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 811-5344

William Blair Funds

(Exact name of registrant as specified in charter)

222 West Adams Street, Chicago, IL	60606
(Address of principal executive offices)	(Zip Code)

Michelle R. Seitz

William Blair Funds

222 West Adams Street, Chicago, IL 60606

(Name and address of agent for service)

Registrant’s telephone number, including area code: 312-236-1600

Date of fiscal year end: December 31

Date of reporting period: June 30, 2010

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A Registrant is not required to respond to the collection of information contained in Form N-CSR unless the form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimates and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. (ss) 3507.

Item 1. June 30, 2010 Annual Reports transmitted to shareholders.

SEMI-ANNUAL REPORT

JUNE 30, 2010

Table of Contents

Growth Fund
An Overview from the Portfolio Managers	4
Portfolio of Investments	8
Large Cap Growth Fund
An Overview from the Portfolio Managers	9
Portfolio of Investments	13
Small Cap Growth Fund
An Overview from the Portfolio Managers	14
Portfolio of Investments	17
Mid Cap Growth Fund
An Overview from the Portfolio Managers	20
Portfolio of Investments	23
Small-Mid Cap Growth Fund
An Overview from the Portfolio Managers	24
Portfolio of Investments	27
Global Markets Overview	28
Global Growth Fund
An Overview from the Portfolio Managers	30
Portfolio of Investments	32
International Growth Fund
An Overview from the Portfolio Manager	35
Portfolio of Investments	37
International Equity Fund
An Overview from the Portfolio Managers	42
Portfolio of Investments	44
International Small Cap Growth Fund
An Overview from the Portfolio Manager	47
Portfolio of Investments	49
Emerging Markets Growth Fund
An Overview from the Portfolio Managers	52
Portfolio of Investments	54
Emerging Leaders Growth Fund
An Overview from the Portfolio Managers	57
Portfolio of Investments	59
Small Cap Value Fund (formerly known as Value Discovery Fund)
An Overview from the Portfolio Managers	61
Portfolio of Investments	64
Mid Cap Value Fund
An Overview from the Portfolio Managers	66
Portfolio of Investments	68
Fixed-Income Overview	69
Bond Fund
An Overview from the Portfolio Managers	71
Portfolio of Investments	73
Income Fund
An Overview from the Portfolio Manager	76
Portfolio of Investments	78
Low Duration Fund
An Overview from the Portfolio Managers	81
Portfolio of Investments	83
Ready Reserves Fund
An Overview from the Portfolio Managers	86
Portfolio of Investments	89
Financial Statements	91
Notes to Financial Statements	106
Board of Trustees and Officers	141
Approval of the Fund’s Management Agreement	147
Fund Expenses	150

This report is submitted for the general information of the shareholders of the William Blair Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by a prospectus of the William Blair Funds. Please carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money.

June 30, 2010 William Blair Funds    1

PERFORMANCE AS OF JUNE 30, 2010—CLASS N SHARES (unaudited)

	Year to Date		1 Yr.	3 Yr.		5 Yr.		10 Yr (or since inception)		Inception Date	Overall Morningstar Rating
Growth Fund											«««« Among 1,545 large growth funds
Class N	(8.09	)	8.47	(5.81	)	2.30		(1.83	)	3/20/1946
Morningstar Large Growth	(8.24	)	12.41	(8.11	)	(0.18	)	(3.37	)
Russell 3000® Growth	(7.25	)	13.95	(6.97	)	0.44		(4.89	)
Standard & Poor’s 500	(6.65	)	14.43	(9.81	)	(0.79	)	(1.59	)
Large Cap Growth Fund											««« Among 1,545 large growth funds
Class N	(8.44	)	9.09	(8.16	)	(1.65	)	(5.68	)	12/27/1999
Morningstar Large Growth	(8.24	)	12.41	(8.11	)	(0.18	)	(3.37	)
Russell 1000® Growth	(7.65	)	13.62	(6.91	)	0.38		(5.14	)
Small Cap Growth Fund											«««« Among 666 small growth funds
Class N	(3.65	)	17.44	(7.96	)	0.47		6.76		12/27/1999
Morningstar Small Growth	(2.45	)	19.07	(8.73	)	0.33		(0.31	)
Russell 2000® Growth	(2.31	)	17.96	(7.54	)	1.14		(1.72	)
Russell 2000®	(1.95	)	21.48	(8.60	)	0.37		3.00
The Small Cap Growth Fund’s Performance during 2000 was primarily attributable to investments in initial public offerings (IPOs) during a rising market. Since then, IPOs have had an insignificant effect on the Fund’s performance.
Mid Cap Growth Fund											«««« Among 694 mid-cap growth funds
Class N	(2.58	)	16.49	(4.23	)	—		0.83		2/1/2006
Morningstar Mid-Cap Growth	(3.53	)	19.58	(7.94	)	—		—
Russell MidCap® Growth	(3.31	)	21.30	(7.53	)	—		(1.99	)
Small-Mid Cap Growth Fund											«««« Among 694 mid-cap growth funds
Class N	(3.07	)	16.86	(4.87	)	3.55		4.55		12/29/2003
Morningstar Mid-Cap Growth	(3.53	)	19.58	(7.94	)	1.13		—
Russell 2500™ Growth	(1.82	)	21.44	(7.10	)	1.81		3.28
Global Growth Fund											Not rated.
Class N	(5.74	)	13.86	—		—		(14.15	)	10/15/2007
Morningstar World Stock	(8.42	)	12.13	—		—		—
MSCI All Country World IMI (net)	(8.65	)	13.07	—		—		(12.92	)
International Growth Fund											«««« Among 215 foreign large growth funds
Class N	(4.20	)	16.42	(11.75	)	2.51		2.47		10/1/1992
Morningstar Foreign Large Growth	(9.44	)	11.03	(10.92	)	2.53		(0.23	)
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49	(10.50	)	3.63		2.23
International Equity Fund											«« Among 215 foreign large growth funds
Class N	(9.21	)	9.45	(12.77	)	0.01		1.89		5/24/2004
Morningstar Foreign Large Growth	(9.44	)	11.03	(10.92	)	2.53		—
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49	(10.50	)	3.63		6.49
International Small Cap Growth Fund											««« Among 112 foreign small/mid growth funds
Class N	(2.31	)	23.00	(9.91	)	—		2.51		11/1/2005
Morningstar Foreign Small/Mid Growth	(6.76	)	16.12	(12.27	)	—		—
MSCI All Country World Small Cap Ex-U.S. (net)	(5.32	)	19.98	(9.68	)	—		3.76
Emerging Markets Growth Fund											«« Among 269 diversified emerging markets funds
Class N	(4.27	)	25.02	(9.01	)	10.95		11.36		6/6/2005
Morningstar Diversified Emerging Markets	(6.28	)	21.84	(5.33	)	10.64		—
MSCI Emerging Markets IMI (net)	(5.68	)	24.57	(2.17	)	12.98		13.20

Please see the next page for important disclosure information.

2     Semi-Annual Report June 30, 2010

PERFORMANCE AS OF JUNE 30, 2010—CLASS N SHARES—CONTINUED (unaudited)

	Year to Date		1 Yr.	3 Yr.		5 Yr.		10 Yr (or since inception)		Inception Date	Overall Morningstar Rating
Small Cap Value Fund											«««« Among 321 small value funds
Class N	0.38		27.49	(5.88	)	2.65		6.57		12/23/1996
Morningstar Small Value	(0.70	)	25.88	(8.66	)	0.36		8.13
Russell 2000® Value	(1.64	)	25.07	(9.85	)	(0.51	)	7.48
Russell 2000®	(1.95	)	21.48	(8.60	)	0.37		3.00
Mid Cap Value Fund
Class N	—		—	—		—		(13.20	)	5/3/2010	Not rated.
Russell Midcap® Value	—		—	—		—		(13.47	)
Bond Fund											«««« Among 1,011 intermediate-term bond funds
Class N	5.27		11.42	7.53		—		6.73		5/1/2007
Morningstar Intermediate-Term Bond	5.21		13.11	6.03		—		—
Barclays Capital U.S. Aggregate Bond Index	5.33		9.50	7.55		—		6.77
Income Fund											««« Among 398 short-term bond funds
Class N	3.94		8.69	3.88		3.34		4.57		10/1/1990
Morningstar Short-term Bond	2.46		7.12	3.65		3.51		4.13
Barclays Capital Intermediate Govt./Credit Bond Index	4.56		8.29	6.97		5.26		6.06
Low Duration Fund											Not rated.
Class N	1.43		—	—		—		0.82		12/1/2009
Merrill Lynch 1-Year U.S. Treasury Note Index	0.51		—	—		—		0.36

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or a loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the Advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. International and emerging markets investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. As interest rates rise, bond prices will fall and bond funds may become more volatile. Class N shares are available to the general public without a sales load. The Emerging Leaders Class N commenced operations on May 3, 2010 and had one share outstanding as of June 30, 2010.

Morningstar Ratings^TM are as of 6/30/2010 and are subject to change every month. The ratings are based on a risk-adjusted return measure that accounts for variation in a fund’s monthly performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each Category receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. The 3/5/10 year Morningstar ratings were as follows: Growth Fund ««««/«« ««/««« , and Large Cap Growth Fund «««/««« /««, out of 1,545/1,298/739 large growth funds; Small Cap Growth Fund «««/««« /«««« out of 666/549/315 small growth funds; Mid Cap Growth Fund ««««/NA /NA and Small-Mid Cap Growth Fund ««««/«« ««/NA out of 694/612/NA mid cap growth funds; Small Cap Value Fund ««««/«« ««/««« out of 321/251/129 small value funds; International Growth Fund «««/««« /«««« and International Equity Fund «««/««/NA out of 215/158/81 foreign large growth funds; International Small Cap Growth Fund «««/NA/NA out of 112/NA/NA foreign small/mid growth funds; Emerging Markets Growth Fund ««/««/NA out of 269/205/NA diversified emerging markets growth funds; Income Fund «««/««« /««« out of 398/336/180 short-term bond funds; Bond Fund ««««/NA/NA out of 1,011/NA/NA intermediate-term bond funds.

Please carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money.

June 30, 2010 William Blair Funds     3

David C. Fording

John F. Jostrand

GROWTH FUND

The Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Growth Fund posted an 8.09% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Russell 3000^® Growth Index, declined 7.25%.

What were the most significant factors impacting Fund performance?

The Fund fell in response to overall negative market sentiment and stock specific exposures. In the first quarter, U.S. equity markets had strong gains followed by deep second quarter declines. The Russell 3000^® Growth rose 4.87% in the first quarter due to continued signs of economic recovery and above expectation corporate earnings. Like 2009, investors continued to seek riskier assets. In the second quarter, investors worried about the sustainability of global economic growth due to mixed economic data, and continued sovereign debt issues, especially in Europe, where calls for fiscal austerity reinforced concerns over economic growth into 2011. With greater uncertainty, market volatility increased, but never reached the extremes of late 2008 and early 2009. Many pundits discussed the possibility of a “double-dip” recession (a recession that is followed by a short-lived recovery and then another recession) even though this phenomenon is very rare, which added to the downward pressures. The Russell 3000^® Growth fell 11.55% in the second quarter. During the first half, there were several notable positives such as continued improvement of corporate profitability, China’s move away from its currency’s peg to the U.S. dollar and some clarity around financial regulation; however, they were outweighed by the questions over economic stability and recovery.

All benchmark sectors declined in the first six months of the year. Consumer Discretionary stocks held up well and benefited from the return of some consumer activity or the potential for it in the future. The Industrials sector was also a relative performer as investors sought companies that would benefit from the late stages of economic recovery. Energy and Materials stocks tumbled sharply as demand came into question with a global slowdown particularly in emerging markets. Utilities were also weak. From a market capitalization perspective, smaller cap stocks outshined larger caps, which may seem uncharacteristic in a challenging environment. Smaller cap stocks had strong relative results in the first quarter, which carried into April as investors continued to seek riskier assets. However, as the second quarter progressed, smaller caps lost steam and in June were the weakest performers.

Were there any investment strategies or themes that did not measure up to your expectations?

We were disappointed that the portfolio lagged in the period, but it did hold up well in the market downturn in the last two months of the period as you would expect from a quality growth manager. We had stock specific issues in Health Care and Information Technology and not enough strength in our contributors to outweigh them. In the Health Care sector, one of our largest stocks and a more defensive position, in our view, disappointed unexpectedly.

4     Semi-Annual Report June 30, 2010

Baxter International, Inc., a leading global diversified manufacturer of hospital supplies and medical equipment, had a weak earnings report due to competitive pricing pressures in its blood plasma division and lower than anticipated guidance for 2010. We sold the company on these issues amid lower confidence in management’s ability to execute in a more competitive environment. Select Information Technology stocks also struggled, which is a reversal from last year where it was the best performing group. QUALCOMM, Inc., one of our larger positions, declined on a disappointment in the company’s estimate for handset ASPs (average selling price). Handset ASPs came under pressure due to a change in geographic mix increasing emerging markets exposure where a larger portion of sales occurred in lower-end phones. A lower ASP negatively affected the company’s royalty calculation and its revenue outlook. In our view, the secular growth case for the stock remains intact; it should continue to benefit from the shift from 2G to 3G technologies and a strong position in smartphones. Globally, there are only 900 million 3G subscribers and over four billion 2G subscribers. Additionally, we think its competitive position remains very strong and will likely continue to take more market share in a less competitive chipset market (with Texas Instruments and Freescale Semiconductor exiting). Lastly, despite solid earnings reports, Google, Inc. declined on high expectations from investors and concerns about its strategy in China. We believe the firm continues to have a strong market position, and is well positioned to benefit from an increase in ad spending as the economy recovers.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

The Fund had strong stock selection in both Industrials and Consumer Discretionary. Both of these groups were also overweighted in comparison to the benchmark and held up well, which was helpful. In Industrials, the biggest contributors were Fastenal Co. and IHS, Inc. Fastenal Co., the largest fastener supplier in North America, benefited from improving sales to manufacturing and non-residential construction customers as well as its U.S. focus. We believe it can take advantage of further store and sales force expansion in combination with strong management execution and accelerating fundamentals. IHS, Inc., the leading global provider of critical technical information to customers primarily in the energy field, also gained ground driven by subscription-based organic growth.

In Consumer Discretionary, McDonald’s Corporation and our education stocks were additive. McDonald’s Corporation, one of our larger positions, continued to demonstrate sustainable growth. It had revenue driving initiatives with the dollar breakfast, new beverage platform, advertising spending, strong margins due to higher than industry average unit volumes and buying power on commodities, as well as strong performance in several geographic regions. In education—a group that rebounded from 2009—our best performers were Capella Education Co. and K12, Inc. Capella Education Co., an on-line post secondary education company, had strong enrollment growth across degree levels. With the market turmoil, it held up well; many view it as more defensive since individuals seek higher education when unemployed to gain new skills or to advance their career at their current employer. In addition, K12, Inc., a technology-based provider of curriculum to students in kindergarten through 12th grade, reported strong quarterly earnings due to solid management execution leveraging its instructional costs. In our view, K12, Inc. should see attractive growth as the firm continues to leverage costs as it expands into new markets, and state budget headwinds subside further.

What is your current strategy? How is the Fund Positioned?

The U.S. economy should continue to see growth, though slower, in the second half of 2010 as indicated by the Conference Board’s Leading Economic Index (LEI). However, we remain concerned about a slowdown in the global economic recovery as fiscal stimulus begins to wear off. Also, growth prospects could be negatively impacted by continued consumer deleveraging, the government deficit, the effects of Chinese interest rate tightening as this

June 30, 2010 William Blair Funds     5

country attempts to slowdown its residential real estate market, and the depths of European government fiscal austerity and the weakness of Europe’s banking group. In our view, a double dip economic recession is unlikely unless China has a hard landing or European sovereign debt contagion spreads.

For the U.S., it is likely that the Federal Reserve will continue to hold interest rates low in order to continue to assist growth. A low interest environment is critical for businesses nationwide as well as the housing group, which appears to have stabilized, but has yet to show recovery. For improvement in housing, employment and wages will need to rise. A catalyst for growth may be corporations where a positive bias for capital spending remains as many firms have pulled back expenditures over the last several years. Also, for many companies, their balance sheets are cash rich and ripe for investment in their business or M&A activity.

In this slow growth environment, we believe our quality growth investment discipline should benefit; companies with superior and sustainable earnings growth will be rewarded as weaker firms fall behind. With the recent change in market sentiment in the quarter, we have begun to see a return to quality stocks, especially in May and June. We would expect this trend to strengthen as the year unfolds and the slow growth environment continues.

In regard to the portfolio, we have adopted a modestly more defensive stance, given the aforementioned concerns over risks to growth in the second half of 2010 and 2011. We expect this positioning to continue with the uncertainty in the market direction. As always, we remain focused on our research intensive investment process, which will be even more critical in identifying durable business franchises in a slow growth economic environment.

6     Semi-Annual Report June 30, 2010

Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	(8.09	)%	8.47	%	(5.81	)%	2.30	%	(1.83	)%
Class I	(8.01	)	8.79		(5.52	)	2.61		(1.56	)
Russell  3000® Growth Index	(7.25	)	13.95		(6.97	)	0.44		(4.89	)
S&P 500 Index	(6.65	)	14.43		(9.81	)	(0.79	)	(1.59	)

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 3000^® Growth Index consists of large, medium, and small capitalization companies with above average price-to-book ratios and forecasted growth rates. The index is weighted by market capitalization and large/medium/small companies make up approximately 80%/15%/5% of the index.

The S&P 500 Index indicates broad larger capitalization equity market performance.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     7

Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Information Technology—28.1%
*Apple, Inc.	77,985	$	19,616
*Genpact, Ltd.†	256,740		3,987
*Google, Inc. Class “A”	29,505		13,128
Hewlett-Packard Co.	423,300		18,320
*McAfee, Inc.	174,800		5,370
Microsoft Corporation	798,700		18,378
QUALCOMM, Inc.	280,740		9,220
*Silicon Laboratories, Inc.	185,440		7,522
Solera Holdings, Inc.	120,667		4,368
*Trimble Navigation, Ltd.	196,500		5,502
*Ultimate Software Group, Inc.	191,450		6,291
*VistaPrint N.V.†	150,607		7,152
			118,854
Industrials—17.4%
Allegiant Travel Co.	85,900		3,667
Fastenal Co.	212,129		10,647
Flowserve Corporation	57,600		4,884
Goodrich Corporation	100,100		6,632
*IHS, Inc. Class “A”	218,415		12,760
Knight Transportation, Inc.	312,430		6,323
Manpower, Inc.	187,700		8,105
Roper Industries, Inc.	131,070		7,335
TransDigm Group, Inc.	164,380		8,388
Union Pacific Corporation	69,700		4,845
			73,586
Health Care—14.4%
Allergan, Inc.	154,300		8,989
*CareFusion Corporation	183,400		4,163
*Celgene Corporation	233,180		11,850
*Cerner Corporation	72,000		5,464
*Gilead Sciences, Inc.	184,935		6,340
*IDEXX Laboratories, Inc.	113,230		6,896
*Illumina, Inc.	141,900		6,177
*NuVasive, Inc.	113,600		4,028
*NxStage Medical, Inc.	81,987		1,217
*VCA Antech, Inc.	231,500		5,732
			60,856
Consumer Discretionary—13.3%
*Bed Bath & Beyond, Inc.	129,900		4,817
*Capella Education Co.	69,328		5,640
DeVry, Inc.	209,948		11,020
*Dick’s Sporting Goods, Inc.	207,500		5,164
Johnson Controls, Inc.	263,600		7,083
*K12, Inc.	202,188		4,484
McDonald’s Corporation	214,464		14,127
P.F. Chang’s China Bistro, Inc.	97,200		3,854
			56,189

*Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Energy—6.7%
Apache Corporation		93,465	$	7,869
*Cameron International Corporation		145,147		4,720
Occidental Petroleum Corporation		117,600		9,073
*Southwestern Energy Co.		166,427		6,431
				28,093
Consumer Staples—6.2%
*Green Mountain Coffee Roasters, Inc.		287,400		7,386
PepsiCo, Inc.		311,100		18,962
				26,348
Materials—5.5%
Ecolab, Inc.		222,320		9,985
Freeport-McMoRan Copper & Gold, Inc.		58,400		3,453
Monsanto Co.		55,930		2,585
Praxair, Inc.		95,765		7,277
				23,300
Financials—5.5%
*Affiliated Managers Group, Inc.		87,763		5,333
Greenhill & Co., Inc.		141,700		8,662
*MSCI, Inc.		118,905		3,220
The Charles Schwab Corporation		409,975		5,814
				23,029
Total Common Stocks—97.1% (cost $391,070)				410,255
Investment in Affiliate
William Blair Ready Reserves Fund		1,262,245		1,262
Total Investment in Affiliate—0.3% (cost $1,262)				1,262
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $9,847, collateralized by FHLMC, 2.000%, due 4/15/13	$	9,847		9,847
Total Repurchase Agreement—2.3% (cost $9,847)				9,847
Total Investments—99.7% (cost $402,179)				421,364
Cash and other assets, less liabilities—0.3%				1,447
Net assets—100.0%			$	422,811

See accompanying Notes to Financial Statements.

8     Semi-Annual Report June 30, 2010

James S. Golan

John F. Jostrand

Tracy McCormick

LARGE CAP GROWTH FUND

The Large Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

How did the Fund perform over the first half of the year? How did the Fund’s performance compare to its benchmark?

The Large Cap Growth Fund posted an 8.44% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Russell 1000^® Growth Index, declined 7.65%.

What were the most significant factors impacting Fund performance?

The Fund fell in response to overall negative market sentiment and stock specific exposures. In the first quarter, U.S. equity markets had strong gains followed by deep second quarter declines. The Russell 1000^® Growth rose 4.65% in the first quarter due to continued signs of economic recovery and above expectation corporate earnings. Like 2009, investors continued to seek riskier assets. In the second quarter, investors worried about the sustainability of global economic growth due to mixed economic data, and continued sovereign debt issues, especially in Europe, where calls for fiscal austerity reinforced concerns over economic growth into 2011. With greater uncertainty, market volatility increased, but never reached the extremes of late 2008 and early 2009. Many pundits discussed the possibility of a “double-dip” recession (a recession that is followed by a short-lived recovery and then another recession) even though this phenomenon is very rare, which added to the downward pressures. The Russell 1000^® Growth fell 11.75% in the second quarter. During the first half, there were several notable positives such as continued improvement in corporate profitability, China’s move away from its currency’s peg to the U.S. dollar and some clarity around financial regulation; however, they were outweighed by the questions over economic stability and recovery.

All benchmark sectors declined in the first six months of the year. The more defensive Telecommunication Services sector was best, followed by Industrials, where investors sought companies that would benefit from the late stages of economic recovery. Consumer Discretionary also held up well and benefited from the return of some consumer activity or the potential for it in the future. Energy and Materials stocks tumbled sharply as demand came into question with a global slowdown particularly in emerging markets. Utilities were also weak. From a market capitalization perspective, smaller cap stocks outshined larger caps, which may seem uncharacteristic in a challenging environment. Smaller cap stocks had strong relative results in the first quarter, which carried into April as investors continued to seek riskier assets. However, as the second quarter progressed, smaller caps lost steam and in June were the weakest performers.

What sectors and investments did not measure up to your expectations?

We were disappointed that the portfolio lagged in the period, but it did hold up well in the market downturn in the last two months of the period as you would expect from a quality growth manager. We had stock specific issues in Information Technology and Health Care and not enough strength in our contributors to outweigh them. In Information Technology,

June 30, 2010 William Blair Funds     9

select stocks struggled, which is a reversal from last year where it was the best performing group. QUALCOMM, Inc., one of our larger positions, declined on a disappointment in the company’s estimate for handset ASPs (average selling price). Handset ASPs came under pressure due to a change in geographic mix increasing emerging markets exposure where a larger portion of sales occurred in lower-end phones. A lower ASP negatively affected the company’s royalty calculation and its revenue outlook. In our view, the secular growth case for the stock remains intact; it should continue to benefit from the shift from 2G to 3G technologies and a strong position in smartphones. Globally, there are only 900 million 3G subscribers and over four billion 2G subscribers. Additionally, we think its competitive position remains very strong and will likely continue to take more market share in a less competitive chipset market (with Texas Instruments and Freescale Semiconductor exiting). Lastly, Microsoft Corporation, our largest position, trailed even though it had very strong earnings reports in the first half. Windows sales exceeded consensus expectations combined with favorable cost of goods sold and continued cost control. However, investors were more focused on technology companies where confidence was greater that growth expectations could be met regardless of the macro backdrop. A good example would be Apple, Inc., which did well and which we continue to own.

In the Health Care sector, one of our largest stocks and a more defensive position, in our view, disappointed unexpectedly. Baxter International, Inc., a leading global diversified manufacturer of hospital supplies and medical equipment, had a weak earnings report due to competitive pricing pressures in its blood plasma division and lower than anticipated guidance for 2010. We sold the company on these issues amid lower confidence in management’s ability to execute in a more competitive environment.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

The Fund had strong stock selection in both the Consumer Discretionary and Industrials sectors. Both of these groups were also overweighted in comparison to the benchmark and held up well, which was helpful. In Consumer Discretionary, O’Reilly Automotive, Inc., Discovery Communications, Inc. and Yum! Brands, Inc. each were additive. One of the best overall portfolio performers was O’Reilly Automotive, Inc., an automotive specialty retailer. The company reported better than expected earnings results driven by strength in core O’Reilly stores and newly acquired CSK stores. We believe it is well positioned to continue to gain market share. Discovery Communications, Inc. benefited from solid international and U.S. advertising growth as a result of strong programming. It will launch the Oprah Winfrey Network (OWN) early next year, which should provide additional earnings upside in our view. Yum! Brands, Inc.’s stock price was assisted by strengthened sales and profits from China, a key driver to growth going forward. The company added 15% to its store base in China during 2009.

In Industrials, Rockwell Automation, Inc. and W.W. Grainger, Inc. were best. As a global provider of industrial automation power, control and information solutions, Rockwell Automation, Inc. had upside surprise in its earnings. Its results were driven by higher demand and volume growth, which dramatically improved its operating margin leverage. W.W. Grainger, Inc., a leading supplier of facilities maintenance products, also had above expectations earnings due to improving industrial activity. We believe the firm has a leading market position and brand, broad product offering, seasoned management, and a strong balance sheet.

What is your current strategy? How is the Fund positioned?

The U.S. economy should continue to see growth, though slower, in the second half of 2010 as indicated by the Conference Board’s Leading Economic Index (LEI). However, we remain concerned about a slowdown in the global economic recovery as fiscal stimulus begins to

10     Semi-Annual Report June 30, 2010

wear off. Also, growth prospects could be negatively impacted by continued consumer deleveraging, the government deficit, the effects of Chinese interest rate tightening as this country attempts to slowdown its residential real estate market, and the depths of European government fiscal austerity and the weakness of Europe’s banking group. In our view, a double dip economic recession is unlikely unless China has a hard landing or European sovereign debt contagion spreads.

For the U.S., it is likely that the Federal Reserve will continue to hold interest rates low in order to continue to assist growth. A low interest environment is critical for businesses nationwide as well as the housing group, which appears to have stabilized, but has yet to show recovery. For improvement in housing, employment and wages will need to rise. A catalyst for growth may be corporations where a positive bias for capital spending remains as many firms have pulled back expenditures over the last several years. Also, for many companies, their balance sheets are cash rich and ripe for investment in their business or M&A activity.

In this slow growth environment, we believe our quality growth investment discipline should benefit; companies with superior and sustainable earnings growth will be rewarded as weaker firms fall behind. With the recent change in market sentiment in the quarter, we have begun to see a return to quality stocks, especially in May and June. We would expect this trend to strengthen as the year unfolds and the slow growth environment continues.

In regard to the portfolio, we have adopted a modestly more defensive stance, given the aforementioned concerns over risks to growth in the second half of 2010 and 2011. We expect this positioning to continue with the uncertainty in the market direction. As always, we remain focused on our research intensive investment process, which will be even more critical in identifying durable business franchises in a slow growth economic environment.

June 30, 2010 William Blair Funds     11

Large Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	(8.44	)%	9.09	%	(8.16	)%	(1.65	)%	(5.68	)%
Class I	(8.57	)	9.17		(7.93	)	(1.44	)	(5.49	)
Russell 1000® Growth Index	(7.65	)	13.62		(6.91	)	0.38		(5.14	)

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 1000^® Growth Index consists of large capitalization companies with above average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

12     Semi-Annual Report June 30, 2010

Large Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Information Technology—29.4%
*Apple, Inc.	6,225	$	1,566
Broadcom Corporation Class “A”	13,950		460
*eBay, Inc.	36,750		721
*EMC Corporation	36,750		672
*Google, Inc. Class “A”	2,065		919
Hewlett-Packard Co.	24,645		1,067
*McAfee, Inc.	18,050		554
Microsoft Corporation	69,135		1,591
QUALCOMM, Inc.	12,215		401
			7,951
Industrials—19.2%
Danaher Corporation	15,644		581
Goodrich Corporation	8,750		580
J.B. Hunt Transport Services, Inc.	12,020		393
Manpower, Inc.	10,800		466
Rockwell Automation, Inc.	13,250		650
Roper Industries, Inc.	8,400		470
*Stericycle, Inc.	6,650		436
United Parcel Service, Inc. Class “B”	17,470		994
W.W. Grainger, Inc.	6,180		615
			5,185
Consumer Discretionary—13.9%
*Discovery Communications, Inc.	17,000		607
Johnson Controls, Inc.	21,650		582
*Kohl’s Corporation	12,246		582
McDonald’s Corporation	10,685		704
*O’Reilly Automotive, Inc.	13,530		643
Yum! Brands, Inc.	16,700		652
			3,770
Health Care—12.0%
Allergan, Inc.	9,565		557
*Celgene Corporation	15,240		775
*Illumina, Inc.	9,600		418
*Medco Health Solutions, Inc.	9,350		515
*Thermo Fisher Scientific, Inc.	19,945		978
			3,243
Consumer Staples—9.0%
Colgate-Palmolive Co.	10,730		845
Mead Johnson Nutrition Co.	12,550		629
PepsiCo, Inc.	15,600		951
			2,425

* Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Energy—7.7%
Apache Corporation		3,665	$	309
EOG Resources, Inc.		4,570		450
Occidental Petroleum Corporation		8,050		621
Schlumberger, Ltd.†		12,980		718
				2,098
Materials—3.8%
Freeport-McMoRan Copper & Gold, Inc.		5,550		328
Praxair, Inc.		9,425		716
				1,044
Financials—2.1%
CME Group, Inc.		2,000		563
Total Common Stocks—97.1% (cost $24,228)				26,279
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $803, collateralized by FHLB, 4.375%, due 9/17/10	$	803		803
Total Repurchase Agreement—3.0% (cost $803)				803
Total Investments—100.1% (cost $25,031)				27,082
Liabilities, plus cash and other assets—(0.1)%				(32	)
Net assets—100.0%			$	27,050

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     13

Michael P. Balkin

Karl W. Brewer

SMALL CAP GROWTH FUND

The Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small Cap Growth Fund posted a 3.65% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Russell 2000^® Growth Index, declined 2.31%.

After a strong first quarter, the U.S. equity market reversed course during the second quarter to finish in negative territory for the first half of the year. The Russell 2000^® Growth returned -9.22% during the second quarter to produce a -2.31% return for 2010 through June. The Fund underperformed during the second quarter and is now slightly behind for the six-month period.

While the year started off on a positive note on the heels of better-than-expected corporate sales and earnings, macro concerns across the globe instilled fear and volatility back into the markets. European sovereign debt downgrades and fiscal austerity measures, the Gulf of Mexico oil catastrophe, U.S. state budget woes and expiring stimulus programs all contributed to investor skepticism. More importantly, given the significance of job growth to a sustainable economic recovery, stubbornly lackluster employment and housing data have stoked fears of slipping back into a recession. Given these negative developments and with the 2008 downturn fresh in investors’ minds, stock prices corrected as they once again succumbed to macro factors rather than specific company fundamentals.

During the second quarter, all sectors within the Russell 2000^® Growth finished well into the red. The Consumer Discretionary (-11%) and Energy (-14%) sectors were the worst performing sectors given the macro concerns discussed above. Industrials and Consumer Staples posted the “best” returns in the down market, finishing -6% apiece.

For the year-to-date period, sector returns were more dispersed. Energy was the outlying loser at down 13% for the six-month period. Consumer Discretionary and Consumer Staples performed well over the period, finishing up 3% each. Most of the other major economic sectors such as Information Technology, Industrials, Financials and Health Care were each down 2-3%.

The Fund’s underperformance during the second quarter is primarily attributable to negative stock selection. This was most pronounced in Consumer Discretionary, Financials and Materials. On the other hand, positive stock selection in Telecommunication Services, Energy and Information Technology each buoyed relative results.

For the first half of the year, the Fund’s narrower underperformance was the result of mixed stock selection across sectors. While stock selection was good in Information Technology, Telecommunication Services and Energy, stock selection in Consumer Discretionary, Materials, Industrials and Health Care outweighed and brought relative performance below the benchmark for the six-month period overall.

Two specific stocks detracting from returns were Cenveo Inc. and Healthways Inc. Cenveo is a specialty printing company. The company operates in two segments: Envelopes, Forms and Labels, and Commercial Printing. The stock was a leading detractor from returns during the second quarter and the year-to-date period as investors became increasingly nervous about the economic sensitivity of Cenveo’s business. However, we added to our position in the stock as we continue to believe the stock offers an attractive reward-to-risk ratio given a solid management team (many of whom have bought stock recently), its leading position in a higher growth segment of the printing industry and an unjustifiably low valuation.

14     Semi-Annual Report June 30, 2010

Healthways Inc. is a healthcare services firm that provides disease management solutions. The company’s services are implemented by managed care companies, governments, employers and hospitals in order to reduce both short term and long term healthcare costs within their patient populations. The stock detracted from returns during the second quarter and the year-to-date period overall in part due to skepticism toward the healthcare reform bill’s impact on managed care, Healthways’ primary customer base. Also, lackluster employment data hurt investor sentiment as Healthways’ business model benefits as the employed base increases. We maintained our position as we believe disease management solutions and Healthways specifically will be a partial solution to lower healthcare costs. Nearer term, we believe data on new contract wins, contract renewals and the new business pipeline are encouraging.

Two specific stocks boosting relative performance were Lionbridge Technologies Inc. and Stanley Inc. Lionbridge Technologies is a market leader in language translation for online content, software manuals and training for leading global companies. The stock was the Fund’s number one contributor during both the first quarter and second quarter, and therefore the year-to-date period as well. Lionbridge’s business momentum has been driven by new business wins from large companies such as Caterpillar and a new contract with IBM to provide its translation technology. The company has also benefitted from existing customers such as Microsoft and Google restarting projects after the recession. We continue to hold the stock as we believe the company is well positioned for additional new customer wins and will benefit from the secular increase in cross-border business activity.

Stanley Inc. is a government information technology services company. The stock was one of the leading contributors to returns during the second quarter and the year-to-date period as it was announced to be acquired by CGI Group, one of the largest independent information technology and business process services firms in the world. We liquidated our position on the rally following this announcement.

Looking forward, while the economic recovery may have a different trajectory (less steep) than some were expecting earlier this year, the market’s decline has improved valuations and lowered expectations. Corporate financial discipline and balance sheets remain strong while inventories are lean throughout most industries. This should lay the groundwork for operating margin expansion, likely beyond prior peak margins, and drive continued earnings growth over the intermediate term. However, investor pessimism is understandably high given the expiration of stimulus plans and diminished appetite for additional programs, U.S. state budget crunches, still absent employment growth and likely further consumer deleveraging.

We consider the impact of these economic scenarios into our stock-specific risk/reward assessments, and focus our time analyzing business models and managements of growth companies who “control their own destiny” to a greater degree and are less dependent on broad economic growth. We continue to find solid investment opportunities across sectors. We believe the Fund consists of great companies with solid competitive positions whose stock prices are trading at attractive valuations.

June 30, 2010 William Blair Funds     15

Small Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	(3.65	)%	17.44	%	(7.96	)%	0.47	%	6.76	%
Class I	(3.49	)	17.80		(7.70	)	0.75		7.03
Russell 2000® Growth Index	(2.31	)	17.96		(7.54	)	1.14		(1.72	)
Russell 2000® Index	(1.95	)	21.48		(8.60	)	0.37		3.00

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2000^® Growth Index consists of small-capitalization companies with above average price-to-book ratios and forecasted growth rates.

The Russell 2000^® Index is an unmanaged composite of the smallest 2000 stocks of the Russell 3000^® Index.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

16     Semi-Annual Report June 30, 2010

Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Information Technology—25.1%
*BancTec, Inc.—144A§**	603,327	$	3,017
*Cavium Networks, Inc.	344,300		9,017
*DG FastChannel, Inc.	523,989		17,072
*DJSP Enterprises, Inc.†	633,000		3,576
*Internet Capital Group, Inc.	1,035,346		7,869
*Inuvo, Inc.	8,813,761		1,498
*j2 Global Communications, Inc.	699,948		15,287
*Lionbridge Technologies, Inc.	4,326,258		19,771
*MaxLinear, Inc. Class “A”	385,140		5,384
*Monolithic Power Systems, Inc.	528,471		9,438
*ShoreTel, Inc.	695,800		3,229
*Silicon Laboratories, Inc.	178,677		7,247
*Sonic Solutions, Inc.	906,916		7,573
*TeleNav, Inc.	907,925		7,617
*TeleTech Holdings, Inc.	644,900		8,313
*Ultimate Software Group, Inc.	559,085		18,372
United Online, Inc.	2,416,546		13,919
*ValueClick, Inc.	1,344,740		14,375
*Vertro, Inc.	4,333,215		2,145
*VistaPrint N.V.†	222,768		10,579
			185,298
Consumer Discretionary—19.9%
Abercrombie & Fitch Co. Class “A”	257,200		7,893
*Belo Corporation	2,128,943		12,114
*Career Education Corporation	547,226		12,597
*ChinaCast Education Corporation†	1,387,639		8,243
*Duckwall-ALCO Stores, Inc.	439,493		6,439
Gaiam, Inc. Class “A”	1,358,374		8,245
*Grand Canyon Education, Inc.	569,210		13,337
Jarden Corporation	657,717		17,673
*Kona Grill, Inc.	1,042,992		3,828
*Lincoln Educational Services Corporation	377,098		7,764
MDC Partners, Inc. Class “A”†	949,988		10,146
*Office Depot, Inc.	1,483,300		5,993
*Princeton Review, Inc.	3,381,896		7,846
Strayer Education, Inc.	36,695		7,628
*U.S. Auto Parts Network, Inc.	1,047,636		6,286
*WMS Industries, Inc.	279,500		10,970
			147,002
Health Care—19.9%
*AGA Medical Holdings, Inc.	634,500		8,052
*Air Methods Corporation	455,882		13,562
*American Medical Systems Holdings, Inc.	511,800		11,321
*Brookdale Senior Living, Inc.	439,900		6,598
*CardioNet, Inc.	471,713		2,585
*Eurand N.V.†	1,013,712		9,823
*Haemonetics Corporation	143,265		7,668
*Healthways, Inc.	844,253		10,063
*Integra LifeSciences Holdings Corporation	217,400		8,044
*Kensey Nash Corporation	541,501		12,839
*LCA-Vision, Inc.	808,806		4,481
*MedAssets, Inc.	349,200		8,060
*Natus Medical, Inc.	571,600		9,311
*Quidel Corporation	576,846		7,320
*SurModics, Inc.	475,248		7,799
*The Providence Service Corporation	575,911		8,063
*Trinity Biotech plc—ADR	1,853,763		11,252
			146,841

Issuer	Shares	Value
Common Stocks—(continued)
Industrials—12.3%
*Cenveo, Inc.	2,494,045	$	13,667
*Dolan Media Co.	1,178,966		13,110
*Franklin Covey Co.	647,917		4,212
*GrafTech International, Ltd.	802,900		11,738
*ICF International, Inc.	285,139		6,823
Kaydon Corporation	310,460		10,202
MSC Industrial Direct Co. Class “A”	87,226		4,419
*Odyssey Marine Exploration, Inc.	3,454,930		3,455
*On Assignment, Inc.	1,936,419		9,740
TransDigm Group, Inc.	270,014		13,779
			91,145
Financials—8.9%
*Affiliated Managers Group, Inc.	137,282		8,342
Allied World Assurance Co. Holdings, Ltd.†	198,100		8,990
*CBOE Holdings, Inc.	124,028		4,037
*Cowen Group, Inc.	1,766,517		7,243
*FirstService Corporation†	554,971		11,527
*Marlin Business Services Corporation	970,279		11,731
*National Financial Partners Corporation	1,094,330		10,691
*Penson Worldwide, Inc.	255,201		1,439
United Western Bancorp, Inc.	2,342,215		1,874
			65,874
Telecommunication Services—3.4%
*Cbeyond, Inc.	459,231		5,741
*Syniverse Holdings, Inc.	958,300		19,597
			25,338
Energy—3.4%
*Comstock Resources, Inc.	276,460		7,663
*Concho Resources, Inc.	129,113		7,144
*Oil States International, Inc.	255,800		10,125
			24,932
Consumer Staples—1.9%
*Overhill Farms, Inc.	959,252		5,650
*Smart Balance, Inc.	2,077,700		8,498
			14,148
Materials—1.5%
*Horsehead Holding Corporation	987,100		7,463
*Stillwater Mining Co.	284,100		3,301
			10,764
Total Common Stocks—96.3% (cost $725,989)			711,342
Preferred Stock
Grubb & Ellis Co.—144A, 12.00%§	83,121		6,484
Total Preferred Stock—0.9% (cost $8,312)			6,484
Exchange-Traded Fund
iShares Russell 2000 Growth Index Fund	126,500		8,422
Total Exchange-Traded Fund—1.2% (cost $8,194)			8,422

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     17

Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Investment in Affiliate
William Blair Ready Reserves Fund		3,296,931		3,297
Total Investment in Affiliate—0.4% (cost $3,297)				3,297
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	500		500
Total Short-Term Investment—0.1% (cost $500)				500
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $4,705 collateralized by FFCB, 1.625%, due 3/7/13		4,705		4,705
Total Repurchase Agreement—0.6% (cost $4,705)				4,705
Total Investments—99.5% (cost $750,997)				734,750
Cash and other assets, less liabilities—0.5%				3,728
Net assets—100.0%			$	738,478

ADR = American Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 1.29% of the net assets at June 30, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.41% of the Fund’s net assets at June 30, 2010.

