N-CSR

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

Milwaukee, WI 53202

(Address of principal executive offices) (Zip code)

Andrew D. Ketter

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, 2011

Date of reporting period: December 31, 2011

Item 1. Reports to Stockholders.

Annual Report - Baird Funds

December 31, 2011

Baird Short-Term Bond Fund

Baird Intermediate Bond Fund

Baird Intermediate Municipal Bond Fund

Baird Aggregate Bond Fund

Baird Core Plus Bond Fund

TABLE OF CONTENTS

	Page
Letter to Shareholders	1
2011 Bond Market Overview	2
Baird Short-Term Bond Fund	6
Baird Intermediate Bond Fund	27
Baird Intermediate Municipal Bond Fund	49
Baird Aggregate Bond Fund	73
Baird Core Plus Bond Fund	97
Additional Information on Fund Expenses	125
Statements of Assets and Liabilities	127
Statements of Operations	128
Statements of Changes in Net Assets	129
Financial Highlights	134
Notes to the Financial Statements	143
Report of Independent Registered Public Accounting Firm	157
Directors and Officers	158
Disclosure Regarding the Board of Directors’ Approval
of the Investment Advisory Agreement for Baird Bond Funds	160
Additional Information	163
Privacy Notice	A-1

This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

Cautionary Note on Analyses, Opinions and Outlooks:  In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events.  These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect.  These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate.  It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds.  Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.

Baird Funds

1-866-442-2473

www.bairdfunds.com

February 28, 2012

Dear Shareholder,

Overall, 2011 was another strong year for bond investors.  We are pleased with the absolute and relative performance of the Baird Bond Funds in 2011.  Our disciplined, duration neutral  strategy we employ against benchmarks coupled with our opportunistic ability to add value through yield curve positioning, sector allocation, and individual security selection were critical elements to our success in 2011.

We thank you for your continued investment in Baird Funds.  Steady inflows into the Baird Funds family have increased total net assets to $5.5 billion at the end of 2011, an increase of more than 15% over the prior year-end.  We’ve built our reputation on employing a risk controlled process in our approach to investment decision making and portfolio management.  Our long-term success is a testament to this.

On the following pages, we review the bond market in 2011 and the performance and composition of each of the Baird Bond Funds.

We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals and we welcome the opportunity to continue to serve you.

Sincerely,

Mary Ellen Stanek, CFA

President

Baird Funds

Page 1

2011 Bond Market Overview

Treasury Yields Fall, Curve Flattens in 2011

Continued concerns about the European debt crisis, disappointing economic growth (e.g. U.S. GDP < 2%) and the Fed’s Operation Twist caused Treasury yields to fall sharply in 2011.  Most of the declines came in the third quarter, but yields continued to drift lower in the fourth quarter as well.  The decline in yields in 2011 came as a surprise to many investors as consensus expectations had been for stronger U.S. economic growth (3-4%) and rising rates.  For the year, long-term yields plunged nearly 1½% and the yield curve flattened significantly as the spread between 2- and 30-year Treasury yields declined to 265 bps at year-end from 374 bps on December 31, 2010 (see chart and table below).

Treasury Yields (Source: Bloomberg)
		Dec 31,	Sep 30,	Dec 31,	Q4	2011
	Maturity	2010	2011	2011	Change	Change
	1	0.26%	0.10%	0.10%	0.00	-0.16
	2	0.59%	0.24%	0.24%	0.00	-0.35
	3	0.99%	0.40%	0.35%	-0.05	-0.64
	5	2.01%	0.95%	0.83%	-0.12	-1.18
	7	2.70%	1.43%	1.34%	-0.09	-1.36
	10	3.29%	1.92%	1.88%	-0.04	-1.41
	30	4.33%	2.91%	2.89%	-0.02	-1.44

Taxable Yield Spreads Widen

In addition to taking the wind out of the sails of the equity markets in 2011, the escalating turmoil in Europe and slower than expected economic growth also caused yield spreads in the bond market to widen dramatically in the third quarter (see table following page, left).  In particular, spreads on high yield bonds, investment grade corporate bonds and commercial mortgage-backed securities (CMBS) widened sharply as heightened concerns of a double-dip recession reignited investors’ sensitivity to risk (aka risk-off). While spreads on most sectors did narrow during the fourth quarter as investors saw value and returned to the market, spreads in the finance sector continued to edge slightly wider on concerns that large, global financial institutions will not be completely immune from  the debt crisis in Europe.

Risk-On in Municipals

Municipal investors embraced risk in 2011 despite continued challenging credit dynamics in that market.  As a result, lower quality issues outperformed higher rated issues by significant margins (BBBs and As returned +11.84% and +12.53% respectively vs. AAAs at +8.75%, see table following page, right).  Lower quality returns have varied greatly in recent years and have reflected investors’ appetite for risk.  While state and local municipal revenues have increased in each of the last eight quarters, they are still well below peak levels prior to 2008 and budgetary stress is still prevalent at all levels of municipal government as evidenced by pervasive downgrades (Moody’s downgrades outnumbered upgrades 5 to 1 in Q3).  The dearth of new issue supply (32% below 2010) was the key driver of strong municipal performance in 2011 and supply/demand technicals appear to have prevailed over credit fundamentals.

Page 2

2011 Bond Market Overview

Option-Adjusted Spreads (in bps)
	12/31/2010	6/30/2011	9/30/2011	12/31/2011
U.S. Aggregate Index	56	54	90	87
U.S. Agency (non-mortgage) Sector	20	21	31	33
Mortgage and ABS Sectors
US Agency Pass-Throughs	42	37	80	75
Asset-Backed Securities	82	81	77	99
CMBS	254	219	351	308
Credit Sectors
U.S. Investment Grade	156	153	238	234
Industrial	134	135	190	184
Utility	147	143	192	186
Financial Institutions	191	187	332	337
U.S. High Yield	526	525	807	699

Source:  Barclays Capital

Municipal Returns by Quality (%)
	Muni Index	AAA	AA	A	BBB
2011	10.70	8.75	10.28	12.53	11.84
2010	2.38	2.03	2.05	2.23	3.75
2009	12.91	9.06	11.72	15.87	26.09
2008	-2.47	1.61	-0.76	-5.97	-21.33
2007	3.36	3.84	3.52	2.67	-2.73
5-year
annualized	5.22%	5.01%	5.25%	5.17%	2.28%

Source:  Barclays Capital

Strong Fourth Quarter Caps off Exceptional Year

Strong returns in the fourth quarter capped off an exceptional year overall for the bond market (see table below).  With the decline in yields, Treasuries produced a 9.81% return which provided a solid base for very strong market returns in 2011, but the widening of yield spreads resulted in varied returns across other sectors.  Benefitting from weak supply, municipals bounced back after a weak 2010 and returned an amazing 10.70% in 2011.  Investment grade corporates had a great December (+2.14%) and, despite the widening of yield spreads in the second half, still managed to deliver an attractive 8.15% return for the year.  High yield bonds had an impressive bounce in tandem with equities in the fourth quarter (+6.46%) that brought the sector back into positive territory, but still finished in the cellar for the year (+4.98%).  After an eye-popping 2010, CMBS also had a strong fourth quarter (+3.11%) and finished this year with a respectable 6.02% return, as did Agency MBS (+6.23%) and ABS (+5.14%).  In spite of considerable concern in the market that the odds of a double dip recession were growing, possibly the biggest surprise of 2011 was increasing demand for inflation protection that propelled Treasury Inflation-Protected Securities (TIPS) to a staggering 13.56% return.  Bond investors again had to endure pesky (historically high) volatility in 2011, but patience was rewarded in the end with very strong returns overall.

Total Returns of Selected Barclays Capital (BC) Sectors and Indices

Sector/Index	4th Quarter	2011	2010
U.S. Treasury Sector	0.89%	9.81%	5.87%
Gov’t Agency Sector	0.48%	4.86%	4.56%
Corporate Sector	1.93%	8.15%	9.00%
MBS Sector	0.88%	6.23%	5.37%
CMBS Sector	3.11%	6.02%	20.40%
ABS Sector	0.23%	5.14%	5.85%
Municipal Sector	2.12%	10.70%	2.38%
TIPS	2.69%	13.56%	6.31%
High Yield Sector	6.46%	4.98%	15.12%
BC Aggregate Index	1.12%	7.84%	6.54%
BC Gov’t/Credit Index	1.18%	8.74%	6.59%
BC Int. Gov’t/Credit Index	0.84%	5.80%	5.89%
BC 1-3 yr. Gov’t/Credit Index	0.25%	1.59%	2.80%

Page 3

2011 Bond Market Overview

Gold and the Dollar

Gold has been on the rise for the past several years (see chart below left) and its ascent has largely been viewed as (1) a proxy for investors’ inflation expectations and/or (2) a measure of investors’ concern about the overall health and stability of the global financial system and currencies.  While the price of gold did rise 10% in 2011 ($1,564 at year end vs. $1,421 at the end of 2010), it is worth noting that it ended the year 21.5% off its peak of $1,900 (on 9/5/11).  The sharp decline in gold late in the year could be an indication that investors’ inflation concerns are easing and/or that concerns about another imminent global financial meltdown are cooling.  In contrast to gold, the U.S. Dollar has been on a volatile, yet generally downward trend over the past several years.  The U.S. Dollar Index, which indicates the general international value of the Dollar by averaging exchange rates between the Dollar and other major world currencies, appears in the chart, below right.  This descent has reflected (1) the impact of the Fed’s zero-rate policy on exchange rates with other countries with higher target rates and (2) concern that global investors will shy away from U.S. assets because of fears that current U.S. fiscal and monetary policies will ultimately lead to a substantial devaluation of the Dollar.  While the Dollar essentially finished 2011 right where it started the year, it managed to stay above the lows of 2007 and jumped 9.9% from its 2011 low in late April.  The Dollar’s rise in the second half of 2011 is encouraging and could be an indication that, despite a zero-rate policy in place through 2012, investors’ appetite for Dollar-denominated assets may be rebounding as risks in other parts of the world grow.

Outlook

Interest rates –The sharp decline in long-term Treasury yields in 2011 was surprising and we believe that the Fed has been successful in driving (and holding) Treasury yields artificially low.  We believe that wider yields spreads are as much the market’s acknowledgement that Treasury yields are artificially low as they are a reflection of genuine concern about relative risks in non-Treasury sectors.  We would not be surprised if Treasury yields rebounded somewhat in 2012, but with wages and employment still soft, we do not believe inflation will be a major concern in the near future and, accordingly, are not looking for market yields overall to rise significantly over the next 12 months.

Sectors – We see limited relative return potential for Treasuries and Agencies in 2012 and, with the widening of yield spreads in 2011, believe spread sectors offer better value.  Investment grade corporates look particularly attractive given strong underlying credit fundamentals, but we caution that sluggish economic growth could present challenges for many issues in

Page 4

2011 Bond Market Overview

the high-yield sector.  We believe CMBS structures with superior credit enhancement will perform well, and, although residential mortgages should benefit from a strong commitment from the Fed to keep mortgage rates low, a wide range of potential developments on the government policy front poses significant uncertainty to that sector.  With an expected 20% increase in new issue supply in 2012, municipal returns will likely be softer in 2012, but continued demand should be able to absorb additional supply and keep yields from rising sharply.  We again caution investors against going too far out the yield curve or too far down in quality given the high level of global uncertainty and broad spectrum of potential outcomes.

Page 5

Baird Short-Term Bond Fund

December 31, 2011

The Baird Short-Term Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index.  The Barclays Capital 1-3 Year U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government and corporate securities, with maturities between one and three years.

The Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong absolute and relative returns in 2011.  Our long-term commitment to duration neutrality was critically important as well.  The primary factors for the Fund’s outperformance over its benchmark were:

• The Fund’s overweight position to the corporate credit sector was a positive for relative performance.

• Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year.  This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond.  The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads.

• Modest exposure to commercial mortgage-backed securities (CMBS) was a positive for the year.  As part of our risk management for the exposure to this sector, we hold shorter maturity issues with significant credit enhancement.

Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.

We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund.  The Fund’s significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.

Portfolio Characteristics

Quality Distribution*	Sector Weightings*

Net Assets:	$1,017,230,087	Annualized Expense Ratio:
SEC 30-Day Yield:**		Institutional Class:	0.30	%
Institutional Class:	2.41%	Portfolio Turnover Rate:	61.1	%
Average Effective Duration:	1.88 years	Total Number of Holdings:	324
Average Effective Maturity:	2.20 years

* Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending).

** SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2011.

Page 6

Baird Short-Term Bond Fund

Institutional Class*

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (8/31/04), assuming reinvestment of all distributions.

*  The Baird Short-Term Bond Fund is currently offering only the Institutional Class shares to investors.

Page 7

Baird Short-Term Bond Fund

Total Returns

		Average Annual
			Since
For the Periods Ended December 31, 2011	One Year	Five Years	Inception(1)
Institutional Class	2.08%	3.73%	3.43%
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index(2)	1.59%	3.99%	3.54%

(1) For the period from August 31, 2004 (commencement of operations) to December 31, 2011.

(2) The Barclays Capital 1-3 Year U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and three years.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in an index is not possible.

The returns shown in the table above and the line graph on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 8

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4%
Asset Backed Securities – 0.7%
$	26,807	Bombardier Capital
		Mortgage Securitization,
		Series 1998-A, Class A3,
		6.23%, 04/15/2028	$	26,433
	1,473,902	Citigroup Mortgage
		Loan Trust Inc.,
		Series 2006-WFH3,
		Class A3, 0.444%,
		10/25/2036		1,334,701
		Countrywide Asset-
		Backed Certificates:
	876,919	Series 2006-13,
		Class 1AF2,
		5.884%, 01/25/2037 §		822,238
	2,370,498	Series 2006-13,
		Class 1AF3,
		5.944%, 01/25/2037 §		1,423,669
	1,500,000	Series 2006-9,
		Class 1AF3, 5.859%,
		10/25/2046		768,188
	382,792	Credit Based Asset
		Servicing and
		Securitization LLC,
		Series 2005-CB8,
		Class AF2, 5.303%,
		12/25/2035		345,960
		Green Tree Financial
		Corporation:
	54,409	Series 1996-3, Class A5,
		7.35%, 05/15/2027		56,811
	37,331	Series 1998-2, Class A5,
		6.24%, 12/01/2028		39,098
	932,907	Series 1997-5, Class A6,
		6.82%, 05/15/2029		979,107
	443,627	Series 1998-3, Class A5,
		6.22%, 03/01/2030		480,948
	2,000,000	Renaissance Home
		Equity Loan Trust,
		Series 2007-2,
		Class AF2, 5.675%,
		06/25/2037		822,020
	138,347	Residential Asset
		Mortgage Products, Inc.,
		Series 2003-RS7,
		Class AI6, 5.34%,
		08/25/2033		135,970
				7,235,143
Commercial Mortgage Backed Securities – 5.8%
	10,000,000	Bear Stearns Commercial
		Mortgage Securities,
		Series 2005-PWR9,
		Class A4A, 4.871%,
		09/11/2042		10,845,840
	5,808,250	Credit Suisse First
		Boston Mortgage
		Securities Corporation,
		Series 2005-C5, Class A4,
		5.10%, 08/15/2038 @		6,358,367
		GE Capital Commercial
		Mortgage Corporation:
	276,201	Series 2004-C3, Class A3,
		4.865%, 07/10/2039		276,766
	7,180,000	Series 2004-C3, Class A4,
		5.189%, 07/10/2039		7,681,200
	21,148	Government National
		Mortgage Association
		(GNMA),
		Series 2006-15, Class A,
		3.727%, 03/16/2027		21,126

The accompanying notes are an integral part of these financial statements.

Page 9

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Commercial Mortgage
Backed Securities – 5.8% (cont.)
		J.P. Morgan Chase
		Commercial Mortgage
		Securities Corp.:
$	8,774,000	Series 2005-CB12,
		Class A4, 4.895%,
		09/12/2037	$	9,570,855
	11,494,564	Series 2003-CB7,
		Class A4, 4.879%,
		01/12/2038		12,055,556
	3,372,469	RBSCF Trust,
		Series 2010-MB1,
		2.367%, 04/15/2024
		(Acquired 04/09/2010;
		Cost $3,372,399)*		3,435,069
	8,592,492	Wachovia Bank
		Commercial Mortgage
		Trust, Series 2003-C3,
		Class A2, 4.867%,
		02/15/2035		8,804,056
				59,048,835
Financial – 34.8%
	1,000,000	Abbey National
		Treasury Services PLC,
		3.875%, 11/10/2014
		(Acquired 12/29/2011;
		Cost $938,680)* f		938,507
	5,650,000	ABN AMRO Bank N.V.,
		3.00%, 01/31/2014
		(Acquired 01/27/2011
		through 04/28/2011;
		Aggregate Cost
		$5,654,693)* f @		5,609,303
	6,172,000	Aegon NV,
		4.75%, 06/01/2013 f		6,315,320
		Allstate Corporation:
	3,920,000	7.50%, 06/15/2013		4,225,329
	1,080,000	5.00%, 08/15/2014		1,165,476
	4,095,000	American Express Credit
		Corporation, Series C,
		7.30%, 08/20/2013		4,444,136
	1,100,000	Amsouth Bank NA,
		4.85%, 04/01/2013		1,064,250
	7,678,000	ANZ National
		International,
		6.20%, 07/19/2013
		(Acquired 05/25/2010
		through 06/09/2011;
		Aggregate Cost
		$8,127,421)* f		8,146,842
	3,600,000	AON Corporation,
		7.375%, 12/14/2012 @		3,795,210
	5,165,000	ASIF Global
		Financing XIX,
		4.90%, 01/17/2013
		(Acquired 05/26/2011
		through 09/28/2011;
		Aggregate Cost
		$5,323,061)*		5,208,138
	3,500,000	Bank of Ireland,
		2.75%, 03/02/2012
		(Acquired 06/01/2010;
		Cost $3,493,284)* f		3,469,588
	2,277,000	BankAmerica Institutional,
		8.07%, 12/31/2026
		(Acquired 07/22/2010;
		Cost $2,254,230)*		2,049,300
		Barclays Bank PLC Senior
		Unsecured Notes: f
	2,600,000	2.50%, 01/23/2013		2,588,911
	2,605,000	5.20%, 07/10/2014		2,685,286

The accompanying notes are an integral part of these financial statements.

Page 10

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
$	2,000,000	BB&T Corporation,
		2.05%, 04/28/2014 @	$	2,019,572
	1,354,000	Capital One Bank
		USA NA,
		6.50%, 06/13/2013		1,428,198
	4,900,000	Capital One Financial
		Corporation,
		7.375%, 05/23/2014		5,383,689
	2,790,000	CDP Financial Inc.,
		3.00%, 11/25/2014
		(Acquired 11/20/2009
		through 06/25/2010;
		Aggregate Cost
		$2,790,739)* f		2,901,366
	5,500,000	Cie de
		Financement Foncier,
		2.25%, 03/07/2014
		(Acquired 03/01/2011
		through 12/14/2011;
		Aggregate Cost
		$5,491,706)* f		5,406,461
		CIT Group, Inc.:
	50	7.00%, 05/01/2015		50
	287,000	7.00%, 05/04/2015
		(Acquired 04/29/2008
		through 06/09/2008;
		Aggregate Cost
		$287,000)* @		287,359
	417	7.00%, 05/01/2016		417
	478,000	7.00%, 05/02/2016
		(Acquired 04/29/2008
		through 06/09/2008;
		Aggregate Cost
		$478,000)* @		477,402
	783	7.00%, 05/01/2017		783
	669,000	7.00%, 05/02/2017
		(Acquired 04/29/2008
		through 06/09/2008;
		Aggregate Cost
		$667,058)* @		668,164
		Citigroup, Inc.:
	2,900,000	6.50%, 08/19/2013 @		3,018,793
	7,000,000	6.01%, 01/15/2015		7,312,935
		CNA Financial
		Corporation:
	2,125,000	5.85%, 12/15/2014		2,239,142
	525,000	6.50%, 08/15/2016		567,869
	4,100,000	Comerica Bank,
		5.70%, 06/01/2014		4,419,574
	4,000,000	Commonwealth
		Bank of Australia,
		3.50%, 03/19/2015
		(Acquired 08/30/2010;
		Cost $4,121,658)* f		4,084,240
		Countrywide Financial
		Corporation:
	990,000	5.80%, 06/07/2012 @		992,083
	800,000	6.25%, 05/15/2016 @		753,707
	5,871,000	Credit Suisse New York,
		5.00%, 05/15/2013 f		6,022,513
	4,050,000	The Dai-ichi Mutual
		Life Insurance Company,
		5.73%, 03/17/2014
		(Acquired 03/02/2011;
		Cost $4,252,260)* f		4,247,361
	5,000,000	Deutsche Bank
		Aktiengesellschaft,
		4.875%, 05/20/2013 f		5,111,020
	640,000	Dresdner Bank-New York
		Subordinated Debentures,
		7.25%, 09/15/2015 f @		536,778

The accompanying notes are an integral part of these financial statements.

Page 11

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
		Fifth Third Bancorp:
$	3,752,000	6.25%, 05/01/2013	$	3,944,117
	4,955,000	0.479%, 05/17/2013		4,862,332
	550,000	3.625%, 01/25/2016 @		558,026
	1,000,000	First Empire
		Capital Trust I,
		8.234%, 02/01/2027		1,003,613
	1,500,000	First Hawaiian Capital
		Trust I, Series B,
		8.343%, 07/01/2027		1,357,500
	7,915,000	FMR LLC,
		4.75%, 03/01/2013
		(Acquired 10/04/2010
		through 04/06/2011;
		Aggregate Cost
		$8,175,105)*		8,115,827
		General Electric
		Capital Corporation:
	5,000,000	2.10%, 01/07/2014		5,074,850
	2,000,000	5.90%, 05/13/2014		2,190,304
	800,000	4.75%, 09/15/2014 @		862,677
	5,000,000	4.875%, 03/04/2015		5,424,720
	4,980,000	Genworth Life
		Institutional Funding
		Trust, 5.875%,
		05/03/2013 (Acquired
		04/07/2010 through
		03/22/2011; Aggregate
		Cost $5,153,388)*		5,061,259
	787,000	GMAC Inc.,
		7.50%, 12/31/2013		808,642
	225,000	The Goldman
		Sachs Group Inc.,
		3.70%, 08/01/2015 @		220,433
	5,200,000	Goldman Sachs
		Group LP, 8.00%,
		03/01/2013 (Acquired
		04/16/2009 through
		10/12/2011; Aggregate
		Cost $5,440,182)*		5,432,658
	3,000,000	Hartford Financial
		Services Group, Inc.,
		5.50%, 10/15/2016		3,116,028
	1,000,000	Hartford Life
		Global Funding,
		0.609%, 01/17/2012		999,848
		HSBC Finance
		Corporation:
	2,000,000	5.90%, 06/19/2012		2,029,836
	4,200,000	6.375%, 11/27/2012		4,319,868
	1,451,000	4.75%, 07/15/2013		1,481,678
	221,000	6.676%, 01/15/2021		228,602
	1,500,000	HSBC USA Capital
		Trust II, 8.38%,
		05/15/2027 (Acquired
		11/06/2007; Cost
		$1,538,226)* @		1,486,730
		ING Bank N.V.: f
	205,000	2.65%, 01/14/2013
		(Acquired 04/12/2011;
		Cost $206,550)*		204,394
	5,000,000	2.00%, 10/18/2013
		(Acquired 10/13/2010
		through 10/28/2010;
		Aggregate Cost
		$4,993,282)*		4,883,555
	5,675,000	Invesco Ltd.,
		5.375%, 02/27/2013 f		5,898,192

The accompanying notes are an integral part of these financial statements.

Page 12

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
$	5,050,000	Irish Life & Permanent
		Group Holdings PLC,
		3.60%, 01/14/2013
		(Acquired 01/07/2010
		through 08/05/2010;
		Aggregate Cost
		$5,052,950)* f	$	4,416,609
	1,150,000	Jefferies Group, Inc.,
		7.75%, 03/15/2012 @		1,167,250
	1,446,000	Jefferson-Pilot Corp.,
		4.75%, 01/30/2014		1,495,825
		J.P. Morgan Chase & Co.:
	2,025,000	5.75%, 01/02/2013		2,100,613
	723,000	5.125%, 09/15/2014		762,260
	4,050,000	3.45%, 03/01/2016		4,114,610
	1,000,000	Key Bank NA,
		5.80%, 07/01/2014		1,067,682
	3,374,000	KeyCorp,
		6.50%, 05/14/2013		3,569,675
	5,000,000	Kookmin Bank,
		7.25%, 05/14/2014
		(Acquired 05/26/2009
		through 12/15/2011;
		Aggregate Cost
		$5,340,643)* f		5,522,705
		Liberty Mutual
		Group Inc.:
	3,992,000	7.25%, 09/01/2012
		(Acquired 03/31/2010
		through 09/21/2011;
		Aggregate Cost
		$4,101,081)*		4,114,826
	3,188,000	5.75%, 03/15/2014
		(Acquired 09/03/2009
		through 10/05/2010;
		Aggregate Cost
		$3,040,393)*@		3,324,437
	1,700,000	Lincoln National
		Corporation,
		5.65%, 08/27/2012		1,734,250
	1,110,000	Lloyds TSB Bank PLC,
		4.375%, 01/12/2015
		(Acquired 01/05/2010
		through 10/31/2011;
		Aggregate Cost
		$1,110,247)* f		1,068,548
		M&I Marshall &
		Ilsley Bank:
	787,000	5.25%, 09/04/2012		808,643
	5,357,000	4.85%, 06/16/2015		5,654,587
	620,000	Manufacturers &
		Traders Trust Co.,
		1.751%, 04/01/2013		613,832
	5,035,000	Manulife Financial Corp.,
		3.40%, 09/17/2015 f		5,063,080
		Marsh & McLennan
		Companies, Inc.:
	2,512,000	6.25%, 03/15/2012		2,535,567
	4,490,000	4.85%, 02/15/2013		4,632,643
		Massmutual Global
		Funding II:
	2,550,000	2.875%, 04/21/2014
		(Acquired 10/24/2011;
		Cost $2,616,048)*		2,613,253
	3,000,000	2.30%, 09/28/2015
		(Acquired 11/22/2011;
		Cost $2,996,460)*		3,011,937
	2,671,000	MBNA Capital, Series A,
		8.278%, 12/01/2026		2,477,353

The accompanying notes are an integral part of these financial statements.

Page 13

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
$	3,166,000	Mercantile Bankshares
		Corporation Subordinated
		Notes, Series B,
		4.625%, 04/15/2013	$	3,299,159
	300,000	Merrill Lynch
		& Company,
		6.05%, 08/15/2012 @		304,332
		Metropolitan Life
		Global Funding I:
	3,242,000	5.125%, 04/10/2013
		(Acquired 10/25/2010
		through 03/17/2011;
		Aggregate Cost
		$3,390,617)*		3,386,700
	3,173,000	5.20%, 09/18/2013
		(Acquired 10/21/2010
		through 09/23/2011;
		Aggregate Cost
		$3,365,245)*		3,364,300
	1,800,000	3.125%, 01/11/2016
		(Acquired 01/04/2011;
		Cost $1,797,444)*		1,847,070
		Monumental Global
		Funding III:
	350,000	0.588%, 1/25/2013
		(Acquired 07/28/2009;
		Cost 335,098)*		344,905
	1,265,000	5.50%, 04/22/2013
		(Acquired 09/23/2009
		through 03/16/2010;
		Aggregate Cost
		$1,292,462)*		1,317,319
		Morgan Stanley:
	2,600,000	2.875%, 01/24/2014		2,490,259
	1,000,000	4.00%, 07/24/2015		937,752
	3,516,000	Morgan Stanley
		Dean Witter & Co.,
		6.75%, 10/15/2013 @		3,651,370
	475,000	National City
		Bank of Cleveland
		Subordinated Notes,
		4.625%, 05/01/2013		493,110
	350,000	Nationwide Financial
		Services Inc.,
		5.90%, 07/01/2012		354,038
	2,273,000	NB Capital Trust IV,
		8.25%, 04/15/2027		2,091,160
	1,000,000	Nomura Holdings Inc.,
		5.00%, 03/04/2015 f		1,006,971
	1,000,000	North Fork
		Capital Trust II,
		8.00%, 12/15/2027		950,000
	925,000	PNC Funding Corp.,
		5.50%, 09/28/2012		950,296
	4,525,000	Principal Life Global,
		6.25%, 02/15/2012
		(Acquired 08/18/2009
		through 04/06/2010;
		Aggregate Cost
		$4,541,369)* @		4,553,679
		Principal Life Income
		Funding Trusts:
	1,180,000	5.30%, 12/14/2012		1,228,137
	2,000,000	5.10%, 04/15/2014		2,112,612
	2,221,000	Protective Life
		Secured Trust,
		5.45%, 09/28/2012		2,280,554
		Prudential Financial Inc.:
	3,900,000	2.75%, 01/14/2013		3,933,602
	2,428,000	5.15%, 01/15/2013		2,513,699
	1,370,000	4.50%, 07/15/2013 @		1,420,291
	2,455,000	6.20%, 01/15/2015		2,682,714

The accompanying notes are an integral part of these financial statements.

Page 14

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
$	1,000,000	Rabobank Nederland
		Global Senior
		Unsecured Notes,
		4.20%, 05/13/2014
		(Acquired 05/06/2009;
		Cost $998,170)* f	$	1,047,768
		Royal Bank of
		Scotland PLC: f
	1,000,000	3.40%, 08/23/2013		972,862
	3,000,000	4.875%, 08/25/2014
		(Acquired 08/18/2009
		through 01/27/2011;
		Aggregate Cost
		$3,014,287)*		2,935,437
	1,600,000	Santander U.S. Debt S.A.
		Unipersonal, 2.991%,
		10/07/2013 (Acquired
		09/27/2010 through
		12/14/2010; Aggregate
		Cost $1,595,863)* f		1,529,621
		SLM Corporation:
	135,000	5.125%, 08/27/2012		135,689
	1,000,000	5.375%, 01/15/2013		1,006,899
	4,765,000	5.00%, 10/01/2013 @		4,765,000
	5,000,000	Societe Generale SA,
		2.20%, 09/14/2013
		(Acquired 09/07/2010;
		Cost $4,994,350)* f		4,697,890
	1,875,000	SouthTrust Corporation,
		5.80%, 06/15/2014		1,998,407
	3,000,000	Sovereign Bancorp, Inc.,
		5.125%, 03/15/2013		3,008,124
	4,000,000	Sumitomo Mitsui
		Banking Corporation,
		2.15%, 07/22/2013
		(Acquired 07/14/2010;
		Cost $3,998,480)* f		4,061,204
	5,435,000	SunTrust Banks, Inc.,
		5.25%, 11/05/2012		5,570,000
	4,850,000	Svenska Handelsbanken
		AB, 4.875%, 06/10/2014
		(Acquired 09/20/2011
		through 12/13/2011;
		Aggregate Cost
		$5,123,773)* f		5,046,478
	5,000,000	UBS AG,
		2.25%, 01/28/2014 f		4,865,590
	5,575,000	UFJ Finance
		Aruba A.E.C.,
		6.75%, 07/15/2013 f		5,957,205
	750,000	UnitedHealth
		Group, Inc.,
		4.75%, 02/10/2014		803,620
	1,000,000	U.S. Bancorp,
		1.125%, 10/30/2013		1,001,870
	1,600,000	WEA Finance LLC,
		7.50%, 06/02/2014
		(Acquired 12/14/2011;
		Cost $1,754,105)*		1,753,987
	5,260,000	Wellpoint, Inc.,
		6.80%, 08/01/2012		5,439,066
	5,250,000	Wells Fargo Bank NA,
		4.75%, 02/09/2015		5,477,267
	2,500,000	Westpac Banking
		Corporation,
		1.90%, 12/14/2012
		(Acquired 12/07/2009;
		Cost $2,498,700)* f		2,523,013

The accompanying notes are an integral part of these financial statements.

Page 15

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Financial – 34.8% (cont.)
$	710,000	Westpac Securities NZ
		Ltd., 2.50%, 05/25/2012
		(Acquired 03/05/2010;
		Cost $712,713)* f	$	714,342
				353,846,314
Industrial – 25.5%
	2,775,000	Amgen Inc.,
		1.875%, 11/15/2014 @		2,810,917
	5,000,000	Anadarko Petroleum
		Corporation,
		5.75%, 06/15/2014		5,380,925
	4,900,000	Anglo American Capital
		PLC, 2.15%, 09/27/2013
		(Acquired 09/20/2010
		through 10/13/2011;
		Aggregate Cost
		$4,892,744)* f		4,908,139
	2,854,000	Anheuser Busch
		Inbev Worldwide,
		3.00%, 10/15/2012		2,898,671
		ArcelorMittal: f
	2,500,000	5.375%, 06/01/2013		2,559,245
	341,000	9.00%, 02/15/2015		377,005
	1,275,000	3.75%, 08/05/2015 @		1,218,871
	3,000,000	Barrick Gold Corp.,
		1.75%, 05/30/2014 f		3,029,577
	600,000	The Black &
		Decker Corporation,
		8.95%, 04/15/2014		692,915
	5,000,000	BP Capital Markets PLC,
		5.25%, 11/07/2013 f		5,362,820
	5,000,000	British
		Telecommunications PLC,
		5.15%, 01/15/2013 f		5,176,730
		Bunge Limited Finance
		Corporation:
	3,658,000	5.875%, 05/15/2013		3,807,301
	3,000,000	5.35%, 04/15/2014		3,146,559
	1,273,000	Cadbury Schweppes
		U.S. Finance LLC,
		5.125%, 10/01/2013
		(Acquired 09/03/2010
		through 06/22/2011;
		Aggregate Cost
		$1,345,704)*		1,356,536
	4,725,000	CBS Corporation,
		8.20%, 05/15/2014		5,357,219
	5,176,000	Chevron Phillips
		Chemical Company LLC,
		7.00%, 06/15/2014
		(Acquired 07/20/2010
		through 05/25/2011;
		Aggregate Cost
		$5,690,717)* @		5,776,250
	2,191,000	Comcast Holdings
		Corporation,
		10.625%, 07/15/2012		2,284,805
	7,367,000	Computer Sciences
		Corporation,
		5.50%, 03/15/2013 @		7,330,165
		COX
		Communications Inc.:
	4,052,000	7.125%, 10/01/2012		4,242,659
	1,224,000	5.45%, 12/15/2014		1,358,673
	1,750,000	Daimler Finance
		North America LLC,
		6.50%, 11/15/2013		1,906,095
	550,000	Deutsche Telekom
		International Finance B.V.,
		5.25%, 07/22/2013 f		577,997

The accompanying notes are an integral part of these financial statements.

Page 16

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Industrial – 25.5% (cont.)
$	6,195,000	DIRECTV
		Holdings/Financing,
		7.625%, 05/15/2016	$	6,574,444
	2,525,000	EnCana Holdings
		Finance Corp.,
		5.80%, 05/01/2014 f		2,742,317
	6,000,000	EOG Resources
		Canada Inc.,
		4.75%, 03/15/2014
		(Acquired 03/07/2011
		through 11/04/2011;
		Aggregate Cost
		$6,399,985)* f		6,457,980
	5,000,000	Express Scripts, Inc.,
		6.25%, 06/15/2014		5,449,680
		FedEx Corporation:
	450,000	9.65%, 06/15/2012		467,425
	2,460,000	7.375%, 01/15/2014		2,748,435
	4,900,000	Freeport-McMoRan
		Copper & Gold Inc.,
		8.375%, 04/01/2017		5,206,250
	5,000,000	Georgia-Pacific LLC,
		8.25%, 05/01/2016
		(Acquired 04/27/2011;
		Cost $5,537,379)*		5,554,800
	1,000,000	Gilead Sciences, Inc.,
		2.40%, 12/01/2014		1,018,008
	5,845,000	Glencore Funding LLC,
		6.00%, 04/15/2014
		(Acquired 01/12/2010
		through 08/22/2011;
		Aggregate Cost
		$6,040,876)*		6,037,412
	5,305,000	HP Enterprise Services
		LLC, Series B,
		6.00%, 08/01/2013		5,623,693
	6,212,000	Hutchison Whampoa
		International Ltd.,
		6.50%, 02/13/2013
		(Acquired 01/20/2010
		through 10/18/2011;
		Aggregate Cost
		$6,477,349)* f		6,492,143
	5,115,000	Kraft Foods Inc.
		Senior Unsecured Notes,
		2.625%, 05/08/2013		5,225,622
	6,025,000	Laboratory Corporation
		of America Holdings,
		5.50%, 02/01/2013		6,284,208
	5,000,000	Lafarge North
		America Inc.,
		6.875%, 07/15/2013		5,107,700
	6,030,000	Motiva Enterprises LLC
		Senior Unsecured Notes,
		5.20%, 09/15/2012
		(Acquired 05/13/2009
		through 10/22/2010;
		Aggregate Cost
		$6,117,293)*		6,155,593
	4,325,000	Nabors Industries, Inc.,
		5.375%, 08/15/2012		4,420,595
	4,700,000	National Oilwell
		Varco Inc., Series B,
		6.125%, 08/15/2015		4,811,545
	482,000	Pearson Dollar
		Finance PLC,
		5.70%, 06/01/2014
		(Acquired 06/20/2011;
		Cost $521,156)* f		526,089

The accompanying notes are an integral part of these financial statements.

Page 17

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Industrial – 25.5% (cont.)
$	4,426,000	Pearson Dollar Finance
		Two PLC, 5.50%,
		05/06/2013 (Acquired
		05/31/2011 through
		06/15/2011; Aggregate
		Cost $4,653,860)* f	$	4,653,585
	5,000,000	Petrohawk Energy
		Corporation,
		7.875%, 06/01/2015		5,325,000
	2,075,000	Plum Creek
		Timberlands, L.P.,
		5.875%, 11/15/2015		2,303,196
	7,300,000	POSCO,
		8.75%, 03/26/2014
		(Acquired 03/19/2009
		through 04/28/2011;
		Aggregate
		Cost $7,975,057)* f		8,201,083
	5,000,000	Potash Corporation of
		Saskatchewan Inc.,
		5.25%, 05/15/2014 f		5,487,490
	4,000,000	Reed Elsevier
		Capital Inc.,
		7.75%, 01/15/2014		4,462,880
	2,332,000	Rio Tinto Alcan, Inc.,
		5.20%, 01/15/2014 f @		2,491,217
	425,000	Southwestern Bell
		Telephone, L.P.,
		7.00%, 07/01/2015		496,510
	1,672,000	Teck Resources Limited,
		9.75%, 05/15/2014 f		1,964,883
		Telecom Italia Capital: f
	120,000	5.25%, 11/15/2013		115,270
	4,875,000	4.95%, 09/30/2014		4,524,995
	175,000	5.25%, 10/01/2015 @		160,533
		Telefonica
		Emisiones S.A.U.: f
	2,535,000	5.855%,
		02/04/2013 @		2,577,502
	2,000,000	2.582%, 04/26/2013		1,951,594
	1,000,000	Telefonica Moviles
		Chile SA,
		2.875%, 11/09/2015
		(Acquired 11/03/2010;
		Cost $997,270)* f		986,944
		Time Warner, Inc.:
	4,359,000	8.875%, 10/01/2012		4,593,671
	3,600,000	3.15%, 07/15/2015 @		3,744,432
		Tyco Electronics
		Group S.A.: f
	1,645,000	6.00%, 10/01/2012		1,702,721
	1,655,000	5.95%, 01/15/2014		1,763,547
	265,000	Tyco International
		Finance S.A.,
		6.00%, 11/15/2013 f		287,083
	5,714,000	Union Pacific Railroad
		Co. 2004 Pass Through
		Trust, 5.214%,
		09/30/2014 (Acquired
		10/22/2010 through
		08/17/2011; Aggregate
		Cost $6,165,948)*		6,159,635
	1,500,000	USX Corporation,
		9.125%, 01/15/2013		1,601,851
	5,901,000	Vale Inco Limited,
		7.75%, 05/15/2012 f		6,022,136
		Valero Energy
		Corporation:
	3,935,000	6.875%, 04/15/2012		3,998,963
	1,100,000	4.75%, 04/01/2014		1,170,497

The accompanying notes are an integral part of these financial statements.

Page 18

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Industrial – 25.5% (cont.)
		Volkswagen International
		Finance N.V.: f
$	3,000,000	1.625%, 08/12/2013
		(Acquired 08/05/2010;
		Cost $2,991,000)*	$	3,008,241
	2,260,000	0.982%, 04/01/2014
		(Acquired 03/23/2011
		through 12/15/2011;
		Aggregate Cost
		$2,254,566)*		2,214,601
	341,000	Vulcan Materials Co.,
		5.60%, 11/30/2012		353,787
		Waste Management, Inc.:
	2,094,000	6.375%, 11/15/2012		2,189,107
	3,700,000	5.00%, 03/15/2014		3,965,301
	2,025,000	Whirlpool Corp.,
		8.00%, 05/01/2012		2,070,186
	6,100,000	Xerox Corporation,
		8.25%, 05/15/2014		6,883,124
	3,515,000	Xstrata Canada
		Corp., 7.25%,
		07/15/2012 f @		3,620,903
				259,516,481
Other Government Related Securities – 1.5%
	2,500,000	Corp Andina de Fomento,
		5.20%, 05/21/2013 f		2,615,300
	2,000,000	Export-Import
		Bank of Korea Notes,
		5.50%, 10/17/2012 f		2,046,320
	350,000	Korea Development Bank,
		5.30%, 01/17/2013 f		359,955
	1,545,000	Korea Electric
		Power Corporation,
		7.75%, 04/01/2013 f		1,643,450
	3,805,000	Korea Southern
		Power Co., Ltd.,
		5.375%, 04/18/2013
		(Acquired 02/22/2011;
		Cost $3,950,740)* f		3,940,806
	4,400,000	Landesbank
		Baden-Wurttemgerg
		Subordinated Notes,
		6.35%, 04/01/2012 f		4,446,218
				15,052,049
Residential Mortgage Backed Securities – 1.1%
		Bank of America
		Alternative Loan Trust:
	389,533	Series 2003-4, Class 2A1,
		5.00%, 06/25/2018		402,105
	1,523,859	Series 2004-2, Class 5A1,
		5.50%, 03/25/2019		1,587,940
		Countrywide Alternative
		Loan Trust:
	651,813	Series 2005-50CB,
		Class 4A1,
		5.00%, 11/25/2020 §		560,256
	432,294	Series 2005-34CB,
		Class 1A6,
		5.50%, 09/25/2035		431,097
	269,034	Series 2005-73CB, Class
		1A7, 5.50%, 01/25/2036		244,850
	1,706,671	Series 2006-28CB, Class
		A17, 6.00%, 10/25/2036 §		1,059,199
	36,222	Credit Suisse First
		Boston Mortgage
		Securities Corporation,
		Series 2005-11, Class
		5A1, 5.25%, 12/25/2020		36,105

The accompanying notes are an integral part of these financial statements.

Page 19

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Residential Mortgage Backed Securities – 1.1% (cont.)
		Federal Home Loan
		Mortgage Corporation
		(FHLMC):
$	226,429	Series 3033, Class LU,
		5.50%, 03/15/2013	$	227,956
	1,026,962	Series 3124, Class VP,
		6.00%, 06/15/2014		1,060,697
	29,672	Series R001, Class AE,
		4.375%, 04/15/2015		29,664
	825,593	Series 2857, Class VA,
		5.00%, 09/15/2015		842,574
	266,279	Series 2910, Class BD,
		4.50%, 11/15/2018		272,402
	21,800	Series 5, Class B,
		1.013%, 05/15/2019		21,811
	66,428	Series 2970, Class DA,
		5.50%, 01/15/2023		67,186
		Federal National
		Mortgage Association
		(FNMA):
	150,776	5.50%, 07/01/2015		163,842
	47,465	Series 2006-B1, Class AB,
		6.00%, 06/25/2016		47,500
	1,771,963	Series 2004-W6, Class
		1A4, 5.50%, 07/25/2034		1,826,027
	802,277	Series 2004-W6, Class
		1A6, 5.50%, 07/25/2034		839,606
	299,656	Series 2004-W10, Class
		A24, 5.00%, 08/25/2034		298,959
	233,399	J.P. Morgan
		Alternative Loan Trust,
		Series 2006-S2, Class A2,
		5.81%, 05/25/2036		232,375
	209,739	Merrill Lynch Mortgage
		Investors Trust, Series
		2005-A8, Class A1C1,
		5.25%, 08/25/2036		208,245
		Washington Mutual, Inc.
		Pass-Thru Certificates:
	287,917	Series 2004-CB4, Class
		21A, 5.50%, 12/25/2019		294,377
	284,735	Series 2004-CB4,
		Class 22A, 6.00%,
		12/25/2019		294,970
				11,049,743
Taxable Municipal Bonds – 6.1%
		Alaska Municipal
		Bond Bank Authority:
	1,000,000	1.422%, 08/01/2012		1,003,600
	1,000,000	1.918%, 08/01/2013		1,014,910
	1,170,000	City of Arlington TX,
		4.68%, 08/15/2013		1,230,711
		City of Des Moines IA:
	1,000,000	2.082%, 06/01/2012		1,001,650
	1,240,000	2.587%, 06/01/2013		1,254,843
	3,000,000	City of Frederick MD,
		4.52%, 03/01/2013		3,120,630
	8,240,000	Delaware State Economic
		Development Authority,
		2.30%, 07/01/2028		8,274,031
	281,679	Educational Enhancement
		Funding Corporation,
		6.72%, 06/01/2025		263,953
	6,450,000	Government Development
		Bank for Puerto Rico,
		3.67%, 05/01/2014		6,519,982
		Illinois State:
	7,200,000	2.186%, 02/01/2012		7,206,408
	445,000	4.071%, 01/01/2014		456,908
	2,030,000	4.422%, 04/01/2015		2,103,121

The accompanying notes are an integral part of these financial statements.

Page 20

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Taxable Municipal Bonds – 6.1% (cont.)
$	5,000,000	Michigan Strategic
		Fund, 4.50%,
		12/01/2013	$	5,265,200
	7,000,000	New Hampshire
		Business Finance
		Authority, 7.125%,
		07/01/2027		7,028,560
	8,000,000	Port Freeport TX,
		6.25%, 05/15/2033		8,160,000
	1,690,000	Puerto Rico Public
		Finance Corp.,
		6.10%, 08/01/2017
		(Callable 02/13/2012)		1,811,832
	5,000,000	Regional Transportation
		Authority Illinois,
		2.843%, 07/01/2012		5,052,200
	1,000,000	San Francisco
		California City &
		County Revenue Bonds,
		1.869%, 05/01/2012		1,003,910
	175,000	Tobacco Settlement
		Authority Iowa,
		6.50%, 06/01/2023
		(Callable 06/01/2015)		163,503
				61,935,952
Utilities – 14.9%
	3,985,000	Allegheny Energy Supply
		Co. Senior Unsecured
		Notes, 8.25%,
		04/15/2012 (Acquired
		07/28/2010 through
		12/09/2010; Aggregate
		Cost $4,047,202)* @		4,056,953
	4,239,000	Ameren Corporation,
		8.875%, 05/15/2014		4,750,079
	2,200,000	Appalachian Power
		Co., Series O,
		5.65%, 08/15/2012		2,261,721
	2,650,000	Arizona Public Service
		Co., 6.50%, 03/01/2012		2,673,863
	1,000,000	Baltimore Gas &
		Electric Co. Senior
		Unsecured Notes,
		6.125%, 07/01/2013		1,074,126
	3,358,000	Beaver Valley Funding
		Corporation Debentures,
		9.00%, 06/01/2017		3,532,851
	1,000,000	Consolidated Edison
		Company of New York,
		Inc., 4.70%, 02/01/2014		1,074,460
	4,889,000	Consolidated Natural
		Gas, Series A,
		5.00%, 03/01/2014		5,255,093
	3,340,000	DCP Midstream LLC,
		9.70%, 12/01/2013
		(Acquired 07/29/2010
		through 09/17/2010;
		Aggregate Cost
		$3,801,860)*		3,768,462
	500,000	Duke Energy Corp.,
		6.30%, 02/01/2014		551,642
	3,160,000	Duquesne Light Co.,
		Series O,
		6.70%, 04/15/2012		3,207,523
	5,000,000	El Paso Pipeline Partners
		Operating Co LLC,
		4.10%, 11/15/2015		5,118,640

The accompanying notes are an integral part of these financial statements.

Page 21

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Utilities – 14.9% (cont.)
$	4,000,000	Enel Finance International,
		5.70%, 01/15/2013
		(Acquired 03/10/2010
		through 03/31/2010;
		Aggregate Cost
		$4,128,229)* f @	$	4,015,080
		Energy Transfer Partners:
	2,500,000	5.65%, 08/01/2012		2,554,177
	1,495,000	8.50%, 04/15/2014		1,676,169
	2,500,000	5.95%, 02/01/2015		2,702,183
	1,000,000	9.70%, 03/15/2019		1,225,150
		Enterprise Products
		Operating LLC:
	2,630,000	6.125%, 02/01/2013		2,744,965
	1,701,000	Series O, 9.75%,
		01/31/2014		1,964,900
	1,130,000	Exelon Corporation,
		4.90%, 06/15/2015		1,217,551
	4,750,000	Exelon Generation
		Company, LLC,
		5.35%, 01/15/2014 @		5,073,694
	3,662,819	GG1C Funding
		Corporation, 5.129%,
		01/15/2014 (Acquired
		04/02/2009 through
		07/28/2011; Aggregate
		Cost $3,649,253)*		3,739,152
	6,600,000	Gulf South Pipeline
		Company, L.P., 5.75%,
		08/15/2012 (Acquired
		03/25/2011 through
		04/12/2011; Aggregate
		Cost $6,779,727)*		6,745,325
	4,895,000	Indiana Michigan
		Power, Series E,
		6.375%, 11/01/2012		5,095,969
	1,750,000	KeySpan Corporation,
		4.65%, 04/01/2013		1,809,806
	2,895,000	Kinder Morgan Energy
		Partners Senior Notes,
		5.85%, 09/15/2012		2,988,335
	1,169,145	Kiowa Power Partners
		LLC, 4.811%,
		12/30/2013 (Acquired
		05/31/2011 through
		12/29/2011; Aggregate
		Cost $1,169,145)*		1,142,997
	3,180,000	Midamerican Energy
		Holdings Co.,
		5.875%, 10/01/2012		3,291,857
	2,750,000	Nevada Power
		Company,
		7.375%, 01/15/2014		3,036,168
		Nisource Finance Corp.:
	80,000	6.15%, 03/01/2013		84,016
	5,775,000	5.40%, 07/15/2014		6,265,771
	2,500,000	Northeast Utilities,
		7.25%, 04/01/2012		2,535,375
	3,745,000	Pacific Gas and
		Electric Company,
		6.25%, 12/01/2013		4,093,161
	1,100,000	Pennsylvania Electric Co.,
		5.125%, 04/01/2014		1,174,654
	2,745,000	PG&E Corporation,
		5.75%, 04/01/2014		2,990,839
		Plains All
		American Pipeline:
	525,000	4.25%, 09/01/2012		535,534
	4,635,000	5.625%, 12/15/2013		4,952,326

The accompanying notes are an integral part of these financial statements.

