ---------- Total return 1.27%(2) 2.40% 4.69% 10.46% 4.74%(2) Supplemental data and ratios: Net assets, end of period $ 2,145,464 $ 4,611,766 $ 756,792 $ 706,207 $ 624,209 Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55%(3) Ratio of net investment income to average net assets 3.61%(3) 3.45% 3.63% 3.86% 4.07%(3) Portfolio turnover rate(4) 8.0%(2) 4.2% 17.7% 32.6% 14.8%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Calculated using average shares outstanding during the period. (6) The amount shown may not correlate with the aggregate gains and losses of portfolio securities due to the timing of subscriptions and redemptions of Fund shares. (7) Amount is less than $0.01. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD CORE PLUS BOND FUND ---------------------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.38 $ 10.45 $ 10.45 $ 10.42 $ 10.45 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.26(6) 0.54 0.56 0.62 0.65 0.14 Net realized and unrealized gains on investments 0.03 0.10 0.36 0.07 0.05 0.45 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.29 0.64 0.92 0.69 0.70 0.59 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.27) (0.53) (0.56) (0.62) (0.66) (0.14) Distributions from net realized gains -- (0.18) (0.36) (0.04) (0.07) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.27) (0.71) (0.92) (0.66) (0.73) (0.14) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.40 $ 10.38 $ 10.45 $ 10.45 $ 10.42 $ 10.45 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 2.80%(2) 6.29% 8.94% 6.90% 6.84% 5.89%(2) Supplemental data and ratios: Net assets, end of period $ 32,748,400 $ 32,495,641 $ 42,709,634 $ 54,221,923 $69,182,002 $40,083,054 Ratio of expenses to average net assets 0.30%(3) 0.30% 0.30% 0.30% 0.30% 0.30%(3) Ratio of net investment income to average net assets 5.06%(3) 4.85% 4.56% 6.03% 6.25% 6.68%(3) Portfolio turnover rate(4) 19.7%(2) 52.5% 103.1% 66.8% 47.0% 11.8%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding during the period. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD CORE PLUS BOND FUND ---------------------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------- ------------- ------------- ------------- -------------------- Per Share Data: Net asset value, beginning of period $ 10.62 $ 10.67 $ 10.65 $ 10.49 $ 10.45 $ 10.00 ------------ ------------ ------------ ------------ ----------- ---------- Income from investment operations: Net investment income 0.25(6) 0.53 0.53(6) 0.60(6) 0.64(6) 0.12 Net realized and unrealized gains on investments 0.02 0.10 0.37 0.07 0.05 0.45 ------------ ------------ ------------ ------------ ----------- ---------- Total from investment operations 0.27 0.63 0.90 0.67 0.69 0.57 ------------ ------------ ------------ ------------ ----------- ---------- Less distributions: Dividends from net investment income (0.25) (0.50) (0.52) (0.47) (0.58) (0.12) Distributions from net realized gains -- (0.18) (0.36) (0.04) (0.07) (0.00)(5) ------------ ------------ ------------ ------------ ----------- ---------- Total distributions (0.25) (0.68) (0.88) (0.51) (0.65) (0.12) ------------ ------------ ------------ ------------ ----------- ---------- Net asset value, end of period $ 10.64 $ 10.62 $ 10.67 $ 10.65 $ 10.49 $ 10.45 ------------ ------------ ------------ ------------ ----------- ---------- ------------ ------------ ------------ ------------ ----------- ---------- Total return 2.61%(2) 6.09% 8.60% 6.58% 6.70% 5.73%(2) Supplemental data and ratios: Net assets, end of period $ 391,515 $ 125,847 $ 124,481 $ 296,026 $ 258,351 $ 13,222 Ratio of expenses to average net assets 0.55%(3) 0.55% 0.55% 0.55% 0.55% 0.55%(3) Ratio of net investment income to average net assets 4.81%(3) 4.60% 4.31% 5.78% 6.00% 6.43%(3) Portfolio turnover rate(4) 19.7%(2) 52.5% 103.1% 66.8% 47.0% 11.8%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Amount is less than $0.01. (6) Calculated using average shares outstanding during the period. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD SHORT-TERM BOND FUND -------------------------------------------- Institutional Institutional Class Shares Class Shares Six Months Ended August 31, 2004(1) June 30, 2005 through (unaudited) December 31, 2004 ---------------- ---------------------- Per Share Data: Net asset value, beginning of period $ 9.93 $ 10.00 ----------- ----------- Income from investment operations: Net investment income 0.17(5) 0.08 Net realized and unrealized gains (losses) on investments (0.07) (0.07) ----------- ----------- Total from investment operations 0.10 0.01 ----------- ----------- Less distributions: Dividends from net investment income (0.14) (0.08) Distributions from net realized gains -- -- ----------- ----------- Total distributions (0.14) (0.08) ----------- ----------- Net asset value, end of period $ 9.89 $ 9.93 ----------- ----------- ----------- ----------- Total return 1.03%(2) 0.10%(2) Supplemental data and ratios: Net assets, end of period $69,922,402 $31,973,000 Ratio of expenses to average net assets(3) 0.30% 0.30% Ratio of net investment income to average net assets(3) 3.45% 2.60% Portfolio turnover rate(4) 11.7%(2) 16.7%(2)
(1) Commencement of operations. (2) Not annualized. (3) Annualized. (4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (5) Calculated using average shares outstanding during the period. See notes to the financial statements BAIRD FUNDS, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) 1. ORGANIZATION Baird Funds, Inc. (the "Corporation") was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end investment management company under the Investment Company Act of 1940, as amended (the "1940 Act"). The accompanying financial statements include the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund (each, a "Fund" and collectively, the "Funds"), five of the eight portfolios comprising the Corporation and each a diversified fund. The Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund commenced operations with the sale of both Institutional and Investor class shares on September 29, 2000. The Baird Intermediate Municipal Bond Fund commenced operations with the sale of both Institutional and Investor class shares on March 30, 2001. The Baird Short-Term Bond Fund commenced operations with the sale of Institutional Class Shares on August 31, 2004. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%. The investment objective of the Baird Intermediate Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers Intermediate Government/Credit Bond Index. The Lehman Brothers Intermediate Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and ten years. The investment objective of the Baird Aggregate Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers Aggregate Bond Index. The Lehman Brothers Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The primary investment objective of the Baird Intermediate Municipal Bond Fund is to provide current income that is substantially exempt from federal income tax. A secondary objective is to provide total return with relatively low volatility of principal. The Fund strives to achieve an annual rate of return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers 10-Year General Obligation Bond Index. The Lehman Brothers 10-Year General Obligation Bond Index is an unmanaged, market value weighted index of bond prices compiled by Lehman Brothers. This index is comprised of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of eight to twelve years. The investment objective of the Baird Core Plus Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers U.S. Universal Bond Index. The Lehman Brothers U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage- backed securities, Eurobonds, 144A securities and emerging market debt with maturities of at least one year. The investment objective of the Baird Short-Term Bond Fund is to seek an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Lehman Brothers 1-3 Year Government/Credit Bond Index. The Lehman Brothers 1-3 Year Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and three years. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. a) Investment Valuation - Each Fund's portfolio securities and other assets for which market quotations are readily available are valued at market value. Common stocks that are listed on a securities exchange are valued at the last quoted sales price. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Price information on listed stocks is taken from the exchange where the security is primarily traded. If such securities were not traded on the valuation date they are valued at the average of the current bid and asked price. Unlisted equity securities for which market quotations are readily available are valued at the latest quoted bid price. Investments in open-end mutual funds are valued at the net asset value. Market quotations for most debt securities are not readily available. As a result, debt securities are stated at fair value as provided by an independent pricing service, which uses valuation methods such as matrix pricing and other analytical pricing models, as well as market transactions and dealer quotations. Other assets and securities for which no quotations are readily available are valued at fair value as determined in good faith by management in accordance with procedures approved by the Board of Directors. In determining fair value, the valuation committee takes into account all relevant factors and available information. Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. b) Unregistered Securities - Four of the Funds own certain investment securities which are unregistered and thus restricted to resale. These securities are valued by the Funds after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer's financial performance. Where future disposition of these securities requires registration under the Securities Act of 1933, the Funds have the right to include these securities in such registration, generally without costs to the Funds. The Funds have no right to require registration of unregistered securities. The value of such securities for the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund was $13,285,745 (6.12% of net assets), $6,845,095 (4.86% of net assets), $2,056,234 (6.20% of net assets) and $968,637 (1.39% of net assets), respectively, at June 30, 2005. Restricted securities may be deemed to be liquid as determined by Robert W. Baird & Co. Incorporated (the "Advisor") based on several factors. c) Foreign Securities - The Funds may invest in U.S. dollar-denominated debt obligations of foreign companies and foreign governments. Investing in securities of foreign companies and foreign governments involves special risks and consideration not typically associated with investing in U.S. companies and the U.S. government. These risks include currency rate fluctuations, political and economic instability and differences in financial reporting standards and less strict regulation of securities markets. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. Occasionally, events that affect these values and exchange rates may occur after the close of the exchange on which such securities are traded. If such events materially affect the value of a Fund's securities, these securities may be valued at their fair value pursuant to procedures adopted by the Board of Directors. d) Federal Income Taxes - The Funds intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders in a manner which results in no tax cost to the Funds. Therefore, no federal income or excise tax provision is recorded. e) Allocation of Income and Expenses - Each Fund in the series is charged for those expenses directly attributable to the portfolio. Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares. Income, expenses and realized and unrealized gains and losses are allocated to the classes based on their respective net assets. Expenses that are not directly attributable to a Fund are allocated among the Funds in the series in proportion to their assets. f) Distributions to Shareholders - Dividends from net investment income are declared and paid monthly. Distributions of net realized capital gains, if any, are declared and paid at least annually. g) Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. h) Other - Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Premiums and discounts on the purchase of securities are amortized/accreted using the effective interest method. Accounting principles generally accepted in the United States of America require that permanent financial reporting and tax differences be reclassified in the capital accounts. i) Guarantees and Indemnifications - In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown and would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds would expect the risk of loss to be remote. 3. CAPITAL SHARE TRANSACTIONS The following table summarizes the capital share transactions of each Fund: BAIRD INTERMEDIATE BOND FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 32,697,337 3,035,917 Shares sold $ 150,590 13,588 Shares issued through Shares issued through reinvestment of dividends 4,099,907 382,235 reinvestment of dividends 49,128 4,453 Shares redeemed (13,506,425) (1,256,011) Shares redeemed (151,429) (13,666) ------------ ---------- ---------- ------- Net Increase $ 23,290,819 2,162,141 Net Increase $ 48,289 4,375 ------------ ---------- ------------ ---------- Shares Outstanding: Shares Outstanding: Beginning of period 17,693,963 Beginning of period 270,605 ---------- ------- End of period 19,856,104 End of period 274,980 ---------- ------- ---------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 65,558,500 6,038,526 Shares sold $1,907,197 170,365 Shares issued through Shares issued through reinvestment of dividends 6,589,217 608,839 reinvestment of dividends 69,932 6,291 Shares redeemed (29,612,681) (2,727,641) Shares redeemed (270,885) (24,345) ------------ ---------- ---------- ------- Net Increase $ 42,535,036 3,919,724 Net Increase $1,706,244 152,311 ------------ ---------- ------------ ---------- Shares Outstanding: Shares Outstanding: Beginning of period 13,774,239 Beginning of period 118,294 ---------- ------- End of period 17,693,963 End of period 270,605 ---------- ------- ---------- -------
BAIRD AGGREGATE BOND FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 24,775,971 2,301,797 Shares sold $ 360,116 33,118 Shares issued through Shares issued through reinvestment of dividends 2,733,888 255,300 reinvestment of dividends 14,810 1,356 Shares redeemed (3,670,512) (342,314) Shares redeemed (192,340) (17,452) ------------ ---------- ---------- ------- Net Increase $ 23,839,347 2,214,783 Net Increase $ 182,586 17,022 ------------ ---------- ------------ ---------- Shares Outstanding: Shares Outstanding: Beginning of period 10,741,629 Beginning of period 64,721 ---------- ------- End of period 12,956,412 End of period 81,743 ---------- ------- ---------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 48,367,650 4,492,828 Shares sold $ 685,253 62,158 Shares issued through Shares issued through reinvestment of dividends 4,549,171 425,224 reinvestment of dividends 14,520 1,326 Shares redeemed (29,182,312) (2,725,437) Shares redeemed (721,961) (64,948) ------------ ---------- ---------- ------- Net Increase $ 23,734,509 2,192,615 Net Decrease $ (22,188) (1,464) ------------ ---------- ------------ ---------- Shares Outstanding: Shares Outstanding: Beginning of period 8,549,014 Beginning of period 66,185 ---------- ------- End of period 10,741,629 End of period 64,721 ---------- ------- ---------- -------
BAIRD INTERMEDIATE MUNICIPAL BOND FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 11,894,135 1,107,409 Shares sold $ 917,350 83,576 Shares issued through Shares issued through reinvestment of dividends 633,349 59,036 reinvestment of dividends 28,538 2,614 Shares redeemed (5,135,641) (481,117) Shares redeemed (3,372,880) (309,674) ------------ ---------- ----------- ------- Net Increase $ 7,391,843 685,328 Net Decrease $(2,426,992) (223,484) ------------ ----------- ------------ ----------- Shares Outstanding: Shares Outstanding: Beginning of period 3,413,492 Beginning of period 419,482 ---------- ------- End of period 4,098,820 End of period 195,998 ---------- ------- ---------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 11,175,557 1,016,975 Shares sold $ 5,048,883 456,491 Shares issued through Shares issued through reinvestment of dividends 1,044,261 96,858 reinvestment of dividends 77,154 7,040 Shares redeemed (5,105,189) (471,111) Shares redeemed (1,232,642) (112,263) ------------ ---------- ----------- ------- Net Increase $ 7,114,629 642,722 Net Increase $ 3,893,395 351,268 ------------ ----------- ------------ ----------- Shares Outstanding: Shares Outstanding: Beginning of period 2,770,770 Beginning of period 68,214 ---------- ------- End of period 3,413,492 End of period 419,482 ---------- ------- ---------- -------
BAIRD CORE PLUS BOND FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 2,705,996 260,469 Shares sold $ 272,900 25,685 Shares issued through Shares issued through reinvestment of dividends 439,543 42,575 reinvestment of dividends 2,415 228 Shares redeemed (2,938,434) (283,805) Shares redeemed (10,375) (978) ------------ ---------- ----------- ------- Net Increase $ 207,105 19,239 Net Increase $ 264,940 24,935 ------------ ----------- ------------ ----------- Shares Outstanding: Shares Outstanding: Beginning of period 3,130,712 Beginning of period 11,848 ---------- ------- End of period 3,149,951 End of period 36,783 ---------- ------- ---------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 2,974,318 282,586 Shares sold $ 13,500 1,261 Shares issued through Shares issued through reinvestment of dividends 1,177,007 113,096 reinvestment of dividends 5,106 480 Shares redeemed (14,326,134) (1,353,665) Shares redeemed (16,231) (1,555) ------------ ---------- ----------- ------- Net Decrease $(10,174,809) (957,983) Net Increase $ 2,375 186 ------------ ----------- ------------ ----------- Shares Outstanding: Shares Outstanding: Beginning of period 4,088,695 Beginning of period 11,662 ---------- ------- End of period 3,130,712 End of period 11,848 ---------- ------- ---------- -------
BAIRD SHORT-TERM BOND FUND August 31, 2004(1) Six Months Ended through June 30, 2005 December 31, 2004 -------------------------- -------------------------- INSTITUTIONAL CLASS SHARES $ Shares INSTITUTIONAL CLASS SHARES $ Shares ------------ ---------- ---------- ------- Shares sold $ 42,529,994 4,304,043 Shares sold $33,919,057 3,395,735 Shares issued through Shares issued through reinvestment of dividends 627,010 63,489 reinvestment of dividends 158,249 15,909 Shares redeemed (5,102,091) (516,020) Shares redeemed (1,899,021) (191,235) ------------ ---------- ----------- --------- Net Increase $ 38,054,913 3,851,512 Net Increase $32,178,285 3,220,409 ------------ ----------- ------------ ----------- Shares Outstanding: Shares Outstanding: Beginning of period 3,220,409 Beginning of period -- ---------- --------- End of period 7,071,921 End of period 3,220,409 ---------- --------- ---------- ---------
(1) Commencement of operations. 4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION During the period ended June 30, purchases and sales of investment securities (excluding short-term investments) were as follows: Baird Baird Baird Intermediate Baird Baird Intermediate Aggregate Municipal Core Plus Short-Term Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund ------------ --------- ------------ --------- ---------- Purchases: U.S. Government $28,421,365 $24,933,116 $ -- $3,137,664 $12,085,730 Other $45,705,292 $31,002,212 $9,609,588 $4,008,604 $29,761,145 Sales: U.S. Government $43,718,411 $21,601,062 $ -- $2,341,122 $ 4,205,055 Other $14,286,739 $11,001,983 $3,421,845 $3,657,427 $ 857,920
At December 31, 2004, gross unrealized appreciation and depreciation of investments and distributable ordinary income and long-term capital gains for federal tax purposes were as follows: INTERMEDIATE INTERMEDIATE AGGREGATE MUNICIPAL CORE PLUS SHORT-TERM BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND ------------ --------- ------------ --------- ---------- Cost of Investments $195,269,862 $112,589,326 $41,732,095 $31,951,080 $31,788,368 ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- Gross unrealized appreciation $ 4,213,676 $ 3,005,210 $ 1,088,345 $ 1,036,941 $ 2,448 Gross unrealized depreciation (1,742,121) (717,587) (199,844) (380,105) (211,093) ------------ ------------ ----------- ----------- ----------- Net unrealized appreciation/depreciation $ 2,471,555 $ 2,287,623 $ 888,501 $ 656,836 $ (208,645) ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- Undistributed ordinary income $ 223,829 $ 134,477 $ 34,676 $ 44,709 $ 12,668 Undistributed long-term capital gain -- 42,323 -- 21,657 -- ------------ ------------ ----------- ----------- ----------- Total distributable earnings $ 223,829 $ 176,800 $ 34,676 $ 66,366 $ 12,668 ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- Other accumulated gains (losses) $ (651,749) $ -- $ (25,373) $ -- $ (9,308) ------------ ------------ ----------- ----------- ----------- Total accumulated earnings (losses) $ 2,043,635 $ 2,464,423 $ 897,804 $ 723,202 $ (205,285) ------------ ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- -----------
Undistributed income or net realized gains for financial statement purposes may differ from federal income tax purposes due to differences in the recognition and characterization of income, expense and capital gain items for financial statement and tax purposes. The tax components of dividends paid during the periods ended June 30, 2005 and December 31, 2004 were: 2005 2004 -------------------------------- --------------------------------- ORDINARY LONG-TERM ORDINARY LONG-TERM INCOME CAPITAL GAINS INCOME CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS ------------- ------------- ------------- ------------- Baird Intermediate Bond Fund $4,566,480 $ -- $7,212,508 $ -- Baird Aggregate Bond Fund $3,029,111 $ -- $5,007,328 $138,814 Baird Intermediate Municipal Bond Fund $ -- $ -- $ 8,850 $ -- Baird Core Plus Bond Fund $ 825,501 $ -- $1,816,264 $454,258 Baird Short-Term Bond Fund $ 715,553 $ -- $ 231,775 $ --