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

18     Semi-Annual Report June 30, 2010

Small Cap Growth Fund

If the Fund’s portfolio holdings represent ownership of 5% or more of the voting securities of a company, the company is deemed to be a affiliate as defined in the Investment Company Act of 1940. The Small Cap Growth Fund had the following transactions during the period ended June 30, 2010 with companies deemed affiliated during the period or at June 30, 2010:

	Share Activity				Period Ended June 30, 2010
					(in thousands)
Security Name	Balance 12/31/2009	Purchases	Sales	Balance 6/30/2010	Value		Dividends Included in Income
CardioNet, Inc.	1,344,381	208,600	1,081,268	471,713	$	2,585	$	—
pDJSP Enterprises	—	633,000	—	633,000		3,576		—
pDuckwall-ALCO Stores, Inc.	460,853	—	21,360	439,493		6,439		—
pGaiam, Inc.	1,511,007	62,900	215,533	1,358,374		8,254		214
pInuvo, Inc	8,037,127	776,634	—	8,813,761		1,498		—
pKensey Nash	422,340	119,161	—	541,501		12,839		—
pKona Grill, Inc.	1,042,992	—	—	1,042,992		3,828		—
LCA-Vision Inc.	948,955	66,854	207,003	808,806		4,481		—
pLionbridge Technologies, Inc.	4,293,158	509,700	476,600	4,326,258		19,771		—
pMarlin Business Services Corp.	988,701	—	18,422	970,279		11,731		—
pOdyssey Marine Exploration	2,677,030	777,900	—	3,454,930		3,455		—
pOn Assignment Inc	1,516,133	891,986	471,700	1,936,419		9,740		—
pOverhill Farms, Inc.	1,184,052	53,900	278,700	959,252		5,650		—
pPrinceton Review	—	3,381,896	—	3,381,896		7,846		—
The Providence Service Corporation	547,293	166,918	138,300	575,911		8,063		—
pTrinity Biotech	1,501,163	352,600	—	1,853,763		11,252		—
pUnited Western Bancorp, Inc.	2,342,215	—	—	2,342,215		1,874		—
pVertro, Inc.	4,333,215	—	—	4,333,215		2,145		—
					$	125,027	$	214

p Affiliated company at June 30, 2010. The Small Cap Growth Fund’s total value in companies deemed to be affiliated at June 30, 2010 was $ 109,898 (thousands).

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     19

Robert C. Lanphier, IV

David P. Ricci

MID CAP GROWTH FUND

The Mid Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Mid Cap Growth Fund posted a 2.58% decrease (Class N Shares) for the six months ended June 30, 2009. By comparison, the Fund’s benchmark, the Russell Midcap^® Growth Index, declined 3.31%.

After a strong first quarter, the U.S. equity market reversed course during the second quarter to finish in negative territory for the first half of the year. The Russell Midcap^® Growth Index returned -10.20% during the second quarter to produce a -3.31% return for 2010 through June. The Fund outperformed during the second quarter’s decline and is ahead of the benchmark for the year-to-date period as well.

While the year started off on a positive note on the heels of better-than-expected corporate sales and earnings, macro concerns across the globe instilled fear, and volatility, back into the markets. European sovereign debt downgrades and fiscal austerity measures, the Gulf of Mexico oil catastrophe, U.S. state budget woes, and expiring stimulus programs all contributed to investor skepticism. More importantly, given the significance of job growth to a sustainable economic recovery, stubbornly lackluster employment and housing data have stoked fears of slipping back into a recession. Because of these negative developments and with the 2008 downturn fresh in investors’ minds, stock prices corrected as they once again succumbed to macro factors rather than company fundamentals.

During the second quarter, all sectors within the Russell Midcap^® Growth Index finished in the red. The Energy sector (-19%) was the worst performing sector given the macro concerns discussed above. Financials also underperformed with a -13% return. Outperforming modestly were Information Technology (-8%) and the typical defensive sectors, Health Care (-7%) and Consumer Staples (-8%).

For the year-to-date period, sector returns were more dispersed. Energy was the standout loser at -16%. Information Technology (-6%) and Financials (-5%) were the next worst performing sectors. Of the other major economic sectors in the index, Health Care performed best at +4%, while Consumer Discretionary also outperformed, (+1)%.

The Fund’s outperformance during the second quarter is attributable to strong stock selection and our typical lower-beta investment style coming into favor. Fund holdings in Consumer Discretionary, Industrials, Materials and Energy were the largest positive contributors to relative return during the quarter. On the other hand, certain stocks in Health Care and Financials weighed on relative results.

For the first half of the year, the Fund’s outperformance was the result of good stock selection and a positive benefit of our typical smaller-than-benchmark weighted average market capitalization. Stock selection was most significant in the Industrials, Materials, Information Technology and Consumer Discretionary sectors. Detracting from relative performance were some of the Fund’s Health Care and Financials holdings.

Two specific stocks boosting relative performance were Illumina, Inc. and Stericycle, Inc. Illumina, Inc. develops and markets integrated systems used in the gene sequencing and genotyping markets. The company’s machines enable medical and academic institutions to understand the genetic make-up of individuals which allows for more productive research in disease treatment and prevention. With its next generation machine launching soon, investors

20     Semi-Annual Report June 30, 2010

were expecting weak sales out of the company due to prospective customers delaying purchases in anticipation of the new machines. In reality, sales were better-than-expected. Illumina, Inc.’s order book remains robust and sales from non-genome research centers, the company’s core customer base, were quite strong. We maintained our position in the name given Illumina, Inc.’s technological leadership position and growth in the genetic sciences.

Stericycle, Inc. is the leading medical waste management company. The company collects and disposes of medical waste as a service for smaller facilities such as outpatient clinics and dental offices and larger facilities such as hospitals and blood banks. The stock was a leading contributor to returns during the second quarter and for the first half of the year. Given the non-cyclical nature of Stericycle, Inc.’s business, investors often flock to the stock when economic concerns are high as they were during the second quarter. We continue to own the stock, as we have for several years, given the growth opportunity and stability driven by its dominate market position.

On the other hand, two stocks detracting from returns were athenahealth, Inc. and Greenhill & Co., Inc. Athenahealth, Inc. is a provider of internet-based business services for physician practices. For example, the company’s solutions allow physician practices to improve accounts receivable days outstanding, bad debt expenses, and patient scheduling and follow-up. The stock was one of the leading detractors from returns during the second quarter and the first half of the year. During the first quarter, the company had to change a revenue recognition policy for a small piece of its business that weighed on investor confidence. During the second quarter, athenahealth, Inc. announced disappointing contract wins with new physician practices, which brought into question whether the company has the appropriate infrastructure in place to compete with larger competitors. We liquidated our position on the news, but would consider it for repurchase if we became comfortable with the company’s investment in infrastructure to support its growth.

Greenhill & Co., Inc. is a boutique merger and acquisition (M&A) advisory firm which has attracted many talented bankers from large Wall Street investment banks, allowing it to expand into new industry verticals and new geographies across the globe. The stock detracted from returns during the quarter and year-to-date period mainly due to disappointment regarding the expected reacceleration of the M&A cycle. We continue to hold a position as we believe the company is well-positioned to steal market share from larger competitors and will benefit when M&A activity improves.

Looking forward, while the economic recovery may have a different trajectory (less steep) than some were expecting earlier this year, the market’s decline has improved valuations and lowered expectations. Corporate financial discipline and balance sheets remain strong, and inventories are lean throughout most industries. This should lay the ground work for operating margin expansion, likely beyond prior peak margins, and drive continued earnings growth over the intermediate term. However, investor pessimism is understandably high given the expiration of stimulus plans and diminished appetite for additional programs, U.S. state budget crunches, still absent employment growth and likely further consumer deleveraging.

We consider the impact of these economic scenarios into our stock-specific risk/reward assessments, and focus our time analyzing business models and managements of growth companies who “control their own destiny” to a greater degree and are less dependent on broad economic growth. We continue to find solid investment opportunities across sectors. We believe the Fund consists of great companies with solid competitive positions whose stock prices are trading at attractive valuations.

June 30, 2010 William Blair Funds     21

Mid Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		Since Inception(a)
Class N	(2.58	)%	16.49	%	(4.23	)%	0.83	%
Class I	(2.45	)	16.78		(3.99	)	1.13
Russell MidCap® Growth Index	(3.31	)	21.30		(7.53	)	(1.99	)

(a) For the period from February 1, 2006 (Commencement of Operations)  to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Mid Cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell MidCap^® Growth Index is an index that is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

22     Semi-Annual Report June 30, 2010

Mid Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Industrials—20.9%
CH Robinson Worldwide, Inc.	20,400	$	1,135
Fastenal Co.	34,075		1,710
Gardner Denver, Inc.	21,400		954
Manpower, Inc.	16,790		725
MSC Industrial Direct Co. Class “A”	30,900		1,565
Precision Castparts Corporation	4,050		417
Robert Half International, Inc.	59,100		1,392
Rockwell Automation, Inc.	22,000		1,080
Roper Industries, Inc.	27,160		1,520
*Stericycle, Inc.	50,930		3,340
TransDigm Group, Inc.	34,950		1,784
			15,622
Consumer Discretionary—19.7%
*Bed Bath & Beyond, Inc.	39,460		1,463
*CarMax, Inc.	95,770		1,906
*Chipotle Mexican Grill, Inc.	8,600		1,177
DeVry, Inc.	26,110		1,370
*Dick’s Sporting Goods, Inc.	84,529		2,104
*Discovery Communications, Inc.	42,400		1,514
Gentex Corporation	58,780		1,057
*Harman International Industries, Inc.	29,200		873
*O’Reilly Automotive, Inc.	39,380		1,873
*WMS Industries, Inc.	35,540		1,395
			14,732
Information Technology—16.4%
*Alliance Data Systems Corporation	18,850		1,122
*Concur Technologies, Inc.	33,130		1,414
*Dolby Laboratories, Inc. Class “A”	12,770		801
*Genpact, Ltd.†	49,900		775
*McAfee, Inc.	38,100		1,170
*Silicon Laboratories, Inc.	33,910		1,375
Solera Holdings, Inc.	20,500		742
*Trimble Navigation, Ltd.	51,700		1,448
*VeriSign, Inc.	82,200		2,182
*VistaPrint N.V.†	25,830		1,227
			12,256
Health Care—15.9%
*American Medical Systems Holdings, Inc.	33,300		737
*Brookdale Senior Living, Inc.	41,262		619
*CareFusion Corporation	67,339		1,528
*Cerner Corporation	14,600		1,108
DENTSPLY International, Inc.	22,400		670
*HMS Holdings Corporation	14,000		759
*IDEXX Laboratories, Inc.	31,172		1,898
*Illumina, Inc.	58,020		2,526
Perrigo Co.	13,300		786
*QIAGEN N.V.†	62,846		1,208
			11,839

* Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Consumer Staples—9.1%
Church & Dwight Co., Inc.		18,900	$	1,185
*Green Mountain Coffee Roasters, Inc.		127,756		3,283
McCormick & Co., Inc.		41,100		1,560
Mead Johnson Nutrition Co.		15,700		787
				6,815
Financials—5.8%
*Affiliated Managers Group, Inc.		16,175		983
Greenhill & Co., Inc.		20,320		1,242
*IntercontinentalExchange, Inc.		6,550		740
Invesco, Ltd.†		82,500		1,389
				4,354
Energy—4.7%
*Cameron International Corporation		18,600		605
*Denbury Resources, Inc.		67,270		985
*Newfield Exploration Co.		19,930		974
Range Resources Corporation		11,200		449
*Southwestern Energy Co.		12,570		486
				3,499
Materials—3.0%
Ecolab, Inc.		48,800		2,191
Total Common Stocks—95.5% (cost $65,540)				71,308
Investment in Affiliate
William Blair Ready Reserves Fund		18,725		19
Total Investment in Affiliate—0.0% (cost $19)				19
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $3,090, collateralized by FHLB, 4.375%, due 9/17/10	$	3,090		3,090
Total Repurchase Agreement—4.1% (cost $3,090)				3,090
Total Investments—99.6% (cost $68,649)				74,417
Cash and other assets, less liabilities—0.4%				287
Net assets—100.0%			$	74,704

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     23

Karl W. Brewer

Robert C. Lanphier, IV

Matthew A. Litfin

SMALL-MID CAP GROWTH FUND

The Small-Mid Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Small-Mid Cap Growth Fund posted a 3.07% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Russell 2500^™ Growth Index, declined 1.82%.

After a strong first quarter, the U.S. equity market reversed course during the second quarter to finish in negative territory for the first half of 2010. The Russell 2500^™ Growth Index returned -9.77% during the second quarter to produce a -1.82% return for 2010 through June. The William Blair Small-Mid Cap Growth Fund outperformed during the second quarter’s decline and is now modestly behind the benchmark for the year-to-date period.

While the year started off on a positive note on the heels of better-than-expected corporate sales and earnings, macroeconomic concerns across the globe instilled fear and volatility back into the markets. European sovereign debt downgrades and fiscal austerity measures, the Gulf of Mexico oil catastrophe, U.S. state budget woes and expiring stimulus programs all contributed to investor skepticism. Stubbornly lackluster employment and housing data have stoked fears of slipping back into a recession. Because of these negative developments and with the 2008 downturn fresh in investors’ minds, stock prices corrected as this new data raised doubts about future corporate earnings growth.

During the second quarter, all sectors within the Russell 2500^™ Growth Index finished in the red. The Energy sector (-17%) was the worst performing given the concerns discussed above. Consumer Discretionary stocks (-12%) also underperformed as investors anticipated a potential slip in consumer spending due to an uncertain income tax outlook and a potentially weaker economic environment. Financials were down 12% as well, while Information Technology was the best performing major economic sector, returning -7%.

For the year-to-date period, most sectors ranged from -2% to +4%, with Energy being the one outlier at -13%. Of the significant economic sectors in the index, Health Care and Consumer Discretionary led the way (+2%), while Financials (-4%), Industrials (-3%) and Information Technology (-3%) all modestly underperformed.

The Small-Mid Cap Growth Fund’s outperformance during the second quarter is attributable to strong stock selection and our more conservative investment style coming into favor. Fund holdings in Consumer Discretionary, Health Care and Energy were the largest positive contributors to relative returns during the quarter. On the other hand, certain stocks in Information Technology and Financials weighed on relative results.

For the first half of the year, the Fund’s narrow underperformance was the result of mixed stock selection across sectors. Positive contributors to relative return came within the Consumer Discretionary, Materials and Telecommunication Services sectors, while certain underperforming stocks in Financials, Industrials and Health Care detracted from relative performance.

Two specific stocks detracting from returns were Invesco, Ltd. and McAfee, Inc. Invesco, Ltd. is a global asset management firm. The stock was a leading detractor from return during the second quarter and year-to-date period. Despite better-than-expected flows and management guidance regarding synergies of the Van Kampen acquisition in the second quarter, asset flows for the year have been disappointing and investors have concerns regarding the integration of the Van Kampen acquisition. However, the primary factor

24     Semi-Annual Report June 30, 2010

contributing to the stock’s underperformance was the stock market’s second quarter decline and its anticipated effect on assets under management and thus, future revenue growth. We maintained our position in the stock as we continue to believe in Invesco, Ltd.’s management team, its investment products, and believe the Van Kampen acquisition will be highly complementary to its existing business.

McAfee, Inc. is a security technology company that protects systems and networks from known and unknown threats worldwide. The stock detracted from returns during the second quarter and for the first half of the year overall. Earnings announced during the second quarter were disappointing as was management’s guidance for future earnings. While McAfee, Inc.’s consumer business performed well, the corporate side was weaker than expected. Given the previous trends of market share gains with corporate customers, this was disappointing. In addition, one of McAfee, Inc.’s regular software updates caused customer computers to effectively shut down, most likely distracting the sales force (as they dealt with customer issues) and denting the company’s reputation. Despite what we believe is a disappointing development, we continue to own this market leader within a growth industry.

Two specific stocks that boosted relative results were SXC Health Solutions Corporation and Stericycle, Inc. SXC Health Solutions Corporation provides pharmacy benefit management (PBM) services and healthcare information technology solutions. The stock performed well during the second quarter and throughout the first half of the year. The company has strong business momentum and is benefitting from continued growth in mail delivery and generic utilization of pharmaceuticals. During the first quarter, the company announced a large new PBM contract win with HealthSpring, a managed care company, and sales momentum continued to build in the second quarter. SXC Health Solutions Corporation’s recent business strength is in part driven by leveraging its strong customer relationships in its legacy healthcare information technology business to cross-sell the company’s PBM capabilities. We trimmed our position on the strength, but continue to hold a position as we believe the company’s focused management team and differentiated customer solutions will drive further growth.

Stericycle, Inc. is the leading medical waste management company. The company collects and disposes of medical waste as a service for smaller facilities such as outpatient clinics and dental offices, and larger facilities such as hospitals and blood banks. The stock was a leading contributor to returns during the second quarter and for the first half of the year. Given the acyclical nature of Stericycle, Inc.’s business, investors often flock to the stock when economic concerns are high as they were during the second quarter. We continue to own the stock, as we have for several years, given the growth opportunity and stability driven by its dominant market position.

Looking forward, we believe the business environment for U.S. companies remains favorable, and thus the U.S. equity market is attractive, especially for small- and mid-cap growth companies in which your Fund invests. Measures of investor sentiment have become bearish in recent weeks, and periods of outperformance often follow such sentiment shifts. The earnings growth outlook remains intact, valuations are cheaper than normal, profit margins are higher than average (at similar periods of bearishness), interest rates are at all-time lows, and the Federal Reserve remains accommodative. We recognize that either a global recession or significant further weakness in the U.S. housing market could pressure equity returns further in the near-term, but overall we believe the reward-to-risk ratios remain positive.

We consider the impact of these varying economic scenarios in our stock research and earnings estimation process. However, we focus our time analyzing business models and managements of growth companies that control their own destiny and are less dependent on broader economic growth to boost earnings. We continue to find solid investment opportunities across sectors and are confident that your Fund consists of great companies with strong competitive positions whose stock prices are trading at attractive valuations.

June 30, 2010 William Blair Funds     25

Small-Mid Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Class N	(3.07	)%	16.86	%	(4.87	)%	3.55	%	4.55	%
Class I	(2.93	)	17.21		(4.61	)	3.82		4.82
Russell 2500™ Growth Index	(1.82	)	21.44		(7.10	)	1.81		3.28

(a) For the period from December 29, 2003 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Small and Mid cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2500^™ Growth Index measures the performance of those Russell 2500 companies with above average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

26     Semi-Annual Report June 30, 2010

Small-Mid Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Industrials—23.6%
Allegiant Travel Co.	46,865	$	2,001
*Cenveo, Inc.	209,100		1,146
*Corrections Corporation of America	73,455		1,401
*CoStar Group, Inc.	47,800		1,855
Fastenal Co.	57,860		2,904
*GrafTech International, Ltd.	215,700		3,154
Heidrick & Struggles International, Inc.	72,540		1,655
*Huron Consulting Group, Inc.	85,700		1,663
*ICF International, Inc.	59,471		1,423
Kaydon Corporation	51,959		1,707
Manpower, Inc.	69,250		2,990
Robert Half International, Inc.	52,003		1,225
Roper Industries, Inc.	40,800		2,283
*Stericycle, Inc.	66,420		4,356
The Corporate Executive Board Co.	63,300		1,663
TransDigm Group, Inc.	39,508		2,016
			33,442
Consumer Discretionary—21.0%
*Career Education Corporation	82,925		1,909
*Chipotle Mexican Grill, Inc.	10,165		1,391
DeVry, Inc.	36,865		1,935
*Dick’s Sporting Goods, Inc.	175,500		4,368
*Education Management Corporation	88,000		1,342
Gentex Corporation	122,400		2,201
Jarden Corporation	92,200		2,477
*K12, Inc.	83,950		1,862
*O’Reilly Automotive, Inc.	46,150		2,195
P.F. Chang’s China Bistro, Inc.	31,822		1,262
*Steiner Leisure, Ltd.†	38,300		1,472
Strayer Education, Inc.	6,400		1,330
*Tempur-Pedic International, Inc.	78,000		2,398
*Under Armour, Inc. Class “A”	52,960		1,755
*Urban Outfitters, Inc.	52,800		1,816
			29,713
Health Care—17.7%
*AGA Medical Holdings, Inc.	169,159		2,147
*American Medical Systems Holdings, Inc.	81,800		1,809
*athenahealth, Inc.	62,140		1,624
*Brookdale Senior Living, Inc.	56,876		853
*Cerner Corporation	36,600		2,778
*Covance, Inc.	32,900		1,688
CR Bard, Inc.	21,700		1,682
*HMS Holdings Corporation	33,900		1,838
*IDEXX Laboratories, Inc.	25,905		1,578
*Illumina, Inc.	57,700		2,512
*Kensey Nash Corporation	45,816		1,086
*NuVasive, Inc.	39,900		1,415
Perrigo Co.	43,900		2,593
*SXC Health Solutions Corporation†	19,809		1,451
			25,054
Information Technology—17.4%
Blackbaud, Inc.	69,600		1,515
*Cavium Networks, Inc.	62,600		1,640
*Concur Technologies, Inc.	52,400		2,236
*DG FastChannel, Inc.	49,257		1,605

*Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Information Technology—(continued)
*j2 Global Communications, Inc.		108,075	$	2,360
*McAfee, Inc.		73,400		2,255
*Silicon Laboratories, Inc.		42,560		1,726
*Trimble Navigation, Ltd.		62,200		1,742
*Ultimate Software Group, Inc.		74,125		2,436
United Online, Inc.		288,687		1,663
*VeriSign, Inc.		76,200		2,023
*VistaPrint N.V.†		72,757		3,455
				24,656
Financials—8.1%
*Affiliated Managers Group, Inc.		53,980		3,280
*First Horizon National Corporation		157,633		1,805
*FirstService Corporation†		62,375		1,295
Invesco, Ltd.†		173,600		2,922
Jones Lang LaSalle, Inc.		33,200		2,179
				11,481
Energy—4.7%
*Comstock Resources, Inc.		61,800		1,713
*Concho Resources, Inc.		41,740		2,310
*Oceaneering International, Inc.		29,800		1,338
*Oil States International, Inc.		35,200		1,393
				6,754
Consumer Staples—4.4%
Alberto-Culver Co.		118,450		3,209
*Green Mountain Coffee Roasters, Inc.		117,021		3,007
				6,216
Telecommunication Services—1.6%
*Syniverse Holdings, Inc.		112,700		2,305
Total Common Stocks—98.5% (cost $129,979)				139,621
Investment in Affiliate
William Blair Ready Reserves Fund		22,697		23
Total Investment in Affiliate—0.0% (cost $23)				23
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $2,109, collateralized by FHLB, 4.375%, due 09/17/10	$	2,109		2,109
Total Repurchase Agreement—1.5% (cost $2,109)				2,109
Total Investments—100.0% (cost $132,111)				141,753
Liabilities, plus cash and other assets—0.0%				(55	)
Net assets—100.0%			$	141,698

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     27

GLOBAL MARKETS OVERVIEW

Summary

Year to date, the global equity market fell 8.65% as measured by the MSCI AC World IMI (net), with the MSCI World Ex-U.S. Index falling 11.78%. Developed non-U.S. markets underperformed Emerging markets, which fell 5.68%, as measured by the MSCI Emerging Markets IMI (net). The U.S. also underperformed other Developed equity markets, falling 6.28%, as measured by the MSCI US IMI (net), as significant U.S. dollar appreciation particularly hurt European, U.K. and Pacific Ex-Japan returns to U.S. dollar investors. In addition, investor sentiment was hampered by concerns regarding the debt crisis in Europe and the response to it, coupled with concerns about a “double dip” recession. Emerging markets were led by Asia, particularly Indonesia and India, which offset relative weakness from China, while Latin America underperformed, due to weakness in Brazil. Within Emerging Europe, Middle East and Africa (EMEA), South Africa, Egypt and Turkey outperformed Russia and the Central/Eastern European countries. Year to date developed small cap stocks were down 6.31%, as small cap stocks outperformed their larger cap counterparts across most regions. Sectorally, global Consumer and Industrials stocks led relative results, each falling between 3.5% and 4.0%, while Energy fell nearly 16%, and Materials and Utilities were each down approximately 11%. Commodity-related sectors underperformed as the Chinese monetary authorities tightened policy in an attempt to constrain speculation in that market, and the market became concerned about the sustainability of prices amidst potentially softening near term demand.

Outlook

As we enter a more mature phase of recovery, we have seen economic readings begin to weaken throughout the second quarter. Composite leading indicators are rolling over, with the evidence of a potential peak in growth strongest in China. This potential deceleration should not be surprising given the Chinese government’s efforts to restrain real estate markets, but it has become a cause for concern in the markets given China’s important role in global growth. Producer Manufacturing Indices (PMIs) in China and elsewhere are still pointing to growth but are now declining.

Stimulus is fading in the U.S. and employment is stagnant. Sovereign debt concerns have at times threatened to overwhelm Europe and the ECB (European Central Bank) is supporting austerity measures. Fears of a double-dip have re-emerged, and the uncertainties regarding global growth have led to a shift away from risky assets. This risk-off tone has been evidenced by the rally in U.S. Treasuries, the strength of the dollar and the rising price of gold. Despite a fiscal deficit and total debt to GDP ratios that are similar to the worst of the European offenders, the U.S. dollar has appreciated as it is considered to be the best of a dodgy breed.

While the odds of a slowdown have increased and the risks to global growth are now to the downside, double-dips are indeed rare. Indicators are not pointing to negative growth and the reality is that we have likely entered a soft patch as slower growth in the second half will follow the better than expected growth in the first half. We believe that China will avoid a hard landing, the U.S. will maintain positive growth, albeit at a slower rate, and Europe will continue to muddle through.

Earlier this year, with a bubble forming in sections of the residential property market, China put the brakes on lending to moderate prices. While it is possible that they overshoot to the downside, we believe that a hard landing will be averted as policy measures to moderate the housing market are implemented and growth slows from 11.9% in the first quarter to 8-9% in the 2^nd half. China’s removal of the U.S. dollar peg was applauded by global leaders and is a

28     Semi-Annual Report June 30, 2010

positive for the Chinese consumer. China’s inflation rose slightly above target but is very moderate at 3.1% especially given its growth and is expected to stay below 4%. Commodity prices (ex-gold) have retreated promoting lower inflation rates.

Economic readings in the U.S. have become more mixed and fears of a double-dip in housing have resurfaced. Data were strong through the quarter spurred by the $8,000 tax credit but starts and sales plummeted after its expiration. But while purchase applications are depressed, record low mortgage rates have stimulated refinancing activity. U.S. employment data disappointed throughout the quarter. At 9.5%, the unemployment rate is now flat versus a year ago but the most recent decline came from lower participation and not job creation. With the small business recovery yet to come, improvements in the NFIB small business optimism index are a promising sign that we can hope to see a new leg of growth and employment gains. The weak outlook for jobs is negatively impacting confidence but has not flowed through to consumer spending as much as expected. Consumers are also less leveraged than they were going into the crisis.

The sovereign debt crisis in Europe has created pressure for countries to set forth fiscal consolidation plans and some austerity measures have already been imposed. While these measures threaten to weaken already subdued growth, a Euro area double-dip is not the consensus view. The southern countries have remained weak but the German recovery remains intact as industrial production has been strong and exports, as well as those of the rest of the Euro-area have been helped by weakness of the Euro. A weaker exchange rate should be broadly expansionary as strong exports will help to boost government tax receipts and will support employment providing a much needed growth driver.

Aggressive fiscal policy around the world was quite effective during the crisis and prevented a prolonged global recession. Policy makers in the developed economies now face difficult decisions as they must face the deficit positions that they have created or exacerbated. A global debate is heating up between proponents of fiscal austerity and continued stimulative spending. The sovereign debt crisis in Europe has shifted the bias towards tightening while the U.S. has not jumped on the austerity bandwagon and is unlikely to do so ahead of the mid-term elections. Emerging markets do not face the same conflict as their debt-to-GDP ratios are considerably lower.

Monetary policy decisions in the developed world are much simpler as high unemployment persists while near-term inflation threats are benign. Additionally, there are no looming asset bubbles because the impairments in the financial system have prevented excess liquidity from flowing into the system. Central banks are expected to err on the side of tightening too late versus too early given the fragility of growth prospects. This “looser for longer” bias is pro-growth and could be a positive for equity markets.

Earnings expectations have rebounded around the globe. New highs in earnings are predicted for the current fiscal year in the emerging markets regions. Estimates for the developed world still remain 10-40% below prior peaks but earnings revisions going forward will likely slow. Of the cyclical sectors, technology has had the strongest rebound especially in the U.S. Multiples have contracted in every region as macro concerns dominated company fundamentals. Dividend yields are above 3% in Europe (including the U.K.) and companies around the world have substantial cash balances which could be used for future buybacks and/or incremental dividends. Uncertainties remain, but attractive valuations and strong balance sheets create an opportunity for solid returns going forward.

June 30, 2010 William Blair Funds     29

W. George Greig

Kenneth J. McAtamney

GLOBAL GROWTH FUND

The Global Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 28 for the Global Markets Overview.

The Global Growth Fund posted a 5.74% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World IMI index (net) declined 8.65%.

The Fund outpaced the Index year to date. Strong stock selection across most sectors and regions augmented first half results. The Fund’s Consumer Discretionary holdings added significant value during the period, driven by positive relative performance across regions, with particular value added in U.S. media and retailing, and Asian auto. Energy stock selection was boosted by good performance with Developed Europe, the U.S. and emerging Asia, while the Fund’s U.S. Healthcare names performed well. Telecommunication Services stock selection was strong due to the performance of sole sector holding, Softbank, due to strength from iPhone and iPad sales and subscriber increases. Regionally, Developed Europe, U.S., and emerging markets stock selection was strong during the first half of the year. Within Developed Europe, the Fund benefited from an underweighting and stock selection in the underperforming Financials sector, coupled with strong performance by European Discretionary, Energy and Materials holdings. Within the U.K., Energy and Financials outperformed. U.S. stock selection was particularly strong within Consumer Discretionary, Consumer Staples, Energy, and Health Care, which more than offset relative weakness within U.S. Financials.

As of June 30, the Fund maintained its focus on Consumer Discretionary holdings at 26.0% of the Fund, with approximately half of that exposure in the U.S. This weighting increased substantially from year end, when Consumer Discretionary represented approximately 16.8%. Financials, while representing approximately 16.0% of the Fund at June 30, was underweighted versus the Index despite significant exposure in emerging markets, due to the underweighting in Developed Asia, the U.S. and Europe Ex-U.K. This positioning did not change substantially since year end. Health Care and Information Technology represented 11.0% and 13.3% of the Fund, above Index weightings and similar to year end, while Industrials declined. Regionally, the Fund increased exposure in Europe Ex-U.K. to 18.3% from 14.1%, and was overweighted versus the market as of June 30. Conversely, U.S. exposure remained relatively stable as of year end and June 30; however, those endpoints belie an increase in the U.S. weighting during the first quarter and a nearly comparable decrease during the second quarter, due largely to a reduction in Energy, Financials, and Health Care names. Emerging markets declined slightly during the six month period, from approximately 22.4% to 20.5%, as exposure within Emerging Asia decreased.

30     Semi-Annual Report June 30, 2010

Global Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		Since Inception(a)
Class N	(5.74	)%	13.86	%	(14.15	)%
Class I	(5.60	)	14.27		(13.87	)
MSCI All Country World IMI (net)	(8.65	)	13.07		(12.92	)

(a) For the period from October 15, 2007 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Small and Mid Cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1).

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market of developed and emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     31

Global Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Western Hemisphere—42.0%
Canada—2.8%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†	17,345	$	392
Crescent Point Energy Corporation (Oil, gas & consumable fuels)	7,689		269
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	10,800		310
			971
United States—39.2%
*Affiliated Managers Group, Inc. (Capital markets)	4,882		297
American Express Co. (Consumer finance)	15,191		603
*Apple, Inc. (Computers & peripherals)	3,551		893
*AutoZone, Inc. (Specialty retail)	2,426		469
*Bed Bath & Beyond, Inc. (Specialty retail)	11,484		426
*CareFusion Corporation (Health care equipment & supplies)	15,472		351
*Cerner Corporation (Health care technology)	4,462		339
*Chipotle Mexican Grill, Inc. (Hotels, restaurants & leisure)	3,390		464
DeVry, Inc. (Diversified consumer services)	4,670		245
EOG Resources, Inc. (Oil, gas & consumable fuels)	6,320		622
*Express Scripts, Inc. (Health care providers & services)	10,692		503
Family Dollar Stores, Inc. (Multiline retail)	7,931		299
Freeport-McMoRan Copper & Gold, Inc. (Metals & mining)	6,604		390
Gentex Corporation (Auto components)	18,173		327
Goodrich Corporation (Aerospace & defense)	4,801		318
*Google, Inc. Class “A” (Internet software & services)	1,331		592
*GrafTech International, Ltd. (Electrical equipment)	11,720		171
Hewlett-Packard Co. (Computers & peripherals)	14,605		632
*IDEXX Laboratories, Inc. (Health care equipment & supplies)	6,890		420
J.B. Hunt Transport Services, Inc. (Road & rail)	11,126		363
*j2 Global Communications, Inc. (Internet software & services)	7,957		174
*Kohl’s Corporation (Multiline retail)	8,705		413
Lockheed Martin Corporation (Aerospace & defense)	7,148		533
Lowe’s Cos., Inc. (Specialty retail)	20,009		409
Mead Johnson Nutrition Co. (Food products)	8,324		417
MSC Industrial Direct Co. Class “A” (Trading companies & distributors)	6,100		309
*Newfield Exploration Co. (Oil, gas & consumable fuels)	6,964		340
*Silicon Laboratories, Inc. (Semiconductors & semiconductor equipment)	6,022		244
Starbucks Corporation (Hotels, restaurants & leisure)	23,783		578
The Goldman Sachs Group, Inc. (Capital markets)	4,380		575
*Urban Outfitters, Inc. (Specialty retail)	12,022		413
Yum! Brands, Inc. (Hotels, restaurants & leisure)	13,294		519
			13,648

Issuer	Shares	Value
Common Stocks—Europe—18.3%
Denmark—3.1%
Coloplast A/S (Health care equipment & supplies)	2,002	$	199
Novo Nordisk A/S (Pharmaceuticals)	6,900		557
Novozymes A/S (Chemicals)	2,999		320
			1,076
Finland—0.9%
Kone Oyj (Machinery)	7,707		307
Germany—5.9%
Aixtron AG (Semiconductors & semiconductor equipment)	6,073		143
BASF SE (Chemicals)	9,453		516
*Daimler AG (Automobiles)	12,414		628
SAP AG (Software)	13,870		617
Wincor Nixdorf AG (Computers & peripherals)	2,981		167
			2,071
Israel—1.6%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)	10,297		535
Norway—1.6%
Statoil ASA (Oil, gas & consumable fuels)	28,100		541
Portugal—1.0%
Jeronimo Martins SGPS S.A. (Food & staples retailing)	37,643		345
Spain—0.4%
Tecnicas Reunidas S.A. (Energy equipment & services)	3,321		151
Switzerland—3.8%
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)	11,647		407
*Mettler-Toledo International, Inc. (Life sciences tools & services)	2,327		260
Partners Group Holding AG (Capital markets)	3,051		368
Sika AG (Chemicals)	163		289
			1,324
United Kingdom—10.2%
Amlin plc (Insurance)	51,366		296
BlueBay Asset Management plc (Capital markets)	56,147		241
Compass Group plc (Hotels, restaurants & leisure)	56,371		429
Intertek Group plc (Professional services)	8,459		181
Michael Page International plc (Professional services)	29,630		164
Next plc (Multiline retail)	11,109		331
Petrofac, Ltd. (Energy equipment & services)	22,913		403
Reckitt Benckiser Group plc (Household products)	9,050		421
Standard Chartered plc (Commercial banks)	21,245		517
The Weir Group plc (Machinery)	15,751		242
Vedanta Resources plc (Metals & mining)	10,228		321
			3,546

See accompanying Notes to Financial Statements.

32     Semi-Annual Report June 30, 2010

Global Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—10.2%
China—3.7%
CNOOC, Ltd. (Oil, gas & consumable fuels)	373,000	$	634
Dongfeng Motor Group Co., Ltd. (Automobiles)	272,000		315
Industrial and Commercial Bank of China (Commercial banks)	459,000		334
			1,283
Indonesia—2.0%
PT Astra International Tbk (Automobiles)	129,500		684
Malaysia—0.6%
Top Glove Corporation Bhd (Health care equipment & supplies)	51,200		216
South Korea—2.4%
Hyundai Motor Co. (Automobiles)	6,979		817
Taiwan—1.5%
Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & semiconductor equipment)	178,000		333
Tripod Technology Corporation (Electronic equipment, instruments & components)	53,000		196
			529
Emerging Latin America—4.2%
Brazil—1.4%
Natura Cosmeticos S.A. (Personal products)	21,400		474
Chile—1.1%
Banco Santander Chile—ADR (Commercial banks)	5,894		396
Mexico—1.7%
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	268,200		594
Emerging Europe, Mid-East, Africa—3.9%
South Africa—2.7%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)	34,128		337
Mr Price Group, Ltd. (Specialty retail)	33,495		195
Standard Bank Group, Ltd. (Commercial banks)	31,518		418
			950

ADR = American Depository Receipt

† = U.S. listed foreign security

*Non-income producing securities

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—3.9%—(continued)
Turkey—1.2%
Turkiye Garanti Bankasi A.S. (Commercial banks)		102,137	$	425
Japan—4.8%
Canon, Inc. (Office electronics)		14,100		526
Exedy Corporation (Auto components)		5,900		151
Fanuc, Ltd. (Machinery)		4,900		553
Softbank Corporation (Wireless telecommunication services)		16,300		433
				1,663
Asia—1.8%
Australia—1.8%
BHP Billiton, Ltd. (Metals & mining)		19,983		622
Total Common Stocks—95.4% (cost $30,423)				33,168
Preferred Stocks
Emerging Latin America
Itau Unibanco Holding S.A. (Commercial banks)		31,800		572
Randon Participacoes S.A. (Machinery)		34,500		197
Total Preferred Stocks—2.2% (cost $794)				769
Investment in Affiliate
William Blair Ready Reserves Fund		28,800		29
Total Investment in Affiliate—0.1% (cost $29)				29
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $809, collateralized by FHLB, 4.375%, due 9/17/10	$	809		809
Total Repurchase Agreement—2.3% (cost $809)				809
Total Investments—100.0% (cost $32,055)				34,775
Cash and other assets, less liabilities—0.0%				11
Net assets—100.0%			$	34,786

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     33

Global Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	26.0%
Financials	16.0%
Information Technology	13.3%
Health Care	11.0%
Industrials	9.8%
Energy	8.7%
Materials	7.3%
Consumer Staples	6.6%
Telecommunication Services	1.3%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

U.S. Dollar	44.9%
British Pound Sterling	10.4%
Euro	8.5%
Japanese Yen	4.9%
Hong Kong Dollar	3.8%
Brazilian Real	3.7%
Danish Krone	3.2%
Swiss Franc	3.1%
South African Rand	2.8%
South Korean Won	2.4%
Indonesian Rupiah	2.0%
Australian Dollar	1.8%
Mexican Peso	1.7%
Canadian Dollar	1.7%
Norwegian Krone	1.6%
New Taiwan Dollar	1.6%
Turkish Lira	1.3%
All Other Currencies	0.6%
Total	100.0%

See accompanying Notes to Financial Statements.