Page 22

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.4% (cont.)
Utilities – 14.9% (cont.)
		PPL Energy
		Supply, LLC:
$	738,000	6.30%, 07/15/2013	$	788,477
	200,000	Series A, 5.70%,
		10/15/2015		217,007
	4,739,000	Progress Energy Inc.
		Senior Notes,
		6.85%, 04/15/2012		4,819,222
		Rockies Express
		Pipeline LLC:
	4,000,000	6.25%, 07/15/2013
		(Acquired 05/06/2011
		through 05/13/2011;
		Aggregate Cost
		$4,259,040)*		4,221,292
	2,000,000	3.90%, 04/15/2015
		(Acquired 02/17/2011;
		Cost $2,000,250)*		1,976,384
	2,100,000	Sempra Energy,
		2.00%, 03/15/2014		2,126,605
		Spectra Energy
		Capital LLC:
	1,000,000	5.50%, 03/01/2014		1,067,801
	5,814,000	5.668%, 08/15/2014		6,363,377
	5,000,000	System Energy
		Resources, Inc.,
		6.20%, 10/01/2012		5,185,795
	2,810,000	Trans-Allegheny Interstate
		Line Company, 4.00%,
		01/15/2015 (Acquired
		01/19/2010 through
		07/15/2010; Aggregate
		Cost $2,808,281)*		2,929,088
	650,000	Vectren Utility
		Holdings, Inc.,
		5.25%, 08/01/2013		690,407
	3,249,000	Veolia Environnement,
		5.25%, 06/03/2013 f		3,418,728
	6,000,000	Williams Partners L.P.,
		3.80%, 02/15/2015		6,298,758
				151,083,508
U.S. Treasury Obligations – 8.0%
	76,250,000	U.S. Treasury Bonds,
		2.375%, 03/31/2016 @		81,652,999
				81,652,999
		Total Long-Term
		Investments
		(Cost $1,003,912,683)		1,000,421,024
Shares
SHORT-TERM INVESTMENTS – 0.9%
Money Market Mutual Fund – 0.9%
	9,177,207	Short-Term Investments
		Trust – Liquid Assets
		Portfolio, 0.16% «		9,177,207
		Total Short-Term
		Investments
		(Cost $9,177,207)		9,177,207
Principal
Amount
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 9.2%
Commercial Paper – 0.0%
$	872,492	Atlantic East
		Funding LLC,
		0.610%,
		03/25/2012 †**		544,878
		Total Commercial Paper
		(Cost $872,492)		544,878

The accompanying notes are an integral part of these financial statements.

Page 23

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Shares			Value
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 9.2% (cont.)
Investment Companies – 9.2%
	93,682,575	Mount Vernon Securities
		Lending Trust Prime
		Portfolio, 0.23% «	$	93,682,575
		Total Investment
		Companies
		(Cost $93,682,575)		93,682,575
		Total Investments
		Purchased With Cash
		Proceeds From
		Securities Lending
		(Cost $94,555,067)		94,227,453
		Total Investments
		(Cost $1,107,644,957)
		– 108.5%		1,103,825,684
Asset Relating to Securities
Lending Investments – 0.0%
		Support
		Agreement** ^ a †		327,614
		Total (Cost $0)		327,614
		Liabilities in Excess of
		Other Assets – (8.5)%		(86,923,211	)
		TOTAL NET
		ASSETS – 100.0%	$	1,017,230,087

Notes to Schedule of Investments

* Restricted Security Deemed Liquid

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

^ Non-Income Producing

« 7-Day Yield

§ Security in Default

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

The accompanying notes are an integral part of these financial statements.

Page 24

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Page 25

Baird Short-Term Bond Fund

Schedule of Investments       December 31, 2011

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Fixed Income
Asset Backed Securities	$	—	$	7,235,143	$	—	$	7,235,143
Commercial Mortgage Backed Securities		—		59,048,835		—		59,048,835
Corporate Debt Securities		—		764,446,303		—		764,446,303
Other Government Related Securities		—		15,052,049		—		15,052,049
Residential Mortgage Backed Securities		—		11,049,743		—		11,049,743
Taxable Municipal Bonds		—		61,935,952		—		61,935,952
U.S. Treasury Obligations		—		81,652,999		—		81,652,999
Total Fixed Income		—		1,000,421,024		—		1,000,421,024
Short-Term Investments
Money Market Mutual Fund		9,177,207		—		—		9,177,207
Total Short-Term Investments		9,177,207		—		—		9,177,207
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		544,878		—		544,878
Money Market Mutual Fund		93,682,575		—		—		93,682,575
Total Investments Purchased with
Cash Proceeds from Securities Lending		93,682,575		544,878		—		94,227,453
Total Investments	$	102,859,782	$	1,000,965,902	$	—	$	1,103,825,684
Asset Relating to Securities Lending Investments	$	—	$	327,614	$	—	$	327,614

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.

Page 26

Baird Intermediate Bond Fund

December 31, 2011

The Baird Intermediate Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital Intermediate U.S. Government/Credit Bond Index.  The Barclays Capital Intermediate U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government and corporate securities, with maturities between one and ten years.

The Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong absolute and relative returns in 2011.  Our long-term commitment to duration neutrality was critically important as well.  The primary factors for the Fund’s outperformance over its benchmark were:

• The Fund’s overweight position to the corporate credit sector was a positive for relative performance.  Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year.  This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond.  The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads.

• Modest exposure to commercial mortgage-backed securities (CMBS) was a positive for the year.  As part of our risk management for the exposure to this sector, we hold shorter maturing issues with significant credit enhancement.

• The Fund’s modest exposure to non-Agency mortgages was a positive contributor as pricing remained stable and the Fund benefited from relatively high coupon payments, an important consideration in this low-rate environment.

• Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011).  However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact.

• Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect.

Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.

We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund.  The Fund’s yield advantage over the benchmark index is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.

Page 27

Baird Intermediate Bond Fund

December 31, 2011

Portfolio Characteristics

Quality Distribution*	Sector Weightings*

Net Assets:	$717,945,143	Annualized Expense Ratio:
SEC 30-Day Yield:**		Institutional Class:	0.30	%
Institutional Class:	2.70%	Investor Class:	0.55	%***
Investor Class:	2.45%	Portfolio Turnover Rate:	24.1	%
Average Effective Duration:	3.97 years	Total Number of Holdings:	334
Average Effective Maturity:	4.75 years

* Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending).

** SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2011.

*** Includes 0.25% 12b-1 fee.

Page 28

Baird Intermediate Bond Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Page 29

Baird Intermediate Bond Fund

Total Returns

		Average Annual
				Since
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Inception(1)
Institutional Class Shares	6.14%	6.07%	5.46%	6.04%
Investor Class Shares	5.84%	5.77%	5.18%	5.77%
Barclays Capital Intermediate
U.S. Government/Credit Bond Index(2)	5.80%	5.88%	5.20%	5.75%

(1) For the period from September 29, 2000 (commencement of operations) through December 31, 2011.

(2) The Barclays Capital Intermediate U.S. 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 10 years.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in an index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 30

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2%
Asset Backed Securities – 1.4%
$	51,327	Amresco Residential
		Securities Mortgage
		Loan Trust,
		Series 1998-1, Class A6,
		6.51%, 08/25/2027	$	51,657
	3,923	Cityscape Home
		Equity Loan Trust,
		Series 1997-C, Class A4,
		7.00%, 07/25/2028		3,817
		Countrywide Asset-
		Backed Certificates:
	1,332,919	Series 2006-S3, Class A2,
		6.085%, 06/25/2021 §		904,535
	3,124	Series 2006-S2, Class A2,
		5.627%, 07/25/2027 §		3,114
	96,902	Series 2004-12, Class AF6,
		4.634%, 03/25/2035		94,766
	3,963,654	Series 2005-1, Class AF6,
		5.03%, 07/25/2035		3,795,833
	1,753,839	Series 2006-13, Class 1AF2,
		5.884%, 01/25/2037 §		1,644,477
	356,287	Series 2006-13, Class 1AF3,
		5.944%, 01/25/2037 §		213,978
	1,380,000	Series 2006-9, Class 1AF3,
		5.859%, 10/25/2046		706,732
		Delta Funding Home
		Equity Loan Trust:
	22,050	Series 1997-2, Class A6,
		7.04%, 06/25/2027		22,678
	6,172	Series 1999-1, Class A6F,
		6.34%, 12/15/2028		6,111
	538,268	Series 1999-2, Class A7F,
		7.03%, 08/15/2030		521,836
	8,661	Equivantage Home
		Equity Loan Trust,
		Series 1996-3, Class A3,
		7.70%, 09/25/2027		8,581
		Green Tree Financial
		Corporation:
	60,109	Series 1993-4, Class A5,
		7.05%, 01/15/2019		60,584
	581,360	Series 1998-2, Class A5,
		6.24%, 12/01/2028		608,871
	810,358	Series 1998-3, Class A5,
		6.22%, 03/01/2030		878,531
	310,356	Series 1998-4, Class A5,
		6.18%, 04/01/2030		317,239
	20,084	IMC Home
		Equity Loan Trust,
		Series 1998-1, Class A6,
		7.02%, 06/20/2029		19,968
	135,354	Oakwood Mortgage
		Investors, Inc.,
		Series 1999-B, Class A3,
		6.45%, 11/15/2017		116,203
	42,179	Residential Asset
		Mortgage Products, Inc.,
		Series 2003-RS7, Class AI6,
		5.34%, 08/25/2033		41,454
				10,020,965
Commercial Mortgage Backed Securities – 3.3%
	5,600,000	Citigroup Deutsche Bank,
		Series 2005-CD1, Class A4,
		5.399%, 07/15/2044		6,189,031
	4,000,000	Credit Suisse First
		Boston Mortgage
		Securities Corporation,
		Series 2005-C5, Class A4,
		5.10%, 08/15/2038		4,378,852

The accompanying notes are an integral part of these financial statements.

Page 31

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Commercial Mortgage
Backed Securities – 3.3% (cont.)
		J.P. Morgan Chase
		Commercial Mortgage
		Securities Corp.:
$	5,000,000	Series 2005-CB12, Class
		A4, 4.895%, 09/12/2037	$	5,454,100
	1,915,761	Series 2003-CB7, Class
		A4, 4.879%, 01/12/2038		2,009,259
	5,000,000	Wachovia Bank
		Commercial
		Mortgage Trust,
		Series 2005-C22, Class A4,
		5.444%, 12/15/2044		5,501,895
				23,533,137
Financial – 21.5%
	3,257,000	American Express Credit
		Corporation, Series C,
		7.30%, 08/20/2013		3,534,689
	630,000	AmSouth Bancorp,
		6.75%, 11/01/2025		510,747
	1,850,000	ANZ National (Int’l) LTD,
		2.375%, 12/21/2012
		(Acquired 12/15/2009
		through 05/18/2011;
		Cost $1,851,721)* f		1,881,935
	425,000	AON Corporation,
		3.50%, 09/30/2015		436,118
	1,700,000	Australia and New Zealand
		Banking Group Limited,
		3.25%, 03/01/2016
		(Acquired 02/22/2011;
		Cost $1,693,081)* f @		1,717,252
	600,000	Banco Santander Chile,
		7.375%, 07/18/2012 f		614,077
	835,000	Bank of America
		Corporation
		Subordinated Notes,
		10.20%, 07/15/2015		894,505
	2,390,000	Bank of Ireland,
		2.75%, 03/02/2012
		(Acquired 06/01/2010
		through 07/23/2010;
		Cost $2,385,422)* f		2,369,233
	2,695,000	BankAmerica Institutional,
		8.07%, 12/31/2026
		(Acquired 01/04/2006
		through 11/06/2007;
		Cost $2,749,342)*		2,425,500
	2,500,000	Banponce Trust I, Series A,
		8.327%, 02/01/2027		1,700,000
	2,390,000	Barclays Bank PLC,
		5.00%, 09/22/2016 f		2,475,237
	2,322,000	BB&T Corporation,
		6.85%, 04/30/2019 @		2,833,388
	1,150,000	Bear Stearns Cos., Inc.,
		6.40%, 10/02/2017		1,284,813
		Capital One
		Financial Corporation:
	1,000,000	7.375%, 05/23/2014		1,098,712
	2,000,000	3.15%, 07/15/2016 @		2,008,558
	1,000,000	CDP Financial Inc.,
		4.40%, 11/25/2019
		(Acquired 11/20/2009;
		Cost $997,520)* f		1,085,037
	3,500,000	Cie de Financement Foncier,
		2.25%, 03/07/2014
		(Acquired 07/26/2011;
		Cost $3,531,373)* f		3,440,475

The accompanying notes are an integral part of these financial statements.

Page 32

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Financial – 21.5% (cont.)
		CIT Group, Inc.:
$	302	7.00%, 05/01/2015	$	303
	29,000	7.00%, 05/04/2015
		(Acquired 01/23/2009
		through 01/28/2009;
		Cost $29,000)*		29,036
	839	7.00%, 05/01/2016		839
	48,000	7.00%, 05/02/2016
		(Acquired 01/23/2009
		through 01/28/2009;
		Cost $48,000)* @		47,940
	374	7.00%, 05/01/2017		374
	68,000	7.00%, 05/02/2017
		(Acquired 01/23/2009
		through 01/28/2009;
		Cost $68,000)*		67,915
		Citigroup, Inc.:
	1,000,000	5.50%, 04/11/2013		1,020,923
	200,000	5.50%, 10/15/2014		205,609
	2,100,000	6.01%, 01/15/2015		2,193,881
	2,000,000	CNA Financial
		Corporation,
		6.50%, 08/15/2016		2,163,308
	1,900,000	Countrywide
		Financial Corporation,
		6.25%, 05/15/2016		1,790,055
	2,425,000	Credit Suisse New York,
		5.30%, 08/13/2019 f @		2,500,927
	1,577,000	Dresdner Bank-New York
		Subordinated Debentures,
		7.25%, 09/15/2015 f @		1,322,655
	1,495,000	Fifth Third Bancorp,
		6.25%, 05/01/2013		1,571,550
	1,800,000	Fifth Third Bank,
		4.75%, 02/01/2015		1,864,584
	368,577	First National
		Bank of Chicago
		Pass-Thru Certificates,
		Series 1993-A,
		8.08%, 01/05/2018		416,971
	1,546,000	FMR LLC,
		4.75%, 03/01/2013
		(Acquired 02/26/2003
		through 12/01/2009;
		Cost $1,553,439)*		1,585,227
		General Electric
		Capital Corporation:
	2,000,000	5.625%, 09/15/2017		2,213,550
	1,600,000	6.00%, 08/07/2019		1,837,805
	2,300,000	5.50%, 01/08/2020		2,530,671
	1,150,000	Genworth Financials Inc.,
		5.75%, 06/15/2014 @		1,137,064
	2,620,000	Genworth Life
		Institutional Funding Trust,
		5.875%, 05/03/2013
		(Acquired 03/22/2011;
		Cost $2,730,041)*		2,662,751
		GMAC Inc.:
	80,000	7.50%, 12/31/2013		82,200
	96,000	8.00%, 12/31/2018		94,320
	200,000	GMAC LLC,
		6.75%, 12/01/2014		201,745
		The Goldman
		Sachs Group, Inc.:
	2,125,000	5.15%, 01/15/2014		2,165,445
	700,000	5.95%, 01/18/2018		716,955
	2,000,000	6.15%, 04/01/2018		2,064,178

The accompanying notes are an integral part of these financial statements.

Page 33

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Financial – 21.5% (cont.)
$	1,800,000	Great West Life &
		Annuity Insurance,
		7.153%, 05/16/2046
		(Acquired 05/16/2006
		through 11/08/2007;
		Cost $1,792,736)*	$	1,755,000
	1,000,000	Hartford Financial
		Services Group, Inc.
		4.00%, 03/30/2015		1,004,843
	1,758,000	HSBC Finance
		Corporation,
		6.676%, 01/15/2021		1,818,470
	1,000,000	HSBC Holdings PLC,
		5.25%, 12/12/2012 f @		1,019,510
	2,000,000	Humana Inc.,
		7.20%, 06/15/2018		2,332,928
		ING Bank N.V.: f
	2,000,000	2.00%, 10/18/2013
		(Acquired 10/28/2010;
		Cost $2,001,364)*		1,953,422
	1,000,000	3.00%, 09/01/2015
		(Acquired 08/17/2010;
		Cost $997,320)*		945,425
	1,417,000	Invesco Ltd.,
		5.375%, 02/27/2013 f		1,472,729
	2,075,000	Irish Life & Permanent
		Group Holdings PLC,
		3.60%, 01/14/2013
		(Acquired 01/07/2010;
		Cost $2,073,880)* f		1,814,745
		Istar Financial, Inc.:
	1,050,000	5.95%, 10/15/2013		900,375
	75,000	5.85%, 03/15/2017		59,438
	2,000,000	Jefferies Group Inc.,
		6.875%, 04/15/2021		1,800,000
		J.P. Morgan
		Chase & Co.:
	575,000	5.75%, 01/02/2013		596,470
	1,725,000	3.45%, 03/01/2016		1,752,519
		Key Bank NA:
	1,000,000	5.80%, 07/01/2014		1,067,682
	2,000,000	7.413%, 05/06/2015		2,173,338
	2,600,000	Kookmin Bank,
		7.25%, 05/14/2014
		(Acquired 06/12/2009;
		Cost $2,623,037)* f		2,871,807
		Liberty Mutual
		Group, Inc.:
	1,550,000	7.25%, 09/01/2012
		(Acquired 08/03/2004
		through 08/24/2011;
		Cost $1,579,688)*		1,597,690
	1,000,000	5.75%, 03/15/2014
		(Acquired 09/03/2009
		through 10/15/2010;
		Cost $985,086)*		1,042,797
	1,650,000	Lloyds TSB Bank PLC,
		5.80%, 01/13/2020
		(Acquired 02/09/2010;
		Cost $1,612,801)* f @		1,566,474
	1,925,000	M&I Marshall
		& Ilsley Bank,
		4.85%, 06/16/2015		2,031,936
	1,650,000	Manulife Financial Corp.,
		4.90%, 09/17/2020 f		1,682,333
		Marsh & McLennan
		Companies, Inc.:
	1,825,000	6.25%, 03/15/2012		1,842,122
	700,000	4.85%, 02/15/2013		722,238

The accompanying notes are an integral part of these financial statements.

Page 34

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Financial – 21.5% (cont.)
$	500,000	MBIA Insurance Corp.,
		14.00%, 01/15/2033
		(Acquired 01/11/2008;
		Cost $500,000)*	$	280,000
		Merrill Lynch & Company:
	1,000,000	5.70%, 05/02/2017 @		918,387
	1,000,000	6.875%, 04/25/2018		985,939
	3,000,000	MetLife Institutional
		Funding II,
		1.201%, 04/04/2014
		(Acquired 03/29/2011;
		Cost $3,000,000)*		2,993,358
	1,735,000	Monumental Global
		Funding III,
		5.25%, 01/15/2014
		(Acquired 04/05/2011
		through 12/05/2011;
		Cost $1,826,099)*		1,823,266
		Morgan Stanley:
	100,000	4.75%, 04/01/2014		98,509
	1,400,000	6.625%, 04/01/2018		1,382,420
	750,000	Morgan Stanley
		Dean Witter & Co.,
		6.75%, 10/15/2013		778,876
	1,725,000	National Australia
		Bank Ltd.,
		3.00%, 07/27/2016
		(Acquired 07/20/2011;
		Cost $1,720,239)* f		1,718,562
	2,320,000	Navigators Group Inc.
		Senior Unsecured Notes,
		7.00%, 05/01/2016		2,393,799
	1,260,000	NB Capital Trust IV,
		8.25%, 04/15/2027		1,159,200
	2,500,000	Nomura Holdings Inc.,
		5.00%, 03/04/2015 f		2,517,427
	1,000,000	North Fork Capital
		Trust II,
		8.00%, 12/15/2027		950,000
		Protective Life
		Secured Trust:
	3,091,000	5.45%, 09/28/2012		3,173,882
	1,225,000	4.30%, 06/01/2013		1,259,582
	3,125,000	Prudential Financial Inc.,
		5.15%, 01/15/2013		3,235,300
	2,000,000	Rabobank Nederland
		Global Senior
		Unsecured Notes,
		4.20%, 05/13/2014
		(Acquired 05/06/2009;
		Cost $1,996,340)* f		2,095,536
	1,650,000	Regions Bank,
		7.50%, 05/15/2018 @		1,633,500
	3,100,000	Royal Bank of
		Scotland Group PLC,
		5.625%, 08/24/2020 f		2,973,291
	1,300,000	Schwab Capital Trust I,
		7.50%, 11/15/2037 @		1,300,429
	250,000	SLM Corporation,
		5.375%, 05/15/2014		250,175
	2,880,000	Sovereign Bancorp, Inc.,
		8.75%, 05/30/2018		3,211,168
	1,000,000	St. Paul Travelers, Inc.,
		6.25%, 06/20/2016		1,165,262
	2,100,000	SunTrust Banks, Inc.,
		3.60%, 04/15/2016 @		2,138,508
	2,800,000	Susa Partnership LP,
		8.20%, 06/01/2017		3,360,969
	1,000,000	Symetra Financial
		Corporation,
		6.125%, 04/01/2016
		(Acquired 08/12/2011;
		Cost $1,070,921)*		1,010,537

The accompanying notes are an integral part of these financial statements.

Page 35

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Financial – 21.5% (cont.)
$	850,000	UFJ Finance
		Aruba A.E.C.,
		6.75%, 07/15/2013 f	$	908,273
	665,000	Union Bank NA,
		2.125%, 12/16/2013		672,558
	650,000	Unionbancal Corporation,
		5.25%, 12/16/2013		668,761
	1,450,000	Wellpoint, Inc.,
		6.80%, 08/01/2012		1,499,362
	1,015,000	Wells Fargo Bank NA,
		4.75%, 02/09/2015		1,058,938
	3,000,000	Westpac Banking
		Corporation,
		3.00%, 08/04/2015 f @		3,034,806
	3,000,000	Willis Group
		Holdings Limited,
		5.75%, 03/15/2021 f		3,181,500
				154,455,428
Industrial – 15.9%
		Ameritech Capital
		Funding Debentures:
	817,800	9.10%, 06/01/2016		968,879
	1,008,000	6.45%, 01/15/2018		1,161,116
		Anadarko Petroleum
		Corporation:
	1,000,000	6.375%, 09/15/2017		1,159,134
	1,000,000	6.95%, 06/15/2019		1,193,820
	2,500,000	BP Capital Markets PLC,
		4.75%, 03/10/2019 f		2,776,805
	2,000,000	British
		Telecommunications PLC,
		5.95%, 01/15/2018 f		2,210,158
		Bunge Limited
		Finance Corporation:
	1,925,000	5.35%, 04/15/2014		2,019,042
	1,085,000	5.10%, 07/15/2015		1,135,634
	2,900,000	Chevron Phillips
		Chemical Company LLC,
		7.00%, 06/15/2014
		(Acquired 04/16/2010;
		Cost $3,131,245)*		3,236,307
	1,250,000	Clear Channel
		Communications,
		5.50%, 12/15/2016		578,125
	125,000	Comcast Cable Holdings,
		8.375%, 03/15/2013		135,939
	525,000	Comcast Corporation,
		6.50%, 01/15/2017		617,493
	75,000	Comcast Holdings
		Corporation,
		10.625%, 07/15/2012		78,211
	3,636,000	Computer Sciences
		Corporation,
		5.50%, 03/15/2013		3,617,820
	3,650,000	ConAgra Foods, Inc.,
		5.875%, 04/15/2014		4,005,568
	1,281,000	COX
		Communications Inc.,
		7.125%, 10/01/2012		1,341,275
		CSX Corporation:
	1,875,000	5.75%, 03/15/2013		1,973,738
	450,000	6.25%, 04/01/2015		514,174
		Deutsche Telekom
		International Finance BV: f
	2,200,000	3.125%, 04/11/2016
		(Acquired 04/04/2011;
		Cost $2,197,778)*		2,216,333
	1,300,000	6.00%, 07/08/2019 @		1,492,400

The accompanying notes are an integral part of these financial statements.

Page 36

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Industrial – 15.9% (cont.)
$	3,000,000	DIRECTV
		Holdings/Financing,
		7.625%, 05/15/2016	$	3,183,750
		Donnelley (R.R.)
		& Sons Co.:
	1,000,000	8.60%, 08/15/2016		1,001,250
	875,000	6.125%, 01/15/2017		813,750
	1,000,000	7.625%, 06/15/2020		935,000
	1,000,000	D.R. Horton Inc.
		Unsubordinated Notes,
		6.50%, 04/15/2016 @		1,036,250
	656,895	Federal Express
		Corporation 1995
		Pass-Thru Certificates,
		Series B2, 7.11%,
		01/02/2014		693,024
	2,250,000	FedEx Corporation,
		7.375%, 01/15/2014		2,513,813
	3,000,000	Freeport-McMoRan
		Copper & Gold Inc.,
		8.375%, 04/01/2017		3,187,500
	2,000,000	Georgia-Pacific LLC,
		8.25%, 05/01/2016
		(Acquired 10/13/2011;
		Cost $2,193,472)*		2,221,920
	3,456,000	Glencore Funding LLC,
		6.00%, 04/15/2014
		(Acquired 03/31/2004
		through 02/02/2010;
		Cost $3,476,285)*		3,569,768
	1,460,000	GTE Corporation,
		6.84%, 04/15/2018		1,748,813
	1,375,000	Hanson Australia Funding,
		5.25%, 03/15/2013 f		1,381,875
	650,000	Hanson PLC Notes,
		6.125%, 08/15/2016 f		659,750
	2,500,000	Hewlett-Packard Co.,
		3.30%, 12/09/2016 @		2,552,760
	620,000	Highmark Inc. Notes,
		6.80%, 08/15/2013
		(Acquired 08/14/2003
		through 06/16/2010;
		Cost $628,310)*		661,880
	250,000	Historic Time Warner Inc.,
		6.875%, 06/15/2018		297,949
	2,800,000	Hutchison Whampoa
		International Ltd.,
		7.625%, 04/09/2019
		(Acquired 10/16/2009
		through 09/19/2011;
		Cost $3,159,007)* f		3,449,421
	1,000,000	Ingersoll-Rand
		Company Debentures,
		6.391%, 11/15/2027 f		1,223,759
	1,625,000	Johnson Controls Inc.,
		5.50%, 01/15/2016 @		1,818,211
	1,675,000	Laboratory Corporation
		of America Holdings,
		5.50%, 02/01/2013		1,747,062
		Lafarge SA: f
	1,000,000	5.50%, 07/09/2015
		(Acquired 07/06/2010;
		Cost $999,140)*		1,017,679
	625,000	6.50%, 07/15/2016		637,506
	180,000	Limited Brands, Inc.,
		5.25%, 11/01/2014		187,200
	75,000	Martin Marietta
		Materials, Inc.,
		6.60%, 04/15/2018		79,027
	1,625,000	Masco Corporation,
		6.125%, 10/03/2016		1,667,580
	825,000	Nabors Industries, Inc.,
		6.15%, 02/15/2018		921,598

The accompanying notes are an integral part of these financial statements.

Page 37

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Industrial – 15.9% (cont.)
$	2,307,000	Nextel Communications
		Senior Notes, Series E,
		6.875%, 10/31/2013	$	2,295,465
	700,000	PCCW-HKT
		Capital II Ltd.,
		6.00%, 07/15/2013
		(Acquired 07/10/2003;
		Cost $696,731)* f		734,390
	925,000	Pearson Dollar Finance PLC,
		5.70%, 06/01/2014
		(Acquired 09/28/2005
		through 12/14/2007;
		Cost $927,116)* f		1,009,612
	2,045,000	Plum Creek
		Timberlands, L.P.,
		5.875%, 11/15/2015		2,269,897
	3,000,000	POSCO,
		5.25%, 04/14/2021
		(Acquired 04/08/2011
		through 09/22/2011;
		Cost $2,978,301)* f @		3,129,807
	2,093,000	Reed Elsevier
		Capital Inc. Notes,
		4.625%, 06/15/2012		2,127,210
	450,000	Rio Tinto Alcan, Inc.,
		5.00%, 06/01/2015 f		488,428
		Rio Tinto Financial
		USA Ltd.: f
	1,800,000	6.50%, 07/15/2018 @		2,169,553
	500,000	3.50%, 11/02/2020 @		511,052
	500,000	Sprint Nextel Corporation,
		6.00%, 12/01/2016 @		415,000
	1,175,000	Sunoco, Inc. Senior
		Unsecured Notes,
		5.75%, 01/15/2017		1,180,668
		TCI
		Communications, Inc.:
	550,000	7.875%, 08/01/2013		605,266
	2,583,000	8.75%, 08/01/2015		3,137,867
		Teck Resources Limited: f
	1,045,000	10.25%, 05/15/2016		1,201,750
	1,000,000	3.15%, 01/15/2017		1,021,596
		Telecom Italia Capital SA: f
	1,360,000	4.95%, 09/30/2014		1,262,358
	2,225,000	5.25%, 10/01/2015 @		2,041,059
		Telefonica Emisiones,
		S.A.U.: f
	2,725,000	6.421%, 06/20/2016		2,851,696
	1,000,000	6.221%, 07/03/2017		1,024,860
	1,000,000	Time Warner Cable, Inc.,
		5.85%, 05/01/2017		1,138,828
		Time Warner, Inc.:
	1,000,000	4.70%, 01/15/2021		1,076,720
	2,000,000	4.75%, 03/29/2021 @		2,168,950
	500,000	Tyco Electronics
		Group S.A.,
		6.55%, 10/01/2017 f		577,599
	650,000	Tyco International
		Finance S.A.,
		6.00%, 11/15/2013 f		704,166
		United AirLines, Inc.
		Pass-Thru Certificates:
	149,529	Series 1991-A, Class A-2,
		10.02%, 03/22/2014		56,821
	48,704	Series 2000-2, Class C,
		7.762%, 04/29/2049 § † **		1,461
	1,500,000	Vale Overseas Limited,
		6.25%, 01/23/2017 f		1,690,376
		Verizon
		Communications, Inc.:
	1,000,000	5.55%, 02/15/2016		1,144,272
	375,000	5.50%, 04/01/2017 @		434,164

The accompanying notes are an integral part of these financial statements.

Page 38

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Industrial – 15.9% (cont.)
$	500,000	Viacom Inc.,
		6.25%, 04/30/2016	$	580,394
		Vulcan Materials Co.:
	69,000	5.60%, 11/30/2012		71,587
	2,000,000	7.00%, 06/15/2018		2,060,000
	125,000	Waste Management, Inc.,
		5.00%, 03/15/2014		133,963
	500,000	Willamette Industries,
		Inc. Notes,
		6.60%, 06/05/2012		506,894
	412,000	Xstrata Canada Corp.,
		6.00%, 10/15/2015 f		443,792
				113,907,587
Other Government Related Securities – 2.0%
	3,000,000	KFW,
		4.875%, 06/17/2019 f		3,565,380
	2,000,000	Korea Development Bank,
		3.875%, 05/04/2017 f @		1,974,968
	300,000	Korea Electric
		Power Corporation,
		6.75%, 08/01/2027 f		357,629
	1,000,000	Korea Hydro &
		Nuclear Power Co., Ltd.,
		6.25%, 06/17/2014
		(Acquired 06/10/2009;
		Cost $989,350)* f		1,078,720
	350,000	National Bank of Hungary
		Yankee Debentures,
		8.875%, 11/01/2013 f		377,345
	2,500,000	Petrobras International
		Finance Company,
		3.875%, 01/27/2016 f @		2,575,527
	2,650,000	United Mexican States,
		5.125%, 01/15/2020 f		3,027,625
	1,495,000	Westdeutsche Landesbank
		Subordinated Notes,
		4.796%, 07/15/2015 f		1,552,465
				14,509,659
Residential Mortgage Backed Securities – 3.8%
		Bank of America
		Alternative Loan Trust:
	253,459	Series 2003-11, Class 4A1,
		4.75%, 01/25/2019		257,185
	755,008	Series 2004-2, Class 5A1,
		5.50%, 03/25/2019		786,758
	907,276	Series 2004-11, Class 4A1,
		5.50%, 12/25/2019		935,810
	41,739	Series 2005-6, Class 7A1,
		5.50%, 07/25/2020		38,956
	509,802	Series 2006-2, Class 7A1,
		6.00%, 03/25/2021		465,217
	720,615	Series 2006-3, Class 6A1,
		6.00%, 04/25/2036		698,414
	808,759	Series 2006-4, Class 3CB4,
		6.00%, 05/25/2046		654,983
	542,362	Bank of America
		Funding Corporation,
		Series 2003-3, Class 1A41,
		5.50%, 10/25/2033		554,092
	708,853	Citicorp Mortgage
		Securities, Inc.,
		Series 2004-5, Class 1A25,
		5.50%, 10/25/2014		717,003
		Countrywide Alternative
		Loan Trust:
	141,625	Series 2005-5R, Class A2,
		4.75%, 12/25/2018		142,825
	749,585	Series 2005-50CB, Class
		4A1, 5.00%, 11/25/2020 §		644,295

The accompanying notes are an integral part of these financial statements.

Page 39

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Residential Mortgage Backed Securities – 3.8% (cont.)
$	668,941	Series 2005-85CB, Class
		3A1, 5.25%, 02/25/2021
		(Acquired 09/26/2007
		through 01/28/2009;
		Cost $648,085)* §	$	611,098
	1,158,470	Series 2006-7CB, Class
		3A1, 5.25%, 05/25/2021 §		996,753
	87,672	Series 2005-10CB, Class
		1A6, 5.50%, 05/25/2035		84,262
	110,839	Series 2005-11CB, Class
		2A1, 5.50%, 06/25/2035		93,452
	213,479	Series 2005-34CB, Class
		1A6, 5.50%, 09/25/2035		212,887
		Credit Suisse First
		Boston Mortgage
		Securities Corporation:
	16,903	Series 2005-11, Class 5A1,
		5.25%, 12/25/2020		16,849
	78,832	Series 2005-3, Class 3A27,
		5.50%, 07/25/2035		81,355
		Federal Gold Loan
		Mortgage Corporation
		(FGLMC) Pass-Thru
		Certificates:
	378,129	6.00%, 06/01/2021		411,970
	23,088	6.00%, 07/01/2028		25,719
		Federal Home Loan
		Mortgage Corporation
		(FHLMC):
	394,810	Series 3033, Class LU,
		5.50%, 03/15/2013		397,473
	1,261,357	Series R003, Class VA,
		5.50%, 08/15/2016		1,318,710
	1,660,913	Series 3122, Class VA,
		6.00%, 01/15/2017		1,691,323
	1,179,941	Series R010, Class VA,
		5.50%, 04/15/2017		1,251,384
	616,655	Series R009, Class AJ,
		5.75%, 12/15/2018		629,688
	3,025	Series 74, Class F,
		6.00%, 10/15/2020		3,284
	220	Series 2673, Class NC,
		5.50%, 05/15/2021		220
	22,862	Series 1395, Class G,
		6.00%, 10/15/2022		25,505
	514,817	Series 2970, Class DA,
		5.50%, 01/15/2023		520,692
		Federal National Mortgage
		Association (FNMA):
	48,147	Series 2005-6, Class VE,
		5.50%, 04/25/2016		48,479
	68,049	Series 2006-B1, Class AB,
		6.00%, 06/25/2016		68,100
	13,864	Series 1989-2, Class D,
		8.80%, 01/25/2019		15,830
	1,087	Series G-29, Class O,
		8.50%, 09/25/2021		1,228
	75,699	Series 1991-137, Class H,
		7.00%, 10/25/2021		85,108
	58,574	Series 1992-136, Class PK,
		6.00%, 08/25/2022		64,088
	39,543	Series 1993-32, Class H,
		6.00%, 03/25/2023		42,954
	417,039	Series 2002-85, Class PD,
		5.50%, 05/25/2031		418,767
	21,897	Series 2004-90, Class YB,
		4.00%, 07/25/2032		22,185
	1,419,413	Series 2004-W6, Class 1A6,
		5.50%, 07/25/2034		1,485,456
	269,690	Series 2004-W10, Class
		A24, 5.00%, 08/25/2034		269,063

The accompanying notes are an integral part of these financial statements.

Page 40

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Residential Mortgage Backed Securities – 3.8% (cont.)
$	221,809	Government National
		Mortgage Association
		(GNMA),
		Series 1999-4, Class ZB,
		6.00%, 02/20/2029	$	251,135
		J.P. Morgan Alternative
		Loan Trust:
	1,932,282	Series 2005-S1, Class 3A1,
		5.50%, 10/25/2020		1,831,351
	976,455	Series 2006-A1, Class 2A1,
		2.661%, 03/25/2036		507,476
	350,098	Series 2006-S2, Class A2,
		5.81%, 05/25/2036		348,563
	338,426	Lehman Mortgage Trust,
		Series 2006-4, Class 3A1,
		5.00%, 08/25/2021		303,170
		Master Alternative
		Loans Trust:
	1,057,823	Series 2004-1, Class 1A1,
		5.00%, 01/25/2019		1,081,057
	258,412	Series 2004-3, Class 1A1,
		5.00%, 03/25/2019		261,306
	215,671	Series 2005-3, Class 4A1,
		5.50%, 03/25/2020		212,273
	31,461	Merrill Lynch Mortgage
		Investors Trust,
		Series 2005-A8, Class
		A1C1, 5.25%, 08/25/2036		31,237
	101,623	Residential Accredit Loans,
		Inc., Series 2004-QS6,
		Class A1, 5.00%,
		05/25/2019		100,956
	187,059	Salomon Brothers
		Mortgage Securities VII,
		Series 2003-UP2, Class A2,
		4.00%, 06/25/2033		193,627
	37,721	Structured Asset
		Securities Corporation,
		Series 2005-2XS, Class
		1A2A, 4.51%,
		02/25/2035		37,620
		Washington Mutual, Inc.
		Pass-Thru Certificates:
	1,342,489	Series 2004-CB1, Class 5A,
		5.00%, 06/25/2019		1,377,895
	1,744,550	Series 2004-CB3, Class 3A,
		5.50%, 10/25/2019		1,784,960
	601,967	Series 2004-CB3, Class 4A,
		6.00%, 10/25/2019		623,658
	691,000	Series 2004-CB4, Class
		21A, 5.50%, 12/25/2019		706,505
	569,469	Series 2004-CB4, Class
		22A, 6.00%, 12/25/2019		589,940
				27,032,149
Taxable Municipal Bonds – 4.1%
		Alaska Municipal Bond
		Bank Authority:
	1,000,000	4.309%, 08/01/2018		1,092,760
	1,340,000	4.459%, 08/01/2019		1,462,597
	3,375,000	California Qualified
		School Construction Bonds,
		5.955%, 03/01/2019		3,701,430
	2,500,000	California School
		Finance Authority,
		4.426%, 07/01/2020		2,668,125
		California State:
	900,000	5.45%, 04/01/2015		981,783
	500,000	5.50%, 03/01/2016		553,955
	2,000,000	Central Valley Support
		Joint Powers Agency,
		5.326%, 09/01/2022		2,034,660

The accompanying notes are an integral part of these financial statements.

Page 41

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Taxable Municipal Bonds – 4.1% (cont.)
$	2,500,000	Contra Costa
		County California
		Pension Obligation,
		5.14%, 06/01/2017	$	2,745,550
	1,465,000	Dallas Independent
		School District,
		4.95%, 02/15/2022
		(Callable 02/15/2021)		1,685,966
	1,000,000	Davie Florida Water
		& Sewer Revenue,
		6.062%, 10/01/2025
		(Callable 10/01/2020)		1,098,620
	3,000,000	Government Development
		Bank for Puerto Rico,
		4.704%, 05/01/2016		3,107,640
	5,000,000	Illinois State,
		3.636%, 02/01/2014		5,095,650
	2,100,000	North East Independent
		School District Texas,
		5.24%, 08/01/2027		2,345,616
	1,260,000	Tobacco Settlement
		Authority Iowa,
		6.50%, 06/01/2023
		(Callable 06/01/2015)		1,177,218
				29,751,570
Utilities – 7.9%
	3,000,000	Ameren Corporation,
		8.875%, 05/15/2014		3,361,698
	2,765,000	Baltimore Gas &
		Electric Co. Senior
		Unsecured Notes,
		6.125%, 07/01/2013		2,969,958
	1,150,000	Centrais Eletricas
		Brasileiras SA,
		5.75%, 10/27/2021
		(Acquired 10/20/2011
		through 10/25/2011;
		Cost $1,152,442)* f @		1,194,850
		Dominion Resources Inc.:
	1,000,000	Series C, 5.15%,
		07/15/2015		1,114,527
	800,000	6.00%, 11/30/2017		943,772
	1,250,000	DTE Energy Company,
		7.625%, 05/15/2014		1,420,479
	3,000,000	El Paso Pipeline Partners
		Operating Co LLC,
		4.10%, 11/15/2015		3,071,184
	2,000,000	Enel Finance International,
		5.70%, 01/15/2013
		(Acquired 03/31/2010;
		Cost $2,063,644)* f		2,007,540
		Energy Transfer Partners:
	600,000	5.65%, 08/01/2012		613,003
	1,336,000	5.95%, 02/01/2015		1,444,046
	515,000	9.70%, 03/15/2019		630,952
	1,000,000	Exelon Corporation,
		4.90%, 06/15/2015		1,077,479
	2,585,000	Exelon Generation
		Company, LLC,
		5.35%, 01/15/2014		2,761,158
	2,500,000	Kinder Morgan Finance,
		5.70%, 01/05/2016 f		2,556,250
	134,339	Kiowa Power Partners LLC,
		4.811%, 12/30/2013
		(Acquired 11/19/2004;
		Cost $134,339)*		134,333
	3,139,000	Midamerican Energy
		Holdings Co.,
		5.875%, 10/01/2012		3,249,414

The accompanying notes are an integral part of these financial statements.

Page 42

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
Utilities – 7.9% (cont.)
$	2,475,000	National Grid PLC
		Senior Unsecured Notes,
		6.30%, 08/01/2016 f	$	2,840,134
	2,000,000	National Rural
		Utilities Corporation,
		10.375%, 11/01/2018		2,877,508
	2,000,000	Nisource Finance Corp.,
		4.45%, 12/01/2021 @		2,043,644
	1,775,000	PPL Energy Supply,
		LLC, Series A,
		5.70%, 10/15/2015		1,925,937
		PSE&G Power LLC:
	425,000	5.00%, 04/01/2014 @		455,106
	144,000	5.32%, 09/15/2016		160,614
	220,000	5.125%, 04/15/2020		246,789
	662,179	RGS (I&M) Funding
		Corporation Debentures,
		9.82%, 12/07/2022		802,713
		Rockies Express
		Pipeline LLC:
	3,000,000	3.90%, 04/15/2015
		(Acquired 02/17/2011;
		Cost $3,000,375)*		2,964,576
	1,000,000	5.625%, 04/15/2020
		(Acquired 03/17/2010;
		Cost $999,110)*		952,336
	2,000,000	Sempra Energy,
		2.00%, 03/15/2014		2,025,338
		Spectra Energy
		Capital LLC:
	1,500,000	5.50%, 03/01/2014		1,601,702
	2,700,000	5.668%, 08/15/2014		2,955,128
	2,500,000	Trans-Allegheny Interstate
		Line Company,
		4.00%, 01/15/2015
		(Acquired 01/19/2010;
		Cost $2,490,650)*		2,605,950
	575,000	Vectren Utility
		Holdings, Inc.,
		5.25%, 08/01/2013		610,745
	2,000,000	West Penn Power
		Company,
		5.875%, 08/15/2016
		(Acquired 10/25/2010;
		Cost $2,236,801)*		2,288,794
	1,000,000	Williams Partners LP,
		5.25%, 03/15/2020		1,106,968
				57,014,625
U.S. Government Agency Issues – 9.3%
	7,000,000	Federal Farm Credit Bank,
		3.00%, 09/22/2014		7,446,474
	6,800,000	Federal Home Loan
		Mortgage Corporation
		(FHLMC),
		2.50%, 05/27/2016		7,201,710
		Federal National Mortgage
		Association (FNMA):
	32,125,000	2.75%, 03/13/2014		33,662,695
	7,500,000	2.625%, 11/20/2014		7,935,180
	3,325,000	2.375%, 04/11/2016		3,513,039
	6,700,000	1.375%, 11/15/2016 @		6,759,174
				66,518,272
U.S. Treasury Obligations – 29.0%
		U.S. Treasury Bonds:
	52,725,000	2.375%, 03/31/2016 @		56,461,041
	58,200,000	2.375%, 07/31/2017 @		62,551,381
	30,400,000	3.875%, 05/15/2018		35,458,743
	12,375,000	9.125%, 05/15/2018 @		18,462,918

The accompanying notes are an integral part of these financial statements.

Page 43

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 98.2% (cont.)
U.S. Treasury Obligations – 29.0% (cont.)
$	5,000,000	2.625%, 08/15/2020 @	$	5,392,580
	10,000,000	7.875%, 02/15/2021 @		15,260,160
	10,000,000	6.25%, 08/15/2023 @		14,312,500
				207,899,323
		Total Long-Term
		Investments
		(Cost $680,641,371)		704,642,715
Shares
SHORT-TERM INVESTMENTS – 1.8%
Money Market Mutual Fund – 1.8%
	12,942,689	Short-Term Investments
		Trust – Liquid Assets
		Portfolio, 0.16% «		12,942,689
		Total Short-Term
		Investments
		(Cost $12,942,689)		12,942,689
Principal
Amount
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 19.4%
Commercial Paper – 0.2%
$	2,204,655	Atlantic East
		Funding LLC,
		0.610%, 03/25/2012 † **		1,376,824
		Total Commercial Paper
		(Cost $2,204,655)		1,376,824
Shares
Investment Companies – 19.2%
	138,206,906	Mount Vernon Securities
		Lending Trust Prime
		Portfolio, 0.23% «		138,206,906
		Total Investment
		Companies
		(Cost $138,206,906)		138,206,906
		Total Investments
		Purchased With Cash
		Proceeds From
		Securities Lending
		(Cost $140,411,561)		139,583,730
		Total Investments
		(Cost $833,995,621)
		– 119.4%		857,169,134
Asset Relating to Securities
Lending Investments – 0.1%
		Support
		Agreement** ^ a †		827,831
		Total (Cost $0)		827,831
		Liabilities in Excess of
		Other Assets – (19.5)%		(140,051,822	)
		TOTAL NET
		ASSETS – 100.0%	$	717,945,143

The accompanying notes are an integral part of these financial statements.

Page 44

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Notes to Schedule of Investments

* Restricted Security Deemed Liquid

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

^ Non-Income Producing

« 7-Day Yield

§ Security in Default

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

The accompanying notes are an integral part of these financial statements.

Page 45

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Page 46

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Fixed Income
Asset Backed Securities	$	—	$	10,020,965	$	—	$	10,020,965
Commercial Mortgage Backed Securities		—		23,533,137		—		23,533,137
Corporate Debt Securities		—		325,376,179		1,461		325,377,640
Other Government Related Securities		—		14,509,659		—		14,509,659
Residential Mortgage Backed Securities		—		27,032,149		—		27,032,149
Taxable Municipal Bonds		—		29,751,570		—		29,751,570
U.S. Government Agency Issues		—		66,518,272		—		66,518,272
U.S. Treasury Obligations		—		207,899,323		—		207,899,323
Total Fixed Income		—		704,641,254		1,461		704,642,715
Short-Term Investments
Money Market Mutual Fund		12,942,689		—		—		12,942,689
Total Short-Term Investments		12,942,689		—		—		12,942,689
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		1,376,824		—		1,376,824
Money Market Mutual Fund		138,206,906		—		—		138,206,906
Total Investments Purchased with
Cash Proceeds from Securities Lending		138,206,906		1,376,824		—		139,583,730
Total Investments	$	151,149,595	$	706,018,078	$	1,461	$	857,169,134
Asset Relating to Securities Lending Investments	$	—	$	827,831	$	—	$	827,831

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.  Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.

Page 47

Baird Intermediate Bond Fund

Schedule of Investments       December 31, 2011

Level 3 Reconciliation Disclosure

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

Description	Investments in Securities
Balance as of December 31, 2010		$	—
Accrued discounts/premiums			—
Realized gain (loss)			—
Change in unrealized appreciation (depreciation)			—
Purchases			—
Sales			—
Transfers in and/or out of Level 3*			1,461
Balance as of December 31, 2011		$	1,461

*Transfers between levels are recognized at the end of the reporting period.

Page 48

Baird Intermediate Municipal Bond Fund

December 31, 2011

The Baird Intermediate Municipal Bond Fund seeks current income that is substantially exempt from federal income tax.  A secondary objective is to provide total return with relatively low volatility of principal.  The Fund strives to achieve an annual rate of return, before Fund expenses, greater than the annual rate of the total return of the Barclays Capital 7-Year General Obligation Bond Index.  The Barclays Capital 7-Year General Obligation Bond Index is an unmanaged, market value weighted index consisting of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of six to eight years.

The Fund delivered very solid absolute returns in 2011.  The Fund’s long-term focus on high quality issues detracted from relative performance for the year as lower quality issues significantly outperformed higher quality issues.

In 2011, low new issue supply was a key driver of returns.  Downgrades out-paced upgrades 5 to 1.  We remain concerned that declining credit fundamentals in many municipalities could result in continued downgrades and price declines in 2012.  We continue to emphasize high quality, intermediate holdings.

The Fund was comprised of a very broadly diversified portfolio at year end, with 58% of its investments in pre-refunded bonds.  A pre-refunded municipal bond is one whose interest and principal payments are paid from an escrow account which typically holds U.S. Treasury and/or U.S. Agency securities.  As a result, pre-refunded municipal bonds are regarded as among the safest municipal bonds available.

With its focus on high quality holdings and intermediate duration, we believe the Fund is well-positioned for 2012.

Portfolio Characteristics

Quality Distribution*	Sector Weightings*

Net Assets:	$1,094,067,902	Annualized Expense Ratio:
SEC 30-Day Yield:***		Institutional Class:	0.30	%
Institutional Class:	1.69%	Investor Class:	0.55	%****
Investor Class:	1.45%	Portfolio Turnover Rate:	8.0	%
Average Effective Duration:	5.00 years	Total Number of Holdings:	291
Average Effective Maturity:	6.16 years

* Percentages shown are based on the Fund’s total investments.

** Includes pre-refunded and escrowed-to-maturity (ETM) bonds.

*** SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2011.

**** Includes 0.25% 12b-1 fee.

Page 49

Baird Intermediate Municipal Bond Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (3/30/01), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (3/30/01), assuming reinvestment of all distributions.

Page 50

Baird Intermediate Municipal Bond Fund

Total Returns

		Average Annual
				Since
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Inception(1)
Institutional Class Shares	8.55%	5.68%	5.15%	5.25%
Investor Class Shares	8.30%	5.39%	4.88%	4.98%
Barclays Capital 7-Year
General Obligation Bond Index(2)	10.58%	6.43%	5.69%	5.51%

(1) For the period from March 30, 2001 (commencement of operations) through December 31, 2011.