For the periods ended June 30, 2005 and December 31, 2004, distributions of $809,347 and $1,314,020, respectively, from the Baird Intermediate Municipal Bond Fund were tax-exempt. Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2004, the Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund and Baird Short-Term Bond Fund elected to defer capital losses occurring between November 1, 2004 and December 31, 2004 in the amount of $166,180, $18,747 and $1,158, respectively. At December 31, 2004, the Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, and Baird Short-Term Bond Fund had accumulated net realized capital loss carryovers of $485,569, $6,626 and $8,150, respectively, expiring in 2012. To the extent these Funds realize future net capital gains, those gains will be offset by any unused capital loss carryforward. 5. INVESTMENT ADVISORY AND OTHER AGREEMENTS The Funds have entered into an Investment Advisory Agreement with Robert W. Baird & Co. Incorporated (the "Advisor"). Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.25% for the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund as applied to the respective Fund's average daily net assets. Certain officers of the Advisor are also officers of the Funds. The Funds have entered into an Administration Agreement with the Advisor. Under the Administration Agreement, the Advisor assumes and pays all expenses of the applicable Fund other than the investment advisory fees and fees under the 12b-1 plan. Pursuant to the Administration Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.05% for the Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund as applied to the respective Fund's average daily net assets. U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds. Robert W. Baird & Co. Incorporated (the "Distributor") is the sole distributor of the Funds pursuant to a distribution agreement. 6. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN The Funds have adopted a distribution and shareholder service plan (the "Plan") pursuant to Rule 12b-1 of the 1940 Act. The Plan allows the Funds to compensate the Distributor for a portion of the costs incurred in distributing the Funds' Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average daily net assets of the Funds' Investor Class Shares. The Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund and Baird Core Plus Bond Fund incurred $3,692, $1,145, $4,082 and $180, respectively, in fees pursuant to the Plan during the six months ended June 30, 2005. PROXY VOTING A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds' website at http://www.bairdfunds.com; and by accessing the SEC's website at http://www.sec.gov. Each Fund's proxy voting record, if applicable, is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds' website at http://www.bairdfunds.com; and by accessing the SEC's website at http://www.sec.gov. The Funds generally do not vote proxies because the securities held in their portfolios, consisting of bonds and other fixed-income securities, are not entitled to vote. PORTFOLIO HOLDINGS DISCLOSURE The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. BAIRD FUNDS, INC. c/o U.S. Bancorp Fund Services, LLC P.O. Box 701 Milwaukee, Wisconsin 53201-0701 1-866-44BAIRD BOARD OF DIRECTORS G. Frederick Kasten, Jr. (Chairman) John W. Feldt George C. Kaiser Frederick P. Stratton, Jr. INVESTMENT ADVISOR Robert W. Baird & Co. Incorporated 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND -DISBURSING AGENT U.S. Bancorp Fund Services, LLC P.O. Box 701 615 East Michigan Street Milwaukee, WI 53202 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 LEGAL COUNSEL Godfrey & Kahn, S.C. 780 North Water Street Milwaukee, Wisconsin 53202 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 100 East Wisconsin Avenue, Suite 1500 Milwaukee, Wisconsin 53202 DISTRIBUTOR Robert W. Baird & Co. Incorporated 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 (BAIRD FUNDS LOGO) SEMI-ANNUAL REPORT June 30, 2005 Baird LargeCap Fund Baird MidCap Fund Baird SmallCap Fund TABLE OF CONTENTS PAGE BAIRD LARGECAP FUND 1 BAIRD MIDCAP FUND 5 BAIRD SMALLCAP FUND 9 ADDITIONAL INFORMATION ON FUND EXPENSES 13 STATEMENTS OF ASSETS AND LIABILITIES 15 STATEMENTS OF OPERATIONS 16 STATEMENTS OF CHANGES IN NET ASSETS 17 FINANCIAL HIGHLIGHTS 20 NOTES TO THE FINANCIAL STATEMENTS 26 This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus. BAIRD LARGECAP FUND A June 30, 2005 summary of the Fund's top 10 holdings and equity sector analysis compared to the Standard & Poor's 500 Index (the "S&P 500 Index") and the Russell 1000 Growth Index is shown below. TOP 10 HOLDINGS* General Electric Company 3.6% Sysco Corporation 3.6% Best Buy Company, Inc. 3.5% Medtronic, Inc. 3.4% Teva Pharmaceutical Industries Ltd. 3.3% Target Corporation 3.3% Genentech, Inc. 3.2% Exxon Mobil Corporation 3.2% Illinois Tool Works, Inc. 3.0% Emerson Electric Company 3.0% NET ASSETS: $66,252,321 PORTFOLIO TURNOVER RATIO: 16.8% NUMBER OF EQUITY HOLDINGS: 39 PORTFOLIO EXPENSE RATIO:*** INSTITUTIONAL CLASS: 0.75% INVESTOR CLASS: 1.00%**** EQUITY SECTOR ANALYSIS** LargeCap Fund S&P 500 Russell 1000 Growth ------------- ------- ------------------- Consumer Discretionary 18.6% 11.4% 15.4% Consumer Staples 14.2% 10.1% 12.5% Energy 6.3% 8.8% 3.0% Financials 6.4% 20.3% 6.2% Health Care 22.5% 13.4% 19.8% Industrials 12.0% 11.2% 14.0% Information Technology 17.8% 15.1% 26.1% Materials 2.4% 2.9% 2.0% Telecommunication Services 0.0% 3.2% 0.6% Utilities 0.0% 3.5% 0.6% * 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 in parentheses relate to the Fund's total equity investments as of June 30, 2005. *** The Advisor has contractually agreed to limit the Fund's total annual fund operating expenses to 0.75% of average daily net assets for the Institutional Class shares and 1.00% of average daily net assets for the Investor Class shares, at least through December 31, 2005. **** Includes 0.25% 12b-1 fee. BAIRD LARGECAP FUND ANNUALIZED TOTAL RETURNS For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ----------------------- Baird LargeCap Fund - Institutional Class Shares 2.73% -4.21% Baird LargeCap Fund - Investor Class Shares 2.38% -4.50% S&P 500 Index(2) 6.32% -2.30% Russell 1000 Growth Index(3) 1.68% -9.83%
(1) For the period September 29, 2000 (commencement of operations) to June 30, 2005. (2) The S&P 500 Index is an unmanaged, market-value weighted index of 500 stocks chosen by Standard & Poor's on the basis of market size, liquidity and industry group representation. The S&P 500 Index is one of the most widely used benchmarks of U.S. equity performance. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. (3) The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth rates. The Russell 3000 Index is comprised of the 3,000 largest U.S. domiciled publicly-traded common stocks by market capitalization representing approximately 98% of the U.S. publicly traded equity market. These indices do not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD LARGECAP FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Shares Value ------ ----- COMMON STOCKS - 97.4% AIR FREIGHT & LOGISTICS - 2.1% 20,457 United Parcel Service, Inc. - Class B $ 1,414,806 ----------- BEVERAGES - 2.5% 31,100 PepsiCo, Inc. 1,677,223 BIOTECHNOLOGY - 6.1% 31,464 Amgen, Inc.* 1,902,314 26,700 Genentech, Inc.* 2,143,476 ----------- 4,045,790 ----------- CHEMICALS - 2.3% 32,500 Praxair, Inc. 1,514,500 ----------- COMMERCIAL BANKS - 2.5% 26,802 Wells Fargo & Company 1,650,467 ----------- COMMUNICATIONS EQUIPMENT - 2.1% 71,400 Cisco Systems, Inc.* 1,364,454 ----------- COMPUTERS & PERIPHERALS - 3.9% 44,200 Dell, Inc.* 1,746,342 11,700 International Business Machines Corporation 868,140 ----------- 2,614,482 ----------- DIVERSIFIED FINANCIAL SERVICES - 1.6% 22,196 Citigroup, Inc. 1,026,121 ----------- ELECTRICAL EQUIPMENT - 3.0% 31,600 Emerson Electric Company 1,979,108 ----------- FOOD & STAPLES RETAILING - 8.7% 65,000 Sysco Corporation 2,352,350 34,400 Walgreen Company 1,582,056 38,250 Wal-Mart Stores, Inc. 1,843,650 ----------- 5,778,056 ----------- HEALTH CARE EQUIPMENT & SUPPLIES - 6.3% 43,700 Medtronic, Inc. 2,263,223 24,800 Zimmer Holdings, Inc.* 1,889,016 ----------- 4,152,239 ----------- HEALTH CARE PROVIDERS & SERVICES - 2.1% 31,800 Caremark Rx, Inc.* 1,415,736 ----------- HOTELS RESTAURANTS & LEISURE - 2.0% 26,200 Starbucks Corporation* 1,353,492 ----------- HOUSEHOLD PRODUCTS - 2.5% 31,800 Procter & Gamble Company 1,677,450 ----------- INDUSTRIAL CONGLOMERATES - 3.6% 68,000 General Electric Company 2,356,200 ----------- INSURANCE - 2.2% 34,000 AFLAC, Incorporated 1,471,520 ----------- INTERNET & CATALOG RETAIL - 2.1% 41,200 eBay, Inc.* 1,360,012 ----------- IT SERVICES - 2.1% 32,920 Fiserv, Inc.* 1,413,914 ----------- MACHINERY - 3.0% 25,100 Illinois Tool Works, Inc. 1,999,968 ----------- MEDIA - 2.2% 33,400 The McGraw-Hill Companies, Inc. 1,477,950 ----------- MULTILINE RETAIL - 3.3% 39,700 Target Corporation 2,160,077 ----------- OFFICE ELECTRONICS - 1.5% 23,000 Zebra Technologies Corporation - Class A* 1,007,170 ----------- OIL & GAS - 6.1% 30,000 Apache Corporation 1,938,000 36,400 Exxon Mobil Corporation 2,091,908 ----------- 4,029,908 ----------- PHARMACEUTICALS - 7.4% 37,500 Abbott Laboratories 1,837,875 13,000 Johnson & Johnson 845,000 70,500 Teva Pharmaceutical Industries Ltd.- ADR F 2,195,370 ----------- 4,878,245 ----------- SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.5% 46,968 Intel Corporation 1,223,986 28,000 Maxim Integrated Products, Inc. 1,069,880 ----------- 2,293,866 ----------- SOFTWARE - 4.2% 17,100 Electronic Arts, Inc.