34     Semi-Annual Report June 30, 2010

W. George Greig

INTERNATIONAL GROWTH FUND

The International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Please see page 28 for the Global Markets Overview.

The International Growth Fund posted a 4.20% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), declined 10.41%.

Year to date, the Fund’s stock selection was strong in virtually every sector, with the exception of the Fund’s one Utilities holding. In particular, Consumer Discretionary stock selection was strong, added by performance by a number of the Fund’s auto- and transportation-related holdings, coupled with strong performance within the U.K.. Energy stock selection augmented results, as the Fund’s holdings outpaced the Index by nearly 10%. Strong Financials stock selection was driven by the significant underweighting in European Financials stocks, coupled with limited exposure to commercial banks and capital markets companies within the European Union. Moreover, the Fund’s tilt towards Financials with significant Emerging Markets exposure added value. Strong performance in U.K. and Emerging Markets Industrials was also positive. Somewhat detracting from results was performance by EDF Energies Nouvelles S.A., the French alternative Utilities company, which was hampered by concerns about demand and subsidies within the alternative energy space. Regionally, stock selection was strong across most regions, with the exception of Pacific Ex-Japan and Canada. In addition, the Fund’s currency hedging strategy also added just shy of 1% to relative performance.

The Fund’s overall positioning did not substantially change since year end, with its focus remaining in Consumer Discretionary and Industrials at the expense of Materials and Financials. Regionally, the Fund remained underweighted in Developed Market Financials due not only to concerns emanating from the European situation and potential regulatory changes, but also from a growth perspective relative to other opportunities. While the European Financial sector was slightly underweighted versus the Index, the European geographic weighting increased from approximately 23% as of year end, due to the reclassification of Israel (and Teva Pharmaceutical Industries, Ltd.) into Europe from Emerging Europe, Middle East, and Africa (EMEA), coupled with an increase in Consumer Discretionary, Energy and Materials. Emerging Markets exposure was 27.0%, slightly below the 29.4% weighting as of year end, although the complexion of the underlying Emerging Markets regional exposures changed. In particular, we reduced exposure in Emerging Asian Consumer Staples, Industrials, Information Technology and Materials holdings due to concerns about a slowdown in these economies amidst potential overheating concerns, as well as specific valuation concerns. Conversely, exposure in Emerging Latin American Energy, Industrials and Telecommunication Services companies increased. After increasing currency hedges against the Pound Sterling, Euro and Japanese Yen in the first quarter of the year, we began unwinding most exposure following the European debt crisis when the Euro and Sterling significantly depreciated. As a result, as of June 30, the only hedge against U.S. dollar appreciation we maintained in the Fund was a partial hedge against the Japanese Yen. This hedge represented approximately 4% of the Fund’s Net Assets at June 30.

June 30, 2010 William Blair Funds     35

International Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	(4.20	)%	16.42	%	(11.75	)%	2.51	%	2.47	%
Class I	(4.01	)	16.78		(11.47	)	2.83		2.76
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49		(10.50	)	3.63		2.23

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

36     Semi-Annual Report June 30, 2010

International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—28.5%
Belgium—0.6%
Colruyt S.A. (Food & staples retailing)	106,844	$	25,134
Denmark—2.0%
Coloplast A/S (Health care equipment & supplies)	179,998		17,866
FLSmidth & Co. A/S (Construction & engineering)	279,902		18,064
Novo Nordisk A/S (Pharmaceuticals)	314,100		25,377
Novozymes A/S (Chemicals)	154,371		16,472
SimCorp A/S (Software)	43,303		6,897
			84,676
Finland—1.1%
Kone Oyj (Machinery)	763,884		30,414
Nokian Renkaat Oyj (Auto components)	649,181		15,888
			46,302
France—5.3%
Air Liquide S.A. (Chemicals)	422,793		42,696
bioMerieux (Health care equipment & supplies)	142,300		14,610
Cie Generale des Etablissements Michelin (Auto components)	479,355		33,398
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)	396,564		13,416
Essilor International S.A. (Health care equipment & supplies)	434,102		25,796
Hermes International (Textiles, apparel & luxury goods)	157,772		20,915
L’Oreal S.A. (Personal products)	425,984		41,708
Schneider Electric S.A. (Electrical equipment)	318,909		32,210
			224,749
Germany—4.5%
BASF SE (Chemicals)	1,161,830		63,483
*Daimler AG (Automobiles)	718,533		36,347
Fielmann AG (Specialty retail)	132,990		10,067
Lanxess AG (Chemicals)	270,359		11,380
MAN SE (Machinery)	243,840		20,103
SAP AG (Software)	980,997		43,622
Wincor Nixdorf AG (Computers & peripherals)	94,858		5,302
			190,304
Ireland—0.3%
Paddy Power plc (Hotels, restaurants & leisure)	368,386		11,445
Israel—1.9%
Bezeq Israeli Telecommunication Corp., Ltd. (Diversified telecommunication services)	9,484,302		20,732
Israel Chemicals, Ltd. (Chemicals)	2,509,008		26,138
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)	659,925		34,309
			81,179
Italy—0.8%
Ansaldo STS SpA (Transportation infrastructure)	681,263		10,936
DiaSorin SpA (Health care equipment & supplies)	273,591		10,022

Issuer	Shares	Value
Common Stocks—Europe—28.5%—(continued)
Italy—(continued)
Saipem SpA (Energy equipment & services)	466,147	$	14,198
			35,156
Norway—1.3%
*Norwegian Air Shuttle ASA (Airlines)	348,631		5,574
Statoil ASA (Oil, gas & consumable fuels)	2,608,900		50,260
			55,834
Portugal—0.4%
Jeronimo Martins SGPS S.A. (Food & staples retailing)	1,773,207		16,246
Spain—2.2%
Banco Santander S.A. (Commercial banks)	5,337,036		55,965
Inditex S.A. (Specialty retail)	375,281		21,399
Tecnicas Reunidas S.A. (Energy equipment & services)	310,555		14,123
			91,487
Sweden—0.2%
Elekta AB (Health care equipment & supplies)	332,018		8,402
Switzerland—7.9%
*ABB, Ltd. (Electrical equipment)	904,993		15,757
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)	1,517,355		52,974
Credit Suisse Group AG (Capital markets)	349,132		13,126
Geberit AG (Building products)	117,166		18,231
Kuehne + Nagel International AG (Marine)	188,115		19,364
Novartis AG (Pharmaceuticals)	890,273		43,145
*Orascom Development Holding AG (Hotels, restaurants & leisure)	109,528		6,076
Partners Group Holding AG (Capital markets)	208,232		25,125
Roche Holding AG (Pharmaceuticals)	94,921		13,792
SGS S.A. (Professional services)	25,338		34,198
Sika AG (Chemicals)	9,633		17,076
Sonova Holding AG (Health care equipment & supplies)	188,900		23,181
Zurich Financial Services AG (Insurance)	247,079		54,460
			336,505
United Kingdom—19.6%
Abcam plc (Biotechnology)	390,302		7,129
Admiral Group plc (Insurance)	1,372,535		28,744
Aggreko plc (Commercial services & supplies)	795,726		16,705
AMEC plc (Energy equipment & services)	1,460,458		17,893
Amlin plc (Insurance)	2,922,234		16,819
Aveva Group plc (Software)	626,588		10,516
Babcock International Group plc (Commercial services & supplies)	2,961,723		26,312
Barclays plc (Commercial banks)	10,037,646		40,065
BHP Billiton plc (Metals & mining)	2,124,238		55,078
BlueBay Asset Management plc (Capital markets)	1,981,156		8,484
Britvic plc (Beverages)	1,727,867		12,245
Burberry Group plc (Textiles, apparel & luxury goods)	1,148,165		12,967

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     37

International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—United Kingdom—19.6%—(continued)
*Cairn Energy plc (Oil, gas & consumable fuels)	2,909,808	$	17,876
Chemring Group plc (Aerospace & defense)	365,436		16,160
Compass Group plc (Hotels, restaurants & leisure)	3,286,320		25,001
*Dana Petroleum plc (Oil, gas & consumable fuels)	811,644		13,663
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)	1,449,531		8,190
Experian plc (Professional services)	1,917,523		16,675
*Heritage Oil plc (Oil, gas & consumable fuels)	1,852,566		10,850
HSBC Holdings plc (Commercial banks)	485,200		4,448
Inmarsat plc (Diversified telecommunication services)	1,143,139		12,121
Intertek Group plc (Professional services)	803,325		17,221
Johnson Matthey plc (Chemicals)	918,153		20,399
Lancashire Holdings, Ltd. (Insurance)	1,093,134		8,103
Meggitt plc (Aerospace & defense)	1,900,607		8,857
Michael Page International plc (Professional services)	2,398,335		13,277
Micro Focus International plc (Software)	812,865		5,108
Mothercare plc (Multiline retail)	715,393		6,071
Next plc (Multiline retail)	1,359,638		40,537
Petrofac, Ltd. (Energy equipment & services)	1,438,148		25,301
Rightmove plc (Media)	690,174		6,474
*Rolls-Royce Group plc (Aerospace & defense)	5,542,009		46,258
Rotork plc (Machinery)	1,039,984		19,873
RPS Group plc (Commercial services & supplies)	2,849,484		7,930
Serco Group plc (Commercial services & supplies)	2,417,037		21,108
Smith & Nephew plc (Health care equipment & supplies)	2,077,300		19,625
Spirax-Sarco Engineering plc (Machinery)	529,194		10,782
Standard Chartered plc (Commercial banks)	2,560,181		62,341
*Telecity Group plc (Internet software & services)	967,535		5,764
*The Berkeley Group Holdings plc (Household durables)	1,150,950		13,059
The Capita Group plc (Professional services)	1,998,602		22,019
The Weir Group plc (Machinery)	1,118,870		17,189
Ultra Electronics Holdings plc (Aerospace & defense)	544,922		12,446
Vedanta Resources plc (Metals & mining)	789,268		24,798
Victrex plc (Chemicals)	669,386		10,889
VT Group plc (Commercial services & supplies)	560,541		6,449
			829,819
Emerging Asia—13.8%
China—3.7%
China Yurun Food Group, Ltd. (Food products)	3,718,000		11,692
China Zhongwang Holdings, Ltd. (Metals & mining)	20,880,400		13,226

Issuer	Shares	Value
Common Stocks—Emerging Asia—13.8%—(continued)
China—(continued)
CNOOC, Ltd. (Oil, gas & consumable fuels)	35,740,000	$	60,747
Dongfeng Motor Group Co., Ltd. (Automobiles)	15,590,000		18,083
Industrial and Commercial Bank of China (Commercial banks)	55,356,000		40,236
Lonking Holdings, Ltd. (Machinery)	8,970,000		5,942
Minth Group, Ltd. (Auto components)	5,484,000		6,480
			156,406
India—3.7%
Asian Paints, Ltd. (Chemicals)	259,124		12,771
Axis Bank, Ltd. (Commercial banks)	351,121		9,308
Housing Development Finance Corporation (Thrifts & mortgage finance)	369,798		23,305
Infosys Technologies, Ltd. (IT services)	624,655		37,269
Jindal Steel & Power, Ltd. (Metals & mining)	1,714,531		22,894
Lupin, Ltd. (Pharmaceuticals)	275,819		11,612
Reliance Industries, Ltd. (Oil, gas & consumable fuels)	769,984		17,920
Tata Motors, Ltd. (Machinery)	1,044,319		17,294
Yes Bank, Ltd. (Commercial banks)	763,463		4,376
			156,749
Indonesia—2.8%
PT Astra International Tbk (Automobiles)	8,692,000		45,924
PT Bank Rakyat Indonesia (Commercial banks)	38,297,500		38,882
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)	10,998,000		9,977
PT United Tractors Tbk (Machinery)	11,861,000		24,311
			119,094
Malaysia—0.2%
Top Glove Corporation Bhd (Health care equipment & supplies)	1,634,400		6,908
Papua New Guinea—0.2%
Oil Search, Ltd. (Oil, gas & consumable fuels)	2,101,336		9,668
South Korea—1.6%
Hyundai Mobis (Auto components)	109,731		18,404
Hyundai Motor Co. (Automobiles)	430,170		50,334
			68,738
Taiwan—1.3%
Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & semiconductor equipment)	22,655,000		42,343
Tripod Technology Corporation (Electronic equipment, instruments & components)	1,788,000		6,612
Wistron Corporation (Computers & peripherals)	5,014,000		7,347
			56,302
Thailand—0.3%
CP ALL PCL (Food & staples retailing)	11,964,700		10,620

See accompanying Notes to Financial Statements.

38     Semi-Annual Report June 30, 2010

International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Japan—12.7%
ABC-Mart, Inc. (Specialty retail)	128,500	$	5,041
Canon, Inc. (Office electronics)	1,756,400		65,460
Dena Co., Ltd. (Internet & catalog retail)	201,000		5,307
Exedy Corporation (Auto components)	264,000		6,768
F.C.C. Co., Ltd. (Auto components)	213,203		3,984
Fanuc, Ltd. (Machinery)	458,100		51,730
*Gree, Inc. (Internet software & services)	150,600		12,026
Hoya Corporation (Electronic equipment, instruments & components)	1,048,000		22,299
K’s Holdings Corporation (Specialty retail)	460,200		9,408
kabu.com Securities Co., Ltd. (Capital markets)	1,257,600		5,899
Kakaku.com, Inc. (Internet software & services)	1,720		7,106
Keyence Corporation (Electronic equipment, instruments & components)	138,100		31,934
Komatsu, Ltd. (Machinery)	1,255,100		22,599
Makita Corporation (Machinery)	505,200		13,519
Miraca Holdings, Inc. (Health care providers & services)	295,000		8,830
MISUMI Group, Inc. (Trading companies & distributors)	558,500		10,314
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)	404,100		19,271
Nabtesco Corporation (Machinery)	464,000		7,152
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)	1,743,000		19,965
Nitori Co., Ltd. (Specialty retail)	188,270		16,229
Osaka Securities Exchange Co., Ltd. (Diversified financial services)	1,506		6,396
Park24 Co., Ltd. (Commercial services & supplies)	859,800		9,223
Point, Inc. (Specialty retail)	179,170		9,827
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)	78,600		7,521
Softbank Corporation (Wireless telecommunication services)	1,864,800		49,461
Sony Financial Holdings, Inc. (Insurance)	3,283		10,951
Terumo Corporation (Health care equipment & supplies)	265,500		12,715
USS Co., Ltd. (Specialty retail)	160,030		11,432
Yahoo! Japan Corporation (Internet software & services)	134,301		53,529
Yamada Denki Co., Ltd. (Specialty retail)	328,510		21,465
			537,361
Emerging Latin America—9.6%
Brazil—5.3%
Amil Participacoes S.A. (Insurance)	562,000		4,561
BR Malls Participacoes S.A. (Real estate management & development)	522,300		6,800
BR Properties S.A. (Real estate management & development)	1,293,570		9,209
Cyrela Brazil Realty S.A. (Household durables)	1,506,100		16,279
Diagnosticos da America S.A. (Health care providers & services)	928,800		8,743
*GP Investments, Ltd. (Capital markets)	1,442,043		4,809
Localiza Rent a Car S.A. (Road & rail)	1,349,300		15,661
Lojas Renner S.A. (Multiline retail)	583,600		15,843
*Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)	982,410		7,429

Issuer	Shares	Value
Common Stocks— Emerging Latin America—9.6%—(continued)
Brazil—(continued)
MRV Engenharia e Participacoes S.A. (Household durables)	1,086,164	$	7,648
Natura Cosmeticos S.A. (Personal products)	1,484,200		32,891
OdontoPrev S.A. (Health care providers & services)	196,900		6,862
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	2,330,000		21,583
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	925,700		7,816
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)	2,718,563		46,690
SLC Agricola S.A. (Food products)	619,200		4,597
Totvs S.A. (Software)	89,700		6,657
			224,078
Chile—0.9%
Banco Santander Chile—ADR (Commercial banks)	294,527		19,760
Lan Airlines S.A. (Airlines)	1,020,184		19,056
			38,816
Colombia—0.8%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	1,401,531		31,413
Mexico—1.9%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)	855,059		40,615
Banco Compartamos S.A. de C.V. (Consumer finance)	1,776,700		9,234
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	1,293,628		4,296
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	2,570,000		6,101
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	9,714,800		21,521
			81,767
Panama—0.2%
Copa Holdings S.A. Class “A” (Airlines)†	178,576		7,897
Peru—0.5%
Credicorp, Ltd. (Commercial banks)†	249,712		22,696
Canada—4.6%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†	1,546,028		34,971
Canadian Western Bank (Commercial banks)	395,232		8,777
Crescent Point Energy Corporation (Oil, gas & consumable fuels)	561,409		19,597
First Quantum Minerals, Ltd. (Metals & mining)	182,938		9,202
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	554,200		15,920
Home Capital Group, Inc. (Thrifts & mortgage finance)	104,016		4,120
Niko Resources, Ltd. (Oil, gas & consuma ble fuels)	291,539		27,115
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)	902,529		17,957

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     39

International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Canada—4.6%—(continued)
Petrominerales, Ltd. (Oil, gas & consumable fuels)	271,698	$	6,342
The Toronto-Dominion Bank (Commercial banks)	447,365		28,988
Tim Hortons, Inc. (Hotels, restaurants & leisure)	669,585		21,436
			194,425
Emerging Europe, Mid-East, Africa—3.6%
Egypt—0.3%
Commercial International Bank Egypt S.A.E. (Commercial banks)	750,509		8,786
Egyptian Financial Group-Hermes Holding (Capital markets)	1,052,537		5,310
			14,096
South Africa—2.0%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)	1,809,481		17,868
Clicks Group, Ltd. (Multiline retail)	1,422,030		6,256
Shoprite Holdings, Ltd. (Food & staples retailing)	1,970,795		21,188
Standard Bank Group, Ltd. (Commercial banks)	2,185,896		28,987
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)	726,838		10,347
			84,646
Turkey—1.1%
BIM Birlesik Magazalar A.S. (Food & staples retailing)	896,238		24,840
Turkiye Garanti Bankasi A.S. (Commercial banks)	5,092,541		21,193
			46,033
United Arab Emirates—0.2%
First Gulf Bank PJSC (Commercial banks)	2,330,208		9,426
Asia—3.2%
Australia—0.8%
Seek, Ltd. (Professional services)	740,725		4,313
Wesfarmers, Ltd. (Food & staples retailing)	872,175		20,846
WorleyParsons, Ltd. (Energy equipment & services)	469,259		8,634
			33,793
Hong Kong—1.7%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)	1,057,500		8,215

ADR = American Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.04% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2010.

Issuer	Shares or Principal Amount		Value
Common Stocks—Asia—3.2%—(continued)
Hong Kong—(continued)
Li & Fung, Ltd. (Distributors)		8,932,000	$	39,962
Noble Group, Ltd. (Trading companies & distributors)		19,075,916		23,057
				71,234
Singapore—0.7%
CapitaLand, Ltd. (Real estate management & development)		5,710,000		14,560
CapitaMalls Asia, Ltd. (Real estate management & development)		9,862,000		14,745
				29,305
Total Common Stocks—95.6% (cost $3,748,423)				4,048,709
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	2,875		1,633
Total Convertible Bond—0.0% (cost $1,491)				1,633
Exchange-Traded Fund
China—0.8%
iShares FTSE/Xinhua A50 China Index		21,306,100		31,411
Total Exchange-Traded Fund—0.8% (cost $34,326)				31,411
Investment in Affiliate
William Blair Ready Reserves Fund		6,376,231		6,376
Total Investment in Affiliate—0.2% (cost $6,376)				6,376
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	6,000		6,000
Total Short-Term Investment—0.1% (cost $6,000)				6,000
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $84,717, collateralized by various U.S. Agency securities, 1.625%—2.000%, due 3/7/13—4/15/13		84,717		84,717
Total Repurchase Agreement—2.0% (cost $84,717)				84,717
Total Investments—98.7% (cost $3,881,333)				4,178,846
Cash and other assets, less liabilities—1.3%				54,375
Net assets—100.0%			$	4,233,221

See accompanying Notes to Financial Statements.

40     Semi-Annual Report June 30, 2010

International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Industrials	18.0%
Financials	17.5%
Consumer Discretionary	16.7%
Energy	10.6%
Information Technology	10.2%
Materials	8.6%
Health Care	8.1%
Consumer Staples	6.2%
Telecommunication Services	3.0%
Exchange-Traded Fund	0.8%
Utilities	0.3%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	20.2%
Euro	15.7%
Japanese Yen	13.2%
Swiss Franc	8.2%
Hong Kong Dollar	5.9%
Brazilian Real	5.5%
Canadian Dollar	4.7%
U.S. Dollar	3.9%
Indian Rupee	3.8%
Indonesian Rupiah	2.9%
Danish Krone	2.1%
South African Rand	2.1%
South Korean Won	1.7%
New Taiwan Dollar	1.4%
Norwegian Krone	1.4%
Singapore Dollar	1.3%
Israeli Shekel	1.1%
Turkish Lira	1.1%
Australian Dollar	1.1%
Mexican Peso	1.0%
All Other Currencies	1.7%
Total	100.0%

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     41

W. George Greig

David Merjan

INTERNATIONAL EQUITY FUND

The International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 28 for the Global Markets Overview.

The International Equity Fund posted a 9.21% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), declined 10.41%.

Year to date stock selection was particularly strong in Discretionary, Energy and Financials. Within Financials, the Fund’s underweighting and stock selection in Europe Ex-U.K. added value, as the Fund eschewed a number of the E.U. commercial banks and capital markets financial institutions, given concerns about debt within the peripheral E.U. economies and ramifications for cross-border financial institutions. Emerging markets Financials performance also augmented results during the first half, as these holdings were not weighed down by slowdown concerns. Regionally, Developed European stock selection added value as did strong performance within Canada and Emerging Asia. The key detractor from performance year to date was Japanese Discretionary and Industrials stock selection.

As of June 30, the Fund maintained its focus in Industrials at 22.7% of the Fund, nearly double that of the MSCI ACWI Ex-U.S. IMI. Financials, while underweighted versus the Index, represented 20.6% of the Fund. Consumer Discretionary and Information Technology each represented approximately 12% of the Fund, above Index weightings. The Fund was most significantly underweighted in Materials, Telecommunication Services and Utilities at quarter end. These exposures did not appreciably change during the six month period. Regionally, the Fund maintained its focus in Developed Europe and Canada at the expense of Developed Asia. Within Europe Ex-U.K., specifically, the Fund was significantly overweighted in Healthcare and Industrials, sectors that generally benefit from a weak euro, and significantly underweighted in Financials, with no exposure in Materials, Telecommunication Services and Utilities. Emerging markets represented 18.4% of the Fund, below the index weighting of 23.5%, and a decrease since year end, due largely to an underweighting in Emerging Asia, and a reclassification of Israel into Europe Ex-U.K. during the quarter, as one of our largest Emerging Markets Europe, Mid-East and Africa holdings was reclassified.

42     Semi-Annual Report June 30, 2010

International Equity Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Class N	(9.21	)%	9.45	%	(12.77	)%	0.01	%	1.89	%
Class I	(9.05	)	9.72		(12.55	)	0.27		2.17
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49		(10.50	)	3.63		6.49

(a) For the period from May 24, 2004 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     43

International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—29.5%
Denmark—1.8%
Novo Nordisk A/S (Pharmaceuticals)	62,789	$	5,073
Finland—1.2%
Kone Oyj (Machinery)	82,794		3,296
France—5.1%
AXA S.A. (Insurance)	127,788		1,952
Cie Generale des Etablissements Michelin (Auto components)	40,015		2,788
L’Oreal S.A. (Personal products)	37,232		3,645
Schneider Electric S.A. (Electrical equipment)	39,425		3,982
Vinci S.A. (Construction & engineering)	53,464		2,220
			14,587
Germany—4.5%
*Infineon Technologies AG (Semiconductors & semiconductor equipment)	274,090		1,589
MAN SE (Machinery)	52,704		4,345
*QIAGEN N.V. (Life sciences tools & services)	143,769		2,797
SAP AG (Software)	93,755		4,169
			12,900
Ireland—1.6%
*Ryanair Holdings plc—ADR (Airlines)	171,745		4,653
Israel—2.0%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)	111,349		5,789
Italy—1.6%
Saipem SpA (Energy equipment & services)	153,903		4,688
Spain—2.3%
Banco Santander S.A. (Commercial banks)	226,014		2,370
Inditex S.A. (Specialty retail)	75,868		4,326
			6,696
Switzerland—9.4%
*ABB, Ltd. (Electrical equipment)	199,825		3,479
*Actelion, Ltd. (Biotechnology)	52,820		1,978
Credit Suisse Group AG (Capital markets)	100,774		3,789
Julius Baer Group, Ltd. (Capital markets)	48,098		1,371
Nestle S.A. (Food products)	114,991		5,545
Roche Holding AG (Pharmaceuticals)	31,895		4,390
Sonova Holding AG (Health care equipment & supplies)	16,525		2,028
Zurich Financial Services AG (Insurance)	19,487		4,295
			26,875
United Kingdom—20.3%
Amlin plc (Insurance)	257,422		1,482
*Autonomy Corporation plc (Software)	125,456		3,420
Barclays plc (Commercial banks)	807,935		3,225
BG Group plc (Oil, gas & consumable fuels)	288,209		4,286
British Sky Broadcasting Group plc (Media)	421,982		4,406
Burberry Group plc (Textiles, apparel & luxury goods)	246,195		2,780
Compass Group plc (Hotels, restaurants & leisure)	463,369		3,525
Experian plc (Professional services)	267,250		2,324
HSBC Holdings plc (Commercial banks)	277,620		2,545
Johnson Matthey plc (Chemicals)	99,047		2,201
Petrofac, Ltd. (Energy equipment & services)	155,776		2,741

Issuer	Shares	Value
Common Stocks—Europe—(continued)
United Kingdom—(continued)
Reckitt Benckiser Group plc (Household products)	129,689	$	6,032
*Rolls-Royce Group plc (Aerospace & defense)	469,821		3,921
Rotork plc (Machinery)	83,564		1,597
Standard Chartered plc (Commercial banks)	184,259		4,487
The Capita Group plc (Professional services)	249,804		2,752
Tullow Oil plc (Oil, gas & consumable fuels)	226,389		3,368
Vedanta Resources plc (Metals & mining)	89,953		2,826
			57,918
Japan—13.1%
Canon, Inc. (Office electronics)	76,200		2,840
Daikin Industries, Ltd. (Building products)	74,700		2,278
Fanuc, Ltd. (Machinery)	38,700		4,370
Hoya Corporation (Electronic equipment, instruments & components)	119,800		2,549
Keyence Corporation (Electronic equipment, instruments & components)	16,300		3,769
Komatsu, Ltd. (Machinery)	175,200		3,155
Makita Corporation (Machinery)	43,300		1,159
Mitsubishi Corporation (Trading companies & distributors)	187,900		3,887
Mitsubishi UFJ Financial Group, Inc. (Commercial banks)	666,500		3,026
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)	200,000		2,291
Softbank Corporation (Wireless telecommunication services)	86,100		2,284
Terumo Corporation (Health care equipment & supplies)	41,100		1,968
Yahoo! Japan Corporation (Internet software & services)	5,448		2,171
Yamada Denki Co., Ltd. (Specialty retail)	25,370		1,658
			37,405
Emerging Asia—11.2%
China—3.1%
China Life Insurance Co., Ltd. (Insurance)	781,000		3,415
CNOOC, Ltd. (Oil, gas & consumable fuels)	2,229,000		3,789
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	538,500		1,765
			8,969
India—4.4%
Bharat Heavy Electricals, Ltd. (Electrical equipment)	73,874		3,892
*Cairn India, Ltd. (Oil, gas & consumable fuels)	378,966		2,454
HDFC Bank, Ltd.—ADR (Commercial banks)	15,028		2,149
Infosys Technologies, Ltd. (IT services)	67,838		4,047
			12,542
Indonesia—0.8%
PT Bank Rakyat Indonesia (Commercial banks)	2,314,000		2,350
South Korea—1.5%
Hyundai Motor Co. (Automobiles)	35,282		4,128

See accompanying Notes to Financial Statements.

44     Semi-Annual Report June 30, 2010

International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—(continued)
Taiwan—1.4%
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	667,000	$	2,338
MediaTek, Inc. (Semiconductors & semiconductor equipment)	120,312		1,679
			4,017
Canada—8.1%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†	143,397		3,244
Canadian National Railway Co. (Road & rail)†	81,895		4,699
Goldcorp, Inc. (Metals & mining)†	86,477		3,792
Royal Bank of Canada (Commercial banks)	54,477		2,595
The Toronto-Dominion Bank (Commercial banks)	48,363		3,134
Thomson Reuters Corporation (Media)	63,680		2,279
Tim Hortons, Inc. (Hotels, restaurants & leisure)	105,343		3,372
			23,115
Asia—5.2%
Australia—1.6%
BHP Billiton, Ltd.—ADR (Metals & mining)	44,797		2,777
WorleyParsons, Ltd. (Energy equipment & services)	102,583		1,887
			4,664
Hong Kong—2.9%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)	216,900		1,685
Li & Fung, Ltd. (Distributors)	874,000		3,910
Noble Group, Ltd. (Trading companies & distributors)	2,103,727		2,543
			8,138
Singapore—0.7%
CapitaLand, Ltd. (Real estate management & development)	813,000		2,073
Emerging Latin America—4.6%
Brazil—3.6%
BM&F BOVESPA S.A. (Diversified financial services)	514,771		3,308
Petroleo Brasileiro S.A.—ADR (Oil, gas & consumable fuels)	35,245		1,210
Vale S.A.—ADR (Metals & mining)	133,569		3,252
Weg S.A. (Machinery)	286,000		2,646
			10,416

ADR = American Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Latin America—(continued)
Mexico—1.0%
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		1,217,800	$	2,698
Emerging Europe, Mid-East, Africa—1.7%
South Africa—0.8%
Standard Bank Group, Ltd. (Commercial banks)		171,625		2,276
Turkey—0.9%
Turkiye Garanti Bankasi A.S. (Commercial banks)		630,652		2,625
Total Common Stocks—93.7% (cost $243,904)				267,891
Preferred Stock
Brazil—0.9%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		182,323		2,713
Total Preferred Stock—0.9% (cost $2,057)				2,713
Investment in Affiliate
William Blair Ready Reserves Fund		4,954		5
Total Investment in Affiliate—0.0% (cost $5)				5
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $10,007, collateralized by FFCB, 1.625%, due 3/7/13	$	10,007		10,007
Total Repurchase Agreement—3.5% (cost $10,007)				10,007
Total Investments—98.1% (cost $255,973)				280,616
Cash and other assets, less liabilities—1.9%				5,297
Net assets—100.0%			$	285,913

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     45

International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

For securities, primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Industrials	22.7%
Financials	20.6%
Consumer Discretionary	12.9%
Information Technology	12.0%
Energy	10.0%
Health Care	8.9%
Consumer Staples	6.6%
Materials	5.5%
Telecommunication Services	0.8%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	20.5%
Euro	15.6%
Japanese Yen	13.8%
U.S. Dollar	11.7%
Swiss Franc	9.9%
Hong Kong Dollar	6.3%
Canadian Dollar	4.2%
Indian Rupee	3.8%
Brazilian Real	3.2%
Danish Krone	1.9%
Singapore Dollar	1.7%
South Korean Won	1.5%
New Taiwan Dollar	1.5%
All Other Currencies	4.4%
Total	100.0%

See accompanying Notes to Financial Statements.

46     Semi-Annual Report June 30, 2010

Jeffrey A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Please see page 28 for the Global Markets Overview.

The International Small Cap Growth Fund decreased 2.31% (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country Ex-U.S. Small Cap Index (net), declined 5.32%.

Sector stock selection drove year to date outperformance, coupled with good performance across most regions, except for Emerging Asia. Within Consumer Discretionary, Japanese internet website Start Today Co., Ltd. performed well, as did footwear retailer ABC-Mart, Inc. U.K. Consumer Discretionary stock selection was strong, outperforming by nearly 21%, while Emerging Europe, Middle East and Africa (EMEA) and Latin American stocks also added value. Consumer Staples stock selection benefited from good performance by Unicharm Petcare Corporation as its parent company made a tender offer for the remaining outstanding publicly traded shares. Industrials stock selection was bolstered by strong Developed Europe and Emerging Markets stock selection, particularly within the defense, services, and transportation industries. Materials and Energy stock selection was also additive to results for the year to date period, as the Fund’s Materials holdings outperformed by over 31%, and Energy by nearly 13% versus the Index. Somewhat detracting from year to date results was Financials, Information Technology, and Utilities stock selection. Within Financials, the Fund’s underweighting and stock selection in Europe was more than offset by underperformance in Asian Financials holdings and U.K. asset management firms. Information Technology stock selection was hampered by several stock-specific issues, while EDF Energies Nouvelles S.A., the sole Utilities holding, underperformed the sector as a whole, as investors were concerned about the timing of wind farm development in the U.S., coupled with potentially reduced subsidies for alternative energy within Europe as a result of austerity measures.

As of June 30, the Fund maintained its focus in Consumer Discretionary at 26.6% of the Fund, with just over 7% within emerging markets specifically, well above the 16.5% Index weighting, and an increase since year end. Industrials was the second largest sector at 19.1% of the Fund, albeit underweighted versus the Index’s 21.7% weighting. Information Technology and Healthcare represented 15.0% and 13.5% of the Fund, respectively, well above Index weightings. We increased exposure to Emerging Markets and U.K. Healthcare holdings during the period, at the expense of Japanese Industrials. Since year end, we reduced our already underweighted Financials exposure from 12.6% to 9.9%. Materials, representing 4.1% of the Fund, remained significantly underweighted versus the market throughout the six month period. Regionally, the Fund was overweighted in Developed European stocks, due largely to Healthcare, Information Technology and Consumer Discretionary weightings within Europe Ex-U.K. and Industrials holdings within the U.K. Emerging markets represented 22.8% of the Fund at June 30, above the 18.8% as of year end, but lower than the Index weighting, due largely to an underweighting in the emerging Asian region.

June 30, 2010 William Blair Funds     47

International Small Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		Since Inception(a)
Class N	(2.31	)%	23.00	%	(9.91	)%	2.51	%
Class I	(2.19	)	23.21		(9.60	)	2.83
MSCI AC World Ex-U.S. Small Cap Index (net)	(5.32	)	19.98		(9.68	)	3.76

(a) For the period from November 1, 2005 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Small Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of small capitalization developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

48     Semi-Annual Report June 30, 2010

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—27.1%
Austria—0.4%
Schoeller-Bleckmann Oilfield Equipment AG (Energy equipment & services)	40,651	$	1,843
Denmark—1.7%
FLSmidth & Co. A/S (Construction & engineering)	99,420		6,416
SimCorp A/S (Software)	5,318		847
			7,263
Finland—2.0%
Nokian Renkaat Oyj (Auto components)	361,056		8,836
France—3.0%
bioMerieux (Health care equipment & supplies)	58,739		6,031
*Boursorama (Capital markets)	152,766		1,518
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)	49,132		1,662
Gemalto N.V. (Computers & peripherals)	108,366		4,078
			13,289
Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)	247,766		5,857
CTS Eventim AG (Media)	43,054		2,074
Fielmann AG (Specialty retail)	44,923		3,401
Wincor Nixdorf AG (Computers & peripherals)	50,204		2,806
Wirecard AG (IT services)	365,197		3,111
			17,249
Ireland—1.5%
*Norkom Group plc (Software)	215,133		347
Paddy Power plc (Hotels, restaurants & leisure)	195,972		6,088
			6,435
Italy—2.5%
Ansaldo STS SpA (Transportation infrastructure)	217,207		3,487
DiaSorin SpA (Health care equipment & supplies)	99,945		3,661
Trevi Finanziaria SpA (Construction & engineering)	266,974		3,831
			10,979
Luxembourg—1.0%
Oriflame Cosmetics S.A. (Personal products)	83,200		4,321
Netherlands—0.5%
BinckBank N.V. (Capital markets)	179,314		2,231
Norway—0.7%
*Norwegian Air Shuttle ASA (Airlines)	95,256		1,523
Opera Software ASA (Internet software & services)	171,405		590
*Pronova BioPharma A/S (Pharmaceuticals)	510,609		1,006
			3,119
Spain—1.6%
Tecnicas Reunidas S.A. (Energy equipment & services)	158,310		7,200
Sweden—1.6%
Elekta AB (Health care equipment & supplies)	283,883		7,184

Issuer	Shares	Value
Common Stocks—Europe—27.1%—(continued)
Switzerland—6.7%
*Dufry Group (Specialty retail)	55,866	$	4,178
*Orascom Development Holding AG (Hotels, restaurants & leisure)	39,856		2,211
Partners Group Holding AG (Capital markets)	78,830		9,512
Sika AG (Chemicals)	2,919		5,174
*Temenos Group AG (Software)	357,555		8,608
			29,683
United Kingdom—22.1%
Abcam plc (Biotechnology)	141,429		2,583
Aggreko plc (Commercial services & supplies)	214,055		4,494
Amlin plc (Insurance)	1,009,467		5,810
Ashmore Group plc (Capital markets)	589,384		2,127
*ASOS plc (Internet & catalog retail)	154,303		1,973
Aveva Group plc (Software)	201,540		3,382
Babcock International Group plc (Commercial services & supplies)	814,504		7,236
*Blinkx plc (Internet software & services)	2,006,326		1,109
BlueBay Asset Management plc (Capital markets)	199,031		852
Britvic plc (Beverages)	735,535		5,213
*Ceres Power Holdings plc (Electrical equipment)	262,261		295
Chemring Group plc (Aerospace & defense)	75,742		3,349
*Dana Petroleum plc (Oil, gas & consumable fuels)	359,274		6,048
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)	255,283		1,442
*EnQuest plc (Oil, gas & consumable fuels)	299,681		445
Intertek Group plc (Professional services)	113,091		2,424
Lancashire Holdings, Ltd. (Insurance)	232,960		1,727
Meggitt plc (Aerospace & defense)	784,642		3,657
Michael Page International plc (Professional services)	799,923		4,429
Micro Focus International plc (Software)	544,439		3,421
Mothercare plc (Multiline retail)	264,430		2,244
Petrofac, Ltd. (Energy equipment & services)	257,082		4,523
*Promethean World plc (Diversified consumer services)	350,726		953
Rightmove plc (Media)	248,521		2,331
RPS Group plc (Commercial services & supplies)	316,754		882
Serco Group plc (Commercial services & supplies)	978,331		8,544
Spirax-Sarco Engineering plc (Machinery)	158,159		3,222
*Telecity Group plc (Internet software & services)	338,559		2,017
The Weir Group plc (Machinery)	536,643		8,244
Victrex plc (Chemicals)	166,542		2,709
			97,685
Japan—16.7%
ABC-Mart, Inc. (Specialty retail)	232,414		9,117
Aeon Delight Co., Ltd. (Commercial services & supplies)	83,700		1,629
CyberAgent, Inc. (Media)	1,378		2,042
Dena Co., Ltd. (Internet & catalog retail)	173,700		4,587
Disco Corporation (Semiconductors & semiconductor equipment)	53,900		3,410

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     49

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Japan—16.7%—(continued)
EPS Co., Ltd. (Life sciences tools & services)	560	$	1,416
Exedy Corporation (Auto components)	148,800		3,815
F.C.C. Co., Ltd. (Auto components)	160,709		3,003
*Gree, Inc. (Internet software & services)	60,130		4,802
kabu.com Securities Co., Ltd. (Capital markets)	201,900		947
Kakaku.com, Inc. (Internet software & services)	614		2,537
Miraca Holdings, Inc. (Health care providers & services)	294,500		8,815
Nabtesco Corporation (Machinery)	244,000		3,761
Nitori Co., Ltd. (Specialty retail)	59,950		5,168
Osaka Securities Exchange Co., Ltd. (Diversified financial services)	1,367		5,805
Point, Inc. (Specialty retail)	71,440		3,919
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)	26,300		2,517
Start Today Co., Ltd. (Internet & catalog retail)	245		671
USS Co., Ltd. (Specialty retail)	82,050		5,861
			73,822
Emerging Asia—14.6%
China—8.1%
361 Degrees International, Ltd. (Textiles, apparel & luxury goods)	6,448,000		4,594
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)	2,613,559		3,736
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)	1,796,429		2,005
China Green (Holdings), Ltd. (Food products)	1,754,556		1,761
China High Speed Transmission Equipment Group Co., Ltd. (Electrical equipment)	1,056,000		2,218
Comba Telecom Systems Holdings, Ltd. (Communications equipment)	1,752,998		1,932
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)	99,812		595
Golden Eagle Retail Group, Ltd. (Multiline retail)	285,000		595
Haitian International Holdings, Ltd. (Machinery)	1,481,496		1,034
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	1,278,373		4,189
Lonking Holdings, Ltd. (Machinery)	4,126,000		2,733
Minth Group, Ltd. (Auto components)	2,463,384		2,911
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)	5,779,000		3,806
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)	300,800		1,310
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)	1,132,865		2,398
			35,817
India—3.0%
Ipca Laboratories, Ltd. (Pharmaceuticals)	378,865		2,368
Lupin, Ltd. (Pharmaceuticals)	178,480		7,514
Yes Bank, Ltd. (Commercial banks)	598,128		3,428
			13,310

Issuer	Shares	Value
Common Stocks—Emerging Asia—14.6%—(continued)
Indonesia—1.1%
*PT Ciputra Development Tbk (Real estate management & development)	14,294,000	$	523
PT Kalbe Farma Tbk (Pharmaceuticals)	10,314,500		2,368
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)	2,159,000		1,959
			4,850
Taiwan—2.4%
Chicony Electronics Co., Ltd. (Computers & peripherals)	1,306,000		2,895
Tripod Technology Corporation (Electronic equipment, instruments & components)	1,041,000		3,849
Wistron Corporation (Computers & peripherals)	2,441,000		3,577
			10,321
Canada—6.0%
*Bankers Petroleum, Ltd. (Oil, gas & consumable fuels)	191,809		1,265
Canadian Western Bank (Commercial banks)	143,600		3,189
*Consolidated Thompson Iron Mines, Ltd. (Metals & mining)	403,378		2,751
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	240,700		6,914
Home Capital Group, Inc. (Thrifts & mortgage finance)	54,147		2,145
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)	200,562		2,163
Petrominerales, Ltd. (Oil, gas & consumable fuels)	121,785		2,843
*Red Back Mining, Inc. (Metals & mining)	203,289		5,138
			26,408
Emerging Latin America—4.6%
Brazil—2.5%
Brasil Brokers Participacoes S.A. (Real estate management & development)	319,800		1,031
Localiza Rent a Car S.A. (Road & rail)	201,400		2,338
Lojas Renner S.A. (Multiline retail)	146,900		3,988
OdontoPrev S.A. (Health care providers & services)	38,700		1,349
Positivo Informatica S.A. (Computers & peripherals)	213,000		2,002
Tegma Gestao Logistica S.A. (Road & rail)	44,455		376
			11,084
Colombia—1.1%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	225,671		5,058
Mexico—1.0%
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	668,910		2,221
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)	789,787		2,064
			4,285

See accompanying Notes to Financial Statements.