(2) The Barclays Capital 7-Year General Obligation Bond Index is an unmanaged, market value weighted index comprised of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million, have a minimum amount outstanding of at least $5 million, have been issued within the last five years and have a maturity of six to eight years.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in an index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 51

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5%
Alabama – 2.1%
$	1,000,000	Alabama State
		Public School &
		College Authority,
		5.00%, 05/01/2019	$	1,232,470
	1,000,000	Camden Alabama
		Industrial Development
		Board Revenue,
		6.125%, 12/01/2024
		(Pre-refunded to
		12/01/2013)		1,104,320
	1,080,000	Gulf Shores Alabama,
		5.00%, 12/15/2018
		(Callable 12/15/2017)		1,218,726
		Montgomery Alabama
		Special Care
		Facility Revenue:
	1,540,000	5.00%, 11/15/2015
		(Pre-refunded to
		11/15/2014)		1,724,446
	11,385,000	5.00%, 11/15/2021
		(Pre-refunded to
		11/15/2014)		12,783,078
	3,985,000	5.25%, 11/15/2029
		(Pre-refunded to
		11/15/2014)		4,502,532
				22,565,572
Alaska – 0.1%
	1,000,000	Alaska State Housing
		Finance Corporation,
		5.00%, 06/01/2017
		(Callable 06/01/2015)
		(Insured by NPFGC)		1,052,990
Arizona – 1.5%
	1,415,000	Arizona Health
		Facilities Authority
		Hospital Revenue,
		6.375%, 12/01/2037
		(Pre-refunded
		to 12/01/2012)		1,504,088
	2,375,000	Arizona School Facilities
		Board Revenue,
		5.75%, 07/01/2018
		(Pre-refunded to
		07/01/2014)		2,676,079
	1,000,000	Gila County Arizona
		Unified School
		District Bonds,
		5.25%, 07/01/2027
		(Callable 07/01/2017)		1,084,620
	1,860,000	Maricopa County
		Arizona University
		School District
		No. 48 Scottsdale,
		4.00%, 07/01/2026
		(Pre-refunded to
		07/01/2016)		2,118,391
	1,540,000	Phoenix Arizona Civic
		Corporation of
		Wastewater Systems
		Revenue,
		5.00%, 07/01/2015
		(Callable 07/01/2014)
		(Partially Pre-refunded,
		Insured by NPFGC)		1,669,222
		Pima County Arizona
		Industrial Development
		Authority:
	1,000,000	7.125%, 07/01/2024
		(Pre-refunded to
		07/01/2014)		1,144,590

The accompanying notes are an integral part of these financial statements.

Page 52

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Arizona – 1.5% (cont.)
$	2,870,000	7.50%, 07/01/2034
		(Pre-refunded to
		07/01/2014)	$	3,194,195
	2,675,000	7.50%, 07/01/2034
		(Pre-refunded to
		07/01/2014)		3,086,308
				16,477,493
California – 6.4%
	4,260,000	Bakersfield California
		Certificates Participation,
		0.00%, 04/15/2021
		(ETM) ^		3,464,615
	2,480,000	Coalinga California
		Regional Medical Center,
		5.125%, 03/01/2032
		(Pre-refunded to
		03/01/2015)		2,757,611
	3,000,000	Contra Costa County
		California Certificate
		Participation, 0.00%,
		11/01/2014 (ETM) ^		2,936,460
	3,620,000	Golden State Tobacco
		Securitization
		Corporation Asset
		Backed Bonds,
		5.50%, 06/01/2043
		(Pre-refunded to
		06/01/2013)		3,873,183
		Golden State Tobacco
		Securitization Corporation
		Revenue Bonds:
	7,320,000	6.25%, 06/01/2033
		(Callable 06/01/2013)
		(Pre-refunded to
		various dates)		7,787,748
	875,000	5.00%, 06/01/2038
		(Pre-refunded to
		06/01/2013)		930,081
	6,950,000	5.625%, 06/01/2038
		(Pre-refunded to
		06/01/2013)		7,448,246
	820,000	Mount Diablo
		California Hospital
		District Revenue,
		5.00%, 12/01/2013
		(ETM)		864,707
	3,725,000	Pittsburg California
		Redevelopment Agency
		Residential Mortgage
		Revenue, 9.60%,
		06/01/2016 (ETM)		5,075,238
	1,800,000	Port Oakland
		California Revenue,
		5.00%, 11/01/2017
		(Insured by NPFGC)		2,043,396
		San Joaquin Hills
		California Transportation
		Corridor Agency Toll
		Road Revenue: (ETM) ^
	6,865,000	0.00%, 01/01/2020		5,907,882
	14,000,000	0.00%, 01/01/2023		10,660,720
	17,295,000	San Marcos California
		Public Facilities
		Authority Revenue,
		0.00%, 09/01/2019
		(ETM) ^		15,032,295

The accompanying notes are an integral part of these financial statements.

Page 53

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
California – 6.4% (cont.)
$	1,130,000	Woodside California
		Elementary School
		District Government
		School Bonds,
		5.00%, 10/01/2023
		(Pre-refunded to
		10/01/2016)	$	1,324,936
				70,107,118
Colorado – 5.2%
	795,000	Colorado Educational
		& Cultural Facilities
		Authority, 7.625%,
		03/15/2032 (Pre-refunded
		to 03/15/2013)		854,466
	8,640,000	Colorado Springs
		Colorado Utilities
		Revenue Bonds, 5.875%,
		11/15/2017 (ETM)		9,582,969
	1,000,000	Conservatory
		Metropolitan
		District Colorado,
		6.75%, 12/01/2034
		(Pre-refunded to
		12/01/2013)		1,117,400
	1,330,000	County of El Paso
		Colorado Mortgage
		Revenue Bonds,
		0.00%, 09/01/2015
		(ETM) ^		1,281,907
		Dawson Ridge
		Metropolitan District
		No. 1 Colorado:  (ETM) ^
	7,830,000	0.00%, 10/01/2022		5,964,659
	12,745,000	0.00%, 10/01/2022		9,708,759
		Denver Colorado
		Convention Center &
		Hotel Authority
		Revenue Bonds:
	1,000,000	5.00%, 12/01/2021
		(Pre-refunded to
		12/01/2013)		1,082,040
	2,950,000	5.00%, 12/01/2022
		(Pre-refunded to
		12/01/2013)		3,192,018
	1,500,000	5.00%, 12/01/2023
		(Pre-refunded to
		12/01/2013)		1,623,060
	5,065,000	5.00%, 12/01/2024
		(Pre-refunded to
		12/01/2013)		5,480,533
	7,975,000	Denver Colorado Health
		& Hospital Authority
		Healthcare Revenue,
		6.25%, 12/01/2033
		(Pre-refunded to
		12/01/2014)		9,250,761
	6,750,000	Regional Transportation
		District Colorado
		Sales Tax Revenue,
		5.00%, 11/01/2036
		(Pre-refunded to
		11/01/2016)		8,074,215
				57,212,787
Delaware – 0.1%
	650,000	Delaware State
		Economic Development
		Authority Revenue,
		6.75%, 01/01/2013
		(ETM)		668,525

The accompanying notes are an integral part of these financial statements.

Page 54

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Florida – 11.9%
$	4,040,000	Bartram Springs
		Community Development
		District Special Assessment,
		6.65%, 05/01/2034
		(Pre-refunded to
		05/01/2013)	$	4,417,659
	1,925,000	Brevard County Florida
		School Board,
		5.00%, 07/01/2020
		(Callable 07/01/2017)
		(Insured by AMBAC)		2,140,119
		Broward County
		Florida School Board:
	8,000,000	5.25%, 07/01/2022
		(Callable 07/01/2021)		9,212,720
	4,865,000	5.25%, 07/01/2023
		(Callable 07/01/2021)		5,517,932
	2,265,000	County of St. Lucie
		Florida, 6.00%,
		10/01/2020 (ETM)		2,923,390
	1,980,000	Dade County Florida
		Health Facility Authority
		Hospital Revenue, 5.75%,
		05/01/2021 (ETM)		2,395,107
	3,000,000	Escambia County
		Florida Housing Finance
		Authority Multifamily
		Housing Revenue,
		0.00%, 10/15/2018
		(ETM) ^		2,664,030
	13,800,000	Florida State
		Board of Education,
		5.00%, 06/01/2022
		(Callable 06/01/2019)		16,385,568
	2,500,000	Florida State
		Department of
		Management Services,
		5.00%, 08/01/2018		2,936,150
		Florida State Mid-Bay
		Bridge Authority
		Revenue: (ETM)
	4,675,000	6.875%, 10/01/2022		6,511,013
	3,175,000	6.875%, 10/01/2022		4,421,918
	1,385,000	Florida State Municipal
		Power Agency Revenue,
		5.00%, 10/01/2017
		(Callable 02/13/2012)
		(ETM)		1,696,680
	1,500,000	Gulf Environmental
		Services Inc. Florida
		Revenue Bonds, 5.00%,
		10/01/2018 (ETM)		1,705,875
		Highlands County
		Florida Health
		Facilities Revenue:
	9,650,000	5.875%, 11/15/2029
		(Pre-refunded to
		11/15/2013)		10,571,672
	5,000,000	5.375%, 11/15/2035
		(Pre-refunded to
		11/15/2013)		5,431,400
	2,000,000	Hillsborough County
		Florida School Board
		Master Lease Program,
		5.50%, 07/01/2018
		(Insured by NPFGC)		2,349,480

The accompanying notes are an integral part of these financial statements.

Page 55

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Florida – 11.9% (cont.)
		Hillsborough County
		Industrial Development
		Authority:
$	1,855,000	5.625%, 08/15/2029
		(Pre-refunded to
		08/15/2018)	$	2,380,614
	1,500,000	8.00%, 08/15/2032
		(Pre-refunded to
		08/15/2019)		2,166,450
	2,000,000	Islands At Doral
		(SW) Community
		Development District,
		6.375%, 05/01/2035
		(Pre-refunded to
		05/01/2013)		2,153,860
	300,000	Jacksonville Florida
		Health Facility Authority
		Hospital Revenue,
		11.50%, 10/01/2012
		(Callable 02/13/2012)
		(ETM)		324,825
	2,195,000	Laguna Lakes
		Community Development
		District Special Assessment
		Revenue Bonds,
		6.40%, 05/01/2033
		(Pre-refunded to
		05/01/2013)		2,358,154
	1,470,000	Miami Beach Florida
		Resort Tax Revenue,
		6.25%, 10/01/2022 (ETM)		1,942,502
	7,100,000	Miami-Dade
		County Florida,
		4.50%, 10/01/2020		8,148,244
	3,000,000	Miami Dade County
		Florida Entitlement
		Revenue Bonds,
		5.00%, 08/01/2015
		(Insured by NPFGC)		3,303,300
	3,000,000	Miami-Dade County
		Florida School Board,
		5.00%, 05/01/2016
		(Insured by NPFGC)		3,324,840
	2,420,000	Miami-Dade County
		Florida Water &
		Sewer Revenue,
		5.00%, 10/01/2013
		(Insured by NPFGC)		2,582,067
	4,220,000	Orange County Florida
		Health Facilities Authority
		Revenue Bond, 6.25%,
		10/01/2013 (ETM)		4,643,435
	880,000	Orlando Florida Utilities
		Commission Water &
		Electric Revenue, 6.75%,
		10/01/2017 (ETM)		1,038,638
	1,000,000	Palm Beach County
		Florida Revenue,
		5.00%, 11/01/2018
		(Callable 11/01/2017)		1,149,250
	2,460,000	Pinellas County Housing
		Finance Authority,
		4.25%, 03/01/2027
		(Callable 09/01/2019)		2,613,258
	1,000,000	Sarasota County
		Florida School Board,
		5.00%, 07/01/2015
		(Insured by NPFGC)		1,107,740

The accompanying notes are an integral part of these financial statements.

Page 56

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Florida – 11.9% (cont.)
$	5,200,000	Seminole County
		Florida Water &
		Sewage Revenue,
		6.00%, 10/01/2019
		(ETM)	$	6,386,692
	3,000,000	Sunrise Florida Utility
		System Revenue, 5.50%,
		10/01/2018 (ETM)		3,583,020
				130,487,602
Georgia – 3.8%
	8,445,000	Atlanta Georgia Water
		& Wastewater Revenue,
		5.50%, 11/01/2017
		(Insured by AGM)		10,143,881
	7,745,000	Forsyth County Georgia
		Hospital Authority
		Revenue Anticipation
		Certificates, 6.375%,
		10/01/2028 (Callable
		02/13/2012) (ETM)		10,130,537
	470,000	Fulton County Georgia
		Hospital Authority
		Revenue, 7.875%,
		10/01/2013 (Callable
		02/13/2012) (ETM)		510,021
		Georgia Municipal
		Electric Authority
		Power Revenue:
	120,000	6.50%, 01/01/2017
		(Insured by AGM)		137,632
	7,350,000	6.50%, 01/01/2017
		(Insured by AGM)		8,936,350
	7,400,000	Gwinnett County
		Georgia School District,
		5.00%, 02/01/2026
		(Pre-refunded to
		02/01/2018)		9,100,446
	2,555,000	Northwestern Gwinnett
		County Georgia
		Facilities Corporation I
		Certificate Participation,
		5.75%, 06/15/2019
		(Callable 06/15/2014)
		(Pre-refunded to
		06/15/2015)		2,810,679
				41,769,546
Illinois – 10.4%
	2,360,000	Chicago Illinois,
		5.00%, 01/01/2017
		(Callable 01/01/2016)
		(Insured by AGM)		2,632,061
		Chicago Illinois
		Board of Education:
	2,100,000	5.00%, 12/01/2017
		(Insured by AMBAC)		2,431,485
	4,345,000	5.00%, 12/01/2017
		(Callable 12/01/2016)
		(Insured by AGM)		4,953,300
	1,000,000	6.00%, 01/01/2020
		(Insured by NPFGC)		1,152,300
		Chicago Illinois Public
		Building Community
		Building Revenue: (ETM)
	3,725,000	7.00%, 01/01/2015		4,052,502
	1,555,000	7.00%, 01/01/2020		2,088,318

The accompanying notes are an integral part of these financial statements.

Page 57

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Illinois – 10.4% (cont.)
$	2,605,000	Cook County Illinois
		School District No. 097,
		9.00%, 12/01/2015
		(Insured by NPFGC)	$	3,251,066
	1,430,000	Cook County Illinois
		School District No. 100,
		8.10%, 12/01/2016
		(ETM)		1,919,718
	2,000,000	Cook County Illinois
		School District No. 159,
		0.00%, 12/01/2022
		(ETM) ^		1,492,820
	1,095,000	Dupage County Illinois
		Stormwater Project,
		5.60%, 01/01/2021		1,337,575
	12,285,000	Illinois Development
		Financial Authority,
		0.00%, 07/15/2023
		(ETM) ^		8,987,215
	2,330,000	Illinois Finance
		Authority Revenue,
		5.50%, 08/15/2043
		(Pre-refunded to
		08/15/2014)		2,618,198
	1,000,000	Illinois Municipal
		Electric Agency Power
		Supply Revenue Bonds,
		5.25%, 02/01/2016
		(Insured by NPFGC)		1,130,660
		Illinois State:
	1,000,000	5.00%, 01/01/2019
		(Insured by AGM)		1,142,860
	5,000,000	4.00%, 09/01/2019
		(Callable 09/01/2018)
		(Insured by AGM)		5,318,100
	3,000,000	6.00%, 11/01/2026
		(Insured by NPFGC)		3,420,450
	2,100,000	Illinois State Toll
		Highway Authority
		Priority Revenue Bonds,
		5.50%, 01/01/2016
		(Insured by AGM)		2,398,641
		Illinois State Toll
		Highway Authority
		Revenue Bonds:
	1,065,000	5.00%, 01/01/2026
		(Pre-refunded to
		07/01/2016)		1,262,355
	2,055,000	5.00%, 01/01/2031
		(Pre-refunded to
		07/01/2016)		2,435,812
	6,750,000	Kane Cook & Dupage
		Counties Illinois
		Community United
		School District No. 303,
		5.00%, 01/01/2014
		(Insured by AGM)		7,230,465
	2,130,000	Kane Cook & Dupage
		Counties Illinois School
		District No. 46 Elgin,
		0.00%, 01/01/2013
		(Insured by AGM) ^		2,099,988
		Kane McHenry Cook &
		De Kalb Counties Illinois
		School District No. 300:
	1,000,000	9.00%, 01/01/2015
		(Insured by AMBAC)		1,191,810
	6,140,000	7.00%, 01/01/2018
		(Insured by AMBAC)		7,567,980

The accompanying notes are an integral part of these financial statements.

Page 58

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Illinois – 10.4% (cont.)
$	13,625,000	Kendall Kane & Will
		Counties Community
		Unit School District
		No. 308,
		0.00%, 02/01/2021 ^	$	9,752,503
		Lake County Illinois
		Community Consolidated
		School District:
		(Insured by NPFGC) ^
	1,755,000	0.00%, 12/01/2012		1,715,495
	1,920,000	0.00%, 12/01/2013		1,832,256
	1,875,000	0.00%, 12/01/2014		1,729,481
	1,025,000	Lake County Illinois
		Community High School
		District No. 124 Grant,
		5.00%, 12/01/2017		1,218,715
	1,000,000	Lake County Illinois
		Community High School
		District No. 128,
		5.00%, 01/01/2013		1,043,220
		McHenry & Kane
		Counties Illinois
		Community School
		District No. 158:
		(Insured by NPFGC) ^
	1,870,000	0.00%, 01/01/2013		1,813,788
	1,970,000	0.00%, 01/01/2016		1,726,843
		Metropolitan Pier &
		Exposition Authority
		Illinois:  (ETM)
	1,805,000	5.50%, 06/15/2016		2,158,094
	2,000,000	5.50%, 12/15/2023		2,542,000
	2,000,000	Northwest Suburban
		Illinois Municipal Joint
		Action Revenue, 5.00%,
		05/01/2014 (ETM)		2,209,000
	4,705,000	Regional Transportation
		Authority Illinois,
		6.00%, 07/01/2022
		(Insured by NPFGC)		6,055,335
	2,742,000	Round Lake Illinois,
		6.70%, 03/01/2033
		(Pre-refunded to
		03/01/2013)		2,959,029
		Southern Illinois
		University Revenue:
		(Insured by NPFGC)
	1,000,000	5.25%, 04/01/2018		1,154,160
	1,390,000	5.25%, 04/01/2019		1,621,588
	950,000	Winnebago & Boone
		Counties Illinois School
		District No. 205,
		5.00%, 02/01/2013
		(Insured by AMBAC)		989,482
		Winnebago County
		Illinois School District
		No. 122 Harlam-Loves
		Park: ^
	155,000	0.00%, 01/01/2018
		(ETM)		143,170
	1,205,000	0.00%, 01/01/2018
		(Insured by AGM)		1,007,585
				113,787,423
Indiana – 1.6%
	1,990,000	Franklin Community
		Multi-School
		Building Corp,
		5.00%, 07/15/2020		2,359,861

The accompanying notes are an integral part of these financial statements.

Page 59

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Indiana – 1.6% (cont.)
		Hammond Indiana
		Multi-School
		Building Corporation
		Revenue Bonds:
$	1,000,000	6.00%, 01/15/2018
		(ETM)	$	1,172,350
	1,330,000	5.00%, 07/15/2018
		(Insured by NPFGC)		1,570,358
	1,115,000	Indiana State Office
		Building Commissions
		Facilities Revenue Bonds,
		5.25%, 07/01/2017		1,305,654
	820,000	Indiana Toll Road
		Commission, 9.00%,
		01/01/2015 (ETM)		925,960
	1,155,000	Indianapolis Local Public
		Improvement Bond Bank,
		5.50%, 01/01/2019
		(Insured by NPFGC)		1,409,862
	3,460,000	Indianapolis Local
		Public Improvement
		Bond Waterworks Project,
		5.50%, 07/01/2018
		(Insured by NPFGC)		4,214,661
	1,000,000	Perry Township
		Multi School
		Building Corporation,
		5.00%, 07/10/2018
		(Callable 07/10/2015)		1,083,600
	1,650,000	Purdue University
		Indiana Revenue,
		5.00%, 07/01/2015		1,881,842
	1,000,000	South Bend Indiana
		Community School
		Building Corporation,
		5.00%, 07/15/2017
		(Insured by NPFGC)		1,160,800
				17,084,948
Iowa – 0.3%
	1,010,000	Des Moines Iowa
		Metropolitan Wastewater
		Reclamation Authority,
		5.00%, 06/01/2015
		(Callable 06/01/2014)
		(Insured by NPFGC)		1,116,999
	180,000	Muscatine Iowa Electric
		Revenue, 6.70%,
		01/01/2013 (Callable
		07/01/2012) (ETM)		185,143
	2,000,000	Wapello County Iowa
		Hospital Revenue,
		6.25%, 10/01/2022
		(Pre-refunded to
		10/01/2012)		2,083,460
				3,385,602
Kansas – 0.2%
	1,865,000	Wyandotte County
		Kansas Revenue,
		5.00%, 09/01/2019
		(Callable 03/01/2019)
		(Insured by BHAC)		2,252,827
Kentucky – 0.5%
	3,340,000	Jefferson County
		Kentucky School District
		Financial School Building
		Revenue Bonds,
		5.50%, 01/01/2018
		(Insured by AGM)		4,081,079

The accompanying notes are an integral part of these financial statements.

Page 60

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Kentucky – 0.5% (cont.)
$	1,035,000	Kentucky Economic
		Development Finance
		Authority Health System
		Revenue, 5.80%,
		10/01/2014
		(Pre-refunded
		to 10/01/2013)	$	1,140,104
				5,221,183
Louisiana – 2.7%
		Louisiana Public Facilities
		Authority Revenue:
	710,000	5.50%, 05/15/2027
		(Pre-refunded to
		05/15/2026)		894,991
	12,935,000	5.50%, 05/15/2032
		(Pre-refunded to
		05/15/2026)		16,562,750
	10,000,000	State of Louisiana,
		5.00%, 11/15/2020
		(Callable 05/15/2020)		12,377,200
				29,834,941
Maine – 0.5%
	4,340,000	Maine Health & Higher
		Education Facilities
		Authority, 5.00%,
		07/01/2035
		(Pre-refunded
		to 07/01/2015)		4,972,381
Massachusetts – 3.2%
		Massachusetts State:
	5,820,000	5.00%, 08/01/2020
		(Pre-refunded to
		08/01/2016)		6,903,742
	15,000,000	4.00%, 12/01/2022
		(Callable 12/01/2019)		16,879,650
		Massachusetts State
		Obligations Tax Revenue:
	1,000,000	5.25%, 01/01/2026
		(Pre-refunded to
		01/01/2014)		1,093,470
	1,845,000	5.75%, 01/01/2032
		(Pre-refunded to
		01/01/2014)		2,035,681
		Massachusetts State
		Water Resources
		Authority:  (ETM)
	4,105,000	5.25%, 12/01/2015		4,527,363
	3,200,000	6.50%, 07/15/2019		3,897,760
				35,337,666
Michigan – 2.2%
	1,550,000	Clarkston Michigan
		Community Schools,
		5.00%, 05/01/2013
		(Insured by AGM)		1,640,939
	1,000,000	Detroit Michigan
		City School District,
		5.00%, 05/01/2016
		(Callable 05/01/2015)
		(Insured by AGM)		1,071,260
	2,185,000	Detroit Michigan
		Sewer Disposal Revenue,
		5.00%, 07/01/2030
		(Pre-refunded to
		07/01/2015)		2,503,376
	1,550,000	Harper Creek
		Michigan Community
		School District,
		5.00%, 05/01/2016
		(Callable 05/01/2015)
		(Insured by AGM)		1,718,749

The accompanying notes are an integral part of these financial statements.

Page 61

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Michigan – 2.2% (cont.)
$	1,390,000	Jenison Michigan
		Public Schools,
		5.25%, 05/01/2015
		(Insured by NPFGC)	$	1,523,190
	2,275,000	Lakeview Public
		School District,
		5.00%, 05/01/2017
		(Insured by NPFGC)		2,598,118
		Livonia Michigan Public
		Schools School District:
	4,295,000	5.00%, 05/01/2017
		(Callable 05/01/2014)
		(Insured by NPFGC)		4,609,179
	3,000,000	5.00%, 05/01/2022
		(Callable 05/01/2014)
		(Insured by NPFGC)		3,163,920
	4,000,000	Michigan State Housing
		Development Authority,
		4.75%, 06/01/2016		4,264,640
	2,000,000	State of Michigan,
		0.00%, 06/01/2022
		(ETM) ^		1,512,980
				24,606,351
Minnesota – 1.3%
	1,040,000	Centennial Independent
		School District No. 12
		Minnesota, 5.00%,
		02/01/2014 (Pre-refunded
		to 02/01/2012) (Insured
		by AGM)		1,043,442
		Minnesota State Housing
		Finance Agency
		Homeownership
		Finance Bond:
	1,115,000	4.25%, 07/01/2028
		(Callable 01/01/2020)		1,183,450
	2,000,000	4.50%, 07/01/2034
		(Callable 07/01/2021)		2,149,280
	1,215,000	Robbinsdale Independent
		School District No. 281,
		5.00%, 07/01/2020
		(Pre-refunded to
		02/01/2012) (Insured
		by AGM)		1,219,022
	5,000,000	University of Minnesota,
		5.50%, 07/01/2021
		(ETM)		6,111,650
	1,895,000	Western Minnesota
		Municipal Power Agency,
		6.375%, 01/01/2016
		(ETM)		2,103,147
				13,809,991
Mississippi – 0.3%
	1,110,000	Mississippi Development
		Bank Special Obligations,
		5.25%, 10/01/2030
		(Pre-refunded to
		10/01/2015)		1,284,459
	1,050,000	Mississippi Housing
		Financial Corporation,
		0.00%, 06/01/2015
		(ETM) ^		1,012,179

The accompanying notes are an integral part of these financial statements.

Page 62

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Mississippi – 0.3% (cont.)
$	1,000,000	Mississippi State,
		5.00%, 11/01/2021
		(Pre-refunded to
		11/01/2012)	$	1,037,040
				3,333,678
Missouri – 0.3%
	1,000,000	St. Charles County
		Missouri Francis Howell
		School District,
		4.50%, 03/01/2018		1,186,100
	2,000,000	St. Louis County
		Industrial Development
		Authority, 6.625%,
		11/15/2035
		(Pre-refunded
		to 11/15/2013)		2,228,620
				3,414,720
Nebraska – 1.1%
	1,640,000	Nebraska Public Power
		District Revenue,
		5.00%, 01/01/2015
		(Insured by NPFGC)		1,826,517
	9,150,000	Omaha Nebraska Public
		Electric Power District
		Revenue, 6.20%,
		02/01/2017 (ETM)		10,479,312
				12,305,829
Nevada – 0.2%
	2,080,000	Las Vegas Clark County
		Nevada Library District,
		5.00%, 01/01/2017		2,365,334
New Hampshire – 0.6%
	5,340,000	New Hampshire Housing
		Finance Authority
		Revenue Bonds,
		5.25%, 07/01/2028
		(Callable 01/01/2021)		5,813,925
	1,000,000	State of
		New Hampshire,
		5.00%, 07/01/2021
		(Callable 07/01/2020)		1,250,860
				7,064,785
New Jersey – 2.9%
		New Jersey Economic
		Development Authority
		Revenue Bonds:
	2,250,000	6.375%, 04/01/2018
		(Pre-refunded to
		05/15/2014)		2,553,030
	6,000,000	6.375%, 04/01/2031
		(Pre-refunded to
		05/15/2014)		6,808,080
	895,000	New Jersey Sports &
		Exposition Authority
		State Contract Bonds,
		6.50%, 03/01/2013
		(ETM)		928,428
	10,000,000	New Jersey State
		Housing & Mortgage
		Finance Agency Bonds,
		4.50%, 10/01/2029
		(Callable 04/01/2021)		10,507,100

The accompanying notes are an integral part of these financial statements.

Page 63

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
New Jersey – 2.9% (cont.)
		New Jersey State
		Transportation Trust
		Fund Authority:
$	2,595,000	5.50%, 12/15/2015
		(Insured by AMBAC)	$	2,981,421
	5,000,000	5.25%, 12/15/2020		5,993,900
		New Jersey
		State Turnpike
		Authority: (ETM)
	1,500,000	6.50%, 01/01/2016		1,662,345
	130,000	6.50%, 01/01/2016		143,913
				31,578,217
New Mexico – 0.4%
		New Mexico Mortgage
		Financial Authority:
	1,610,000	4.625%, 09/01/2025
		(Callable 03/01/2020)		1,731,104
	1,170,000	4.50%, 09/01/2028
		(Callable 03/01/2020)		1,250,321
	1,000,000	New Mexico State
		Hospital Equipment
		Loan Council Hospital
		Revenue, 5.25%,
		07/01/2025 (Pre-refunded
		to 07/01/2015)		1,146,850
				4,128,275
New York – 6.5%
	2,000,000	Long Island Power
		Authority and Electric
		System Revenue,
		5.00%, 12/01/2017
		(Callable 12/01/2016)
		(Insured by NPFGC)		2,319,560
	13,230,000	Metropolitan Transit
		Authority New York,
		6.00%, 04/01/2020
		(ETM)		17,133,644
	4,730,000	New York City, New
		York Transitional
		Financial Authority
		Building Aid
		Revenue Bonds,
		5.00%, 01/15/2015
		(Insured by AGM)		5,300,390
		New York, New York:
	1,000,000	5.00%, 03/01/2016
		(Callable 03/01/2015)
		(Insured by FGIC-TCRS)		1,125,260
	5,000,000	5.00%, 08/01/2017		5,979,350
	1,125,000	5.25%, 08/15/2021
		(Callable 08/15/2018)		1,343,419
	2,000,000	New York State
		Dormitory Authority
		and Personal Income
		Tax Revenue,
		5.00%, 12/15/2017		2,428,360
	4,040,000	New York State
		Thruway Authority,
		5.00%, 03/15/2022
		(Callable 03/15/2019)		4,899,510
		New York State
		University Dormitory
		Authority Revenues:
	1,800,000	5.50%, 05/15/2013
		(Insured by NPFGC)		1,860,660
	5,290,000	5.25%, 05/15/2015		5,823,814
	4,715,000	Suffolk County Water
		Authority, 6.00%,
		06/01/2017 (ETM)		5,590,151

The accompanying notes are an integral part of these financial statements.

Page 64

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
New York – 6.5% (cont.)
$	180,000	TSASC Inc. New York,
		4.75%, 06/01/2022
		(Callable 06/01/2016)	$	176,805
	13,075,000	Westchester Tobacco
		Asset Securitization
		Corp. New York, 6.95%,
		07/15/2039
		(Pre-refunded
		to 07/15/2017)		17,322,414
				71,303,337
North Carolina – 2.7%
		North Carolina Eastern
		Municipal Power Agency
		Power Systems Revenue:
		(ETM)
	3,310,000	5.00%, 01/01/2017		3,801,370
	5,700,000	6.40%, 01/01/2021		7,152,930
	6,235,000	4.50%, 01/01/2024
		(Pre-refunded to
		01/01/2022)		7,709,889
	1,735,000	6.00%, 01/01/2026
		(Pre-refunded to
		01/01/2022)		2,369,958
	6,495,000	North Carolina Medical
		Care Community
		Hospital Revenue, 5.25%,
		11/01/2029 (Pre-refunded
		to 11/01/2014)		7,307,654
	1,180,000	North Carolina
		Municipal Power Agency
		No. 1 Catawba Electric
		Revenue, 5.50%,
		01/01/2013 (ETM)		1,208,108
				29,549,909
Ohio – 1.4%
	1,000,000	Akron Ohio Community
		Learning Center Income
		Tax Revenue,
		5.25%, 12/01/2016
		(Callable 12/01/2013)
		(Insured by NPFGC)		1,083,180
	2,000,000	Cincinnati Ohio City
		School District,
		5.00%, 12/01/2016
		(Insured by AGM)		2,351,600
		Cleveland Municipal
		School District:
	1,790,000	4.00%, 12/01/2017		1,969,573
	1,865,000	4.00%, 12/01/2018		2,056,312
	1,940,000	4.00%, 12/01/2019		2,124,203
	2,015,000	5.00%, 12/01/2020		2,338,105
	90,000	Miamisburg Ohio Water
		Revenue, 7.00%,
		11/15/2016 (Callable
		02/13/2012) (ETM)		96,278
	2,835,000	Ohio Housing
		Finance Agency,
		5.00%, 11/01/2028
		(Callable 05/01/2020)		3,075,125
				15,094,376
Pennsylvania – 3.6%
	1,275,000	Central Dauphin
		Pennsylvania School
		District, 6.75%,
		02/01/2024 (Pre-refunded
		to 02/01/2016)		1,576,614
	1,380,000	Erie Pennsylvania Sewer
		Authority Revenue,
		5.125%, 06/01/2020
		(ETM)		1,682,151

The accompanying notes are an integral part of these financial statements.

Page 65

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Pennsylvania – 3.6% (cont.)
$	6,830,000	Pennsylvania Convention
		Center Authority Revenue
		Bonds, 6.00%,
		09/01/2019 (ETM)	$	8,645,004
		Pennsylvania Housing
		Finance Agency:
	2,130,000	3.70%, 04/01/2018		2,190,939
	1,760,000	3.75%, 10/01/2018		1,819,277
	1,025,000	3.90%, 04/01/2019		1,058,261
	1,675,000	3.90%, 10/01/2019
		(Callable 04/01/2019)		1,736,992
	3,390,000	Pennsylvania State Higher
		Education Facilities
		Authority Revenue, 5.00%,
		01/01/2029 (Pre-refunded
		to 01/01/2013)		3,546,855
	3,000,000	Pennsylvania State Public
		School Building Authority
		Lease Revenue, 5.00%,
		11/15/2034 (Pre-refunded
		to 11/15/2014)		3,359,310
	1,790,000	Philadelphia Pennsylvania
		Authority For Industrial
		Development Revenue,
		5.25%, 01/01/2027
		(Pre-refunded to
		01/01/2017)		2,158,346
	2,905,000	Philadelphia Pennsylvania
		Gas Works, 7.00%,
		05/15/2020 (ETM)		3,575,648
		Pittsburgh Pennsylvania
		Water & Sewer Authority
		Revenue Bonds:
	870,000	7.25%, 09/01/2014
		(Callable 01/27/2012)
		(ETM)		961,777
	4,500,000	5.00%, 09/01/2029
		(Pre-refunded to
		09/01/2015)		5,160,195
	1,500,000	St. Mary Hospital
		Authority Pennsylvania
		Health Revenue, 5.375%,
		11/15/2034 (Pre-refunded
		to 11/15/2014)		1,690,980
				39,162,349
Puerto Rico – 0.3%
	1,625,000	Puerto Rico Public
		Building Authority, 5.50%,
		07/01/2022 (Pre-refunded
		to 07/01/2014)		1,816,685
	1,080,000	Puerto Rico Public
		Finance Corp.,
		6.00%, 08/01/2026
		(ETM)		1,472,472
				3,289,157
South Carolina – 1.3%
	6,375,000	Piedmont Municipal
		Power Agency South
		Carolina Electric
		Revenue, 6.75%,
		01/01/2020 (ETM)		8,839,511
		South Carolina Jobs
		Economic Development
		Authority Hospital
		Facilities Revenue:
	2,575,000	7.00%, 08/01/2030
		(Pre-refunded to
		08/01/2013)		2,834,637
	2,430,000	6.375%, 08/01/2034
		(Pre-refunded to
		08/01/2013)		2,651,276
				14,325,424

The accompanying notes are an integral part of these financial statements.

Page 66

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
South Dakota – 0.1%
$	1,030,000	Heartland Consumers
		Power District, 7.00%,
		01/01/2016 (ETM)	$	1,158,204
Tennessee – 1.1%
	1,000,000	Metropolitan
		Government Nashville
		& Davidson County
		Tennessee H&E, 0.00%,
		06/01/2021 (ETM) ^		813,250
	5,000,000	Shelby County Tennessee
		Health Educational &
		Housing Facilities
		Revenue, 5.50%,
		08/15/2019 (ETM)		5,762,650
	4,965,000	Tennessee Housing
		Development Agency,
		4.50%, 07/01/2028
		(Callable 01/01/2020)		5,320,494
				11,896,394
Texas – 13.2%
	2,125,000	Barbers Hill Texas
		Independent School
		District General Obligation,
		5.00%, 02/15/2017
		(Callable 02/15/2015)
		(PSF Guaranteed)		2,403,587
	6,060,000	Capital Area Housing
		Finance Corporation
		Texas, 0.00%,
		01/01/2016 (ETM) ^		5,782,149
	1,500,000	Central Texas Housing
		Finance Corporation,
		0.00%, 09/01/2016
		(ETM) ^		1,419,390
	1,500,000	Cypress-Fairbanks
		Texas Independent
		School District,
		5.00%, 02/15/2017
		(Callable 02/15/2016)
		(PSF Guaranteed)		1,745,670
	2,410,000	Dallas Texas Independent
		School District,
		5.00%, 02/15/2020
		(PSF Guaranteed)		3,028,864
	1,355,000	El Paso Texas Waterworks
		& Sewer Revenue,
		5.00%, 08/15/2018		1,651,447
	1,625,000	Frisco Texas Independent
		School District,
		6.00%, 08/15/2018
		(Callable 08/15/2016)
		(PSF Guaranteed)		1,976,309
	1,000,000	Georgetown Texas
		Independent
		School District,
		5.00%, 02/15/2016
		(Callable 02/15/2015)
		(PSF Guaranteed)		1,124,840
		Harris County Texas:
	1,500,000	5.00%, 10/01/2019		1,869,795
	4,700,000	5.75%, 10/01/2028
		(Pre-refunded to
		10/01/2018)		6,059,193
		Harris County Texas
		Health Facilities
		Development
		Corporation Hospital
		Revenue: (ETM)
	5,475,000	5.50%, 10/01/2013		5,760,466
	4,280,000	5.50%, 10/01/2019		5,224,853

The accompanying notes are an integral part of these financial statements.

Page 67

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Texas – 13.2% (cont.)
$	10,960,000	Houston Texas Health
		Facilities Corporate
		Facilities Revenue,
		7.125%, 02/15/2034
		(Pre-refunded to
		02/15/2014)	$	12,535,938
	825,000	Houston Texas Sewer
		System Revenue, 9.375%,
		10/01/2013 (Callable
		04/01/2012) (ETM)		912,491
	3,000,000	Houston Texas Utility
		System Revenue,
		5.25%, 05/15/2015
		(Callable 05/15/2014)
		(Insured by NPFGC)		3,298,980
	16,050,000	Houston Texas Water &
		Sewer System Revenue
		Bonds, 5.50%,
		12/01/2029 (ETM)		21,272,028
	1,500,000	Humble Texas
		Independent
		School District,
		5.00%, 02/15/2021		1,888,740
	1,315,000	La Porte Texas
		Independent School
		District,
		5.00%, 02/15/2018
		(Callable 02/15/2015)
		(Insured by NPFGC)		1,445,514
	3,425,000	Lubbock Texas,
		5.00%, 02/15/2021
		(Callable 02/15/2018)
		(Insured by AGM)		4,013,209
	1,730,000	Lubbock Texas Housing
		Finance Corp., 8.00%,
		10/01/2021 (ETM)		2,564,898
	1,000,000	Lubbock Texas
		Independent
		School District,
		4.00%, 02/15/2022
		(Callable 02/15/2020)		1,129,070
	1,735,000	Lufkin Texas
		Independent
		School District,
		5.00%, 08/15/2015
		(Callable 08/15/2014)
		(PSF Guaranteed)		1,927,689
	1,050,000	Magnolia Texas
		Independent
		School District,
		5.00%, 08/15/2016
		(PSF Guaranteed)		1,239,840
	1,265,000	Mission Consolidation
		Independent
		School District,
		5.00%, 02/15/2019
		(Callable 02/15/2015)
		(PSF Guaranteed)		1,427,919
	1,125,000	North Central Texas
		Health Facilities Revenue,
		5.75%, 02/15/2015
		(ETM)		1,277,505
	1,210,000	Pearland Texas
		Waterworks & Sewage,
		5.25%, 03/01/2023
		(Pre-refunded to
		03/01/2014)		1,333,892
	2,035,000	Retama Texas
		Development
		Corporation Special
		Facilities Revenue, 8.75%,
		12/15/2018 (ETM)		3,014,690

The accompanying notes are an integral part of these financial statements.

Page 68

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Texas – 13.2% (cont.)
$	1,295,000	Rockwall Texas
		Independent
		School District,
		5.00%, 02/15/2015
		(PSF Guaranteed)	$	1,462,638
	11,565,000	San Antonio Texas
		Electric & Gas Revenue,
		5.65%, 02/01/2019
		(ETM)		14,313,191
	2,100,000	San Antonio Texas Hotel
		Occupancy Tax Revenue
		Bonds, 0.00%,
		08/15/2015 (ETM) ^		2,021,334
	2,000,000	San Antonio Texas
		Independent
		School District,
		5.00%, 08/15/2017
		(Callable 08/15/2015)
		(PSF Guaranteed)		2,299,940
	1,020,000	Spring Texas Independent
		School District,
		5.00%, 08/15/2019
		(Callable 08/15/2018)
		(PSF Guaranteed)		1,251,081
	7,990,000	Tarrant County Texas
		Health Facilities
		Revenue, 6.00%,
		09/01/2024 (ETM)		10,407,934
	1,800,000	Tarrant County Texas
		Housing Finance
		Corporation Revenue
		Bonds, 0.00%,
		09/15/2016 (ETM) ^		1,698,516
		Texas State:
	6,285,000	5.00%, 10/01/2018		7,780,641
	3,965,000	5.00%, 04/01/2020
		(Callable 04/01/2016)		4,614,388
	1,225,000	University of Texas
		Revenue Bonds, 5.00%,
		08/15/2018 (Pre-refunded
		to 08/15/2016)		1,448,905
				144,627,534
Utah – 0.7%
		Granite School District
		Board of Education:
	3,900,000	5.00%, 06/01/2022
		(Callable 06/01/2021)		4,841,850
	1,750,000	5.00%, 06/01/2023
		(Callable 06/01/2021)		2,134,318
	395,000	Salt Lake City Utah
		Hospital Revenue,
		8.125%, 05/15/2015
		(Callable 02/13/2012)
		(ETM)		426,592
				7,402,760
Virginia – 0.6%
	1,095,000	Bristol Virginia Utility
		Systems General
		Obligations, 5.50%,
		11/01/2018 (ETM)		1,338,024
	4,210,000	Tobacco Settlement
		Financing Corporation
		Revenue, 5.625%,
		06/01/2037 (Pre-refunded
		to 06/01/2015)		4,866,423
				6,204,447

The accompanying notes are an integral part of these financial statements.

Page 69

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
MUNICIPAL BONDS – 96.5% (cont.)
Washington – 3.0%
$	1,005,000	City of Ocean Shores WA,
		5.50%, 12/01/2021
		(Callable 06/01/2012)
		(Insured by NPFGC)	$	1,020,799
	4,500,000	Snohomish County
		School District No. 201,
		4.00%, 12/01/2021
		(Callable 12/01/2020)		5,175,315
	3,605,000	Snohomish County
		Washington Public
		Utilities Revenue,
		6.80%, 01/01/2020
		(Callable 02/13/2012)
		(ETM)		4,696,017
	2,755,000	Thurston & Pierce
		Counties Washington
		Community Schools,
		4.25%, 12/01/2021
		(Callable 12/01/2020)		3,163,814
		Washington State:
	1,500,000	5.00%, 07/01/2018
		(Callable 07/01/2013)		1,602,555
	10,000,000	5.00%, 01/01/2021		12,513,000
	3,970,000	5.50%, 07/01/2023		5,104,110
				33,275,610
West Virginia – 1.5%
	7,365,000	Berkeley Brooke Fayette
		Counties West Virginia
		Single Family Mortgage
		Revenue, 0.00%,
		12/01/2014 (ETM) ^		7,179,476
	8,390,000	West Virginia State
		Building Community
		Lease Revenue Bonds,
		7.00%, 07/01/2013
		(ETM)		9,217,841
				16,397,317
Wisconsin – 0.7%
	960,000	Badger Tobacco Asset
		Securitization Corporation
		Wisconsin, 5.75%,
		06/01/2012 (ETM)		981,466
	3,000,000	Ladysmith-Hawkins
		Wisconsin School District
		General Obligation,
		5.20%, 04/01/2018
		(Callable 04/01/2016)
		(Insured by NPFGC)		3,202,800
	3,320,000	Wisconsin State
		Health & Educational
		Facilities Revenue,
		5.00%, 12/01/2019
		(Callable 12/01/2014)
		(Insured by NPFGC)		3,496,724
				7,680,990
		Total Municipal Bonds
		(Cost $992,692,536)		1,056,193,592

The accompanying notes are an integral part of these financial statements.

Page 70

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Shares			Value
SHORT-TERM INVESTMENTS – 4.2%
Money Market Mutual Fund – 4.2%
	45,532,199	Goldman Sachs
		Financial Square
		Funds, 0.01% «	$	45,532,199
		Total Short-Term
		Investments
		(Cost $45,532,199)		45,532,199
		Total Investments
		(Cost $1,038,224,735)
		– 100.7%		1,101,725,791
		Liabilities in Excess of
		Other Assets – (0.7)%		(7,657,889	)
		TOTAL NET
		ASSETS – 100.0%	$	1,094,067,902

Notes to Schedule of Investments

AGM – Assured Guaranty Municipal

AMBAC – Ambac Assurance Corporation. Ambac Assurance’s plan of rehabilitation transferring certain troubled insurance policies and assets (mostly relating to insurance coverage and credit default swaps on residential mortgage-backed securities) to a segregated account has obtained court approval but has not yet been implemented.

BHAC – Berkshire Hathaway Assurance Corp.

FGIC-TCRS – Financial Guaranty Insurance Company

NPFGC – National Public Finance Guarantee Corp.

PSF – Texas Permanent School Fund

ETM – Escrowed to Maturity

^ Non-Income Producing

« 7-Day Yield

The accompanying notes are an integral part of these financial statements.

Page 71

Baird Intermediate Municipal Bond Fund

Schedule of Investments       December 31, 2011

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Fixed Income
Municipal Bonds	$	—	$	1,056,193,591	$	—	$	1,056,193,591
Total Fixed Income		—		1,056,193,591		—		1,056,193,591
Short-Term Investments
Money Market Mutual Fund		45,532,199		—		—		45,532,199
Total Short-Term Investments		45,532,199		—		—		45,532,199
Total Investments	$	45,532,199	$	1,056,193,591	$	—	$	1,101,725,790

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.

Page 72

Baird Aggregate Bond Fund

December 31, 2011

The Baird Aggregate Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Aggregate Bond Index.  The Barclays Capital U.S. 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 Fund entered the year with a significant yield advantage over its benchmark.  The Fund closed the year with strong absolute returns and slightly ahead of the benchmark.  Our long-term commitment to duration neutrality was critically important.  The primary factors for the Fund’s performance over its benchmark index were:

• The Fund’s overweight position to the corporate credit sector was a positive for relative performance.  Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year.  This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond.  The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads.

• An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS, was a positive for the year.

• Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011).  However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact.

• Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect.

Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.

We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund.  The Fund’s significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.

Portfolio Characteristics

Quality Distribution*	Sector Weightings*

Net Assets:	$1,506,393,540	Annualized Expense Ratio:
SEC 30-Day Yield:**		Institutional Class:	0.30	%
Institutional Class:	4.02%	Investor Class:	0.55	%***
Investor Class:	3.77%	Portfolio Turnover Rate:	45.9	%
Average Effective Duration:	4.95 years	Total Number of Holdings:	433
Average Effective Maturity:	7.46 years

* Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending).

** SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2011.

*** Includes 0.25% 12b-1 fee.

Page 73

Baird Aggregate Bond Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Page 74

Baird Aggregate Bond Fund

Total Returns

		Average Annual
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Since Inception(1)
Institutional Class Shares	7.85%	5.97%	5.83%	6.44%
Investor Class Shares	7.46%	5.70%	5.58%	6.19%
Barclays Capital
U.S. Aggregate Bond Index(2)	7.84%	6.50%	5.78%	6.26%

(1) For the period from September 29, 2000 (commencement of operations) through December 31, 2011.

(2) The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, U.S. dollar denominated, fixed-rate taxable bonds, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities, with maturities of at least one year.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in an index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 75

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1%
Asset Backed Securities – 4.0%
$	1,004	Amresco Residential
		Securities Mortgage
		Loan Trust,
		Series 1997-3, Class A9,
		6.96%, 03/25/2027	$	1,004
		Bayview Financial
		Acquisition Trust:
	1,122,368	Series 2006-A, Class 1A2,
		5.483%, 02/28/2041		1,111,285
	2,500,000	Series 2007-B, Class 1A2,
		6.831%, 08/28/2047		1,012,683
	246	Contimortgage Home
		Equity Trust,
		Series 1997-2, Class A9,
		7.09%, 04/15/2028		245
		Countrywide Asset-
		Backed Certificates:
	85,397	Series 2006-S2, Class A2,
		5.627%, 07/25/2027 §		85,121
	1,030,086	Series 2005-17,
		Class 1AF2, 5.363%,
		03/25/2030 §		791,581
	3,775,804	Series 2004-13,
		Class AF4, 4.583%,
		01/25/2033		3,662,983
	2,703,311	Series 2004-S1, Class A3,
		4.615%, 02/25/2035		2,548,016
	6,566,105	Series 2004-15, Class AF6,
		4.613%, 04/25/2035		6,171,587
	9,552,406	Series 2005-1, Class AF6,
		5.03%, 07/25/2035		9,147,957
	10,994,762	Series 2005-11,
		Class AF3, 4.778%,
		02/25/2036		8,252,097
	4,387,363	Series 2005-10,
		Class AF6, 4.915%,
		02/25/2036		3,790,887
	4,823,456	Series 2005-13, Class
		AF3, 5.43%, 04/25/2036		3,723,008
	1,844,159	Series 2005-17,
		Class 1AF5, 5.564%,
		05/25/2036 §		1,075,077
	1,609,433	Series 2007-S1, Class A6,
		5.693%, 11/25/2036		1,272,814
	3,069,218	Series 2006-13,
		Class 1AF2, 5.884%,
		01/25/2037 §		2,877,834
	1,500,000	Series 2006-10,
		Class 1AF3, 5.812%,
		09/25/2046		776,934
	408,311	Credit Based Asset
		Servicing and
		Securitization LLC,
		Series 2005-CB8,
		Class AF2, 5.303%,
		12/25/2035		369,025
	70,812	Equivantage Home
		Equity Loan Trust,
		Series 1996-3, Class A3,
		7.70%, 09/25/2027		70,159
	2,944,783	FedEx Corporation
		Pass-Thru Certificates,
		Series 1998-1, Class B,
		6.845%, 01/15/2019		3,239,261
		GE Capital Mortgage
		Services, Inc.:
	689	Series 1997-HE4, Class
		A7, 6.735%, 12/25/2028		685
	13,613	Series 1999-HE1, Class
		A7, 6.265%, 04/25/2029		13,281

The accompanying notes are an integral part of these financial statements.

Page 76

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Asset Backed Securities – 4.0% (cont.)
		Green Tree Financial
		Corporation:
$	452,839	Series 1993-3, Class A7,
		6.40%, 10/15/2018	$	463,026
	321,354	Series 1993-4, Class A5,
		7.05%, 01/15/2019		323,892
	30,996	Series 1997-1, Class A5,
		6.86%, 03/15/2028		32,609
	1,301,979	Series 1998-2, Class A5,
		6.24%, 12/01/2028		1,363,590
	52,649	Series 1997-6, Class A8,
		7.07%, 01/15/2029		54,853
	1,134,206	Series 1998-3, Class A5,
		6.22%, 03/01/2030		1,229,622
	699,078	Series 1998-4, Class A5,
		6.18%, 04/01/2030		714,582
	34,823	IMC Home Equity
		Loan Trust,
		Series 1997-5, Class A10,
		5.749%, 11/20/2028		34,385
	67,677	Oakwood Mortgage
		Investors, Inc.,
		Series 1999-B, Class A3,
		6.45%, 11/15/2017		58,101
	3,000,000	Renaissance Home
		Equity Loan Trust,
		Series 2007-1, Class AF3,
		5.612%, 04/25/2037		1,043,094
		Residential Asset
		Mortgage Products, Inc.:
	2,225,369	Series 2003-RS7, Class
		AI6, 5.34%, 08/25/2033		2,187,128
	661,507	Series 2005-RS1, Class
		AI6, 4.713%, 01/25/2035		599,289
		Residential Asset
		Securities Corporation:
	1,656,932	Series 2003-KS2,
		Class AI6, 3.99%,
		04/25/2033		1,577,373
	128,586	Series 2003-KS5, Class
		AI6, 3.62%, 07/25/2033		111,099
	173,557	Series 2004-KS2, Class
		AI6, 4.30%, 03/25/2034		166,690
				59,952,857
Commercial Mortgage Backed Securities – 7.7%
	15,639,000	Bear Stearns Commercial
		Mortgage Securities,
		Series 2005-PWR9,
		Class A4A, 4.871%,
		09/11/2042		16,961,809
	15,850,000	Citigroup Deutsche
		Bank, Series 2005-CD1,
		Class A4,
		5.399%, 07/15/2044		17,517,166
	15,000,000	Commercial Mortgage
		Pass-Through Certificates,
		Series 2005-C6,
		Class A5A, 5.116%,
		06/10/2044		16,445,565
	8,974,000	Credit Suisse First
		Boston Mortgage
		Securities Corporation,
		Series 2005-C5, Class A4,
		5.10%, 08/15/2038		9,823,955
	10,750,000	GE Capital Commercial
		Mortgage Corporation,
		Series 2005-C4, Class A4,
		5.486%, 11/10/2045		11,872,418

The accompanying notes are an integral part of these financial statements.