* 968,031 73,000 Microsoft Corp. 1,813,320 ----------- 2,781,351 ----------- SPECIALTY RETAIL - 8.5% 33,350 Best Buy Co, Inc. 2,286,143 41,856 Home Depot, Inc. 1,628,198 80,250 Staples, Inc. 1,710,930 ----------- 5,625,271 ----------- Total Common Stocks (Cost $56,915,842) 64,519,376 ----------- SHORT TERM INVESTMENTS - 3.6% INVESTMENT COMPANIES - 3.3% 2,177,318 SEI Daily Income Trust Government Fund - Class B 2,177,318 ----------- Principal Amount - --------- VARIABLE RATE DEMAND NOTES# - 0.3% $243,637 American Family Financial Services, Inc. 2.95% 243,637 ----------- Total Short-Term Investments (Cost $2,420,955) 2,420,955 ----------- Total Investments (Cost $59,336,797) 101.0% 66,940,331 ----------- Liabilities in Excess of Other Assets (1.0)% (688,010) ----------- TOTAL NET ASSETS 100.0% $66,252,321 ----------- ----------- ADR - American Depository Receipt * Non Income Producing F Foreign security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of June 30, 2005. See notes to the financial statements BAIRD MIDCAP FUND A June 30, 2005 summary of the Fund's top 10 holdings and equity sector analysis compared to the Standard & Poor's MidCap 400 Index (the "S&P MidCap 400 Index") and the Russell Midcap Growth Index is shown below. TOP 10 HOLDINGS* Microchip Technology Incorporated 3.4% ResMed, Inc. 3.3% Wintrust Financial Corporation 3.2% Pentair, Inc. 3.2% Pharmaceutical Product Development, Inc. 3.1% CDW Corporation 3.1% Cooper Cameron Corporation 3.0% Medicis Pharmaceutical Corporation - Class A 2.8% Zebra Technologies Corporation - Class A 2.8% Applebees International, Inc. 2.8% NET ASSETS: $103,933,092 PORTFOLIO TURNOVER RATIO: 34.7% NUMBER OF EQUITY HOLDINGS: 41 PORTFOLIO EXPENSE RATIO:*** INSTITUTIONAL CLASS: 0.85% INVESTOR CLASS: 1.10%**** EQUITY SECTOR ANALYSIS** MidCap Fund S&P 400 Russell Midcap Growth ----------- ------- --------------------- Consumer Discretionary 22.6% 19.6% 25.0% Consumer Staples 2.6% 4.6% 2.7% Energy 7.0% 8.6% 8.5% Financials 15.2% 17.7% 8.7% Health Care 18.1% 12.0% 16.8% Industrials 15.2% 11.3% 12.3% Information Technology 19.3% 13.9% 21.1% Materials 0.0% 4.2% 2.5% Telecommunication Services 0.0% 0.5% 1.5% Utilities 0.0% 7.6% 1.0% * 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 in parentheses relate to the Fund's total equity investments as of June 30, 2005. *** The Advisor has contractually agreed to limit the Fund's total annual fund operating expenses to 0.85% of average daily net assets for the Institutional Class shares and 1.10% of average daily net assets for the Investor Class shares, at least through December 31, 2005. **** Includes 0.25% 12b-1 fee. BAIRD MIDCAP FUND ANNUALIZED TOTAL RETURNS For the Period Ended June 30, 2005 ONE YEAR SINCE INCEPTION(1) - ---------------------------------- -------- ----------------------- Baird MidCap Fund - Institutional Class Shares 2.78% 1.45% Baird MidCap Fund - Investor Class Shares 2.61% 1.24% S&P MidCap 400 Index(2) 14.03% 7.21% Russell Midcap Growth Index(3) 10.86% -1.22%
(1) For the period December 29, 2000 (commencement of operations) to June 30, 2005. (2) The S&P MidCap 400 Index is an unmanaged, market-value weighted index of 400 mid-cap stocks chosen by Standard & Poor's on the basis of market size, liquidity and industry group representation. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. (3) The Russell Midcap Index consists of the 800 smallest companies in the Russell 1000 Index, which represent approximately 24% of the total market capitalization of the Russell 1000 Index. The Russell Midcap Growth Index measures the performance of those companies in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth rates. These indices do not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD MIDCAP FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Shares Value ------ ----- COMMON STOCKS - 94.6% AIR FREIGHT & LOGISTICS - 2.3% 40,495 C.H. Robinson Worldwide, Inc. $ 2,356,809 ------------ AUTO COMPONENTS - 2.4% 57,055 Autoliv, Inc. 2,499,009 ------------ CAPITAL MARKETS - 4.1% 82,728 Eaton Vance Corporation 1,978,027 21,645 Legg Mason, Inc. 2,253,461 ------------ 4,231,488 ------------ COMMERCIAL BANKS - 10.3% 99,832 Amegy Bancorporation, Inc. 2,234,240 74,485 East West Bancorp, Inc. 2,501,951 101,669 TCF Financial Corporation 2,631,194 64,094 Wintrust Financial Corporation 3,355,321 ------------ 10,722,706 ------------ COMMERCIAL SERVICES & SUPPLIES - 1.7% 34,641 Stericycle, Inc.* 1,743,135 ------------ ELECTRICAL EQUIPMENT - 4.9% 51,561 Rockwell Automation, Inc. 2,511,536 35,672 Roper Industries, Inc. 2,545,911 ------------ 5,057,447 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.8% 56,582 CDW Corporation 3,230,266 184,557 Symbol Technologies, Inc. 1,821,578 ------------ 5,051,844 ------------ ENERGY EQUIPMENT & SERVICES - 5.5% 50,665 Cooper Cameron Corporation* 3,143,763 41,417 Smith International, Inc. 2,638,263 ------------ 5,782,026 ------------ FOOD & STAPLES RETAILING - 2.5% 84,740 United Natural Foods, Inc.* 2,573,554 ------------ HEALTH CARE EQUIPMENT & SUPPLIES - 9.3% 127,012 Cytyc Corporation* 2,801,885 42,621 Gen-Probe, Incorporated* 1,544,159 52,304 ResMed, Inc.* 3,451,541 50,593 Varian Medical Systems, Inc.* 1,888,636 ------------ 9,686,221 ------------ HEALTH CARE PROVIDERS & SERVICES - 5.0% 42,615 Patterson Companies, Inc.* 1,921,084 69,095 Pharmaceutical Product Development, Inc.* 3,237,792 ------------ 5,158,876 ------------ HOTELS RESTAURANTS & LEISURE - 6.8% 107,693 Applebees International, Inc. 2,852,787 57,430 The Cheesecake Factory Incorporated* 1,994,544 37,114 PF Chang's China Bistro, Inc.* 2,188,984 ------------ 7,036,315 ------------ HOUSEHOLD DURABLES - 1.7% 22,115 Harman International Industries, Incorporated 1,799,276 ------------ IT SERVICES - 5.8% 69,990 Alliance Data Systems Corporation* 2,838,794 21,933 Global Payments, Inc. 1,487,058 55,242 Iron Mountain, Incorporated* 1,713,607 ------------ 6,039,459 ------------ MACHINERY - 3.2% 76,915 Pentair, Inc. 3,292,731 ------------ MEDIA - 1.8% 37,429 Pixar* 1,873,322 ------------ OFFICE ELECTRONICS - 2.8% 65,963 Zebra Technologies Corporation - Class A* 2,888,520 ------------ OIL & GAS - 1.0% 31,194 XTO Energy, Inc. 1,060,284 ------------ PHARMACEUTICALS - 2.8% 91,484 Medicis Pharmaceutical Corporation - Class A 2,902,787 ------------ SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.4% 119,600 Microchip Technology Incorporated 3,542,552 ------------ SOFTWARE - 1.4% 90,975 Activision, Inc.* 1,502,907 ------------ SPECIALTY RETAIL - 8.7% 58,053 Dick's Sporting Goods, Inc.* 2,240,265 61,355 PETCO Animal Supplies, Inc.* 1,798,929 49,190 Tractor Supply Company* 2,415,229 64,635 Williams-Sonoma, Inc.* 2,557,607 ------------ 9,012,030 ------------ TRADING COMPANIES & DISTRIBUTORS - 2.4% 41,217 Fastenal Company 2,524,953 ------------ Total Common Stocks (Cost $89,635,104) 98,338,251 ------------ SHORT TERM INVESTMENTS - 5.3% INVESTMENT COMPANIES - 4.5% 4,668,302 SEI Daily Income Trust Government Fund - Class B 4,668,302 ------------ Principal Amount - --------- VARIABLE RATE DEMAND NOTES# - 0.8% $606,944 American Family Financial Services, Inc., 2.95% 606,944 186,907 Wisconsin Corporate Central Credit Union, 3.00% 186,907 ------------ 793,851 ------------ Total Short-Term Investments (Cost $5,462,153) 5,462,153 ------------ Total Investments (Cost $95,097,257) 99.9% 103,800,404 ------------ Other Assets in Excess of Liabilities 0.1% 132,688 ------------ TOTAL NET ASSETS 100.0% $103,933,092 ------------ ------------ * Non Income Producing # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of June 30, 2005. See notes to the financial statements BAIRD SMALLCAP FUND A June 30, 2005 summary of the Fund's top 10 holdings and equity sector analysis compared to the Standard & Poor's Small Cap 600 Index (the "S&P 600 Index") and the Russell 2000 Growth Index is shown below. TOP 10 HOLDINGS* Amegy Bancorporation, Inc. 3.2% Gulfmark Offshore, Inc. 3.2% United Surgical Partners International, Inc. 3.1% Insight Enterprises, Inc. 3.1% Wintrust Financial Corporation 3.1% Providence Service Corporation 3.1% United Natural Foods, Inc. 3.0% SRA International Inc. - Class A 2.9% Fred's, Inc. 2.9% AC Moore Arts & Crafts, Inc. 2.8% NET ASSETS: $28,174,404 PORTFOLIO TURNOVER RATIO: 29.1% NUMBER OF EQUITY HOLDINGS: 41 PORTFOLIO EXPENSE RATIO:*** INSTITUTIONAL CLASS: 0.95% INVESTOR CLASS: 1.20%**** EQUITY SECTOR ANALYSIS** SmallCap Fund S&P 600 Russell 2000 Growth ------------- ------- ------------------- Consumer Discretionary 21.7% 18.0% 16.5% Consumer Staples 3.0% 3.8% 2.5% Energy 6.0% 7.2% 5.8% Financials 10.9% 15.3% 10.4% Health Care 20.7% 13.0% 21.0% Industrials 15.7% 17.6% 14.4% Information Technology 22.0% 14.8% 24.8% Materials 0.0% 5.4% 3.5% Telecommunication Services 0.0% 0.3% 0.8% Utilities 0.0% 4.6% 0.3% * 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 in parentheses relate to the Fund's total equity investments as of June 30, 2005. *** The Advisor has contractually agreed to limit the Fund's total annual fund operating expenses to 0.95% of average daily net assets for the Institutional Class shares and 1.20% of average daily net assets for the Investor Class shares, at least through December 31, 2005. **** Includes 0.25% 12b-1 fee. BAIRD SMALLCAP FUND ANNUALIZED TOTAL RETURNS ONE YEAR AND For the Period Ended June 30, 2005 SINCE INCEPTION(1) - ---------------------------------- ----------------------- Baird SmallCap Fund - Institutional Class Shares 8.10% Baird SmallCap Fund - Investor Class Shares 7.80% S&P Small Cap 600 Index(2) 13.45% Russell 2000 Growth Index(3) 4.29% (1) For the period June 30, 2004 (commencement of operations) through June 30, 2005. (2) The Standard & Poor's Small Cap 600 Index is an unmanaged, market- value weighted index of 600 small-capitalization common stocks chosen by Standard & Poor's on the basis of market size, liquidity and industry characteristics. The Index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. (3) The Russell 2000 Index consists of the 2,000 smallest U.S. domiciled publicly-traded common stocks that are included in the Russell 3000 Index. These common stocks represent approximately 8% of the U.S. Equity market. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book and higher forecasted growth rates. These indices do not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. THE FUND'S INVESTMENT RESULTS REPRESENT AVERAGE ANNUAL TOTAL RETURNS. THE RETURNS REFLECT REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. THE RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. BAIRD SMALLCAP FUND SCHEDULE OF INVESTMENTS JUNE 30, 2005 (UNAUDITED) Shares Value ------ ----- COMMON STOCKS - 96.7% AIRLINES - 2.1% 31,973 SkyWest, Inc. $ 581,269 ----------- COMMERCIAL BANKS - 10.6% 40,507 Amegy Bancorporation, Inc. 906,547 28,458 Boston Private Financial Holdings, Inc. 717,141 14,683 East West Bancorp, Inc. 493,202 16,432 Wintrust Financial Corporation 860,215 ----------- 2,977,105 ----------- COMMERCIAL SERVICES & SUPPLIES - 6.7% 24,084 Brady Corporation - Class A 746,604 13,357 G & K Services, Inc. 503,960 31,971 Marlin Business Services, Inc.* 642,617 ----------- 1,893,181 ----------- COMMUNICATIONS EQUIPMENT - 2.5% 116,075 Westell Technologies, Inc. - Class A* 694,129 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.9% 45,777 Plexus Corporation* 651,407 17,289 ScanSource, Inc.* 742,389 ----------- 1,393,796 ----------- ENERGY EQUIPMENT & SERVICES - 5.8% 32,849 GulfMark Offshore, Inc.* 897,106 19,036 Oceaneering International, Inc.* 735,742 ----------- 1,632,848 ----------- FOOD & STAPLES RETAILING - 2.9% 27,149 United Natural Foods, Inc.* 824,515 ----------- HEALTH CARE EQUIPMENT & SUPPLIES - 4.6% 25,612 Molecular Devices Corporation* 553,987 27,364 Wright Medical Group, Inc.