50     Semi-Annual Report June 30, 2010

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—3.6%
South Africa—2.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		259,678	$	2,564
Clicks Group, Ltd. (Multiline retail)		1,192,055		5,244
Mr Price Group, Ltd. (Specialty retail)		395,587		2,297
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		48,854		696
				10,801
Turkey—1.1%
Asya Katilim Bankasi A.S. (Commercial banks)		877,427		2,003
BIM Birlesik Magazalar A.S. (Food & staples retailing)		100,074		2,774
				4,777
Asia—3.5%
Australia—2.5%
Cochlear, Ltd. (Health care equipment & supplies)		80,252		4,999
JB Hi-Fi, Ltd. (Specialty retail)		256,719		4,084
Seek, Ltd. (Professional services)		366,928		2,136
				11,219
Singapore—1.0%
Midas Holdings, Ltd. (Metals & mining)		3,017,000		1,952
Olam International, Ltd. (Food & staples retailing)		1,284,700		2,358
				4,310
Total Common Stocks—98.2% (cost $392,593)				433,379
Convertible Bond
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		545
Total Convertible Bond—0.1% (cost $497)				545
Investment in Affiliate
William Blair Ready Reserves Fund		488,907		489
Total Investment in Affiliate—0.1% (cost $489)				489
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	500		500
Total Short-Term Investment—0.1% (cost $500)				500

Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $7,130, collateralized by FHLMC, 2.000%, due 4/15/13	$	7,130	$	7,130
Total Repurchase Agreement—1.6% (cost $7,130)				7,130
Total Investments—100.1% (cost $401,209)				442,043
Liabilities, plus cash and other assets—(0.1)%				(454	)
Net assets—100.0%			$	441,589

ADR = American Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.12% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.12% of the net assets at June 30, 2010.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	26.6%
Industrials	19.1%
Information Technology	15.0%
Health Care	13.5%
Financials	9.9%
Energy	7.2%
Consumer Staples	4.2%
Materials	4.1%
Utilities	0.4%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	22.5%
Japanese Yen	17.0%
Euro	15.7%
Hong Kong Dollar	8.1%
Canadian Dollar	7.3%
Swiss Franc	6.8%
Indian Rupee	3.1%
Brazilian Real	2.7%
Swedish Krona	2.6%
Australian Dollar	2.6%
South African Rand	2.5%
New Taiwan Dollar	2.4%
Danish Krone	1.7%
Indonesian Rupiah	1.1%
Turkish Lira	1.1%
All Other Currencies	2.8%
Total	100.0%

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     51

Todd M. McClone

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 28 for the Global Markets Overview.

The Emerging Markets Growth Fund posted a 4.27% decrease (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index, declined 5.68%.

The emerging markets growth strategy outpaced the Index year to date as stock selection was strong across most sectors and regions, due largely to second quarter performance. In particular, the Fund added significant value in Consumer, Financials, and Industrials. Within Consumer, the Fund’s focus in Asian auto companies and Consumer Staples added value, as did stock selection within Latin America. Emerging Markets Europe, Mid-East and Africa (EMEA) grocery holdings augmented results, as did Brazilian Consumer Staples performance. Financials stock selection was strong across regions, while transportation and infrastructure-related Asian Industrials added value. The Fund outperformed across each emerging markets region, benefiting largely from individual stock selection, rather than overall sector positioning within regions. Somewhat detracting from performance was Materials stock selection, which was focused on mining and fertilizers, areas which underperformed due to concerns about demand for commodities amidst a slowdown in China property development specifically and a potential global slowdown in general.

As of June 30, the Fund maintained its focus in Consumer stocks with 34.5% of the Fund invested across Consumer Discretionary and Consumer Staples names, a slight increase since year end. Financials was the largest single sector within the portfolio at 25.2%. While Asian Financials represented approximately 10% of the overall exposure, the weighting was significantly lower than the Index. We reduced Information Technology from a 13.7% weighting as of year end to 8.8% during the second quarter, as a result of concerns about near-intermediate term earnings sustainability. Materials and Telecommunication Services were also significantly underweighted versus the Index, and remained relatively stable during the period. Regionally, while 48.2% of the Fund was in Emerging Asian stocks, it remained very underweighted versus the Index, due largely to lower exposure in Korea and Taiwan. Conversely, the Fund was significantly overweighted in Latin America at 26.7% of the Fund, particularly in the Consumer, Energy and Financials sectors.

52     Semi-Annual Report June 30, 2010

Emerging Markets Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Class N	(4.27	)%	25.02	%	(9.01	)%	10.95	%	11.36	%
Class I	(4.09	)	25.46		(8.78	)	11.22		11.62
MSCI Emerging Markets IMI (net)	(5.68	)	24.57		(2.17	)	12.98		13.20

(a) For the period from June 6, 2005 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company L.L.C. without a sales load or distribution (12b-1) fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     53

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%
China—18.6%
361 Degrees International, Ltd. (Textiles, apparel & luxury goods)	3,259,000	$	2,322
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)	1,511,949		2,161
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)	2,175,078		2,428
*Baidu, Inc.—ADR (Internet software & services)	177,193		12,063
China Dongxiang Group Co. (Textiles, apparel & luxury goods)	4,154,000		2,769
China Green (Holdings), Ltd. (Food products)	2,409,000		2,417
China High Speed Transmission Equipment Group Co., Ltd. (Electrical equipment)	1,708,000		3,588
China Life Insurance Co., Ltd. (Insurance)	4,004,000		17,510
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)	3,693,406		13,325
China Vanke Co., Ltd. (Real estate management & development)	1,345,426		1,411
China Yurun Food Group, Ltd. (Food products)	2,479,000		7,796
CNOOC, Ltd. (Oil, gas & consumable fuels)	18,107,000		30,776
Comba Telecom Systems Holdings, Ltd. (Communications equipment)	1,964,600		2,165
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)	150,368		896
*Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	154,717		5,811
Dongfeng Motor Group Co., Ltd. (Automobiles)	13,550,000		15,717
Golden Eagle Retail Group, Ltd. (Multiline retail)	1,754,000		3,662
Haitian International Holdings, Ltd. (Machinery)	1,960,185		1,368
Hengan International Group Co., Ltd. (Personal products)	987,000		7,992
Industrial and Commercial Bank of China (Commercial banks)	47,465,000		34,500
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	1,035,000		3,391
Lonking Holdings, Ltd. (Machinery)	4,894,000		3,242
Mindray Medical International, Ltd.—ADR (Health care equipment & supplies)	108,484		3,409
Minth Group, Ltd. (Auto components)	1,004,000		1,186
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)	3,331,000		2,194
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)	640,700		2,791
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)	784,861		1,662
			188,552
India—13.3%
Asian Paints, Ltd. (Chemicals)	63,367		3,123
Axis Bank, Ltd. (Commercial banks)	391,009		10,366
Bharat Heavy Electricals, Ltd. (Electrical equipment)	248,597		13,098
*Cairn India, Ltd. (Oil, gas & consumable fuels)	807,585		5,229

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%—(continued)
India—(continued)
Dabur India, Ltd. (Personal products)	849,316	$	3,830
Financial Technologies (India), Ltd. (Software)	71,919		2,054
Hero Honda Motors, Ltd. (Automobiles)	86,847		3,810
Housing Development Finance Corporation (Thrifts & mortgage finance)	135,622		8,547
Infosys Technologies, Ltd. (IT services)	354,841		21,171
Jindal Steel & Power, Ltd. (Metals & mining)	691,867		9,238
Larsen & Toubro, Ltd. (Construction & engineering)	439,205		16,987
Lupin, Ltd. (Pharmaceuticals)	137,292		5,780
Sterlite Industries India, Ltd. (Metals & mining)	4,299,728		15,518
Sun TV Network, Ltd. (Media)	277,889		2,598
Tata Motors, Ltd. (Machinery)	607,261		10,056
Yes Bank, Ltd. (Commercial banks)	619,020		3,548
			134,953
Indonesia—3.9%
PT Astra International Tbk (Automobiles)	2,998,500		15,842
PT Bank Rakyat Indonesia (Commercial banks)	10,504,000		10,664
*PT Ciputra Development Tbk (Real estate management & development)	54,385,456		1,991
PT Unilever Indonesia Tbk (Household products)	2,137,500		3,986
PT United Tractors Tbk (Machinery)	3,545,000		7,266
			39,749
Malaysia—1.3%
CIMB Group Holdings Bhd (Commercial banks)	4,551,200		9,799
Top Glove Corporation Bhd (Health care equipment & supplies)	708,900		2,996
			12,795
Papua New Guinea—0.7%
Oil Search, Ltd. (Oil, gas & consumable fuels)	1,451,850		6,680
South Korea—6.8%
Amorepacific Corporation (Personal products)	7,331		6,237
Hyundai Mobis (Auto components)	106,180		17,809
Hyundai Motor Co. (Automobiles)	252,022		29,489
LG Household & Health Care, Ltd. (Household products)	19,694		5,593
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)	15,020		9,421
			68,549
Taiwan—2.8%
Chicony Electronics Co., Ltd. (Computers & peripherals)	1,056,000		2,341
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	2,721,100		9,538
MediaTek, Inc. (Semiconductors & semiconductor equipment)	627,142		8,753

See accompanying Notes to Financial Statements.

54     Semi-Annual Report June 30, 2010

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%—(continued)
Taiwan—(continued)
Tripod Technology Corporation (Electronic equipment, instruments & components)	809,000	$	2,991
Wistron Corporation (Computers & peripherals)	2,888,000		4,232
			27,855
Thailand—0.8%
CP ALL PCL (Food & staples retailing)	8,734,700		7,753
Minor International PCL (Hotels, restaurants & leisure)	2,544,400		794
			8,547
Emerging Latin America—26.7%
Brazil—14.0%
Amil Participacoes S.A. (Insurance)	696,384		5,652
Anhanguera Educacional Participacoes S.A. (Diversified consumer services)	162,800		2,461
BR Malls Participacoes S.A. (Real estate management & development)	601,900		7,836
BR Properties S.A. (Real estate management & development)	305,241		2,173
Brasil Brokers Participacoes S.A. (Real estate management & development)	438,200		1,413
Cia de Bebidas das Americas—ADR (Beverages)	204,409		20,647
Cyrela Brazil Realty S.A. (Household durables)	423,400		4,577
Diagnosticos da America S.A. (Health care providers & services)	971,600		9,145
*Hypermarcas S.A. (Personal products)	601,228		7,721
Localiza Rent a Car S.A. (Road & rail)	677,500		7,864
Lojas Renner S.A. (Multiline retail)	334,000		9,067
M Dias Branco S.A. (Food products)	112,934		2,440
MRV Engenharia e Participacoes S.A. (Household durables)	1,129,880		7,956
Natura Cosmeticos S.A. (Personal products)	525,200		11,639
OdontoPrev S.A. (Health care providers & services)	61,900		2,157
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	987,300		9,146
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	583,500		4,927
Positivo Informatica S.A. (Computers & peripherals)	242,700		2,282
Totvs S.A. (Software)	62,800		4,660
Vale S.A.—ADR (Metals & mining)	747,662		18,206
			141,969
Chile—1.9%
Banco Santander Chile—ADR (Commercial banks)	133,920		8,985
Lan Airlines S.A. (Airlines)	254,122		4,747
S.A.C.I. Falabella (Multiline retail)	912,778		5,942
			19,674
Colombia—0.6%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	266,540		5,974

Issuer	Shares	Value
Common Stocks—Emerging Latin America—26.7%—(continued)
Mexico—8.1%
America Movil S.A.B. de C.V. (Wireless telecommunication services)	12,208,300	$	28,885
Banco Compartamos S.A. de C.V. (Consumer finance)	884,400		4,597
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	748,917		2,487
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)	1,163,002		3,040
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	4,028,428		9,563
Grupo Televisa S.A.—ADR (Media)	371,363		6,465
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	12,396,300		27,461
			82,498
Panama—0.5%
Copa Holdings S.A. Class “A” (Airlines)†	102,809		4,546
Peru—1.6%
Credicorp, Ltd. (Commercial banks)†	177,258		16,111
Emerging Europe, Mid-East, Africa—14.0%
Egypt—0.6%
Commercial International Bank Egypt S.A.E. (Commercial banks)	406,718		4,761
Egyptian Financial Group-Hermes Holding (Capital markets)	282,784		1,427
			6,188
Qatar—1.4%
Qatar National Bank S.A.Q. (Commercial banks)	386,845		14,219
Russia—1.8%
Magnit OAO (Food & staples retailing)†	120,984		8,048
*X5 Retail Group N.V.—GDR (Food & staples retailing)	304,600		10,222
			18,270
South Africa—6.3%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)	516,628		5,102
Clicks Group, Ltd. (Multiline retail)	904,081		3,977
Mr Price Group, Ltd. (Specialty retail)	538,924		3,130
Naspers, Ltd. (Media)	227,587		7,664
Shoprite Holdings, Ltd. (Food & staples retailing)	955,130		10,269
Standard Bank Group, Ltd. (Commercial banks)	1,758,112		23,314
Truworths International, Ltd. (Specialty retail)	1,095,500		7,625
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)	169,068		2,407
			63,488
Turkey—3.4%
Asya Katilim Bankasi A.S. (Commercial banks)	2,012,230		4,594
BIM Birlesik Magazalar A.S. (Food & staples retailing)	240,426		6,664

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     55

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—14.0%—(continued)
Turkey—(continued)
Turkiye Garanti Bankasi A.S. (Commercial banks)		5,611,846	$	23,354
				34,612
United Arab Emirates—0.5%
First Gulf Bank PJSC (Commercial banks)		1,173,086		4,745
Total Common Stocks—88.9% (cost $746,081)				899,974
Preferred Stocks
Brazil—4.6%
Itau Unibanco Holding S.A. (Commercial banks)		955,854		17,211
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,764,180		26,252
Randon Participacoes S.A. (Machinery)		662,300		3,776
				47,239
Total Preferred Stocks—4.6% (cost $48,102)				47,239
Investment in Warrants
Thailand—0.0%
*Minor International PCL 2013, $13.00 (Hotels, restaurants & leisure)		575,650		43
Total Warrants—0.0% (cost $0)				43
Convertible Bond
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		910
Total Convertible Bond—0.1% (cost $831)				910
Investment in Affiliate
William Blair Ready Reserves Fund		66,217		66
Total Investment in Affiliate—0.0% (cost $66)				66
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	2,000		2,000
Total Short-Term Investment—0.2% (cost $2,000)				2,000

Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $44,125, collateralized by FFCB, 1.625%, due 3/7/13	$	44,125	$	44,125
Total Repurchase Agreement—4.4% (cost $44,125)				44,125
Total Investments—98.2% (cost $841,205)				994,357
Cash and other assets, less liabilities—1.8%				18,124
Net assets—100.0%			$	1,012,481

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.09% of the net assets at June 30, 2010.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	25.2%
Consumer Discretionary	18.6%
Consumer Staples	15.9%
Energy	10.3%
Information Technology	8.8%
Industrials	8.6%
Materials	5.9%
Health Care	3.7%
Telecommunication Services	3.0%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.5%
Brazilian Real	16.0%
Indian Rupee	14.2%
U.S. Dollar	12.2%
Mexican Peso	8.0%
South Korean Won	7.2%
South African Rand	6.7%
Indonesian Rupiah	4.2%
Turkish Lira	3.7%
New Taiwan Dollar	2.9%
Qatari Rial	1.5%
Malaysian Ringgit	1.4%
Chilean Peso	1.1%
All Other Currencies	3.4%
Total	100.0%

See accompanying Notes to Financial Statements.

56     Semi-Annual Report June 30, 2010

Todd M. McClone

Jeffrey A. Urbina

EMERGING LEADERS GROWTH FUND

The Emerging Leaders Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 28 for the Global Markets Overview.

The Emerging Leaders Growth Fund posted a 2.02% decrease (Class I Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) declined 6.55%.

Class N Shares, which commenced operations on May 3, decreased 6.14% in the two-month period ended June 30, 2010, while the MSCI Emerging Markets Large Cap Index (net) decreased 8.69%.

Year to date performance was augmented by the Fund’s significant weighting in Consumer Discretionary and Staples stocks at the expense of Materials and Information Technology (IT). Stock selection was also a key determinant of outperformance during the first half of 2010 across regions and sectors. The Fund’s Staples holdings were up just over 13%, significantly outpacing the Index, due primarily to strong performance in the Fund’s Emerging Asian consumer products and grocery holdings, coupled with strong Emerging Europe, Middle East, and Africa (EMEA) grocery/discount performance. Industrials stock selection was also particularly strong, with infrastructure related holdings driving results. Regionally, the Fund benefited from good performance across most sectors within Emerging Asia, as well as the overweighting in Consumer Discretionary and Staples at the expense of Asian IT and Materials stocks. EMEA value added was largely within the Consumer Staples sector, while Emerging Latin America performance benefited from the underweighting and stock performance within Energy, coupled with strong Financials stock selection.

As of June 30, the Fund maintained its significant exposure in Consumer Discretionary and Staples stocks, with 28.0% in Consumer Staples and another 14.8% in Consumer Discretionary, compared to the 5.94% and 4.36% Index weightings, respectively. Consumer Staples exposure increased by nearly 10% since year end, particularly in Emerging Asia and Emerging Latin America, while Consumer Discretionary decreased by nearly 5%. The Fund maintained its marginal overweighting of Financials at 28.2% of the Fund, with higher weightings in EMEA and Emerging Latin America offset by an underweighting in Asian Financials. The Fund was most significantly underweighted in Energy stocks, which represented 8.0% of the Fund, compared with nearly 16.0% in the Index, and in IT and Materials, which were also significantly underweighted. IT decreased by approximately 9% during the six month period, while Materials decreased by approximately 8%, as we sold holdings in these sectors due to deteriorating short-intermediate term earnings growth in favor of Consumer Staples holdings and, to some extent, cash equivalents.

June 30, 2010 William Blair Funds     57

Emerging Leaders Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		Since Inception
Class I	(2.02	)%	28.80	%	(7.53	)(a)
MSCI Emerging Markets Large Cap Index (net)	(6.55	)	21.93		(6.11	)(a)

(a) For the period from March 26, 2008 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1). The Emerging Leaders Class N commenced operations on May 3, 2010 and had one share outstanding as of June 30, 2010.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Large Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure market performance of large capitalization stocks in emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

58     Semi-Annual Report June 30, 2010

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—55.8%
China—19.7%
*Baidu, Inc.—ADR (Internet software & services)	12,159	$	828
Belle International Holdings, Ltd. (Specialty retail)	865,000		1,227
China Dongxiang Group Co. (Textiles, apparel & luxury goods)	1,304,000		869
China Life Insurance Co., Ltd. (Insurance)	270,000		1,181
China Oilfield Services, Ltd. (Energy equipment & services)	638,000		742
China Yurun Food Group, Ltd. (Food products)	280,000		880
CNOOC, Ltd. (Oil, gas & consumable fuels)	1,463,000		2,487
*Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	17,354		652
Dongfeng Motor Group Co., Ltd. (Automobiles)	536,000		622
Golden Eagle Retail Group, Ltd. (Multiline retail)	470,000		981
Hengan International Group Co., Ltd. (Personal products)	116,000		939
Industrial and Commercial Bank of China (Commercial banks)	3,181,000		2,312
Want Want China Holdings, Ltd. (Food products)	1,410,000		1,183
			14,903
India—17.1%
Axis Bank, Ltd. (Commercial banks)	40,528		1,075
Bharat Heavy Electricals, Ltd. (Electrical equipment)	18,157		957
*Cairn India, Ltd. (Oil, gas & consumable fuels)	153,377		993
Dabur India, Ltd. (Personal products)	249,748		1,126
HDFC Bank, Ltd. (Commercial banks)	35,862		1,473
Housing Development Finance Corporation (Thrifts & mortgage finance)	8,191		516
Infosys Technologies, Ltd. (IT services)	22,404		1,337
ITC, Ltd. (Tobacco)	140,246		915
Jindal Steel & Power, Ltd. (Metals & mining)	85,364		1,140
Larsen & Toubro, Ltd. (Construction & engineering)	39,463		1,526
Nestle India, Ltd. (Food products)	14,634		908
Tata Motors, Ltd. (Machinery)	58,945		976
			12,942
Indonesia—7.1%
PT Astra International Tbk (Automobiles)	281,000		1,485
PT Bank Rakyat Indonesia (Commercial banks)	1,326,000		1,346
PT Unilever Indonesia Tbk (Household products)	667,000		1,244
PT United Tractors Tbk (Machinery)	644,000		1,320
			5,395
Malaysia—2.7%
CIMB Group Holdings Bhd (Commercial banks)	957,500		2,062
South Korea—6.4%
Hyundai Mobis (Auto components)	7,579		1,271
Hyundai Motor Co. (Automobiles)	13,180		1,542

Issuer	Shares	Value
Common Stocks—Emerging Asia—55.8%—(continued)
South Korea—(continued)
LG Household & Health Care, Ltd. (Household products)	4,198	$	1,192
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)	1,280		803
			4,808
Taiwan—1.0%
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	222,000		778
Thailand—1.8%
CP ALL PCL (Food & staples retailing)	1,504,200		1,335
Emerging Latin America—21.2%
Brazil—8.4%
Cia de Bebidas das Americas—ADR (Beverages)	14,721		1,487
Cyrela Brazil Realty S.A. (Household durables)	14,500		157
*Hypermarcas S.A. (Personal products)	123,100		1,581
Natura Cosmeticos S.A. (Personal products)	45,800		1,015
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	57,000		528
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	55,900		472
Vale S.A.—ADR (Metals & mining)	44,252		1,077
			6,317
Chile—3.9%
Banco Santander Chile—ADR (Commercial banks)	13,259		890
Lan Airlines S.A. (Airlines)	49,913		932
S.A.C.I. Falabella (Multiline retail)	172,523		1,123
			2,945
Colombia—1.2%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	40,415		906
Mexico—6.1%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)	31,637		1,503
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)	229,400		869
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	317,626		754
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	664,800		1,473
			4,599
Peru—1.6%
Credicorp, Ltd. (Commercial banks)†	13,436		1,221
Emerging Europe, Mid-East, Africa—13.7%
Egypt—0.9%
Commercial International Bank Egypt S.A.E. (Commercial banks)	55,505		650
Russia—4.0%
*Magnit OJSC—144A—GDR (Food & staples retailing)	53,628		751

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     59

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—13.7%—(continued)
Russia—4.0%—(continued)
Sberbank of Russian Federation (Commercial banks)†		425,545	$	1,022
*X5 Retail Group N.V.—GDR (Food & staples retailing)		36,350		1,227
				3,000
South Africa—4.3%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		86,313		852
Shoprite Holdings, Ltd. (Food & staples retailing)		117,179		1,260
Standard Bank Group, Ltd. (Commercial banks)		88,959		1,180
				3,292
Turkey—4.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		43,371		1,202
Turkiye Garanti Bankasi A.S. (Commercial banks)		435,175		1,811
				3,013
United Arab Emirates—0.5%
First Gulf Bank PJSC (Commercial banks)		99,024		400
Total Common Stocks—90.7% (cost $59,694)				68,566
Preferred Stock
Brazil—2.4%
Itau Unibanco Holding S.A. (Commercial banks)		101,085	$	1,820
Total Preferred Stock—2.4% (cost $1,494)				1,820
Investment in Affiliate
William Blair Ready Reserves Fund		440,296		440
Total Investment in Affiliate—0.6% (cost $440)				440
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $2,709, collateralized by FHLB, 4.375% due 9/17/10	$	2,709		2,709
Total Repurchase Agreement—3.6% (cost $2,709)				2,709
Total Investments—97.3% (cost $64,337)				73,535
Cash and other assets, less liabilities—2.7%				2,074
Net assets—100.0%			$	75,609

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	28.2%
Consumer Staples	28.0%
Consumer Discretionary	14.8%
Industrials	8.1%
Energy	8.0%
Information Technology	5.3%
Materials	4.2%
Telecommunication Services	2.2%
Health Care	1.2%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	19.1%
Indian Rupee	18.4%
U.S. Dollar	15.1%
Brazilian Real	7.9%
Indonesian Rupiah	7.7%
South Korean Won	6.8%
South African Rand	4.7%
Mexican Peso	4.4%
Turkish Lira	4.3%
Malaysian Ringgit	2.9%
Chilean Peso	2.9%
Thai Baht	1.9%
Canadian Dollar	1.3%
New Taiwan Dollar	1.1%
All Other Currencies	1.5%
Total	100.0%

See accompanying Notes to Financial Statements.

60     Semi-Annual Report June 30, 2010

Chad M. Kilmer

Mark T. Leslie

David S. Mitchell

Small Cap Value Fund (formerly known as Value Discovery Fund)

The Small Cap Value Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The Fund posted a 0.38% increase (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Russell 2000^® Value Index, declined 1.64%.

After a strong first quarter, the U.S. equity market reversed course during the second quarter to finish in negative territory for the first half of the year. The Russell 2000^® Value Index returned -10.60% during the second quarter to produce a -1.64% return for 2010 through June. The Fund outperformed during the second quarter’s decline and is ahead on the year-to-date period as well.

While the year started off on a positive note on the heels of better-than-expected corporate sales and earnings, macro concerns across the globe instilled fear, and volatility, back into the markets. European sovereign debt downgrades and fiscal austerity measures, the Gulf of Mexico oil catastrophe, U.S. state budget woes, and expiring stimulus programs all contributed to investor skepticism. More importantly, given the significance of job growth to a sustainable economic recovery, stubbornly lackluster employment and housing data have stoked fears of slipping back into a recession. Because of these negative developments and with the 2008 downturn fresh in investors’ minds, stock prices corrected as they once again succumbed to macro factors rather than company fundamentals.

During the second quarter, all sectors within the Russell 2000^® Value Index finished in the red. Consumer Discretionary (-17%), Materials (-15%) and Energy (-13%) were the worst performing sectors. The typically defensive Utilities and Consumer Staples sectors performed best at -3% and -7%, respectively.

For the year-to-date period, sector returns were more or less in line with the benchmark, with a few exceptions. Energy and Materials were the outliers at -9% apiece. Financials were the best performing sector finishing at +1% for the six-month period.

The Fund’s outperformance during the second quarter is attributable to strong stock selection across several sectors. The Fund’s holdings in Information Technology, Energy and Financials were the largest positive contributors to relative return during the quarter. On the other hand, certain stocks in Consumer Discretionary and Materials weighed on relative results.

For the first half of the year, the Fund’s outperformance was the result of good stock selection across most sectors. Stock selection was most significant in the Information Technology, Energy and Telecommunication Services sectors. Detracting from relative performance during the period were some of the Fund’s Health Care holdings.

Two specific stocks boosting relative performance were Sybase, Inc. and TAL International Group, Inc. Sybase, Inc. develops enterprise software and services to manage, analyze and mobilize information. During the second quarter, it announced it was being acquired by SAP, the large cap German software and services company. We sold our position after shares rallied on the announcement.

TAL International Group, Inc. owns, leases and trades intermodal shipping containers. The stock was a top contributor during the second quarter and first half of the year overall. The

June 30, 2010 William Blair Funds     61

company is benefitting from its investment in additional containers during the downturn and the secular trend of shipping companies leasing containers as opposed to owning them outright. We continue to own the name given its solid cash flow characteristics and high caliber management team.

Two stocks detracting from return were Pacific Sunwear of California, Inc. and Intrepid Potash, Inc. Pacific Sunwear of California, Inc. is a specialty retailer. The stock was the leading detractor from return during the second quarter and the year-to-date period. The market downdraft during the second quarter was led down by the consumer sector and by specialty retailers in particular as fears of a double-dip recession started to cause consumer confidence to fall. Because Pacific Sunwear of California, Inc. is a corporate transformation story and high-beta stock it will demonstrate particularly high volatility (in both strong and weak markets). We added to our position during the weakness as we saw nothing stock specific to point to as the reason for the weakness. Valuation on the stock is attractive and the company has a solid net cash position. The new management team has been assembled and we are nearing the time when some of their early actions will start to be noticed (improved merchandise and focused strategy should lead to improving comps in the latter part of 2010 and beyond).

Intrepid Potash, Inc., a producer of potash-based fertilizer and related products, underperformed during the second quarter and for the first half of the year due to weaker than expected volumes. We believe this was likely triggered by dealer reluctance to refill inventory ahead of the fall application season, production constraints at one of its mining facilities and weak demand in the oil and gas drilling fluid additive market.

Looking forward, while the economic recovery may have a different trajectory (less steep) than some were expecting earlier this year, the market’s decline has improved valuations and lowered expectations. Corporate financial discipline and balance sheets remain strong, and inventories are lean throughout most industries. This should lay the ground work for operating margin expansion, likely beyond prior peak margins, and drive continued earnings growth over the intermediate term. However, investor pessimism is understandably high given the expiration of stimulus plans and diminished appetite for additional programs, U.S. state budget crunches, still absent employment growth and likely further consumer deleveraging.

We consider the impact of these economic scenarios into our stock-specific risk/reward assessments, and remain focused on finding quality companies at discount prices and corporate transformation opportunities. As always, we believe building the Fund with these types of companies should produce solid investment results over the long term.

62     Semi-Annual Report June 30, 2010

Small Cap Value Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	0.38	%	27.49	%	(5.88	)%	2.65	%	6.57	%
Class I	0.47		27.76		(5.69	)	2.86		6.81
Russell 2000® Value	(1.64	)	25.07		(9.85	)	(0.51	)	7.48
Russell 2000® Index	(1.95	)	21.48		(8.60	)	0.37		3.00

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller companies involves special risks, including higher volatility and lower liquidity. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2000^® Value Index is the Fund’s primary benchmark. The Russell 2000^® Value consists of small-capitalization companies with below average price-to-book ratios and forecasted growth rates.

The Russell 2000^® Index is an unmanaged composite of the smallest 2000 stocks of the Russell 3000^® Index.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     63

Small Cap Value Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Financials—36.3%
American Campus Communities, Inc.	24,665	$	673
Astoria Financial Corporation	81,360		1,119
BioMed Realty Trust, Inc.	69,020		1,111
Boston Private Financial Holdings, Inc.	192,128		1,235
*Eagle Bancorp, Inc.	68,546		807
Education Realty Trust, Inc.	187,805		1,132
*Excel Trust, Inc.	98,525		1,182
First Niagara Financial Group, Inc.	58,670		735
First Potomac Realty Trust	95,587		1,374
FirstMerit Corporation	47,507		814
Highwoods Properties, Inc.	41,770		1,160
Iberiabank Corporation	28,775		1,481
LaSalle Hotel Properties	35,377		728
MarketAxess Holdings, Inc.	76,520		1,055
Meadowbrook Insurance Group, Inc.	137,755		1,189
Mid-America Apartment Communities, Inc.	24,790		1,276
National Retail Properties, Inc.	55,565		1,191
NewAlliance Bancshares, Inc.	90,775		1,018
Old National Bancorp	114,522		1,186
*PHH Corporation	46,610		887
Platinum Underwriters Holdings, Ltd.†	28,645		1,040
*PMA Capital Corporation Class “A”	143,960		943
*ProAssurance Corporation	19,710		1,119
Realty Income Corporation	23,395		710
*Safeguard Scientifics, Inc.	90,775		959
Sandy Spring Bancorp, Inc.	80,585		1,129
*SVB Financial Group	21,875		902
*Texas Capital Bancshares, Inc.	32,933		540
The Hanover Insurance Group, Inc.	36,500		1,588
Umpqua Holdings Corporation	112,498		1,291
Washington Federal, Inc.	51,745		837
			32,411
Industrials—17.2%
Acuity Brands, Inc.	21,450		780
Belden, Inc.	47,375		1,042
*EMCOR Group, Inc.	39,815		923
ESCO Technologies, Inc.	25,460		656
G&K Services, Inc. Class “A”	54,670		1,129
*Global Defense Technology & Systems, Inc.	55,815		713
*GrafTech International, Ltd.	60,180		880
Interface, Inc. Class “A”	76,020		816
*Kadant, Inc.	54,480		949
Kaydon Corporation	30,520		1,003
*Marten Transport, Ltd.	39,335		817
*Old Dominion Freight Line, Inc.	27,190		956
*On Assignment, Inc.	156,855		789
Quanex Building Products Corporation	52,750		912
Robbins & Myers, Inc.	42,395		922
TAL International Group, Inc.	50,795		1,141
Towers Watson & Co. Class “A”	23,275		904
			15,332
Consumer Discretionary—12.0%
*AFC Enterprises, Inc.	98,504		896
Ameristar Casinos, Inc.	58,065		875
*Carter’s, Inc.	36,665		962
Christopher & Banks Corporation	132,982		823
Fred’s, Inc. Class “A”	88,400		978
*Gaylord Entertainment Co.	36,710		811

Issuer	Shares	Value
Common Stocks—(continued)
Consumer Discretionary—(continued)
*Jo-Ann Stores, Inc.	22,895	$	859
*Kirkland’s, Inc.	46,270		781
*Maidenform Brands, Inc.	44,295		902
Meredith Corporation	29,625		922
*Pacific Sunwear of California, Inc.	295,650		946
*Pinnacle Entertainment, Inc.	103,565		980
			10,735
Information Technology—9.1%
ADTRAN, Inc.	34,145		931
*Atmel Corporation	261,320		1,254
* Avid Technology, Inc.	69,316		882
Cognex Corporation	40,315		709
*Digital River, Inc.	44,145		1,056
Earthlink, Inc.	118,335		942
*MaxLinear, Inc. Class “A”	21,233		297
*Parametric Technology Corporation	76,210		1,194
*Ultra Clean Holdings	101,273		863
			8,128
Energy—6.9%
Berry Petroleum Co. Class “A”	48,899		1,258
*Forest Oil Corporation	49,543		1,356
*Magnum Hunter Resources Corporation	135,741		592
*Newpark Resources, Inc.	128,815		779
*Northern Oil and Gas, Inc.	26,588		341
SM Energy Co.	28,545		1,146
*TETRA Technologies, Inc.	74,440		676
			6,148
Utilities—6.1%
Chesapeake Utilities Corporation	29,940		940
Cleco Corporation	51,960		1,372
Northwest Natural Gas Co.	28,937		1,261
NorthWestern Corporation	34,975		916
South Jersey Industries, Inc.	21,460		922
			5,411
Materials—5.5%
*Intrepid Potash, Inc.	33,949		664
Minerals Technologies, Inc.	28,230		1,342
*PolyOne Corporation	124,105		1,045
*RTI International Metals, Inc.	38,730		934
Silgan Holdings, Inc.	32,165		913
			4,898
Health Care—2.6%
*Magellan Health Services, Inc.	23,355		848
*Mednax, Inc.	10,418		580
*Zoll Medical Corporation	31,855		863
			2,291
Consumer Staples—2.3%
J&J Snack Foods Corporation	19,252		811
Spartan Stores, Inc.	93,315		1,280
			2,091
Telecommunication Services—1.2%
*Syniverse Holdings, Inc.	52,375		1,071
Total Common Stocks—99.2% (cost $86,834)			88,516

See accompanying Notes to Financial Statements.

64     Semi-Annual Report June 30, 2010

Small Cap Value Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Investment in Affiliate
William Blair Ready Reserves Fund		3,605	$	4
Total Investment in Affiliate—0.0% (cost $4)				4
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $1,625, collateralized by FHLB, 4.375%, due 9/17/10	$	1,625		1,625
Total Repurchase Agreement—1.8% (cost $1,625)				1,625
Total Investments—101.0% (cost $88,463)				90,145
Liabilities, plus cash and other assets—(1.0)%				(866	)
Net assets—100.0%			$	89,279

* Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     65

Chad M. Kilmer

Mark T. Leslie

David S. Mitchell

MID CAP VALUE FUND

The Mid Cap Value Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

We are pleased to have the Mid Cap Value Fund become the newest addition to the William Blair Fund Family and would like to thank our shareholders for investing with us.

We are enthusiastic about the opportunities available to us as the Managers of the Mid Cap Value Fund. We believe the key to successful investing is striking a balance between attractive valuations and solid fundamentals. We look for this balance in two separate ways: quality companies at discount prices and corporate transformation opportunities. Critical to our long-term investment success is controlling stock-specific downside risk, and the consistent application of this philosophy.

How did the Fund perform since its inception? How did the Fund’s performance compare to its benchmark?

The Mid Cap Value Fund commenced operations on May 3, 2010. Through the two-month period ending June 30, 2010, the Fund posted a decrease of 13.20% (Class N Shares). By comparison, the Fund’s benchmark the Russell Midcap^® Value Index declined 13.47% for this short time period.

This narrow outperformance over the shortened two-month period was the result of mixed stock selection across sectors. Positive stock selection in Materials, including Pactiv Corporation, was offset by negative stock selection in Consumer Discretionary, including Chico’s FAS, Inc.

Looking forward, while the economic recovery may have a different trajectory (less steep) than some were expecting earlier this year, the market’s decline has improved valuations and lowered expectations. Corporate financial discipline and balance sheets remain strong, and inventories are lean throughout most industries. This should lay the ground work for operating margin expansion, likely beyond prior peak margins, and drive continued earnings growth over the intermediate term. However, investor pessimism is understandably high given the expiration of stimulus plans and diminished appetite for additional programs, U.S. state budget crunches, still absent employment growth and likely further consumer deleveraging.

We consider the impact of these economic scenarios into our stock-specific risk/reward assessments, and remain focused on finding quality companies at discount prices and corporate transformation opportunities. As always, we believe building a portfolio with these types of companies should produce solid investment results over the long term.