Page 77

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Commercial Mortgage
Backed Securities – 7.7% (cont.)
$	4,625,000	J.P. Morgan Chase
		Commercial Mortgage
		Securities Corp., Series
		2011-C5, Class A3,
		4.171%, 08/15/2046	$	4,952,492
	15,355,000	J.P. Morgan Chase
		Commercial Mortgage
		Trust, Series 2005-CB12,
		Class A4, 4.895%,
		09/12/2037		16,749,541
	9,825,000	Morgan Stanley Capital I,
		Series 2005-HQ7, Class
		A4, 5.202%, 11/14/2042		10,802,499
	10,000,000	Wachovia Bank
		Commercial Mortgage
		Trust, Series 2005-C22,
		Class A4, 5.444%,
		12/15/2044		11,003,790
				116,129,235
Financial – 16.6%
	3,725,000	Aegon NV,
		4.75%, 06/01/2013 f		3,811,498
	2,700,000	American Express Credit
		Corporation, Series C,
		7.30%, 08/20/2013		2,930,199
		American General
		Finance Corporation:
	1,000,000	5.85%, 06/01/2013		880,000
	500,000	6.90%, 12/15/2017		360,000
	1,000,000	American International
		Group Inc.,
		8.175%, 05/15/2058		890,000
	2,000,000	Ameriprise Financial, Inc.,
		7.30%, 06/28/2019 @		2,398,428
	250,000	AmSouth Bancorp,
		6.75%, 11/01/2025		202,678
	1,708,000	Arden Realty LP,
		5.25%, 03/01/2015		1,814,004
	3,700,000	ASIF Global
		Financing XIX,
		4.90%, 01/17/2013
		(Acquired 10/25/2011;
		Cost $3,796,766)*		3,730,902
	400,000	BAC Capital Trust VI,
		5.625%, 03/08/2035		332,384
	1,715,000	Bank of America
		Corporation
		Subordinated Notes,
		10.20%, 07/15/2015		1,837,218
	100,000	BankAmerica Capital II,
		Series 2, 8.00%,
		12/15/2026		90,000
	2,175,000	Banponce Trust I, Series
		A, 8.327%, 02/01/2027		1,479,000
	2,500,000	Barclays Bank PLC,
		6.75%, 05/22/2019 f @		2,771,557
	2,400,000	The Bear Stearns
		Companies LLC,
		5.30%, 10/30/2015		2,580,934
	100,000	Capital One Financial
		Corporation,
		6.15%, 09/01/2016		104,053
	5,000,000	CDP Financial Inc.,
		4.40%, 11/25/2019
		(Acquired 11/20/2009;
		Cost $4,987,600)* f		5,425,185
		CIT Group, Inc.:
	217	7.00%, 05/01/2015		218
	53,000	7.00%, 05/04/2015
		(Acquired 01/23/2006;
		Cost $53,000)* @		53,066

The accompanying notes are an integral part of these financial statements.

Page 78

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Financial – 16.6% (cont.)
$	694	7.00%, 05/01/2016	$	694
	88,000	7.00%, 05/02/2016
		(Acquired 01/23/2006;
		Cost $88,000)* @		87,890
	172	7.00%, 05/01/2017		172
	124,000	7.00%, 05/02/2017
		(Acquired 01/23/2006;
		Cost $124,000)*		123,845
	2,000,000	Citigroup Capital XXI,
		8.30%, 12/21/2057		1,997,500
		Citigroup, Inc.:
	1,000,000	5.50%, 04/11/2013		1,020,923
	3,125,000	6.01%, 01/15/2015		3,264,703
	2,675,000	6.125%, 11/21/2017 @		2,854,843
	5,000,000	CNA Financial
		Corporation,
		6.50%, 08/15/2016		5,408,270
	5,330,000	Countrywide
		Financial Corporation,
		6.25%, 05/15/2016 @		5,021,574
	1,000,000	Credit Agricole S.A.,
		6.637%, 05/29/2049
		(Acquired 05/23/2007;
		Cost $1,000,000)* f @		580,000
	1,575,000	Credit Suisse New York,
		5.30%, 08/13/2019 f @		1,624,313
	3,135,000	First Empire
		Capital Trust I,
		8.234%, 02/01/2027		3,146,327
	1,575,000	First Empire
		Capital Trust II,
		8.277%, 06/01/2027		1,635,187
	3,749,000	First Hawaiian Capital
		Trust I, Series B,
		8.343%, 07/01/2027		3,392,845
	608,152	First National Bank of
		Chicago Pass-Thru
		Certificates,
		Series 1993-A,
		8.08%, 01/05/2018		688,002
	2,500,000	Fleet Capital Trust II,
		7.92%, 12/11/2026		2,225,000
		General Electric
		Capital Corporation:
	2,475,000	4.375%, 09/21/2015		2,662,409
	1,500,000	5.625%, 09/15/2017		1,660,163
	4,700,000	5.625%, 05/01/2018		5,264,009
	1,416,000	Genworth Financial, Inc.,
		5.75%, 06/15/2014 @		1,400,071
	6,500,000	Genworth Life Institutional
		Funding Trust, 5.875%,
		05/03/2013 (Acquired
		04/14/2011; Cost
		$6,766,994)*		6,606,060
		GMAC Inc.:
	336,000	7.50%, 12/31/2013		345,240
	403,000	8.00%, 12/31/2018		395,947
	150,000	GMAC LLC,
		6.75%, 12/01/2014		151,309
	1,180,000	Goldman Sachs Capital I,
		6.345%, 02/15/2034 @		998,764
		The Goldman
		Sachs Group, Inc.:
	2,200,000	3.70%, 08/01/2015 @		2,155,349
	1,000,000	6.25%, 09/01/2017		1,045,437
	4,500,000	6.15%, 04/01/2018		4,644,400
	2,520,000	Goldman Sachs
		Group LP, 8.00%,
		03/01/2013 (Acquired
		01/05/2009 through
		09/23/2010; Aggregate
		Cost $2,649,945)*		2,632,750

The accompanying notes are an integral part of these financial statements.

Page 79

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Financial – 16.6% (cont.)
$	2,800,000	Great West Life &
		Annuity Insurance,
		7.153%, 05/16/2046
		(Acquired 05/16/2006
		through 11/08/2007;
		Aggregate Cost
		$2,783,656)*	$	2,730,000
	2,200,000	Hartford Financial
		Services Group Inc.,
		8.125%, 06/15/2038 @		2,178,000
	2,100,000	HSBC Holdings PLC
		Subordinated Notes,
		6.50%, 09/15/2037 f		2,072,891
	400,000	HSBC USA
		Capital Trust I,
		7.808%, 12/15/2026
		(Acquired 03/08/2007;
		Cost $407,729)*		394,000
	500,000	HSBC USA
		Capital Trust II,
		8.38%, 05/15/2027
		(Acquired 11/06/2007;
		Cost $512,741)*		495,577
	2,000,000	Humana Inc.,
		7.20%, 06/15/2018		2,332,928
	500,000	Industrial Bank of Korea,
		3.75%, 09/29/2016
		(Acquired 03/22/2011;
		Cost $496,855)* f		503,479
	3,650,000	ING Bank N.V.,
		4.00%, 03/15/2016
		(Acquired 03/08/2011;
		Cost $3,648,029)* f		3,526,787
	1,246,000	Invesco Ltd.,
		5.375%, 12/15/2014 f		1,335,700
	7,025,000	Irish Life & Permanent
		Group Holdings PLC,
		3.60%, 01/14/2013
		(Acquired 01/07/2010;
		Cost $7,021,207)* f		6,143,896
		Jefferies Group Inc.:
	4,000,000	6.875%, 04/15/2021		3,600,000
	1,395,000	6.25%, 01/15/2036		1,140,686
	6,800,000	John Hancock Mutual
		Life Insurance Company,
		7.375%, 02/15/2024
		(Acquired 08/26/2010;
		Cost $7,659,844)*		8,134,840
	3,000,000	J.P. Morgan Chase Bank
		NA, 5.875%, 06/13/2016		3,247,299
		J.P. Morgan Chase & Co.:
	2,700,000	3.70%, 01/20/2015		2,799,374
	4,600,000	5.60%, 07/15/2041		4,816,039
	1,250,000	Kaupthing Bank,
		5.75%, 10/04/2011
		(Acquired 06/06/2008
		through 07/22/2008;
		Aggregate Cost
		$969,046)* f §		309,375
	3,400,000	Key Bank NA,
		7.413%, 05/06/2015		3,694,675
	5,000,000	Kookmin Bank,
		7.25%, 05/14/2014
		(Acquired 08/24/2009
		through 03/10/2010;
		Aggregate Cost
		$5,283,744)* f @		5,522,705
		Liberty Mutual
		Group, Inc.:
	450,000	7.25%, 09/01/2012
		(Acquired 06/20/2011;
		Cost $466,365)*		463,846

The accompanying notes are an integral part of these financial statements.

Page 80

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Financial – 16.6% (cont.)
$	2,500,000	10.75%, 06/15/2058
		(Acquired 05/21/2008;
		Cost $2,445,125)*	$	3,137,500
	565,000	Liberty Mutual
		Insurance Company,
		7.697%, 10/15/2097
		(Acquired 03/26/2003;
		Cost $361,718)*		533,993
	1,125,000	Lincoln National
		Corporation,
		6.05%, 04/20/2067 @		936,562
	1,600,000	Lloyds TSB Bank PLC,
		5.80%, 01/13/2020
		(Acquired 02/10/2010;
		Cost $1,559,396)* f		1,519,005
	100,000	Manulife Financial Corp.,
		4.90%, 09/17/2020 f		101,960
		Marsh & McLennan
		Companies, Inc.:
	7,000,000	6.25%, 03/15/2012		7,065,674
	4,075,000	4.85%, 02/15/2013		4,204,459
	1,000,000	9.25%, 04/15/2019		1,318,788
	1,000,000	Massachusetts Mutual
		Life Insurance Company,
		8.875%, 06/01/2039
		(Acquired 05/27/2009;
		Cost $987,100)*		1,462,758
	800,000	MBIA Insurance Corp.,
		14.00%, 01/15/2033
		(Acquired 01/11/2008;
		Cost $800,000)* @		448,000
		Merrill Lynch
		& Company:
	1,000,000	6.40%, 08/28/2017		968,304
	1,750,000	6.875%, 04/25/2018		1,725,393
	1,275,000	7.75%, 05/14/2038		1,211,406
	422,000	Metlife Inc.,
		6.50%, 12/15/2032		505,811
	1,650,000	Monumental Global
		Funding Limited,
		5.50%, 04/22/2013
		(Acquired 07/09/2010;
		Cost $1,710,831)*		1,718,242
		Morgan Stanley:
	1,075,000	4.75%, 04/01/2014		1,058,969
	1,000,000	4.00%, 07/24/2015		937,752
	150,000	6.625%, 04/01/2018		148,116
	3,644,000	Morgan Stanley
		Dean Witter & Co.,
		6.75%, 10/15/2013		3,784,298
	1,000,000	The NASDAQ
		OMX Group Inc.,
		4.00%, 01/15/2015		1,024,679
		National City
		Bank of Cleveland
		Subordinated Notes:
	1,310,000	4.625%, 05/01/2013		1,359,946
	2,000,000	5.80%, 06/07/2017		2,201,776
	4,921,000	Navigators Group Inc.
		Senior Unsecured Notes,
		7.00%, 05/01/2016		5,077,537
	4,389,000	NB Capital Trust IV,
		8.25%, 04/15/2027		4,037,880
	2,500,000	North Fork
		Capital Trust II,
		8.00%, 12/15/2027		2,375,000
	2,750,000	Protective Life Corp.,
		7.375%, 10/15/2019		3,051,755
	1,000,000	Regions Financial Corp.,
		7.75%, 11/10/2014		1,005,000
	4,750,000	Regions Financing Trust
		II, 6.625%, 05/15/2047		3,895,000

The accompanying notes are an integral part of these financial statements.

Page 81

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Financial – 16.6% (cont.)
$	1,000,000	Republic New York
		Capital I,
		7.75%, 11/15/2026	$	1,002,500
	700,000	Republic New York
		Corporation Debentures,
		9.125%, 05/15/2021		791,916
	1,500,000	Santander Issuances,
		6.50%, 08/11/2019
		(Acquired 10/18/2007;
		Cost $1,660,835)* f		1,305,952
	1,100,000	Santander U.S. Debt
		S.A. Unipersonal,
		2.991%, 10/07/2013
		(Acquired 09/27/2010;
		Cost $1,100,000)* f		1,051,614
	8,760,000	Schwab Capital Trust I,
		7.50%, 11/15/2037		8,762,891
		SLM Corporation:
	1,000,000	5.375%, 01/15/2013		1,006,899
	3,000,000	5.00%, 10/01/2013 @		3,000,000
	1,137,000	5.375%, 05/15/2014		1,137,797
	500,000	5.625%, 08/01/2033		372,960
	4,900,000	Sovereign Bancorp, Inc.,
		8.75%, 05/30/2018		5,463,446
	6,000,000	SunTrust Banks Inc.,
		5.25%, 11/05/2012		6,149,034
	1,032,000	Susa Partnership LP,
		8.20%, 06/01/2017		1,238,757
	1,000,000	Symetra Financial
		Corporation,
		6.125%, 04/01/2016
		(Acquired 03/23/2006;
		Cost $995,570)*		1,010,537
	3,000,000	TD Ameritrade
		Holding Corporation,
		5.60%, 12/01/2019		3,243,744
	1,000,000	Travelers
		Companies, Inc.,
		6.75%, 06/20/2036		1,286,790
	560,000	UFJ Finance
		Aruba A.E.C.,
		6.75%, 07/15/2013 f		598,392
	4,120,000	Wachovia Bank NA,
		6.00%, 11/15/2017		4,549,399
	750,000	Willis North
		America Inc.,
		5.625%, 07/15/2015		796,394
				249,752,002
Industrial – 13.4%
	4,200,000	Acuity Brands Lighting
		Inc., 6.00%, 12/15/2019		4,729,498
	2,325,000	Allied Waste North
		America, Inc.,
		6.875%, 06/01/2017		2,458,687
		Ameritech Capital
		Funding Debentures:
	1,750,092	9.10%, 06/01/2016		2,073,401
	1,500,000	6.45%, 01/15/2018		1,727,851
	3,000,000	Anadarko Petroleum
		Corporation,
		6.375%, 09/15/2017		3,477,402
	2,000,000	Anglo American
		Capital PLC,
		9.375%, 04/08/2019
		(Acquired 04/02/2009;
		Cost $2,000,000)* f		2,544,844
		Bunge Limited
		Finance Corporation:
	600,000	5.35%, 04/15/2014		629,312
	1,289,000	5.10%, 07/15/2015		1,349,154
	3,800,000	Bunge NA Finance LP,
		5.90%, 04/01/2017		4,149,737

The accompanying notes are an integral part of these financial statements.

Page 82

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Industrial – 13.4% (cont.)
$	3,000,000	CenturyLink Inc.,
		5.15%, 06/15/2017	$	2,973,546
	8,164,000	Chevron Phillips
		Chemical Company LLC,
		7.00%, 06/15/2014
		(Acquired 10/27/2010
		through 10/28/2010;
		Aggregate Cost
		$9,004,058)* @		9,110,763
	800,000	Clear Channel
		Communications,
		5.50%, 12/15/2016		370,000
	1,000,000	Comcast Corporation,
		6.95%, 08/15/2037		1,272,308
	500,000	Comcast-Cable Holdings,
		7.875%, 08/01/2013		550,242
	7,075,000	Computer
		Sciences Corporation,
		5.50%, 03/15/2013 @		7,039,625
		ConAgra Foods, Inc.:
	1,687,000	5.819%, 06/15/2017		1,889,398
	120,000	9.75%, 03/01/2021		162,276
	324,985	Continental Airlines, Inc.
		Pass-Thru Certificates,
		Series 1997-4, Class A,
		6.90%, 01/02/2018		338,374
	2,000,000	COX
		Communications Inc.,
		7.25%, 11/15/2015		2,351,132
	2,000,000	Daimler Finance
		North America LLC,
		1.184%, 03/28/2014
		(Acquired 12/09/2011;
		Cost $1,947,613)*		1,930,110
	410,000	Deutsche Telekom
		International
		Finance BV,
		8.75%, 06/15/2030 f		571,913
	8,000,000	DIRECTV
		Holdings/Financing,
		7.625%, 05/15/2016		8,490,000
		Donnelley (R.R.)
		& Sons Co.:
	2,500,000	8.60%, 08/15/2016		2,503,125
	2,000,000	6.125%, 01/15/2017 @		1,860,000
	1,000,000	7.625%, 06/15/2020		935,000
	1,000,000	D.R. Horton Inc.
		Unsubordinated Notes,
		6.50%, 04/15/2016 @		1,036,250
	3,000,000	Express Scripts, Inc.,
		3.125%, 05/15/2016 @		3,016,629
	8,907,000	Freeport-McMoRan
		Copper & Gold Inc.,
		8.375%, 04/01/2017		9,463,687
	7,000,000	Georgia-Pacific LLC,
		8.25%, 05/01/2016
		(Acquired 12/10/2010;
		Cost $7,585,171)*		7,776,720
	8,092,000	Glencore Funding LLC,
		6.00%, 04/15/2014
		(Acquired 03/31/2004
		through 06/20/2011;
		Aggregate Cost
		$8,163,111)*		8,358,381
		GTE Corporation:
	2,400,000	6.84%, 04/15/2018		2,874,761
	100,000	8.75%, 11/01/2021		140,031
	650,000	Health Management
		Association,
		6.125%, 04/15/2016		672,750

The accompanying notes are an integral part of these financial statements.

Page 83

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Industrial – 13.4% (cont.)
		Highmark Inc. Notes,
$	1,950,000	6.80%, 08/15/2013
		(Acquired 08/14/2003
		through 12/17/2007;
		Aggregate Cost
		$1,961,298)*	$	2,081,721
	3,000,000	4.75%, 05/15/2021
		(Acquired 05/03/2011;
		Cost $2,987,880)*		3,074,394
	1,000,000	Holcim U.S. Finance,
		6.00%, 12/30/2019
		(Acquired 09/24/2009;
		Cost $986,740)* f		1,030,469
	5,700,000	Hutchison Whampoa
		International Ltd.,
		7.625%, 04/09/2019
		(Acquired 10/22/2009
		through 10/29/2009;
		Aggregate Cost
		$6,298,836)* f		7,022,035
	950,000	Johnson Controls Inc.,
		6.00%, 01/15/2036		1,098,975
	400,000	Laboratory Corporation
		of America Holdings,
		5.625%, 12/15/2015		445,298
	1,000,000	Lafarge SA,
		7.125%, 07/15/2036 f @		882,932
	1,000,000	Martin Marietta
		Materials, Inc.,
		6.25%, 05/01/2037		899,106
	1,000,000	Masco Corporation,
		6.125%, 10/03/2016		1,026,203
	1,100,000	Nabors Industries, Inc.,
		6.15%, 02/15/2018		1,228,798
	7,045,000	National Oilwell Varco
		Inc., Series B,
		6.125%, 08/15/2015		7,212,199
	1,300,000	New Cingular Wireless
		Services, Inc.,
		8.75%, 03/01/2031		1,910,090
	1,500,000	Nextel Communications,
		Series D,
		7.375%, 08/01/2015@		1,372,500
	320,000	Pactiv Corporation,
		7.95%, 12/15/2025 @		216,000
	400,000	PCCW-HKT
		Capital II Ltd.,
		6.00%, 07/15/2013
		(Acquired 07/10/2003;
		Cost $398,132)* f		419,651
	4,355,000	Plum Creek
		Timberlands, L.P.,
		5.875%, 11/15/2015		4,833,937
	1,000,000	Questar Market
		Resources Inc.,
		6.80%, 03/01/2020		1,070,000
	2,000,000	Ralcorp Holdings, Inc.,
		4.95%, 08/15/2020		2,038,816
	500,000	Rio Tinto Alcan, Inc.,
		5.75%, 06/01/2035 f		591,150
	3,700,000	Rio Tinto Financial
		USA Ltd.,
		6.50%, 07/15/2018 f @		4,459,636
	1,500,000	SK Telecom,
		6.625%, 07/20/2027
		(Acquired 07/13/2007;
		Cost $1,482,015)* f		1,776,663
		Sprint Capital
		Corporation:
	2,800,000	6.90%, 05/01/2019 @		2,303,000
	358,000	8.75%, 03/15/2032		289,532

The accompanying notes are an integral part of these financial statements.

Page 84

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Industrial – 13.4% (cont.)
$	1,000,000	Talisman Energy Inc.,
		7.75%, 06/01/2019 f	$	1,233,061
	2,793,000	Teck Resources Limited,
		10.25%, 05/15/2016 f		3,211,950
		Telecom Italia
		Capital SA: f
	2,000,000	7.175%, 06/18/2019 @		1,874,216
	5,519,000	7.20%, 07/18/2036		4,558,407
		Telefonica Emisiones,
		S.A.U.: f
	1,950,000	6.421%, 06/20/2016		2,040,663
	5,075,000	6.221%, 07/03/2017		5,201,165
		Time Warner, Inc.:
	1,050,000	4.70%, 01/15/2021		1,130,556
	1,100,000	7.625%, 04/15/2031		1,419,969
	500,000	7.70%, 05/01/2032		652,342
	1,000,000	6.55%, 05/01/2037		1,137,416
	3,100,000	6.75%, 06/15/2039		3,663,326
	5,000,000	6.25%, 03/29/2041 @		5,994,755
	3,000,000	Tyco Electronics
		Group S.A.,
		6.55%, 10/01/2017 f		3,465,594
	53,574	United AirLines, Inc.
		Pass-Thru Certificates,
		Series 2000-2, Class C,
		7.762%, 04/29/2049 § † **		1,607
	317,248	U.S. Airways
		Pass-Thru Certificate,
		Series 1998-1, 6.85%,
		01/30/2018		291,868
		Vale Overseas Limited: f
	3,850,000	8.25%, 01/17/2034 @		4,943,916
	1,550,000	6.875%, 11/21/2036		1,764,754
	1,000,000	6.875%, 11/10/2039		1,145,400
	2,000,000	Verizon Wireless Cap LLC,
		8.50%, 11/15/2018		2,699,400
		Vulcan Materials Co.:
	2,000,000	7.00%, 06/15/2018		2,060,000
	500,000	7.15%, 11/30/2037		450,000
	100,000	Westvaco Corporation,
		9.75%, 06/15/2020		126,287
	2,000,000	Weyerhaeuser Company,
		7.25%, 07/01/2013		2,117,636
	3,600,000	Woodside Finance Ltd.,
		8.125%, 03/01/2014
		(Acquired 02/24/2009;
		Cost $3,598,884)* f		4,025,786
	690,000	Xstrata Finance
		Canada Ltd.,
		5.80%, 11/15/2016
		(Acquired 12/06/2011;
		Cost $746,256)* f		752,707
				202,072,793
Other Government Related Securities – 1.4%
	5,496,000	Corp Andina
		De Fomento Notes,
		5.75%, 01/12/2017 f		6,011,184
		Korea Electric Power
		Corporation: f
	342,000	7.75%, 04/01/2013		363,793
	2,165,000	6.75%, 08/01/2027		2,580,892
	510,000	National Bank of Hungary
		Yankee Debentures,
		8.875%, 11/01/2013 f		549,845
	3,000,000	PEMEX Finance Ltd.,
		10.61%, 08/15/2017 f		3,673,386
	2,800,000	PEMEX Project
		Funding Master Trust,
		5.75%, 03/01/2018		3,080,000
	1,000,000	Petrobras International
		Finance Company,
		5.75%, 01/20/2020 f		1,070,120

The accompanying notes are an integral part of these financial statements.

Page 85

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Other Government Related Securities – 1.4% (cont.)
$	301,000	United Mexican States,
		6.75%, 09/27/2034 f	$	392,053
	2,788,000	Westdeutsche
		Landesbank
		Subordinated Notes,
		4.796%, 07/15/2015 f		2,895,165
				20,616,438
Residential Mortgage Backed Securities – 28.6%
		Bank of America
		Alternative Loan Trust:
	296,384	Series 2003-4, Class 2A1,
		5.00%, 06/25/2018		305,949
	3,772,223	Series 2003-5, Class 2A1,
		5.00%, 07/25/2018		3,895,774
	499,878	Series 2003-11, Class 4A1,
		4.75%, 01/25/2019		507,225
	326,616	Series 2004-6, Class 4A1,
		5.00%, 07/25/2019		330,632
	7,440,241	Series 2004-7, Class 4A1,
		5.00%, 08/25/2019		7,637,371
	339,242	Series 2004-11, Class 4A1,
		5.50%, 12/25/2019		349,912
	524,125	Series 2005-2, Class 4A1,
		5.50%, 03/25/2020		515,278
	2,391,969	Series 2005-4, Class 3A1,
		5.50%, 05/25/2020		2,277,246
	1,641,141	Series 2005-10, Class 5A1,
		5.25%, 11/25/2020		1,566,354
	2,681,626	Series 2007-1,
		Class 1A1, 5.792%,
		04/25/2022		2,490,622
	1,127,133	Series 2003-11,
		Class 2A1, 6.00%,
		01/25/2034		1,130,223
	508,989	Series 2005-2,
		Class 1CB2,
		5.50%, 03/25/2035		453,696
	730,152	Series 2005-9,
		Class 1CB3,
		5.50%, 10/25/2035		579,306
	418,281	Series 2005-11,
		Class 1CB4,
		5.50%, 12/25/2035		327,456
	1,580,949	Series 2006-5, Class CB7,
		6.00%, 06/25/2046 §		1,069,404
	2,834,424	Bear Stearns Asset
		Backed Securities Trust,
		Series 2004-AC2, Class
		2A, 5.00%, 05/25/2034		2,833,752
		Chase Mortgage
		Finance Corporation:
	689,163	Series 2003-S13, Class
		A11, 5.50%, 11/25/2033		701,290
	26,525	Series 2003-S14, Class
		3A6, 5.50%, 01/25/2034		26,802
	5,500,068	Series 2006-A1, Class
		2A3, 5.806%, 09/25/2036		4,047,621
	764,160	Citigroup Mortgage
		Loan Trust, Inc.,
		Series 2005-9, Class 2A2,
		5.50%, 11/25/2035		718,568
		Countrywide Alternative
		Loan Trust:
	814,766	Series 2005-50CB,
		Class 4A1, 5.00%,
		11/25/2020 §		700,320
	3,702,242	Series 2006-7CB, Class
		3A1, 5.25%, 05/25/2021 §		3,185,428
	806,937	Series 2006-J5, Class 3A1,
		6.045%, 07/25/2021 §		621,843

The accompanying notes are an integral part of these financial statements.

Page 86

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Residential Mortgage
Backed Securities – 28.6% (cont.)
$	894,334	Series 2006-43CB,
		Class 2A1,
		6.00%, 02/25/2022 §	$	793,024
	127,664	Series 2002-11,
		Class A4, 6.25%,
		10/25/2032		129,702
	10,942,901	Series 2003-20CB, Class
		1A1, 5.50%, 10/25/2033		11,484,826
	4,488,807	Series 2005-10CB, Class
		1A6, 5.50%, 05/25/2035		4,314,211
	398,493	Series 2005-34CB, Class
		1A6, 5.50%, 09/25/2035		397,390
	1,920,005	Series 2006-28CB, Class
		A17, 6.00%, 10/25/2036 §		1,191,599
	78,763	Countrywide Home
		Loans, Inc.,
		Series 2003-39, Class A5,
		5.00%, 05/25/2012		78,738
		Deutsche Mortgage
		Securities Inc.:
	1,294,102	Series 2006-AR5,
		Class 21A, 6.00%,
		10/25/2021		1,041,002
	209,335	Series 2004-4, Class
		1A6, 5.65%, 04/25/2034		207,648
		Federal Gold Loan
		Mortgage Corporation
		(FGLMC):
	35,100	6.50%, 07/01/2014		36,871
	455,435	6.00%, 06/01/2020		493,917
	261,221	5.50%, 11/01/2022		283,556
	301,633	5.00%, 06/01/2023		328,979
	286,219	5.50%, 07/01/2023		312,749
	771,610	6.50%, 06/01/2029		884,124
	2,654,444	5.50%, 01/01/2036		2,889,704
	1,608,549	6.00%, 12/01/2036		1,772,225
	2,544,488	5.50%, 04/01/2037		2,764,438
	7,953,396	5.50%, 05/01/2038		8,640,900
	8,189,898	5.50%, 08/01/2038		8,897,846
		Federal Home Loan
		Mortgage Corporation
		(FHLMC):
	77,196	Series 206, Class E,
		0.00%, 07/15/2019 ^		75,794
	41,246	Series 141, Class D,
		5.00%, 05/15/2021		44,320
	45,162	Series 1074, Class I,
		6.75%, 05/15/2021		49,393
	257,928	Series 1081, Class K,
		7.00%, 05/15/2021		289,279
	45,025	Series 163, Class F,
		6.00%, 07/15/2021		50,232
	85,968	Series 188, Class H,
		7.00%, 09/15/2021		95,800
	36,031	Series 1286, Class A,
		6.00%, 05/15/2022		39,090
	8,123,355	4.50%, 11/01/2039		8,615,300
	9,016,262	4.50%, 08/01/2040		9,559,464
	14,875,049	4.50%, 08/01/2040		15,771,225
	20,856,732	4.50%, 09/01/2040		22,113,286
		Federal National
		Mortgage Association
		(FNMA):
	1,085,459	5.00%, 12/01/2019		1,172,396
	9,492,890	5.00%, 11/01/2021		10,253,194
	623,988	5.50%, 01/01/2023		684,459
	1,064,752	5.50%, 07/01/2023		1,167,937
	2,652,048	5.00%, 11/01/2023		2,906,159
	1,033,995	6.00%, 03/01/2026		1,140,339
	2,416,953	6.00%, 05/01/2026		2,665,531
	2,563,774	5.00%, 05/01/2028		2,772,572

The accompanying notes are an integral part of these financial statements.

Page 87

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Residential Mortgage
Backed Securities – 28.6% (cont.)
$	312,066	6.00%, 03/01/2033	$	347,635
	333,829	5.00%, 11/01/2033		361,017
	7,706,810	5.50%, 04/01/2034		8,454,371
	1,424,541	5.50%, 09/01/2034		1,556,361
	352,039	6.00%, 11/01/2034		391,216
	5,122,766	5.50%, 02/01/2035		5,596,802
	25,220,127	5.00%, 10/01/2035 @		27,266,212
	13,781,098	5.00%, 11/01/2035		14,899,145
	19,446,037	5.00%, 02/01/2036		21,023,675
	3,002,128	5.50%, 11/01/2036		3,275,239
	11,833,585	5.50%, 04/01/2037 @		12,936,004
	595,712	6.00%, 08/01/2037		653,256
	8,326,631	5.50%, 06/01/2038		9,073,719
	12,574,365	4.00%, 08/01/2040 @		13,221,084
	3,809,508	3.50%, 12/01/2040		3,921,297
	10,018,285	3.50%, 02/01/2041		10,312,269
	29,936,584	4.00%, 02/01/2041		31,476,267
	16,720,797	4.00%, 09/01/2041		17,585,998
	27,705	Series 2002-56, Class
		MC, 5.50%, 09/25/2017		29,447
	266,502	Series 1989-37, Class G,
		8.00%, 07/25/2019		298,853
	69,102	Series 1989-94, Class G,
		7.50%, 12/25/2019		77,657
	10,733	Series 1990-58, Class J,
		7.00%, 05/25/2020		11,990
	102,062	Series 1990-76, Class G,
		7.00%, 07/25/2020		114,007
	47,572	Series 1990-105, Class J,
		6.50%, 09/25/2020		51,989
	15,043	Series 1990-108, Class G,
		7.00%, 09/25/2020		16,816
	34,335	Series 1991-1, Class G,
		7.00%, 01/25/2021		38,488
	34,613	Series 1991-86, Class Z,
		6.50%, 07/25/2021		38,037
	424,344	Series 1993-58, Class H,
		5.50%, 04/25/2023		462,544
	278,776	Series 1998-66, Class C,
		6.00%, 12/25/2028		305,366
	1,364,411	Series 2004-W6, Class
		1A4, 5.50%, 07/25/2034		1,406,040
	2,807,969	Series 2004-W6, Class
		1A6, 5.50%, 07/25/2034		2,938,620
	529,392	Series 2004-W10,
		Class A24,
		5.00%, 08/25/2034		528,161
	4,100,000	Series 2004-W10, Class
		A4, 5.75%, 08/25/2034		4,179,227
		First Horizon Alternative
		Mortgage Securities:
	563,185	Series 2005-FA7, Class
		2A1, 5.00%, 09/25/2020		534,219
	787,018	Series 2006-FA6, Class
		3A1, 5.75%, 11/25/2021		723,317
	2,213,867	Series 2006-FA8, Class
		2A1, 5.75%, 02/25/2037		2,033,623
		Government National
		Mortgage Association
		(GNMA):
	227,281	6.00%, 11/20/2033		258,077
	13,509,885	5.00%, 07/20/2040		14,954,597
	36,070,858	4.50%, 01/20/2041		39,417,554
	235,508	Impac CMB Trust,
		Series 2004-4, Class 2A2,
		4.905%, 09/25/2034		227,383
	976,455	J.P. Morgan Alternative
		Loan Trust, Series
		2006-A1, Class 2A1,
		2.661%, 03/25/2036		507,477

The accompanying notes are an integral part of these financial statements.

Page 88

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Residential Mortgage
Backed Securities – 28.6% (cont.)
		J.P. Morgan
		Mortgage Trust:
$	602,481	Series 2006-A7,
		Class 2A2, 2.756%,
		01/25/2037 §	$	393,046
	2,574,066	Series 2006-A7,
		Class 2A4R, 2.756%,
		01/25/2037 §		1,679,014
	6,100,000	Series 2007-A2,
		Class 2A3, 3.911%,
		04/25/2037		3,896,540
		Master Alternative
		Loans Trust:
	1,480,953	Series 2004-1, Class 1A1,
		5.00%, 01/25/2019		1,513,480
	89,920	Series 2004-2, Class 4A1,
		5.00%, 02/25/2019		90,785
	1,113,403	Series 2004-4, Class 4A1,
		5.00%, 04/25/2019		1,141,637
	591,912	Series 2003-5, Class 6A1,
		6.00%, 08/25/2033		626,476
	550,045	RAAC Series, Series
		2004-SP1, Class AI4,
		5.285%, 08/25/2027		552,193
	352,693	Residential Accredit
		Loans, Inc., Series
		2004-QS6, Class A1,
		5.00%, 05/25/2019		350,375
	154,473	Residential Funding
		Mortgage Security I,
		Series 2003-S11, Class
		A2, 4.00%, 06/25/2018		156,067
	724,853	Salomon Brothers
		Mortgage Securities
		VII, Series 2003-UP2,
		Class A2,
		4.00%, 06/25/2033		750,305
	1,190,843	Structured Asset
		Securities Corporation,
		Series 2005-7XS,
		Class 1A4B, 5.44%,
		04/25/2035		1,196,893
		Washington Mutual, Inc.
		Pass-Thru Certificates:
	1,349,984	Series 2004-CB1, Class
		5A, 5.00%, 06/25/2019		1,385,587
	2,436,896	Series 2004-CB2, Class
		7A, 5.50%, 08/25/2019		2,541,359
	56,504	Series 2004-CB3, Class
		3A, 5.50%, 10/25/2019		57,812
	740,420	Series 2004-CB3, Class
		4A, 6.00%, 10/25/2019		767,099
	500,975	Series 2004-CB4,
		Class 21A,
		5.50%, 12/25/2019		512,216
				431,797,231
Taxable Municipal Bonds – 5.1%
	5,000,000	Atlanta Independent
		School System,
		5.557%, 03/01/2026		5,455,700
		California Qualified
		School Construction Bonds:
	2,500,000	5.041%, 07/01/2020		2,734,100
	7,500,000	7.155%, 03/01/2027		8,417,250

The accompanying notes are an integral part of these financial statements.

Page 89

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Taxable Municipal Bonds – 5.1% (cont.)
$	2,000,000	California School
		Finance Authority,
		5.043%, 01/01/2021
		(Callable 12/31/2015)	$	2,079,940
	3,500,000	California State,
		5.75%, 03/01/2017		3,924,480
	5,975,000	Contra Costa County
		California Pension
		Obligation,
		5.14%, 06/01/2017		6,561,864
	1,000,000	Cuyahoga County
		Ohio Industrial
		Development Revenue,
		9.125%, 10/01/2023		844,710
	2,580,000	Eaton Ohio
		Community City Schools,
		5.39%, 08/25/2027
		(Callable 06/01/2020)		2,732,839
	4,975,000	Elgin Ohio LOC
		School District,
		5.499%, 08/31/2027
		(Callable 12/01/2019)		5,196,338
	10,000,000	Illinois State,
		3.636%, 02/01/2014		10,191,300
	6,500,000	San Dieguito California
		Public Facilities,
		6.459%, 05/01/2027		7,349,940
	5,000,000	State Public School
		Building Authorities
		Revenue,
		5.00%, 09/15/2027		5,232,950
	2,650,000	Three Rivers Ohio
		LOC School District,
		5.209%, 09/15/2027
		(Callable 12/01/2020)		2,779,876
	7,415,000	Tobacco Settlement
		Authority Iowa,
		6.50%, 06/01/2023
		(Callable 06/01/2015)		6,927,835
	2,000,000	West Contra Costa
		Unified School District,
		6.25%, 08/01/2030		2,076,240
	4,000,000	Westlake Ohio
		City School District,
		5.227%, 12/01/2026
		(Callable 12/01/2020)		4,267,800
				76,773,162
Utilities – 7.1%
		Allegheny Energy
		Supply Co. Senior
		Unsecured Notes:
	5,500,000	8.25%, 04/15/2012
		(Acquired 06/17/2010
		through 09/21/2010;
		Aggregate Cost
		$5,583,746)*		5,599,308
	1,900,000	5.75%, 10/15/2019
		(Acquired 09/22/2009
		through 06/30/2010;
		Aggregate Cost
		$1,891,569)*		2,032,050
	6,900,000	Ameren Corporation,
		8.875%, 05/15/2014		7,731,905
	850,000	Arizona Pubic Service
		Senior Unsecured Notes,
		8.75%, 03/01/2019		1,085,504
	1,914,000	Beaver Valley Funding
		Corporation Debentures,
		9.00%, 06/01/2017		2,013,662

The accompanying notes are an integral part of these financial statements.

Page 90

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Utilities – 7.1% (cont.)
$	5,862,000	Constellation Energy
		Group Inc.,
		4.55%, 06/15/2015	$	6,189,276
	4,500,000	El Paso Pipeline Partners
		Operating Co LLC,
		7.50%, 11/15/2040		5,237,721
		Enel Finance
		International: f
	2,475,000	5.125%, 10/07/2019
		(Acquired 09/30/2009;
		Cost $2,464,110)*		2,211,039
	1,900,000	6.80%, 09/15/2037
		(Acquired 09/13/2007;
		Cost $1,894,965)*		1,650,087
	1,173,000	Energy Transfer Partners,
		8.50%, 04/15/2014		1,315,148
	825,000	Enterprise Products
		Operating LLC,
		6.125%, 02/01/2013		861,063
	2,200,000	Exelon Generation
		Company, LLC,
		6.20%, 10/01/2017 @		2,526,379
	2,500,000	FPL Group Capital,
		Inc., Series D,
		7.30%, 09/01/2067 @		2,600,000
	360,869	GG1C Funding
		Corporation,
		5.129%, 01/15/2014
		(Acquired 06/27/2006;
		Cost $355,436)*		368,389
		Kinder Morgan Energy
		Partners Senior Notes:
	1,000,000	9.00%, 02/01/2019		1,261,515
	2,250,000	6.95%, 01/15/2038		2,541,350
	1,000,000	6.50%, 09/01/2039		1,111,495
	900,000	Kinder Morgan Finance,
		5.70%, 01/05/2016 f		920,250
	257,767	Kiowa Power
		Partners LLC,
		4.811%, 12/30/2013
		(Acquired 11/19/2004
		through 12/23/2011;
		Aggregate Cost $257,767)*		253,888
	2,600,000	Korea Gas Corp.,
		4.25%, 11/02/2020
		(Acquired 10/26/2010;
		Cost $2,587,026)* f		2,567,284
	5,500,000	Mega Advance
		Investments Ltd.,
		5.00%, 05/12/2021
		(Acquired 05/09/2011;
		Cost $5,443,790)* f @		5,593,000
	1,325,000	National Grid PLC
		Senior Unsecured Notes,
		6.30%, 08/01/2016 f		1,520,476
		National Rural
		Utilities Corporation:
	4,647,000	10.375%, 11/01/2018		6,685,890
	100,000	8.00%, 03/01/2032		140,804
	1,284,000	Nisource Finance Corp.,
		6.15%, 03/01/2013		1,348,450
	2,000,000	ONEOK, Inc.,
		5.20%, 06/15/2015 @		2,191,972
	3,401,000	ONEOK Partners L.P.,
		6.15%, 10/01/2016		3,905,399
	1,000,000	Plains All
		American Pipeline,
		5.625%, 12/15/2013		1,068,463
	2,060,000	PPL Energy Supply,
		LLC, Series A,
		5.70%, 10/15/2015		2,235,172

The accompanying notes are an integral part of these financial statements.

Page 91

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 97.1% (cont.)
Utilities – 7.1% (cont.)
		PSE&G Power LLC:
$	575,000	5.00%, 04/01/2014 @	$	615,731
	3,223,000	5.32%, 09/15/2016		3,594,857
	4,005,000	5.125%, 04/15/2020 @		4,492,685
	1,285,406	RGS (I&M) Funding
		Corporation Debentures,
		9.82%, 12/07/2022		1,558,208
	2,000,000	Rockies Express
		Pipeline LLC,
		5.625%, 04/15/2020
		(Acquired 03/17/2010;
		Cost $1,998,220)*		1,904,672
	1,400,000	Southern Natural Gas,
		5.90%, 04/01/2017
		(Acquired 03/14/2007;
		Cost $1,397,676)*		1,600,021
	3,000,000	Southwestern Public
		Service Co.,
		5.60%, 10/01/2016		3,436,686
	7,500,000	Spectra Energy
		Capital LLC,
		5.668%, 08/15/2014		8,208,690
	2,000,000	Trans-Canada Pipelines,
		6.50%, 08/15/2018 f		2,447,532
	1,100,000	Vectren Utility
		Holdings, Inc.,
		5.25%, 08/01/2013		1,168,382
	3,100,000	Williams Partners LP,
		6.30%, 04/15/2040		3,779,815
				107,574,218
U.S. Government Agency Issues – 0.2%
		Federal Home Loan
		Mortgage Corporation
		(FHLMC),
	2,475,000	2.00%, 08/25/2016 @		2,573,668
U.S. Treasury Obligations – 13.0%
		U.S. Treasury Bonds:
	30,900,000	2.375%, 07/31/2017 @		33,210,269
	33,575,000	6.25%, 08/15/2023 @		48,054,219
	42,325,000	5.25%, 11/15/2028 @		58,355,594
	43,600,000	4.375%, 02/15/2038 @		56,366,603
				195,986,685
		Total Long-Term
		Investments
		(Cost $1,414,416,945)		1,463,228,289
Shares
SHORT-TERM INVESTMENT – 4.2%
Money Market Mutual Funds – 4.2%
	35,025,049	Dreyfus Institutional
		Cash Advantage
		Fund, 0.06% «		35,025,049
	27,475,860	Short-Term Investments
		Trust – Liquid Assets
		Portfolio, 0.16% «		27,475,860
		Total Short-Term
		Investments
		(Cost $62,500,909)		62,500,909

The accompanying notes are an integral part of these financial statements.

Page 92

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 17.8%
Commercial Paper – 0.1%
$	3,026,931	Atlantic East
		Funding LLC,
		0.610%,
		03/25/2012 † **	$	1,890,343
		Total Commercial Paper
		(Cost $3,026,931)		1,890,343
Shares
Investment Companies – 17.7%
	266,909,084	Mount Vernon Securities
		Lending Trust Prime
		Portfolio, 0.23% «		266,909,084
		Total Investment
		Companies
		(Cost $266,909,084)		266,909,084
		Total Investments
		Purchased With Cash
		Proceeds From
		Securities Lending
		(Cost $269,936,015)		268,799,427
		Total Investments
		(Cost $1,746,853,869)
		– 119.1%		1,794,528,625
Asset Relating to Securities
Lending Investments – 0.1%
		Support
		Agreement** ^ a †		1,136,588
		Total (Cost $0)		1,136,588
		Liabilities in Excess of
		Other Assets – (19.2)%		(289,271,673	)
		TOTAL NET
		ASSETS – 100.0%	$	1,506,393,540

Notes to Schedule of Investments

* Restricted Security Deemed Liquid

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

^ Non-Income Producing

« 7-Day Yield

§ Security in Default

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

The accompanying notes are an integral part of these financial statements.

Page 93

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Page 94

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Fixed Income
Asset Backed Securities	$	—	$	59,952,857	$	—	$	59,952,857
Commercial Mortgage Backed Securities		—		116,129,235		—		116,129,235
Corporate Debt Securities		—		559,397,406		1,607		559,399,013
Other Government Related Securities		—		20,616,438		—		20,616,438
Residential Mortgage Backed Securities		—		431,797,231		—		431,797,231
Taxable Municipal Bonds		—		76,773,162		—		76,773,162
U.S. Government Agency Issues		—		2,573,668		—		2,573,668
U.S. Treasury Obligations		—		195,986,685		—		195,986,685
Total Fixed Income		—		1,463,226,682		1,607		1,463,228,289
Short-Term Investments
Money Market Mutual Funds		62,500,909		—		—		62,500,909
Total Short-Term Investments		62,500,909		—		—		62,500,909
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		1,890,343		—		1,890,343
Money Market Mutual Fund		266,909,084		—		—		266,909,084
Total Investments Purchased with
Cash Proceeds from Securities Lending		266,909,084		1,890,343		—		268,799,427
Total Investments	$	329,409,993	$	1,465,117,025	$	1,607	$	1,794,528,625
Asset Relating to Securities Lending Investments	$	—	$	1,136,588	$	—	$	1,136,588

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.  Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.

Page 95

Baird Aggregate Bond Fund

Schedule of Investments       December 31, 2011

Level 3 Reconciliation Disclosure

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

Description	Investments in Securities
Balance as of December 31, 2010		$	—
Accrued discounts/premiums			—
Realized gain (loss)			—
Change in unrealized appreciation (depreciation)			—
Purchases			—
Sales			—
Transfers in and/or out of Level 3*			1,607
Balance as of December 31, 2011		$	1,607

*  Transfers between levels are recognized at the end of the reporting period.

Page 96

Baird Core Plus Bond Fund

December 31, 2011

The Baird Core Plus Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Universal Bond Index.  The Barclays Capital 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 Fund entered the year with a significant yield advantage over its benchmark and converted that advantage into strong absolute and relative returns in 2011.  Our long-term commitment to duration neutrality was critically important as well.  The primary factors for the Fund’s outperformance over its benchmark were:

• The Fund’s overweight position to the corporate credit sector was a positive for relative performance.  Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year.  This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond.  The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads.

• An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS, was a positive for the year.

• Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011).  However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact.

• Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect.

Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.

We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund.  The Fund’s yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.

Portfolio Characteristics

Quality Distribution*	Sector Weightings*

Net Assets:	$1,100,769,443	Annualized Expense Ratio:
SEC 30-Day Yield:**		Institutional Class:	0.30	%
Institutional Class:	3.67%	Investor Class:	0.55	%***
Investor Class:	3.37%	Portfolio Turnover Rate:	34.6	%
Average Effective Duration:	4.92 years	Total Number of Holdings:	527
Average Effective Maturity:	7.07 years

* Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending).

** SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2011.

*** Includes 0.25% 12b-1 fee.

Page 97

Baird Core Plus Bond Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Page 98

Baird Core Plus Bond Fund

Total Returns

		Average Annual
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Since Inception(1)
Institutional Class Shares	7.89%	7.30%	6.74%	7.13%
Investor Class Shares	7.57%	7.03%	6.46%	6.86%
Barclays Capital
U.S. Universal Bond Index(2)	7.40%	6.39%	6.01%	6.40%

(1) For the period from September 29, 2000 (commencement of operations) through December 31, 2011.

(2) The Barclays Capital U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt, with maturities of at least one year.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in an index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 99

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1%
Asset Backed Securities – 1.8%
$	31,305	Amresco Residential
		Securities Mortgage
		Loan Trust,
		Series 1998-2, Class A6,
		6.45%, 12/25/2027	$	30,617
		Bayview Financial
		Acquisition Trust:
	700,000	Series 2007-A,
		6.205%, 05/28/2037		679,004
	150,000	Series 2007-B, Class 1A2,
		6.831%, 08/28/2047		60,761
	840,000	Chase Issuance Trust,
		Series 2004-8A, Class A8,
		0.398%, 09/15/2015		840,171
		Countrywide Asset-
		Backed Certificates:
	4,166	Series 2006-S2, Class A2,
		5.627%, 07/25/2027 §		4,152
	193,805	Series 2004-12, Class AF6,
		4.634%, 03/25/2035		189,533
	1,218,767	Series 2004-15, Class AF6,
		4.613%, 04/25/2035		1,145,538
	3,312,000	Series 2005-7, Class AF6,
		4.693%, 08/25/2035		2,868,285
	2,014,923	Series 2005-11, Class AF3,
		4.778%, 02/25/2036		1,512,296
	502,370	Series 2005-10, Class AF6,
		4.915%, 02/25/2036		434,071
	1,859,626	Series 2005-13, Class AF3,
		5.43%, 04/25/2036		1,435,361
	250,008	Series 2006-S9, Class A3,
		5.728%, 08/25/2036		186,242
	155,752	Series 2007-S1,
		Class A6, 5.693%,
		11/25/2036		123,176
	438,460	Series 2006-13, Class
		1AF2, 5.884%,
		01/25/2037 §		411,119
	237,525	Series 2006-13, Class
		1AF3, 5.944%,
		01/25/2037 §		142,652
	190,124	Series 2007-S2, Class A2,
		5.649%, 05/25/2037		164,037
	300,000	Series 2007-4, Class A3,
		5.714%, 09/25/2037		118,078
	1,300,000	Series 2006-10, Class
		1AF3, 5.812%,
		09/25/2046		673,343
	616,000	Series 2006-9, Class
		1AF3, 5.859%,
		10/25/2046		315,469
	1,603,643	Credit Based Asset
		Servicing and
		Securitization LLC,
		Series 2005-CB8,
		Class AF2, 5.303%,
		12/25/2035		1,449,344
	3,665	GE Capital Mortgage
		Services, Inc., Series
		1999-HE1, Class A7,
		6.265%, 04/25/2029		3,576
		Green Tree Financial
		Corporation:
	32,367	Series 1993-4, Class A5,
		7.05%, 01/15/2019		32,622
	12,399	Series 1997-1, Class A5,
		6.86%, 03/15/2028		13,044
	43,420	Series 1997-4, Class A5,
		6.88%, 02/15/2029		45,481
	613,053	Series 1997-5, Class A6,
		6.82%, 05/15/2029		643,413

The accompanying notes are an integral part of these financial statements.