* 730,619 ----------- 1,284,606 ----------- HEALTH CARE PROVIDERS & SERVICES - 11.2% 18,601 Computer Programs & Systems, Inc. 693,259 36,135 PAREXEL International Corporation* 717,280 34,596 Providence Service Corporation* 859,018 16,872 United Surgical Partners International, Inc.* 878,694 ----------- 3,148,251 ----------- HOTELS RESTAURANTS & LEISURE - 6.5% 17,945 Buffalo Wild Wings, Inc.* 559,884 12,710 PF Chang's China Bistro, Inc.* 749,636 8,327 Red Robin Gourmet Burgers Inc.* 516,107 ----------- 1,825,627 ----------- INTERNET & CATALOG RETAIL - 3.1% 42,925 Insight Enterprises, Inc.* 866,227 ----------- IT SERVICES - 6.9% 39,865 Covansys Corporation* 512,265 30,659 Open Solutions Inc.* 622,685 23,642 SRA International, Inc. - Class A* 820,850 ----------- 1,955,800 ----------- MACHINERY - 3.8% 13,581 Bucyrus International, Inc. - Class A 515,806 16,574 Nordson Corporation 568,157 ----------- 1,083,963 ----------- MULTILINE RETAIL - 2.9% 49,275 Fred's, Inc. 816,980 ----------- PHARMACEUTICALS - 4.3% 37,672 Noven Pharmaceuticals, Inc.* 658,507 31,099 Salix Pharmaceuticals, Ltd.* 549,208 ----------- 1,207,715 ----------- SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT - 3.3% 14,024 Varian Semiconductor Equipment Associates, Inc.* 518,888 30,659 Zoran Corporation* 407,458 ----------- 926,346 ----------- SOFTWARE - 3.6% 15,229 Kronos Incorporated* 615,099 14,024 THQ Inc.* 410,483 ----------- 1,025,582 ----------- SPECIALTY RETAIL - 8.5% 24,522 AC Moore Arts & Crafts, Inc.* 775,140 36,795 Gander Mountain Company* 419,463 14,705 Hibbett Sporting Goods, Inc.* 556,437 12,928 Tractor Supply Company* 634,765 ----------- 2,385,805 ----------- TRADING COMPANIES & DISTRIBUTORS - 2.5% 16,652 Watsco, Inc. 709,375 ----------- Total Common Stocks (Cost $24,945,203) 27,233,120 ----------- SHORT TERM INVESTMENTS - 2.4% MONEY MARKET FUNDS - 2.0% 561,509 SEI Daily Income Trust Government Fund - Class B 561,509 ----------- Principal Amount - --------- VARIABLE RATE DEMAND NOTES# - 0.4% $70,000 American Family Financial Services, Inc., 2.95% 70,000 60,000 Wisconsin Corporate Central Credit Union, 3.00% 60,000 ----------- 130,000 ----------- Total Short Term Investments (Cost $691,509) 691,509 ----------- Total Investments (Cost $25,636,712) 99.1% 27,924,629 ----------- Other Assets in Excess of Liabilities 0.9% 249,775 ----------- TOTAL NET ASSETS 100.0% $28,174,404 ----------- ----------- * Non Income Producing # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of June 30, 2005. See notes to the financial statements BAIRD FUNDS, INC. ADDITIONAL INFORMATION ON FUND EXPENSES JUNE 30, 2005 (UNAUDITED) EXAMPLE As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; interest expense and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (1/1/05 - 6/30/05). ACTUAL EXPENSES The fourth and fifth columns of the table below provide information about account values based on actual returns and actual expenses. Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund's transfer agent. If you request that a redemption be made by wire transfer, currently the Fund's transfer agent charges a $15.00 fee. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fifth column entitled "Expenses Paid During Period'' to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The sixth and seventh columns of the table below provide information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the seventh column of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher. ACTUAL VS. HYPOTHETICAL RETURNS For the Six Months Ended June 30, 2005 HYPOTHETICAL (5% RETURN ACTUAL BEFORE EXPENSES) ------------------------- -------------------------- FUND'S BEGINNING ENDING EXPENSES ENDING EXPENSES ANNUALIZED ACCOUNT ACCOUNT PAID ACCOUNT PAID EXPENSE VALUE VALUE DURING VALUE DURING RATIO(1) 1/1/05 6/30/05 PERIOD(1) 6/30/05 PERIOD(1) ------------- --------- ------- -------------- ------- -------------- BAIRD LARGECAP FUND Institutional Class 0.75% $1,000.00 $988.90 $3.70 $1,021.08 $3.76 Investor Class 1.00% $1,000.00 $986.40 $4.93 $1,019.84 $5.01 BAIRD MIDCAP FUND Institutional Class 0.85% $1,000.00 $976.20 $4.16 $1,020.58 $4.26 Investor Class 1.10% $1,000.00 $975.00 $5.39 $1,019.34 $5.51 BAIRD SMALLCAP FUND Institutional Class 0.95% $1,000.00 $997.20 $4.70 $1,020.08 $4.76 Investor Class 1.20% $1,000.00 $995.40 $5.94 $1,018.84 $6.01
(1) Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181 days and divided by 365 to reflect the one-half year period. BAIRD FUNDS, INC. STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED) BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP FUND FUND FUND -------------- ------------ -------------- ASSETS: Investments, at value (cost $59,336,797; $66,940,331 $103,800,403 $27,924,629 $95,097,257; and $25,636,712, respectively) Dividends receivable 39,613 20,880 959 Interest receivable 5,585 7,317 2,191 Receivable for fund shares sold -- 139,941 263,299 Other assets 34,289 48,772 27,414 ----------- ------------ ----------- Total assets 67,019,818 104,017,313 28,218,492 ----------- ------------ ----------- LIABILITIES: Payable to Advisor and Distributor 29,915 48,263 18,315 Payable for securities purchased 638,632 -- -- Payable for Fund shares purchased 65,205 -- -- Accrued expenses and other liabilities 33,745 35,958 25,773 ----------- ------------ ----------- Total liabilities 767,497 84,221 44,088 ----------- ------------ ----------- NET ASSETS $66,252,321 $103,933,092 $28,174,404 ----------- ------------ ----------- ----------- ------------ ----------- NET ASSETS CONSIST OF: Capital stock $68,800,912 $ 94,726,413 $26,352,548 Accumulated undistributed net investment income 176,667 -- -- Accumulated net realized gain (loss) on investments sold (10,328,792) 503,533 (466,061) Net unrealized appreciation on investments 7,603,534 8,703,146 2,287,917 ----------- ------------ ----------- NET ASSETS $66,252,321 $103,933,092 $28,174,404 ----------- ------------ ----------- ----------- ------------ ----------- INSTITUTIONAL CLASS SHARES Net Assets $63,774,217 $ 99,655,073 $27,945,017 Shares outstanding ($0.01 par value, unlimited shares authorized) 7,933,111 9,355,523 2,585,408 Net asset value, offering and redemption price per share $ 8.04 $ 10.65 $ 10.81 ----------- ------------ ----------- ----------- ------------ ----------- INVESTOR CLASS SHARES Net Assets $ 2,478,104 $ 4,278,019 $ 229,387 Shares outstanding ($0.01 par value, unlimited shares authorized) 310,353 405,544 21,273 Net asset value, offering and redemption price per share $ 7.98 $ 10.55 $ 10.78 ----------- ------------ ----------- ----------- ------------ -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED) BAIRD LARGECAP BAIRD MIDCAP BAIRD SMALLCAP FUND FUND FUND -------------- ------------ -------------- INVESTMENT INCOME: Dividends (net of foreign taxes withheld of $1,762, $0, $0, respectively) $ 389,553 $ 270,023 $ 30,665 Interest 34,649 28,781 7,983 ----------- ----------- -------- Total investment income 424,202 298,804 38,648 ----------- ----------- -------- EXPENSES: Investment advisory fees 212,670 357,830 83,202 Administration fees 19,982 29,725 5,200 Shareholder servicing fees 13,114 14,968 9,831 Fund accounting fees 15,293 14,756 14,143 Professional fees 14,362 15,973 9,086 Federal and state registration 9,602 10,618 7,236 Directors fees 3,311 4,427 724 Custody fees 1,776 3,663 2,982 Reports to shareholders 1,878 1,710 690 Distribution fees - Investor Class Shares 2,934 5,129 209 Miscellaneous 2,093 2,666 454 ----------- ----------- -------- 297,015 461,465 133,757 Expense reimbursement by Advisor (48,693) (50,795) (40,558) ----------- ----------- -------- Total expenses 248,322 410,670 93,199 ----------- ----------- -------- NET INVESTMENT INCOME (LOSS) 175,880 (111,866) (54,551) ----------- ----------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments (1,669,009) 591,902 (262,973) Change in unrealized appreciation/depreciation on investments 717,634 (2,777,114) 694,351 ----------- ----------- -------- Net realized and unrealized gain (loss) on investments (951,375) (2,185,212) 431,378 ----------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (775,495) $(2,297,078) $376,827 ----------- ----------- -------- ----------- ----------- --------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD LARGECAP FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment income $ 175,880 $ 443,344 Net realized loss on investments (1,669,009) (696,191) Change in unrealized appreciation/depreciation on investments 717,634 3,517,047 ----------- ----------- Net increase (decrease) in net assets resulting from operations (775,495) 3,264,200 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 3,479,662 6,437,380 Shares issued to holders in reinvestment of dividends -- 439,027 Cost of shares redeemed (3,106,039) (3,421,800) ----------- ----------- Net increase in net assets resulting from capital share transactions 373,623 3,454,607 ----------- ----------- DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net investment income -- (431,568) ----------- ----------- DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net investment income -- (10,989) ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (401,872) 6,276,250 NET ASSETS: Beginning of period 66,654,193 60,377,943 ----------- ----------- End of period (including undistributed net investment income of $176,667 and $787, respectively) $66,252,321 $66,654,193 ----------- ----------- ----------- -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD MIDCAP FUND ------------------------------------ Six Months Ended June 30, 2005 Year Ended (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment loss $ (111,866) $ (258,644) Net realized gain on investments 591,902 1,764,507 Change in unrealized appreciation/depreciation on investments (2,777,114) 6,685,264 ------------ ----------- Net increase (decrease) in net assets resulting from operations (2,297,078) 8,191,127 ------------ ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 19,780,714 56,415,797 Shares issued to holders in reinvestment of dividends -- 149,585 Cost of shares redeemed (3,972,270) (3,773,365) ------------ ----------- Net increase in net assets resulting from capital share transactions 15,808,444 52,792,017 ------------ ----------- DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: From net realized gains -- (143,452) ------------ ----------- DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: From net realized gains -- (6,831) ------------ ----------- TOTAL INCREASE IN NET ASSETS 13,511,366 60,832,861 NET ASSETS: Beginning of period 90,421,726 29,588,865 ------------ ----------- End of period $103,933,092 $90,421,726 ------------ ----------- ------------ -----------