66     Semi-Annual Report June 30, 2010

Mid Cap Value Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Since Inception(a)
Class N	(13.20	)%
Class I	(13.10	)
Russell Midcap® Value Index	(13.47	)

(a) For the period May 3, 2010 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Mid Cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Russell 2000^® Midcap Value consists of Midcap-capitalization companies with below average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     67

Mid Cap Value Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks
Financials—28.9%
Alexandria Real Estate Equities, Inc.	400	$	25
Allied World Assurance Co. Holdings, Ltd.†	560		25
Ameriprise Financial, Inc.	1,060		38
Apartment Investment & Management Co.	1,300		25
Boston Properties, Inc.	300		21
Brandywine Realty Trust	1,780		19
Comerica, Inc.	1,440		53
Corporate Office Properties Trust	700		27
Discover Financial Services	2,100		29
Fifth Third Bancorp	3,490		43
*Forest City Enterprises, Inc. Class “A”	2,020		23
Host Hotels & Resorts, Inc.	1,730		23
KeyCorp	2,160		17
PartnerRe, Ltd.†	350		25
People’s United Financial, Inc.	3,010		41
Realty Income Corporation	750		23
The Hanover Insurance Group, Inc.	810		35
Unum Group	1,040		23
Validus Holdings, Ltd.†	950		23
Ventas, Inc.	470		22
Washington Federal, Inc.	1,600		26
			586
Industrials—12.1%
*AGCO Corporation	810		22
Cintas Corporation	1,070		26
Eaton Corporation	600		39
Goodrich Corporation	400		26
J.B. Hunt Transport Services, Inc.	780		25
Kennametal, Inc.	970		25
Manpower, Inc.	470		20
Parker Hannifin Corporation	680		38
Snap-On, Inc.	610		25
			246
Consumer Discretionary—12.1%
*Big Lots, Inc.	710		23
Chico’s FAS, Inc.	2,980		29
DISH Network Corporation	980		18
Fortune Brands, Inc.	720		28
Meredith Corporation	840		26
*Mohawk Industries, Inc.	430		20
Newell Rubbermaid, Inc.	2,000		29
Whirlpool Corporation	380		33
*WMS Industries, Inc.	980		39
			245
Utilities—9.5%
DPL, Inc.	1,190		28
DTE Energy Co.	820		37
Northeast Utilities	830		21
TECO Energy, Inc.	1,990		30
Wisconsin Energy Corporation	720		37
Xcel Energy, Inc.	1,920		40
			193

ADR = American Depository Receipt

† = U.S. listed foreign security

* Non-income producing securities

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Energy—8.8%
Cabot Oil & Gas Corporation		700	$	22
Ensco plc—ADR		490		19
*Forest Oil Corporation		1,360		37
Helmerich & Payne, Inc.		510		19
*Petrohawk Energy Corporation		1,270		22
Pioneer Natural Resources Co.		530		31
*Whiting Petroleum Corporation		360		28
				178
Materials—7.9%
Airgas, Inc.		460		29
Carpenter Technology Corporation		750		25
Lubrizol Corporation		280		22
*Pactiv Corporation		1,070		30
Sonoco Products Co.		1,040		32
Steel Dynamics, Inc.		1,710		22
				160
Information Technology—6.6%
*Atmel Corporation		6,690		32
*Hewitt Associates, Inc. Class “A”		610		21
*Ingram Micro, Inc. Class “A”		1,160		17
Tellabs, Inc.		4,520		29
*VeriSign, Inc.		1,270		34
				133
Consumer Staples—6.2%
Bunge, Ltd.†		330		16
Campbell Soup Co.		760		27
ConAgra Foods, Inc.		1,340		32
HJ Heinz Co.		720		31
The Kroger Co.		1,010		20
				126
Health Care—5.1%
CIGNA Corporation		730		23
Hill-Rom Holdings, Inc.		870		27
*Laboratory Corporation of America Holdings		350		26
*Mettler-Toledo International, Inc.†		250		28
				104
Total Common Stocks—97.2% (cost $2,275)				1,971
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $65, collateralized by FHLB, 4.375%, due 9/17/10	$	65	$	65
Total Repurchase Agreement—3.2% (cost $65)				65
Total Investments—100.4% (cost $2,340)				2,036
Liabilities, plus cash and other assets—(0.4)%				(9	)
Net assets—100.0%			$	2,027

See accompanying Notes to Financial Statements.

68     Semi-Annual Report June 30, 2010

Fixed Income Markets Overview

Summary

The first half of 2010 was a tale of two quarters for the fixed-income markets.

The first quarter of 2010 reflected investor optimism about economic recovery and growth. Prices of fixed-income securities began to reflect expectations for a healthy rebound in the U.S. economy.

The second quarter was a much more challenging environment. Weaker economic data, stubbornly high unemployment and nervousness about government debt levels in the U.S. and in Europe began to undermine investor confidence. To add to these worries was news on April 16^th that the Securities and Exchange Commission (SEC) had filed a civil lawsuit accusing the Wall Street firm Goldman Sachs of securities fraud. All these factors caused investors to turn more bearish towards all “risk” assets.

There were two Federal Reserve Open Market Committee meetings (FOMC) that were held during the second quarter and both confirmed that the Federal Reserve Board had decided to keep short-term interest rates near zero for “an extended period.” The Fed cited impediments to economic growth, including the effect of new financial problems abroad. In its statement following its most recent meeting on June 23, the Fed said, “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

It is worth noting that among the Federal Reserve Board’s arsenal of tools for stimulating growth in the economy is to purchase higher-coupon mortgage-backed securities. The demand created by the Fed’s purchases, in turn, prompts loan originators to lower interest rates, and has driven 30-year mortgages rates to low levels that are unprecedented.

Longer-term interest rates trended lower during the second quarter, with the 10-Year U.S. Treasury Note, which finished at 3.83% at the end of the first quarter, to end the second quarter at 2.93%.

Outlook

In hindsight, during the first quarter investors were probably too optimistic about an economy which was supported by government stimulus. Conversely, this sentiment swung to extreme pessimism during the second quarter. We believe the reality is that the economy is self-sustaining, but serious headwinds remain.

We believe that U.S. GDP growth will likely remain subpar due to structural unemployment in the U.S. economy. We believe this current environment is one that should be favorable for Corporate bonds, and we intend to maintain an overweight position in that sector, as well as higher-coupon Agency Mortgage-backed securities.

It is important to note that the fundamentals for U.S. corporations—for example, corporate balance sheets—remain strong. We believe demand for Corporate bonds will remain robust, and we think Corporate bonds will perform well, based on the prospects for further stabilization in the economy.

We anticipate continued strong fixed-income demand as insurance companies, pension funds, and other investors still carry high cash balances and are looking to invest funds at yields higher than the near zero cash and money market yields offered.

June 30, 2010 William Blair Funds     69

We remain encouraged that the fixed-income markets have been able to absorb major potential policy changes in the health care and financial services industries with relatively minor changes in risk premiums.

Interest rates are at historic lows. We don’t anticipate any major changes in Federal Reserve policy or interest rates until 2011.

As a firmer root structure emerges to the nascent economic recovery, there is the possibility that upward pressure might be placed on interest rates. While we do not expect this to materially have an impact on the prices of fixed income securities, we nonetheless believe the current structure of the Fund will help provide protection.

70     Semi-Annual Report June 30, 2010

Christopher T. Vincent

Paul J. Sularz

BOND FUND

The Bond Fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 69 for the Fixed Income Market Overview.

How did the Fund perform during the past six months? How did the Fund’s performance compare to its benchmark?

The Bond Fund posted a 5.27% increase on a total return basis (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Bond Index, gained 5.33%.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

The Fund’s significant overweight in investment grade Corporate securities and its roughly 10% exposure to high yield securities boosted performance during the first quarter. However, these sectors struggled during the second quarter with the paradigm shift of investor sentiment from expectations of economic growth to fears of a double-dip recession.

The Fund nearly doubled its holdings in below investment grade securities (those rated below BBB). Investment grade securities, at almost 50% of the Fund’s portfolio, were double the weight of the Fund’s benchmark Barclays Capital U.S. Aggregate Bond Index.

The Fund’s underweight in Commercial Mortgage-backed securities (which comprise 1% of the Fund and approximately 3% of the benchmark Index), was a slight drag on performance, when compared to the benchmark.

We made a conscious decision to invest in Corporate REITs, which are actively managed rather than the static pools of mortgages typically held in Commercial Mortgage-backed securities. We believe this is more prudent in the event of continued weakness in commercial real estate.

We also avoided owning U.S. Agency debentures, but instead emphasized U.S. Agency Mortgage-backed securities via higher coupon pools that are “seasoned,” as well as low loan balance pools. We believe the above-market coupons in these pools will experience slower amortization and should protect the Fund in a rising rate environment, while still providing an attractive level of current income.

We continue to position the Fund with a significant underweight to U.S. Treasuries, and maintain a very modest allocation to U.S. Treasury securities via TIPs (Treasury Inflation Protected Securities).

While we do not believe inflation is an immediate concern, we think our Fund’s positioning overall is defensive and appropriate in the event that interest rates rise sharply.

June 30, 2010 William Blair Funds     71

Bond Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		Since Inception(a)
Class N	5.27	%	11.42	%	7.53	%	6.73	%
Class I	5.29		11.62		7.70		6.89
Barclays Capital U.S. Aggregate Bond Index	5.33		9.50		7.55		6.77

(a) For the period from May 1, 2007 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1).

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Barclays Capital U.S. Aggregate Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total investments.

72     Semi-Annual Report June 30, 2010

Bond Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—46.8%
U.S. Treasury Inflation Indexed Notes/Bonds—7.9%
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29	$	7,956	$	10,677
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/13		593		628
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17		3,243		3,580
Total U.S. Treasury Inflation Indexed Notes/Bonds				14,885
Government National Mortgage Association (GNMA)—1.0%
GNR 2004-2 M5, 4.891%, due 7/16/34		125		136
GNR 2006-67 GB, 4.324%, due 9/16/34, VRN		1,540		1,666
Total GNMA Mortgage Obligations				1,802
Federal Home Loan Mortgage Corp. (FHLMC)—8.9%
#G90024, 7.000%, due 1/20/13		49		52
#G30093, 7.000%, due 12/1/17		41		45
#G30255, 7.000%, due 7/1/21		88		97
#G12792, 4.500%, due 12/1/21		563		600
#D95897, 5.500%, due 3/1/23		292		317
#G30372, 5.000%, due 9/1/27		676		718
#G01728, 7.500%, due 7/1/32		322		368
#C01385, 6.500%, due 8/1/32		439		488
#G02141, 6.000%, due 3/1/36		2,053		2,275
#A62179, 6.000%, due 6/1/37		1,083		1,198
#A63539, 6.000%, due 7/1/37		1,401		1,542
#G03170, 6.500%, due 8/1/37		2,195		2,413
#A66843, 6.500%, due 10/1/37		1,153		1,281
#A78138, 5.500%, due 6/1/38		1,572		1,711
#A81799, 6.500%, due 9/1/38		3,309		3,682
Total FHLMC Mortgage Obligations				16,787
Federal National Mortgage Association (FNMA)—29.0%
#535559, 7.500%, due 9/1/12		126		128
#598453, 7.000%, due 6/1/15		1		1
#689612, 5.000%, due 5/1/18		479		517
#695910, 5.000%, due 5/1/18		845		915
#747903, 4.500%, due 6/1/19		438		468
#745735, 5.000%, due 3/1/21		1,036		1,112
#253847, 6.000%, due 5/1/21		290		319
#900725, 6.000%, due 8/1/21		247		271
#545437, 7.000%, due 2/1/32		227		257
#545759, 6.500%, due 7/1/32		2,495		2,785
#254548, 5.500%, due 12/1/32		1,073		1,158
#684601, 6.000%, due 3/1/33		2,307		2,591
#190340, 5.000%, due 9/1/33		2,216		2,357
#254868, 5.000%, due 9/1/33		1,083		1,152
#555800, 5.500%, due 10/1/33		485		523
#725027, 5.000%, due 11/1/33		874		930
#555880, 5.500%, due 11/1/33		568		613
#555946, 5.500%, due 11/1/33		899		980
#756153, 5.500%, due 11/1/33		2,474		2,668
#725231, 5.000%, due 2/1/34		893		950
#725205, 5.000%, due 3/1/34		1,902		2,023
#725220, 5.000%, due 3/1/34		831		884
#725232, 5.000%, due 3/1/34		2,692		2,863
#725238, 5.000%, due 3/1/34		1,512		1,608

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#725424, 5.500%, due 4/1/34		$	610	$	657
#725611, 5.500%, due 6/1/34			543		586
#786546, 6.000%, due 7/1/34			1,031		1,145
#787816, 6.000%, due 7/1/34			979		1,076
#190353, 5.000%, due 8/1/34			644		684
#357883, 5.000%, due 5/1/35			1,320		1,404
#745092, 6.500%, due 7/1/35			677		756
#357944, 6.000%, due 9/1/35			126		139
#829306, 6.000%, due 9/1/35			356		395
#843487, 6.000%, due 10/1/35			302		333
#849191, 6.000%, due 1/1/36			195		216
#848782, 6.500%, due 1/1/36			876		970
#745349, 6.500%, due 2/1/36			1,229		1,353
#831540, 6.000%, due 6/1/36			251		273
#745802, 6.000%, due 7/1/36			719		792
#886220, 6.000%, due 7/1/36			1,225		1,346
#893318, 6.500%, due 8/1/36			287		317
#256859, 5.500%, due 8/1/37			1,119		1,196
#928561, 6.000%, due 8/1/37			883		969
#948689, 6.000%, due 8/1/37			2,570		2,799
#888967, 6.000%, due 12/1/37			1,986		2,173
#962058, 6.500%, due 3/1/38			3,411		3,815
#934006, 6.500%, due 9/1/38			1,812		2,008
#986856, 6.500%, due 9/1/38			1,198		1,319
Total FNMA Mortgage Obligations					54,794
Non-Agency Mortgage-Backed Obligations—1.6%
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, 7/25/18	CCC		252		178
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M2, 2.759%, 2/28/33, VRN§	CC		162		21
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 4.653%, 8/25/34, VRN	AAA		680		711
Chase Mortgage Finance Corporation, 2006-A1, Tranche 2A3, 6.000%, 9/25/36, VRN	CCC		2,460		2,074
Total Non-Agency Mortgage-Backed Obligations					2,984
Consumer Asset-Backed Securities—4.1%
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13	A2		2,000		2,225
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14	Aaa		1,800		1,919
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14	Aaa		2,230		2,324
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16	A2		954		985
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23**§	C		199		119

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     73

Bond Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Consumer Asset-Backed Securities—(continued)
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5, 6.455%, 7/25/34	A2	$	463	$	111
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35	AA+		40		40
Total Consumer Asset-Backed Securities					7,723
Corporate Obligations—46.0%
Morgan Stanley, 6.600%, due 4/1/12	A		545		578
Wells Fargo & Co., 4.375%, due 1/31/13	AA-		350		370
Weatherford International, Ltd., 5.150%, due 3/15/13	Baa1		1,425		1,493
John Deere Capital Corporation, 4.500%, due 4/3/13	A		700		754
Citigroup, Inc., 5.500%, due 4/11/13	A+		1,500		1,559
General Electric Capital Corporation, 4.800%, due 5/1/13	AA+		600		640
Kansas City Southern de Mexico S.A. de C.V., 7.625%, due 12/1/13	BB-		1,000		1,020
CME Group, Inc., 5.750%, due 2/15/14	AA		700		779
PACCAR, Inc., 6.875%, due 2/15/14	A+		800		927
America Movil S.A.B. de C.V., 5.500%, due 3/1/14	A2		700		763
Smith International, Inc., 8.625%, due 3/15/14	BBB+		970		1,152
General Electric Capital Corporation, 5.900%, due 5/13/14	AA+		225		248
Bank of America Corporation, 7.375%, due 5/15/14	A+		700		785
American Express Co., 7.250%, due 5/20/14	A+		500		568
Capital One Financial Corporation, 7.375%, due 5/23/14	A-		1,235		1,412
Hewlett-Packard Co., 4.750%, due 6/2/14	A+		800		886
Macquarie Group Ltd.—144A, 7.300%, due 8/1/14	A2		1,000		1,102
Petrohawk Energy Corporation, 10.500%, due 8/1/14	B		1,000		1,075
AT&T, Inc., 5.100%, due 9/15/14	A		1,250		1,387
D.R. Horton, Inc., 5.625%, due 9/15/14	BB		1,000		980
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14	A1		1,350		1,457
Boeing Capital Corporation, 3.250%, due 10/27/14	A+		1,400		1,458
Crown Castle International Corporation, 9.000%, due 1/15/15	B1		1,000		1,058
EI du Pont de Nemours & Co., 3.250%, due 1/15/15	A		500		522

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
Georgia-Pacific LLC—144A, 7.000%, due 1/15/15	BB+	$	1,000	$	1,010
The Kroger Co., 4.950%, due 1/15/15	BBB		1,175		1,266
Simon Property Group L.P., 4.200%, due 2/1/15	A-		1,500		1,541
DIRECTV Holdings LLC, 3.550%, due 3/15/15	Baa2		1,600		1,611
Yum! Brands, Inc., 4.250%, due 9/15/15	BBB-		350		371
Cisco Systems, Inc., 5.500%, due 2/22/16	A+		2,000		2,304
Omnicom Group, Inc., 5.900%, due 4/15/16	A-		750		853
Yum! Brands, Inc., 6.250%, due 4/15/16	BBB-		700		800
Owens-Brockway Glass Container, Inc., 7.375%, due 5/15/16	BB+		1,250		1,303
SABMiller plc—144A, 6.500%, due 7/1/16	BBB+		700		822
Petrobras International Finance Co., 6.125%, due 10/6/16	Baa1		1,350		1,433
EI du Pont de Nemours & Co., 5.250%, due 12/15/16	A		500		570
Comcast Corporation, 6.500%, due 1/15/17	BBB+		350		401
Corrections Corporation of America, 7.750%, due 6/1/17	BB		1,250		1,297
ERP Operating L.P., 5.750%, due 6/15/17	A-		1,100		1,185
JPMorgan Chase & Co., 6.125%, due 6/27/17	A1		600		656
BB&T Corporation, 4.900%, due 6/30/17	A2		665		686
American Express Co., 6.150%, due 8/28/17	A+		1,000		1,096
IBM Corporation, 5.700%, due 9/14/17	A+		1,250		1,453
Exelon Generation Co. LLC, 6.200%, due 10/1/17	A3		1,100		1,250
Toll Brothers Finance Corporation, 8.910%, due 10/15/17	BBB-		950		1,059
Triumph Group, Inc., 8.000%, due 11/15/17	B+		1,000		955
Union Pacific Corporation, 5.750%, due 11/15/17	BBB		800		903
Wells Fargo & Co., 5.625%, due 12/11/17	AA-		1,000		1,093
Kohl’s Corporation, 6.250%, due 12/15/17	BBB+		350		408
Morgan Stanley, 6.625%, due 4/1/18	A		950		996
General Electric Capital Corporation, 5.625%, due 5/1/18	AA+		350		372
Philip Morris International, Inc., 5.650%, due 5/16/18	A		1,000		1,094
Time Warner Cable, Inc., 6.750%, due 7/1/18	BBB		1,000		1,148
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18	A+		1,075		1,143

See accompanying Notes to Financial Statements.

74     Semi-Annual Report June 30, 2010

Bond Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19	BBB+	$	700	$	850
FedEx Corporation, 8.000%, due 1/15/19	BBB		750		952
CSX Corporation, 7.375%, due 2/1/19	BBB-		800		980
Honeywell International, Inc., 5.000%, due 2/15/19	A		925		1,035
Pfizer, Inc., 6.200%, due 3/15/19	AA		1,250		1,486
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19	A+		1,300		1,559
Owens Corning, 9.000%, due 6/15/19	BBB-		950		1,123
Jefferies Group, Inc., 8.500%, due 7/15/19	BBB		1,300		1,460
Discovery Communications LLC, 5.625%, due 8/15/19	Baa2		500		541
Roper Industries, Inc., 6.250%, due 9/1/19	BBB-		1,225		1,358
Boston Properties L.P., 5.875%, due 10/15/19	A-		1,500		1,605
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20	A2		250		253
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20	Ba3		1,515		1,546
Jarden Corporation, 7.500%, due 1/15/20	B		1,000		978
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20	A		1,500		1,650
Johnson Controls, Inc., 5.000%, due 3/30/20	BBB		1,625		1,708
United Technologies Corporation, 4.500%, due 4/15/20	A+		1,500		1,623
Iron Mountain, Inc., 8.000%, due 6/15/20	B+		1,250		1,269
HCA, Inc., 7.250%, due 9/15/20	BB		1,000		1,005
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20	Aa2		400		415
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22	A		679		699
The Kroger Co., 8.000%, due 9/15/29	BBB		325		419
Conoco Funding Co., 7.250%, due 10/15/31	A1		400		496

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc.

The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury.

VRN = Variable Rate Note

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.07% of the net assets at June 30, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2010.

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
Kohl’s Corporation, 6.000%, due 1/15/33	BBB+	$	1,000	$	1,069
Pacific Gas & Electric Co., 6.050%, due 3/1/34	A		750		837
Wisconsin Electric Power Co., 5.700%, due 12/1/36	A1		500		542
Comcast Corporation, 6.450%, due 3/15/37	BBB+		650		703
Yum! Brands, Inc., 6.875%, due 11/15/37	BBB-		600		689
JPMorgan Chase & Co., 6.400%, due 5/15/38	Aa3		900		1,042
COX Communications, Inc.—144A, 6.950%, due 6/1/38	Baa2		350		402
General Electric Capital Corporation, 6.875%, due 1/10/39	AA+		750		828
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40	A3		1,515		1,602
Total Corporate Obligations					86,776
Total Long-Term Investments—98.5% (cost $175,529)					185,751
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $2,878, collateralized by FHLB, 4.375%, due 9/17/10	AAA		2,878		2,878
Total Repurchase Agreement—1.5% (cost $2,878)					2,878
Total Investments—100.0% (cost $178,407)					188,629
Cash and other assets, less liabilities—0.0%					35
Net assets—100.0%				$	188,664

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     75

Christopher T. Vincent

INCOME FUND

The Income Fund seeks a high level of current income with relative stability of principal.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Please see page 69 for the Fixed Income Market Overview.

The Income Fund posted a 3.94% increase on a total return basis (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Barclays Capital Intermediate Government /Credit Bond Index, gained 4.56%.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

The Fund’s significant overweight in investment grade Corporate securities boosted performance during the first quarter. However, this sector struggled during the second quarter with the paradigm shift of investor sentiment from expectations of economic growth to fears of a double-dip recession.

The Fund’s underweight in Commercial Mortgage-backed securities (which comprise 1% of the Fund and approximately 3% of the benchmark Index), was a slight drag on performance, when compared to the benchmark.

We made a conscious decision to invest in Corporate REITs, which are actively managed rather than the static pools of mortgages typically held in Commercial Mortgage-backed securities. We believe this is more prudent in the event of continued weakness in commercial real estate.

We also avoided owning U.S. Agency debentures, but instead emphasized U.S. Agency Mortgage-backed securities via higher coupon pools that are “seasoned,” as well as low loan balance pools. We believe the above-market coupons in these pools will experience slower amortization and should protect the Fund in a rising rate environment, while still providing an attractive level of current income.

We continue to position the Fund with a significant underweight to U.S. Treasuries, and maintain a very modest allocation to U.S. Treasury securities via TIPs (Treasury Inflation Protected Securities).

While we do not believe inflation is an immediate concern, we think our Fund’s positioning overall is defensive and appropriate in the event that interest rates rise sharply.

76     Semi-Annual Report June 30, 2010

Income Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		10 Year
Class N	3.94	%	8.69	%	3.88	%	3.34	%	4.57	%
Class I	4.06		8.80		4.04		3.51		4.73
Barclays Capital Intermediate Government/Credit Bond Index	4.56		8.29		6.97		5.26		6.06

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution (12b-1) or service fees.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Barclays Capital Intermediate Government/Credit Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total investments.

June 30, 2010 William Blair Funds     77

Income Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—34.3%
U.S. Treasury Inflation Indexed Notes/Bonds—3.5%
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17	$	3,783	$	4,177
U.S. Treasury—1.6%
U.S. Treasury Note, 5.125%, due 5/15/16		1,000		1,167
U.S. Treasury Note, 3.125%, due 5/15/19		700		714
Total U.S. Treasury Obligations				1,881
Government National Mortgage Association (GNMA)—0.3%
#780405, 9.500%, due 11/15/17		180		196
#357322, 7.000%, due 9/15/23		123		138
Total GNMA Mortgage Obligations
				334
Federal Home Loan Mortgage Corp. (FHLMC)—10.3%
#M80925, 5.000%, due 6/1/11		367		369
#E00436, 7.000%, due 6/1/11		45		47
#G10708, 6.500%, due 8/1/12		40		42
#E72924, 7.000%, due 10/1/13		314		331
#E81703, 7.000%, due 5/1/15		339		361
#E81697, 8.000%, due 5/1/15		878		957
#E81908, 8.500%, due 12/1/15		78		90
#J02184, 8.000%, due 4/1/16		617		663
#G90022, 8.000%, due 9/17/16		262		281
#M30028, 5.500%, due 5/1/17		63		66
#E90398, 7.000%, due 5/1/17		706		767
#E96536, 5.000%, due 3/1/18		985		1,059
#E97112, 4.000%, due 5/1/18		386		407
#B13459, 4.500%, due 4/1/19		318		339
#C67537, 9.500%, due 8/1/21		19		20
#D95621, 6.500%, due 7/1/22		2,052		2,276
#A45790, 7.500%, due 5/1/35		364		417
#G02141, 6.000%, due 3/1/36		1,142		1,265
#A81799, 6.500%, due 9/1/38		2,115		2,354
Total FHLMC Mortgage Obligations				12,111
Federal National Mortgage Association (FNMA)—18.6%
#695512, 8.000%, due 9/1/10		2		2
#313816, 6.000%, due 4/1/11		16		16
#577393, 10.000%, due 6/1/11		11		12
#577395, 10.000%, due 8/1/11		44		45
#254788, 6.500%, due 4/1/13		108		112
#725315, 8.000%, due 5/1/13		113		121
#593561, 9.500%, due 8/1/14		175		191
#567027, 7.000%, due 9/1/14		650		694
#567026, 6.500%, due 10/1/14		527		573
#458124, 7.000%, due 12/15/14		89		95
#576554, 8.000%, due 1/1/16		672		737
#256106, 5.000%, due 2/1/16		1,021		1,066
#576553, 8.000%, due 2/1/16		1,132		1,267
#555747, 8.000%, due 5/1/16		113		120
#735569, 8.000%, due 10/1/16		693		758
#725410, 7.500%, due 4/1/17		432		458
#643217, 6.500%, due 6/1/17		205		223
#679247, 7.000%, due 8/1/17		862		960
#888979, 6.000%, due 12/1/17		853		905
#685194, 4.500%, due 3/1/18		1,349		1,441

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#689334, 5.000%, due 3/1/18		$	197	$	211
#695910, 5.000%, due 5/1/18			845		915
#740847, 6.000%, due 10/1/18			552		602
#323501, 6.500%, due 1/1/19			162		179
#255358, 5.000%, due 9/1/19			257		276
#852864, 7.000%, due 7/1/20			1,699		1,897
#458147, 10.000%, due 8/15/20			424		478
#835563, 7.000%, due 10/1/20			758		842
#735574, 8.000%, due 3/1/22			440		511
#679253, 6.000%, due 10/1/22			1,010		1,110
FNR G93-19 SH, 11.234%, due 4/25/23, VRN			11		13
#255956, 5.500%, due 10/1/25			223		241
#806458, 8.000%, due 6/1/28			402		465
#880155, 8.500%, due 7/1/29			796		925
#797846, 7.000%, due 3/1/32			1,043		1,153
#745519, 8.500%, due 5/1/32			504		586
#654674, 6.500%, due 9/1/32			241		269
#733897, 6.500%, due 12/1/32			283		315
#886220, 6.000%, due 7/1/36			1,017		1,118
Total FNMA Mortgage Obligations					21,902
Non-Agency Mortgage-Backed Obligations—0.2%
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M1, 2.759%, 2/28/33, VRN§	CCC		424		169
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M2, 2.759%, 2/28/33, VRN§	CC		325		42
Total Non-Agency Mortgage-Backed Obligations					211
Consumer Asset-Backed Securities—5.8%
Peco Energy Transition Trust, 2001-A, Tranche A1, 6.520%, 12/31/10	AAA		301		304
Citibank Credit Card Issuance Trust, 2009-A3, Tranche A3, 2.700%, 6/24/13	AAA		965		982
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13	AAA		432		437
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13	A2		1,000		1,112
Mercedes-Benz Auto Receivables Trust, 2009-1, Tranche A3, 1.670%, 1/15/14	AAA		405		409
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14	Aaa		1,200		1,279
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14	Aaa		1,500		1,563
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23**§	C		676		405

See accompanying Notes to Financial Statements.

78     Semi-Annual Report June 30, 2010

Income Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Consumer Asset-Backed Securities—(continued)
First Plus Home Loan Trust, 1997-4, Tranche M2, 7.830%, 9/11/23**§	C	$	143	$	86
First Plus Home Loan Trust, 1998-3, Tranche M2, 7.920%, 5/10/24**§	Caa1		256		154
ABFS Mortgage Loan Trust, 2002-2, Tranche A7, 5.715%, 7/15/33	AAA		5		5
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35	AA+		101		99
Total Consumer Asset-Backed Securities					6,835
Corporate Obligations—58.3%
Pacific Gas & Electric Co., 4.200%, due 3/1/11	A		1,250		1,276
Wisconsin Energy Corporation, 6.500%, due 4/1/11	A3		1,250		1,300
Eli Lilly & Co., 3.550%, due 3/6/12	AA		500		521
BHP Billiton Finance USA, Ltd., 5.125%, due 3/29/12	A+		1,195		1,272
Morgan Stanley, 6.600%, due 4/1/12	A		1,600		1,698
COX Communications, Inc., 7.125%, due 10/1/12	Baa2		500		556
Wells Fargo & Co., 4.375%, due 1/31/13	AA-		1,400		1,480
PepsiCo, Inc., 4.650%, due 2/15/13	Aa3		540		587
John Deere Capital Corporation, 4.500%, due 4/3/13	A		1,000		1,077
Citigroup, Inc., 5.500%, due 4/11/13	A+		1,000		1,039
General Electric Capital Corporation, 4.800%, due 5/1/13	AA+		1,500		1,599
Novartis Capital Corporation, 4.125%, due 2/10/14	Aa2		1,000		1,079
CME Group, Inc., 5.750%, due 2/15/14	AA		1,000		1,112
PACCAR, Inc., 6.875%, due 2/15/14	A+		1,000		1,158
PepsiAmericas, Inc., 4.375%, due 2/15/14	A+		500		545
America Movil S.A.B. de C.V., 5.500%, due 3/1/14	A2		1,000		1,090
Coca-Cola Enterprises, Inc., 7.375%, due 3/3/14	A+		900		1,073
General Electric Capital Corporation, 5.900%, due 5/13/14	AA+		225		248
Bank of America Corporation, 7.375%, due 5/15/14	A+		500		560
Hewlett-Packard Co., 4.750%, due 6/2/14	A+		1,100		1,219
St. Jude Medical, Inc., 3.750%, due 7/15/14	A		500		528

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
AT&T, Inc., 5.100%, due 9/15/14	A	$	1,750	$	1,941
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14	A1		1,000		1,079
Boeing Capital Corporation, 3.250%, due 10/27/14	A+		1,000		1,042
EI du Pont de Nemours & Co., 3.250%, due 1/15/15	A		1,200		1,252
Simon Property Group L.P., 4.200%, due 2/1/15	A-		1,125		1,156
DIRECTV Holdings LLC, 3.550%, due 3/15/15	Baa2		750		755
United Technologies Corporation, 4.875%, due 5/1/15	A+		1,000		1,118
Cisco Systems, Inc., 5.500%, due 2/22/16	A+		1,250		1,440
Omnicom Group, Inc., 5.900%, due 4/15/16	A-		1,000		1,137
Yum! Brands, Inc., 6.250%, due 4/15/16	BBB-		1,000		1,143
Petrobras International Finance Co., 6.125%, due 10/6/16	Baa1		1,000		1,062
BHP Billiton Finance USA, Ltd., 5.400%, due 3/29/17	A+		1,000		1,127
ERP Operating L.P., 5.750%, due 6/15/17	A-		1,000		1,077
JPMorgan Chase & Co., 6.125%, due 6/27/17	A1		1,750		1,915
BB&T Corporation, 4.900%, due 6/30/17	A2		1,500		1,546
Kimberly-Clark Corporation, 6.125%, due 8/1/17	A		1,000		1,184
American Express Co., 6.150%, due 8/28/17	A+		1,500		1,644
IBM Corporation, 5.700%, due 9/14/17	A+		1,750		2,034
Exelon Generation Co. LLC, 6.200%, due 10/1/17	A3		2,000		2,274
Tesco plc—144A, 5.500%, due 11/15/17	A-		1,750		1,945
Abbott Laboratories, 5.600%, due 11/30/17	AA		500		580
Wells Fargo & Co., 5.625%, due 12/11/17	AA-		750		820
Kohl’s Corporation, 6.250%, due 12/15/17	BBB+		1,000		1,165
Philip Morris International, Inc., 5.650%, due 5/16/18	A		1,250		1,367
Time Warner Cable, Inc., 6.750%, due 7/1/18	BBB		1,000		1,148
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19	BBB+		800		971
FedEx Corporation, 8.000%, due 1/15/19	BBB		1,000		1,270
Honeywell International, Inc., 5.000%, due 2/15/19	A		1,225		1,370
The Procter & Gamble Co., 4.700%, due 2/15/19	AA-		500		548

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     79

Income Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
Unilever Capital Corporation, 4.800%, due 2/15/19	A+	$	500	$	547
Pfizer, Inc., 6.200%, due 3/15/19	AA		1,000		1,188
Jefferies Group, Inc., 8.500%, due 7/15/19	BBB		1,100		1,236
Boston Properties L.P., 5.875%, due 10/15/19	A-		1,350		1,444
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20	A2		1,000		1,014
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20	A		1,000		1,100
Johnson Controls, Inc., 5.000%, due 3/30/20	BBB		1,000		1,051
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20	Aa2		1,250		1,296
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22	A		1,493		1,538
Total Corporate Obligations					68,541
Total Long-Term Investments—98.6% (cost $109,106)					115,992

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury.

VRN = Variable Rate Note

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.73% of the net assets at June 30, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. These holdings represent 0.55% of the Fund’s net assets at June 30, 2010.

Issuer	NRSRO Rating	Principal Amount		Value
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $373, collateralized by FHLB, 4.375%, due 9/17/10	AAA	$	373	$	373
Total Repurchase Agreement—0.3% (cost $373)					373
Total Investments—98.9% (cost $109,479)					116,365
Cash and other assets, less liabilities—1.1%					1,248
Net assets—100.0%				$	117,613

See accompanying Notes to Financial Statements.

80     Semi-Annual Report June 30, 2010

Christopher T. Vincent

Paul J. Sularz

LOW DURATION FUND

The Low Duration Fund seeks to maximize total return. Total return includes both income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 69 for the Fixed Income Market Overview.

The Low Duration Fund posted a 1.43% increase on a total return basis (Class N Shares) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Merrill Lynch 1-Year U.S. Treasury Note Index, gained 0.51%.

What were the most significant factors impacting Fund performance during the first half of 2010? What factors were behind the Fund’s performance versus the benchmark?

Assets in this new Fund continued to build since the Fund’s inception on December 1, 2009, with assets increasing to $132 million by June 30, 2010.

The Fund had a very positive six months, with the Fund outperforming its Merrill Lynch 1-Year U.S. Treasury Note Index benchmark. We believe the Fund has been able to accomplish this objective without sacrificing credit quality. The Fund does not own below-investment grade securities as mandated by the Prospectus.

We are especially pleased with the way the Fund performed during the first quarter of the year. Short-term interest rate volatility is the worst enemy of a fixed income fund, and the Fund experienced a bout of rising rates at the end of March—which was preceded by a similar episode during the last week of December.

The Fund invested capital as the Fund’s asset flows grew steadily from its inception. We continued to invest in new Consumer Asset-backed securities (such as “top tier” banks and auto receivables) as well as seasoned U.S. Agency Mortgage-backed securities and Corporate Bonds.

We consider the Consumer Asset-backed securities that the Fund invests in to be highly liquid. Nearly a third of these investments are floating rate instruments that reset on monthly basis, which helps offset the negative impact of rising short-term rates on the Fund’s portfolio. The benefits of this strategy are especially evident in a rising rate environment such as the one the Fund experienced in December and March.

Similarly, the Fund’s U.S. Government-guaranteed short duration Mortgage-backed Fannie Mae and Freddie Mac securities pay monthly principal and interest, which we then are able to reinvest.

The Fund kept its exposure to cash and cash equivalents extremely low, given the very low rates currently available from money market instruments.

Finally it is worth noting that the Fund paid a total of $0.09157 per share (Class N Shares) in income distributions to shareholders of record during the first half of 2010.

June 30, 2010 William Blair Funds     81

Low Duration Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		Since Inception
Class N	1.43	%	0.82	%
Class I	1.49		0.89
Merrill Lynch 1-Year U.S. Treasury Note Index	0.51		0.36

(a) For the period from December 1, 2009 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1).

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Merrill Lynch 1-Year U.S. Treasury Note Index is comprised of a single U.S. Treasury Note issue purchased at the beginning of the month and held for a full month. Each month the index is rebalanced and the issue selected is the outstanding U.S. Treasury Note that matures closest to, but not beyond one year from the rebalancing date.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total investments.