Page 100

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Asset Backed Securities – 1.8% (cont.)
$	628,767	Series 1998-3, Class A5,
		6.22%, 03/01/2030	$	681,663
	267,682	Series 1998-4, Class A5,
		6.18%, 04/01/2030		273,619
	2,172,416	Home Equity Asset Trust,
		Series 2006-4, Class 2A3,
		0.464%, 08/25/2036		1,829,118
	38,673	Oakwood Mortgage
		Investors, Inc.,
		Series 1999-B, Class A3,
		6.45%, 11/15/2017		33,201
		Renaissance Home
		Equity Loan Trust:
	233,591	Series 2005-1, Class AF6,
		4.97%, 05/25/2035		208,265
	819,000	Series 2006-2, Class AF3,
		5.797%, 08/25/2036		334,907
	712,467	Series 2006-3,
		Class AF2, 5.58%,
		11/25/2036		401,271
	500,000	Series 2007-1,
		Class AF2, 5.512%,
		04/25/2037		171,617
	300,000	Series 2007-1, Class AF3,
		5.612%, 04/25/2037		104,309
	1,500,000	Series 2007-2, Class AF2,
		5.675%, 06/25/2037		616,515
	136,224	Residential Asset
		Mortgage Products, Inc.,
		Series 2003-RS10, Class
		AI7, 4.85%, 11/25/2033		134,321
		Residential Asset
		Securities Corporation:
	165,325	Series 2003-KS5, Class
		AI6, 3.62%, 07/25/2033		142,842
	124,566	Series 2003-KS9,
		Class AI6, 4.71%,
		11/25/2033		110,188
	1,407,894	Series 2006-EMX8,
		0.414%, 10/25/2036		1,305,198
				19,868,419
Commercial Mortgage Backed Securities – 7.4%
	8,160,000	Bear Stearns Commercial
		Mortgage Securities,
		Series 2005-PWR9,
		Class A4A, 4.871%,
		09/11/2042		8,850,205
	8,510,000	Citigroup Deutsche
		Bank, Series 2005-CD1,
		Class A4, 5.399%,
		07/15/2044		9,405,116
	4,712,000	Commercial Mortgage
		Pass-Through Certificates,
		Series 2005-C6, Class
		A5A, 5.116%, 06/10/2044		5,166,100
		GE Capital Commercial
		Mortgage Corporation:
	1,610,000	Series 2003-C2, Class A4,
		5.145%, 07/10/2037		1,674,787
	1,600,000	Series 2004-C3, Class A4,
		5.189%, 07/10/2039		1,711,688
	6,295,000	Series 2005-C4, Class A4,
		5.486%, 11/10/2045		6,952,267
		GMAC Commercial
		Mortgage Securities, Inc.:
	1,750,000	Series 2003-C1, Class A2,
		4.079%, 05/10/2036		1,787,809
	6,727,000	Series 2004-C2, Class A4,
		5.301%, 08/10/2038		7,162,512

The accompanying notes are an integral part of these financial statements.

Page 101

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Commercial Mortgage
Backed Securities – 7.4% (cont.)
		J.P. Morgan Chase
		Commercial Mortgage
		Securities Corp.:
$	5,970,000	Series 2005-CB12,
		Class A4, 4.895%,
		09/12/2037	$	6,512,196
	11,570,000	Series 2011-C5,
		Class A3, 4.171%,
		08/15/2046		12,389,260
	11,275,000	Morgan Stanley Capital I,
		Series 2005-HQ7,
		Class A4, 5.202%,
		11/14/2042		12,396,761
		Wachovia Bank
		Commercial
		Mortgage Trust:
	1,504,900	Series 2003-C3, Class A2,
		4.867%, 02/15/2035		1,541,953
	5,000,000	Series 2005-C22,
		Class A4, 5.444%,
		12/15/2044		5,501,895
				81,052,549
Financial – 19.5%
	1,045,000	Abbey National Treasury
		Services PLC,
		3.875%, 11/10/2014
		(Acquired 02/25/2010
		through 12/29/2011;
		Cost $1,024,493)*		980,740
	2,000,000	AIG SunAmerica
		Global Financing X,
		6.90%, 03/15/2032
		(Acquired 11/10/2011;
		Cost $2,138,315)*		2,118,310
	175,000	Allstate Corporation,
		5.35%, 06/01/2033		180,327
	1,065,000	Ally Financial Inc.,
		8.30%, 02/12/2015		1,123,575
		American Express
		Credit Corporation:
	935,000	Series C, 7.30%,
		08/20/2013		1,014,717
	1,040,000	2.75%, 09/15/2015		1,045,516
		American General
		Finance Corporation:
	275,000	5.85%, 06/01/2013		242,000
	1,000,000	6.90%, 12/15/2017		720,000
	225,000	AmSouth Bancorp,
		6.75%, 11/01/2025		182,410
	2,500,000	AON Corporation,
		3.50%, 09/30/2015		2,565,398
	975,000	Arden Realty LP,
		5.25%, 03/01/2015		1,035,511
	2,464,000	ASIF Global
		Financing XIX,
		4.90%, 01/17/2013
		(Acquired 09/28/2011
		through 12/06/2011;
		Cost $2,519,536)*		2,484,579
	2,250,000	Australia and New
		Zealand Banking
		Group Limited,
		3.25%, 03/01/2016
		(Acquired 02/22/2011
		through 09/14/2011;
		Cost $2,242,352)* f @		2,272,833
	200,000	BankAmerica
		Capital II, Series 2,
		8.00%, 12/15/2026		180,000

The accompanying notes are an integral part of these financial statements.

Page 102

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Financial – 19.5% (cont.)
$	1,400,000	BankAmerica
		Institutional, 8.07%,
		12/31/2026 (Acquired
		07/22/2010 through
		08/16/2011; Cost
		$1,360,717)*	$	1,260,000
	575,000	Bank of America
		Corporation
		Subordinated Notes,
		10.20%, 07/15/2015		615,977
	2,060,000	Banponce Trust I,
		Series A,
		8.327%, 02/01/2027		1,400,800
	3,850,000	Barclays Bank PLC,
		6.75%, 05/22/2019 f @		4,268,199
	600,000	The Bear Stearns
		Companies LLC,
		5.30%, 10/30/2015		645,233
		Capital One
		Financial Corporation:
	2,500,000	7.375%, 05/23/2014		2,746,780
	125,000	6.15%, 09/01/2016		130,067
	1,000,000	The Chubb Corp.,
		6.375%, 03/29/2067		987,500
		CIT Group, Inc.:
	88	7.00%, 05/01/2015		88
	43,000	7.00%, 05/04/2015
		(Acquired 11/27/2007
		through 08/02/2010;
		Cost $43,000)* @		43,054
	814	7.00%, 05/01/2016		814
	571,000	7.00%, 05/02/2016
		(Acquired 11/27/2007
		through 08/02/2010;
		Cost $571,000)* @		570,286
	540	7.00%, 05/01/2017		540
	4,100,000	7.00%, 05/02/2017
		(Acquired 11/27/2007
		through 12/20/2011;
		Cost $4,098,750)* @		4,094,875
	700,000	Citigroup Capital XXI,
		8.30%, 12/21/2057		699,125
	5,250,000	Citigroup, Inc.,
		6.01%, 01/15/2015		5,484,701
		CNA Financial
		Corporation:
	1,000,000	6.50%, 08/15/2016		1,081,654
	3,500,000	5.875%, 08/15/2020		3,595,372
		Comerica Bank:
	1,675,000	5.75%, 11/21/2016		1,835,738
	525,000	5.20%, 08/22/2017		567,796
	1,100,000	Countrywide Financial
		Corporation,
		6.25%, 05/15/2016 @		1,036,347
	4,166,000	Credit Suisse New York,
		5.30%, 08/13/2019 f @		4,296,437
	2,700,000	Dresdner Bank-
		New York Subordinated
		Debentures,
		7.25%, 09/15/2015 f @		2,264,533
	500,000	First Empire
		Capital Trust I,
		8.234%, 02/01/2027		501,807
	2,300,000	First Empire
		Capital Trust II,
		8.277%, 06/01/2027		2,387,892
	2,250,000	First Horizon
		National Corporation,
		5.375%, 12/15/2015		2,277,569

The accompanying notes are an integral part of these financial statements.

Page 103

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Financial – 19.5% (cont.)
$	350,148	First National
		Bank of Chicago
		Pass-Thru Certificates,
		Series 1993-A,
		8.08%, 01/05/2018	$	396,123
	1,148,000	FMR LLC,
		4.75%, 03/01/2013
		(Acquired 11/28/2011
		through 12/15/2011;
		Cost $1,181,149)*		1,177,128
		General Electric
		Capital Corporation:
	1,150,000	5.625%, 09/15/2017		1,272,791
	1,875,000	5.50%, 01/08/2020		2,063,048
	3,000,000	4.65%, 10/17/2021 @		3,131,001
	1,000,000	Genworth Financial, Inc.,
		7.625%, 09/24/2021 @		934,999
	2,300,000	Genworth Life
		Institutional
		Funding Trust,
		5.875%, 05/03/2013
		(Acquired 08/24/2011;
		Cost $2,270,130)*		2,337,529
		GMAC Inc.:
	1,000,000	6.00%, 05/23/2012 @		1,002,500
	1,305,000	7.50%, 12/31/2013		1,340,887
	984,000	8.00%, 12/31/2018		966,780
	250,000	GMAC LLC,
		6.75%, 12/01/2014		252,182
	125,000	Goldman Sachs Capital I,
		6.345%, 02/15/2034		105,801
		The Goldman
		Sachs Group, Inc.:
	100,000	5.15%, 01/15/2014		101,903
	3,500,000	5.95%, 01/18/2018		3,584,774
	1,000,000	5.25%, 07/27/2021		975,540
	300,000	6.75%, 10/01/2037		279,154
	1,805,000	Goldman Sachs
		Group LP,
		8.00%, 03/01/2013
		(Acquired 05/19/2006
		through 10/28/2010;
		Cost $1,887,224)*		1,885,759
		Hartford Financial
		Services Group Inc.:
	1,000,000	7.30%, 11/01/2015		1,074,831
	2,913,000	5.375%, 03/15/2017		2,930,711
	800,000	8.125%, 06/15/2038 @		792,000
	3,000,000	HSBC Bank USA NA,
		4.625%, 04/01/2014		3,065,373
	1,000,000	HSBC Holdings PLC,
		5.25%, 12/12/2012 f		1,019,510
	800,000	Humana Inc.,
		7.20%, 06/15/2018		933,171
		ING Bank N.V.: f
	1,600,000	4.00%, 03/15/2016
		(Acquired 03/08/2011
		through 09/20/2011;
		Cost $1,601,347)*		1,545,989
	2,500,000	5.00%, 06/09/2021
		(Acquired 10/12/2011;
		Cost $2,468,800)*		2,422,630
		Invesco Ltd.: f
	380,000	5.375%, 02/27/2013		394,945
	1,535,000	5.375%, 12/15/2014		1,645,505
	4,400,000	Irish Life & Permanent
		Group Holdings PLC,
		3.60%, 01/14/2013
		(Acquired 12/01/2010
		through 10/14/2011;
		Cost $4,095,215)* f		3,848,134
	400,000	Istar Financial, Inc.,
		5.85%, 03/15/2017		317,000

The accompanying notes are an integral part of these financial statements.

Page 104

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Financial – 19.5% (cont.)
$	875,000	Jefferies Group Inc.,
		6.45%, 06/08/2027	$	728,438
	1,000,000	Jefferson-Pilot Corp.,
		4.75%, 01/30/2014		1,034,457
	1,500,000	John Hancock Mutual
		Life Insurance Company,
		7.375%, 02/15/2024
		(Acquired 08/26/2010;
		Cost $1,689,672)*		1,794,450
		J.P. Morgan
		Chase & Co.:
	3,100,000	4.25%, 10/15/2020		3,121,771
	2,400,000	4.35%, 08/15/2021 @		2,423,777
		Key Bank NA:
	2,000,000	5.80%, 07/01/2014		2,135,364
	600,000	7.413%, 05/06/2015		652,002
	820,000	4.95%, 09/15/2015		862,661
	1,279,000	5.45%, 03/03/2016		1,376,447
	2,900,000	Kookmin Bank,
		7.25%, 05/14/2014
		(Acquired 03/10/2010
		through 09/23/2011;
		Cost $3,134,136)* f		3,203,169
		Liberty Mutual
		Group, Inc.:
	775,000	5.75%, 03/15/2014
		(Acquired 12/21/2010
		through 06/10/2011;
		Cost $801,130)*		808,168
	225,000	6.50%, 03/15/2035
		(Acquired 09/29/2008
		through 11/23/2010;
		Cost $182,763)*		219,349
	900,000	10.75%, 06/15/2058
		(Acquired 05/21/2008
		through 05/06/2009;
		Cost $750,457)*		1,129,500
	375,000	Liberty Mutual
		Insurance Company,
		7.697%, 10/15/2097
		(Acquired 03/26/2003;
		Cost $240,079)*		354,420
	825,000	Lincoln National
		Corporation,
		6.05%, 04/20/2067 @		686,813
	4,650,000	Lloyds TSB Bank PLC,
		5.80%, 01/13/2020
		(Acquired 01/05/2010
		through 10/27/2011;
		Cost $4,772,319)* f		4,414,608
	2,189,000	M&I Marshall
		& Ilsley Bank,
		4.85%, 06/16/2015		2,310,601
		Manufacturer &
		Traders Trust Co.:
	500,000	6.625%, 12/04/2017		575,968
	265,000	5.585%, 12/28/2020		258,316
		Manulife
		Financial Corp.: f
	2,285,000	3.40%, 09/17/2015		2,297,744
	425,000	4.90%, 09/17/2020		433,328
		Marsh & McLennan
		Companies, Inc.:
	2,400,000	4.85%, 02/15/2013		2,476,246
	1,000,000	4.80%, 07/15/2021 @		1,094,567
	700,000	MBIA Insurance Corp.,
		14.00%, 01/15/2033
		(Acquired 01/11/2008;
		Cost $700,000)*		392,000

The accompanying notes are an integral part of these financial statements.

Page 105

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Financial – 19.5% (cont.)
$	150,000	MBNA Capital,
		Series A, 8.278%,
		12/01/2026	$	139,125
		Merrill Lynch &
		Company:
	100,000	5.00%, 02/03/2014		99,486
	800,000	6.875%, 04/25/2018		788,751
	725,000	7.75%, 05/14/2038		688,838
		Metlife Inc.:
	300,000	Series A, 6.817%,
		08/15/2018		356,861
	215,000	7.717%, 02/15/2019		269,598
	1,915,000	Metropolitan Life
		Global Funding I,
		3.125%, 01/11/2016
		(Acquired 09/27/2011
		through 10/11/2011;
		Cost $1,918,134)*		1,965,077
		Morgan Stanley:
	2,505,000	4.75%, 04/01/2014		2,467,643
	650,000	6.00%, 04/28/2015		651,131
	300,000	5.375%, 10/15/2015		293,139
	1,125,000	6.625%, 04/01/2018		1,110,873
	3,000,000	National Australia Bank
		Ltd., 3.00%, 07/27/2016
		(Acquired 07/20/2011;
		Cost $2,991,720)* f		2,988,804
	2,000,000	National City
		Bank of Cleveland
		Subordinated Notes,
		5.80%, 06/07/2017		2,201,776
	800,000	Nationwide Financial
		Services Inc.,
		5.90%, 07/01/2012		809,229
	100,000	Nationwide Mutual
		Insurance Company,
		7.875%, 04/01/2033
		(Acquired 10/13/2009;
		Cost $90,266)*		102,709
	3,709,000	Navigators Group Inc.
		Senior Unsecured Notes,
		7.00%, 05/01/2016		3,826,983
	175,000	NB Capital Trust IV,
		8.25%, 04/15/2027		161,000
	325,000	Nomura Holdings Inc.,
		6.70%, 03/04/2020 f		342,204
	775,000	PHH Corporation,
		7.125%, 03/01/2013		745,938
	1,550,000	Principal Life Income
		Funding Trust,
		5.10%, 04/15/2014		1,637,274
	1,450,000	Protective Life
		Secured Trust,
		4.30%, 06/01/2013		1,490,934
		Prudential Financial Inc.:
	2,297,000	6.20%, 01/15/2015		2,510,058
	2,000,000	6.00%, 12/01/2017		2,224,330
	1,203,000	Prudential Holdings LLC,
		8.695%, 12/18/2023
		(Acquired 11/29/2011;
		Cost $1,450,441)*		1,511,389
	1,400,000	Regions Financing
		Trust II,
		6.625%, 05/15/2047		1,148,000
		Royal Bank of Scotland
		Group PLC: f
	705,000	5.00%, 11/12/2013		630,318
	350,000	4.875%, 08/25/2014
		(Acquired 08/24/2011;
		Cost $351,180)*		342,468

The accompanying notes are an integral part of these financial statements.

Page 106

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Financial – 19.5% (cont.)
$	1,528,000	5.05%, 01/08/2015	$	1,246,000
	3,300,000	4.875%, 03/16/2015		3,155,400
	300,000	Santander Financial
		Issuances,
		7.25%, 11/01/2015 f		304,208
	2,500,000	Santander U.S. Debt
		S.A. Unipersonal,
		2.991%, 10/07/2013
		(Acquired 08/25/2011;
		Cost $2,400,102)* f		2,390,033
	2,378,000	Schwab Capital Trust I,
		7.50%, 11/15/2037		2,378,785
		SLM Corporation:
	425,000	5.125%, 08/27/2012		427,168
	1,300,000	5.375%, 05/15/2014		1,300,911
	50,000	5.625%, 08/01/2033		37,296
	5,500,000	Societe Generale SA,
		5.20%, 04/15/2021
		(Acquired 09/20/2011
		through 12/09/2011;
		Cost $4,739,327)* f @		4,673,224
	2,143,000	Sovereign Bancorp Inc.,
		8.75%, 05/30/2018		2,389,421
	1,500,000	Sumitomo Mitsui
		Banking Corporation,
		3.15%, 07/22/2015
		(Acquired 09/23/2011;
		Cost $1,558,090)* f		1,565,220
		SunTrust Banks Inc.:
	1,450,000	5.25%, 11/05/2012		1,486,017
	4,250,000	3.50%, 01/20/2017		4,271,913
	1,000,000	Susa Partnership LP,
		8.20%, 06/01/2017		1,200,346
	3,590,000	Symetra Financial
		Corporation,
		6.125%, 04/01/2016
		(Acquired 10/12/2010
		through 11/07/2011;
		Cost $3,816,620)*		3,627,828
	1,000,000	TD Ameritrade
		Holding Corporation,
		5.60%, 12/01/2019		1,081,248
	500,000	Travelers Companies, Inc.,
		5.35%, 11/01/2040 @		577,673
	3,300,000	UBS AG,
		5.75%, 04/25/2018 f		3,419,047
	1,070,000	UFJ Finance Aruba A.E.C.,
		6.75%, 07/15/2013 f		1,143,356
	1,000,000	UnitedHealth Group, Inc.,
		6.00%, 02/15/2018 @		1,188,961
	1,000,000	Unitrin, Inc.
		Senior Unsecured Notes,
		6.00%, 05/15/2017		1,061,522
	5,322,000	Wachovia Bank NA,
		6.00%, 11/15/2017		5,876,675
	2,000,000	WEA Finance LLC,
		7.50%, 06/02/2014
		(Acquired 12/28/2011;
		Cost $2,197,980)*		2,192,484
		Wellpoint, Inc.:
	100,000	5.25%, 01/15/2016		111,956
	75,000	5.95%, 12/15/2034		88,616
	150,000	Westpac Banking
		Corporation,
		4.875%, 11/19/2019 f		159,588
	600,000	Willis North
		America Inc.,
		5.625%, 07/15/2015		637,115
				215,016,909

The accompanying notes are an integral part of these financial statements.

Page 107

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Industrial – 15.9%
$	700,000	Acuity Brands
		Lighting Inc.,
		6.00%, 12/15/2019	$	788,250
	265,000	Allied Waste North
		America, Inc.,
		6.875%, 06/01/2017		280,238
		Anadarko Petroleum
		Corporation:
	2,225,000	5.95%, 09/15/2016 @		2,522,149
	1,700,000	8.70%, 03/15/2019		2,170,390
	2,500,000	Anglo American
		Capital PLC,
		9.375%, 04/08/2019
		(Acquired 09/20/2011;
		Cost $3,249,899)* f		3,181,055
	4,000,000	Aristotle Holding Inc.,
		3.50%, 11/15/2016
		(Acquired 11/14/2011;
		Cost $3,998,920)*		4,073,820
		AT&T Inc.:
	100,000	5.625%, 06/15/2016 @		114,717
	2,000,000	4.45%, 05/15/2021 @		2,196,928
	1,000,000	5.55%, 08/15/2041 @		1,177,417
	286,211	Atlas Air, Inc.
		Pass-Thru Certificates,
		Series 2000-1, 8.707%,
		07/02/2021		286,211
	1,000,000	Bemis Company, Inc.,
		4.50%, 10/15/2021		1,059,361
	1,500,000	BP Capital Markets PLC,
		4.75%, 03/10/2019 f		1,666,083
	50,000	British
		Telecommunications PLC,
		5.95%, 01/15/2018 f		55,254
	1,500,000	Browning-Ferris
		Industries Inc.,
		9.25%, 05/01/2021		2,081,745
		Bunge Limited
		Finance Corporation:
	625,000	5.35%, 04/15/2014		655,533
	2,527,000	5.10%, 07/15/2015		2,644,928
	1,105,000	8.50%, 06/15/2019		1,345,050
	1,950,000	Bunge NA Finance LP,
		5.90%, 04/01/2017		2,129,470
	2,000,000	CenturyLink Inc.,
		5.15%, 06/15/2017		1,982,364
	1,500,000	Chevron Phillips
		Chemical Company LLC,
		7.00%, 06/15/2014
		(Acquired 11/05/2010
		through 05/25/2011;
		Cost $1,664,830)* @		1,673,952
	50,000	Clear Channel
		Communications,
		5.50%, 12/15/2016		23,125
	1,000,000	CNPC HK
		Overseas Capital Ltd,
		5.95%, 04/28/2041
		(Acquired 04/20/2011;
		Cost $978,120)* f @		1,109,370
	825,000	Comcast Cable Holdings,
		7.875%, 08/01/2013		907,898
	350,000	Comcast Corporation,
		6.50%, 01/15/2017		411,662
	875,000	Comcast Holdings
		Corporation,
		10.625%, 07/15/2012		912,462
		Computer Sciences
		Corporation:
	2,100,000	5.00%, 02/15/2013 @		2,089,500
	3,100,000	5.50%, 03/15/2013 @		3,084,500

The accompanying notes are an integral part of these financial statements.

Page 108

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Industrial – 15.9%
$	49,796	Continental Airlines, Inc.
		Pass-Thru Certificates,
		Series 1997-4, Class A,
		6.90%, 01/02/2018	$	51,848
	800,000	COX
		Communications Inc.,
		5.45%, 12/15/2014		888,022
		CSX Corporation:
	750,000	6.25%, 04/01/2015		856,958
	175,000	6.22%, 04/30/2040		214,373
	2,000,000	Daimler Finance
		North America LLC,
		1.537%, 09/13/2013
		(Acquired 09/07/2011;
		Cost $2,000,000)*		1,974,300
		Deutsche Telekom
		International Finance BV: f
	2,450,000	3.125%, 04/11/2016
		(Acquired 11/09/2011;
		Cost $2,489,270)*		2,468,189
	425,000	8.75%, 06/15/2030 f		592,837
	1,752,000	DIRECTV
		Holdings/Financing,
		7.625%, 05/15/2016		1,859,310
		Donnelley (R.R.)
		& Sons Co.:
	1,250,000	8.60%, 08/15/2016		1,251,562
	1,200,000	6.125%, 01/15/2017 @		1,116,000
	750,000	The Dow Chemical Co.,
		4.125%, 11/15/2021 @		769,290
	500,000	Encana Corporation,
		6.50%, 05/15/2019 f @		597,573
	287,391	Federal Express
		Corporation 1995
		Pass-Thru Certificates,
		Series B2, 7.11%,
		01/02/2014		303,198
	500,000	First Data Corporation,
		9.875%, 09/24/2015 @		470,000
	2,325,000	Fiserv, Inc.,
		3.125%, 06/15/2016		2,367,299
	2,000,000	Ford Motor
		Credit Co. LLC,
		3.875%, 01/15/2015 @		1,992,536
	1,050,000	France Telecom SA,
		2.75%, 09/14/2016 f		1,052,830
	4,300,000	Freeport-McMoRan
		Copper & Gold Inc.,
		8.375%, 04/01/2017		4,568,750
		Georgia-Pacific LLC:
	1,000,000	8.25%, 05/01/2016
		(Acquired 10/13/2011;
		Cost $1,096,736)*		1,110,960
	1,000,000	5.40%, 11/01/2020
		(Acquired 10/27/2010;
		Cost $994,130)* @		1,107,648
	4,510,000	Glencore Funding LLC,
		6.00%, 04/15/2014
		(Acquired 03/31/2004
		through 12/15/2011;
		Cost $4,636,826)*		4,658,465
	975,000	GTE Corporation,
		8.75%, 11/01/2021		1,365,309
	2,200,000	Hanson Australia Funding,
		5.25%, 03/15/2013 f		2,211,000
	2,375,000	Hanson PLC Notes,
		6.125%, 08/15/2016 f @		2,410,625

The accompanying notes are an integral part of these financial statements.

Page 109

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Industrial – 15.9% (cont.)
$	2,100,000	Health Management
		Association,
		6.125%, 04/15/2016	$	2,173,500
	4,000,000	Hewlett-Packard Co.,
		4.65%, 12/09/2021 @		4,220,320
	425,000	Highmark Inc. Notes,
		6.80%, 08/15/2013
		(Acquired 10/28/2010
		through 11/24/2010;
		Cost $454,455)*		453,708
	92,000	Historic Time Warner Inc.,
		6.875%, 06/15/2018		109,645
	3,563,000	Hutchison Whampoa
		International Ltd.,
		4.625%, 09/11/2015
		(Acquired 08/19/2010
		through 12/28/2011;
		Cost $3,739,734)* f		3,771,400
	1,114,000	International
		Paper Company,
		7.40%, 06/15/2014		1,236,651
		Johnson Controls Inc.:
	100,000	5.50%, 01/15/2016 @		111,890
	1,150,000	5.25%, 12/01/2041		1,219,003
	5,000,000	Kinross Gold Corp.,
		6.875%, 09/01/2041
		(Acquired 08/15/2011;
		Cost $4,959,050)* f		5,102,280
		Lafarge SA: f
	1,375,000	6.50%, 07/15/2016		1,402,512
	875,000	7.125%, 07/15/2036		772,566
		Martin Marietta
		Materials, Inc.:
	475,000	6.60%, 04/15/2018		500,502
	450,000	6.25%, 05/01/2037		404,598
		Masco Corporation:
	2,150,000	6.125%, 10/03/2016		2,206,336
	1,000,000	7.125%, 03/15/2020 @		1,009,224
	250,000	Nabors Industries, Inc.,
		6.15%, 02/15/2018		279,272
	2,655,000	National Oilwell
		Varco Inc., Series B,
		6.125%, 08/15/2015		2,718,011
	350,000	New Cingular Wireless
		Services, Inc.,
		8.75%, 03/01/2031		514,255
	300,000	Nextel Communications
		Senior Notes, Series E,
		6.875%, 10/31/2013		298,500
	50,000	Pactiv Corporation,
		7.95%, 12/15/2025 @		33,750
	200,000	PCCW-HKT
		Capital II Ltd.,
		6.00%, 07/15/2013
		(Acquired 07/10/2003;
		Cost $199,066)* f		209,826
	775,000	PCCW-HKT
		Capital III Ltd.,
		5.25%, 07/20/2015
		(Acquired 09/29/2008
		through 12/20/2010;
		Cost $787,124)* f		813,549
	75,000	Pearson Dollar
		Finance PLC,
		5.70%, 06/01/2014
		(Acquired 09/29/2008;
		Cost $74,131)* f		81,860
	3,000,000	Petrohawk Energy
		Corporation,
		7.875%, 06/01/2015		3,195,000

The accompanying notes are an integral part of these financial statements.

Page 110

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Industrial – 15.9% (cont.)
		Plum Creek
		Timberlands, L.P.:
$	1,200,000	5.875%, 11/15/2015	$	1,331,969
	1,200,000	4.70%, 03/15/2021		1,206,782
		POSCO: f
	1,725,000	8.75%, 03/26/2014
		(Acquired 09/23/2011;
		Cost $1,924,623)*		1,937,927
	2,175,000	4.25%, 10/28/2020
		(Acquired 10/21/2010;
		Cost $2,165,365)*		2,106,207
	2,000,000	Reliance Holdings
		USA Inc.,
		4.50%, 10/19/2020
		(Acquired 10/14/2010
		through 10/18/2010;
		Cost $1,988,700)* @		1,817,206
	1,077,000	Rio Tinto Alcan, Inc.,
		5.20%, 01/15/2014 f		1,150,532
	1,125,000	Rio Tinto Financial
		USA Ltd., 6.50%,
		07/15/2018 f @		1,355,970
	2,250,000	Sealed Air Corp.,
		8.375%, 09/15/2021
		(Acquired 09/16/2011
		through 09/19/2011;
		Cost $2,291,717)* @		2,486,250
	610,000	SK Telecom,
		6.625%, 07/20/2027
		(Acquired 07/13/2007
		through 04/08/2009;
		Cost $544,614)* f		722,510
	1,000,000	Sonoco Products Co.,
		4.375%, 11/01/2021		1,035,773
		Sprint Capital
		Corporation:
	675,000	6.90%, 05/01/2019 @		555,187
	300,000	8.75%, 03/15/2032		242,625
	200,000	Sprint Nextel Corporation,
		6.00%, 12/01/2016		166,000
	1,031,000	SunGard Data
		Systems Inc.,
		4.875%, 01/15/2014		1,032,289
	701,000	Sunoco, Inc.
		Senior Unsecured Notes,
		5.75%, 01/15/2017		704,382
	1,000,000	Sunoco Logistics
		Partners Operations LP,
		6.10%, 02/15/2042 @		1,070,141
	2,635,000	TCI Communications, Inc.,
		8.75%, 08/01/2015		3,201,038
	836,000	Teck Resources Limited,
		10.25%, 05/15/2016 f		961,400
		Telecom Italia
		Capital SA: f
	340,000	4.95%, 09/30/2014		315,589
	4,100,000	5.25%, 10/01/2015 @		3,761,053
	1,775,000	7.20%, 07/18/2036		1,466,058
		Telefonica Emisiones,
		S.A.U.: f
	2,850,000	6.421%, 06/20/2016		2,982,508
	1,942,000	6.221%, 07/03/2017		1,990,278
	1,000,000	5.462%, 02/16/2021		954,266
	100,000	7.045%, 06/20/2036		97,507
		Time Warner, Inc.:
	175,000	8.875%, 10/01/2012		184,421
	2,300,000	7.25%, 10/15/2017		2,755,922
	725,000	7.625%, 04/15/2031		935,889
	95,000	7.70%, 05/01/2032		123,945

The accompanying notes are an integral part of these financial statements.

Page 111

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Industrial – 15.9% (cont.)
		Transocean, Inc.: f
$	2,000,000	6.375%, 12/15/2021	$	2,125,766
	675,000	6.80%, 03/15/2038		680,358
	500,000	Tyco Electronics
		Group S.A.,
		7.125%, 10/01/2037 f		664,913
		United AirLines, Inc.
		Pass-Thru Certificates:
	124,608	Series 1991-A, Class A-2,
		10.02%, 03/22/2014		47,351
	155,852	Series 2000-2, Class C,
		7.762%, 04/29/2049 § † **		4,675
	590,114	U.S. Airways
		Pass-Thru Trust,
		Series 1998-1, Class B,
		7.35%, 07/30/2019		534,053
	322,000	USX Corporation,
		9.125%, 01/15/2013		343,864
		Vale Overseas Limited: f
	3,850,000	6.25%, 01/23/2017		4,338,631
	100,000	8.25%, 01/17/2034 @		128,413
	250,000	6.875%, 11/21/2036		284,638
	150,000	Viacom Inc.,
		6.25%, 04/30/2016		174,118
		Vodafone Group PLC: f
	125,000	5.75%, 03/15/2016		144,115
	175,000	5.625%, 02/27/2017 @		203,198
	500,000	6.15%, 02/27/2037		622,201
		Vulcan Materials Co.:
	200,000	6.40%, 11/30/2017		203,000
	1,000,000	7.00%, 06/15/2018		1,030,000
	500,000	7.15%, 11/30/2037		450,000
	1,250,000	Weatherford
		International Ltd.,
		6.75%, 09/15/2040 f		1,417,975
	505,000	Westvaco Corporation,
		9.75%, 06/15/2020		637,751
	1,000,000	Weyerhaeuser Company,
		7.25%, 07/01/2013		1,058,818
		Williams
		Companies Inc.:
	1,034,000	7.875%, 09/01/2021		1,272,571
	37,000	7.50%, 01/15/2031		45,095
	46,000	7.75%, 06/15/2031		57,221
		Woodside Finance Ltd.: f
	400,000	5.00%, 11/15/2013
		(Acquired 11/26/2010;
		Cost $418,998)*		419,351
	1,000,000	8.125%, 03/01/2014
		(Acquired 02/24/2009;
		Cost $999,690)*		1,118,274
	4,000,000	WPX Energy Inc.,
		6.00%, 01/15/2022
		(Acquired 11/07/2011
		through 11/16/2011;
		Cost $3,985,000)*		4,095,000
	2,000,000	Xstrata Canada Corp.,
		5.375%, 06/01/2015 f		2,171,816
	2,000,000	Xstrata Canada
		Financial Corp.,
		4.95%, 11/15/2021
		(Acquired 11/03/2011;
		Cost $1,997,480)* f		2,043,250
				174,688,512
Other Government Related Securities – 2.2%
	2,000,000	Corp Andina de Fomento,
		8.125%, 06/04/2019 f		2,456,606
	5,000,000	Eksportfinans ASA,
		2.00%, 09/15/2015 f		4,141,900

The accompanying notes are an integral part of these financial statements.

Page 112

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Other Government Related Securities – 2.2% (cont.)
		Export-Import Bank
		of Korea Notes: f
$	3,500,000	5.875%, 01/14/2015	$	3,753,659
	1,000,000	4.00%, 01/29/2021 @		965,026
	100,000	Korea Development Bank,
		5.30%, 01/17/2013 f		102,844
	115,000	Korea Electric
		Power Corporation,
		6.75%, 08/01/2027 f		137,091
		Korea Hydro & Nuclear
		Power Co., Ltd.: f
	1,000,000	6.25%, 06/17/2014
		(Acquired 03/21/2011;
		Cost $1,078,033)*		1,078,720
	500,000	3.125%, 09/16/2015
		(Acquired 09/09/2010;
		Cost $493,770)*		500,628
	550,000	Landesbank Baden-
		Wurttemgerg
		Subordinated Notes,
		6.35%, 04/01/2012 f		555,777
	150,000	National Bank
		of Hungary
		Yankee Debentures,
		8.875%, 11/01/2013 f		161,719
	4,100,000	Petrobras International
		Finance Company,
		3.875%, 01/27/2016 f		4,223,865
	4,000,000	Petroleos Mexicanos,
		6.50%, 06/02/2041
		(Acquired 10/12/2011
		through 10/13/2011;
		Cost $4,130,680)* f @		4,500,000
	100,000	United Mexican States,
		6.75%, 09/27/2034 f		130,250
	1,885,000	Westdeutsche
		Landesbank
		Subordinated Notes,
		4.796%, 07/15/2015 f		1,957,456
				24,665,541
Residential Mortgage Backed Securities – 24.6%
		Bank of America
		Alternative Loan Trust:
	88,084	Series 2004-2, Class 5A1,
		5.50%, 03/25/2019		91,788
	92,493	Series 2005-2, Class 4A1,
		5.50%, 03/25/2020		90,931
	1,444,041	Series 2005-4, Class 3A1,
		5.50%, 05/25/2020		1,374,782
	168,442	Series 2005-8, Class 5A1,
		5.50%, 09/25/2020		156,902
	359,829	Series 2006-2, Class 6A1,
		5.50%, 03/25/2021		332,455
	187,714	Series 2007-1,
		Class 1A1, 5.792%,
		04/25/2022		174,344
	5,853,379	Series 2005-2, Class 1CB2,
		5.50%, 03/25/2035		5,217,509
	360,308	Series 2006-3, Class 6A1,
		6.00%, 04/25/2036		349,207
	447,935	Series 2006-5, Class CB7,
		6.00%, 06/25/2046 §		302,998
		Chase Mortgage
		Finance Corporation:
	46,988	Series 2003-S13,
		Class A11, 5.50%,
		11/25/2033		47,815
	1,008,346	Series 2006-A1,
		Class 2A3, 5.806%,
		09/25/2036		742,064

The accompanying notes are an integral part of these financial statements.

Page 113

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Residential Mortgage
Backed Securities – 24.6% (cont.)
		Citigroup Mortgage
		Loan Trust, Inc.:
$	108,063	Series 2005-9,
		Class 2A2, 5.50%,
		11/25/2035	$	101,615
	362,919	Series 2005-9,
		Class 22A2, 6.00%,
		11/25/2035		309,073
		Countrywide Alternative
		Loan Trust:
	814,766	Series 2005-50CB,
		Class 4A1, 5.00%,
		11/25/2020 §		700,320
	1,045,053	Series 2006-7CB,
		Class 3A1, 5.25%,
		05/25/2021 §		899,169
	568,796	Series 2006-43CB,
		Class 2A1, 6.00%,
		02/25/2022 §		504,364
	1,069,599	Series 2005-10CB,
		Class 1A6, 5.50%,
		05/25/2035		1,027,996
	239,808	Series 2006-J2, Class A3,
		6.00%, 04/25/2036		176,083
	1,461,337	Series 2006-28CB,
		Class A17, 6.00%,
		10/25/2036 §		906,939
	21,733	Credit Suisse First
		Boston Mortgage
		Securities Corporation,
		Series 2005-11,
		Class 5A1, 5.25%,
		12/25/2020		21,663
	355,964	Deutsche ALT-A
		Securities Inc. Alternate
		Loan Trust, Series 2005-3,
		Class 4A5, 5.25%,
		06/25/2035		321,621
	242,432	Deutsche Mortgage
		Securities Inc., Series
		2006-AR5, Class 21A,
		6.00%, 10/25/2021		195,017
		Federal Gold Loan
		Mortgage Corporation
		(FGLMC) Pass-Thru
		Certificates:
	191,414	5.00%, 12/01/2020		206,326
	353,403	5.00%, 05/01/2021		380,935
	65,762	6.00%, 06/01/2021		71,647
	72,905	6.50%, 12/01/2028		83,535
	34,061	6.50%, 06/01/2029		39,027
	1,532,413	5.50%, 04/01/2037		1,664,877
	883,161	5.50%, 04/01/2038		959,503
		Federal Home Loan
		Mortgage Corporation
		(FHLMC):
	219,625	Series 3122, Class VA,
		6.00%, 01/15/2017		223,646
	1,946,903	Series R010, Class VA,
		5.50%, 04/15/2017		2,064,784
	469,980	Series R010, Class AB,
		5.50%, 12/15/2019		483,008
	9,726	Series 1053, Class G,
		7.00%, 03/15/2021		11,536
	17,836	Series 136, Class E,
		6.00%, 04/15/2021		19,410
	198,061	Series 2804, Class VC,
		5.00%, 07/15/2021		222,825

The accompanying notes are an integral part of these financial statements.

Page 114

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Residential Mortgage
Backed Securities – 24.6% (cont.)
$	14,836	Series 1122, Class G,
		7.00%, 08/15/2021	$	16,687
	34,098	Series 1186, Class I,
		7.00%, 12/15/2021		38,374
	24,247	Series 3132, Class MA,
		5.50%, 12/15/2023		24,588
	1,475,888	5.50%, 05/01/2038		1,603,466
	5,690,729	4.50%, 11/01/2039		6,035,356
	14,298,516	4.50%, 08/01/2040		15,159,958
	14,517,159	4.50%, 08/01/2040		15,391,774
		Federal National
		Mortgage Association
		(FNMA):
	1,374,996	5.00%, 11/01/2021		1,485,122
	729,027	5.50%, 03/01/2023		799,677
	324,200	5.50%, 07/01/2023		355,618
	467,033	5.50%, 12/01/2023		512,877
	103,399	6.00%, 03/01/2026		114,034
	480,708	5.00%, 05/01/2028		519,857
	55,862	6.50%, 09/01/2028		63,859
	119,646	6.50%, 02/01/2029		136,775
	70,344	5.50%, 01/01/2032		76,897
	3,436,154	5.50%, 04/01/2034		3,756,267
	5,637,165	5.50%, 04/01/2034		6,183,970
	172,657	5.50%, 09/01/2034		188,634
	88,934	5.50%, 02/01/2035		97,163
	10,908,568	5.00%, 04/01/2035		11,796,979
	15,162,045	5.00%, 07/01/2035		16,396,866
	18,378,682	5.00%, 02/01/2036		19,869,727
	3,594,690	5.00%, 03/01/2036		3,886,324
	13,016,214	5.50%, 04/01/2036		14,212,538
	595,712	6.00%, 08/01/2037		653,256
	3,661,204	4.00%, 08/01/2040		3,849,505
	4,288,069	4.00%, 10/01/2040		4,508,611
	9,605,896	4.00%, 12/01/2040		10,191,498
	8,275,429	3.50%, 01/01/2041		8,518,269
	12,736,901	4.00%, 02/01/2041		13,391,979
	8,966,669	4.50%, 07/01/2041		9,549,322
	19,484,702	4.00%, 09/01/2041		20,492,918
	8,859	Series 1989-94, Class G,
		7.50%, 12/25/2019		9,956
	31,639	Series 1990-15, Class J,
		7.00%, 02/25/2020		34,961
	5,705	Series 1991-21, Class J,
		7.00%, 03/25/2021		6,373
	108,045	Series 1991-43, Class J,
		7.00%, 05/25/2021		121,337
	135,476	Series 1991-65, Class Z,
		6.50%, 06/25/2021		146,945
	222,283	Series 1992-129, Class L,
		6.00%, 07/25/2022		248,088
	286,580	Series 2003-33, Class LD,
		4.25%, 09/25/2022		292,067
	45,721	Series 1993-32, Class H,
		6.00%, 03/25/2023		49,665
	239,715	Series 1993-58, Class H,
		5.50%, 04/25/2023		261,294
	147,568	Series 2002-85, Class PD,
		5.50%, 05/25/2031		148,179
	12,420,000	Series 2004-90, Class LH,
		5.00%, 04/25/2034		13,304,448
	452,835	Series 2004-W6,
		Class 1A4, 5.50%,
		07/25/2034		466,651
	481,366	Series 2004-W6,
		Class 1A6, 5.50%,
		07/25/2034		503,764
	26,636	Series 2004-W10,
		Class A24, 5.00%,
		08/25/2034		26,574

The accompanying notes are an integral part of these financial statements.

Page 115

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Residential Mortgage
Backed Securities – 24.6% (cont.)
$	1,500,000	Series 2004-W10,
		Class A4, 5.75%,
		08/25/2034	$	1,528,986
		First Horizon Alternative
		Mortgage Securities:
	510,843	Series 2006-FA6,
		Class 3A1, 5.75%,
		11/25/2021		469,495
	1,396,439	Series 2006-FA8,
		Class 2A1, 5.75%,
		02/25/2037		1,282,747
		Government National
		Mortgage Association
		(GNMA):
	74,498	6.00%, 12/20/2028		84,723
	29,290	6.50%, 01/20/2029		33,503
	213,198	Series 2003-2, Class PB,
		5.50%, 03/20/2032		220,223
	60,608	6.00%, 11/20/2033		68,821
	8,577,913	4.50%, 05/20/2040		9,380,483
	4,076,077	5.00%, 07/20/2040		4,511,962
	14,213,511	4.50%, 01/20/2041		15,532,257
		J.P. Morgan Alternative
		Loan Trust:
	2,125,510	Series 2005-S1, Class
		3A1, 5.50%, 10/25/2020		2,014,486
	195,291	Series 2006-A1,
		Class 2A1, 2.661%,
		03/25/2036		101,495
	2,743,600	Series 2006-S2, Class A2,
		5.81%, 05/25/2036		2,731,572
	300,000	Series 2006-S3,
		Class A3A, 6.00%,
		08/25/2036		262,651
		J.P. Morgan
		Mortgage Trust:
	705,792	Series 2006-A7,
		Class 2A4R, 2.756%,
		01/25/2037 §		460,375
	1,250,000	Series 2007-A2,
		Class 2A3, 3.911%,
		04/25/2037		798,471
		Master Alternative
		Loans Trust:
	423,129	Series 2004-1, Class 1A1,
		5.00%, 01/25/2019		432,423
	560,744	Series 2005-3, Class 4A1,
		5.50%, 03/25/2020		551,909
	116,589	Series 2003-5, Class 6A1,
		6.00%, 08/25/2033		123,397
	730,255	Master Asset
		Securitization Trust,
		Series 2005-2, Class 1A1,
		5.25%, 11/25/2035		715,195
	115,356	Merrill Lynch Mortgage
		Investors Trust,
		Series 2005-A8,
		Class A1C1, 5.25%,
		08/25/2036		114,535
	946,061	Residential Accredit
		Loans, Inc.,
		Series 2005-QS2, Class
		A-1, 5.50%, 02/25/2035		832,533
	1,330,942	Structured Asset
		Securities Corporation,
		Series 2005-7XS, Class
		1A4B, 5.44%,
		04/25/2035		1,337,703

The accompanying notes are an integral part of these financial statements.

Page 116

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Residential Mortgage
Backed Securities – 24.6% (cont.)
		Washington Mutual, Inc.
		Pass-Thru Certificates:
$	188,552	Series 2004-CB1,
		Class 5A, 5.00%,
		06/25/2019	$	193,525
	164,089	Series 2004-CB2, Class
		5A, 5.00%, 07/25/2019		168,289
	341,760	Series 2004-CB2, Class
		7A, 5.50%, 08/25/2019		356,410
	96,315	Series 2004-CB3, Class
		4A, 6.00%, 10/25/2019		99,785
	177,959	Series 2004-CB4, Class
		22A, 6.00%, 12/25/2019		184,356
	195,441	Wells Fargo Alternative
		Loan Trust, Series
		2007-PA1, Class A4,
		6.00%, 03/25/2037 §		136,581
				270,703,652
Taxable Municipal Bonds – 3.1%
	625,000	Bellevue California
		Union School District,
		5.00%, 08/01/2028		622,263
		California
		Qualified School
		Construction Bonds:
	1,500,000	5.041%, 07/01/2020		1,640,460
	1,700,000	7.155%, 03/01/2027		1,907,910
	2,000,000	California State,
		5.50%, 03/01/2016		2,215,820
	1,500,000	Central Valley Support
		Joint Powers Agency,
		5.676%, 09/01/2024		1,538,760
	1,250,000	Colton Joint Unified
		School District,
		6.008%, 08/01/2026		1,328,587
	1,300,000	Contra Costa County
		California Pension
		Obligation,
		5.14%, 06/01/2017		1,427,686
	1,000,000	Davie Florida Water
		& Sewer Revenue,
		6.599%, 10/01/2030
		(Callable 10/01/2020)		1,091,740
	1,000,000	Elgin Ohio LOC
		School District,
		5.499%, 08/31/2027
		(Callable 12/01/2019)		1,044,490
		Illinois State:
	2,000,000	4.026%, 03/01/2014		2,053,840
	1,200,000	4.421%, 01/01/2015		1,242,132
	2,000,000	4.961%, 03/01/2016		2,112,380
	3,000,000	North East Independent
		School District Texas,
		5.24%, 08/01/2027		3,350,880
	1,515,000	San Dieguito California
		Public Facilities,
		6.459%, 05/01/2027		1,713,101
	2,000,000	State Public School
		Building Authorities
		Revenue,
		5.00%, 09/15/2027		2,093,180
	1,350,000	Three Rivers Ohio
		LOC School District,
		5.209%, 09/15/2027
		(Callable 12/01/2020)		1,416,164
	2,300,000	Tobacco Settlement
		Authority Iowa,
		6.50%, 06/01/2023
		(Callable 06/01/2015)		2,148,890

The accompanying notes are an integral part of these financial statements.

Page 117

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Taxable Municipal Bonds – 3.1% (cont.)
$	4,000,000	West Contra Costa
		Unified School District,
		6.25%, 08/01/2030	$	4,152,480
	1,160,000	Westlake Ohio City
		School District,
		5.227%, 12/01/2026
		(Callable 12/01/2020)		1,237,662
				34,338,425
Utilities – 6.1%
		Allegheny Energy
		Supply Co. Senior
		Unsecured Notes:
	500,000	8.25%, 04/15/2012
		(Acquired 12/23/2011;
		Cost $509,119)*		509,028
	500,000	5.75%, 10/15/2019
		(Acquired 09/22/2009;
		Cost $498,175)*		534,750
	1,816,000	Ameren Corporation,
		8.875%, 05/15/2014		2,034,948
	1,025,000	Appalachian Power
		Company Senior
		Unsecured Notes,
		6.70%, 08/15/2037		1,325,838
	1,150,000	Arizona Pubic Service
		Senior Unsecured Notes,
		8.75%, 03/01/2019		1,468,624
	4,000,000	Centrais Eletricas
		Brasileiras SA,
		5.75%, 10/27/2021
		(Acquired 10/20/2011;
		Cost $4,000,000)* f @		4,156,000
	3,000,000	CMS Energy
		Corporation,
		4.25%, 09/30/2015		3,032,094
	750,000	Constellation Energy
		Group Inc.,
		4.55%, 06/15/2015		791,872
	2,245,000	DCP Midstream LLC,
		4.75%, 09/30/2021
		(Acquired 09/14/2011
		through 11/18/2011;
		Cost $2,252,809)*		2,320,367
	2,500,000	El Paso Pipeline Partners
		Operating Co LLC,
		7.50%, 11/15/2040		2,909,845
	500,000	Enel Finance
		International,
		6.80%, 09/15/2037
		(Acquired 09/13/2007
		through 09/29/2008;
		Cost $498,897)* f		434,233
		Energy Transfer Partners:
	875,000	5.65%, 08/01/2012		893,962
	125,000	6.125%, 02/15/2017		137,241
	1,189,000	9.70%, 03/15/2019		1,456,704
	223,000	Entergy Arkansas, Inc.,
		5.00%, 07/01/2018		222,465
		Exelon Corporation:
	500,000	4.90%, 06/15/2015		538,740
	225,000	5.625%, 06/15/2035		242,202
	4,350,000	Exelon Generation
		Company, LLC,
		6.20%, 10/01/2017 @		4,995,340
	1,000,000	FPL Group Capital,
		Inc., Series D, 7.30%,
		09/01/2067 @		1,040,000
	277,591	GG1C Funding
		Corporation,
		5.129%, 01/15/2014
		(Acquired 11/21/2008;
		Cost $271,924)*		283,376

The accompanying notes are an integral part of these financial statements.