See notes to the financial statements BAIRD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS BAIRD SMALLCAP FUND --------------------------------------- Six Months Ended June 30, 2004(1) June 30, 2005 through (unaudited) December 31, 2004 ---------------- ----------------- OPERATIONS: Net investment loss $ (54,551) $ (50,298) Net realized loss on investments (262,973) (203,088) Change in unrealized appreciation/depreciation on investments 694,351 1,593,566 ----------- ----------- Net increase in net assets resulting from operations 376,827 1,340,180 ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 12,221,611 17,042,209 Cost of shares redeemed (1,823,480) (982,943) ----------- ----------- Net increase in net assets resulting from capital share transactions 10,398,131 16,059,266 ----------- ----------- TOTAL INCREASE IN NET ASSETS 10,774,958 17,399,446 NET ASSETS: Beginning of period 17,399,446 -- ----------- ----------- End of period $28,174,404 $17,399,446 ----------- ----------- ----------- -----------
(1) Commencement of operations. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD LARGECAP FUND --------------------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------ ------------ ------------ ------------ -------------------- Per Share Data: Net asset value, beginning of period $ 8.13 $ 7.78 $ 6.41 $ 8.63 $ 9.58 $ 10.00 ----------- ----------- ----------- ----------- ----------- ---------- Income from investment operations: Net investment income 0.02(2) 0.06(2) 0.02 0.02 0.01 0.00(3) Net realized and unrealized gains (losses) on investments (0.11) 0.35 1.37 (2.22) (0.95) (0.42) ----------- ----------- ----------- ----------- ----------- ---------- Total from investment operations (0.09) 0.41 1.39 (2.20) (0.94) (0.42) ----------- ----------- ----------- ----------- ----------- ---------- Less distributions: Dividends from net investment income -- (0.06) (0.02) (0.02) (0.01) (0.00)(3) Distributions from net realized gains -- -- -- -- -- (0.00)(3) ----------- ----------- ----------- ----------- ----------- ---------- Total distributions -- (0.06) (0.02) (0.02) (0.01) (0.00) ----------- ----------- ----------- ----------- ----------- ---------- Net asset value, end of period $ 8.04 $ 8.13 $ 7.78 $ 6.41 $ 8.63 $ 9.58 ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ---------- Total return (1.11%)(4) 5.21% 21.75% (25.53%) (9.84%) (4.15%)(4) Supplemental data and ratios: Net assets, end of period $63,774,217 $64,754,140 $59,743,783 $48,900,767 $51,446,666 $9,623,337 Ratio of expenses to average net assets(6) 0.75%(5) 0.75% 0.75% 0.75% 0.75% 0.85%(5) Ratio of net investment income to average net assets(6) 0.55%(5) 0.72% 0.34% 0.23% 0.12% 0.13%(5) Portfolio turnover rate(7) 16.8%(4) 23.2% 24.8% 16.2% 9.0% 4.4%(4)
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Amount is less than $0.01. (4) Not annualized. (5) Annualized. (6) Without fees reimbursed, ratios of net expenses to average net assets for the periods ended June 30, 2005, December 31, 2004, December 31, 2003, December 31, 2002, December 31, 2001 and December 31, 2000 would have been 0.90%, 0.93%, 0.95%, 0.95%, 1.06% and 2.94%, respectively; and the ratios of net investment income (loss) to average net assets would have been 0.40%, 0.54%, 0.14%, 0.03%, (0.19%) and (1.97%), respectively. (7) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD LARGECAP FUND --------------------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares Class Shares September 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------ ------------ ------------ ------------ -------------------- Per Share Data: Net asset value, beginning of period $ 8.09 $ 7.75 $ 6.40 $ 8.61 $ 9.57 $ 10.00 ----------- ----------- ----------- ----------- ----------- ---------- Income from investment operations: Net investment income (loss) 0.01(2) 0.04(2) 0.01 (0.00)(3) (0.01) (0.00)(3) Net realized and unrealized gains (losses) on investments (0.12) 0.35 1.35 (2.21) (0.95) (0.43) ----------- ----------- ----------- ----------- ----------- ---------- Total from investment operations (0.11) 0.39 1.36 (2.21) (0.96) (0.43) ----------- ----------- ----------- ----------- ----------- ---------- Less distributions: Dividends from net investment income -- (0.05) (0.01) (0.00)(3) -- -- Distributions from net realized gains -- -- -- -- -- (0.00)(3) ----------- ----------- ----------- ----------- ----------- ---------- Total distributions -- (0.05) (0.01) (0.00) -- (0.00) ----------- ----------- ----------- ----------- ----------- ---------- Net asset value, end of period $ 7.98 $ 8.09 $ 7.75 $ 6.40 $ 8.61 $ 9.57 ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ---------- Total return (1.36%)(4) 5.00% 21.20% (25.65%) (10.03%) (4.28%)(4) Supplemental data and ratios: Net assets, end of period $ 2,478,104 $ 1,900,053 $ 634,160 $ 647,018 $ 615,533 $ 42,288 Ratio of expenses to average net assets(6) 1.00%(5) 1.00% 1.00% 1.00% 1.00% 1.10%(5) Ratio of net investment income (loss) to average net assets(6) 0.30%(5) 0.47% 0.09% (0.02%) (0.13%) (0.12%)(5) Portfolio turnover rate(7) 16.8%(4) 23.2% 24.8% 16.2% 9.0% 4.4%(4)
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Amount is less than $0.01. (4) Not annualized. (5) Annualized. (6) Without fees reimbursed, ratios of net expenses to average net assets for the periods ended June 30, 2005, December 31, 2004, December 31, 2003, December 31, 2002, December 31, 2001 and December 31, 2000 would have been 1.15%, 1.18%, 1.20%, 1.20%, 1.31% and 3.19%, respectively; and the ratios of net investment income (loss) to average net assets would have been 0.15%, 0.29%, (0.11%), (0.22%), (0.44%) and (2.22%), respectively. (7) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD MIDCAP FUND --------------------------------------------------------------------------------------------- Institutional Institutional Class Shares Institutional Institutional Institutional Institutional Class Shares Six Months Class Shares Class Shares Class Shares Class Shares December 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------ ------------ ------------ ------------ -------------------- Per Share Data: Net asset value, beginning of period $ 10.91 $ 9.72 $ 7.66 $ 9.11 $ 9.70 $ 10.00 ----------- ----------- ----------- ----------- ----------- ---------- Income from investment operations: Net investment income (0.01)(2) (0.04)(2) (0.07) (0.07)(2) (0.06)(2) (0.00)(3) Net realized and unrealized gains (losses) on investments (0.25) 1.25 2.13 (1.38) (0.53) (0.30) ----------- ----------- ----------- ----------- ----------- ---------- Total from investment operations (0.26) 1.21 2.06 (1.45) (0.59) (0.30) ----------- ----------- ----------- ----------- ----------- ---------- Less distributions: Distributions from net realized gains -- (0.02) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- Net asset value, end of period $ 10.65 $ 10.91 $ 9.72 $ 7.66 $ 9.11 $ 9.70 ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ---------- Total return (2.38%)(4) 12.44% 26.89% (15.92%) (6.08%) (3.00%)(4) Supplemental data and ratios: Net assets, end of period $99,655,073 $86,476,869 $28,629,656 $ 20,864,264 $13,049,574 $7,853,228 Ratio of expenses to average net assets(6) 0.85%(5) 0.85% 1.20% 1.25% 1.25% 1.25%(5) Ratio of net investment loss to average net assets(6) (0.22%)(5) (0.43%) (0.81%) (0.84%) (0.67%) (1.25%)(5) Portfolio turnover rate(7) 34.7%(4) 77.9% 81.8% 55.4% 73.6% 0.0%
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Amount is less than $0.01. (4) Not annualized. (5) Annualized. (6) Without fees reimbursed, ratios of net expenses to average net assets for the periods ended June 30, 2005, December 31 2004, December 31, 2003, December 31, 2002, December 31, 2001 and December 31, 2000 would have been 0.96%, 1.05%, 1.20%, 1.39%, 2.06% and 2.78%, respectively; and the ratios of net investment loss to average net assets would have been (0.33%), (0.63%), (0.81%), (0.98%), (1.48%) and (2.78%), respectively. (7) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD MIDCAP FUND --------------------------------------------------------------------------------------------- Investor Investor Class Shares Investor Investor Investor Investor Class Shares Six Months Class Shares Class Shares Class Shares Class Shares December 29, Ended Year Ended Year Ended Year Ended Year Ended 2000(1) through June 30, 2005 December 31, December 31, December 31, December 31, December 31, (unaudited) 2004 2003 2002 2001 2000 ------------- ------------ ------------ ------------ ------------ -------------------- Per Share Data: Net asset value, beginning of period $ 10.82 $ 9.65 $ 7.63 $ 9.09 $ 9.70 $ 10.00 ----------- ----------- ----------- ----------- ----------- ---------- Income from investment operations: Net investment income (0.02) (0.07)(2) (0.09) (0.09)(2) (0.08)(2) (0.00)(3) Net realized and unrealized gains (losses) on investments (0.25) 1.26 2.11 (1.37) (0.53) (0.30) ----------- ----------- ----------- ----------- ----------- ---------- Total from investment operations (0.27) 1.19 2.02 (1.46) (0.61) (0.30) ----------- ----------- ----------- ----------- ----------- ---------- Less distributions: Distributions from net realized gains -- (0.02) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- Net asset value, end of period $ 10.55 $ 10.82 $ 9.65 $ 7.63 $ 9.09 $ 9.70 ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ---------- Total return (2.50%)(4) 12.32% 26.47% (16.06%) (6.29%) (3.00%)(4) Supplemental data and ratios: Net assets, end of period $ 4,278,019 $ 3,944,857 $ 959,209 $ 801,703 $ 1,050,356 $ 10 Ratio of expenses to average net assets(6) 1.10%(5) 1.10% 1.45% 1.50% 1.50% 1.50%(5) Ratio of net investment loss to average net assets(6) (0.47%)(5) (0.68%) (1.06%) (1.09%) (0.92%) (1.50%)(5) Portfolio turnover rate(7) 34.7%(4) 77.9% 81.8% 55.4% 73.6% 0.0%
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Amount is less than $0.01. (4) Not annualized. (5) Annualized. (6) Without fees reimbursed, ratios of net expenses to average net assets for the periods ended June 30, 2005, December 31, 2004, December 31, 2003, December 31, 2002, December 31, 2001 and December 31, 2000 would have been 1.21%, 1.30%, 1.45%, 1.64%, 2.31% and 3.03%, respectively; and the ratios of net investment loss to average net assets would have been (0.58%), (0.88%), (1.06%), (1.23%), (1.73%) and (3.03%), respectively. (7) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD SMALLCAP FUND ----------------------------------------- Institutional Institutional Class Shares Class Shares Six Months Ended June 30, 2004(1) June 30, 2005 through (unaudited) December 31, 2004 ---------------- --------------------- Per Share Data: Net asset value, beginning of period $ 10.84 $ 10.00 ----------- ----------- Income from investment operations: Net investment loss(2) (0.03) (0.03) Net realized and unrealized gains (losses) on investments (0.00) 0.87 ----------- ----------- Total from investment operations (0.03) 0.84 ----------- ----------- Net asset value, end of period $ 10.81 $ 10.84 ----------- ----------- ----------- ----------- Total return(3) (0.28%) 8.40% Supplemental data and ratios: Net assets, end of period $27,945,017 $17,331,262 Ratio of expenses to average net assets(5) 0.95%(4) 0.95%(4) Ratio of net investment loss to average net assets(5) (0.55%)(4) (0.65%)(4) Portfolio turnover rate(3)(6) 29.1% 34.7%