82     Semi-Annual Report June 30, 2010

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—44.8%
Government National Mortgage Association (GNMA)—0.3%
#003438, 4.500%, due 9/20/18	$	363	$	387
Federal Home Loan Mortgage Corp. (FHLMC)—17.2%
#M80856, 4.500%, due 10/1/10		104		105
#M80898, 4.500%, due 2/1/11		191		196
#M80903, 4.000%, due 3/1/11		369		374
#M80953, 4.000%, due 12/1/11		342		350
#E70847, 5.500%, due 6/1/13		3		4
#G11320, 6.000%, due 4/1/14		761		826
#G11211, 6.000%, due 7/1/16		419		455
#G11187, 5.500%, due 9/1/16		566		614
#E86134, 5.000%, due 11/1/16		308		331
#G11337, 5.500%, due 11/1/17		2,103		2,283
#E96536, 5.000%, due 3/1/18		614		660
#E95355, 5.000%, due 4/1/18		695		747
#E01377, 4.500%, due 5/1/18		707		749
#G11618, 4.500%, due 5/1/18		3,337		3,560
#E01488, 5.000%, due 10/1/18		725		780
#E99895, 5.000%, due 10/1/18		1,483		1,594
#G12093, 4.500%, due 12/1/18		827		882
#B11386, 5.000%, due 12/1/18		324		348
#G11506, 5.500%, due 12/1/18		541		587
#G11567, 5.500%, due 12/1/18		592		643
#E01545, 5.000%, due 1/1/19		410		440
#G11766, 5.000%, due 3/1/19		295		317
#G18001, 4.500%, due 7/1/19		381		406
#G11596, 5.500%, due 8/1/19		300		326
#B16291, 5.000%, due 9/1/19		1,867		2,006
#G18045, 5.000%, due 3/1/20		329		353
#G11892, 4.000%, due 4/1/20		323		340
#G18048, 5.000%, due 4/1/20		234		251
#J08152, 5.000%, due 5/1/20		258		277
#G12827, 5.500%, due 2/1/21		765		830
#G12394, 5.000%, due 5/1/21		433		465
#G12113, 5.500%, due 5/1/21		496		538
#J06402, 5.500%, due 11/1/22		119		128
Total FHLMC Mortgage Obligations				22,765
Federal National Mortgage Association (FNMA)—27.3%
#254956, 4.000%, due 11/1/10		267		268
#255325, 4.500%, due 7/1/11		1,303		1,337
#545898, 5.500%, due 9/1/17		961		1,041
#545899, 5.500%, due 9/1/17		1,102		1,195
#735647, 5.000%, due 12/1/17		2,952		3,175
#254591, 5.500%, due 1/1/18		641		695
#681310, 4.500%, due 2/1/18		668		714
#683100, 5.500%, due 2/1/18		781		851
#675717, 5.000%, due 3/1/18		710		764
#656564, 5.000%, due 4/1/18		3,198		3,440
#555456, 5.500%, due 4/1/18		3,372		3,655
#929388, 4.500%, due 5/1/18		923		964
#704049, 5.500%, due 5/1/18		1,505		1,635
#555622, 4.500%, due 6/1/18		746		796
#656573, 5.000%, due 6/1/18		417		449
#709848, 5.000%, due 6/1/18		393		423
#713807, 4.500%, due 7/1/18		355		379
#711991, 5.000%, due 8/1/18		370		398

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#740444, 4.500%, due 9/1/18		$	567	$	606
#743183, 5.000%, due 10/1/18			154		166
#749596, 5.000%, due 11/1/18			512		550
#255233, 4.000%, due 5/1/19			813		860
#725445, 4.500%, due 5/1/19			915		976
#995234, 5.000%, due 7/1/19			3,335		3,587
#785259, 5.000%, due 8/1/19			630		677
#725953, 5.000%, due 10/1/19			182		196
#745240, 4.500%, due 12/1/19			875		935
#735401, 5.500%, due 3/1/20			547		593
#735646, 4.500%, due 7/1/20			1,098		1,172
#836016, 4.500%, due 9/1/20			1,799		1,916
#881284, 4.500%, due 12/1/21			1,652		1,758
Total FNMA Mortgage Obligations					36,171
Consumer Asset-Backed Securities—41.6%
BMW Vehicle Lease Trust, 2009-1, Tranche A2, 2.040%, 4/15/11	AAA		483		484
Nissan Auto Lease Trust, 2009-A, Tranche A2, 2.010%, 4/15/11	AAA		558		559
Nissan Auto Receivables Owner Trust, 2009-1, Tranche A2, 3.920%, 4/15/11	AAA		80		81
Mercedes-Benz Auto Receivables Trust, 2010-1, Tranche A1, 0.309%, 5/13/11	A-1+		763		762
Volkswagen Auto Lease Trust, 2009-A, Tranche A2, 2.870%, 7/15/11	AAA		364		365
Honda Auto Receivables Owner Trust, 2009-2, Tranche A2, 2.220%, 8/15/11	AAA		61		61
Nissan Auto Lease Trust, 2009-B, Tranche A2, 1.220%, 9/15/11	AAA		1,568		1,568
Ford Credit Auto Owner Trust, 2009-D, Tranche A2, 1.210%, 1/15/12	AAA		1,835		1,837
Honda Auto Receivables Owner Trust, 2008-1, Tranche A3, 4.470%, 1/18/12	AAA		771		779
Honda Auto Receivables Owner Trust, 2010-1, Tranche A2, 0.620%, 2/21/12	AAA		2,375		2,373
USAA Auto Owner Trust, 2009-2, Tranche A2, 0.740%, 3/15/12	AAA		165		165
Ally Auto Receivables Trust, 2010-1, Tranche A2, 0.750%, 4/15/12	AAA		1,000		999
Volkswagen Auto Lease Trust, 2009-A, Tranche A3, 3.410%, 4/16/12	AAA		1,550		1,582
CNH Equipment Trust, 2008-A, Tranche A3, 4.120%, 5/15/12	AAA		555		559
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A2, 2.520%, 5/15/12	AAA		45		45
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A2, 0.660%, 5/21/12	AAA		2,000		1,999
USAA Auto Owner Trust, 2010-1, Tranche A2, 0.630%, 6/15/12	AAA		1,350		1,349

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     83

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Consumer Asset-Backed Securities—(continued)
Ford Credit Auto Owner Trust, 2007-B, Tranche A4A, 5.240%, 7/15/12	AAA	$	530	$	551
Chase Issuance Trust, 2009-A6, Tranche A6, 1.200%, 7/16/12, VRN	AAA		1,300		1,300
CNH Equipment Trust, 2008-B, Tranche A3A, 4.780%, 7/16/12	AAA		442		447
CNH Equipment Trust, 2009-C, Tranche A2, 0.950%, 8/15/12	AAA		1,000		1,001
CNH Equipment Trust, 2010-A, Tranche A2, 0.810%, 8/15/12	AAA		1,000		1,000
Chase Issuance Trust, 2007-A15, Tranche A, 4.960%, 9/17/12	AAA		198		200
BMW Vehicle Owner Trust, 2010-A, Tranche A2, 0.680%, 9/25/12	AAA		1,500		1,499
Capital Auto Receivables Asset Trust, 2008-2, Tranche A3B, 1.800%, 10/15/12, VRN	AAA		840		847
Citibank Credit Card Issuance Trust, 2005-A7, Tranche A7, 4.750%, 10/22/12	AAA		200		202
MBNA Credit Card Master Note Trust, 2005-A6, Tranche A6, 4.500%, 1/15/13	AAA		150		151
CarMax Auto Owner Trust, 2009-1, Tranche A3, 4.120%, 3/15/13	AAA		421		432
Bank of America Credit Card Trust, 2008-A1, Tranche A1, 0.930%, 4/15/13, VRN	AAA		320		320
Ford Credit Auto Owner Trust, 2009-A, Tranche A3A, 3.960%, 5/15/13	AAA		600		615
Bank of America Credit Card Trust, 2007-A2, Tranche A2, 0.370%, 6/17/13, VRN	AAA		1,283		1,282
USAA Auto Owner Trust, 2009-1, Tranche A3, 3.020%, 6/17/13	AAA		1,500		1,524
American Express Issuance Trust, 2007-2, Tranche A, 0.600%, 7/15/13, VRN	AAA		373		373
Capital One Multi-Asset Execution Trust, 2003-A5, Tranche A5, 0.640%, 7/15/13, VRN	AAA		1,000		1,000
American Express Credit Account Master Trust, 2008-1, Tranche A, 0.800%, 8/15/13, VRN	AAA		1,200		1,202
American Express Credit Account Master Trust—144A, 2006-B, Tranche A, 0.390%, 8/15/13, VRN	AAA		1,070		1,070
American Express Issuance Trust, 2005-2, Tranche A, 0.420%, 8/15/13, VRN	AAA		730		727
Discover Card Master Trust I, 2006-1, Tranche A2, 0.400%, 8/16/13, VRN	AAA		354		353
Ford Credit Auto Owner Trust, 2009-D, Tranche A3, 2.170%, 10/15/13	AAA		1,160		1,176
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13	AAA		1,728		1,749

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Consumer Asset-Backed Securities—(continued)
John Deere Owner Trust, 2009-B, Tranche A3, 1.570%, 10/15/13	AAA	$	865	$	866
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13	A2		2,000		2,225
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A3, 3.190%, 11/15/13	AAA		2,007		2,049
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14	Aaa		1,000		1,066
Capital One Multi-Asset Execution Trust, 2006-A7, Tranche A7, 0.380%, 3/17/14, VRN	AAA		1,000		998
Capital One Multi-Asset Execution Trust, 2008-A6, Tranche A6, 1.450%, 3/17/14, VRN	AAA		1,610		1,622
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14	Aaa		1,765		1,839
Chase Issuance Trust, 2007-A9, Tranche A, 0.380%, 6/16/14, VRN	AAA		2,000		1,990
Nissan Auto Receivables Owner Trust, 2008-A, Tranche A4, 4.280%, 6/16/14	AAA		150		155
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14	AAA		550		553
Citibank Credit Card Issuance Trust, 2007-A7, Tranche A7, 0.698%, 8/20/14, VRN	AAA		200		200
American Express Credit Account Master Trust, 2007-5, Tranche A, 0.380%, 12/15/14, VRN	AAA		1,000		995
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.500%, 1/15/15, VRN	AAA		2,000		2,005
Capital One Multi-Asset Execution Trust, 2007-A4, Tranche A4, 0.380%, 3/16/15, VRN	AAA		620		616
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.650%, 9/15/15, VRN	AAA		1,300		1,297
Chase Issuance Trust, 2008-A3, Tranche A, 1.450%, 3/15/16, VRN	AAA		2,000		2,054
Total Consumer Asset-Backed Securities					55,118
Corporate Obligations—11.7%
Teva Pharmaceutical Finance III LLC, 1.500%, due 6/15/12	A-		1,000		1,004
General Electric Capital Corporation, 3.500%, due 8/13/12	AA+		1,000		1,032
Johnson & Johnson, 5.150%, due 8/15/12	AAA		1,900		2,071
Bank of America Corporation, 5.375%, due 9/11/12	A+		1,000		1,044

See accompanying Notes to Financial Statements.

84     Semi-Annual Report June 30, 2010

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Corporate Obligations—(continued)
ConocoPhillips, 4.750%, due 10/15/12	A1	$	1,000	$	1,074
Citigroup, Inc., 5.300%, due 10/17/12	A+		1,000		1,036
Wells Fargo & Co., 5.250%, due 10/23/12	AA-		1,000		1,070
Morgan Stanley, 5.250%, due 11/2/12	A		1,000		1,040
The Walt Disney Co., 4.700%, due 12/1/12	A		1,500		1,627
Hewlett-Packard Co., 4.500%, due 3/1/13	A+		1,000		1,079
American Honda Finance Corp.—144A, 2.375%, due 3/18/13	A+		1,000		1,014
Novartis Capital Corporation, 1.900%, due 4/24/13	Aa2		1,235		1,254
American Express Co., 4.875%, due 7/15/13	A+		1,000		1,068
Total Corporate Obligations					15,413
Total Long-Term Investments—98.1% (cost $129,421)					129,854

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc.

The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury.

VRN = Variable Rate Note

Issuer	NRSRO Rating	Principal Amount		Value
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $10,438, collateralized by FHLB, 4.375%, due 9/17/10	AAA	$	10,438	$	10,438
Total Repurchase Agreement—7.9% (cost $10,438)					10,438
Total Investments—106.0% (cost $139,859)					140,292
Liabilities, plus cash and other assets—(6.0)%					(7,939	)
Net assets—100.0%				$	132,353

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     85

Christopher T. Vincent

Kathleen M. Lynch

READY RESERVES FUND

The Ready Reserves Fund seeks current income, a stable share price and daily liquidity.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

The return for the six months ended June 30, 2009, of the Fund’s Class N Shares was 0.00%, versus the 0.02% return of the Fund’s benchmark, the AAA-Rated Money Market Funds Average. Total assets were $1.27 billion, compared to $1.35 billion at December 31, 2009, and $1.51 billion at June 30, 2009.

Federal Open Market Committee (FOMC) meetings held during the first half of 2010 confirmed that the Federal Reserve Board had decided to keep short-term interest rates near zero for “an extended period.” The Fed cited impediments to economic growth, including the effect of new financial problems abroad.

In its statement following its most recent two-day meeting on June 23, the Fed said, “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

Although the rate decision announced by the FOMC at the end of its meeting was in line with what Fed observers had expected, many considered the remarks to be remarkably dovish, and reflected the Fed’s concern over consumer spending and an unemployment rate that stands at 9.7%

The FOMC did not change its basic characterization of the pace of economic recovery, which it described as “likely to be moderate for a time.” However, it did change its language on growth, saying the economic recovery was “proceeding.” (In April, the FOMC said economic activity “has continued to strengthen.”)

This slight change in language was an indication to observers that the Fed is more concerned about the pace of economic growth.

Although the FOMC did not change its language on inflation, which was described as “likely to be subdued for some time,” it acknowledged declining prices for items such as energy and other commodities. Inflation in recent months has been largely flat, and is well below the Fed’s unofficial annual target of about 2.0%.

The FOMC left the Federal Funds target rate unchanged at a range of 0.00% -0.25% (It has stood at that level since December 2008.) The FOMC had previously raised the Discount Rate (on February 18) from 0.50% to 0.75%.

More notable was that the Fed has now exited many of the temporary liquidity programs enacted during the recent financial crisis. The last remaining program was the Term Asset-Backed Securities Loan Facility (TALF), which closed on June 30. Many Fed watchers believe that the Fed’s willingness to let these programs wind down reflects their cautious optimism about the economy.

As we wrote about at the end of last year, as the extreme financial conditions of 2009 eased—and in particular the lingering effects of the credit crisis—money market funds experienced gradual liquidations and orderly outflows to longer-fixed income securities, as well as equities. Corporations are rightly and rationally looking to longer-term funding markets as a source for capital, and less short-term Commercial Paper is being issued.

In such a low interest rate environment, with an exceedingly low federal funds rate, managing the Fund is a challenge, and we expect it to remain so until 2011, when we expect economic fundamentals to strengthen, and short-term rates to firm somewhat.

86     Semi-Annual Report June 30, 2010

We continue to favor overnight repurchase agreements, in an effort to maintain a high degree of overnight liquidity.

The Fund also continues to maintain a relatively short Average Maturity. At June 30, 2010, the Fund’s Average Maturity was 38 days, compared to 48 days at March 31, 2010, 50 days at December 31, 2009, and 51 days at the same time one year ago.

June 30, 2010 William Blair Funds     87

Ready Reserves Fund

Performance Highlights (unaudited)

The Fund’s 7 day yield on June 30, 2010 was 0.01%.

Average Annual Total Returns—Class N Shares period ended June 30, 2010.

	Year to Date		1 Year		3 Year		5 Year		10 Year
Ready Reserves Fund	0.00	%	0.01	%	1.54	%	2.60	%	2.35	%
AAA-Rated Money Market Funds	0.01		0.04		1.54		2.55		2.30

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. Class N Shares are available to the general public without a sales load. Total return includes reinvestment of income. Yields fluctuate and are not guaranteed. An investment in the Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corp. (FDIC) or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

The AAA Rated Money Market Funds Average represents the average annual composite performance of all AAA rated First Tier Retail Money Market Funds listed by iMoneyNet data.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all fixed-income securities in the Fund performed the same, nor is there any guarantee that these fixed-income securities will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total Investments.

88     Semi-Annual Report June 30, 2010

Ready Reserves Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Amortized Cost
U.S. Government Agency Mortgage-Backed Notes—1.2%
Federal Home Loan Mortgage Corporation (FHLMC), 3.000%—5.000%, 7/1/10—11/1/10	$	12,601	$	12,662
Federal National Mortgage Association (FNMA), 3.500%—5.000%, 7/1/10—12/1/10		3,353		3,370
Total U.S. Government Agency Mortgage-Backed Notes				16,032
U.S. Government Agency Notes—9.0%
Federal Home Loan Bank (FHLB), 0.500%—5.125%, 9/10/10—2/18/11		38,735		39,013
Federal Home Loan Mortgage Corporation (FHLMC), 2.875%—4.750%, 7/12/10—2/3/11		40,733		41,122
Federal National Mortgage Association (FNMA), 1.750%—4.500%, 7/12/10—5/19/11		33,772		34,073
Total U.S. Government Agency Notes				114,208
Corporate Notes—9.1%
Abbott Laboratories, 5.600%, 5/15/11		618		644
Caterpillar Financial Services Corporation, 0.853%, 8/6/10, VRN		5,515		5,518
CME Group, Inc., 1.003%, 8/6/10, VRN		7,075		7,080
General Electric Capital Corporation, 4.250%—6.875%, 9/13/10—4/28/11		16,691		17,148
JPMorgan Chase & Co., 2.625%, 12/1/10		15,310		15,451
Kimberly-Clark Corporation, 0.438%, 7/30/10, VRN		4,575		4,575
Morgan Stanley, 2.900%, 12/1/10		14,000		14,144
Regions Bank, 2.750%, 12/10/10		3,000		3,031
Wal-Mart Stores, Inc., 4.125%—4.750%, 7/1/10—2/15/11		29,815		30,071
Wells Fargo & Co., 0.766%, 1/24/11, VRN		4,712		4,723
Wells Fargo & Co., 4.000%—4.875%, 8/9/10—6/2/11		13,054		13,252
Total Corporate Notes				115,637
Commercial Paper—58.1%
Abbott Laboratories, 0.130%—0.240%, 7/8/10—8/10/10		25,000		24,995
American Honda Finance Corporation, 0.180%—0.300%, 7/6/10—8/16/10		45,000		44,994
AT&T, Inc., 0.180%—0.190%, 7/8/10—7/26/10		35,000		34,997
Caterpillar Financial Services Corporation, 0.210%—0.300%, 7/7/10—9/9/10		26,000		25,993
Chevron Funding Corporation, 0.090%—0.190%, 7/1/10—7/9/10		22,000		22,000
Coca-Cola Co., 0.150%—0.300%, 7/8/10—9/13/10		46,000		45,987
Colgate Palmolive Co., 0.120%, 7/12/10—7/13/10		12,000		12,000
ConocoPhillips Qatar Funding, Ltd., 0.180%—0.260%, 7/6/10—9/16/10		50,000		49,988
EI du Pont de Nemours & Co., 0.150%—0.180%, 7/2/10—7/16/10		19,750		19,750

Issuer	Principal Amount		Amortized Cost
Commercial Paper—(continued)
General Electric Capital Corporation, 0.170%—0.310%, 7/9/10—8/24/10	$	31,000	$	30,994
Hewlett Packard Co., 0.180%—0.240%, 7/8/10—7/27/10		45,000		44,995
IBM Corporation, 0.130%—0.190%, 7/1/10—7/8/10		33,000		33,000
John Deere Credit, Inc., 0.200%, 7/19/10—7/22/10		15,000		14,997
John Deere Credit, Ltd., 0.170%—0.180%, 7/2/10—7/26/10		17,000		16,998
John Deere, Ltd., 0.190%, 7/28/10		14,000		13,998
Johnson & Johnson, 0.150%—0.190%, 8/5/10		14,000		13,998
Kimberly-Clark Corporation, 0.180%—0.190%, 7/6/10—7/14/10		21,000		20,999
Merck & Co., Inc., 0.200%—0.250%, 7/7/10—8/3/10		17,000		16,999
Microsoft Corporation, 0.170%—0.200%, 7/6/10—7/28/10		18,800		18,799
Nestle Capital Corporation, 0.210%—0.250%, 7/12/10—9/8/10		44,000		43,992
Oracle Corporation, 0.250%, 7/15/10		5,000		4,999
PACCAR Financial Corporation, 0.150%—0.320%, 7/1/10—8/6/10		21,100		21,097
Private Export Funding, 0.220%—0.300%, 7/13/10—10/1/10		35,000		34,987
Procter & Gamble International Funding, 0.160%—0.240%, 7/1/10—7/21/10		48,100		48,100
Roche Holding, Inc., 0.160%—0.210%, 7/6/10—7/23/10		20,000		19,999
Toyota Credit Corporation, 0.120%—0.370%, 7/6/10—7/30/10		48,000		47,994
Wal-Mart Stores, Inc., 0.150%—0.160%, 7/2/10—7/9/10		12,000		12,000
Total Commercial Paper				739,649
Asset-Backed Commercial Paper—7.3%
Chariot Funding L.L.C., 0.270%—0.430%, 7/6/10—9/15/10		38,500		38,492
Govco L.L.C, 0.280%—0.400%, 7/7/10—7/29/10		45,000		44,992
Wal-Mart Funding Corporation, 0.350%, 7/9/10		10,000		9,999
Total Asset-Backed Commercial Paper				93,483
Repurchase Agreements—15.1%
Bank of America, 0.020% dated 6/30/10, due 7/1/10, repurchase price $63,000 collateralized by FNMA, 5.500%, due 8/1/37		63,000		63,000
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $41,653 collateralized by FFCB, 1.625%, due 3/7/13		41,653		41,653
Goldman Sachs, 0.040% dated 6/30/10, due 7/1/10, repurchase price $63,000, collateralized by FDIC guaranteed securities, 2.250%-3.125%, 12/1/11-12/10/12		63,000		63,000

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     89

Ready Reserves Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Amortized Cost
Repurchase Agreements—(continued)
JPMorgan & Co., 0.030% dated 6/30/10, due 7/1/10, repurchase price $25,000, collateralized by GNMA, 0.738%-6.341%, due 12/20/34-3/20/40	$	25,000	$	25,000
Total Repurchase Agreements				192,653
Total Investments—99.8% (cost $1,271,662)				1,271,662
Cash and other assets, less liabilities—0.2%				2,055
Net assets—100.0%			$	1,273,717
Portfolio Weighted Average Maturity				38 Days

VRN = Variable Rate Note

See accompanying Notes to Financial Statements.

90     Semi-Annual Report June 30, 2010

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	Growth Fund			Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
Assets
Investments in securities, at cost	$	400,917		$	25,031		$	608,731		$	68,630
Investments in Affiliated Companies, at cost		—			—			138,969			—
Investments in Affiliated Fund, at cost		1,262			—			3,297			19
Investments in securities, at value	$	420,102		$	27,082		$	621,555		$	74,398
Investments in Affiliated Companies, at value		—			—			109,898			—
Investments in Affiliated Fund, at amortized cost		1,262			—			3,297			19
Receivable for securities sold		8,426			—			10,137			316
Receivable for fund shares sold		460			29			757			1,153
Receivable from Advisor		—			2			4			—
Dividend and interest receivable		243			17			407			21
Total assets		430,493			27,130			746,055			75,907
Liabilities
Payable for investment securities purchased		6,683			5			4,486			1,058
Payable for fund shares redeemed		633			26			2,151			48
Management fee payable		275			19			722			67
Distribution fee payable		36			1			101			2
Other payables and accrued expenses		55			29			117			28
Total liabilities		7,682			80			7,577			1,203
Net Assets	$	422,811		$	27,050		$	738,478		$	74,704
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	46		$	5		$	38		$	8
Capital paid in excess of par value		432,172			33,237			860,765			75,927
Accumulated net investment income (loss)		(101	)		20			(3,454	)		(248	)
Accumulated realized gain (loss)		(28,491	)		(8,263	)		(102,624	)		(6,751	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		19,185			2,051			(16,247	)		5,768
Net Assets	$	422,811		$	27,050		$	738,478		$	74,704
Class N Shares
Net Assets	$	164,119		$	5,685		$	454,616		$	10,912
Shares Outstanding		18,058,169			1,008,941			23,590,977			1,111,295
Net Asset Value Per Share	$	9.09		$	5.64		$	19.26		$	9.82
Class I Shares
Net Assets	$	258,692		$	21,365		$	283,862		$	63,792
Shares Outstanding		27,456,811			3,707,013			14,244,244			6,412,320
Net Asset Value Per Share	$	9.42		$	5.76		$	19.93		$	9.95

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     91

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Growth Fund			Large Cap Growth Fund			Small Cap Growth Fund			Mid Cap Growth Fund
Investment income
Dividends . . . . . . . . . . .	$	2,034		$	170		$	1,759		$	180
Less foreign tax withheld		—			—			(22	)		—
Dividend Income from Affiliated Companies		—			—			214			—
Interest		7			—			11			1
Total income . . . . . . . . . . . . . . . . . . . .		2,041			170			1,962			181
Expenses
Investment advisory fees		1,678			118			4,335			356
Distribution fees		218			8			608			14
Custodian fees		19			19			22			21
Transfer agent fees		57			5			43			6
Sub-transfer agent fees
Class N		65			3			205			5
Class I		46			—			68			10
Professional fees		17			13			22			13
Registration fees		15			18			33			15
Shareholder reporting fees		25			2			61			7
Trustee fees		6			—			11			1
Other expenses		9			2			12			3
Total expenses before waiver		2,155			188			5,420			451
Expenses reimbursed to (waived or absorbed by) the Advisor		—			(37	)		(4	)		(22	)
Net expenses		2,155			151			5,416			429
Net investment income (loss)		(114	)		19			(3,454	)		(248	)
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		9,445			217			86,090	(a)		5,587
Foreign currency transactions		—			—			6			—
Total net realized gain (loss)		9,445			217			86,096			5,587
Change in net unrealized appreciation (depreciation) of investments		(47,002	)		(2,742	)		(115,199	)		(7,324	)
Net increase (decrease) in net assets resulting from operations	$	(37,671	)	$	(2,506	)	$	(32,557	)	$	(1,985	)

(a) Affiliated Companies accounted for $1,616 of the net realized gain on investments and $(100,538) of the change in unrealized depreciation on investments during the period.

See accompanying Notes to Financial Statements.

92     Semi-Annual Report June 30, 2010

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Growth Fund						Large Cap Growth Fund						Small Cap Growth Fund						Mid Cap Growth Fund
	2010			2009			2010			2009			2010			2009			2010			2009
Operations
Net investment income (loss)	$	(114	)	$	56		$	19		$	17		$	(3,454	)	$	(4,618	)	$	(248	)	$	(147	)
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		9,445			(19,046	)		217			(2,753	)		86,096			(34,140	)		5,587			(6,206	)
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(47,002	)		119,029			(2,742	)		9,950			(115,199	)		322,910			(7,324	)		22,569
Net increase (decrease) in net assets resulting from operations		(37,671	)		100,039			(2,506	)		7,214			(32,557	)		284,152			(1,985	)		16,216
Distributions to shareholders from
Net investment income . . . . . . . .		—			(43	)		—			(16	)		—			—			—			—
Net realized gain		—			—			—			—			—			—			—			—
		—			(43	)		—			(16	)		—			—			—			—
Capital stock transactions
Net proceeds from sale of shares		76,489			131,594			1,574			6,234			128,743			317,852			13,766			21,823
Shares issued in reinvestment of income dividends and capital gain distributions		—			34			—			14			—			—			—			—
Less cost of shares redeemed		(35,527	)		(50,690	)		(2,329	)		(6,414	)		(120,506	)		(240,833	)		(7,911	)		(7,731	)
Net increase (decrease) in net assets resulting from capital share transactions		40,962			80,938			(755	)		(166	)		8,237			77,019			5,855			14,092
Increase (decrease) in net assets		3,291			180,934			(3,261	)		7,032			(24,320	)		361,171			3,870			30,308
Net assets
Beginning of period		419,520			238,586			30,311			23,279			762,798			401,627			70,834			40,526
End of period	$	422,811		$	419,520		$	27,050		$	30,311		$	738,478		$	762,798		$	74,704		$	70,834
Undistributed net investment income (loss) at the end of the period	$	(101	)	$	13		$	20		$	1		$	(3,454	)	$	—		$	(248	)	$	—

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     93

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
Assets
Investments in securities, at cost	$	132,088		$	32,026		$	3,874,957		$	255,968
Investments in Affiliated Fund, at cost		23			29			6,376			5
Investments in securities, at value	$	141,730		$	34,746		$	4,172,470		$	280,611
Investments in Affiliated Fund, at amortized cost		23			29			6,376			5
Foreign currency, at value (cost $—, $23,$32,387,$60)		—			23			32,416			60
Receivable for securities sold		876			—			66,062			1,945
Receivable for fund shares sold		42			5			18,176			5,189
Receivable from Advisor		6			7			—			23
Dividend and interest receivable		26			61			15,549			778
Total assets		142,703			34,871			4,311,049			288,611
Liabilities
Payable for investment securities purchased		782			—			65,453			2,296
Payable for fund shares redeemed		75			3			6,648			33
Unrealized depreciation on forward foreign currency contracts		—			—			313			—
Management fee payable		123			30			3,548			257
Distribution and shareholder administration fee payable		5			5			492			3
Other payables and accrued expenses		20			47			1,374			109
Total liabilities		1,005			85			77,828			2,698
Net Assets	$	141,698		$	34,786		$	4,233,221		$	285,913
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	12		$	5		$	236		$	28
Capital paid in excess of par value		142,709			56,116			5,618,310			400,484
Accumulated net investment income (loss)		(458	)		97			20,619			1,869
Accumulated realized gain (loss)		(10,207	)		(24,152	)		(1,703,234	)		(141,120	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		9,642			2,720			297,290			24,652
Net Assets	$	141,698		$	34,786		$	4,233,221		$	285,913
Class N Shares
Net Assets	$	21,860		$	3,820		$	2,370,531		$	12,619
Shares Outstanding		1,922,212			581,160			133,387,195			1,255,647
Net Asset Value Per Share	$	11.37		$	6.57		$	17.77		$	10.05
Class I Shares
Net Assets	$	119,838		$	30,966		$	1,862,690		$	273,294
Shares Outstanding		10,349,890			4,714,606			102,431,412			26,937,236
Net Asset Value Per Share	$	11.58		$	6.57		$	18.19		$	10.15

See accompanying Notes to Financial Statements.

94     Semi-Annual Report June 30, 2010

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Small-Mid Cap Growth Fund			Global Growth Fund			International Growth Fund			International Equity Fund
Investment income
Dividends	$	404		$	358		$	68,146		$	4,054
Less foreign tax withheld		—			(27	)		(5,716	)		(366	)
Interest		1			—			239			6
Total income		405			331			62,669			3,694
Expenses
Investment advisory fees		753			186			21,883			1,597
Distribution fees		30			5			3,053			18
Shareholder services fees		—			28			—			—
Custodian fees		25			37			418			57
Transfer agent fees		17			9			194			6
Sub-transfer agent fees
Class N		6			2			1,223			6
Class I		6			1			512			141
Professional fees		15			18			62			21
Registration fees		15			23			61			23
Shareholder reporting fees		5			3			712			7
Trustee fees		2			1			70			5
Other expenses		7			3			85			5
Total expenses before waiver		881			316			28,273			1,886
Expenses reimbursed to (waived or absorbed by) the Advisor		(18	)		(72	)		—			(100	)
Net expenses		863			244			28,273			1,786
Net investment income (loss)		(458	)		87			34,396			1,908
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		13,922			2,332			344,236			7,042
Foreign currency transactions		—			(47	)		44,079			(300	)
Total net realized gain (loss)		13,922			2,285			388,315			6,742
Change in net unrealized appreciation (depreciation) of:
Investments		(17,589	)		(4,485	)		(591,335	)		(37,134	)
Foreign currency translations		—			—			(15,437	)		(22	)
Total change in net unrealized appreciation (depreciation)		(17,589	)		(4,485	)		(606,772	)		(37,156	)
Net increase (decrease) in net assets resulting from operations	$	(4,125	)	$	(2,113	)	$	(184,061	)	$	(28,506	)

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     95

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Small-Mid Cap Growth Fund						Global Growth Fund						International Growth Fund						International Equity Fund
	2010			2009			2010			2009			2010			2009			2010			2009
Operations
Net investment income (loss)	$	(458	)	$	(382	)	$	87		$	7		$	34,396		$	21,404		$	1,908		$	2,131
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		13,922			(7,046	)		2,285			(3,204	)		388,315			(397,479	)		6,742			(47,092	)
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(17,589	)		47,865			(4,485	)		14,318			(606,772	)		1,657,928			(37,156	)		112,766
Net increase (decrease) in net assets resulting from operations		(4,125	)		40,437			(2,113	)		11,121			(184,061	)		1,281,853			(28,506	)		67,805
Distributions to shareholders from
Net investment income		—			—			—			(3	)		—			(31,541	)		—			(1,449	)
Net realized gain		—			—			—			—			—			—			—			—
		—			—			—			(3	)		—			(31,541	)		—			(1,449	)
Capital stock transactions
Net proceeds from sale of shares		14,360			52,642			3,089			4,434			722,087			1,361,082			44,494			87,167
Shares issued in reinvestment of income dividends and capital gain distributions		—			—			—			3			—			28,646			—			1,387
Less cost of shares redeemed		(15,365	)		(29,730	)		(4,477	)		(5,273	)		(778,213	)		(1,297,570	)		(28,243	)		(85,228	)
Net increase (decrease) in net assets resulting from capital share transactions		(1,005	)		22,912			(1,388	)		(836	)		(56,126	)		92,158			16,251			3,326
Increase (decrease) in net assets		(5,130	)		63,349			(3,501	)		10,282			(240,187	)		1,342,470			(12,255	)		69,682
Net assets
Beginning of period		146,828			83,479			38,287			28,005			4,473,408			3,130,938			298,168			228,486
End of period	$	141,698		$	146,828		$	34,786		$	38,287		$	4,233,221		$	4,473,408		$	285,913		$	298,168
Undistributed net investment income (loss) at the end of the period	$	(458	)	$	—		$	97		$	10		$	20,619		$	(13,777	)	$	1,869		$	(39	)

See accompanying Notes to Financial Statements.

96     Semi-Annual Report June 30, 2010

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund
Assets
Investments in securities, at cost	$	400,720		$	841,139		$	63,897
Investments in Affiliated Fund, at cost		489			66			440
Investments in securities, at value	$	441,554		$	994,291		$	73,095
Investments in Affiliated Fund, at amortized cost		489			66			440
Foreign currency, at value (cost $287,$15,312,$445)		283			15,340			444
Receivable for securities sold		1,532			7,319			4,977
Receivable for fund shares sold		103			139			42
Receivable from Advisor		—			—			8
Dividend and interest receivable		886			1,866			231
Total assets		444,847			1,019,021			79,237
Liabilities
Payable for investment securities purchased		2,554			5,170			1,106
Payable for fund shares redeemed		184			108			2,379
Unrealized depreciation on forward foreign currency contracts		26			—			—
Management fee payable		371			902			88
Distribution and shareholder administration fee payable		35			26			1
Other payables and accrued expenses		88			334			54
Total liabilities		3,258			6,540			3,628
Net Assets	$	441,589		$	1,012,481		$	75,609
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	43		$	81		$	9
Capital paid in excess of par value		554,469			1,022,262			76,172
Accumulated net investment income (loss)		2,169			(4,033	)		209
Accumulated realized gain (loss)		(155,912	)		(159,015	)		(9,981	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		40,820			153,186			9,200
Net Assets	$	441,589		$	1,012,481		$	75,609
Class N Shares
Net Assets	$	17,130		$	23,929			—	(a)
Shares Outstanding		1,686,843			1,941,918			1
Net Asset Value Per Share	$	10.16		$	12.32		$	8.26
Class I Shares
Net Assets	$	226,458		$	144,783		$	10,455
Shares Outstanding		22,072,747			11,654,720			1,265,620
Net Asset Value Per Share	$	10.26		$	12.42		$	8.26

(a) The class commenced operations on May 3, 2010 and had one share outstanding as of June 30, 2010.

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     97

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	International Small Cap Growth Fund			Emerging Markets Growth Fund			Emerging Leaders Growth Fund
Investment income
Dividends	$	5,104		$	10,396		$	1,344
Less foreign tax withheld		(269	)		(791	)		(140	)
Interest		72			94			1
Total income		4,907			9,699			1,205
Expenses
Investment advisory fees		2,124			5,526			609
Distribution fees		20			32			—
Shareholder services fees		184			148			7
Custodian fees		77			266			59
Transfer agent fees		18			23			4
Sub-transfer agent fees
Class N		6			11			—
Class I		25			35			—
Professional fees		21			27			16
Registration fees		35			40			25
Shareholder reporting fees		23			11			2
Trustee fees		6			14			2
Other expenses		8			15			4
Total expenses before waiver		2,547			6,148			728
Expenses reimbursed to (waived or absorbed by) the Advisor		—			—			(29	)
Net expenses		2,547			6,148			699
Net investment income (loss)		2,360			3,551			506
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		17,578			71,759			22,851
Foreign currency transactions		113			(2,200	)		(295	)
Total net realized gain (loss)		17,691			69,559			22,556
Change in net unrealized appreciation (depreciation) of:
Investments		(32,179	)		(118,023	)		(24,739	)
Foreign currency translations		(33	)		(29	)		2
Total change in net unrealized appreciation (depreciation)		(32,212	)		(118,052	)		(24,737	)
Net increase (decrease) in net assets resulting from operations	$	(12,161	)	$	(44,942	)	$	(1,675	)

See accompanying Notes to Financial Statements.

98     Semi-Annual Report June 30, 2010

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	International Small Cap Growth Fund						Emerging Markets Growth Fund						Emerging Leaders Growth Fund
	2010			2009			2010			2009			2010			2009
Operations
Net investment income (loss)	$	2,360		$	1,001		$	3,551		$	3,476		$	506		$	507
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		17,691			(30,308	)		69,559			(59,561	)		22,556			3,205
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(32,212	)		174,254			(118,052	)		461,348			(24,737	)		51,098
Net increase (decrease) in net assets resulting from operations		(12,161	)		144,947			(44,942	)		405,263			(1,675	)		54,810
Distributions to shareholders from
Net investment income		—			(778	)		—			(11,127	)		—			(1,588	)
Net realized gain		—			—			—			—			—			—
		—			(778	)		—			(11,127	)		—			(1,588	)
Capital stock transactions
Net proceeds from sale of shares		121,773			139,125			162,010			422,203			3,502			42,409
Shares issued in reinvestment of income dividends and capital gain distributions		—			676			—			10,336			—			1,466
Less cost of shares redeemed		(58,874	)		(185,107	)		(142,847	)		(174,003	)		(41,354	)		(28,637	)
Net increase (decrease) in net assets resulting from capital share transactions		62,899			(45,306	)		19,163			258,536			(37,852	)		15,238
Increase (decrease) in net assets		50,738			98,863			(25,779	)		652,672			(39,527	)		68,460
Net assets
Beginning of period		390,851			291,988			1,038,260			385,588			115,136			46,676
End of period	$	441,589		$	390,851		$	1,012,481		$	1,038,260		$	75,609		$	115,136
Undistributed net investment income (loss) at the end of the period	$	2,169		$	(191	)	$	(4,033	)	$	(7,584	)	$	209		$	(297	)

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     99

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	Small Cap Value Fund			Mid Cap Value Fund
Assets
Investments in securities, at cost	$	88,459		$	2,340
Investments in Affiliated Fund, at cost		4			—
Investments in securities, at value	$	90,141		$	2,036
Investments in Affiliated Fund, at amortized cost		4			—
Receivable for securities sold		1,767			—
Receivable for fund shares sold		285			—
Receivable from Advisor		15			13
Dividend and interest receivable		52			2
Total assets		92,264			2,051
Liabilities
Payable for investment securities purchased		2,832			—
Payable for fund shares redeemed		36			—
Management fee payable		85			2
Distribution fee payable		2			—
Other accrued expenses		30			22
Total liabilities		2,985			24
Net Assets	$	89,279		$	2,027
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	8		$	1
Capital paid in excess of par value		92,944			2,314
Accumulated net investment income (loss)		151			3
Accumulated realized gain (loss)		(5,506	)		13
Net unrealized appreciation (depreciation) of investments and foreign currencies		1,682			(304	)
Net Assets	$	89,279		$	2,027
Class N Shares
Net Assets	$	8,250		$	3
Shares Outstanding		783,690			393
Net Asset Value Per Share	$	10.53		$	8.68
Class I Shares
Net Assets	$	81,029		$	2,024
Shares Outstanding		7,574,617			232,980
Net Asset Value Per Share	$	10.70		$	8.69

See accompanying Notes to Financial Statements.

100     Semi-Annual Report June 30, 2010

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Small Cap Value Fund			Mid Cap Value Fund(a)
Investment income
Dividends	$	602		$	7
Interest		1			—
Total income		603			7
Expenses
Investment advisory fees		463			3
Distribution fees		10			—
Custodian fees		25			7
Transfer agent fees		11			2
Sub-transfer agent fees
Class N		9			—
Class I		7			—
Professional fees		12			4
Registration fees		14			9
Shareholder reporting fees		6			1
Trustee fees		1			—
Other expenses		3			1
Total expenses before waiver		561			27
Expenses reimbursed to (waived or absorbed by) the Advisor		(91	)		(23	)
Net expenses		470			4
Net investment income (loss)		133			3
Realized and unrealized gain (loss)
Net realized gain (loss) on transaction		3,869			13
Change in net unrealized appreciation (depreciation) of investments		(4,055	)		(304	)
Net increase (decrease) in net assets resulting from operations	$	(53	)	$	(288	)

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     101

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Small Cap Value Fund						Mid Cap Value Fund
	2010			2009			2010(a)
Operations
Net investment income (loss)	$	133		$	347		$	3
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		3,869			(3,891	)		13
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(4,055	)		14,493			(304	)
Net increase (decrease) in net assets resulting from operations		(53	)		10,949			(288	)
Distributions to shareholders from
Net investment income		—			(213	)		—
Net realized gain		—			—			—
		—			(213	)		—
Capital stock transactions
Net proceeds from sale of shares		40,089			14,901			2,320
Shares issued in reinvestment of income dividends and capital gain distributions		—			170			—
Less cost of shares redeemed		(5,616	)		(7,197	)		(5	)
Net increase (decrease) in net assets resulting from capital share transactions		34,473			7,874			2,315
Increase (decrease) in net assets		34,420			18,610			2,027
Net assets
Beginning of period		54,859			36,249			—
End of period	$	89,279		$	54,859		$	2,027
Undistributed net investment income (loss) at the end of the period	$	151		$	18		$	3

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

See accompanying Notes to Financial Statements.

102     Semi-Annual Report June 30, 2010

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	Bond Fund		Income Fund			Low Duration Fund			Ready Reserves Fund
Assets
Investments in securities, at cost	$	178,407	$	109,479		$	139,859		$	1,271,662
Investments in securities, at value	$	188,629	$	116,365		$	140,292		$	1,271,662
Receivable for fund shares sold		1,073		438			1,527			—
Receivable from Advisor		5		—			46			359
Dividend and interest receivable		1,889		1,240			422			2,387
Total assets		191,596		118,043			142,287			1,274,408
Liabilities
Payable for investment securities purchased		2,478		—			8,470			—
Payable for fund shares redeemed		372		331			1,411			—
Management fee payable		45		48			31			255
Distribution and shareholder administration fee payable		18		5			11			—
Other accrued expenses		19		46			11			436
Total liabilities		2,932		430			9,934			691
Net Assets	$	188,664	$	117,613		$	132,353		$	1,273,717
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	18	$	13		$	13		$	1,274
Capital paid in excess of par value		178,222		153,425			132,344			1,273,312
Accumulated net investment income (loss)		152		(38	)		(295	)		84
Accumulated realized gain (loss)		50		(42,673	)		(142	)		(953	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		10,222		6,886			433			—
Net Assets	$	188,664	$	117,613		$	132,353		$	1,273,717
Class N Shares
Net Assets	$	4,041	$	37,746		$	4,794		$	1,273,717
Shares Outstanding		376,963		4,084,615			480,226			1,273,773,916
Net Asset Value Per Share	$	10.72	$	9.24		$	9.98		$	1.00
Class I Shares
Net Assets	$	149,991	$	79,867		$	87,149
Shares Outstanding		14,126,812		8,705,818			8,729,865
Net Asset Value Per Share	$	10.62	$	9.17		$	9.98

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     103

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Bond Fund			Income Fund			Low Duration Fund			Ready Reserves Fund
Investment income
Interest	$	4,208		$	2,792		$	1,143		$	1,654
Total income		4,208			2,792			1,143			1,654
Expenses
Investment advisory fees		246			287			172			1,522
Distribution fees		3			27			2			—
Shareholder services fees		105			—			58			2,223
Custodian fees		29			27			20			18
Transfer agent fees		9			12			7			18
Sub-transfer agent fees
Class N		—			14			—			—
Class I		1			1			—			—
Professional fees		15			16			15			37
Registration fees		29			16			43			13
Shareholder reporting fees		2			10			2			23
Trustee fees		2			2			1			27
Other expenses		6			5			3			37
Total expenses before waiver		447			417			323			3,918
Expenses reimbursed to (waived or absorbed by) the Advisor		(53	)		(5	)		(34	)		(2,326	)
Net expenses		394			412			289			1,592
Net investment income (loss)		3,814			2,380			854			62
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions of investments		1,015			1,045			(141	)		—
Change in net unrealized appreciation (depreciation) of investments		3,709			1,233			1,001			—
Net increase (decrease) in net assets resulting from operations	$	8,538		$	4,658		$	1,714		$	62

See accompanying Notes to Financial Statements.