Page 118

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Utilities – 6.1% (cont.)
$	1,000,000	IPALCO
		Enterprises Inc.,
		5.00%, 05/01/2018	$	980,000
	1,875,000	KeySpan Corp.,
		8.00%, 11/15/2030		2,510,959
		Kinder Morgan Energy
		Partners Senior Notes:
	400,000	6.50%, 02/01/2037		440,465
	350,000	6.95%, 01/15/2038		395,321
		Kinder Morgan Finance:
	1,685,000	5.70%, 01/05/2016 f		1,722,912
	1,000,000	6.00%, 01/15/2018
		(Acquired 12/06/2010;
		Cost $999,930)*		1,017,500
	30,131	Kiowa Power
		Partners LLC,
		4.811%, 12/30/2013
		(Acquired 11/19/2004;
		Cost $30,131)*		30,129
	1,500,000	Mega Advance
		Investments Ltd.,
		5.00%, 05/12/2021
		(Acquired 05/09/2011;
		Cost $1,484,670)* f @		1,525,363
	2,225,000	National Grid PLC
		Senior Unsecured Notes,
		6.30%, 08/01/2016 f		2,553,252
		National Rural
		Utilities Corporation:
	2,175,000	10.375%, 11/01/2018		3,129,290
	125,000	8.00%, 03/01/2032		176,005
	1,583,000	Nisource Finance Corp.,
		5.40%, 07/15/2014		1,717,527
	1,000,000	NuStar Logistics L.P.,
		4.80%, 09/01/2020		1,041,428
	500,000	PPL Electric
		Utilities Corp.,
		5.20%, 07/15/2041		597,156
		PPL Energy
		Supply, LLC:
	1,350,000	Series A, 5.70%,
		10/15/2015		1,464,797
	1,950,000	6.20%, 05/15/2016		2,174,800
	3,077,000	PSE&G Power LLC,
		5.32%, 09/15/2016		3,432,012
	500,000	Public Service Company
		of New Mexico,
		7.95%, 05/15/2018		584,463
	233,710	RGS (I&M) Funding
		Corporation Debentures,
		9.82%, 12/07/2022		283,311
		Rockies Express
		Pipeline LLC:
	850,000	3.90%, 04/15/2015
		(Acquired 09/15/2011;
		Cost $863,191)*		839,963
	2,000,000	6.85%, 07/15/2018
		(Acquired 12/21/2011;
		Cost $2,040,560)*		2,066,400
	2,695,000	5.625%, 04/15/2020
		(Acquired 12/10/2010
		through 12/29/2011;
		Cost $2,702,902)*		2,566,546
	300,000	Southern Natural Gas,
		5.90%, 04/01/2017
		(Acquired 03/14/2007;
		Cost $299,502)*		342,862
	1,395,000	Spectra Energy
		Capital LLC,
		5.668%, 08/15/2014		1,526,816

The accompanying notes are an integral part of these financial statements.

Page 119

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
LONG-TERM INVESTMENTS – 96.1% (cont.)
Utilities – 6.1% (cont.)
$	1,000,000	Veolia
		Environnement SA,
		6.00%, 06/01/2018 f	$	1,091,780
		Williams Partners LP:
	2,000,000	7.25%, 02/01/2017		2,372,676
	500,000	6.30%, 04/15/2040		609,648
				66,521,010
U.S. Treasury Obligations – 15.5%
		U.S. Treasury Bonds:
	74,675,000	2.375%, 07/31/2017 @		80,258,151
	15,250,000	6.25%, 08/15/2023 @		21,826,562
	18,775,000	5.25%, 11/15/2028 @		25,886,031
	32,975,000	4.375%, 02/15/2038 @		42,630,476
				170,601,220
		Total Long-Term
		Investments
		(Cost $1,033,618,775)		1,057,456,237
Shares
SHORT-TERM INVESTMENTS – 3.3%
Money Market Mutual Funds – 3.3%
	16,725,061	Dreyfus Institutional
		Cash Advantage
		Fund, 0.06% «		16,725,061
	19,171,029	Short-Term
		Investments Trust –
		Liquid Assets
		Portfolio, 0.16% «		19,171,029
		Total Short-Term
		Investments
		(Cost $35,896,090)		35,896,090
Principal
Amount
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 18.5%
Commercial Paper – 0.0%
$	275,151	Atlantic East
		Funding LLC,
		0.610%,
		03/25/2012 † **		171,834
		Total Commercial Paper
		(Cost $275,151)		171,834

The accompanying notes are an integral part of these financial statements.

Page 120

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Shares			Value
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 18.5% (cont.)
Investment Companies – 18.5%
	203,655,253	Mount Vernon
		Securities Lending
		Trust Prime
		Portfolio, 0.23% «	$	203,655,253
		Total Investment
		Companies
		(Cost $203,655,253)		203,655,253
		Total Investments
		Purchased With Cash
		Proceeds From
		Securities Lending
		(Cost $203,930,404)		203,827,087
		Total Investments
		(Cost $1,273,445,269)
		– 117.9%		1,297,179,414
Asset Relating to Securities
Lending Investments – 0.0%
		Support
		Agreement** ^ a †		103,317
		Total (Cost $0)		103,317
		Liabilities in Excess of
		Other Assets – (17.9)%		(196,513,288	)
		TOTAL NET
		ASSETS – 100.0%	$	1,100,769,443

Notes to Schedule of Investments

* Restricted Security Deemed Liquid

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

^ Non-Income Producing

« 7-Day Yield

§ Security in Default

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

The accompanying notes are an integral part of these financial statements.

Page 121

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Page 122

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Fixed Income
Asset Backed Securities	$	—	$	19,868,419	$	—	$	19,868,419
Commercial Mortgage Backed Securities		—		81,052,549		—		81,052,549
Corporate Debt Securities		—		456,221,756		4,675		456,226,431
Other Government Related Securities		—		24,665,541		—		24,665,541
Residential Mortgage Backed Securities		—		270,703,652		—		270,703,652
Taxable Municipal Bonds		—		34,338,425		—		34,338,425
U.S. Treasury Obligations		—		170,601,220		—		170,601,220
Total Fixed Income		—		1,057,451,562		4,675		1,057,456,237
Short-Term Investments
Money Market Mutual Funds		35,896,090		—		—		35,896,090
Total Short-Term Investments		35,896,090		—		—		35,896,090
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		171,834		—		171,834
Money Market Mutual Fund		203,655,253		—		—		203,655,253
Total Investments Purchased with
Cash Proceeds from Securities Lending		203,655,253		171,834		—		203,827,087
Total Investments	$	239,551,343	$	1,057,623,396	$	4,675	$	1,297,179,414
Asset Relating to Securities Lending Investments	$	—	$	103,317	$	—	$	103,317

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.  Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.

Page 123

Baird Core Plus Bond Fund

Schedule of Investments       December 31, 2011

Level 3 Reconciliation Disclosure

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

Description	Investments in Securities
Balance as of December 31, 2010		$	—
Accrued discounts/premiums			—
Realized gain (loss)			—
Change in unrealized appreciation (depreciation)			—
Purchases			—
Sales			—
Transfers in and/or out of Level 3*			4,675
Balance as of December 31, 2011		$	4,675

*  Transfers between levels are recognized at the end of the reporting period.

Page 124

Baird Funds, Inc.

Additional Information on Fund Expenses       December 31, 2011

Example

As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, such as management fees; distribution and/or service (12b-1) fees;  and other fund expenses.  Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent.  If you request that a redemption be made by wire transfer, currently the Funds’ transfer agent charges a $15.00 fee.

This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/11 – 12/31/11).

Actual Expenses

The third and fourth columns of the following table provide information about account values based on actual returns and actual expenses.  You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fourth column entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The fifth and sixth columns of the following table provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.  Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs.  Therefore, the sixth column of the table (entitled “Expenses Paid During Period”) is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher.

Page 125

Baird Funds, Inc.

Additional Information on Fund Expenses       December 31, 2011

Actual vs. Hypothetical Returns

For the Six Months Ended December 31, 2011

					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)	7/1/11	12/31/11	Period(1)	12/31/11	Period(1)
Baird Short-Term Bond Fund
Institutional Class	0.30%	$1,000.00	$1,003.80	$1.52	$1,023.69	$1.53
Baird Intermediate Bond Fund
Institutional Class	0.30%	$1,000.00	$1,027.80	$1.53	$1,023.69	$1.53
Investor Class	0.55%	$1,000.00	$1,027.20	$2.81	$1,022.43	$2.80
Baird Intermediate Municipal
Bond Fund
Institutional Class	0.30%	$1,000.00	$1,046.30	$1.55	$1,023.69	$1.53
Investor Class	0.55%	$1,000.00	$1,044.00	$2.83	$1,022.43	$2.80
Baird Aggregate Bond Fund
Institutional Class	0.30%	$1,000.00	$1,043.70	$1.55	$1,023.69	$1.53
Investor Class	0.55%	$1,000.00	$1,042.00	$2.83	$1,022.43	$2.80
Baird Core Plus Bond Fund
Institutional Class	0.30%	$1,000.00	$1,040.70	$1.54	$1,023.69	$1.53
Investor Class	0.55%	$1,000.00	$1,039.10	$2.83	$1,022.43	$2.80

(1) Expenses are equal to the Fund’s annualized net expense ratio multiplied by the average account value over the period, multiplied by 184 days and divided by 365 to reflect the one-half year period.

Page 126

Baird Funds, Inc.

Statements of Assets and Liabilities       December 31, 2011

						Baird
	Baird			Baird		Intermediate			Baird			Baird
	Short-Term			Intermediate		Municipal			Aggregate			Core Plus
	Bond Fund			Bond Fund		Bond Fund			Bond Fund			Bond Fund
ASSETS:
Investments, at value (cost $1,107,644,957;
$833,995,621; $1,038,224,735; $1,746,853,869;
& $1,273,445,269, respectively)*	$	1,103,825,684		$	857,169,134	$	1,101,725,791		$	1,794,528,625		$	1,297,179,414
Support Agreement (Note 6)		327,614			827,831		—			1,136,588			103,317
Interest receivable		12,145,638			7,904,596		12,790,444			13,882,062			10,534,167
Receivable for investments sold or paid down		11,908,626			16,345		—			35,718			5,353
Receivable for Fund shares sold		1,334,025			1,376,242		5,658,713			9,460,533			7,693,113
Uninvested cash		86,061			9,582		—			18,504			4,372,020
Total assets		1,129,627,648			867,303,730		1,120,174,948			1,819,062,030			1,319,887,384
LIABILITIES:
Payable for collateral received
for securities loaned (Note 6)		94,561,562			140,421,143		—			269,954,519			203,944,523
Payable for securities purchased		12,214,111			8,667,341		25,318,609			41,721,116			14,047,687
Payable for Fund shares repurchased		5,344,690			8,153		449,824			455,848			707,639
Payable to Advisor and Distributor		266,223			184,048		338,613			391,504			386,780
Other liabilities		10,975			77,902		—			145,503			31,312
Total liabilities		112,397,561			149,358,587		26,107,046			312,668,490			219,117,941
NET ASSETS	$	1,017,230,087		$	717,945,143	$	1,094,067,902		$	1,506,393,540		$	1,100,769,443
NET ASSETS CONSIST OF:
Capital stock	$	1,020,168,156		$	693,158,986	$	1,030,734,224		$	1,459,349,952		$	1,076,993,157
Undistributed net investment income		12,570			130,830		19,518			82,473			127,835
Accumulated net realized gain (loss)
on investments sold		541,020			653,983		(186,896	)		(1,850,229	)		(189,011	)
Net unrealized appreciation (depreciation) on
investments and support agreement		(3,491,659	)		24,001,344		63,501,056			48,811,344			23,837,462
NET ASSETS	$	1,017,230,087		$	717,945,143	$	1,094,067,902		$	1,506,393,540		$	1,100,769,443
INSTITUTIONAL CLASS SHARES
Net Assets	$	1,017,230,087		$	703,229,161	$	836,132,295		$	1,480,275,135		$	768,891,204
Shares outstanding ($0.01 par value,
unlimited shares authorized)		106,097,860			63,607,447		70,057,143			139,030,987			71,093,096
Net asset value, offering and
redemption price per share	$	9.59		$	11.06	$	11.94		$	10.65		$	10.82
INVESTOR CLASS SHARES
Net Assets				$	14,715,982	$	257,935,607		$	26,118,405		$	331,878,239
Shares outstanding ($0.01 par value,
unlimited shares authorized)					1,283,478		21,177,650			2,386,621			29,680,841
Net asset value, offering and
redemption price per share				$	11.47	$	12.18		$	10.94		$	11.18

* Includes securities out on loan to brokers with a market value of $92,550,098, $137,665,514, $0, $263,868,621, and $199,757,841, respectively.

The accompanying notes are an integral part of these financial statements.

Page 127

Baird Funds, Inc.

Statements of Operations       Year Ended December 31, 2011

						Baird
	Baird			Baird		Intermediate		Baird		Baird
	Short-Term			Intermediate		Municipal		Aggregate		Core Plus
	Bond Fund			Bond Fund		Bond Fund		Bond Fund		Bond Fund
INVESTMENT INCOME:
Interest income, net of paydowns	$	26,954,725		$	25,562,458	$	29,493,730	$	70,656,628	$	30,345,174
Income from securities lending (Note 6)		133,932			222,274		—		262,695		143,388
Other income		28,071			15,743		920		20,895		13,189
Total investment income		27,116,728			25,800,475		29,494,650		70,940,218		30,501,751
EXPENSES:
Investment advisory fee		2,511,553			1,701,713		2,428,416		4,034,928		1,686,615
Administration fee		502,311			340,343		485,683		806,986		337,323
Distribution expense –
Investor Class Shares (Note 8)		—			32,693		550,110		70,894		297,670
Interest Expense (Note 7)		926			—		4,345		—		22
Total expenses		3,014,790			2,074,749		3,468,554		4,912,808		2,321,630
NET INVESTMENT INCOME		24,101,938			23,725,726		26,026,096		66,027,410		28,180,121
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments		6,005,269			3,633,559		1,184,801		29,334,806		5,311,546
Change in unrealized appreciation/depreciation
on investments and support agreement		(9,257,746	)		12,455,100		51,360,206		27,081,217		15,339,832
Net realized and unrealized
gain (loss) on investments		(3,252,477	)		16,088,659		52,545,007		56,416,023		20,651,378
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS	$	20,849,461		$	39,814,385	$	78,571,103	$	122,443,433	$	48,831,499

The accompanying notes are an integral part of these financial statements.

Page 128

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird Short-Term Bond Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	24,101,938		$	22,342,660
Net realized gain on investments		6,005,269			3,517,847
Change in unrealized appreciation/depreciation
on investments and support agreement		(9,257,746	)		4,968,573
Net increase in net assets resulting from operations		20,849,461			30,829,080
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		514,984,905			523,293,674
Shares issued to holders in reinvestment of dividends		27,443,430			22,945,673
Cost of shares redeemed		(434,651,786	)		(239,674,038	)
Other capital contribution (Note 3)		—			24,793
Net increase in net assets resulting
from capital share transactions		107,776,549			306,590,102
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(24,321,455	)		(22,712,303	)
From net realized gains		(6,100,633	)		(1,929,290	)
Total Distributions		(30,422,088	)		(24,641,593	)
TOTAL INCREASE IN NET ASSETS		98,203,922			312,777,589
NET ASSETS:
Beginning of year		919,026,165			606,248,576
End of year (including undistributed net
investment income of $12,570 and $0, respectively)	$	1,017,230,087		$	919,026,165

The accompanying notes are an integral part of these financial statements.

Page 129

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird Intermediate Bond Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	23,725,726		$	24,416,303
Net realized gain on investments		3,633,559			8,859,362
Change in unrealized appreciation/depreciation
on investments and support agreement		12,455,100			10,584,059
Net increase in net assets resulting from operations		39,814,385			43,859,724
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		215,597,625			163,307,410
Shares issued to holders in reinvestment of dividends		24,186,576			24,923,797
Cost of shares redeemed		(136,560,126	)		(133,422,324	)
Net increase in net assets resulting
from capital share transactions		103,224,075			54,808,883
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(23,416,880	)		(24,028,156	)
From net realized gains		(5,067,500	)		(4,782,773	)
Total Distributions		(28,484,380	)		(28,810,929	)
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income		(411,556	)		(313,689	)
From net realized gains		(101,027	)		(98,191	)
Total Distributions		(512,583	)		(411,880	)
TOTAL INCREASE IN NET ASSETS		114,041,497			69,445,798
NET ASSETS:
Beginning of year		603,903,646			534,457,848
End of year (including undistributed net
investment income of $130,830 and $112,543, respectively)	$	717,945,143		$	603,903,646

The accompanying notes are an integral part of these financial statements.

Page 130

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird Intermediate Municipal Bond Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	26,026,096		$	23,097,843
Net realized gain on investments		1,184,801			75,330
Change in unrealized appreciation/depreciation on investments		51,360,206			(8,200,997	)
Net increase in net assets resulting from operations		78,571,103			14,972,176
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		434,046,253			550,282,182
Shares issued to holders in reinvestment of dividends		22,891,902			20,938,691
Cost of shares redeemed		(356,580,147	)		(351,297,595	)
Other capital contribution (Note 3)		—			2,094
Net increase in net assets resulting
from capital share transactions		100,358,008			219,925,372
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(20,603,834	)		(18,087,492	)
From net realized gains		(467,874	)		—
Total Distributions		(21,071,708	)		(18,087,492	)
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income		(5,402,244	)		(5,032,968	)
From net realized gains		(141,151	)		—
Total Distributions		(5,543,395	)		(5,032,968	)
TOTAL INCREASE IN NET ASSETS		152,314,008			211,777,088
NET ASSETS:
Beginning of year		941,753,894			729,976,806
End of year (including undistributed net
investment income of $19,518 and $0, respectively)	$	1,094,067,902		$	941,753,894

The accompanying notes are an integral part of these financial statements.

Page 131

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird Aggregate Bond Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	66,027,410		$	68,033,449
Net realized gain on investments		29,334,806			17,413,416
Change in unrealized appreciation/depreciation on
investments and support agreement		27,081,217			32,470,647
Net increase in net assets resulting from operations		122,443,433			117,917,512
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		605,032,019			624,236,049
Shares issued to holders in reinvestment of dividends		87,989,277			72,134,875
Cost of shares redeemed		(908,429,486	)		(433,249,939	)
Net increase (decrease) in net assets resulting
from capital share transactions		(215,408,190	)		263,120,985
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(67,922,305	)		(69,717,831	)
From net realized gains		(28,455,915	)		(9,498,319	)
Total Distributions		(96,378,220	)		(79,216,150	)
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income		(1,101,319	)		(1,549,845	)
From net realized gains		(496,921	)		(218,924	)
Total Distributions		(1,598,240	)		(1,768,769	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(190,941,217	)		300,053,578
NET ASSETS:
Beginning of year		1,697,334,757			1,397,281,179
End of year (including undistributed net investment
income of $82,473 and $38,284, respectively)	$	1,506,393,540		$	1,697,334,757

The accompanying notes are an integral part of these financial statements.

Page 132

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird Core Plus Bond Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	28,180,121		$	19,758,841
Net realized gain on investments		5,311,546			2,788,631
Change in unrealized appreciation/depreciation on
investments and support agreement		15,339,832			4,481,630
Net increase in net assets resulting from operations		48,831,499			27,029,102
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		687,143,111			294,817,715
Shares issued to holders in reinvestment of dividends		30,879,432			21,571,061
Cost of shares redeemed		(143,951,115	)		(70,688,565	)
Net increase in net assets resulting
from capital share transactions		574,071,428			245,700,211
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(24,400,094	)		(17,444,760	)
From net realized gains		(2,509,064	)		(2,081,939	)
Total Distributions		(26,909,158	)		(19,526,699	)
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net investment income		(4,960,208	)		(2,869,768	)
From net realized gains		(1,035,923	)		(262,999	)
Total Distributions		(5,996,131	)		(3,132,767	)
TOTAL INCREASE IN NET ASSETS		589,997,638			250,069,847
NET ASSETS:
Beginning of year		510,771,805			260,701,958
End of year (including undistributed net investment
income of $127,835 and $83,682, respectively)	$	1,100,769,443		$	510,771,805

The accompanying notes are an integral part of these financial statements.

Page 133

Baird Funds, Inc.

Financial Highlights

	Baird Short-Term Bond Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	9.68		$	9.57		$	9.25		$	9.91		$	9.81
Income from investment operations:
Net investment income		0.23			0.29			0.41			0.52			0.48
Net realized and unrealized
gains (losses) on investments		(0.03	)		0.13			0.32			(0.67	)		0.10
Total from investment operations		0.20			0.42			0.73			(0.15	)		0.58
Less distributions:
Dividends from net investment income		(0.23	)		(0.29	)		(0.41	)		(0.51	)		(0.48	)
Distributions from net realized gains		(0.06	)		(0.02	)		—			—			—
Total distributions		(0.29	)		(0.31	)		(0.41	)		(0.51	)		(0.48	)
Net asset value, end of year	$	9.59		$	9.68		$	9.57		$	9.25		$	9.91
Total return		2.08	%		4.39	%		8.14	%		(1.79	)%		6.08	%
Supplemental data and ratios:
Net assets, end of year	$	1,017,230,087		$	919,026,165		$	606,248,576		$	214,999,406		$	199,090,483
Ratio of expenses to average net assets		0.30	%		0.30	%		0.30	%		0.30	%		0.30	%
Ratio of net investment income
to average net assets		2.40	%		2.92	%		4.28	%		5.01	%		5.00	%
Portfolio turnover rate		61.1	%		58.7	%		55.5	%		98.5	%		36.6	%

The accompanying notes are an integral part of these financial statements.

Page 134

Baird Funds, Inc.

Financial Highlights

	Baird Intermediate Bond Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.87		$	10.61		$	10.00		$	10.62		$	10.52
Income from investment operations:
Net investment income		0.39			0.44	(1)		0.51	(1)		0.55			0.54
Net realized and unrealized
gains (losses) on investments		0.27			0.35			0.63			(0.64	)		0.10
Total from investment operations		0.66			0.79			1.14			(0.09	)		0.64
Less distributions:
Distributions from net investment income		(0.39	)		(0.44	)		(0.51	)		(0.53	)		(0.54	)
Distributions from net realized gains		(0.08	)		(0.09	)		(0.02	)		—			—
Total distributions		(0.47	)		(0.53	)		(0.53	)		(0.53	)		(0.54	)
Net asset value, end of year	$	11.06		$	10.87		$	10.61		$	10.00		$	10.62
Total return		6.14	%		7.54	%		11.76	%		(0.91	)%		6.24	%
Supplemental data and ratios:
Net assets, end of year	$	703,229,161		$	591,158,539		$	527,750,216		$	401,914,872		$	398,321,566
Ratio of expenses to average net assets		0.30	%		0.30	%		0.30	%		0.30	%		0.30	%
Ratio of net investment income
to average net assets		3.49	%		4.05	%		4.92	%		5.14	%		5.13	%
Portfolio turnover rate(2)		24.1	%		38.7	%		38.6	%		32.9	%		42.5	%

(1) Calculated using average shares outstanding during the year.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 135

Baird Funds, Inc.

Financial Highlights

	Baird Intermediate Bond Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	11.26		$	10.97		$	10.32		$	10.96		$	10.85
Income from investment operations:
Net investment income		0.37			0.43	(1)		0.50	(1)		0.52			0.52
Net realized and unrealized
gains (losses) on investments		0.28			0.36			0.65			(0.65	)		0.10
Total from investment operations		0.65			0.79			1.15			(0.13	)		0.62
Less distributions:
Distributions from net investment income		(0.36	)		(0.41	)		(0.48	)		(0.51	)		(0.51	)
Distributions from net realized gains		(0.08	)		(0.09	)		(0.02	)		—			—
Total distributions		(0.44	)		(0.50	)		(0.50	)		(0.51	)		(0.51	)
Net asset value, end of year	$	11.47		$	11.26		$	10.97		$	10.32		$	10.96
Total return		5.84	%		7.30	%		11.51	%		(1.31	)%		5.89	%
Supplemental data and ratios:
Net assets, end of year	$	14,715,982		$	12,745,107		$	6,707,632		$	4,017,828		$	3,276,351
Ratio of expenses to average net assets		0.55	%		0.55	%		0.55	%		0.55	%		0.55	%
Ratio of net investment income
to average net assets		3.24	%		3.80	%		4.67	%		4.89	%		4.88	%
Portfolio turnover rate(2)		24.1	%		38.7	%		38.6	%		32.9	%		42.5	%

(1) Calculated using average shares outstanding during the year.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 136

Baird Funds, Inc.

Financial Highlights

	Baird Intermediate Municipal Bond Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	11.31		$	11.35		$	10.98		$	10.69		$	10.55
Income from investment operations:
Net investment income		0.32			0.32			0.32	(1)		0.39	(1)		0.37	(1)
Net realized and unrealized
gains (losses) on investments		0.64			(0.04	)		0.36			0.28			0.14
Total from investment operations		0.96			0.28			0.68			0.67			0.51
Less distributions:
Distributions from net investment income		(0.32	)		(0.32	)		(0.31	)		(0.38	)		(0.37	)
Distributions from net realized gains		(0.01	)		—			—			—			—
Total distributions		(0.33	)		(0.32	)		(0.31	)		(0.38	)		(0.37	)
Net asset value, end of year	$	11.94		$	11.31		$	11.35		$	10.98		$	10.69
Total return		8.55	%		2.42	%		6.22	%		6.37	%		4.93	%
Supplemental data and ratios:
Net assets, end of year	$	836,132,295		$	738,957,721		$	533,313,125		$	226,148,164		$	106,583,763
Ratio of expenses to average net assets		0.30	%		0.30	%		0.30	%		0.30	%		0.30	%
Ratio of net investment income
to average net assets		2.74	%		2.74	%		2.83	%		3.58	%		3.44	%
Portfolio turnover rate(2)		8.0	%		8.7	%		0.7	%		0.9	%		5.6	%

(1) Calculated using average shares outstanding during the year.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 137

Baird Funds, Inc.

Financial Highlights

	Baird Intermediate Municipal Bond Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	11.53		$	11.57		$	11.19		$	10.90		$	10.75
Income from investment operations:
Net investment income		0.29			0.29			0.29	(1)		0.36	(1)		0.35	(1)
Net realized and unrealized
gains (losses) on investments		0.66			(0.04	)		0.37			0.28			0.14
Total from investment operations		0.95			0.25			0.66			0.64			0.49
Less distributions:
Distributions from net investment income		(0.29	)		(0.29	)		(0.28	)		(0.35	)		(0.34	)
Distributions from net realized gains		(0.01	)		—			—			—			—
Total distributions		(0.30	)		(0.29	)		(0.28	)		(0.35	)		(0.34	)
Net asset value, end of year	$	12.18		$	11.53		$	11.57		$	11.19		$	10.90
Total return		8.30	%		2.11	%		5.95	%		6.02	%		4.68	%
Supplemental data and ratios:
Net assets, end of year	$	257,935,607		$	202,796,173		$	196,663,681		$	17,415,418		$	396,464
Ratio of expenses to average net assets		0.55	%		0.55	%		0.55	%		0.55	%		0.55	%
Ratio of net investment income
to average net assets		2.49	%		2.49	%		2.58	%		3.33	%		3.19	%
Portfolio turnover rate(2)		8.0	%		8.7	%		0.7	%		0.9	%		5.6	%

(1) Calculated using average shares outstanding during the year.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 138

Baird Funds, Inc.

Financial Highlights

	Baird Aggregate Bond Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.52		$	10.23		$	9.74		$	10.54		$	10.51
Income from investment operations:
Net investment income		0.44	(1)		0.47	(2)		0.54			0.56			0.54
Net realized and unrealized
gains (losses) on investments		0.36			0.37			0.49			(0.81	)		0.03
Total from investment operations		0.80			0.84			1.03			(0.25	)		0.57
Less distributions:
Distributions from net investment income		(0.46	)		(0.49	)		(0.54	)		(0.55	)		(0.54	)
Distributions from net realized gains		(0.21	)		(0.06	)		(0.00	)(3)		—			—
Total distributions		(0.67	)		(0.55	)		(0.54	)		(0.55	)		(0.54	)
Net asset value, end of year	$	10.65		$	10.52		$	10.23		$	9.74		$	10.54
Total return		7.85	%		8.34	%		10.88	%		(2.36	)%		5.61	%
Supplemental data and ratios:
Net assets, end of year	$	1,480,275,135		$	1,658,404,061		$	1,362,164,059		$	842,724,670		$	725,580,384
Ratio of expenses to average net assets		0.30	%		0.30	%		0.30	%		0.30	%		0.30	%
Ratio of net investment income
to average net assets		4.10	%		4.44	%		5.37	%		5.46	%		5.37	%
Portfolio turnover rate(4)		45.9	%		41.4	%		37.7	%		21.9	%		33.6	%

(1) Calculated using average shares outstanding during the year.

(2) Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences.

(3) Amount is less than ($0.005).

(4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 139

Baird Funds, Inc.

Financial Highlights

	Baird Aggregate Bond Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.80		$	10.48		$	9.97		$	10.78		$	10.73
Income from investment operations:
Net investment income		0.42	(1)		0.46	(2)		0.52			0.52			0.53
Net realized and unrealized
gains (losses) on investments		0.37			0.38			0.50			(0.81	)		0.04
Total from investment operations		0.79			0.84			1.02			(0.29	)		0.57
Less distributions:
Distributions from net investment income		(0.44	)		(0.46	)		(0.51	)		(0.52	)		(0.52	)
Distributions from net realized gains		(0.21	)		(0.06	)		(0.00	)(3)		—			—
Total distributions		(0.65	)		(0.52	)		(0.51	)		(0.52	)		(0.52	)
Net asset value, end of year	$	10.94		$	10.80		$	10.48		$	9.97		$	10.78
Total return		7.46	%		8.16	%		10.55	%		(2.63	)%		5.45	%
Supplemental data and ratios:
Net assets, end of year	$	26,118,405		$	38,930,696		$	35,117,120		$	29,146,211		$	14,363,416
Ratio of expenses to average net assets		0.55	%		0.55	%		0.55	%		0.55	%		0.55	%
Ratio of net investment income
to average net assets		3.85	%		4.19	%		5.12	%		5.21	%		5.12	%
Portfolio turnover rate(4)		45.9	%		41.4	%		37.7	%		21.9	%		33.6	%

(1) Calculated using average shares outstanding during the year.

(2) Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences.

(3) Amount is less than ($0.005).

(4) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 140

Baird Funds, Inc.

Financial Highlights

	Baird Core Plus Bond Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.51		$	10.18		$	9.46		$	10.22		$	10.16
Income from investment operations:
Net investment income		0.45	(1)		0.59	(2)		0.65	(1)		0.56	(1)		0.54	(1)
Net realized and unrealized
gains (losses) on investments		0.36			0.39			0.74			(0.73	)		0.05
Total from investment operations		0.81			0.98			1.39			(0.17	)		0.59
Less distributions:
Distributions from net investment income		(0.46	)		(0.60	)		(0.65	)		(0.55	)		(0.53	)
Distributions from net realized gains		(0.04	)		(0.05	)		(0.02	)		(0.04	)		—
Total distributions		(0.50	)		(0.65	)		(0.67	)		(0.59	)		(0.53	)
Net asset value, end of year	$	10.82		$	10.51		$	10.18		$	9.46		$	10.22
Total return		7.89	%		9.81	%		15.36	%		(1.79	)%		5.99	%
Supplemental data and ratios:
Net assets, end of year	$	768,891,204		$	452,419,012		$	215,194,337		$	158,983,325		$	114,421,895
Ratio of expenses to average net assets		0.30	%		0.30	%		0.30	%		0.30	%		0.30	%
Ratio of net investment income
to average net assets		4.22	%		5.56	%		6.67	%		5.61	%		5.41	%
Portfolio turnover rate(3)		34.6	%		61.5	%		33.2	%		27.7	%		47.4	%

(1) Calculated using average shares outstanding during the period.

(2) Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences.

(3) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 141

Baird Funds, Inc.

Financial Highlights

	Baird Core Plus Bond Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.85		$	10.49		$	9.72		$	10.50		$	10.42
Income from investment operations:
Net investment income		0.44	(1)		0.57	(2)		0.64	(1)		0.53	(1)		0.53	(1)
Net realized and unrealized
gains (losses) on investments		0.37			0.41			0.78			(0.74	)		0.06
Total from investment operations		0.81			0.98			1.42			(0.21	)		0.59
Less distributions:
Distributions from net investment income		(0.44	)		(0.57	)		(0.63	)		(0.53	)		(0.51	)
Distributions from net realized gains		(0.04	)		(0.05	)		(0.02	)		(0.04	)		—
Total distributions		(0.48	)		(0.62	)		(0.65	)		(0.57	)		(0.51	)
Net asset value, end of year	$	11.18		$	10.85		$	10.49		$	9.72		$	10.50
Total return		7.57	%		9.53	%		15.06	%		(2.07	)%		5.80	%
Supplemental data and ratios:
Net assets, end of year	$	331,878,239		$	58,352,793		$	45,507,621		$	29,583,588		$	2,473,660
Ratio of expenses to average net assets		0.55	%		0.55	%		0.55	%		0.55	%		0.55	%
Ratio of net investment income
to average net assets		3.97	%		5.31	%		6.42	%		5.36	%		5.16	%
Portfolio turnover rate(3)		34.6	%		61.5	%		33.2	%		27.7	%		47.4	%

(1) Calculated using average shares outstanding during the period.

(2) Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences.

(3) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 142

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

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 Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund (each, a “Fund” and collectively, the “Funds”), five of the seven series comprising the Corporation, each of which is diversified within the meaning of the 1940 Act.  Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) serves as investment advisor to the Funds.

The Baird Short-Term Bond Fund commenced operations with the sale of Institutional Class shares on August 31, 2004.  The Baird Intermediate Municipal Bond Fund commenced operations with the sale of both Institutional and Investor Class shares on March 30, 2001.  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 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 of 0.25%.

The investment objective of the Baird Short-Term Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index. The Barclays Capital 1-3 Year U.S. 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 investment objective of the Baird Intermediate Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital Intermediate U.S. Government/Credit Bond Index.  The Barclays Capital Intermediate U.S. 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 primary investment objective of the Baird Intermediate Municipal Bond Fund is to provide current income that is substantially exempt from federal income tax.  A secondary objective is to provide total return with relatively low volatility of principal.

The investment objective of the Baird Aggregate Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Aggregate Bond Index.  The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, U.S.-dollar denominated, fixed-rate taxable bonds, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities, with maturities of at least one year.

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 Barclays Capital U.S. Universal Bond Index. The Barclays Capital 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.

Page 143

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

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 – Section 2(a)(41) of the 1940 Act, together with the rules and interpretations of the SEC, require the Funds, in computing net asset value, to value their portfolio securities using market quotations when they are “readily available.”  When market quotations are not readily available (e.g., because there is no regular market quotation for such securities, the market for such security is limited, the validity of quotations is questionable or, for debt securities, Interactive Data Corporation (IDC), the Funds’ independent pricing service, does not provide a price), the Board of Directors of the Corporation must value the securities at “fair value determined in good faith.”  The Board has delegated such responsibility to the Advisor pursuant to pricing policies and procedures that the Board has adopted and regularly reviews. In general, the “fair value” of a security means the price that would be received to sell a security in an orderly transaction between market participants at the measurement date.

The Funds determine the fair value of their investments and compute their net asset value per share as of the close of regular trading of the New York Stock Exchange (4:00 p.m. EST).

Consistent with Section 2(a)(41) of the 1940 Act, the Funds price their securities as follows:  debt securities are valued at their bid prices by an independent pricing service using valuation methods that are designed to represent fair value, such as matrix pricing and other analytical pricing models, market transactions and dealer quotations.  Debt securities purchased with a remaining maturity of 60 days or less are valued at acquisition cost, plus or minus any amortized discount or premium which approximates fair value.  Investments in mutual funds are valued at their stated net asset value.  Common stocks that are listed on a securities exchange (other than NASDAQ) are valued at the last quoted sales price.  Securities traded on Nasdaq are valued at the Nasdaq Official Closing Price.  Price information on listed stocks is taken from the exchange where the security is primarily traded.  Securities that were not traded on the valuation date, as well as stocks that are not listed on an exchange, including NASDAQ, are valued at the average of the current bid and asked price.  Other assets and securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Advisor in accordance with procedures approved by the Corporation’s Board of Directors.  In accordance with such procedures, the Advisor may use broker quotes or prices obtained from alternative independent pricing services or, if the broker quotes or prices from alternative pricing services are unavailable or deemed to be unreliable, fair value will be determined by a valuation committee of the Advisor.  In determining fair value, the valuation committee takes into account all relevant factors and available information.  Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security.  Fair value pricing involves subjective judgments and there is no single standard for determining a security’s fair value.  As a result, different mutual funds could reasonably arrive at a different fair value for the same security.  It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine.  In addition, given the volatility and periodic illiquidity experienced in recent years, the prices determined for any individual security on any given day may

Page 144

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

2.SIGNIFICANT ACCOUNTING POLICIES (cont.)

vary significantly from the amount that can be obtained in an actual sale of that security, and the Funds’ NAVs may fluctuate significantly from day to day or from period to period.

In May 2011, the FASB ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and the International Financial Reporting Standards (“IFRS”)” (ASU 2011-04). ASU 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact these amendments may have on the Fund’s financial statements.

b) Unregistered Securities – Four of the Funds own certain investment securities which are unregistered and thus restricted with respect to resale.  The value of such securities for the Baird Short-Term Bond, Baird Intermediate Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds were $240,409,977 (23.63% of net assets), $75,882,546 (10.57% of net assets), $133,366,618 (8.85% of net assets) and $131,958,967 (11.99% of net assets), respectively, at December 31, 2011. Restricted securities may be deemed to be liquid as determined by the Advisor based on several factors.  All of the restricted securities held by the Funds as of December 31, 2011 consist of securities issued pursuant to Rule 144A under the Securities Act of 1933 and nearly all have been deemed to be liquid.

c)Foreign Securities – Foreign securities are defined as securities of issuers that are organized outside the United States. 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 considerations not typically associated with investing in U.S. companies and the U.S. government.  These risks include foreign currency 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)Income Tax Status – The Funds intend to continue to qualify as regulated investment companies as provided in subchapter M of the Internal Revenue Code 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.

Page 145

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

2.SIGNIFICANT ACCOUNTING POLICIES (cont.)

There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2011, or for any other tax years which are open for exam. As of December 31, 2011, open tax years include the tax years ended December 31, 2008 through 2011. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense and other expense, respectively, in the Statement of Operations. During the year, the Funds did not incur any interest or penalties.

e)Allocation of Income and Expenses – Each Fund is charged for those expenses directly attributable to it.  Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares.  Income, expenses and realized and unrealized gains and losses are allocated to the classes based on their respective net assets.  Expenses that are not directly attributable to a Fund are allocated among the Funds in the series in proportion to their assets.

f)Distributions to Shareholders – Dividends from net investment income are declared and paid monthly.  Distributions of net realized capital gains, if any, are declared and paid at least annually.  The book basis character of distributions may differ from their ultimate characterization for Federal income tax purposes.

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) Securities Transactions and Investment Income – Investment and shareholder transactions are recorded on the 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.  Paydown gains and losses are netted and recorded as interest income on the Statement of Operations for financial reporting purposes.  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.

Page 146

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS

The following table summarizes the capital share transactions of each Fund for the past two fiscal years:

BAIRD SHORT-TERM BOND FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2010
Institutional Class Shares	Shares			Amount			Institutional Class Shares	Shares			Amount
Shares sold		53,122,196		$	514,984,905		Shares sold		53,941,581		$	523,293,674
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		2,841,238			27,443,430		reinvestment of dividends		2,370,167			22,945,673
Shares redeemed		(44,833,884	)		(434,651,786	)	Shares redeemed		(24,719,978	)		(239,674,038	)
Net increase		11,129,550		$	107,776,549		Other capital
Shares Outstanding:							contribution(1)		—			24,793
							Net increase		31,591,770		$	306,590,102
Beginning of year		94,968,310					Shares Outstanding:
End of year		106,097,860					Beginning of year		63,376,540
							End of year		94,968,310

(1) Reimbursement from broker/dealer for trade error.

BAIRD INTERMEDIATE BOND FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		18,638,168		$	205,507,343		Shares sold		883,474		$	10,090,282
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		2,149,990			23,704,272		reinvestment of dividends		42,204			482,304
Shares redeemed		(11,543,624	)		(127,767,983	)	Shares redeemed		(773,902	)		(8,792,143	)
Net increase		9,244,534		$	101,443,632		Net increase		151,776		$	1,780,443
Shares Outstanding:							Shares Outstanding:
Beginning of year		54,362,913					Beginning of year		1,131,702
End of year		63,607,447					End of year		1,283,478

Page 147

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS (cont.)

BAIRD INTERMEDIATE BOND FUND (cont.)
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		14,049,678		$	153,279,282		Shares sold		873,924		$	10,028,128
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		2,246,787			24,530,527		reinvestment of dividends		34,799			393,270
Shares redeemed		(11,685,367	)		(129,013,096	)	Shares redeemed		(388,645	)		(4,409,228	)
Net increase		4,611,098		$	48,796,713		Net increase		520,078		$	6,012,170
Shares Outstanding:							Shares Outstanding:
Beginning of year		49,751,815					Beginning of year		611,624
End of year		54,362,913					End of year		1,131,702
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		28,247,024		$	327,854,380		Shares sold		8,949,573		$	106,191,873
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		1,511,354			17,575,486		reinvestment of dividends		447,538			5,316,416
Shares redeemed		(25,043,108	)		(288,447,567	)	Shares redeemed		(5,800,868	)		(68,132,580	)
Net increase		4,715,270		$	56,982,299		Net increase		3,596,243		$	43,375,709
Shares Outstanding:							Shares Outstanding:
Beginning of year		65,341,873					Beginning of year		17,581,407
End of year		70,057,143					End of year		21,177,650

Page 148

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS (cont.)

BAIRD INTERMEDIATE MUNICIPAL BOND FUND (cont.)
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		38,588,699		$	445,517,129		Shares sold		8,950,612		$	104,765,053
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		1,397,612			16,069,118		reinvestment of dividends		415,616			4,869,573
Shares redeemed		(21,627,081	)		(248,842,671	)	Shares redeemed		(8,780,560	)		(102,454,924	)
Other capital							Net increase		585,668		$	7,179,702
contribution(2)		—			2,094		Shares Outstanding:
Net increase		18,359,230		$	212,745,670		Beginning of year		16,995,739
Shares Outstanding:							End of year		17,581,407
Beginning of year		46,982,643
End of year		65,341,873

(2) Reimbursement from Distributor for trade error.

BAIRD AGGREGATE BOND FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		55,839,863		$	597,699,924		Shares sold		667,679		$	7,332,095
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		8,120,694			86,467,957		reinvestment of dividends		139,163			1,521,320
Shares redeemed		(82,507,416	)		(886,351,800	)	Shares redeemed		(2,025,333	)		(22,077,686	)
Net decrease		(18,546,859	)	$	(202,183,919	)	Net decrease		(1,218,491	)	$	(13,224,271	)
Shares Outstanding:							Shares Outstanding:
Beginning of year		157,577,846					Beginning of year		3,605,112
End of year		139,030,987					End of year		2,386,621

Page 149

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS (cont.)

BAIRD AGGREGATE BOND FUND (cont.)
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		58,009,539		$	612,648,476		Shares sold		1,067,964		$	11,587,573
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		6,665,390			70,415,189		reinvestment of dividends		158,898			1,719,686
Shares redeemed		(40,243,021	)		(422,708,572	)	Shares redeemed		(971,470	)		(10,541,367	)
Net increase		24,431,908		$	260,355,093		Net increase		255,392		$	2,765,892
Shares Outstanding:							Shares Outstanding:
Beginning of year		133,145,938					Beginning of year		3,349,720
End of year		157,577,846					End of year		3,605,112
BAIRD CORE PLUS BOND FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		36,047,590		$	388,252,142		Shares sold		26,760,168		$	298,890,969
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		2,340,028			25,063,056		reinvestment of dividends		524,142			5,816,376
Shares redeemed		(10,328,750	)		(110,911,182	)	Shares redeemed		(2,980,242	)		(33,039,933	)
Net increase		28,058,868		$	302,404,016		Net increase		24,304,068		$	271,667,412
Shares Outstanding:							Shares Outstanding:
Beginning of year		43,034,228					Beginning of year		5,376,773
End of year		71,093,096					End of year		29,680,841

Page 150

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS (cont.)

BAIRD CORE PLUS BOND FUND (cont.)
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		25,148,651		$	268,520,599		Shares sold		2,412,145		$	26,297,116
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		1,773,718			18,680,311		reinvestment of dividends		266,407			2,890,750
Shares redeemed		(5,023,697	)		(52,797,338	)	Shares redeemed		(1,639,473	)		(17,891,227	)
Net increase		21,898,672		$	234,403,572		Net increase		1,039,079		$	11,296,639
Shares Outstanding:							Shares Outstanding:
Beginning of year		21,135,556					Beginning of year		4,337,694
End of year		43,034,228					End of year		5,376,773

4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION

During the year ended December 31, 2011, purchases and sales of investment securities (excluding short-term investments) were as follows:

					Baird
	Baird		Baird		Intermediate		Baird		Baird
	Short-Term		Intermediate		Municipal		Aggregate		Core Plus
	Bond Fund		Bond Fund		Bond Fund		Bond Fund		Bond Fund
Purchases:
U.S. Government	$	235,567,196	$	132,667,879	$	—	$	482,411,784	$	410,584,818
Other	$	510,442,615	$	138,375,067	$	177,081,584	$	221,688,514	$	356,815,956
Sales:
U.S. Government	$	289,870,636	$	67,409,813	$	—	$	655,498,506	$	180,427,886
Other	$	290,015,402	$	90,065,999	$	75,334,170	$	276,129,235	$	48,329,116

Page 151

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)

At December 31, 2011, gross unrealized appreciation and depreciation of investments and distributable ordinary income and long-term capital gains for federal tax purposes were as follows:

							Baird
	Baird			Baird			Intermediate			Baird			Baird
	Short-Term			Intermediate			Municipal			Aggregate			Core Plus
	Bond Fund			Bond Fund			Bond Fund			Bond Fund			Bond Fund
Cost of Investments	$	1,107,663,428		$	833,995,621		$	1,038,274,202		$	1,748,288,036		$	1,273,564,118
Gross unrealized appreciation	$	7,284,356		$	32,040,424		$	63,679,571		$	79,018,370		$	36,284,483
Gross unrealized depreciation		(10,794,486	)		(8,039,080	)		(227,982	)		(31,641,193	)		(12,565,870	)
Net unrealized appreciation	$	(3,510,130	)	$	24,001,344		$	63,451,589		$	47,377,177		$	23,718,613
Undistributed
ordinary income	$	84,035		$	424,194		$	—		$	82,473		$	127,835
Undistributed long-term
capital gain		488,026			360,619			—			—			—
Undistributed
tax-exempt income		—			—			19,518			—			—
Total distributable earnings	$	572,061		$	784,813		$	19,518		$	82,473		$	127,835
Other accumulated losses	$	—		$	—		$	(137,429	)	$	(416,062	)	$	(70,162	)
Total accumulated
earnings/(losses)	$	(2,938,069	)	$	24,786,157		$	63,333,678		$	47,043,588		$	23,776,286

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.  The difference between book-basis and tax-basis unrealized appreciation is attributed primarily to the tax deferral of losses on wash sales.

Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share.  For the year ended December 31, 2011, the following table shows the reclassifications made:

	Undistributed Net				Accumulated Net				Paid In
	Investment Income (Loss)				Realized Gain (Loss)				Capital
Baird Short-Term Bond Fund		$	232,087			$	(232,087	)		$	—
Baird Intermediate Bond Fund			120,996				(120,998	)			2
Baird Intermediate Municipal Bond Fund			(500	)			500				—
Baird Aggregate Bond Fund			3,040,403				(3,040,404	)			1
Baird Core Plus Bond Fund			1,224,334				(1,224,334	)			—

Page 152

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)

The tax components of dividends paid during the periods shown below were as follows:

	Year Ended				Year Ended
	December 31, 2011				December 31, 2010
	Ordinary		Long-Term		Ordinary		Long-Term
	Income		Capital Gains		Income		Capital Gains
	Distributions		Distributions		Distributions		Distributions
Baird Short-Term Bond Fund	$	26,304,269	$	4,117,819	$	23,700,754	$	940,839
Baird Intermediate Bond Fund	$	24,939,410	$	4,057,553	$	25,148,629	$	4,074,180
Baird Intermediate Municipal Bond Fund	$	407,181	$	608,525	$	648,696	$	—
Baird Aggregate Bond Fund	$	75,902,247	$	22,074,213	$	71,267,676	$	9,717,243
Baird Core Plus Bond Fund	$	30,406,429	$	2,498,860	$	20,825,534	$	1,833,932

For the years ended December 31, 2011 and December 31, 2010, distributions of $25,599,397 and $22,471,764, 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, 2011, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund elected to defer capital losses occurring between November 1, 2011 and December 31, 2011 in the amount of $137,429, $416,062 and $70,162, respectively.

At December 31, 2011, there were no accumulated net realized capital loss carryovers.

During the year ended December 31, 2011, Baird Intermediate Municipal Bond Fund utilized capital loss carryovers of $713,705.

On December 22, 2010, the Regulated Investment Modernization Act of 2010 (the “RIC Act”) was enacted, and the provisions within the RIC Act are effective for the Funds for the year ended December 31, 2011.  The RIC Act modernized several of the federal income and excise tax provisions related to regulated investments companies (“RICs”).  Under the RIC Act, new capital losses may be carried forward indefinitely with the character of the original loss retained.  Prior to the RIC Act, capital losses could be carried forward for eight years, and were carried forward as short-term capital losses regardless of the character of the original loss.  The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests.  The RIC Act exempts RICs from the preferential dividend rule and repeals the 60-day designation requirement for certain types of pay-through income and gains.  In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a RIC during the portion of its taxable year ending after October 31 or December 31.

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Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

5.INVESTMENT ADVISORY AND OTHER AGREEMENTS

The Funds have entered into an Investment Advisory Agreement with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.25% for the Funds as applied to the respective Fund’s average daily net assets.  Certain officers of the Advisor are also officers of the Funds.

The Funds have entered into an Administration Agreement with Baird.  Under the Administration Agreement, the Advisor assumes and pays all expenses of the applicable Fund other than the investment advisory fees, fees under the 12b-1 plan, costs related to portfolio securities transactions and extraordinary or non-recurring expenses.  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 Funds as applied to the respective Fund’s average daily net assets.

U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Funds.  U.S. Bank, N.A. serves as custodian for the Funds.

Baird (the “Distributor”) is the distributor of the Funds pursuant to a distribution agreement.

6.SECURITIES LENDING

Each Fund (other than the Intermediate Municipal Bond Fund) may lend up to one-third of its total assets (including such loans) to borrowers under terms of participation in a securities lending program administered by U.S. Bank, N.A., the Fund’s custodian and an affiliate of the Funds’ transfer agent and administrator.  The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the market value of any loaned securities at the time of the loan, plus accrued interest.

The Funds receive compensation in the form of fees and earn interest on the cash collateral.  The amount of fees depends on a number of factors including the type of security and length of the loan.  Each Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period.  Each Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand.