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Not annualized. (4) Annualized. (5) Without fees reimbursed, ratio of net expenses to average net assets for the period ended June 30, 2005 and December 31, 2004 would have been 1.36% and 1.89%, respectively; and the ratio of net investment loss to average net assets would have been (0.96%) and (1.59%), respectively. (6) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. FINANCIAL HIGHLIGHTS BAIRD SMALLCAP FUND ----------------------------------------- Investor Investor Class Shares Class Shares Six Months Ended June 30, 2004(1) June 30, 2005 through (unaudited) December 31, 2004 ---------------- --------------------- Per Share Data: Net asset value, beginning of period $ 10.83 $ 10.00 ----------- ----------- Income from investment operations: Net investment loss(2) (0.04) (0.05) Net realized and unrealized gains (losses) on investments (0.01) 0.88 ----------- ----------- Total from investment operations (0.05) 0.83 ----------- ----------- Net asset value, end of period $ 10.78 $ 10.83 ----------- ----------- ----------- ----------- Total return(3) (0.46%) 8.30% Supplemental data and ratios: Net assets, end of period $ 229,387 $ 68,184 Ratio of expenses to average net assets(5) 1.20%(4) 1.20%(4) Ratio of net investment loss to average net assets(5) (0.80%)(4) (0.90%)(4) Portfolio turnover rate(3)(6) 29.1% 34.7%
(1) Commencement of operations. (2) Calculated using average shares outstanding during the period. (3) Not annualized. (4) Annualized. (5) Without fees reimbursed, ratio of net expenses to average net assets for the period ended June 30, 2005 and December 31, 2004 would have been 1.61% and 2.14%, respectively; and the ratio of net investment loss to average net assets would have been (1.21%) and (1.84%), respectively. (6) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See notes to the financial statements BAIRD FUNDS, INC. NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) 1. ORGANIZATION Baird Funds, Inc. (the "Corporation") was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end management company under the Investment Company Act of 1940, as amended (the "1940 Act"). The accompanying financial statements include the Baird LargeCap Fund, the Baird MidCap Fund and the Baird SmallCap Fund (each a "Fund" and collectively the "Funds"), three of the eight portfolios comprising the Corporation. Pursuant to the 1940 Act, the Funds are "diversified" series of the Corporation. The Baird LargeCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on September 29, 2000. The Baird MidCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on December 29, 2000. The Baird SmallCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on June 30, 2004. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%. The investment objective of the Baird LargeCap Fund is to seek long-term growth of capital through investments in equity securities of large-capitalization companies. The investment objective of the Baird MidCap Fund is to seek long-term growth of capital through investments in equity securities of mid-capitalization companies. The investment objective of the Baird SmallCap Fund is to seek long-term growth of capital through investments in equity securities of small-capitalization companies. On June 30, 2005, one shareholder related to the investment advisor held approximately 51% of the Baird LargeCap Fund and one shareholder related to the investment advisor held 57% of the Baird SmallCap Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. a) Investment Valuation - Common stocks that are listed on a securities exchange are valued at the last quoted sales price. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Price information on listed stocks is taken from the exchange where the security is primarily traded. If such securities were not traded on the valuation date they are valued at the average of the current bid and asked price. Unlisted equity securities for which market quotations are readily available are valued at the latest quoted bid price. Debt securities are valued at the latest bid price. Investments in open-end mutual funds are valued at the net asset value. Other assets and securities for which no quotations are readily available are valued at fair value as determined in good faith by management in accordance with procedures approved by the Board of Directors. In determining fair value, the valuation committee takes into account all relevant factors and available information. Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. b) Foreign Securities - Investing in securities of foreign companies and foreign governments involves special risks and consideration not typically associated with investing in U.S. companies and the U.S. government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. c) Federal Income Taxes - The Funds intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders in a manner which results in no tax cost to the Funds. Therefore, no federal income or excise tax provision is recorded. d) Distributions to Shareholders - Dividends from net investment income are declared and paid annually. Distributions of net realized gains, if any, are declared and paid at least annually. e) Allocation of Income and Expenses - Each Fund in the series is charged for those expenses directly attributable to the portfolio. Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares. Income, expenses, and realized and unrealized gains and losses are allocated to the classes based on their respective net assets. Expenses that are not directly attributable to a Fund are allocated among the Funds in the series in proportion to their assets. f) Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. g) Other - Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Accounting principles generally accepted in the United States of America require that permanent financial reporting and tax differences be reclassified in the capital accounts. h) Guarantees and Indemnifications - In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown and this would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds would expect the risk of loss to be remote. 3. CAPITAL SHARE TRANSACTIONS The following table summarizes the capital share transactions of each Fund: BAIRD LARGECAP FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 --------------------------- ------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $ 2,795,071 351,080 Shares sold $ 684,591 86,057 Shares issued through Shares issued through reinvestment of dividends -- -- reinvestment of dividends -- -- Shares redeemed (3,021,524) (378,768) Shares redeemed (84,515) (10,568) ----------- --------- ---------- ------- Net Decrease $ (226,453) (27,688) Net Increase $ 600,076 75,489 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period 7,960,799 Beginning of period 234,864 --------- ------- End of period 7,933,111 End of period 310,353 --------- ------- --------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 --------------------------- ------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $ 5,204,938 657,907 Shares sold $1,232,442 156,739 Shares issued through Shares issued through reinvestment of dividends 428,099 52,721 reinvestment of dividends 10,928 1,354 Shares redeemed (3,382,487) (430,488) Shares redeemed (39,313) (5,082) ----------- --------- ---------- ------- Net Increase $ 2,250,550 280,140 Net Increase $1,204,057 153,011 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period 7,680,659 Beginning of period 81,853 --------- ------- End of period 7,960,799 End of period 234,864 --------- ------- --------- -------
BAIRD MIDCAP FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 --------------------------- ------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $18,888,664 1,766,101 Shares sold $ 892,050 83,465 Shares issued through Shares issued through reinvestment of dividends -- -- reinvestment of dividends -- -- Shares redeemed (3,530,515) (334,715) Shares redeemed (441,755) (42,615) ----------- --------- ---------- ------- Net Increase $15,358,149 1,431,386 Net Increase $ 450,295 40,850 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period 7,924,137 Beginning of period 364,694 --------- ------- End of period 9,355,523 End of period 405,544 --------- ------- --------- -------
Year Ended Year Ended December 31, 2004 December 31, 2004 --------------------------- ------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $53,356,727 5,302,856 Shares sold $3,059,070 299,099 Shares issued through Shares issued through reinvestment of dividends 142,982 13,214 reinvestment of dividends 6,603 615 Shares redeemed (3,419,077) (337,955) Shares redeemed (354,288) (34,372) ----------- --------- ---------- ------- Net Increase $50,080,632 4,978,115 Net Increase $2,711,385 265,342 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period 2,946,022 Beginning of period 99,352 --------- ------- End of period 7,924,137 End of period 364,694 --------- ------- --------- -------
BAIRD SMALLCAP FUND Six Months Ended Six Months Ended June 30, 2005 June 30, 2005 --------------------------- ------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $11,885,101 1,160,741 Shares sold $ 336,510 15,512 Shares redeemed (1,818,120) (173,803) Shares redeemed (5,360) (535) ----------- --------- ---------- ------- Net Increase $10,066,981 986,938 Net Increase $ 331,150 14,977 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period 1,598,470 Beginning of period 6,296 --------- ------- End of period 2,585,408 End of period 21,273 --------- ------- --------- -------
June 30, 2004(1) through June 30, 2004(1) through December 31, 2004 December 31, 2004 ----------------------------- ----------------------------- INSTITUTIONAL CLASS SHARES $ Shares INVESTOR CLASS SHARES $ Shares ----------- --------- ---------- ------- Shares sold $16,977,724 1,699,415 Shares sold $ 64,485 6,296 Shares redeemed (982,943) (100,945) Shares redeemed -- -- ----------- --------- ---------- ------- Net Increase $15,994,781 1,598,470 Net Increase $ 64,485 6,296 ----------- ---------- ----------- ---------- Shares Outstanding: Shares Outstanding: Beginning of period -- Beginning of period -- --------- ------- End of period 1,598,470 End of period 6,296 --------- ------- --------- -------