104     Semi-Annual Report June 30, 2010

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Bond Fund						Income Fund						Low Duration Fund						Ready Reserves Fund
	2010			2009			2010			2009			2010			2009(a)			2010			2009
Operations
Net investment income (loss)	$	3,814		$	6,076		$	2,380		$	5,749		$	854		$	78		$	62		$	1,639
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		1,015			284			1,045			(4,058	)		(141	)		—			—			—
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		3,709			7,229			1,233			9,909			1,001			(568	)		—			—
Net increase (decrease) in net assets resulting from operations		8,538			13,589			4,658			11,600			1,714			(490	)		62			1,639
Distributions to shareholders from
Net investment income		(3,662	)		(6,213	)		(2,418	)		(6,533	)		(1,149	)		(86	)		(62	)		(1,639	)
Net realized gain		—			—			—			—			—			—			—			—
		(3,662	)		(6,213	)		(2,418	)		(6,533	)		(1,149	)		(86	)		(62	)		(1,639	)
Capital stock transactions
Net proceeds from sale of shares		60,462			77,912			8,682			16,970			93,547			97,472			357,462			638,552
Shares issued in reinvestment of income dividends and capital gain distributions		2,336			4,029			2,038			5,431			882			37			62			1,710
Less cost of shares redeemed		(26,354	)		(16,586	)		(12,955	)		(50,295	)		(57,775	)		(1,799	)		(436,708	)		(1,128,550	)
Net increase (decrease) in net assets resulting from capital share transactions		36,444			65,355			(2,235	)		(27,894	)		36,654			95,710			(79,184	)		(488,288	)
Increase (decrease) in net assets		41,320			72,731			5			(22,827	)		37,219			95,134			(79,184	)		(488,288	)
Net assets
Beginning of period		147,344			74,613			117,608			140,435			95,134			—			1,352,901			1,841,189
End of period	$	188,664		$	147,344		$	117,613		$	117,608		$	132,353		$	95,134		$	1,273,717		$	1,352,901
Undistributed net investment income (loss) at the end of the period	$	152		$	—		$	(38	)	$	—		$	(295	)	$	—		$	84		$	84

(a) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     105

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of the William Blair Funds’ (the “Fund”) significant accounting policies in effect during the period covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles.

(a) Description of the Fund

William Blair Funds is a diversified mutual fund registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. For each portfolio, the number of shares authorized is unlimited. The Fund currently consists of the following nineteen portfolios (the “Portfolios”), each with its own investment objective and policies.

Equity Portfolios Growth
Large Cap Growth
Small Cap Growth
Mid Cap Growth
Small-Mid Cap Growth
Small Cap Value (formerly known as
Value Discovery)
Mid Cap Value Global Equity Portfolio Global Growth International Equity Portfolios International Growth International Equity Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Leaders Growth Fixed-Income Portfolios Bond Income Low Duration Money Market Portfolio Ready Reserves

The investment objectives of the Portfolios are as follows:

Equity	Long-term capital appreciation.
Global Equity	Long-term capital appreciation.
International Equity	Long-term capital appreciation.
Fixed-Income	High level of current income with relative stability of principal. (Maximize total return—Low Duration)
Money Market	Current income, a stable share price and daily liquidity.

The Institutional International Growth Portfolio, the Institutional International Equity Portfolio and the Institutional Class of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration Portfolio issue a separate report.

(b) Share Classes

Three different classes of shares currently exist: N, I and Institutional. This report includes financial highlight information for Classes N and I. The table below describes the Class N shares and the Class I shares covered by this report:

Class	Description
N	Class N shares are sold to the general public, either directly through the Fund’s distributor or through a select number of financial intermediaries. Class N shares are sold without any sales load, and carry an annual 12b-1 distribution fee (0.25% for the Equity, Global Equity and International Equity Portfolios and 0.15% for the Fixed-Income Portfolios) or a service fee (0.35% for the Money Market Portfolio), transfer agent expense which is not a fixed rate and may vary by Portfolio and class, and an annual shareholder administration fee (0.15% for the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration Portfolio).
I	Class I shares are sold to a limited group of investors. They do not carry any sales load or distribution fees and generally have lower ongoing expenses than the Class N shares. Class I shares of the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration Portfolio carry an annual shareholder administration fee of 0.15%.

106     Semi-Annual Report June 30, 2010

Investment income, realized and unrealized gains and losses, and certain Portfolio level expenses and expense reductions, if any, are allocated based on the relative net assets of each class, except for certain class specific expenses, which are charged directly to the appropriate class. Differences in class expenses may result in the payment of different per share dividends by class. All share classes of the Portfolios have equal rights with respect to voting subject to class specific arrangements.

(c) Investment Valuation

The market value of domestic equity securities is determined by valuing securities traded on national securities markets or in the over-the-counter markets at the last sale price or, if applicable, the official closing price or, in the absence of a recent sale on the date of determination, at the latest bid price.

The value of foreign equity securities is generally determined based upon the last sale price on the foreign exchange or market on which it is primarily traded and in the currency of that market as of the close of the appropriate exchange or, if there have been no sales during that day, at the latest bid price. The Board of Trustees has determined that the passage of time between when the foreign exchanges or markets close and when the Portfolios compute their net asset values could cause the value of foreign equity securities to no longer be representative or accurate and, as a result, may necessitate that such securities be fair valued. Accordingly, for foreign equity securities, the Portfolios may use an independent pricing service to fair value price the security as of the close of regular trading on the New York Stock Exchange. As a result, a Portfolio’s value for a security may be different from the last sale price (or the latest bid price).

Fixed-income securities are valued by using market quotations or independent pricing services that use either prices provided by market-makers or matrixes that produce estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Other securities, and all other assets, including securities for which a market price is not available or is deemed unreliable, (e.g., securities affected by unusual or extraordinary events, such as natural disasters or securities affected by market or economic events, such as bankruptcy filings), or the value of which is affected by a significant valuation event, are valued at a fair value as determined in good faith by, or under the direction of, the Board of Trustees and in accordance with the Fund’s Valuation Procedures. The value of fair valued securities may be different from the last sale price (or the latest bid price), and there is no guarantee that a fair valued security will be sold at the price at which a Portfolio is carrying the security.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Securities held in the Ready Reserves Portfolio are valued at amortized cost, which approximates market value.

As of June 30, 2010, there were securities held in the Small Cap Growth, International Growth, International Small Cap Growth, Emerging Markets Growth, Bond and Income Portfolios requiring fair valuation pursuant to the Fund’s Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

Interest income is recorded on an accrual basis, adjusted for amortization of premium or discount. Variable rate bonds and floating rate notes earn interest at coupon rates that fluctuate at specific time intervals. The interest rates shown in the Portfolio of Investments for the Bond, Income, Low Duration and Ready Reserves Portfolios were the rates in effect on June 30, 2010. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

Premiums and discounts are accreted and amortized on a straight-line basis for short-term investments and on an effective interest method for long-term investments.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the period ended June 30, 2010, the Bond, Income and Low Duration Portfolios recognized a reduction of interest income and a decrease of net realized loss of $(217), $(260) and $(419), respectively (in thousands). This reclassification had no effect on the net asset value of the Portfolios.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

June 30, 2010 William Blair Funds     107

Reported net realized foreign currency gains or losses arise from disposition of foreign currency, the difference in the foreign exchange rates between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the ex-date or accrual date and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies held at period end.

Security and shareholder transactions are accounted for no later than one business day following the trade date. However, for financial reporting purposes, security and shareholder transactions are accounted for on the trade date of the last business day of the reporting period. Realized gains and losses from securities transactions are recognized on a specifically identified cost basis.

Awards from class action litigation may be recorded as a reduction of cost. If the Portfolios no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Dividends to Shareholders

Shares are sold and redeemed on a continuous basis at net asset value. The net asset value per share is determined separately for each class by dividing the Portfolio’s net assets attributable to that class by the number of shares of the class outstanding as of the close of regular trading on the New York Stock Exchange, which is generally 4:00 p.m. Eastern time, on each day the Exchange is open. Redemption fees may be applicable to redemptions or exchanges within 60 days of purchase. For both Class N and Class I shares, the William Blair domestic equity portfolios assess a 1% redemption fee on shares sold or exchanged that have been owned 60 days or less and the William Blair international portfolios assess a 2% redemption fee on shares sold or exchanged that have been owned 60 days or less as disclosed within the Fund’s Prospectus. The redemption fees collected by the Portfolio are netted against the amount of redemptions for presentation on the Statement of Changes in Net Assets.

The redemption fees collected by the Portfolios were as follows (in thousands):

	Period Ended June 30, 2010		Year Ended December 31, 2009
Growth	$	7	$	3
Large Cap Growth		1		—
Small Cap Growth		48		59
Mid Cap Growth		2		—
Small-Mid Cap Growth		—		1
Global Growth		—		—
International Growth		82		130
International Equity		6		7
International Small Cap Growth		3		8
Emerging Markets Growth		16		9
Emerging Leaders Growth		—		—
Small Cap Value		16		—
Mid Cap Value		—		N/A

Dividends from net investment income, if any, of the Growth, Large Cap Growth, Small Cap Growth, Mid Cap Growth, Small-Mid Cap Growth, Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, Small Cap Value and Mid Cap Value Portfolios are declared and paid at least annually. Dividends from the Bond and Income Portfolios are declared and paid monthly and dividends from the Ready Reserves Portfolio are declared daily and paid monthly. At June 30, 2010, dividends from the Low Duration Portfolio are declared and paid monthly. Effective September 16, 2010, dividends from the Low Duration Portfolio will be declared daily and paid monthly. Capital gain distributions, if any, are declared and paid at least annually in December. Dividends payable to shareholders are recorded on the ex-dividend date.

(f) Foreign Currency Translation and Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios may invest in securities denominated in foreign currencies. As such, assets and

108     Semi-Annual Report June 30, 2010

liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the current exchange rate on the date of valuation. The values of foreign investments, open forward foreign currency contracts, and cash denominated in foreign currencies are translated into U.S. dollars using a spot market rate of exchange as of the time of the determination of each Portfolio’s Net Asset Value, typically 4:00 p.m. Eastern time on days when there is regular trading on the New York Stock Exchange. Payables and receivables for securities transactions, dividends, interest income and tax reclaims are translated into U.S. dollars using a spot market rate of exchange as of 4:00 p.m. Eastern time. Settlement of purchases and sales and dividend and interest receipts are translated into U.S. dollars using a spot market rate of exchange as of 11:00 a.m. Eastern time.

(g) Income Taxes

Each Portfolio intends to comply with the provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies. Each portfolio intends to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all, or substantially all, federal income and excise taxes. No provision for federal income and excise taxes has been made.

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios may be subject to a tax imposed on net realized gains on securities of certain foreign countries.

Each Portfolio is subject to the provisions of Accounting Standards Codification (ASC) 740 Income Taxes, formally known as FASB (Financial Accounting Standards Board) Interpretation No. 48, Accounting for Uncertainties in Income Taxes. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management has evaluated the implications of ASC 740 and all of the uncertain tax positions of the Portfolios and has determined that no liability is required to be recorded in the financial statements as of December 31, 2009 and December 31, 2008.

The statute of limitations on the Funds’ tax returns for each of the tax years in the four year period ended December 31, 2009, remains open and the returns are subject to examination.

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for federal income tax purposes. The Portfolios also treat the deferred loss associated with current and prior year wash sales as an adjustment to the cost of investments for tax purposes. The cost of investments for federal income tax purposes and related gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) at June 30, 2010, were as follows (in thousands):

Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ (Depreciation)
Growth	$	403,082	$	42,627	$	24,345	$	18,282
Large Cap Growth		25,590		2,569		1,077		1,492
Small Cap Growth		765,252		94,532		125,034		(30,502	)
Mid Cap Growth		69,064		8,334		2,981		5,353
Small-Mid Cap Growth		135,182		13,639		7,068		6,571
Global Growth		32,119		3,938		1,282		2,656
International Growth		3,919,754		500,009		241,140		258,869
International Equity		260,231		33,555		13,161		20,394
International Small Cap Growth		404,797		54,293		17,061		37,232
Emerging Markets Growth		859,271		155,003		19,883		135,120
Emerging Leaders Growth		65,317		9,680		1,460		8,220
Small Cap Value		90,124		4,815		4,794		21
Mid Cap Value		2,340		4		308		(304	)
Bond		178,480		10,820		671		10,149
Income		109,627		7,808		1,070		6,738
Low Duration		139,859		608		175		433
Ready Reserves		1,271,662		—		—		—

June 30, 2010 William Blair Funds     109

The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal income tax regulations that may differ from U.S. generally accepted accounting principles. As a result, net investment income or loss and net realized gain or loss for a reporting period may differ from the amount distributed during such period. In addition, the Portfolios may periodically record reclassifications among certain capital accounts to reflect differences between financial reporting and income tax basis distributions. The reclassifications were reported in order to reflect the tax treatment for certain permanent differences that exist between income tax regulations and U.S. generally accepted accounting principles. The reclassifications generally relate to net operating losses, Section 988 currency gains and losses, PFICs gains and losses, recharacterization of dividends received from investments in REITs, expired capital loss carryforwards. These reclassifications have no impact on the net asset values of the Portfolios. Accordingly, at December 31, 2009, (the Funds’ most recent fiscal year end) the following reclassifications were recorded (in thousands):

Portfolio	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain/(Loss)			Capital Paid in Excess of Par Value
Growth	$	—		$	—		$	—
Large Cap Growth		—			2,117			(2,117	)
Small Cap Growth		4,618			—			(4,618	)
Mid Cap Growth		147			—			(147	)
Small-Mid Cap Growth		382			—			(382	)
Global Growth		23			(23	)		—
International Growth		3,052			(3,052	)		—
International Equity		(508	)		508			—
International Small Cap Growth		(294	)		301			(7	)
Emerging Markets Growth		741			(741	)		—
Emerging Leaders Growth		836			(836	)		—
Small Cap Value		(153	)		158			(5	)
Bond		127			(120	)		(7	)
Income		524			(519	)		(5	)
Low Duration		8			(1	)		(7	)
Ready Reserves		—			—			—

Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of 2010 distributions will be determined at the end of the fiscal year. The tax character of distributions paid during 2009 and 2008 was as follows (in thousands):

	Distributions Paid in 2009						Distributions Paid in 2008
Portfolio	Ordinary Income		Long-Term Capital Gains		Total Distributions		Ordinary Income		Long-Term Capital Gains		Total Distributions
Growth	$	43	$	—	$	43	$	—	$	5,607	$	5,607
Large Cap Growth		16		—		16		—		—		—
Small Cap Growth		—		—		—		5,544		14,989		20,533
Mid Cap Growth		—		—		—		—		—		—
Small-Mid Cap Growth		—		—		—		3		—		3
Global Growth		3		—		3		391		—		391
International Growth		31,541		—		31,541		—		171,159		171,159
International Equity		1,449		—		1,449		296		2,938		3,234
International Small Cap Growth		778		—		778		—		4,881		4,881
Emerging Markets Growth		11,127		—		11,127		10,054		31,707		41,761
Emerging Leaders Growth		1,588		—		1,588		87		—		87
Small Cap Value		213		—		213		322		—		322
Bond		6,213		—		6,213		3,517		—		3,517
Income		6,533		—		6,533		8,436		—		8,436
Low Duration(a)		86		—		86		—		—		—
Ready Reserves		1,639		—		1,639		33,783		—		33,783

(a) For the period from December 1, 2009 (commencement of operations) to December 31, 2009.

110     Semi-Annual Report June 30, 2010

As of December 31, 2009, the components of distributable earnings on a tax basis were as follows (in thousands):

Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Gain		Net Unrealized Appreciation/ Depreciation
Growth	$	13	$	(37,099	)	$	—	$	65,350
Large Cap Growth		1		(7,905	)		—		4,218
Small Cap Growth		—		(153,063	)		—		63,295
Mid Cap Growth		—		(11,749	)		—		12,503
Small-Mid Cap Growth		—		(20,754	)		—		23,856
Global Growth		10		(26,300	)		—		7,068
International Growth		17,572		(2,033,670	)		—		814,834
International Equity		—		(143,310	)		—		57,217
International Small Cap Growth		—		(168,452	)		—		67,690
Emerging Markets Growth		2,427		(199,632	)		—		232,285
Emerging Leaders Growth		130		(29,527	)		—		30,500
Small Cap Value		—		(7,592	)		—		3,972
Bond		—		(875	)		—		6,423
Income		—		(43,467	)		—		5,402
Low Duration		—		(1	)		—		(568	)
Ready Reserves		84		(953	)		—		—

As of December 31, 2009, the Portfolios have unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows (in thousands):

Portfolio	2010		2011		2012		2013		2014		2015		2016		2017		Total
Growth	$	—	$	—	$	—	$	—	$	—	$	—	$	8,153	$	28,946	$	37,099
Large Cap Growth		1,582		769		—		—		—		—		1,709		3,845		7,905
Small Cap Growth		—		—		—		—		—		—		36,185		116,878		153,063
Mid Cap Growth		—		—		—		—		—		—		4,249		7,500		11,749
Small-Mid Cap Growth		—		—		—		—		—		—		10,635		9,806		20,441
Global Growth		—		—		—		—		—		126		13,022		13,125		26,273
International Growth		—		—		—		—		—		—		835,953		1,198,096		2,034,049
International Equity		—		—		—		—		—		—		61,377		81,925		143,302
International Small Cap Growth		—		—		—		—		—		—		81,949		86,330		168,279
Emerging Markets Growth		—		—		—		—		—		—		84,442		115,253		199,695
Emerging Leaders Growth		—		—		—		—		—		—		21,249		8,278		29,527
Small Cap Value		—		—		—		—		—		—		2,082		5,414		7,496
Bond		—		—		—		—		—		135		559		174		868
Income		1,692		1,582		4,431		3,398		4,138		9,190		14,459		4,577		43,467
Low Duration		—		—		—		—		—		—		—		1		1
Ready Reserves		930		—		20		—		—		3		—		—		953

June 30, 2010 William Blair Funds     111

For the period from November 1, 2009 through December 31, 2009, the following Portfolios incurred net realized capital losses, foreign currency losses or PFIC losses. Each Portfolio intends to treat this loss as having occurred in fiscal year 2010 for federal income tax purposes (in thousands):

Portfolio	Capital Amount		Currency Amount		PFIC Amount
Growth	$	—	$	—	$	—
Large Cap Growth		—		—		—
Small Cap Growth		—		—		—
Mid Cap Growth		—		—		—
Small-Mid Cap Growth		313		—		—
Global Growth		27		—		—
International Growth		—		—		—
International Equity		—		72		—
International Small Cap Growth		—		211		—
Emerging Markets Growth		—		—		—
Emerging Leaders Growth		—		—		—
Small Cap Value		96		—		—
Bond		7		—		—
Income		—		—		—
Low Duration		—		—		—
Ready Reserves		—		—		—

(h) Repurchase Agreements

In a repurchase agreement, a Portfolio buys a security at one price and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser’s holding period, while the seller’s obligation to repurchase is secured by the value of the underlying security. The Advisor will monitor, on an ongoing basis, the value of the underlying securities to ensure that the value always equals or exceeds the repurchase price plus accrued interest. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon a Portfolio’s ability to dispose of the underlying securities. The risk to a Portfolio is limited to the ability of the seller to pay the agreed upon sum on the delivery date. In the event of default, a repurchase agreement provides that a Portfolio is entitled to sell the underlying collateral. The loss, if any, to a Portfolio will be the difference between the proceeds from the sale and the repurchase price. However, if bankruptcy proceedings are commenced with respect to the seller of the security, disposition of the collateral by the Portfolio may be delayed or limited. Although no definitive creditworthiness criteria are used, the Advisor reviews the creditworthiness of the banks and non-bank dealers with which a Portfolio enters into repurchase agreements to evaluate those risks. The Advisor will review and monitor the creditworthiness of broker dealers and banks with which a Portfolio enters into repurchase agreements. A Portfolio may, under certain circumstances, deem repurchase agreements collateralized by U.S. Government securities to be investments in U.S. Government securities.

(i) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates.

(j) Fair Value Measurements

The Portfolios are subject to ASC 820 Fair Value measurement and Disclosures. In accordance with ASC 820, “Fair value” is defined as the price that a Portfolio would receive upon selling a security in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used in determining the value of a Portfolio’s investments. ASC 820 established a three-tier hierarchy of inputs to classify fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

• Level 1—Quoted prices in active markets for an identical security.

• Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates,

112     Semi-Annual Report June 30, 2010

prepayment speeds, credit risk, and others. In addition, other observable inputs such as foreign exchange rates, benchmark securities indices and foreign futures contracts may be utilized in the valuation of certain foreign securities when significant events occur between the last sale on the foreign securities exchange and the time the net asset value of the Fund is calculated.

• Level 3—Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.

The Fund adopted FASB Accounting Standards Update 2010-06 “Fair Value Measurements and Disclosures (ASU 820)” which requires the Fund to disclose details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers. Any transfers between Level 1 and Level 2 are disclosed, effective beginning of the period, in the tables below with the reasons for the transfers disclosed in a footnote.

At June 30, 2010, the Portfolios held no other financial instruments, such as, options or futures, that required fair valuation.

As of June 30, 2010, the hierarchical input levels of securities in each Portfolio, segregated by security class, are as follows (in thousands):

	Growth		Large Cap Growth		Small Cap Growth		Mid Cap Growth		Small- Mid Cap Growth		Global Growth
Investments in securities
Level 1—Quoted prices
Common stock	$	410,255	$	26,279	$	708,325	$	71,308	$	139,621	$	16,879
Preferred stock		—		—		—		—		—		769
Exchange traded fund		—		—		8,422		—		—		—
Short-term investments		1,262		—		3,297		19		23		29
Level 2—Other significant observable inputs
Common stock		—		—		—		—		—		16,289
Preferred stock		—		—		6,484		—		—		—
Short-term investments		9,847		803		5,205		3,090		2,109		809
Level 3—Significant unobservable inputs
Common stock		—		—		3,017		—		—		—
Total investments in securities	$	421,364	$	27,082	$	734,750	$	74,417	$	141,753	$	34,775

June 30, 2010 William Blair Funds     113

	International Growth			International Equity		International Small Cap Growth			Emerging Markets Growth		Emerging Leaders Growth		Small Cap Value		Mid Cap Value
Investments in securities
Level 1—Quoted prices
Common stock	$	646,022		$	51,596	$	48,829		$	301,497	$	20,219	$	88,516	$	1,971
Warrants		—			—		—			43		—		—		—
Preferred stock		—			2,713		—			47,239		1,820		—		—
Exchange traded funds		31,411			—		—			—		—		—		—
Short-term investments		6,376			5		489			66		440		4		—
Level 2—Other significant observable inputs
Common stock		3,402,687			216,295		384,550			598,477		48,347		—		—
Convertible bonds		1,633			—		545			910		—		—		—
Short-term investments		90,717			10,007		7,630			46,125		2,709		1,625		65
Level 3—Significant unobservable inputs
None		—			—		—			—		—		—		—
Total investments in securities	$	4,178,846		$	280,616	$	442,043		$	994,357	$	73,535	$	90,145	$	2,036
Level 1 and Level 2 transfers
Transfer from Level 1 to Level 2(a)		12,714			1,649		—			—		3,063		—		—
Transfer from Level 2 to Level 1(b)		—			—		—			—		—		—		—
Other financial instruments
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	(313	)			$	(26	)
	Bond			Income		Low Duration Bond			Ready Reserves*
Investments in securities
Level 1—Quoted prices
None	$	—		$	—	$	—		$	—
Level 2—Other significant observable inputs
U.S. government and agency bonds		88,268			40,405		59,323			130,240
Corporate bonds		86,776			68,541		15,413			115,637
Asset backed bonds		10,588			6,401		55,118			—
Commercial paper		—			—		—			833,132
Short-term investments		2,878			373		10,438			192,653
Level 3—Significant unobservable inputs
Asset backed bonds		119			645		—			—
Total investments in securities	$	188,629		$	116,365	$	140,292		$	1,271,662

* All of the investments held by the Ready Reserves Fund are short-term investments.

(a) Fair valuation estimates were obtained from the Portfolios’ pricing vendor and applied to certain foreign securities at June 30, 2010 but not on December 31, 2009 resulting in a transfer from Level 1 to Level 2.

(b) Fair valuation estimates were obtained from the Portfolios’ pricing vendor and applied to certain foreign securities at December 31, 2009 but not on June 30, 2010 resulting in a transfer from Level 2 to Level 1.

Level 1 Common Stocks are exchange traded securities with a quoted price. Typically, Level 2 Common Stocks are non-U.S. exchange traded securities with a quoted price that are fair valued by an independent pricing service approved by the Board of Trustees.

114     Semi-Annual Report June 30, 2010

The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value:

	Balance January 1, 2010		Net Purchases/ (Sales)		Transfers to/(from) Level 3		Change in Unrealized Gain (Loss)		Realized Gain (Loss)		Balance June 30, 2010
Small Cap Growth	$	3,017	$	—	$	—	$	—	$	—	$	3,017
Bond		—		—		119		—		—		119
Income		—		—		645		—		—		645

The fair value estimates for the Level 3 securities in the Small Cap Growth, Bond and Income Portfolios were determined in good faith by the Pricing Committee in consultation with the Valuation Committee, pursuant to the Valuation Procedures adopted by the Board of Trustees. There were various factors considered in reaching this fair value determination, including, but not limited, to the following: the type of security, the extent of public trading of the security, information obtained from a broker-dealer for the security, analysis of the company’s performance, market trends that influence its performance and the potential for adverse outcome in pending litigation. At June 30, 2010, these securities represented 0.40%, 0.06%, 0.55% of the net assets of the Small Cap Growth, Bond and Income Portfolios respectively.

The First Plus bonds held in the Bond and Income Portfolios transferred from level 2 to level 3 during the period due to the lack of significant other observable inputs.

(k) Subsequent Events

On July 27, 2010, the Board of Trustees approved the following changes to the William Blair Funds:

Effective August 16, 2010, the Value Discovery Portfolio changed its name to the Small Cap Value Portfolio. Under normal market conditions, the William Blair Small Cap Value Fund invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of small capitalized (“small cap”) companies.

Effective September 16, 2010, the Low Duration Portfolio will begin declaring dividends on a daily basis to be paid out monthly.

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Portfolio has a management agreement with William Blair & Company L.L.C. (the “Company”) for investment advisory, clerical, bookkeeping and administrative services. Each Portfolio pays the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets. A summary of the annual rates expressed as a percentage of average daily net assets is as follows:

Equity Portfolios			International Portfolios
Growth	0.75	%	International Growth Fund:
Large Cap Growth Small Cap Growth	0.80 1.10	%  %	First $250 million	1.10	%
			Next $4.75 billion	1.00	%
Mid Cap Growth	0.95	%	Next $5 billion	0.95	%
Small-Mid Cap Growth	1.00	%	Next $5 billion	0.925	%
Small Cap Value	1.10	%	In excess of $15 billion	0.90	%
Mid Cap Value	0.95	%	International Equity
Global Portfolio			First $250 million	1.10	%
Global Growth	1.00	%	In excess of $250 million	1.00	%
			International Small Cap Growth	1.00	%
			Emerging Markets Growth	1.10	%
			Emerging Leaders Growth	1.10	%

June 30, 2010 William Blair Funds     115

Fixed-Income Portfolios			Money Market Portfolio
Bond Low Duration	0.30	%	Ready Reserves
	0.30	%	First $250 million	0.275	%
Income*			Next $250 million	0.250	%
First $250 million	0.25	%	Next $2 billion	0.225	%
In excess of $250 million	0.20	%	In excess of $2.5 billion	0.200	%
*Management fee also includes a charge of 5% of gross income.

Some of the Portfolios have also entered into an Expense Limitation Agreement with the Company. Under the terms of the Agreement, the Company will waive its management fee and/or reimburse the Portfolio for expenses in excess of the agreed upon rate. The amount the Company owes a Portfolio as of the reporting date is recorded as the Receivable from Advisor on the Statement of Assets and Liabilities. The Company reimburses the Portfolios on a monthly basis. Under the terms of the Agreement, the Company has agreed to waive its advisory fees and/or absorb other operating expenses through April 30, 2011, if total expenses for each class of the following Portfolios exceed the following rates (as a percentage of average daily net assets):

	Class N				Class I
Portfolio	Effective May 1, 2010 through April 30, 2011		Effective May 1, 2009 through April 30, 2010		Effective May 1, 2010 through April 30, 2011		Effective May 1, 2009 through April 30, 2010
Large Cap Growth	1.20	%	1.23	%	0.95	%	0.98	%
Small Cap Growth	1.50	%	1.50	%	1.25	%	1.25	%
Mid Cap Growth	1.35	%	1.36	%	1.10	%	1.11	%
Small-Mid Cap Growth	1.35	%	1.36	%	1.10	%	1.11	%
Global Growth	1.50	%	1.55	%	1.25	%	1.30	%
International Growth	1.45	%	1.45	%	1.20	%	1.20	%
International Equity	1.45	%	1.45	%	1.20	%	1.20	%
International Small Cap Growth	1.65	%	1.65	%	1.40	%	1.40	%
Emerging Markets Growth	1.70	%	1.70	%	1.45	%	1.45	%
Emerging Leaders Growth	1.65	%	N/A		1.40	%	1.40	%
Small Cap Value	1.35	%	1.29	%	1.10	%	1.09	%
Mid Cap Value	1.35	%	N/A		1.10	%	N/A
Bond	0.65	%	0.65	%	0.50	%	0.50	%
Income	0.85	%	0.85	%	0.70	%	0.70	%
Low Duration	0.70	%	0.70	%(a)	0.55	%	0.55	%(a)

(a) Effective December 1, 2009 through April 30, 2011

For a period of three years subsequent to the commencement of operations of the Global Growth, Emerging Leaders Growth, Mid Cap Value and Low Duration Portfolios, the Company is entitled to reimbursement for previously waived fees and reimbursed expenses to the extent the overall expense ratio remains below the expense limitation in place at the time the fee was waived and/or the expense was reimbursed. The total amount available for recapture at June 30, 2010 was $471 (in thousands) for the Global Growth Portfolio, $209 for the Emerging Leaders Growth Portfolio, $23 for the Mid Cap Value Portfolio and $48 for the Low Duration Portfolio.

The Advisor has agreed to voluntarily waive fees and reimburse expenses incurred for the Ready Reserves Portfolio in order to maintain a minimum yield given the current rate environment.

For the period ended June 30, 2010, the fees incurred by the Portfolios and related fee waivers were as follows (in thousands):

Portfolio	Fund Level Waiver		Class I Specific Waiver		Class N Specific Waiver		Total Waiver
Growth	$	—	$	—	$	—	$	—
Large Cap Growth		34		—		3		37
Small Cap Growth		1		—		3		4
Mid Cap Growth		7		10		5		22

116     Semi-Annual Report June 30, 2010

Portfolio	Fund Level Waiver		Class N Specific Waiver		Class I Specific Waiver		Total Waiver
Small-Mid Cap Growth	$	5	$	6	$	7	$	18
Global Growth		69		2		1		72
International Growth		—		—		—		—
International Equity		—		4		96		100
International Small Cap Growth		—		—		—		—
Emerging Markets Growth		—		—		—		—
Emerging Leaders Growth		28		—		1		29
Small Cap Value		76		10		5		91
Mid Cap Value		23		—		—		23
Bond		52		—		1		53
Income		—		5		—		5
Low Duration		34		—		—		34
Ready Reserves		2,326		—		—		2,326

(b) Underwriting, Distribution Services and Service Agreement

Each Portfolio, except the Ready Reserves Portfolio, has a Distribution Agreement with the Company for distribution services to the Portfolios’ Class N shares. Each Portfolio pays the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets of Class N shares. The annual rate expressed as a percentage of average daily net assets for Class N is 0.25% for all Portfolios except the Income, Bond and Low Duration Portfolios, which is 0.15%. Pursuant to the Distribution Agreement, the Company enters into related selling group agreements with various firms at various rates for sales of the Portfolios’ Class N shares.

The Ready Reserves Portfolio has a Service Agreement with the Company to provide shareholder services and automatic sweep services. The Portfolio pays the Company an annual fee, payable monthly, based upon 0.35% of the average daily net assets of Class N shares. The Board of Trustees has determined that the amount payable for “service fees” (as defined by FINRA (Financial Industry Regulatory Authority)) does not exceed 0.25% of the average annual net assets attributable to Class N shares.

The Global Growth, International Small Cap Growth, Emerging Markets Growth, Emerging Leaders Growth, Bond and Low Duration Portfolios have a Shareholder Administration Agreement with the Company to provide shareholder administration services. Class N and Class I shares of the Portfolios pay the Company an annual fee, payable monthly, based upon 0.15% of average daily net assets attributable to each class, respectively. For the period ended June 30, 2010, the following fees were incurred (in thousands):

Portfolio	Class N		Class I		Total
Global Growth	$	3	$	25	$	28
International Small Cap Growth		12		172		184
Emerging Markets Growth		19		129		148
Emerging Leaders Growth		—		7		7
Bond		3		102		105
Low Duration		2		56		58

(c) Investments in Affiliated Portfolio

Pursuant to the rules of the 1940 Act, each of the Portfolios of the Fund may invest in the William Blair Ready Reserves Portfolio (“Ready Reserves”), an open-end money market portfolio managed by the Company. Ready Reserves Portfolio is used as a cash management option by the other Portfolios in the Fund. The Company waives management fees in an amount equal to the management fee and service fee that Ready Reserves receives based on the Portfolio’s net assets, less any waivers, if applicable. The fees waived with respect to each Portfolio for the period ended June 30, 2010 are listed below. Distributions received from Ready Reserves are reflected as “Dividend income from Affiliated Fund” in each Portfolio’s Statement of Operations. Amounts relating to the Portfolios’ investments in Ready Reserves were as follows for the period ended June 30, 2010 (in thousands):

Portfolio	12/31/2009 Value		Purchases		Sales		Fees Waived		Dividend Income		6/30/2010 Value		Percent of Net Assets
Growth	$	1,262	$	—	$	—	$	1	$	—	$	1,262	0.3	%
Small Cap Growth		3,297		—		—		4		—		3,297	0.4	%

June 30, 2010 William Blair Funds     117

Portfolio	12/31/2009 Value		Purchases		Sales		Fees Waived		Dividend Income		6/30/2010 Value		Percent of Net Assets
Mid Cap Growth	$	19	$	—	$	—	$	—	$	—	$	19	0.0	%
Small-Mid Cap Growth		23		—		—		—		—		23	0.0	%
Global Growth		29		—		—		—		—		29	0.1	%
International Growth		6,376		—		—		7		—		6,376	0.2	%
International Equity		5		—		—		—		—		5	0.0	%
International Small Cap Growth		489		—		—		1		—		489	0.1	%
Emerging Markets Growth		66		—		—		—		—		66	0.0	%
Emerging Leaders Growth		440		—		—		—		—		440	0.6	%
Small Cap Value		4		—		—		—		—		4	0.0	%

(3) Investment Transactions

Investment transactions, excluding money market instruments, for the period ended June 30, 2010, were as follows (in thousands):

Portfolio	Purchases		Sales
Growth	$	153,388	$	(121,290	)
Large Cap Growth		5,273		(6,552	)
Small Cap Growth		455,499		(441,417	)
Mid Cap Growth		37,543		(33,094	)
Small-Mid Cap Growth		81,328		(81,152	)
Global Growth		21,137		(23,049	)
International Growth		1,934,238		(1,920,845	)
International Equity		102,505		(92,922	)
International Small Cap Growth		232,156		(164,521	)
Emerging Markets Growth		571,734		(585,505	)
Emerging Leaders Growth		82,429		(123,187	)
Small Cap Value		66,335		(32,005	)
Mid Cap Value		2,401		(138	)
Bond		71,630		(35,163	)
Income		18,618		(21,332	)
Low Duration		106,303		(50,354	)

(4) Forward Foreign Currency Contracts

The Global Growth, International Growth, International Equity, International Small Cap Growth, Emerging Markets Growth and Emerging Leaders Growth Portfolios from time to time may enter into forward foreign currency contracts with the Fund’s custodian and other counterparties in an attempt to hedge against a decline in the value of foreign currency against the U.S. dollar. The Portfolios bear the market risk that arises from changes in foreign currency rates and bear the credit risk if the counterparty fails to perform under the contract.

For the period ended June 30, 2010, the International Growth, and International Small Cap Portfolios engaged in forward foreign currency contracts with total notional volume (in thousands) of $2,153,072 and $89,804, respectively.