As of December 31, 2011, the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund had loaned securities that were collateralized by cash equivalents.  The cash collateral is invested by the custodian in accordance with approved investment guidelines.  Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending.  A Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Funds are indemnified from this risk by contract with the securities lending agent.

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Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

6.SECURITIES LENDING (cont.)

As of December 31, 2011, the market value of the securities on loan and payable on collateral due to broker were as follows:

	Market Value of			Payable on Collateral
	Securities on Loan			due to Broker
Baird Short-Term Bond Fund		$	92,550,098		$	94,561,562
Baird Intermediate Bond Fund			137,665,514			140,421,143
Baird Aggregate Bond Fund			263,868,621			269,954,519
Baird Core Plus Bond Fund			199,757,841			203,944,523

The Funds receive cash as collateral in return for securities lent as part of the securities lending program.  The collateral is invested in the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act) and a legacy interest in Atlantic East Funding LLC.  The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2011.

The Funds’ interest in Atlantic East Funding LLC is priced at fair value by the Valuation Committee of the Advisor. The fair value of the Funds’ interest in Atlantic East Funding LLC is based on the underlying market values of the securities owned by Atlantic East Funding LLC, which are determined by independent pricing sources.  In addition, the Funds’ transfer agent and administrator and securities lending agent entered into a support agreement with the Funds to cover potential losses realized by the Funds on their investment in Atlantic East Funding LLC (up to a certain amount). The amounts agreed to be provided to the Funds under the support agreement are shown in the Funds’ schedules of investments and statements of assets and liabilities.  At December 31, 2011, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 100% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.

The interest income earned by the Funds on investments of cash collateral received from borrowers for the securities loaned to them (“securities lending income”) is reflected in the Funds’ statements of operations.  Interest income earned on collateral investments and recognized by the Funds during the year ended December 31, 2011 for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund were $133,932, $222,274, $262,695, and $143,388, respectively.

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Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

7.LINE OF CREDIT

The Corporation maintains an uncommitted, senior secured line of credit (“LOC”) with U.S. Bank, N.A. (the “Bank”) to provide the Funds a temporary liquidity source to meet unanticipated redemptions.  Under the terms of the LOC, borrowings for each Fund are limited to one-third of the total assets (including the amount borrowed) of the respective Fund, or as otherwise indicated within the Funds’ agreement with the Bank.  The Bank charges interest at the Bank’s Prime Rate less 1% (weighted average rate of 2.25% during 2011).  For the year ended December 31, 2011, the Baird Short-Term Bond Fund, Baird Intermediate Municipal Bond Fund, and Baird Core Plus Bond Fund incurred $926, $4,345 and $22 in interest charges, respectively, on average daily loan balances of $40,581, $190,463 and $945, respectively.  The Baird Intermediate Bond Fund and Baird Aggregate Bond Fund did not borrow from the LOC during the period.

8.DISTRIBUTION AND SHAREHOLDER SERVICE PLAN

The Funds have adopted a distribution and shareholder service plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act.  The Plan allows the Funds to compensate the Distributor for the costs incurred in distributing the Funds’ Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate of 0.25% of the average daily net assets of the Funds’ Investor Class Shares.  The Baird Intermediate Bond, Baird Intermediate Municipal Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds incurred $32,693, $550,110, $70,894 and $297,670, respectively, in fees pursuant to the Plan during the year ended December 31, 2011.

9.SUBSEQUENT EVENT

In preparing these financial statements, the Corporation has evaluated events after December 31, 2011.  There were no subsequent events since December 31, 2011 that would require adjustment to or additional disclosure in these financial statements.

Page 156

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Baird Funds, Inc.

We have audited the accompanying statements of assets and liabilities of Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund (five of the seven funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the aforementioned Funds of Baird Funds, Inc. as of December 31, 2011, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Chicago, Illinois

February 28, 2012

Page 157

Baird Funds, Inc.

Directors & Officers as of December 31, 2011

				Number of
				Portfolios	Other
	Positions	Term of Office	Principal	in Complex	Directorships
	Held with	and Length of	Occupation(s)	Overseen	Held
Name, Address and Age	the Funds	Time Served	During Past 5 Years	by Director	by Director
G. Frederick Kasten, Jr.	Independent	Indefinite;	Retired; Chairman, the Advisor (January 2000-December	7	Director of Regal-Beloit
c/o Robert W. Baird	Director and	Since September	2005); Chairman and CEO, the Advisor (January 1998-		Corporation, a
& Co. Incorporated	Chairman	2000	January 2000); President, Chairman and CEO,  the		manufacturing
777 East Wisconsin Avenue			Advisor (June 1983-January 1998); President, the Advisor		company
Milwaukee, WI  53202			(January 1979-January 1983)
Age:  72
John W. Feldt	Independent	Indefinite;	Retired; Senior Vice President-Finance, University of	7	Director of Thompson
c/o University of	Director	Since September	Wisconsin Foundation (1985-2006); Vice President-		Plumb Funds, Inc., a
Wisconsin Foundation		2000	Finance, University of Wisconsin Foundation (1980-1985);		mutual fund complex
1848 University Avenue			Associate Director, University of Wisconsin Foundation		(3 portfolios)
Madison, WI  53726			(1967-1980)
Age:  69
Frederick P. Stratton, Jr.	Independent	Indefinite;	Retired; Chairman Emeritus, Briggs & Stratton	7	Director of Weyco
10134 N. Port Washington	Director	Since May	Corporation, a manufacturing company, since 2003;		Group, Inc., a men’s
Road, #2B		2004	Chairman of the Board, Briggs & Stratton Corporation		footwear distributor;
Mequon, WI  53092			(2001-2002); Chairman and CEO, Briggs & Stratton		Director of Wisconsin
Age:  72			Corporation (1986-2001)		Energy Corporation
					and its subsidiaries,
					Wisconsin Electric
					Power Company and
					Wisconsin Gas LLC
Marlyn J. Spear, CFA	Independent	Indefinite;	Chief Investment Officer, Building Trades United	7	Management Trustee of
c/o Robert W. Baird	Director	Since January	Pension Trust Fund, since July 1989; Investment Officer,		AFL-CIO Housing
& Co. Incorporated		2008	Northwestern Mutual Financial Network (1988-1989);		Investment Trust, a
777 East Wisconsin Avenue			Assistant Vice-President, Firstar Trust Company		mutual fund complex
Milwaukee, WI  53202			(1978-1987); Financial Analyst, Harco Holdings, Inc.		(1 portfolio)
Age:  58			(1976-1978)
Cory L. Nettles*	Interested	Indefinite;	Managing Director, Generation Growth Capital, Inc., a	7	Director of Weyco
Generation Growth Capital, Inc.	Director	Since January	private equity fund, since March 2007; Of Counsel,		Group, Inc., a men’s
411 East Wisconsin Avenue,		2008	Quarles & Brady LLP, a law firm, since January 2005;		footwear distributor
Suite 1710			Secretary, Wisconsin Department of Commerce
Milwaukee, WI  53202			(January 2003 – January 2005)
Age:  41

* Mr. Nettles is considered an “interested person” of the Corporation (as defined in the 1940 Act) because of his association with the law firm, Quarles & Brady LLP, which provides legal services to the Advisor.  The legal services that Quarles & Brady LLP has provided to the Advisor include litigation, real estate, trademark and miscellaneous securities related matters that did not relate to the Corporation or the Funds.  Mr. Nettles also serves as a senior advisor to Baird Private Equity, a division of the Advisor.

Additional information about the Funds’ directors is available in the Statement of Additional Information which may be obtained without charge, upon request, by calling 1-866-44BAIRD, or at www.bairdfunds.com.

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Baird Funds, Inc.

Directors & Officers as of December 31, 2011

	Position(s)	Term of Office	Principal
	Held with	and Length of	Occupation(s)
Name, Address, and Age	the Funds	Time Served	During Past 5 Years
Mary Ellen Stanek	President	Re-elected by	Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of
777 East Wisconsin Avenue		Board annually;	the Advisor, since March 2000
Milwaukee, WI  53202		Since
Age: 55		September 2000
Charles B. Groeschell	Vice President	Re-elected by	Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of
777 East Wisconsin Avenue		Board annually;	the Advisor, since February 2000
Milwaukee, WI  53202		Since
Age: 58		January 2010
Todd S. Nichol	Vice President	Re-elected by	Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the
777 East Wisconsin Avenue	and Chief	Board annually;	the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice
Milwaukee, WI  53202	Compliance	Since	President, the Advisor (January 2004-January 2005)
Age: 49	Officer	August 2004
Heidi Schneider	Vice President	Re-elected by	Senior Vice President, the Advisor since September 2007; Controller, the Advisor (April 1997-
777 East Wisconsin Avenue		Board annually;	September 2007)
Milwaukee, WI  53202		Since
Age: 40		August 2010
Dominick P. Zarcone	Treasurer	Re-elected by	Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment
777 East Wisconsin Avenue		Board annually;	Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor
Milwaukee, WI  53202		Since	since February 1995
Age: 53		March 2011
Charles M. Weber	Secretary	Re-elected by	Managing Director, the Advisor since January 2009; Senior Vice President, the Advisor
777 East Wisconsin Avenue		Board annually;	(July 2005-December 2008); Associate General Counsel, the Advisor since July 2005; Partner,
Milwaukee, WI 53202		Since	Quarles & Brady LLP, a law firm (October 1998-June 2005)
Age: 48		September 2005
Dustin J. Hutter	Assistant	Re-elected by	Senior Vice President, the Advisor since January 2011; First Vice President, the Advisor (January
777 East Wisconsin Avenue	Treasurer	Board annually;	2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant
Milwaukee, WI 53202		Since	Controller, the Advisor since January 2006
Age: 35		February 2011
John McVoy	AML	Re-elected by	AML Compliance Officer and Privacy Officer, the Advisor since June 2010; AML Compliance
777 East Wisconsin Avenue	Compliance	Board annually;	Officer - Trust & Securities, U.S. Bancorp (August 2008-May 2010); Law Clerk, First American
Milwaukee, WI 53202	Officer	Since	Fund Advisors (May 2007-September 2007)
Age: 27		August 2010
Andrew D. Ketter	Assistant	Re-elected by	First Vice President and Associate General Counsel, the Advisor since September 2010; Associate,
777 East Wisconsin Avenue	Secretary	Board annually;	Quarles & Brady LLP, a law firm (September 2002-August 2010)
Milwaukee, WI 53202		Since
Age: 37		February 2011

Page 159

Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS

The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 16, 2011 to consider the annual renewal of the investment advisory agreement with Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) for management of the Baird Intermediate Bond, Aggregate Bond, Intermediate Municipal Bond, Core Plus Bond and Short-Term Bond Funds (collectively, the “Funds”), which are mutual fund series or portfolios of the Corporation.  The Board reviewed and discussed various information that had been provided prior to the meeting, including the investment advisory agreement, memoranda provided by outside legal counsel and the Secretary of the Funds discussing the Board’s fiduciary obligations and factors the Board should assess in considering the renewal of the investment advisory agreement, information in response to requests from the Board, including the directors who are not “interested persons” of the Company or the Advisor within the meaning of the Investment Company Act of 1940 (the “1940 Act”) (“Independent Directors”), from the Advisor (including the Advisor’s Form ADV, Form BD and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2011, management fees and expense ratios, and other pertinent information.  The Board also discussed relevant case law, including the Supreme Court’s decision in Jones v. Harris Associates, L.P.

The Independent Directors met separately in executive session with Fund legal counsel to consider the investment advisory agreement.  The Board discussed the Advisor’s 15(c) response with the President of the Funds.  The Board also reviewed a summary of the Advisor’s risk management tools and process.  The Board also received information periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information.  Based on its evaluation of this information, the Board, including a majority of the Independent Directors, approved the continuation of the investment advisory agreement for an additional one-year period.

In considering the investment advisory agreement and reaching its conclusions, the Board reviewed and analyzed various factors that it determined were relevant, including the factors below.

Nature, Extent and Quality of Services Provided to the Funds

The Board analyzed the nature, extent and quality of the services provided by the Advisor to the Funds.  The Board reviewed and considered the Advisor’s significant role in establishing the Funds and the construction of their investment objectives, principal strategies, investment limitations and fee structures.  The Board noted the Advisor’s overall reputation and positive name recognition, the depth of the Advisor’s personnel, resources and commitment to the Funds, and the experience, credentials and continuity of the portfolio management teams employed to manage the Funds’ investments.  The Board further noted that the Advisor has approximately $16 billion of assets under discretionary management and has strong relationships with numerous institutional accounts.  The Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients.  However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements.

The Board considered the Advisor’s disciplined investment decision-making process used for the Funds.  The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio

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Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS (cont.)

transactions, ensuring adherence to the Funds’ investment policies and restrictions, compliance, risk management services, valuation, providing support services to the Board and the Audit Committee of the Board and overseeing the Funds’ other service providers.  In addition, the Board considered that the Advisor provides administrative services to each of the Funds at an annual rate of 0.05% of the Fund’s average daily net assets, and is responsible for paying each Fund’s custody, transfer agency, accounting, printing, auditing, legal and director fees and other ordinary expenses (except for advisory and 12b-1 fees), which has the effect of capping the Funds’ expense ratios at 0.55% and 0.30% for Investor and Institutional Class shares, respectively.  The Board further noted that the Advisor, in its capacity as a registered broker-dealer, also serves as distributor and principal underwriter of shares of the Funds and spends time and effort marketing the Funds.  The Board also considered the strength of the Advisor’s compliance department, including the Funds’ chief compliance officer, and the fact that the Advisor has not experienced any significant legal, compliance or regulatory difficulties since the Funds were launched.  The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the respective investment advisory agreement.

Investment Performance of the Advisor and the Funds

In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2011 regarding the Fund’s performance in comparison to its benchmark index and its peer groups as determined by Lipper.  The Board concluded that the Funds had performed extremely well over most time periods and had achieved consistent performance results.  While the Intermediate Municipal Bond Fund has trailed its benchmark index in certain periods, the Board noted that the Fund did not hold the lower quality bonds that had outperformed higher quality bonds in recent years due to the Advisor’s disciplined risk management process, and referred to the Advisor’s commentary in this regard.  The Board also noted that each of the Funds (both Institutional and Investor Class shares) had outperformed its Lipper peer group average over most time periods.

The Board also considered the Advisor’s quarterly portfolio commentaries and reviews explaining the Funds’ performance, the Advisor’s consistent and disciplined investment decision process and the investment strategies it employs for the Funds.  After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, each Fund and its shareholders were likely to benefit from the continued management by the Advisor.

Costs of Services Provided and Profits Realized by the Advisor

The Board examined the fee and expense information for each of the Funds, including a comparison of such information to other similarly situated mutual funds as determined by Lipper.  The Board noted that each Fund’s advisory fee and total expense ratio (for both its Investor Class and Institutional Class shares) were significantly lower than the average and median advisory fees and expense ratios for all mutual funds in its Lipper category.

The Board also reviewed and considered investment management fees charged by the Advisor to other investment advisory clients and found that the fee paid by the Funds (0.25%) was less than the fee that the Advisor charges on the first $25 million (0.30%) of a separately managed account and the same as the fee that the Advisor charges on the next $25 million.  The Board noted and discussed the extent of the significant additional services provided to the Funds that the Advisor did not provide in

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Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS (cont.)

the other advisory relationships.  Those services included certain administrative services, oversight of the Funds’ other service providers, director support, risk management, regulatory compliance and various other services.  The Board also reviewed sub-advisory fees paid to the Advisor under sub-advisory arrangements with two unaffiliated mutual funds, noting that the sub-advisory services were limited to asset management and that the Advisor provided numerous other services under the advisory agreement with the Funds and, accordingly, that the sub-advisory fees were expected to be lower than the Funds’ advisory fees.

The Board considered the fees realized, and the costs incurred, by the Advisor in providing investment management services to the Funds and a profitability analysis with respect to each Fund.  The Board noted the unique expense structure of the Funds whereby the Institutional Class shareholders were charged only a management fee and an administration fee and the Advisor incurred all of the other expenses on behalf of each Fund and that Investor Class shareholders incurred the same expenses as the Institutional Class shareholders plus a 0.25% 12b-1 fee.  The Board noted that for the past fiscal year, the Advisor had incurred significantly more in expenses under the Administration Agreement than it received in administrative fees.

The Board concluded that the profits realized by the Advisor from its relationship with the Funds were appropriate.  The Board noted that the Advisor’s profitability information does not reflect certain internal resources provided by the Advisor to the Funds, such as legal and compliance support.  The Board reviewed and considered the general financial condition of the Advisor and determined it to be sound.  The Board also reviewed a report regarding revenue sharing payments, noting that any payments by the Advisor to third party platforms were made from the Advisor’s profits.  In light of all of the information that it received and considered, the Board concluded that the management fee and total expense ratio of each Fund were reasonable.

Economies of Scale and Fee Levels Reflecting Those Economies

The Board noted that the Funds’ advisory fee structure does not contain any breakpoint reductions as the Funds grow in size.  However, the Board recognized that the Advisor essentially bears all of the Funds’ expenses other than management, 12b-1 and administration fees.  The Board also recognized that the advisory fee rates paid by the Funds were designed to be lower than the fees otherwise charged by the Advisor to its separately managed account clients and to be comparable to the second or third breakpoint advisory fee levels paid by other comparable mutual funds.

The directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future depending on Fund asset levels.

Benefits Derived from the Relationship with the Funds

The Board noted that the Advisor does not have any soft dollar arrangements and does not realize any other tangible benefits in connection with its management of the Funds.  The Board believed that the Funds generally benefit from their association with the Advisor and the use of the “Baird” name.  The Board concluded that the other benefits realized by the Advisor from its relationship with the Funds were appropriate.

Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the investment advisory agreement, the directors, including all of the Independent Directors, concluded that the continuation of the investment advisory agreement was in the best interest of each Fund and its shareholders.

Page 162

Additional Information

Proxy Voting

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.

Each Fund’s proxy voting record for the most recent 12-month period ended June 30, if applicable, is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.  The Funds generally do not vote proxies because the securities held in their portfolios, consisting of bonds and other fixed-income securities, are not entitled to vote.

Portfolio Holdings Disclosure

The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.  Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330.  The Funds’ Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.

Tax Information

The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(c) for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund were 7.54%, 4.45%, 9.06% and 3.44%, respectively.

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BAIRD FUNDS, INC.

PRIVACY POLICY

Protecting the privacy of Fund shareholders is important to us.  The following is a description of the practices and policies through which Baird Funds, Inc. protects the privacy and security of your non-public personal information.

What Information We Collect

We collect and maintain information about you so that we can open and maintain your account in the Funds and provide various services to you.  We may collect and maintain the following personal information about you:

• Information we receive from you or your financial advisor on account applications or other forms, correspondence, or conversations, such as your name, address, e-mail address, phone number, social security number, assets, income and date of birth; and

• Information about your transactions with us, our affiliates, or others, such as your account number and balance, positions, activity, history, cost basis information, and other financial information.

What Information We Disclose

We do not sell any non-public personal information about our current or former shareholders to third parties.  We do not disclose any non-public personal information about our current or former shareholders to anyone, except as permitted or required by law.  We are permitted by law to share any of the information we collect, as described above, with our affiliates.  In addition, we may share such information with nonaffiliated third parties to the extent necessary to effect, process, administer or enforce a transaction that the shareholder requests or authorizes, in connection with maintaining or servicing the shareholder’s account, as requested by regulatory authorities or as otherwise permitted or required by law.  For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions.  We may also provide your name and address to third party service providers who send account statements and other Fund-related material to you.

How We Protect Your Information

We restrict access to your non-public personal information to those persons who require such information to provide products or services to you.  We maintain physical, electronic, and procedural safeguards that comply with federal standards to protect the confidentiality, integrity and security of your non-public personal information.

We will continue to adhere to the privacy policies and practices in this notice even after your account is closed or becomes inactive.

In the event that you hold shares of the Fund(s) through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with nonaffiliated third parties.

Page A-1

Baird Funds, Inc.

c/o U.S. Bancorp Fund Services, LLC

P.O. Box 701

Milwaukee, WI 53201-0701

1-866-44BAIRD

Board of Directors

G. Frederick Kasten, Jr. (Chairman)

John W. Feldt

Cory L. Nettles

Marlyn J. Spear

Frederick P. Stratton, Jr.

Investment Advisor and Distributor

Robert W. Baird & Co. Incorporated

777 East Wisconsin Avenue

Milwaukee, WI 53202

Administrator and Transfer Agent

U.S. Bancorp Fund Services, LLC

P.O. Box 701

615 East Michigan Street

Milwaukee, WI 53202

Custodian

U.S. Bank, N.A.

1555 N. RiverCenter Drive, Suite 302

Milwaukee, WI 53212

Legal Counsel

Godfrey & Kahn, S.C.

780 North Water Street

Milwaukee, WI 53202

Independent Registered Public Accounting Firm

Grant Thornton LLP

175 West Jackson Boulevard, 13th Floor

Chicago, IL 60604

Annual Report - Baird Funds

December 31, 2011

Baird LargeCap Fund

Baird MidCap Fund

TABLE OF CONTENTS

	Page
Letter to Shareholders	1
2011 Economic and Stock Market Commentary	2
Baird LargeCap Fund	4
Baird MidCap Fund	13
Additional Information on Fund Expenses	22
Statements of Assets and Liabilities	24
Statements of Operations	25
Statements of Changes in Net Assets	26
Financial Highlights	28
Notes to the Financial Statements	32
Report of Independent Registered Public Accounting Firm	42
Directors and Officers	43
Disclosure Regarding the Board of Directors’ Approval
of the Investment Advisory Agreement for Baird Equity Funds	45
Additional Information	48
Privacy Notice	A-1

This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

Cautionary Note on Analyses, Opinions and Outlooks:  In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events.  These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect.  These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate.  It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds.  Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.

Baird Funds, Inc.

1-866-442-2473

www.bairdfunds.com

February 28, 2012

Dear Shareholder,

Our equity portfolio management team adds long-term value with its quality conscious investment management approach.  While equity returns for investors in 2011 were modest, we are pleased with the performance of the Funds in 2011, notably our MidCap product, which offered exceptional performance.

We thank you for your continued investment in Baird Funds.  Steady inflows into the Baird Funds family have increased total net assets to $5.5 billion at the end of 2011, an increase of more than 15% over the prior year-end.  We’ve built our reputation on employing a risk controlled process in our approach to investment decision making and portfolio management.  Our long-term success is a testament to this.

On the following pages, we review the equity market in 2011 and the performance and composition of each of the Baird MidCap and LargeCap Funds.

We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals and we welcome the opportunity to continue to serve you.

Sincerely,

Mary Ellen Stanek, CFA

President

Baird Funds

2011 Economic and Stock Market Commentary

Equities produced a strong rally in the fourth quarter, which helped stock market averages recover from a challenging late summer retreat to finish the year with modest gains.  The broad-based S&P 500 index rose 2.1% for all of 2011, while the Dow Jones Industrial Average advanced 8.4%.  In general, larger stocks fared better than smaller and mid cap companies as evidenced by the Russell 1000® Growth index, which advanced 2.6% compared to the Russell Midcap® Growth Index decline of 1.7%.

The somewhat muted market returns experienced by investors in 2011 belied the volatility during the course of the year.  A robust start to the year pushed the S&P 500 index up over 8% into late spring.  However, the headwinds of sovereign debt crises, slowing economic growth and negative political discourse caught up with the stock market during the third quarter of 2011.  The fundamental performance of companies across most sectors, as reflected in second quarter earnings reported in July, did not foreshadow the surge in market volatility or the accompanying drop in equity prices.  A broad sell-off lasting most of the quarter coincided with the contentious U.S. debt-ceiling debate and subsequent ratings downgrade that affected stocks, commodities and other riskier assets.

The pause in economic activity was short-lived, and a series of encouraging economic releases were enough to change the direction of equities in the fourth quarter.  Most domestic equity indices posted double digit returns in the year’s final three months as the U.S. economy strengthened and corporate profits continued to march higher.

Sector performance within the broad S&P 500 index was varied.  As one might expect during a period of slowing economic growth and heightened uncertainty, more defensive areas of the market, including consumer staples and health care, outperformed.  Sectors with more cyclical earnings streams such as materials, financials, and industrials lagged the market.  It was also a period where the perceived safety of size outperformed smaller and mid-sized companies.

Economic Outlook

As we flip the calendar to a new year, it is our belief that macroeconomic factors will again dominate the investment landscape.  Sovereign debt and banking crises, central bank decisions, and global politics are front and center in the minds of investors, and rightly so.  Resolution and clarity would be welcome – potentially lifting both spirits and earnings multiples for shareholders.  Fortunately, domestic company fundamentals generally remain rather positive, providing some degree of comfort.

European sovereign debt challenges have been intensely discussed and debated with steps taken, but few concrete accomplishments.  Because so much country debt is held by the banking system, it is difficult to structure a solution that requires austerity measures, asset write-downs and capital raising without inducing at least a modest recession in Europe.  The stronger northern economies (i.e., Germany and France) are being pressured to provide the lifelines necessary to manage the debt situation.  Recapitalizing the banks will possibly require TARP-like

Page 2

2011 Economic and Stock Market Commentary

financing.  These are big, but not impossible tasks.  We are closely monitoring our companies with European exposure with an eye to further reducing position sizes where appropriate.

The Chinese central bank maintained a restrictive monetary policy through much of the past year in order to reduce raw material and real estate inflation.  Those efforts have largely been successful, but have slowed GDP growth to a rate below their stated goals.  It is not outside the realm of possibility that the breaking mechanism is reversed in 2012.  This change would provide welcome relief for many companies that generate revenues and profits from that important growth economy.

Aside from our country’s own debt and budget situation, 2012 is a Presidential election year.  Uncertainty regarding the path of key issues including tax policy, federal budget cuts, and entitlement reform may be with us for much of 2012, and may well keep a lid on stocks.  In sum, risks remain elevated and we have positioned the portfolios accordingly.  Better clarity and confidence would make for a more favorable investing climate, and should the winds begin shifting to our back, we will adjust to an improved investing environment.

Page 3

Baird LargeCap Fund

December 31, 2011

Portfolio Managers’ Commentary

For the year ended December 31, 2011, the Baird LargeCap Fund Institutional Class posted a decline of 2.34% (-2.58% for the Investor Class), as compared to a return of 2.64% for the Russell 1000® Growth Index, the LargeCap Fund’s primary benchmark.

We can attribute the Fund’s underperformance to two themes.  First, we were positioned for an economic recovery which was highlighted by heavier weights in the industrial, energy and materials sectors.  This positioning proved a drag on performance during 2011 as the slowdown in economic data and the negative impact from the U.S. budget debate called for a more defensive stance.

The second performance headwind arose from the market cap profile of the Fund, which was smaller than the benchmark, as there was a clear relationship between size and performance during the year.  When broken down into quintiles, the benchmark’s largest market cap group produced a collective return that far exceeded the benchmark, while companies generally underperformed in the lower three market cap quintiles.

Our investment strategy is focused on identifying large cap companies in the earlier part of their life cycle (generally having market capitalizations that are smaller than the benchmark average) where we believe there remains a meaningful runway for attractive growth.  The strategy is simply an effort to keep the collective portfolio away from the law of large numbers, which eventually affects the growth rate of the biggest and most well known businesses.  However, in periods of significant market volatility, our strategy can struggle on a relative basis as size and liquidity become key investment themes and investor time horizons shrink.

We saw the size theme most notably in technology where the Fund’s holdings drove the largest underperformance during the year.  While the Fund was essentially equal in weight compared to the benchmark, the composition was much different.  During the year, the five largest technology companies accounted for nearly 15% of the Russell 1000® Growth Index.  The Fund had exposure to three of these names, Apple, Oracle and Google, but their collective weight was approximately 60% that of the benchmark.

The most difficult sectors from a relative performance standpoint were technology as discussed, as well as industrials, consumer discretionary, financial services, and energy.  The more cyclical nature of many of the businesses in these sectors was challenged by the slower pace of economic growth in 2011.  As a case in point, while we saw continued solid fundamental performance from the Fund’s industrial companies, concerns about the global economy pressured valuation levels in this sector.  We continue to have confidence in our view that companies in the sector will produce favorable earnings growth in the coming year.

The highlight of the year was the strength in the materials sector as well as the Fund’s health care holdings.  Our pursuit of less commodity-exposed businesses in the materials sector proved beneficial.  We lean toward quality companies that, although impacted by the economy, are not tied to the price level of a particular commodity.  Performance in health care was encouraging after a difficult 2010.  Good stock selection offset the challenges of

Page 4

Baird LargeCap Fund

December 31, 2011

a slowdown in medical procedures and pressure on overall utilization of services.  Market volatility may present opportunities in the sector, which we will weigh carefully given the overhang that remains as the economy gradually recovers and the coming reform of the health care system.

The Fund’s performance was clearly impacted by the portfolio’s positioning for more robust economic activity and the lower average market cap position relative to the target benchmark.  Our focus will remain on executing our investment process and expending energy on the things we can control – identifying and investing in what we believe are good businesses, properly allocating capital across sectors and aligning position sizes to account for risk and reward for clients.  We are confident that our investment process is sound and our strategy will add long-term value for clients.

Portfolio Managers:

Douglas E. Guffy

Kenneth M. Hemauer, CFA

Page 5

Baird LargeCap Fund

A December 31, 2011 summary of the Fund’s top 10 holdings and equity sector analysis compared to the Russell 1000® Growth Index is shown below.

Top 10 Holdings*			Equity Sector Analysis**
Apple Inc.	5.9%
Praxair, Inc.	3.8%
Danaher Corporation	3.5%
Emerson Electric Company	3.2%
Occidental Petroleum Corporation	3.0%
Cognizant Technology
Solutions Corporation – Class A	2.8%
Fastenal Company	2.8%
C.H. Robinson Worldwide, Inc.	2.8%
O’Reilly Automotive, Inc.	2.7%
Core Laboratories N.V.	2.6%
Net Assets:	$20,641,186
Portfolio Turnover Rate:	38.2%
Number of Equity Holdings:	54
Annualized Portfolio Expense Ratio:***
INSTITUTIONAL CLASS:	0.75%
INVESTOR CLASS:	1.00%	****

* The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security.  Percentages shown relate to the Fund’s total net assets as of December 31, 2011.

** Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2011, and may not add up to 100% due to rounding.

*** The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 0.75% of average daily net assets for the Institutional Class shares and 1.00% of average daily net assets for the Investor Class shares, at least through April 30, 2013.

**** Includes 0.25% 12b-1 fee.

Page 6

Baird LargeCap Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.

Page 7

Baird LargeCap Fund

Average Annual Total Returns

				Since
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Inception(1)
Institutional Class Shares	-2.34%	0.70%	0.50%	-0.85%
Investor Class Shares	-2.58%	0.47%	0.25%	-1.10%
Russell 1000® Growth Index(2)	2.64%	2.50%	2.60%	-1.87%

(1) For the period from September 29, 2000 (commencement of operations) through December 31, 2011.

(2) The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe.  It includes those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in the index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 8

Baird LargeCap Fund

Schedule of Investments       December 31, 2011

Shares			Value
COMMON STOCKS – 98.8%
Aerospace & Defense – 2.0%
	2,475	Precision Castparts Corp.	$	407,855
Air Freight & Logistics – 2.8%
	8,282	C.H. Robinson
		Worldwide, Inc.		577,918
Auto Components – 2.3%
	15,450	Johnson Controls, Inc.		482,967
Capital Markets – 2.2%
	4,816	State Street Corporation		194,133
	4,489	T. Rowe Price Group, Inc.		255,649
				449,782
Chemicals – 3.8%
	7,250	Praxair, Inc.		775,025
Commercial Banks – 0.6%
	2,175	PNC Financial
		Services Group, Inc.		125,432
Commercial Services & Supplies – 2.1%
	5,625	Stericycle, Inc.*		438,300
Communications Equipment – 3.5%
	800	F5 Networks, Inc.*		84,896
	5,825	Juniper Networks, Inc.*		118,888
	6,325	QUALCOMM
		Incorporated		345,977
	7,075	Riverbed Technology, Inc.*		166,263
				716,024
Computers & Peripherals – 8.7%
	2,985	Apple Inc.*		1,208,925
	22,950	EMC Corporation*@		494,343
	2,300	NetApp, Inc.*		83,421
				1,786,689
Electrical Equipment – 3.2%
	14,300	Emerson
		Electric Company		666,237
Electronic Equipment, Instruments
& Components – 1.3%
	7,550	Agilent
		Technologies, Inc.*		263,722
Energy Equipment & Services – 7.1%
	4,746	Core Laboratories N.V. f @		540,807
	5,250	Oceaneering
		International, Inc.		242,183
	4,687	Schlumberger Limited f @		320,169
	7,225	Tidewater Inc.		356,192
				1,459,351
Food & Staples Retailing – 2.6%
	7,725	Whole Foods
		Market, Inc.@		537,506
Health Care Equipment
& Supplies – 2.4%
	1,065	Intuitive Surgical, Inc.*		493,106
Health Care Providers & Services – 2.5%
	11,625	Express Scripts, Inc.*@		519,521
Insurance – 1.2%
	5,525	Aflac, Inc.@		239,012
Internet & Catalog Retail – 1.8%
	2,183	Amazon.com, Inc.*		377,877
Internet Software & Services – 4.1%
	8,050	Akamai Technologies, Inc.*		259,854
	718	Baidu, Inc.* f		83,625
	783	Google, Inc. – Class A*		505,740
				849,219
IT Services – 4.3%
	9,100	Cognizant Technology
		Solutions Corporation –
		Class A*		585,221
	840	MasterCard, Inc. – Class A		313,169
				898,390

The accompanying notes are an integral part of these financial statements.

Page 9

Baird LargeCap Fund

Schedule of Investments       December 31, 2011

Shares			Value
COMMON STOCKS – 98.8% (cont.)
Machinery – 6.6%
	3,850	Caterpillar Inc.	$	348,810
	15,234	Danaher Corporation		716,607
	8,050	PACCAR Inc.		301,634
				1,367,051
Media – 1.9%
	8,975	DIRECTV*@		383,771
Metals & Mining – 0.6%
	3,375	Freeport-McMoRan
		Copper & Gold Inc.		124,166
Multiline Retail – 2.1%
	10,765	Dollar General
		Corporation*		442,872
Oil, Gas & Consumable Fuels – 7.9%
	4,000	Continental
		Resources, Inc.*@		266,840
	3,625	Noble Energy, Inc.		342,164
	6,572	Occidental Petroleum
		Corporation		615,796
	2,925	QEP Resources, Inc.		85,702
	9,775	Southwestern
		Energy Company*		312,214
				1,622,716
Pharmaceuticals – 3.9%
	6,000	Allergan, Inc.@		526,440
	2,850	Perrigo Company@		277,305
				803,745
Semiconductors &
Semiconductor Equipment – 1.1%
	6,365	Altera Corporation		236,141
Software – 6.4%
	5,225	Citrix Systems, Inc.*		317,262
	16,175	Oracle Corporation		414,889
	3,100	Red Hat, Inc.*		127,999
	4,460	Salesforce.com, Inc.*@		452,511
				1,312,661
Specialty Retail – 7.0%
	14,450	Dick’s Sporting
		Goods, Inc.		532,916
	7,025	O’Reilly Automotive, Inc.*		561,649
	2,225	Tractor Supply Company		156,083
	7,200	Urban Outfitters, Inc.*		198,432
				1,449,080
Trading Companies & Distributors – 2.8%
	13,269	Fastenal Company@		578,661
		Total Common Stocks
		(Cost $16,083,686)		20,384,797
SHORT-TERM INVESTMENTS – 1.2%
Money Market Mutual Fund – 1.2%
	251,768	Short-Term Investments
		Trust – Liquid Assets
		Portfolio, 0.16%«		251,768
		Total Short-Term
		Investments
		(Cost $251,768)		251,768
Principal
Amount
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 17.9%
Commercial Paper – 0.5%
$	159,452	Atlantic East
		Funding LLC,
		0.61%, 03/25/2012†**		99,579
		Total Commercial Paper
		(Cost $159,452)		99,579

The accompanying notes are an integral part of these financial statements.

Page 10

Baird LargeCap Fund

Schedule of Investments       December 31, 2011

Shares			Value
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 17.9% (cont.)
Investment Companies – 17.4%
	3,591,681	Mount Vernon Securities
		Lending Trust Prime
		Portfolio, 0.23%«	$	3,591,681
		Total Investment
		Companies
		(Cost $3,591,681)		3,591,681
		Total Investments Purchased
		With Cash Proceeds From
		Securities Lending
		(Cost $3,751,133)		3,691,260
		Total Investments
		(Cost $20,086,587) –
		117.9%		24,327,825
Asset Relating to Securities
Lending Investments – 0.3%
		Support Agreement*a **†		59,873
		Total (Cost $0)		59,873
		Liabilities in Excess of
		Other Assets – (18.2)%		(3,746,512	)
		TOTAL NET
		ASSETS – 100.0%	$	20,641,186

Notes to Schedule of Investments

* Non-Income Producing

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

« 7-Day Yield

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

Industry classifications shown in the Schedule of Investments are based on the Global Industry Classification Standard (GICS®). GICS was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.

The accompanying notes are an integral part of these financial statements.

Page 11

Baird LargeCap Fund

Schedule of Investments       December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Equity
Common Stocks	$	20,384,797	$	—	$	—	$	20,384,797
Total Equity		20,384,797		—		—		20,384,797
Short-Term Investments
Money Market Mutual Fund		251,768		—		—		251,768
Total Short-Term Investments		251,768		—		—		251,768
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		99,579		—		99,579
Money Market Mutual Fund		3,591,681		—		—		3,591,681
Total Investments Purchased with Cash
Proceeds from Securities Lending		3,591,681		99,579		—		3,691,260
Total Investments*	$	24,228,246	$	99,579	$	—	$	24,327,825
Asset Relating to Securities Lending Investments	$	—	$	59,873	$	—	$	59,873

*Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments.

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.

Page 12

Baird MidCap Fund

December 31, 2011

Portfolio Managers’ Commentary

For the year ended December 31, 2011, the Baird MidCap Fund Institutional Class posted a total return of 5.19% (4.93% for the Investor Class), as compared to a decline of 1.65% for the Russell MidCap® Growth Index, the MidCap Fund’s primary benchmark.

As we assess the strong relative performance for the year we note the impact of good stock picking in multiple sectors and the benefit of owning quality companies in a year characterized by periods of meaningful uncertainty.  The Fund’s holdings in the energy, materials, and consumer discretionary sectors enjoyed the strongest returns during the year.  The financial services and technology sectors also contributed to outperformance.  Companies with strong earnings, cash flow, and superior balance sheets continued to be rewarded.

While the Fund carried a modest pro-cyclical stance during the course of 2011, sector weight remained well-balanced and in a tight range when compared to the benchmark.  We deem this prudent, as we worry that the improved economic conditions of the fourth quarter may fade somewhat in the New Year.  This concern is especially true for the first six months, as earnings comparisons will be more challenging and global growth, particularly in Europe, will decline further.

The Fund’s holdings of consumer discretionary stocks produced broad strength, which in our view were a reflection of solid earnings growth and the more domestic nature of the businesses.  Despite persistently high unemployment, consumer spending has churned to higher levels and is now above its prior peak.  Several of the Fund’s retailing stocks have grown square footage at well over 10%, and when coupled with same store sales of mid single digits, above average earnings growth is achieved.  This type of financial performance was rewarded in 2011.

Of particular note was the strength from the Fund’s energy holdings, despite the fact that stock performance in this sector is closely tied to the price of the underlying commodities.  The bulk of the sector is made up of businesses providing services and equipment.  We believe those companies benefit from the overall strength of energy industry spending on new drilling activity, as well as upgrading and replacing equipment.  The Fund also benefitted from holding an exploration and development company possessing significant acreage and production in the Marcellus shale formation in the eastern U.S.

The positive impact of the Fund’s basic materials holdings was a function of our more conservative holdings.  The businesses models we focus on were not as affected by economic uncertainty as we tend to shy away from those that are tied more directly to commodity prices such as chemical, building material, and fertilizer companies.  This was particularly true of our holdings in distribution companies, which benefit from higher demand for their products but are somewhat more immune from the price volatility of the underlying commodities.

Page 13

Baird MidCap Fund

December 31, 2011

The Fund’s holdings of industrial companies lagged slightly during the year.  The sector remained modestly overweight in the Fund but several positions were trimmed mid-year as earnings comparisons became more difficult and the risks of a European recession became evident.  We remain confident in the business models in this sector.

The more defensive nature of health care businesses and a meaningful slowdown in medical procedures as well as pressure on overall utilization of services continued as a theme during 2011.  These issues negatively impacted earnings multiples and share prices.  We remained underweight the sector for the majority of the year, but the Fund benefitted from the introduction of several new stocks in the areas of prescription benefit management, generic products, and biotechnology.

The MidCap Fund remained consistently positioned in favor of high-quality names that deliver attractive returns with lower volatility for the Fund than for our target index.  We have positioned the Fund for the continued domestic economic growth we expect in 2012, with attention to particular businesses that should demonstrate better profitability and stronger growth than peers.  We believe in our strategy of focusing on high quality business models and controlling risk, and we will continue to work our investment philosophy and process.

Portfolio Managers:

Kenneth M. Hemauer, CFA

Charles F. Severson, CFA

Page 14

Baird MidCap Fund

A December 31, 2011 summary of the Fund’s top 10 holdings and equity sector analysis compared to the Russell Midcap® Growth Index is shown below.

Top 10 Holdings*			Equity Sector Analysis**
Oceaneering International, Inc.	2.9%
Plantronics, Inc.	2.5%
Microchip Technology Incorporated	2.4%
Roper Industries, Inc.	2.4%
Fastenal Company	2.3%
ANSYS, Inc.	2.3%
Catalyst Health Solutions, Inc.	2.2%
Perrigo Company	2.1%
Digital Realty Trust, Inc.	2.1%
Church & Dwight Co., Inc.	2.1%
Net Assets:	$43,461,051
Portfolio Turnover Rate:	44.8%
Number of Equity Holdings:	55
Annualized Portfolio Expense Ratio:***
INSTITUTIONAL CLASS:	0.85%
INVESTOR CLASS:	1.10%	****

* The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security.  Percentages shown relate to the Fund’s total net assets as of December 31, 2011.

** Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2011, and may not add up to 100% due to rounding.

*** The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 0.85% of average daily net assets for the Institutional Class shares and 1.10% of average daily net assets for the Investor Class shares, at least through April 30, 2013.

**** Includes 0.25% 12b-1 fee.

Page 15

Baird MidCap Fund

Institutional Class

Value of a $25,000 Investment

Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.

Investor Class

Value of a $10,000 Investment

Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.

Page 16

Baird MidCap Fund

Average Annual Total Returns

				Since
For the Periods Ended December 31, 2011	One Year	Five Years	Ten Years	Inception(1)
Institutional Class Shares	5.19%	5.89%	5.77%	4.34%
Investor Class Shares	4.93%	5.64%	5.53%	4.10%
Russell Midcap® Growth Index(2)	-1.65%	2.44%	5.29%	2.43%

(1) For the period from December 29, 2000 (commencement of operations) through December 31, 2011.

(2) The Russell Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe.  It includes those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values.  This index does not reflect any deduction for fees, expenses or taxes.  A direct investment in the index is not possible.

The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares.  The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Past performance does not guarantee future results.  Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com.  Mutual fund performance changes over time and current performance may be lower or higher than that stated.

Page 17

Baird MidCap Fund

Schedule of Investments       December 31, 2011

Shares			Value
COMMON STOCKS – 93.6%
Auto Components – 1.8%
	25,805	Gentex Corporation	$	763,570
Automobiles – 1.7%
	18,995	Harley-Davidson, Inc.@		738,336
Biotechnology – 1.5%
	8,898	Alexion
		Pharmaceuticals, Inc.*		636,207
Capital Markets – 3.9%
	4,595	Affiliated Managers
		Group, Inc.*		440,890
	13,493	Greenhill & Co., Inc.@		490,740
	37,805	Invesco Limited f		759,503
				1,691,133
Chemicals – 3.5%
	10,670	Airgas, Inc.		833,114
	12,350	Ecolab, Inc.@		713,953
				1,547,067
Commercial Banks – 1.0%
	21,900	East West Bancorp, Inc.		432,525
Commercial Services & Supplies – 1.7%
	9,385	Stericycle, Inc.*		731,279
Communications Equipment – 3.7%
	30,140	Plantronics, Inc.		1,074,190
	22,565	Riverbed Technology, Inc.*		530,277
				1,604,467
Containers & Packaging – 1.8%
	14,707	AptarGroup, Inc.		767,264
Electrical Equipment – 3.8%
	8,395	Rockwell Automation, Inc.		615,941
	11,837	Roper Industries, Inc.		1,028,280
				1,644,221
Electronic Equipment, Instruments
& Components – 4.6%
	21,345	Agilent Technologies, Inc.*		745,581
	23,010	Plexus Corp.*		630,014
	14,900	Trimble
		Navigation Limited*		646,660
				2,022,255
Energy Equipment & Services – 7.7%
	6,780	Core Laboratories N.V. f @		772,581
	16,870	Dresser-Rand Group, Inc.*		841,982
	26,911	Oceaneering
		International, Inc.@		1,241,404
	16,345	Rowan Companies, Inc.*		495,744
				3,351,711
Food Products – 1.9%
	16,412	McCormick &
		Co, Incorporated		827,493
Health Care Providers & Services – 2.2%
	18,115	Catalyst Health
		Solutions, Inc.*		941,980
Health Care Technology – 0.9%
	6,650	Cerner Corporation*		407,312
Hotels Restaurants & Leisure – 3.6%
	12,658	Buffalo Wild Wings Inc.*@		854,542
	38,750	InterContinental
		Hotels Group PLC ADR f		697,112
				1,551,654
Household Products – 2.1%
	19,676	Church & Dwight
		Co., Inc.@		900,374
IT Services – 3.6%
	7,935	Alliance Data Systems
		Corporation*@		823,970
	15,060	Teradata Corporation*@		730,561
				1,554,531
Life Sciences Tools & Services – 1.3%
	32,681	ICON PLC – ADR* f		559,172

The accompanying notes are an integral part of these financial statements.

Page 18

Baird MidCap Fund

Schedule of Investments       December 31, 2011

Shares			Value
COMMON STOCKS – 93.6% (cont.)
Machinery – 4.9%
	27,985	Actuant Corporation@	$	634,980
	6,680	Joy Global Inc.		500,799
	6,410	Navistar International
		Corporation*		242,811
	17,085	WABCO Holdings Inc.*		741,489
				2,120,079
Multiline Retail – 1.8%
	19,195	Dollar General
		Corporation*		789,682
Office Electronics – 1.8%
	21,535	Zebra Technologies
		Corporation*		770,522
Oil, Gas & Consumable Fuels – 3.1%
	11,065	Cabot Oil &
		Gas Corporation		839,834
	10,635	Whiting Petroleum
		Corporation*		496,548
				1,336,382
Pharmaceuticals – 2.1%
	9,660	Perrigo Company@		939,918
Professional Services – 1.1%
	13,010	Manpower Inc.		465,107
Real Estate Investment
Trust (REIT) – 2.1%
	13,565	Digital Realty Trust, Inc.@		904,379
Road & Rail – 1.8%
	17,070	J.B. Hunt Transport
		Services, Inc.		769,345
Semiconductors &
Semiconductor Equipment – 4.2%
	21,250	Altera Corporation		788,375
	28,863	Microchip Technology
		Incorporated@		1,057,252
				1,845,627
Software – 4.1%
	17,300	ANSYS, Inc.*		990,944
	12,885	Citrix Systems, Inc.*		782,377
				1,773,321
Specialty Retail – 9.2%
	23,111	Dick’s Sporting
		Goods, Inc.		852,334
	10,865	O’Reilly Automotive, Inc.*		868,657
	10,846	Tractor Supply Company		760,847
	12,500	Ulta Salon, Cosmetics
		& Fragrance, Inc.*		811,500
	25,794	Urban Outfitters, Inc.*		710,882
				4,004,220
Textiles, Apparel & Luxury Goods – 0.8%
	5,145	Under Armour,
		Inc. – Class A*		369,360
Trading Companies & Distributors – 4.3%
	22,917	Fastenal Company@		999,410
	13,615	Watsco, Inc.@		893,961
				1,893,371
		Total Common Stocks
		(Cost $33,051,687)		40,653,864
SHORT-TERM INVESTMENTS – 6.2%
Money Market Mutual Funds – 6.2%
	1,895,725	Dreyfus Institutional
		Cash Advantage
		Fund, 0.06%«		1,895,725
	800,000	Short-Term Investments
		Trust – Liquid Assets
		Portfolio, 0.16%«		800,000
		Total Short-Term
		Investments
		(Cost $2,695,725)		2,695,725

The accompanying notes are an integral part of these financial statements.

Page 19

Baird MidCap Fund

Schedule of Investments       December 31, 2011

Principal
Amount			Value
INVESTMENTS PURCHASED
WITH CASH PROCEEDS FROM
SECURITIES LENDING – 17.0%
Commercial Paper – 0.3%
$	224,461	Atlantic East
		Funding LLC,
		0.61%, 03/25/2012†**	$	140,178
		Total Commercial Paper
		(Cost $224,461)		140,178
Shares
Investment Companies – 16.7%
	7,260,199	Mount Vernon Securities
		Lending Trust Prime
		Portfolio, 0.23%«		7,260,199
		Total Investment
		Companies
		(Cost $7,260,199)		7,260,199
		Total Investments Purchased
		With Cash Proceeds From
		Securities Lending
		(Cost $7,484,660)		7,400,377
		Total Investments
		(Cost $43,232,072) –
		116.8%		50,749,966
Asset Relating to Securities
Lending Investments – 0.2%
		Support Agreement*a **†		84,283
		Total (Cost $0)		84,283
		Liabilities in Excess of
		Other Assets – (17.0)%		(7,373,198	)
		TOTAL NET
		ASSETS – 100.0%	$	43,461,051

Notes to Schedule of Investments

ADR  American Depository Receipt

* Non-Income Producing

** Illiquid Security

@ This security or portion of this security is out on loan at December 31, 2011.

f Foreign Security

« 7-Day Yield

† Priced at Fair Value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors.

a The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent.

Industry classifications shown in the Schedule of Investments are based on the Global Industry Classification Standard (GICS®). GICS was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.

The accompanying notes are an integral part of these financial statements.

Page 20

Baird MidCap Fund

Summary of Fair Value Exposure at December 31, 2011

The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Management has determined that these standards have no material impact on the Funds’ financial statements.  The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability.  These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:

Level 1 –	Unadjusted quoted prices in active markets for identical unrestricted securities.
Level 2 –	Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.).
Level 3 –	Significant unobservable inputs (including the Fund’s own assumptions about the factors that market participants would use in valuing the security) based on the best information available.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Equity
Common Stocks	$	40,653,864	$	—	$	—	$	40,653,864
Total Equity		40,653,864		—		—		40,653,864
Short-Term Investments
Money Market Mutual Funds		2,695,725		—		—		2,695,725
Total Short-Term Investments		2,695,725		—		—		2,695,725
Investments Purchased with Cash
Proceeds from Securities Lending
Commercial Paper		—		140,178		—		140,178
Money Market Mutual Fund		7,260,199		—		—		7,260,199
Total Investments Purchased with
Cash Proceeds from Securities Lending		7,260,199		140,178		—		7,400,377
Total Investments*	$	50,609,788	$	140,178	$	—	$	50,749,966
Asset Relating to Securities Lending Investments	$	—	$	84,283	$	—	$	84,283

*Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments.

Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy.  There were no significant transfers between Level 1, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.

Page 21

Baird Funds, Inc.