(1) Commencement of operations. 4. INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION During the period ended June 30, 2005, purchases and sales of investment securities (excluding short-term investments) were as follows: Baird Baird Baird LargeCap Fund MidCap Fund SmallCap Fund ------------- ------------ ------------- Purchases: $12,822,415 $44,314,789 $15,540,182 Sales: $10,595,790 $32,568,471 $ 5,685,582 At December 31, 2004, accumulated earnings/losses on a tax basis were as follows: LARGECAP MIDCAP SMALLCAP FUND FUND FUND -------- ------ -------- Cost of Investments $59,865,853 $82,628,748 $16,126,782 ----------- ----------- ----------- ----------- ----------- ----------- Gross unrealized appreciation 9,615,738 12,085,890 2,038,830 Gross unrealized depreciation (2,787,706) (629,780) (451,647) ----------- ----------- ----------- Net unrealized appreciation/(depreciation) $ 6,828,032 $11,456,110 $ 1,587,183 ----------- ----------- ----------- ----------- ----------- ----------- Undistributed ordinary income 787 -- -- Undistributed long-term capital gain -- -- -- ----------- ----------- ----------- Total distributable earnings $ 787 $ -- $ -- ----------- ----------- ----------- ----------- ----------- ----------- Other accumulated gains (losses) $(8,601,915) $ (64,219) $ (196,705) ----------- ----------- ----------- Total accumulated earnings/(losses) $(1,773,096) $11,391,891 $ 1,390,478 ----------- ----------- ----------- ----------- ----------- -----------
Undistributed income or net realized gains for financial statement purposes may differ from amounts recognized for federal income tax purposes due to differences in the recognition and characterization of income, expense and capital gain items. Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2004, the Baird MidCap Fund and the Baird SmallCap Fund elected to defer capital losses occurring between November 1, 2004 and December 31, 2004 in the amounts of $64,219 and $5,827, respectively. At December 31, 2004, the Baird LargeCap Fund had accumulated net realized capital loss carryovers of $1,167,011 that expire in 2012, $3,094,411 that expire in 2011, $4,188,556 that expire in 2010 and $151,937 that expire in 2009. At December 31, 2004, the Baird SmallCap Fund had accumulated net realized capital loss carryover of $190,878 expiring in 2012. To the extent the Funds realize future net capital gains, taxable distributions to shareholders will be offset by any unused capital loss carryover. During the six months ended June 30, 2005, the Funds made no distributions. During the period ended December 31, 2004, the Funds paid the following dividends: ORDINARY INCOME DIVIDENDS NET LONG-TERM CAPITAL GAINS ------------------------- --------------------------- Baird LargeCap Fund $442,557 -- Baird MidCap Fund -- $150,283 Baird SmallCap Fund -- -- 5. INVESTMENT ADVISORY AND OTHER AGREEMENTS The Funds have entered into an Investment Advisory Agreement with Robert W. Baird & Co. Incorporated (the "Advisor"). Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.65% for the Baird LargeCap Fund, 0.75% for the Baird MidCap Fund and 0.85% for the Baird SmallCap Fund as applied to the respective Fund's average daily net assets. Certain officers of the Advisor are also officers of the Funds. For the six months ended June 30, 2005 and through December 31, 2005, the Advisor has contractually agreed to waive its investment advisory fee and/or reimburse the Funds' operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that each Fund's operating expenses do not exceed the following amounts: INSTITUTIONAL CLASS SHARES INVESTOR CLASS SHARES -------------------------- --------------------- Baird LargeCap Fund 0.75% 1.00% Baird MidCap Fund 0.85% 1.10% Baird SmallCap Fund 0.95% 1.20% To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which expenses were reimbursed or absorbed. A Fund will make no such payment, however, if the total annual Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. Six Months Ended June 30, December 31, ---------------- ---------------------------------- YEAR ENDED: 2005 2004 2003 2002 REIMBURSED / ABSORBED EXPENSES SUBJECT TO RECOVERY BY ADVISOR UNTIL: 2008 2007 2006 2005 BAIRD LARGECAP FUND $48,693 $114,127 $108,138 $91,116 BAIRD MIDCAP FUND $50,795 $116,179 $ 1,122 $21,503 BAIRD SMALLCAP FUND $40,558 $ 72,320 -- --
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds. Robert W. Baird & Co. Incorporated (the "Distributor") is the sole distributor of the Funds pursuant to a distribution agreement. No commissions were earned by the Distributor for services rendered as a registered broker-dealer in securities transactions for the Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Fund for the period ended June 30, 2005. 6. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN The Funds have adopted a distribution and shareholder service plan (the "Plan") pursuant to Rule 12b-1 of the 1940 Act. The Plan allows the Funds to compensate the Distributor for a portion of the costs incurred in distributing the Funds' Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average daily net assets of the Funds' Investor Class Shares. The Baird LargeCap Fund, Baird MidCap Fund and Baird SmallCap Fund incurred $2,934, $5,129 and $209, respectively, in fees pursuant to the Plan during the six months ended June 30, 2005. PROXY VOTING A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds' website at http://www.bairdfunds.com; and by accessing the SEC's website at http://www.sec.gov. Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds' website at http://www.bairdfunds.com; and by accessing the SEC's website at http://www.sec.gov. PORTFOLIO HOLDINGS DISCLOSURE The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. BAIRD FUNDS, INC. c/o U.S. Bancorp Fund Services, LLC P.O. Box 701 Milwaukee, Wisconsin 53201-0701 1-866-44BAIRD BOARD OF DIRECTORS G. Frederick Kasten, Jr. (Chairman) John W. Feldt George C. Kaiser Frederick P. Stratton, Jr. INVESTMENT ADVISOR Robert W. Baird & Co. Incorporated 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND -DISBURSING AGENT U.S. Bancorp Fund Services, LLC P.O. Box 701 615 East Michigan Street Milwaukee, WI 53202 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 LEGAL COUNSEL Godfrey & Kahn, S.C. 780 North Water Street Milwaukee, Wisconsin 53202 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 100 East Wisconsin Avenue, Suite 1500 Milwaukee, Wisconsin 53202 DISTRIBUTOR Robert W. Baird & Co. Incorporated 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 ITEM 2. CODE OF ETHICS. - ----------------------- Not applicable - only required for annual reports on Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. - ---------------------------------------- Not applicable - only required for annual reports on Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. - ----------------------------------------------- Not applicable - only required for annual reports on Form N-CSR. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. - ---------------------------------------------- Not applicable because the Registrant is not a "listed issuer" within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934. ITEM 6. SCHEDULE OF INVESTMENTS. - -------------------------------- Schedule of Investments is included as part of the semi-annual reports to shareholders filed under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END - ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. - -------------------------------- Not applicable because the Registrant is not a closed-end management investment company. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES - ------------------------------------------------------------------------ Not applicable because the Registrant is not a closed-end management investment company. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT - --------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. - ---------------------------------- Not applicable because the Registrant is not a closed-end management investment company. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------ There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant's board of directors. ITEM 11. CONTROLS AND PROCEDURES. - --------------------------------- (a) Disclosure Controls and Procedures. The Registrant's management, with the ---------------------------------- participation of its principal executive and principal financial officers, has evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940), as of a date within 90 days prior to the filing date of this Form N- CSR. Based on such evaluation, the Registrant's principal executive and principal financial officers have concluded that the design and operation of the Registrant's disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed on Form N-CSR is recorded, processed, summarized and reported within the applicable time periods. (b) Changes in Internal Control Over Financial Reporting. There were no ---------------------------------------------------- changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. - ----------------- (a) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Baird Funds, Inc. By: /s/ Mary Ellen Stanek ---------------------------- Mary Ellen Stanek, President Date: September 1, 2005 --------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Mary Ellen Stanek ---------------------------- Mary Ellen Stanek, President Date: September 1, 2005 --------------------------- By: /s/ Leonard Rush ----------------------- Leonard Rush, Treasurer Date: September 1, 2005 --------------------- EX-99.CERT 2 bfif_bef-ex99cert302.txt CERTIFICATIONS -------------- I, Mary Ellen Stanek, certify that: 1. I have reviewed this report on Form N-CSR of Baird Funds, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting 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; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 1, 2005 /s/ Mary Ellen Stanek --------------------- --------------------- Mary Ellen Stanek President CERTIFICATIONS -------------- I, Leonard Rush, certify that: 1. I have reviewed this report on Form N-CSR of Baird Funds, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting 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; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 1, 2005 /s/ Leonard Rush ------------------------- ---------------- Leonard Rush Treasurer EX-99.906 CERT 3 bfif_bef-ex99cert906.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT --------------------------------------------------------------- Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Baird Funds, Inc. (the "Company") does hereby certify, to such officer's knowledge, that the report on Form N-CSR of the Company for the period ended June 30, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mary Ellen Stanek /s/ Leonard Rush - ---------------------------- ---------------------------- Mary Ellen Stanek Leonard Rush President, Baird Funds, Inc. Treasurer, Baird Funds, Inc. Date: September 1, 2005 Date: September 1, 2005 ----------------------- ----------------------- This certification is furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" as part of Form N-CSR or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. The certification shall also not be deemed to be incorporated by reference into the Report or any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----