Additional Information on Fund Expenses       December 31, 2011

Example

As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, such as management fees; distribution and/or service (12b-1) fees; and other fund expenses.  Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent.  If you request that a redemption be made by wire transfer, currently the Fund’s transfer agent charges a $15.00 fee.

This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/11 – 12/31/11).

Actual Expenses

The third and fourth columns of the following table provide information about account values based on actual returns and actual expenses.  You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fourth column entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The fifth and sixth columns of the following table provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.  Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs.  Therefore, the sixth column of the table (entitled “Expenses Paid During Period”) is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher.

Page 22

Baird Funds, Inc.

Additional Information on Fund Expenses       December 31, 2011

Actual vs. Hypothetical Returns

For the Six Months Ended December 31, 2011

					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)	7/1/11	12/31/11	Period(1)	12/31/11	Period(1)
Baird LargeCap Fund
Institutional Class	0.75%	$1,000.00	$931.80	$3.65	$1,021.42	$3.82
Investor Class	1.00%	$1,000.00	$930.30	$4.87	$1,020.16	$5.09
Baird MidCap Fund
Institutional Class	0.85%	$1,000.00	$953.10	$4.18	$1,020.92	$4.33
Investor Class	1.10%	$1,000.00	$951.80	$5.41	$1,019.66	$5.60

(1) Expenses are equal to the Fund’s annualized net expense ratio multiplied by the average account value over the period, multiplied by 184 days and divided by 365 to reflect the one-half year period.

Page 23

Baird Funds, Inc.

Statements of Assets and Liabilities       December 31, 2011

	Baird			Baird
	LargeCap Fund			MidCap Fund
ASSETS:
Investments, at value (cost $20,086,587 and $43,232,072, respectively)*	$	24,327,825		$	50,749,966
Support Agreement (Note 6)		59,873			84,283
Dividends receivable		19,816			20,196
Interest receivable		31			176
Receivable for investments sold		105,963			—
Receivable for fund shares sold		13,262			139,627
Uninvested cash		249			503
Prepaid expenses		10,015			10,483
Total assets		24,537,034			51,005,234
LIABILITIES:
Payable for collateral received for securities loaned (Note 6)		3,751,382			7,485,163
Payable for securities purchased		103,493			—
Payable to Advisor and Distributor		1,622			16,503
Accrued expenses and other liabilities		39,351			42,517
Total liabilities		3,895,848			7,544,183
NET ASSETS	$	20,641,186		$	43,461,051
NET ASSETS CONSIST OF:
Capital stock	$	19,776,446		$	35,822,291
Accumulated undistributed net investment income		53			—
Accumulated net realized gain (loss) on investments sold		(3,436,424	)		36,583
Net unrealized appreciation on investments and support agreement		4,301,111			7,602,177
NET ASSETS	$	20,641,186		$	43,461,051
INSTITUTIONAL CLASS SHARES
Net Assets	$	20,485,829		$	40,880,008
Shares outstanding ($0.01 par value, unlimited shares authorized)		2,351,402			4,097,047
Net asset value, offering and redemption price per share	$	8.71		$	9.98
INVESTOR CLASS SHARES
Net Assets	$	155,357		$	2,581,043
Shares outstanding ($0.01 par value, unlimited shares authorized)		17,896			267,314
Net asset value, offering and redemption price per share	$	8.68		$	9.66

*Includes securities out on loan to brokers with a market value of $3,611,399 and $7,212,293, respectively.

The accompanying notes are an integral part of these financial statements.

Page 24

Baird Funds, Inc.

Statements of Operations       Year Ended December 31, 2011

	Baird			Baird
	LargeCap Fund			MidCap Fund
INVESTMENT INCOME:
Dividends (net of foreign taxes or issuance fees
withheld of $1,041 and $1,448, respectively)	$	189,408		$	272,833
Income from securities lending (Note 6)		6,425			12,488
Interest		604			1,888
Other income		—			54
Total investment income		196,437			287,263
EXPENSES:
Investment advisory fees		146,615			286,318
Administration fees		4,059			6,699
Shareholder servicing fees		15,330			18,670
Fund accounting fees		22,165			23,604
Professional fees		29,195			29,195
Federal and state registration		37,272			38,195
Directors fees		43,795			43,795
Custody fees		2,077			6,627
Reports to shareholders		4,147			6,756
Distribution fees – Investor Class Shares (Note 8)		396			3,543
Miscellaneous expenses		780			930
Total expenses		305,831			464,332
Expense reimbursement by Advisor (Note 5)		(136,264	)		(136,295	)
Total expenses		169,567			328,037
NET INVESTMENT INCOME (LOSS)		26,870			(40,774	)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments		1,579,463			3,717,798
Change in unrealized appreciation/depreciation on investments
and support agreement		(2,097,553	)		(1,766,260	)
Net realized and unrealized gain (loss) on investments		(518,090	)		1,951,538
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS	$	(491,220	)	$	1,910,764

The accompanying notes are an integral part of these financial statements.

Page 25

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird LargeCap Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment income	$	26,870		$	27,834
Net realized gain on investments		1,579,463			541,152
Change in unrealized appreciation/depreciation
on investments and support agreement		(2,097,553	)		3,040,877
Net increase (decrease) in net assets from operations		(491,220	)		3,609,863
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		2,788,450			1,834,410
Shares issued to holders in reinvestment of dividends		26,756			19,011
Cost of shares redeemed		(5,196,123	)		(2,992,605	)
Net decrease in net assets resulting
from capital share transactions		(2,380,917	)		(1,139,184	)
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net investment income		(26,841	)		(19,202	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(2,898,978	)		2,451,477
NET ASSETS:
Beginning of year		23,540,164			21,088,687
End of year (including undistributed
net investment income of $53 and $27, respectively)	$	20,641,186		$	23,540,164

The accompanying notes are an integral part of these financial statements.

Page 26

Baird Funds, Inc.

Statements of Changes in Net Assets

	Baird MidCap Fund
	Year Ended			Year Ended
	December 31, 2011			December 31, 2010
OPERATIONS:
Net investment loss	$	(40,774	)	$	(32,176	)
Net realized gain on investments		3,717,798			2,878,157
Change in unrealized appreciation/depreciation
on investments and support agreement		(1,766,260	)		4,470,072
Net increase in net assets from operations		1,910,764			7,316,053
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		11,352,599			4,145,696
Shares issued to holders in reinvestment of dividends		2,310,237			—
Cost of shares redeemed		(4,282,939	)		(4,001,060	)
Net increase in net assets resulting
from capital share transactions		9,379,897			144,636
DISTRIBUTIONS TO
INSTITUTIONAL CLASS SHAREHOLDERS:
From net realized gains		(2,240,606	)		—
DISTRIBUTIONS TO
INVESTOR CLASS SHAREHOLDERS:
From net realized gains		(140,127	)		—
TOTAL INCREASE IN NET ASSETS		8,909,928			7,460,689
NET ASSETS:
Beginning of year		34,551,123			27,090,434
End of year (including undistributed net investment
income of $0 and $0, respectively)	$	43,461,051		$	34,551,123

The accompanying notes are an integral part of these financial statements.

Page 27

Baird Funds, Inc.

Financial Highlights

	Baird LargeCap Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	8.93		$	7.57		$	5.59		$	9.33		$	8.53
Income from investment operations:
Net investment income		0.01			0.01			0.03			0.03			0.02
Net realized and unrealized
gains (losses) on investments		(0.22	)		1.36			1.98			(3.74	)		0.80
Total from investment operations		(0.21	)		1.37			2.01			(3.71	)		0.82
Less distributions:
Distributions from net investment income		(0.01	)		(0.01	)		(0.03	)		(0.03	)		(0.02	)
Net asset value, end of year	$	8.71		$	8.93		$	7.57		$	5.59		$	9.33
Total return		(2.34	%)		18.06	%		36.27	%		(39.88	%)		9.63	%
Supplemental data and ratios:
Net assets, end of year	$	20,485,829		$	23,399,325		$	20,741,302		$	16,349,025		$	27,644,009
Ratio of expenses to average net assets		0.75	%		0.75	%		0.75	%		0.75	%		0.75	%
Ratio of expenses to average
net assets (before waivers)		1.35	%		1.40	%		1.39	%		1.17	%		1.10	%
Ratio of net investment income
to average net assets		0.12	%		0.14	%		0.46	%		0.32	%		0.25	%
Ratio of net investment loss
to average net assets (before waivers)		(0.48	%)		(0.51	%)		(0.18	%)		(0.10	%)		(0.10	%)
Portfolio turnover rate(1)		38.2	%		52.0	%		58.7	%		43.0	%		72.2	%

(1) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 28

Baird Funds, Inc.

Financial Highlights

	Baird LargeCap Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	8.91		$	7.56		$	5.59		$	9.29		$	8.50
Income from investment operations:
Net investment income (loss)		(0.01	)		(0.02	)		0.02			0.00	(1)		0.00	(1)
Net realized and unrealized
gains (losses) on investments		(0.22	)		1.37			1.97			(3.70	)		0.79
Total from investment operations		(0.23	)		1.35			1.99			(3.70	)		0.79
Less distributions:
Distributions from net investment income		—			—			(0.02	)		—			—
Net asset value, end of year	$	8.68		$	8.91		$	7.56		$	5.59		$	9.29
Total return		(2.58	%)		17.86	%		35.79	%		(39.94	%)		9.29	%
Supplemental data and ratios:
Net assets, end of year	$	155,357		$	140,839		$	347,385		$	261,198		$	740,779
Ratio of expenses to average net assets		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%
Ratio of expenses to average
net assets (before waivers)		1.60	%		1.65	%		1.64	%		1.42	%		1.35	%
Ratio of net investment income (loss)
to average net assets		(0.13	%)		(0.11	%)		0.21	%		0.07	%		0.00	%
Ratio of net investment loss
to average net assets (before waivers)		(0.73	%)		(0.76	%)		(0.43	%)		(0.35	%)		(0.35	%)
Portfolio turnover rate(2)		38.2	%		52.0	%		58.7	%		43.0	%		72.2	%

(1) Amount is less than $0.005.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 29

Baird Funds, Inc.

Financial Highlights

	Baird MidCap Fund – Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	10.04		$	7.90		$	5.63		$	9.62		$	9.33
Income from investment operations:
Net investment income (loss)(1)		(0.01	)		(0.01	)		0.02			0.01			(0.01	)
Net realized and unrealized
gains (losses) on investments		0.54			2.15			2.27			(3.99	)		1.99
Total from investment operations		0.53			2.14			2.29			(3.98	)		1.98
Less distributions:
Distributions from net investment income		—			—			(0.02	)		(0.01	)		—
Distributions from net realized gains		(0.59	)		—			—			—			(1.69	)
Total distributions		(0.59	)		—			(0.02	)		(0.01	)		(1.69	)
Net asset value, end of year	$	9.98		$	10.04		$	7.90		$	5.63		$	9.62
Total return		5.19	%		27.09	%		40.90	%		(41.53	%)		20.89	%
Supplemental data and ratios:
Net assets, end of year	$	40,880,008		$	33,432,268		$	25,513,554		$	18,163,034		$	36,616,547
Ratio of expenses to average net assets		0.85	%		0.85	%		0.85	%		0.85	%		0.85	%
Ratio of expenses to average
net assets (before waivers)		1.21	%		1.30	%		1.34	%		1.19	%		1.11	%
Ratio of net investment income (loss)
to average net assets		(0.10	%)		(0.10	%)		0.25	%		0.06	%		(0.06	%)
Ratio of net investment loss
to average net assets (before waivers)		(0.46	%)		(0.55	%)		(0.24	%)		(0.28	%)		(0.32	%)
Portfolio turnover rate(2)		44.8	%		62.7	%		61.3	%		74.0	%		72.3	%

(1) Calculated using average shares outstanding during the year.

(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 30

Baird Funds, Inc.

Financial Highlights

	Baird MidCap Fund – Investor Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Per Share Data:
Net asset value, beginning of year	$	9.76		$	7.69		$	5.49		$	9.40		$	9.17
Income from investment operations:
Net investment income (loss)(1)		(0.03	)		(0.03	)		0.00	(2)		(0.02	)		(0.04	)
Net realized and unrealized
gains (losses) on investments		0.52			2.10			2.21			(3.89	)		1.96
Total from investment operations		0.49			2.07			2.21			(3.91	)		1.92
Less distributions:
Distributions from net investment income		—			—			(0.01	)		—			—
Distributions from net realized gains		(0.59	)		—			—			—			(1.69	)
Total distributions		(0.59	)		—			(0.01	)		—			(1.69	)
Net asset value, end of year	$	9.66		$	9.76		$	7.69		$	5.49		$	9.40
Total return		4.93	%		26.92	%		40.52	%		(41.70	%)		20.61	%
Supplemental data and ratios:
Net assets, end of year	$	2,581,043		$	1,118,855		$	1,576,880		$	1,563,786		$	4,783,844
Ratio of expenses to average net assets		1.10	%		1.10	%		1.10	%		1.10	%		1.10	%
Ratio of expenses to average
net assets (before waivers)		1.46	%		1.55	%		1.59	%		1.44	%		1.36	%
Ratio of net investment income (loss)
to average net assets		(0.35	%)		(0.35	%)		0.00	%		(0.19	%)		(0.31	%)
Ratio of net investment loss
to average net assets (before waivers)		(0.71	%)		(0.80	%)		(0.49	%)		(0.53	%)		(0.57	%)
Portfolio turnover rate(3)		44.8	%		62.7	%		61.3	%		74.0	%		72.3	%

(1) Calculated using average shares outstanding during the year.

(2) Amount is less than $0.005.

(3) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.

The accompanying notes are an integral part of these financial statements.

Page 31

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

1.ORGANIZATION

Baird Funds, Inc. (the “Corporation”) was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).  The accompanying financial statements include the Baird LargeCap Fund and the Baird MidCap Fund (each a “Fund” and collectively the “Funds”), two of the seven series comprising the Corporation.  Pursuant to the 1940 Act, the Funds are “diversified” series of the Corporation.  The investment advisor to the Funds is Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”).

The Baird LargeCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on September 29, 2000. The Baird MidCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on December 29, 2000. The 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 of 0.25%.

The Baird LargeCap Fund seeks long-term growth of capital through investments in equity securities of large-capitalization companies.  Dividend income is a secondary consideration.

The Baird MidCap Fund seeks long-term growth of capital through investments in equity securities of mid-capitalization companies.

On December 31, 2011, shareholders affiliated with the Advisor held 84% of the Institutional Class shares of the Baird LargeCap Fund and 36% of the Institutional Class shares of the Baird MidCap Fund.  These shareholders included the Advisor’s participant-directed retirement and deferred compensation plans and the Baird Foundation.

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 – Section 2(a)(41) of the 1940 Act, together with the rules and interpretations of the SEC, require the Funds, in computing net asset value, to value their portfolio securities using market quotations when they are “readily available.”  When market quotations are not readily available (e.g., because there is no regular market quotation for such securities, the market for such security is limited, the validity of quotations is questionable or, for debt securities, Interactive Data Corporation (IDC), the Funds’ independent pricing service, does not provide a price), the Board of Directors of the Corporation must value the securities at “fair value determined in good faith.”  The Board has delegated such responsibility to the Advisor pursuant to pricing policies and procedures that the Board has adopted and regularly reviews.  In general, the “fair value” of a security means the price that would be received to sell a security in an orderly transaction between market participants at the measurement date.

The Funds determine the fair value of their investments and compute their net asset value per share as of the close of regular trading of the New York Stock Exchange (4:00 p.m. EST).

Page 32

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

2.SIGNIFICANT ACCOUNTING POLICIES (cont.)

Consistent with Section 2(a)(41) of the 1940 Act, the Funds price their securities as follows:  common stocks that are listed on a securities exchange (other than NASDAQ) are valued at the last quoted sale price.  Securities traded on NASDAQ are valued at the NASDAQ Official Closing Price.  Price information on listed stocks is taken from the exchange where the security is primarily traded.  Securities that were not traded on the valuation date, as well as stocks that are not listed on an exchange, including NASDAQ, are valued at the average of the current bid and asked price.  Debt securities are valued at their bid prices by an independent pricing service using valuation methods that are designed to represent fair value, such as matrix pricing and other analytical pricing models, market transactions and dealer quotations.  Debt securities purchased with a remaining maturity of 60 days or less are valued at acquisition cost plus or minus any amortized discount or premium.  Investments in mutual funds are valued at their stated net asset value.  Other assets and securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Advisor in accordance with procedures approved by the Corporation’s Board of Directors.  In accordance with such procedures, the Advisor may use broker quotes or prices obtained from alternative independent pricing services or, if the broker quotes or prices from alternative pricing services are unavailable or deemed to be unreliable, fair value will be determined by a valuation committee of the Advisor.  In determining fair value, the valuation committee takes into account all relevant factors and available information.  Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security.  Fair value pricing involves subjective judgments and there is no single standard for determining a security’s fair value.  As a result, different mutual funds could reasonably arrive at a different fair value for the same security.  It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine.  In addition, given the volatility and periodic illiquidity experienced in recent years, the prices determined for any individual security on any given day may vary significantly from the amount that can be obtained in an actual sale of that security, and the Funds’ NAV may fluctuate significantly from day to day or from period to period.

In May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and the International Financial Reporting Standards (“IFRS”)” (ASU 2011-04). ASU 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact these amendments may have on the Fund’s financial statements.

b)Foreign Securities – Foreign securities are defined as securities issued by companies that are organized outside the United States.  Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government.  These risks include foreign currency fluctuations and adverse political and economic developments.  Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government.  Occasionally, events that affect those values and exchange rates may occur after the close of the exchange on which such securities are traded.  If such events materially affect the value of a Fund’s securities, these securities may be valued at their fair value pursuant to procedures adopted

Page 33

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

2.SIGNIFICANT ACCOUNTING POLICIES (cont.)

by the Board of Directors.  All of the foreign securities owned by the Funds as of December 31, 2011 are traded directly on the New York Stock Exchange or NASDAQ or through an American Depository Receipt (ADR).

c)Income Tax Status – The Funds intend to continue to qualify as regulated investment companies as provided in subchapter M of the Internal Revenue Code 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.

There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2011, or for any other tax years which are open for exam. As of December 31, 2011, open tax years include the tax years ended December 31, 2008 through 2011. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense and other expense, respectively, in the Statement of Operations. During the year, the Funds did not incur any interest or penalties.

d)Distributions to Shareholders – Distributions from net investment income, if any, are declared and paid annually.  Distributions of net realized gains, if any, are declared and paid at least annually.  The book basis character of distributions may differ from their ultimate characterization for Federal income tax purposes.

e)Allocation of Income and Expenses – Each Fund is charged for those expenses directly attributable to it.  Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares.  Income, expenses, and realized and unrealized gains and losses are allocated to the classes based on their respective net assets.  Expenses that are not directly attributable to a Fund are allocated among the series of the Corporation in proportion to their assets.

f)Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

g) Securities Transactions and Investment Income – Investment and shareholder transactions are recorded on the trade date.  The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds.  Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis.  Accounting principles generally accepted in the United States require that permanent financial reporting and tax differences be reclassified in the capital accounts.

h) Guarantees and Indemnifications – In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses.  The Funds’ maximum exposure under these arrangements is unknown and this would involve future claims against the Funds that have not yet occurred.  Based on experience, the Funds would expect the risk of loss to be remote.

Page 34

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS

The following table summarizes the capital share transactions of each Fund for the past two fiscal years:

BAIRD LARGECAP FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		310,586		$	2,768,012		Shares sold		2,275		$	20,438
Shares issued to
shareholders in
reinvestment of dividends		3,047			26,756
Shares redeemed		(581,336	)		(5,194,653	)	Shares redeemed		(180	)		(1,470	)
Net decrease		(267,703	)	$	(2,399,885	)	Net increase		2,095		$	18,968
Shares Outstanding:							Shares Outstanding:
Beginning of year		2,619,105					Beginning of year		15,801
End of year		2,351,402					End of year		17,896
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		231,994		$	1,795,760		Shares sold		5,115		$	38,650
Shares issued to
shareholders in
reinvestment of dividends		2,124			19,011
Shares redeemed		(355,005	)		(2,730,847	)	Shares redeemed		(35,252	)		(261,758	)
Net decrease		(120,887	)	$	(916,076	)	Net decrease		(30,137	)	$	(223,108	)
Shares Outstanding:							Shares Outstanding:
Beginning of year		2,739,992					Beginning of year		45,938
End of year		2,619,105					End of year		15,801

Page 35

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

3.CAPITAL SHARE TRANSACTIONS (cont.)

BAIRD MIDCAP FUND
	Year Ended							Year Ended
	December 31, 2011							December 31, 2011
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		918,529		$	9,487,425		Shares sold		187,694		$	1,865,174
Shares issued to							Shares issued to
shareholders in							shareholders in
reinvestment of dividends		214,890			2,170,393		reinvestment of dividends		14,314			139,844
Shares redeemed		(364,653	)		(3,784,255	)	Shares redeemed		(49,311	)		(498,684	)
Net increase		768,766		$	7,873,563		Net increase		152,697		$	1,506,334
Shares Outstanding:							Shares Outstanding:
Beginning of year		3,328,281					Beginning of year		114,617
End of year		4,097,047					End of year		267,314
	Year Ended							Year Ended
	December 31, 2010							December 31, 2010
Institutional Class Shares	Shares			Amount			Investor Class Shares	Shares			Amount
Shares sold		455,890		$	3,935,728		Shares sold		24,937		$	209,968
Shares redeemed		(358,437	)		(3,077,251	)	Shares redeemed		(115,309	)		(923,809	)
Net increase		97,453		$	858,477		Net decrease		(90,372	)	$	(713,841	)
Shares Outstanding:							Shares Outstanding:
Beginning of year		3,230,828					Beginning of year		204,989
End of year		3,328,281					End of year		114,617

Page 36

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION

During the year ended December 31, 2011, purchases and sales of investment securities (excluding short-term investments) were as follows:

	Baird		Baird
	LargeCap Fund		MidCap Fund
Purchases:	$	8,521,303	$	21,761,518
Sales:	$	10,301,876	$	16,629,744

The Baird LargeCap Fund and Baird MidCap Fund did not purchase or sell U.S. Government securities during the year ended December 31, 2011.

At December 31, 2011, accumulated earnings/losses on a tax basis were as follows:

	Baird			Baird
	LargeCap			MidCap
	Fund			Fund
Cost of Investments	$	20,098,494		$	43,364,740
Gross unrealized appreciation	$	5,071,705		$	9,447,340
Gross unrealized depreciation		(782,501	)		(1,977,831	)
Net unrealized appreciation	$	4,289,204		$	7,469,509
Undistributed ordinary income	$	53		$	—
Undistributed long-term capital gain		—			169,251
Total distributable earnings	$	53		$	169,251
Other accumulated losses	$	(3,424,517	)	$	—
Total accumulated earnings	$	864,740		$	7,638,760

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.  The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales.

Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting.  These reclassifications have no effect on net assets or net asset value per share.  For the year ended December 31, 2011, the following table shows the reclassification made:

	Undistributed				Accumulated
	Net Investment				Net Realized
	Income/(Loss)				Gain/(Loss)			Paid In Capital
Baird LargeCap Fund		$	(3	)		$	3		$	—
Baird MidCap Fund			40,774				—			(40,774	)

Page 37

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)

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, 2011, the Baird LargeCap Fund and Baird MidCap Fund did not defer any capital losses occurring between November 1, 2011 and December 31, 2011.

At December 31, 2011, accumulated net realized capital loss carryovers, if any, and the year(s) in which the capital loss carryovers expire were:

	Capital Loss Carryover			Year of Expiration
Baird LargeCap Fund		$	407,235		2016
			3,017,282		2017

To the extent the Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryovers.  During the year ended December 31, 2011, the Baird LargeCap Fund and the Baird MidCap Fund utilized capital loss carryovers of $1,538,929 and $1,264,942, respectively.

RIC Modernization Act

On December 22, 2010, the Regulated Investment Modernization Act of 2010 (the “RIC Act”) was enacted, and the provisions within the RIC Act are effective for the Funds for the year ended December 31, 2011.  The RIC Act modernized several of the federal income and excise tax provisions related to regulated investments companies (“RICs”).  Under the RIC Act, new capital losses may be carried forward indefinitely with the character of the original loss retained.  Prior to the RIC Act, capital losses could be carried forward for eight years, and were carried forward as short-term capital losses regardless of the character of the original loss.  The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests.  The RIC Act exempts RICs from the preferential dividend rule and repeals the 60-day designation requirement for certain types of pay-through income and gains.  In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a RIC during the portion of its taxable year ending after October 31 or December 31.

During the year ended December 31, 2011, the Funds paid the following dividends:

	Ordinary Income Dividends			Net Capital Gain
Baird LargeCap Fund		$	26,841		$	—
Baird MidCap Fund			—			2,380,733

During the year ended December 31, 2010, the Funds paid the following dividends:

	Ordinary Income Dividends
Baird LargeCap Fund		$	19,202
Baird MidCap Fund			—

Page 38

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

5.INVESTMENT ADVISORY AND OTHER AGREEMENTS

The Funds have entered into an Investment Advisory Agreement with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.65% for the Baird LargeCap Fund and 0.75% for the Baird MidCap Fund as applied to the respective Fund’s average daily net assets.  Certain officers of the Advisor are also officers of the Funds.

For the year ended December 31, 2011 and through April 30, 2013, the Advisor has contractually agreed to waive its investment advisory fee and/or reimburse the Funds’ operating expenses (exclusive of brokerage, taxes, and extraordinary expenses) to the extent necessary to ensure that each Fund’s annual operating expenses do not exceed the following percentages of average daily net assets:

	Institutional Class Shares	Investor Class Shares
Baird LargeCap Fund	0.75%	1.00%
Baird MidCap Fund	0.85%	1.10%

To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which expenses were reimbursed or absorbed.  A Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed.

	Fiscal Year Ended December 31,
	2011	2010	2009
Reimbursed / Absorbed Expenses Subject
to Recovery by Advisor Until:	2014	2013	2012
Baird LargeCap Fund	$136,264	$136,939	$118,040
Baird MidCap Fund	$136,295	$133,302	$110,382

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 and Baird MidCap Fund for the year ended December 31, 2011.

6.SECURITIES LENDING

Each Fund may lend up to one-third of its total assets (including such loans) to borrowers under terms of participation in a securities lending program administered by U.S. Bank N.A., the Funds’ custodian and an affiliate of the Funds’ transfer agent and administrator.  The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the market value of any loaned securities at the time of the loan, plus accrued interest.

Page 39

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

6.SECURITIES LENDING (cont.)

The Funds receive compensation in the form of fees and earn interest on the cash collateral.  The amount of fees depends on a number of factors including the type of security and length of the loan.  Each Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period.  Each Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand.

As of December 31, 2011, the Baird LargeCap and Baird MidCap Funds had loaned securities that were collateralized by cash equivalents.  The cash collateral is invested by the custodian in accordance with approved investment guidelines.  Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending.  A Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Funds are indemnified from this risk by contract with the securities lending agent.

As of December 31, 2011, the market value of the securities on loan and payable on collateral due to broker were as follows:

	Market Value of	Payable on Collateral
	Securities on Loan	due to Broker
Baird LargeCap Fund	$3,611,399	$3,751,382
Baird MidCap Fund	$7,212,293	$7,485,163

The Funds receive cash as collateral in return for securities lent as part of the securities lending program.  The collateral is invested in the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act), other than a legacy interest in Atlantic East Funding LLC.  The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2011.

The Funds’ interest in Atlantic East Funding LLC is priced at fair value by the Valuation Committee of the Advisor. The fair value of the Funds’ interest in Atlantic East Funding LLC is based on the underlying market values of the securities owned by Atlantic East Funding LLC, which are determined by independent pricing sources.  In addition, the Funds’ transfer agent and administrator and securities lending agent entered into a support agreement with the Funds to cover potential losses realized by the Funds on their investment in Atlantic East Funding LLC (up to a certain amount). The amounts agreed to be provided to the Funds under the support agreement are shown in the Funds’ schedules of investments and statements of assets and liabilities.  At December 31, 2011, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 100% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.

The interest income earned by the Funds on investments of cash collateral received from borrowers for the securities loaned to them (“securities lending income”) is reflected in the Funds’ statements of operations.  Interest income earned on collateral investments and recognized by the Funds during the year ended December 31, 2011 for the Baird LargeCap Fund and Baird MidCap Fund was $6,425 and $12,488, respectively.

Page 40

Baird Funds, Inc.

Notes to the Financial Statements       December 31, 2011

7.LINE OF CREDIT

The Corporation maintains an uncommitted, senior secured line of credit (“LOC”) with U.S. Bank, N.A. (the “Bank”) to provide the Funds a temporary liquidity source to meet unanticipated redemptions.  Under the terms of the LOC, borrowings for each Fund are limited to one-third of the total assets (including the amount borrowed) of the respective Fund, or as otherwise indicated within the Funds’ agreement with the Bank.  The Bank charges interest at the Bank’s Prime Rate less 1% (weighted average rate of 2.25% during 2011).  For the year ended December 31, 2011, the Baird LargeCap Fund and the Baird MidCap Fund did not borrow on the LOC.

8.DISTRIBUTION AND SHAREHOLDER SERVICE PLAN

The Funds have adopted a distribution and shareholder service plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act.  The Plan allows the Funds to compensate the Distributor for the costs incurred in distributing the Funds’ Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate of 0.25% of the average daily net assets of the Funds’ Investor Class Shares.  The Baird LargeCap Fund and Baird MidCap Fund incurred $396 and $3,543, respectively, in fees pursuant to the Plan during the year ended December 31, 2011.

9.SUBSEQUENT EVENT

In preparing these financial statements, the Corporation has evaluated subsequent events after December 31, 2011.  There were no subsequent events since December 31, 2011 that would require adjustment to or additional disclosure in these financial statements.

Page 41

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Baird Funds, Inc.

We have audited the accompanying statements of assets and liabilities of Baird LargeCap Fund and Baird MidCap Fund (two of the seven funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended.  These financial statements and financial highlights are the responsibility of the Funds’ management.  Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.  The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian and brokers.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the aforementioned Funds of Baird Funds, Inc. as of December 31, 2011, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Chicago, Illinois

February 28, 2012

Page 42

Baird Funds, Inc.

Directors & Officers as of December 31, 2011

				Number of
				Portfolios	Other
	Positions	Term of Office	Principal	in Complex	Directorships
	Held with	and Length of	Occupation(s)	Overseen	Held
Name, Address and Age	the Funds	Time Served	During Past 5 Years	by Director	by Director
G. Frederick Kasten, Jr.	Independent	Indefinite;	Retired; Chairman, the Advisor (January 2000-December	7	Director of Regal-Beloit
c/o Robert W. Baird	Director and	Since September	2005); Chairman and CEO, the Advisor (January 1998-		Corporation, a
& Co. Incorporated	Chairman	2000	January 2000); President, Chairman and CEO,  the		manufacturing
777 East Wisconsin Avenue			Advisor (June 1983-January 1998); President, the Advisor		company
Milwaukee, WI  53202			(January 1979-January 1983)
Age:  72
John W. Feldt	Independent	Indefinite;	Retired; Senior Vice President-Finance, University of	7	Director of Thompson
c/o University of	Director	Since September	Wisconsin Foundation (1985-2006); Vice President-		Plumb Funds, Inc., a
Wisconsin Foundation		2000	Finance, University of Wisconsin Foundation (1980-1985);		mutual fund complex
1848 University Avenue			Associate Director, University of Wisconsin Foundation		(3 portfolios)
Madison, WI  53726			(1967-1980)
Age:  69
Frederick P. Stratton, Jr.	Independent	Indefinite;	Retired; Chairman Emeritus, Briggs & Stratton	7	Director of Weyco
10134 N. Port Washington	Director	Since May	Corporation, a manufacturing company, since 2003;		Group, Inc., a men’s
Road, #2B		2004	Chairman of the Board, Briggs & Stratton Corporation		footwear distributor;
Mequon, WI  53092			(2001-2002); Chairman and CEO, Briggs & Stratton		Director of Wisconsin
Age:  72			Corporation (1986-2001)		Energy Corporation
					and its subsidiaries,
					Wisconsin Electric
					Power Company and
					Wisconsin Gas LLC
Marlyn J. Spear, CFA	Independent	Indefinite;	Chief Investment Officer, Building Trades United	7	Management Trustee of
c/o Robert W. Baird	Director	Since January	Pension Trust Fund, since July 1989; Investment Officer,		AFL-CIO Housing
& Co. Incorporated		2008	Northwestern Mutual Financial Network (1988-1989);		Investment Trust, a
777 East Wisconsin Avenue			Assistant Vice-President, Firstar Trust Company		mutual fund complex
Milwaukee, WI  53202			(1978-1987); Financial Analyst, Harco Holdings, Inc.		(1 portfolio)
Age:  58			(1976-1978)
Cory L. Nettles*	Interested	Indefinite;	Managing Director, Generation Growth Capital, Inc.,	7	Director of Weyco
Generation Growth Capital, Inc.	Director	Since January	a private equity fund, since March 2007; Of Counsel,		Group, Inc., a men’s
411 East Wisconsin Avenue,		2008	Quarles & Brady LLP, a law firm, since January 2005;		footwear distributor
Suite 1710			Secretary, Wisconsin Department of Commerce
Milwaukee, WI  53202			(January 2003 – January 2005)
Age:  41

* Mr. Nettles is considered an “interested person” of the Corporation (as defined in the 1940 Act) because of his association with the law firm, Quarles & Brady LLP, which provides legal services to the Advisor.  The legal services that Quarles & Brady LLP has provided to the Advisor include litigation, real estate, trademark and miscellaneous securities related matters that did not relate to the Corporation or the Funds.  Mr. Nettles also serves as a senior advisor to Baird Private Equity, a division of the Advisor.

Additional information about the Funds’ directors is available in the Statement of Additional Information which may be obtained without charge, upon request, by calling 1-866-44BAIRD, or at www.bairdfunds.com.

Page 43

Baird Funds, Inc.

Directors & Officers as of December 31, 2011

	Position(s)	Term of Office	Principal
	Held with	and Length of	Occupation(s)
Name, Address, and Age	the Funds	Time Served	During Past 5 Years
Mary Ellen Stanek	President	Re-elected by	Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of
777 East Wisconsin Avenue		Board annually;	the Advisor, since March 2000
Milwaukee, WI  53202		Since
Age: 55		September 2000
Charles B. Groeschell	Vice President	Re-elected by	Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of
777 East Wisconsin Avenue		Board annually;	the Advisor, since February 2000
Milwaukee, WI  53202		Since
Age: 58		January 2010
Todd S. Nichol	Vice President	Re-elected by	Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the
777 East Wisconsin Avenue	and Chief	Board annually;	the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice
Milwaukee, WI  53202	Compliance	Since	President, the Advisor (January 2004-January 2005)
Age: 49	Officer	August 2004
Heidi Schneider	Vice President	Re-elected by	Senior Vice President, the Advisor since September 2007; Controller, the Advisor (April 1997-
777 East Wisconsin Avenue		Board annually;	September 2007)
Milwaukee, WI  53202		Since
Age: 40		August 2010
Dominick P. Zarcone	Treasurer	Re-elected by	Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment
777 East Wisconsin Avenue		Board annually;	Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor
Milwaukee, WI  53202		Since	since February 1995
Age: 53		March 2011
Charles M. Weber	Secretary	Re-elected by	Managing Director, the Advisor since January 2009; Senior Vice President, the Advisor
777 East Wisconsin Avenue		Board annually;	(July 2005-December 2008); Associate General Counsel, the Advisor since July 2005; Partner,
Milwaukee, WI 53202		Since	Quarles & Brady LLP, a law firm (October 1998-June 2005)
Age: 48		September 2005
Dustin J. Hutter	Assistant	Re-elected by	Senior Vice President, the Advisor since January 2011; First Vice President, the Advisor (January
777 East Wisconsin Avenue	Treasurer	Board annually;	2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant
Milwaukee, WI 53202		Since	Controller, the Advisor since January 2006
Age: 35		February 2011
John McVoy	AML	Re-elected by	AML Compliance Officer and Privacy Officer, the Advisor since June 2010; AML Compliance
777 East Wisconsin Avenue	Compliance	Board annually;	Officer - Trust & Securities, U.S. Bancorp (August 2008-May 2010); Law Clerk, First American
Milwaukee, WI 53202	Officer	Since	Fund Advisors (May 2007-September 2007)
Age: 27		August 2010
Andrew D. Ketter	Assistant	Re-elected by	First Vice President and Associate General Counsel, the Advisor since September 2010; Associate,
777 East Wisconsin Avenue	Secretary	Board annually;	Quarles & Brady LLP, a law firm (September 2002-August 2010)
Milwaukee, WI 53202		Since
Age: 37		February 2011

Page 44

Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS

The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 16, 2011 to consider the annual renewal of the investment advisory agreement with Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) for management of the Baird LargeCap and MidCap Funds (the “Funds”), which are mutual fund series or portfolios of the Corporation.  The Board reviewed and discussed various information that had been provided prior to the meeting, including the investment advisory agreement, memoranda provided by outside legal counsel and the Secretary of the Funds discussing the Board’s fiduciary obligations and factors the Board should assess in considering the renewal of the investment advisory agreement, information in response to requests from the Board, including the directors who are not “interested persons” of the Company or the Advisor within the meaning of the Investment Company Act of 1940 (the “1940 Act”) (“Independent Directors”), from the Advisor (including the Advisor’s Form ADV, Form BD and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2011, management fees and expense ratios, and other pertinent information.  The Board also discussed relevant case law, including the Supreme Court’s decision in Jones v. Harris Associates, L.P.

The Independent Directors met separately in executive session with Fund legal counsel to consider the investment advisory agreement.  The Board discussed the Advisor’s 15(c) response with the President of the Funds.  The Board also reviewed a summary of the Advisor’s risk management tools and process.  The Board also received information periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information.  Based on its evaluation of this information, the Board, including a majority of the Independent Directors, approved the continuation of the investment advisory agreement for an additional one-year period.

In considering the investment advisory agreement and reaching its conclusions, the Board reviewed and analyzed various factors that it determined were relevant, including the factors below.

Nature, Extent and Quality of Services Provided to the Funds

The Board analyzed the nature, extent and quality of the services provided by the Advisor to the Funds.  The Board reviewed and considered the Advisor’s significant role in establishing the Funds and the construction of their investment objectives, principal strategies, investment limitations and fee structures.  The Board noted the Advisor’s overall reputation and positive name recognition, the depth of the Advisor’s personnel, resources and commitment to the Funds, and the experience, credentials and continuity of the portfolio management teams employed to manage the Funds’ investments.  The Board further noted that the Advisor has approximately $16 billion of assets under discretionary management and has strong relationships with numerous institutional accounts.  The Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients.  However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements.

The Board considered the Advisor’s disciplined investment decision-making process used for the Funds.  The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio

Page 45

Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS (cont.)

transactions, ensuring adherence to the Funds’ investment policies and restrictions, compliance, risk management services, valuation, providing support services to the Board and the Audit Committee of the Board and overseeing the Funds’ other service providers.  The Board further noted that the Advisor, in its capacity as a registered broker-dealer, also serves as distributor and principal underwriter of shares of the Funds and spends time and effort marketing the Funds.  The Board also considered the strength of the Advisor’s compliance department, including the Funds’ chief compliance officer, and the fact that the Advisor has not experienced any significant legal, compliance or regulatory difficulties since the Funds were launched.  The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the respective investment advisory agreement.

Investment Performance of the Advisor and the Funds

In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2011 regarding the Funds’ performance in comparison to various benchmark indices and their peer groups as determined by Lipper.  The Board noted that the Baird LargeCap Fund (both Institutional and Investor Class shares) had outperformed the Lipper peer group average and its benchmark for the since inception period, but lagged the average and index for certain other  periods.  The Board also considered the effect of the challenging market environment and Advisor’s quarterly commentary and discussion of the reasons for the LargeCap Fund’s underperformance during such periods.  The Board noted that the performance of the Baird Midcap Fund had exceeded its benchmark and Lipper peer group average for the three-year, five-year, ten-year and since inception periods.

The Board also considered the Advisor’s quarterly portfolio commentaries and reviews explaining the Funds’ performance, the Advisor’s consistent and disciplined investment decision process and the investment strategies it employs for the Funds.  After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, each Fund and its shareholders were likely to benefit from the continued management by the Advisor.

Costs of Services Provided and Profits Realized by the Advisor

The Board examined the fee and expense information for each of the Funds, including a comparison of such information to other similarly situated mutual funds as determined by Lipper.  The Board noted that each Fund’s advisory fee was comparable to the average and median for all mutual funds in its Lipper category.  The Board also reviewed and considered management fees charged by the Advisor to other investment advisory clients and found that the investment management fee paid by the Funds was 10 basis points (or 0.10%) less than what the Advisor charges on the first $5 million of a separately managed account.  The Board recognized the extent of the significant additional services provided to each Fund that the Advisor did not provide to its other clients, such as certain administrative services, oversight of the Fund’s other service providers, director support, risk management, regulatory compliance and various other services.

The Board also examined the total expense ratio of each Fund relative to all other mutual funds in its Lipper category.  The Board noted that each Fund’s total expense ratio (both for its Institutional and Investor Class shares), after fee waivers and expense reimbursements by the Advisor, was not only lower than the average and median expense ratios for all funds in its Lipper category, but in the lowest or second lowest quartile.

Page 46

Baird Funds, Inc.

DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS (cont.)

The Board considered the fees realized, and the costs incurred, by the Advisor in providing investment management services to the Funds and the profitability to the Advisor of having a relationship with the Funds.  The Board noted that the Advisor had waived significant fees and/or reimbursed expenses for the Funds since their respective inception dates.

The Board concluded that the profits realized by the Advisor from its relationship with the Funds were appropriate.  The Board noted that the Advisor’s profitability information does not reflect certain internal resources provided by the Advisor to the Funds, such as legal and compliance support.  The Board reviewed and considered the general financial condition of the Advisor and determined it to be sound.  The Board also reviewed a report regarding revenue sharing payments, noting that any payments by the Advisor to third party platforms were made from the Advisor’s profits.  In light of all of the information that it received and considered, the Board concluded that the management fee and total expense ratio of each Fund were reasonable.

Economies of Scale and Fee Levels Reflecting Those Economies

The Board noted that the Funds’ advisory fee structure does not contain any breakpoint reductions as the Funds grow in size.  However, the Board recognized that the advisory fee rates paid by the Funds were designed to be lower than the fees otherwise charged by the Advisor to its separately managed account clients and to be comparable to the second or third breakpoint advisory fee levels paid by other comparable mutual funds.

The Board recognized that the Advisor has been waiving fees and/or reimbursing expenses for the Funds since their inception.

The directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future depending on Fund asset levels.

Benefits Derived from the Relationship with the Funds

The Board noted that the Advisor derives ancillary benefits from its association with the Funds, in the form of research products and services received from unaffiliated broker-dealers who execute portfolio trades for the Funds.  However, the Board determined such products and services have been used for legitimate purposes relating to the Funds by providing assistance in the investment decision-making process.  The Board believed that the Funds generally benefit from their association with the Advisor and the use of the “Baird” name.  The Board concluded that the other benefits realized by the Advisor from its relationship with the Funds were appropriate.

Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the investment advisory agreement, the directors, including all of the Independent Directors, concluded that the continuation of the investment advisory agreement was in the best interest of each Fund and its shareholders.

Page 47

Additional Information

Proxy Voting

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.

Each Fund’s proxy voting record for the most recent 12-month period ended June 30 is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.

Portfolio Holdings Disclosure

The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.  Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330.  The Funds’ Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.

Qualified Dividend Income/Dividends Received Deduction

For the fiscal year ended December 31, 2011, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003.  The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:

Baird LargeCap Fund100%

For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2011 was as follows:

Baird LargeCap Fund100%

Other Tax Information

The Funds had no taxable ordinary income distributions that were designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) during the year ended December 31, 2011.

Page 48

BAIRD FUNDS, INC.

PRIVACY POLICY

Protecting the privacy of Fund shareholders is important to us.  The following is a description of the practices and policies through which Baird Funds, Inc. protects the privacy and security of your non-public personal information.

What Information We Collect

We collect and maintain information about you so that we can open and maintain your account in the Funds and provide various services to you.  We may collect and maintain the following personal information about you:

• Information we receive from you or your financial advisor on account applications or other forms, correspondence, or conversations, such as your name, address, e-mail address, phone number, social security number, assets, income and date of birth; and

• Information about your transactions with us, our affiliates, or others, such as your account number and balance, positions, activity, history, cost basis information, and other financial information.

What Information We Disclose

We do not sell any non-public personal information about our current or former shareholders to third parties.  We do not disclose any non-public personal information about our current or former shareholders to anyone, except as permitted or required by law.  We are permitted by law to share any of the information we collect, as described above, with our affiliates.  In addition, we may share such information with nonaffiliated third parties to the extent necessary to effect, process, administer or enforce a transaction that the shareholder requests or authorizes, in connection with maintaining or servicing the shareholder’s account, as requested by regulatory authorities or as otherwise permitted or required by law.  For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions.  We may also provide your name and address to third party service providers who send account statements and other Fund-related material to you.

How We Protect Your Information

We restrict access to your non-public personal information to those persons who require such information to provide products or services to you.  We maintain physical, electronic, and procedural safeguards that comply with federal standards to protect the confidentiality, integrity and security of your non-public personal information.

We will continue to adhere to the privacy policies and practices in this notice even after your account is closed or becomes inactive.

In the event that you hold shares of the Fund(s) through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with nonaffiliated third parties.

Page A-1

Baird Funds, Inc.

c/o U.S. Bancorp Fund Services, LLC

P.O. Box 701

Milwaukee, WI 53201-0701

1-866-44BAIRD

Board of Directors

G. Frederick Kasten, Jr. (Chairman)

John W. Feldt

Cory L. Nettles

Marlyn J. Spear

Frederick P. Stratton, Jr.

Investment Advisor and Distributor

Robert W. Baird & Co. Incorporated

777 East Wisconsin Avenue

Milwaukee, WI 53202

Administrator and Transfer Agent

U.S. Bancorp Fund Services, LLC

P.O. Box 701

615 East Michigan Street

Milwaukee, WI 53202

Custodian

U.S. Bank, N.A.

1555 N. RiverCenter Drive, Suite 302

Milwaukee, WI 53212

Legal Counsel

Godfrey & Kahn, S.C.

780 North Water Street

Milwaukee, WI 53202

Independent Registered Public Accounting Firm

Grant Thornton LLP

175 West Jackson Boulevard, 10th Floor

Chicago, IL 60604

Item 2. Code of Ethics.

As of the end of the period covered by this report, the Registrant has adopted a code of ethics that applies to the President, Treasurer and Assistant Treasurer of the Registrant.  The Registrant has not made any amendments to its code of ethics during the period covered by this report.  The Registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.

Item 3. Audit Committee Financial Expert.

The Registrant’s board of directors has determined that John W. Feldt, Frederick P. Stratton,  Jr., and Marlyn J. Spear, members of the audit committee, each qualify as an “audit committee financial expert” as such term is defined in paragraph (b) of Item 3 of Form N-CSR.  Mr. Feldt, Mr. Stratton, and Ms. Spear are each “independent” as such term is defined in paragraph (a)(2) of Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

Fees Billed by Grant Thornton LLP.  The aggregate fees billed for professional services by Grant Thornton LLP (“GT”) during the last two fiscal years were as follows:

	FYE  12/31/2011	FYE  12/31/2010
Audit Fees	$99,960	$97,733
Audit-Related Fees	-	-
Tax Fees	$24,752	$24,024
All Other Fees	-	-

In the above table, “audit fees” are fees billed for professional services for the audit of the Registrant’s annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.  “Tax fees” are fees billed for professional services rendered for tax compliance, tax advice and tax planning, and specifically relate to GT’s review of the Registrant’s federal and state tax returns.

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services rendered to the Registrant, as well as all non-audit services provided to the Registrant’s investment adviser and any entity affiliated with the Registrant’s investment adviser with respect to any engagement that relates directly to the operations and financial reporting of the Registrant.  In accordance with its policies and procedures, the audit committee pre-approved all audit and tax services provided by GT to the Registrant during fiscal 2011.  During the past two fiscal years, the Registrant did not receive any non-audit services from GT pursuant to any waivers of the pre-approval requirement under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.  All of GT’s hours spent on auditing the Registrant’s financial statements were attributed to work performed by full-time permanent employees of GT.

During the last two fiscal years, GT has served as the auditor to Robert W. Baird & Co. Incorporated (“RWB”), the Registrant’s investment adviser, and has rendered non-audit services to RWB. The non-audit services that GT provided to RWB in 2011 and 2010 consisted of a review of state and federal tax returns, tax and general consulting services and tax services for RWB associates working overseas. GT charged the following amounts for such non-audit services to RWB: $414,497 for 2011 and $530,703 for 2010. None of the non-audit services provided by GT to RWB directly related to the operations or financial reporting of the Registrant. During the last two fiscal years, GT has also provided audit and non-audit services to affiliates of RWB, but those affiliates do not provide ongoing services to the Registrant. Those services include audits of the financial statements of RWB affiliates, investment partnerships (and their management companies) affiliated with RWB and the portfolio companies owned by such partnerships, reviews of tax returns of RWB affiliates and investment partnerships (and their management companies) affiliated with RWB, and advice and consulting services for RWB affiliates. The Audit Committee has concluded that the provision of these audit and non-audit services to RWB and RWB affiliates is compatible with GT’s independence.

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.

The Schedules of Investments are included as part of the reports to shareholders filed under Item 1 of this Form N-CSR.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable because the Registrant is not a closed-end management investment company.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable because the Registrant is not a closed-end management investment company.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable because the Registrant is not a closed-end management investment company.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors.

Item 11. Controls and Procedures.

(a)   The Registrant’s management, with the participation of its principal executive and principal financial officers, has evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)), as of a date within 90 days prior to the filing date of this Form N-CSR.  Based on such evaluation, the Registrant's principal executive and principal financial officers have concluded that the design and operation of the Registrant's disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed on Form N-CSR is recorded, processed, summarized and reported within the applicable time periods.

(b)   There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 12. Exhibits.

(a)   (1) Code of ethics.  

Incorporated by reference to the Registrant’s Form N-CSR filed on March 9, 2004.

(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  Filed herewith.

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons.  Not applicable because the Registrant is not a closed-end management investment company.

(b)  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BAIRD FUNDS, INC.

By:          /s/Mary Ellen Stanek

Mary Ellen Stanek, President

Date:       March 7, 2012

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:       March 7, 2012

By:          /s/Dominick Zarcone

Dominick Zarcone, Treasurer

Date:       March 7, 2012

EX-99.CERT

CERTIFICATIONS

I, Mary Ellen Stanek, certify that:

1.   I have reviewed this report on Form N-CSR of Baird Funds, Inc.;

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(s) 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(s) 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:    March 7, 2012 /s/Mary Ellen Stanek Mary Ellen Stanek, President

CERTIFICATIONS

I, Dominick Zarcone, certify that:

1.   I have reviewed this report on Form N-CSR of Baird Funds, Inc.;

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(s) 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(s) 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:    March 7, 2012 /s/Dominick Zarcone Dominick Zarcone, Treasurer

EX-99.906 CERT

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. does hereby certify, to such officer’s knowledge, that the report on Form N-CSR of Baird Funds, Inc. for the period ended December 31, 2011 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 Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Baird Funds, Inc. for the stated period.

/s/Mary Ellen Stanek Mary Ellen Stanek President, Baird Funds, Inc.	/s/Dominick Zarcone Dominick Zarcone Treasurer, Baird Funds, Inc.
Dated:    March 7, 2012

This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Baird Funds, Inc. for purposes of the Securities Exchange Act of 1934.