The following table presents the value of open forward foreign currency contracts as of June 30, 2010 and their respective location on the Statement of Assets and Liabilities (values in thousands):

	Assets			Liabilities
Fund	Statement of Assets and Liabilities Location	Value		Statement of Assets and Liabilities Location	Value
International Growth	Unrealized appreciation on foreign forward currency contracts	$	—	Unrealized depreciation on foreign forward currency contracts	$	313
International Small Cap Growth	Unrealized appreciation on foreign forward currency contracts		—	Unrealized depreciation on foreign forward currency contracts		26

118     Semi-Annual Report June 30, 2010

The effect of forward contracts on the Statements of Operations for the period ended June 30, 2010 (values in thousands):

Realized gain (loss) recognized in foreign currency transactions
Fund	Value
International Growth	$	52,676
International Small Cap Growth		723

Change in unrealized gain (loss) recognized in foreign currency translations
Fund	Value
International Growth	$	(15,357	)
International Small Cap Growth		(26	)

The following table presents open forward foreign currency contracts as of June 30, 2010 (values in thousands):

Short Contracts	Settlement Date	Local Currency	Current Value	Unrealized Gain/(loss)
International Growth Fund
Japanese Yen	9/15/2010	14,774,649	166,687	$	(313	)
International Small Cap Growth
Japanese Yen	9/15/2010	1,610,250	18,182	$	(26	)

(5) Fund Share Transactions

The following table summarizes the activity in capital shares of each Portfolio (in thousands):

	Sales (Dollars)
	Period Ended June 30, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	46,304	$	30,185	$	76,489	$	67,911	$	63,683	$	131,594
Large Cap Growth		661		913		1,574		923		5,311		6,234
Small Cap Growth		82,099		46,644		128,743		225,583		92,269		317,852
Mid Cap Growth		1,701		12,065		13,766		4,936		16,887		21,823
Small Mid-Cap Growth		1,635		12,725		14,360		13,361		39,281		52,642
Global Growth		426		2,663		3,089		465		3,968		4,433
International Growth		460,610		261,477		722,087		645,844		715,238		1,361,082
International Equity		580		43,914		44,494		4,147		83,020		87,167
International Small Cap Growth		5,381		67,908		73,289		5,724		102,689		108,413
Emerging Markets Growth		1,055		20,827		21,882		5,532		68,836		74,368
Emerging Leaders Growth		—		3,501		3,501		—		3,863		3,863
Small Cap Value		1,673		38,416		40,089		1,351		13,550		14,901
Mid Cap Value (a)		4		2,316		2,320		—		—		—
Bond		836		42,190		43,026		3,270		69,443		72,713
Income		5,072		3,610		8,682		5,949		11,021		16,970
Low Duration (b)		3,311		46,567		49,878		1,872		82,099		83,971
Ready Reserves		357,462		—		357,462		638,552		—		638,552

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

June 30, 2010 William Blair Funds     119

	Reinvested Distributions (Dollars)
	Period Ended June 30, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	—	$	—	$	—	$	—	$	34	$	34
Large Cap Growth		—		—		—		—		14		14
Small Cap Growth		—		—		—		—		—		—
Mid Cap Growth		—		—		—		—		—		—
Small Mid-Cap Growth		—		—		—		—		—		—
Global Growth		—		—		—		—		3		3
International Growth		—		—		—		15,272		13,374		28,646
International Equity		—		—		—		13		1,374		1,387
International Small Cap Growth		—		—		—		—		249		249
Emerging Markets Growth		—		—		—		192		1,432		1,624
Emerging Leaders Growth		—		—		—		—		100		100
Small Cap Value		—		—		—		19		151		170
Mid Cap Value (a)		—		—		—		—		—		—
Bond		48		1,856		1,904		86		3,171		3,257
Income		688		1,350		2,038		2,004		3,427		5,431
Low Duration (b)		14		476		490		1		36		37
Ready Reserves		62		—		62		1,710		—		1,710
	Redemptions (Dollars)
	Period Ended June 30, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	$	21,331	$	14,196	$	35,527	$	33,393	$	17,297	$	50,690
Large Cap Growth		394		1,935		2,329		1,360		5,054		6,414
Small Cap Growth		76,566		43,940		120,506		152,457		88,376		240,833
Mid Cap Growth		813		7,098		7,911		1,417		6,314		7,731
Small Mid-Cap Growth		2,712		12,653		15,365		1,450		28,280		29,730
Global Growth		1,078		3,399		4,477		822		4,451		5,273
International Growth		527,082		251,131		778,213		839,084		458,486		1,297,570
International Equity		2,070		26,173		28,243		37,908		47,320		85,228
International Small Cap Growth		2,692		43,812		46,504		7,257		36,128		43,385
Emerging Markets Growth		3,268		47,571		50,895		6,566		29,337		35,903
Emerging Leaders Growth		—		1,683		1,683		—		743		743
Small Cap Value		1,174		4,442		5,616		2,315		4,882		7,197
Mid Cap Value (a)		—		5		5		—		—		—
Bond		534		25,702		26,236		308		15,214		15,522
Income		6,296		6,659		12,955		19,152		31,143		50,295
Low Duration (b)		403		40,161		40,564		—		1,799		1,799
Ready Reserves		436,708		—		436,708		1,128,550		—		1,128,550

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

120     Semi-Annual Report June 30, 2010

	Net Change in Net Assets relating to Fund Share Activity (Dollars)
	Period Ended June 30, 2010									Year Ended December 31, 2009
Portfolio	Class N			Class I			Total			Class N			Class I			Total
Growth	$	24,973		$	15,989		$	40,962		$	34,518		$	46,420		$	80,938
Large Cap Growth		267			(1,022	)		(755	)		(437	)		271			(166	)
Small Cap Growth		5,533			2,704			8,237			73,126			3,893			77,019
Mid Cap Growth		888			4,967			5,855			3,519			10,573			14,092
Small Mid-Cap Growth		(1,077	)		72			(1,005	)		11,911			11,001			22,912
Global Growth		(652	)		(736	)		(1,388	)		(357	)		(480	)		(837	)
International Growth		(66,472	)		10,346			(56,126	)		(177,968	)		270,126			92,158
International Equity		(1,490	)		17,741			16,251			(33,748	)		37,074			3,326
International Small Cap Growth		2,689			24,096			26,785			(1,533	)		66,810			65,277
Emerging Markets Growth		(2,269	)		(26,744	)		(29,013	)		(842	)		40,931			40,089
Emerging Leaders Growth		—			1,818			1,818			—			3,220			3,220
Small Cap Value		499			33,974			34,473			(945	)		8,819			7,874
Mid Cap Value (a)		4			2,311			2,315			—			—			—
Bond		350			18,344			18,694			3,048			57,400			60,448
Income		(536	)		(1,699	)		(2,235	)		(11,199	)		(16,695	)		(27,894	)
Low Duration (b)		2,922			6,882			9,804			1,873			80,336			82,209
Ready Reserves		(79,184	)		—			(79,184	)		(488,288	)		—			(488,288	)

	Sales (Shares)
	Period Ended June 30, 2010			Year Ended December 31, 2009
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	4,634	2,878	7,512	7,884	7,054	14,938
Large Cap Growth	108	148	256	181	978	1,159
Small Cap Growth	3,767	2,109	5,876	14,719	5,427	20,146
Mid Cap Growth	159	1,147	1,306	551	1,894	2,445
Small Mid-Cap Growth	133	1,051	1,184	1,183	4,035	5,218
Global Growth	61	382	443	80	709	789
International Growth	25,078	13,772	38,850	43,158	45,616	88,774
International Equity	53	4,006	4,059	474	8,525	8,999
International Small Cap Growth	519	6,331	6,850	688	11,253	11,941
Emerging Markets Growth	83	1,635	1,718	571	7,574	8,145
Emerging Leaders Growth	—	429	429	—	548	548
Small Cap Value	149	3,540	3,689	166	1,517	1,683
Mid Cap Value (a)	—	234	234	—	—	—
Bond	79	4,025	4,104	324	7,009	7,333
Income	553	397	950	666	1,244	1,910
Low Duration (b)	331	4,666	4,997	187	8,211	8,398
Ready Reserves	357,460	—	357,460	638,552	—	638,552

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

June 30, 2010 William Blair Funds     121

	Reinvested Distributions (Shares)
	Period Ended June 30, 2010			Year Ended December 31, 2009
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	—	—	—	—	3	3
Large Cap Growth	—	—	—	—	2	2
Small Cap Growth	—	—	—	—	—	—
Mid Cap Growth	—	—	—	—	—	—
Small Mid-Cap Growth	—	—	—	—	—	—
Global Growth	—	—	—	—	—	—
International Growth	—	—	—	843	722	1,565
International Equity	—	—	—	2	126	128
International Small Cap Growth	—	—	—	—	24	24
Emerging Markets Growth	—	—	—	15	115	130
Emerging Leaders Growth	—	—	—	—	12	12
Small Cap Value	—	—	—	2	15	17
Mid Cap Value (a)	—	—	—	—	—	—
Bond	5	177	182	9	313	322
Income	75	149	224	225	387	612
Low Duration (b)	2	48	50	—	4	4
Ready Reserves	64	—	64	1,710	—	1,710
	Redemptions (Shares)
	Period Ended June 30, 2010			Year Ended December 31, 2009
Portfolio	Class N	Class I	Total	Class N	Class I	Total
Growth	2,151	1,366	3,517	4,263	1,994	6,257
Large Cap Growth	65	310	375	249	973	1,222
Small Cap Growth	3,675	2,061	5,736	10,272	5,811	16,083
Mid Cap Growth	78	664	742	169	744	913
Small Mid-Cap Growth	221	1,034	1,255	148	2,837	2,985
Global Growth	157	491	648	140	818	958
International Growth	28,599	13,375	41,974	58,042	30,142	88,184
International Equity	192	2,410	2,602	4,210	5,321	9,531
International Small Cap Growth	260	4,321	4,581	976	4,632	5,608
Emerging Markets Growth	260	3,901	4,161	678	3,007	3,685
Emerging Leaders Growth	—	209	209	—	123	123
Small Cap Value	103	389	492	278	562	840
Mid Cap Value (a)	—	1	1	—	—	—
Bond	51	2,449	2,500	30	1,505	1,535
Income	687	732	1,419	2,155	3,558	5,713
Low Duration (b)	40	4,019	4,059	—	180	180
Ready Reserves	436,708	—	436,708	1,128,550	—	1,128,550

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

122     Semi-Annual Report June 30, 2010

	Net Change in Shares Outstanding relating to Fund Share Activity (Shares)
	Period Ended June 30, 2010						Year Ended December 31, 2009
Portfolio	Class N		Class I		Total		Class N		Class I		Total
Growth	2,483		1,512		3,995		3,621		5,063		8,684
Large Cap Growth	43		(162	)	(119	)	(68	)	7		(61	)
Small Cap Growth	92		48		140		4,447		(384	)	4,063
Mid Cap Growth	81		483		564		382		1,150		1,532
Small Mid-Cap Growth	(88	)	17		(71	)	1,035		1,198		2,233
Global Growth	(96	)	(109	)	(205	)	(60	)	(109	)	(169	)
International Growth	(3,521	)	397		(3,124	)	(14,041	)	16,196		2,155
International Equity	(139	)	1,596		1,457		(3,734	)	3,330		(404	)
International Small Cap Growth	259		2,010		2,269		(288	)	6,645		6,357
Emerging Markets Growth	(177	)	(2,266	)	(2,443	)	(92	)	4,682		4,590
Emerging Leaders Growth	—		220		220		—		437		437
Small Cap Value	46		3,151		3,197		(110	)	970		860
Mid Cap Value (a)	—		233		233		—		—		—
Bond	33		1,753		1,786		303		5,817		6,120
Income	(59	)	(186	)	(245	)	(1,264	)	(1,927	)	(3,191	)
Low Duration (b)	293		695		988		187		8,035		8,222
Ready Reserves	(79,184	)	—		(79,184	)	(488,288	)	—		(488,288	)

(a) For the period from May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

June 30, 2010 William Blair Funds     123

Financial Highlights

Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	9.89		$	7.12		$	11.70		$	11.42		$	11.33		$	10.70
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.02	)		(0.05	)		(0.04	)		(0.06	)		(0.06	)
Net realized and unrealized gain (loss) on investments		(0.79	)		2.79			(4.35	)		1.53			1.48			1.11
Total from investment operations		(0.80	)		2.77			(4.40	)		1.49			1.42			1.05
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			0.18			1.21			1.33			0.42
Total distributions		—			—			0.18			1.21			1.33			0.42
Net asset value, end of year	$	9.09		$	9.89		$	7.12		$	11.70		$	11.42		$	11.33
Total return (%)*		(8.09	)		38.90			(37.61	)		13.17			12.42			9.75
Ratios to average daily net assets (%):**
Expenses		1.14			1.23			1.17			1.22			1.17			1.15
Net investment income (loss)		(0.23	)		(0.20	)		(0.54	)		(0.35	)		(0.49	)		(0.60	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	10.24		$	7.35		$	12.02		$	11.66		$	11.52		$	10.84
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.01			(0.02	)		0.00	^		(0.02	)		(0.04	)
Net realized and unrealized gain (loss) on investments		(0.82	)		2.88			(4.47	)		1.57			1.49			1.14
Total from investment operations		(0.82	)		2.89			(4.49	)		1.57			1.47			1.10
Less distributions from:
Net investment income		—			0.00	^		—			—			—			—
Net realized gain		—			—			0.18			1.21			1.33			0.42
Total distributions		—			0.00	^		0.18			1.21			1.33			0.42
Net asset value, end of year	$	9.42		$	10.24		$	7.35		$	12.02		$	11.66		$	11.52
Total return (%)*		(8.01	)		39.34			(37.35	)		13.59			12.64			10.08
Ratios to average daily net assets (%):**
Expenses		0.85			0.89			0.85			0.87			0.89			0.90
Net investment income (loss)		0.06			0.14			(0.22	)		0.00			(0.20	)		(0.35	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	422,811	$	419,520	$	238,586	$	369,644	$	264,525	$	253,599
Portfolio turnover rate (%)*		28		67		60		72		61		54

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

124     Semi-Annual Report June 30, 2010

Financial Highlights

Large Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	6.16		$	4.68		$	7.52		$	6.88		$	6.47		$	6.24
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		(0.01	)		(0.02	)		(0.01	)		(0.02	)		(0.02	)
Net realized and unrealized gain (loss) on investments		(0.52	)		1.49			(2.82	)		0.65			0.43			0.25
Total from investment operations		(0.52	)		1.48			(2.84	)		0.64			0.41			0.23
Less distributions from:
Net investment income		—			—			0.00	^		—			—			—
Net realized gain		—			—			—			—			—			—
Total distributions		—			—			0.00	^		—			—			—
Net asset value, end of year	$	5.64		$	6.16		$	4.68		$	7.52		$	6.88		$	6.47
Total return (%)*		(8.44	)		31.62			(37.76	)		9.30			6.34			3.69
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.22			1.23			1.23			1.23			1.24			1.28
Expenses, before waivers and reimbursements		1.56			2.28			1.85			1.50			1.63			2.08
Net investment income (loss), net of waivers and reimbursements		(0.07	)		(0.13	)		(0.29	)		(0.16	)		(0.29	)		(0.37	)
Net investment income (loss), before waivers and reimbursements		(0.41	)		(1.18	)		(0.91	)		(0.43	)		(0.68	)		(1.17	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	6.30		$	4.77		$	7.64		$	6.99		$	6.56		$	6.31
Income (loss) from investment operations:
Net investment income (loss)		0.01			0.01			0.00	^		0.01			0.00	^		(0.01	)
Net realized and unrealized gain (loss) on investments		(0.55	)		1.52			(2.87	)		0.64			0.43			0.26
Total from investment operations		(0.54	)		1.53			(2.87	)		0.65			0.43			0.25
Less distributions from:
Net investment income		—			0.00	^		0.00	^		0.00			—			—
Net realized gain		—			—			—			—			—			—
Total distributions		—			0.00	^		0.00	^		0.00			—			—
Net asset value, end of year	$	5.76		$	6.30		$	4.77		$	7.64		$	6.99		$	6.56
Total return (%)*		(8.57	)		32.17			(37.56	)		9.36			6.55			3.96
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.97			0.98			0.98			0.98			0.99			1.03
Expenses, before waivers and reimbursements		1.20			1.26			1.21			1.20			1.38			1.83
Net investment income (loss), net of waivers and reimbursements		0.18			0.12			(0.04	)		0.18			(0.04	)		(0.12	)
Net investment income (loss), before waivers and reimbursements		(0.05	)		(0.16	)		(0.27	)		(0.04	)		(0.43	)		(0.92	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	27,050	$	30,311	$	23,279	$	33,667	$	20,191	$	16,888
Portfolio turnover rate (%)*		18		88		85		60		53		53

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     125

Financial Highlights

Small Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	19.99		$	11.79		$	23.30		$	25.41		$	23.76		$	25.72
Income (loss) from investment operations:
Net investment income (loss)		(0.10	)		(0.15	)		(0.19	)		(0.33	)		(0.29	)		(0.30	)
Net realized and unrealized gain (loss) on investments		(0.63	)		8.35			(10.73	)		(0.25	)		3.65			0.64
Total from investment operations		(0.73	)		8.20			(10.92	)		(0.58	)		3.36			0.34
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			0.59			1.53			1.71			2.30
Total distributions		—			—			0.59			1.53			1.71			2.30
Net asset value, end of year	$	19.26		$	19.99		$	11.79		$	23.30		$	25.41		$	23.76
Total return (%)*		(3.65	)		69.55			(46.85	)		(2.15	)		14.12			1.18
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.49			1.50			1.50			1.49			1.48			1.49
Expenses, before waivers and reimbursements		1.49			1.55			1.50			1.49			1.48			1.49
Net investment income (loss), net of waivers and reimbursements		(0.99	)		(0.93	)		(1.05	)		(1.24	)		(1.14	)		(1.23	)
Net investment income (loss), before waivers and reimbursements		(0.99	)		(0.98	)		(1.05	)		(1.24	)		(1.14	)		(1.23	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	20.64		$	12.14		$	23.89		$	25.94		$	24.16		$	26.04
Income (loss) from investment operations:
Net investment income (loss)		(0.08	)		(0.11	)		(0.14	)		(0.25	)		(0.22	)		(0.25	)
Net realized and unrealized gain (loss) on investments		(0.64	)		8.61			(11.02	)		(0.27	)		3.71			0.67
Total from investment operations		(0.72	)		8.50			(11.16	)		(0.52	)		3.49			0.42
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			0.59			1.53			1.71			2.30
Total distributions		—			—			0.59			1.53			1.71			2.30
Net asset value, end of year	$	19.92		$	20.64		$	12.14		$	23.89		$	25.94		$	24.16
Total return (%)*		(3.49	)		70.02			(46.70	)		(1.88	)		14.42			1.48
Ratios to average daily net assets (%):**
Expenses		1.20			1.20			1.20			1.20			1.21			1.24
Net investment income (loss)		(0.70	)		(0.63	)		(0.75	)		(0.94	)		(0.87	)		(0.98	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	738,478	$	762,798	$	401,627	$	1,094,419	$	1,261,174	$	831,738
Portfolio turnover rate (%)*		58		122		135		97		105		80

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

126     Semi-Annual Report June 30, 2010

Financial Highlights

Mid Cap Growth Fund

	Class N
	Period Ended June 30,			Period Ended December 31,
	2010			2009			2008			2007			2006(a)
Net asset value, beginning of year	$	10.08		$	7.41		$	11.35		$	10.46		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.05	)		(0.04	)		(0.07	)		(0.07	)		(0.07	)
Net realized and unrealized gain (loss) on investments		(0.21	)		2.71			(3.87	)		1.59			0.53
Total from investment operations		(0.26	)		2.67			(3.94	)		1.52			0.46
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.00	^		0.63			—
Total distributions		—			—			0.00	^		0.63			—
Net asset value, end of year	$	9.82		$	10.08		$	7.41		$	11.35		$	10.46
Total return (%)*		(2.58	)		36.03			(34.71	)		14.62			4.60
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.36			1.36			1.36			1.38			1.40
Expenses, before waivers and reimbursements		1.46			2.13			2.03			1.67			2.35
Net investment income (loss), net of waivers and reimbursements		(0.88	)		(0.51	)		(0.76	)		(0.58	)		(0.70	)
Net investment income (loss), before waivers and reimbursements		(0.98	)		(1.28	)		(1.43	)		(0.87	)		(1.65	)

	Class I
	Period Ended June 30,			Period Ended December 31,
	2010			2009			2008			2007			2006(a)
Net asset value, beginning of year	$	10.20		$	7.48		$	11.42		$	10.49		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.02	)		(0.05	)		(0.04	)		(0.04	)
Net realized and unrealized gain (loss) on investments		(0.22	)		2.74			(3.89	)		1.60			0.53
Total from investment operations		(0.25	)		2.72			(3.94	)		1.56			0.49
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		—			—			0.00	^		0.63			—
Total distributions		—			—			0.00	^		0.63			—
Net asset value, end of year	$	9.95		$	10.20		$	7.48		$	11.42		$	10.49
Total return (%)*		(2.45	)		36.36			(34.50	)		14.95			4.90
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.11			1.11			1.11			1.12			1.15
Expenses, before waivers and reimbursements		1.16			1.28			1.23			1.37			2.10
Net investment income (loss), net of waivers and reimbursements		(0.63	)		(0.26	)		(0.51	)		(0.32	)		(0.43	)
Net investment income (loss), before waivers and reimbursements		(0.68	)		(0.43	)		(0.63	)		(0.57	)		(1.38	)

	Period Ended June 30,		Period Ended December 31,
	2010		2009		2008		2007		2006(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	74,704	$	70,834	$	40,526	$	45,393	$	19,639
Portfolio turnover rate (%)*		46		87		76		66		56

(a) For the period February 1, 2006 (Commencement of Operations) to December 31, 2006.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     127

Financial Highlights

Small-Mid Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	11.73		$	8.16		$	13.10		$	12.96		$	12.40		$	11.28
Income (loss) from investment operations:
Net investment income (loss)		(0.05	)		(0.06	)		(0.03	)		(0.12	)		(0.11	)		(0.11	)
Net realized and unrealized gain (loss) on investments		(0.31	)		3.63			(4.91	)		1.71			1.32			1.32
Total from investment operations		(0.36	)		3.57			(4.94	)		1.59			1.21			1.21
Less distributions from:
Net investment income		—			—			—			—			—			—
Net realized gain		—			—			0.00	^		1.45			0.65			0.09
Total distributions		—			—			0.00	^		1.45			0.65			0.09
Net asset value, end of year	$	11.37		$	11.73		$	8.16		$	13.10		$	12.96		$	12.40
Total return (%)*		(3.07	)		43.75			(37.71	)		12.34			9.68			10.72
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.36			1.36			1.36			1.36			1.38			1.45
Expenses, before waivers and reimbursements		1.42			1.49			1.41			1.42			1.45			1.54
Net investment income (loss), net of waivers and reimbursements		(0.82	)		(0.60	)		(0.26	)		(0.79	)		(0.86	)		(0.97	)
Net investment income (loss), before waivers and reimbursements		(0.88	)		(0.73	)		(0.31	)		(0.85	)		(0.93	)		(1.06	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005
Net asset value, beginning of year	$	11.93		$	8.27		$	13.24		$	13.06		$	12.46		$	11.30
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.03	)		0.00	^		(0.08	)		(0.08	)		(0.08	)
Net realized and unrealized gain (loss) on investments		(0.32	)		3.69			(4.97	)		1.71			1.33			1.33
Total from investment operations		(0.35	)		3.66			(4.97	)		1.63			1.25			1.25
Less distributions from:
Net investment income		—			0.00	^		—			—			—			—
Net realized gain		—			—			0.00	^		1.45			0.65			0.09
Total distributions		—			0.00	^		0.00	^		1.45			0.65			0.09
Net asset value, end of year	$	11.58		$	11.93		$	8.27		$	13.24		$	13.06		$	12.46
Total return (%)*		(2.93	)		44.26			(37.54	)		12.54			9.95			11.05
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.11			1.11			1.11			1.11			1.13			1.20
Expenses, before waivers and reimbursements		1.12			1.18			1.17			1.17			1.20			1.29
Net investment income (loss), net of waivers and reimbursements		(0.57	)		(0.33	)		0.03			(0.54	)		(0.61	)		(0.72	)
Net investment income (loss), before waivers and reimbursements		(0.58	)		(0.40	)		(0.03	)		(0.60	)		(0.68	)		(0.81	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	141,698	$	146,828	$	83,479	$	124,501	$	92,766	$	70,211
Portfolio turnover rate (%)*		56		112		77		80		68		62

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

128     Semi-Annual Report June 30, 2010

Financial Highlights

Global Growth Fund

	Class N
	Period Ended June 30,			Period Ended December 31,
	2010			2009			2008			2007(a)
Net asset value, beginning of year	$	6.97		$	4.96		$	9.89		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.01			(0.01	)		0.08			0.00	^
Net realized and unrealized gain (loss) on investments		(0.41	)		2.02			(4.98	)		(0.11	)
Total from investment operations		(0.40	)		2.01			(4.90	)		(0.11	)
Less distributions from:
Net investment income		—			—			0.03			0.00	^
Net realized gain		—			—			—			—
Total distributions		—			—			0.03			0.00	^
Net asset value, end of year	$	6.57		$	6.97		$	4.96		$	9.89
Total return (%)*		(5.74	)		40.52			(49.52	)		(1.10	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.53			1.55			1.55			1.55
Expenses, before waivers and reimbursements		2.02			2.61			2.17			2.14
Net investment income (loss), net of waivers and reimbursements		0.23			(0.17	)		0.98			(0.08	)
Net investment income (loss), before waivers and reimbursements		(0.26	)		(1.23	)		0.36			(0.67	)

	Class I
	Period Ended June 30,			Period Ended December 31,
	2010			2009			2008			2007(a)
Net asset value, beginning of year	$	6.96		$	4.94		$	9.91		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.02			0.00	^		0.08			0.00	^
Net realized and unrealized gain (loss) on investments		(0.41	)		2.02			(4.98	)		(0.09	)
Total from investment operations		(0.39	)		2.02			(4.90	)		(0.09	)
Less distributions from:
Net investment income		—			0.00	^		0.07			0.00	^
Net realized gain		—			—			—			—
Total distributions		—			0.00	^		0.07			0.00	^
Net asset value, end of year	$	6.57		$	6.96		$	4.94		$	9.91
Total return (%)*		(5.60	)		40.90			(49.41	)		(0.85	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.28			1.30			1.30			1.30
Expenses, before waivers and reimbursements		1.66			1.62			1.74			1.89
Net investment income (loss), net of waivers and reimbursements		0.51			0.05			1.05			0.14
Net investment income (loss), before waivers and reimbursements		0.13			(0.27	)		0.61			(0.45	)

	Period Ended June 30,		Period Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	34,786	$	38,287	$	28,005	$	45,576
Portfolio turnover rate (%)*		58		133		124		63

(a) For the period October 15, 2007 (Commencement of Operations) to December 31, 2007.

(b) Excludes $0.00, $0.00 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008 and 2007, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     129

Financial Highlights

International Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006		2005
Net asset value, beginning of year	$	18.55		$	13.12	$	29.12		$	27.70	$	25.22	$	22.09
Income (loss) from investment operations:
Net investment income (loss) (a)		0.13			0.07		0.29			0.12		0.05		0.15
Net realized and unrealized gain (loss) on investments		(0.91	)		5.47		(15.54	)		4.77		5.71		4.60
Total from investment operations		(0.78	)		5.54		(15.25	)		4.89		5.76		4.75
Less distributions from:
Net investment income		—			0.11		—			0.34		0.37		0.11
Net realized gain		—			—		0.75			3.13		2.91		1.51
Total distributions		—			0.11		0.75			3.47		3.28		1.62
Net asset value, end of year	$	17.77		$	18.55	$	13.12		$	29.12	$	27.70	$	25.22
Total return (%)*		(4.20	)		42.27		(52.33	)		18.13		23.06		21.65
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.43			1.45		1.39			1.40		1.42		1.42
Expenses, before waivers and reimbursements		1.43			1.46		1.39			1.40		1.42		1.42
Net investment income (loss), net of waivers and reimbursements		1.44			0.48		1.29			0.38		0.19		0.16
Net investment income (loss), before waivers and reimbursements		1.44			0.47		1.29			0.38		0.19		0.16

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006		2005
Net asset value, beginning of year	$	18.95		$	13.40	$	29.61		$	28.10	$	25.55	$	22.34
Income (loss) from investment operations:
Net investment income (loss) (a)		0.16			0.12		0.37			0.21		0.13		0.27
Net realized and unrealized gain (loss) on investments		(0.92	)		5.59		(15.83	)		4.86		5.78		4.61
Total from investment operations		(0.76	)		5.71		(15.46	)		5.07		5.91		4.88
Less distributions from:
Net investment income		—			0.16		—			0.43		0.45		0.16
Net realized gain		—			—		0.75			3.13		2.91		1.51
Total distributions		—			0.16		0.75			3.56		3.36		1.67
Net asset value, end of year	$	18.19		$	18.95	$	13.40		$	29.61	$	28.10	$	25.55
Total return (%)*		(4.01	)		42.63		(52.17	)		18.53		23.35		22.00
Ratios to average daily net assets (%):**
Expenses		1.13			1.17		1.08			1.09		1.11		1.17
Net investment income (loss)		1.76			0.74		1.58			0.69		0.45		0.41

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	4,233,221	$	4,473,406	$	3,130,938	$	8,048,654	$	6,267,126	$	4,551,077
Portfolio turnover rate (%) *		46		121		91		56		72		70

(a) Excludes $0.08, $(0.18), $0.09, $0.42, and $0.37 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

130     Semi-Annual Report June 30, 2010

Financial Highlights

International Equity Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006		2005
Net asset value, beginning of year	$	11.07		$	8.35	$	16.53		$	15.21	$	12.86	$	11.33
Income (loss) from investment operations:
Net investment income (loss) (a)		0.05			0.09		0.10			0.09		0.04		(0.01	)
Net realized and unrealized gain (loss) on investments		(1.07	)		2.64		(8.16	)		2.55		2.52		1.54
Total from investment operations		(1.02	)		2.73		(8.06	)		2.64		2.56		1.53
Less distributions from:
Net investment income		—			0.01		—			0.14		0.19		—
Net realized gain		—			—		0.12			1.18		0.02		—
Total distributions		—			0.01		0.12			1.32		0.21		—
Net asset value, end of year	$	10.05		$	11.07	$	8.35		$	16.53	$	15.21	$	12.86
Total return (%)*		(9.21	)		32.69		(48.75	)		17.68		19.96		13.50
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.45			1.45		1.45			1.45		1.46		1.48
Expenses, before waivers and reimbursements		1.51			1.59		1.45			1.47		1.56		1.81
Net investment income (loss), net of waivers and reimbursements		1.02			1.03		0.80			0.52		0.26		(0.33	)
Net investment income (loss), before waivers and reimbursements		0.96			0.89		0.80			0.50		0.16		(0.66	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006		2005
Net asset value, beginning of year	$	11.16		$	8.44	$	16.66		$	15.31	$	12.94	$	11.37
Income (loss) from investment operations:
Net investment income (loss) (a)		0.07			0.08		0.15			0.13		0.06		(0.01	)
Net realized and unrealized gain (loss) on investments		(1.08	)		2.70		(8.25	)		2.57		2.55		1.58
Total from investment operations		(1.01	)		2.78		(8.10	)		2.70		2.61		1.57
Less distributions from:
Net investment income		—			0.06		—			0.17		0.22		—
Net realized gain		—			—		0.12			1.18		0.02		—
Total distributions		—			0.06		0.12			1.35		0.24		—
Net asset value, end of year	$	10.15		$	11.16	$	8.44		$	16.66	$	15.31	$	12.94
Total return (%)*		(9.05	)		32.93		(48.61	)		17.97		20.22		13.81
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.20			1.20		1.20			1.20		1.21		1.23
Expenses, before waivers and reimbursements		1.27			1.39		1.22			1.25		1.35		1.56
Net investment income (loss), net of waivers and reimbursements		1.31			0.86		1.12			0.76		0.46		(0.08	)
Net investment income (loss), before waivers and reimbursements		1.24			0.67		1.10			0.71		0.32		(0.41	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	285,913	$	298,168	$	228,486	$	408,609	$	297,716	$	177,710
Portfolio turnover rate (%)*		33		88		92		70		83		127

(a) Excludes $0.00, $(0.07), $0.01, $0.22, and $0.33 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     131

Financial Highlights

International Small Cap Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005(a)
Net asset value, beginning of year	$	10.40		$	6.62		$	13.98		$	13.37		$	11.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.04			(0.01	)		(0.02	)		(0.02	)		(0.05	)		(0.01	)
Net realized and unrealized gain (loss) on investments		(0.28	)		3.79			(7.22	)		1.72			2.32			1.17
Total from investment operations		(0.24	)		3.78			(7.24	)		1.70			2.27			1.16
Less distributions from:
Net investment income		—			—			—			0.05			0.01			—
Net realized gain		—			—			0.12			1.04			0.05			—
Total distributions		—			—			0.12			1.09			0.06			—
Net asset value, end of year	$	10.16		$	10.40		$	6.62		$	13.98		$	13.37		$	11.16
Total return (%)*		(2.31	)		57.10			(51.82	)		13.06			20.32			11.60
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.56			1.65			1.65			1.60			1.65			1.65
Expenses, before waivers and reimbursements		1.56			1.83			1.62			1.60			1.71			2.57
Net investment income (loss), net of waivers and reimbursements		0.72			(0.16	)		(0.20	)		(0.16	)		(0.40	)		(0.40	)
Net investment income (loss), before waivers and reimbursements		0.72			(0.34	)		(0.17	)		(0.16	)		(0.46	)		(1.32	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006			2005(a)
Net asset value, beginning of year	$	10.49		$	6.67	$	14.01		$	13.41	$	11.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.06			0.01		0.01			0.03		(0.03	)		0.00	^
Net realized and unrealized gain (loss) on investments		(0.29	)		3.83		(7.23	)		1.71		2.34			1.16
Total from investment operations		(0.23	)		3.84		(7.22	)		1.74		2.31			1.16
Less distributions from:
Net investment income		—			0.02		—			0.10		0.01			—
Net realized gain		—			—		0.12			1.04		0.05			—
Total distributions		—			0.02		0.12			1.14		0.06			—
Net asset value, end of year	$	10.26		$	10.49	$	6.67		$	14.01	$	13.41		$	11.16
Total return (%)*		(2.19	)		57.51		(51.56	)		13.34		20.68			11.60
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.26			1.31		1.31			1.29		1.40			1.40
Expenses, before waivers and reimbursements		1.26			1.31		1.28			1.29		1.46			2.32
Net investment income (loss), net of waivers and reimbursements		1.06			0.11		0.11			0.18		(0.25	)		(0.15	)
Net investment income (loss), before waivers and reimbursements		1.06			0.11		0.14			0.18		(0.31	)		(1.07	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	441,589	$	390,851	$	291,988	$	401,459	$	231,969	$	50,534
Portfolio turnover rate (%)*		40		136		78		88		109		127

(a) For the period November 1, 2005 (Commencement of Operations) to December 31, 2005.

(b) Excludes $0.01, $(0.02), $0.05, $0.00, and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

132     Semi-Annual Report June 30, 2010

Financial Highlights

Emerging Markets Growth Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008			2007			2006			2005(a)
Net asset value, beginning of year	$	12.87		$	7.46		$	21.92		$	19.42		$	14.17		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.02			0.00	^		0.11			(0.10	)		(0.04	)		(0.01	)
Net realized and unrealized gain (loss) on investments		(0.57	)		5.51			(13.63	)		7.23			5.41			4.26
Total from investment operations		(0.55	)		5.51			(13.52	)		7.13			5.37			4.25
Less distributions from:
Net investment income		—			0.10			—			0.09			0.01			—
Net realized gain		—			—			0.94			4.54			0.11			0.08
Total distributions		—			0.10			0.94			4.63			0.12			0.08
Net asset value, end of year	$	12.32		$	12.87		$	7.46		$	21.92		$	19.42		$	14.17
Total return (%)*		(4.27	)		73.85			(61.71	)		37.75			37.90			42.52
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.67			1.70			1.67			1.65			1.65			1.55
Expenses, before waivers and reimbursements		1.67			1.81			1.65			1.69			1.78			1.91
Net investment income (loss), net of waivers and reimbursements		0.24			0.04			0.65			(0.45	)		(0.22	)		(0.11	)
Net investment income (loss), before waivers and reimbursements		0.24			(0.07	)		0.67			(0.49	)		(0.35	)		(0.47	)

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007			2006			2005(a)
Net asset value, beginning of year	$	12.95		$	7.51	$	21.99		$	19.47		$	14.19		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.04			0.03		0.15			(0.04	)		(0.01	)		0.01
Net realized and unrealized gain (loss) on investments		(0.57	)		5.54		(13.69	)		7.26			5.41			4.26
Total from investment operations		(0.53	)		5.57		(13.54	)		7.22			5.40			4.27
Less distributions from:
Net investment income		—			0.13		—			0.16			0.01			—
Net realized gain		—			—		0.94			4.54			0.11			0.08
Total distributions		—			0.13		0.94			4.70			0.12			0.08
Net asset value, end of year	$	12.42		$	12.95	$	7.51		$	21.99		$	19.47		$	14.19
Total return (%)*		(4.09	)		74.18		(61.60	)		38.13			38.07			42.72
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.37			1.41		1.41			1.40			1.40			1.40
Expenses, before waivers and reimbursements		1.37			1.41		1.39			1.40			1.47			1.76
Net investment income (loss), net of waivers and reimbursements		0.58			0.31		0.91			(0.20	)		(0.06	)		0.04
Net investment income (loss), before waivers and reimbursements		0.58			0.31		0.93			(0.20	)		(0.13	)		(0.32	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,012,481	$	1,038,260	$	385,588	$	1,165,854	$	813,649	$	249,348
Portfolio turnover rate (%)*		59		113		118		100		113		77

(a) For the period June 6, 2005 (Commencement of Operations) to December 31, 2005.

(b) Excludes $0.15, $(0.09), $0.21, $0.00, and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     133

Financial Highlights

Emerging Leaders Growth Fund

	Class N
	Period Ended June 30,
	2010(a)
Net asset value, beginning of year	$	8.80
Income (loss) from investment operations:
Net investment income (loss)		0.02
Net realized and unrealized gain (loss) on investments		(0.56	)
Total from investment operations		(0.54	)
Less distributions from:
Net investment income		—
Net realized gain		—
Total distributions		—
Net asset value, end of year	$	8.26
Total return (%)*		(6.14	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.65
Expenses, before waivers and reimbursements		1.71
Net investment income (loss), net of waivers and reimbursements		0.51
Net investment income (loss), before waivers and reimbursements		0.45

	Class I
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008(b)
Net asset value, beginning of year	$	8.43		$	4.79	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (c)		0.04			0.02		0.04
Net realized and unrealized gain (loss) on investments		(0.21	)		3.73		(5.25	)
Total from investment operations		(0.17	)		3.75		(5.21	)
Less distributions from:
Net investment income (loss)		—			0.11		0.00	^
Net realized gain		—			—		—
Total distributions		—			0.11		0.00	^
Net asset value, end of year	$	8.26		$	8.43	$	4.79
Total return (%)*		(2.02	)		78.38		(52.09	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.40			1.40		1.40
Expenses, before waivers and reimbursements		1.47			1.54		1.56
Net investment income (loss), net of waivers and reimbursements		0.81			0.37		0.70
Net investment income (loss), before waivers and reimbursements		0.74			0.23		0.54

	Period Ended June 30,		Period Ended December 31,
	2010		2009		2008(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	75,609	$	115,136	$	46,676
Portfolio turnover rate (%)*		79		176		151

(a) For the period May 3, 2010 (Commencement of Operations) to June 30, 2010.

(b) For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

(c) Excludes $1.29 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009 and 2008.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

134     Semi-Annual Report June 30, 2010

Financial Highlights

Small Cap Value Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007			2006			2005
Net asset value, beginning of year	$	10.49		$	8.33	$	11.31		$	16.27		$	14.95		$	22.70
Income (loss) from investment operations:
Net investment income (loss)		0.00	^		0.06		0.09			0.02			0.03			(0.02	)
Net realized and unrealized gain (loss) on investments		0.04			2.13		(3.02	)		(0.96	)		3.22			0.14
Total from investment operations		0.04			2.19		(2.93	)		(0.94	)		3.25			0.12
Less distributions from:
Net investment income		—			0.03		0.05			—			0.01			—
Net realized gain		—			—		—			4.02			1.92			7.87
Total distributions		—			0.03		0.05			4.02			1.93			7.87
Net asset value, end of year	$	10.53		$	10.49	$	8.33		$	11.31		$	16.27		$	14.95
Total return (%)*		0.38			26.24		(25.85	)		(5.54	)		21.78			0.49
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.31			1.29		1.29			1.33			1.34			1.34
Expenses, before waivers and reimbursements		1.74			1.78		1.82			1.66			1.75			1.64
Net investment income (loss), net of waivers and reimbursements		0.08			0.68		0.84			0.10			0.21			(0.22	)
Net investment income (loss), before waivers and reimbursements		(0.35	)		0.19		0.31			(0.23	)		(0.20	)		(0.52	)

	Class I
	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008			2007			2006			2005
Net asset value, beginning of year	$	10.65	$	8.45	$	11.50		$	16.51		$	15.12		$	22.82
Income (loss) from investment operations:
Net investment income (loss)		0.02		0.08		0.11			0.09			0.03			0.00	^
Net realized and unrealized gain (loss) on investments		0.03		2.16		(3.08	)		(1.01	)		3.30			0.17
Total from investment operations		0.05		2.24		(2.97	)		(0.92	)		3.33			0.17
Less distributions from:
Net investment income		—		0.04		0.08			0.07			0.02			—
Net realized gain		—		—		—			4.02			1.92			7.87
Total distributions		—		0.04		0.08			4.09			1.94			7.87
Net asset value, end of year	$	10.70	$	10.65	$	8.45		$	11.50		$	16.51		$	15.12
Total return (%)*		0.47		26.56		(25.77	)		(5.31	)		22.10			0.70
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.09		1.09		1.09			1.09			1.09			1.14
Expenses, before waivers and reimbursements		1.29		1.50		1.57			1.37			1.50			1.39
Net investment income (loss), net of waivers and reimbursements		0.34		0.86		1.06			0.52			0.16			(0.02	)
Net investment income (loss), before waivers and reimbursements		0.14		0.45		0.58			0.24			(0.25	)		(0.27	)

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	89,279	$	54,859	$	36,249	$	47,118	$	146,777	$	70,439
Portfolio turnover rate (%)*		39		62		87		102		162		125

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     135

Financial Highlights

Mid Cap Value Fund

	Class N
	Period Ended June 30,
	2010(a)
Net asset value, beginning of year	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.01
Net realized and unrealized gain (loss) on investments		(1.33	)
Total from investment operations		(1.32	)
Less distributions from:
Net investment income		—
Net realized gain		—
Total distributions		—
Net asset value, end of year	$	8.68
Total return (%)*		(13.20	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.35
Expenses, before waivers and reimbursements		9.89
Net investment income (loss), net of waivers and reimbursements		0.55
Net investment income (loss), before waivers and reimbursements		(7.99	)

	Class I
	Period Ended June 30,
	2010(a)
Net asset value, beginning of year	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.01
Net realized and unrealized gain (loss) on investments		(1.32	)
Total from investment operations		(1.31	)
Less distributions from:
Net investment income		—
Net realized gain		—
Total distributions		—
Net asset value, end of year	$	8.69
Total return (%)*		(13.10	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.10
Expenses, before waivers and reimbursements		8.14
Net investment income (loss), net of waivers and reimbursements		0.80
Net investment income (loss), before waivers and reimbursements		(6.24	)

	Period Ended June  30,
	2010(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	2,027
Portfolio turnover rate (%)*		7

(a) For the period May 3, 2010 (Commencement of Operations) to June 30, 2010.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

136     Semi-Annual Report June 30, 2010

Financial Highlights

Bond Fund

	Class N
	Period Ended June 30,		Period Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.40	$	9.82	$	10.07		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.24		0.48		0.47			0.31
Net realized and unrealized gain (loss) on investments		0.30		0.59		(0.31	)		0.02
Total from investment operations		0.54		1.07		0.16			0.33
Less distributions from:
Net investment income		0.22		0.49		0.41			0.26
Net realized gain		—		—		—			—
Total distributions		0.22		0.49		0.41			0.26
Net asset value, end of year	$	10.72	$	10.40	$	9.82		$	10.07
Total return (%)*		5.27		11.11		1.64			3.38
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.65		0.65		0.65			0.65
Expenses, before waivers and reimbursements		0.71		1.40		2.47			0.81
Net investment income (loss), net of waivers and reimbursements		4.49		4.76		4.69			4.80
Net investment income (loss), before waivers and reimbursements		4.43		4.01		2.87			4.64

	Class I
	Period Ended June 30,		Period Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.31	$	9.72	$	10.04		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.24		0.49		0.48			0.32
Net realized and unrealized gain (loss) on investments		0.30		0.59		(0.31	)		0.02
Total from investment operations		0.54		1.08		0.17			0.34
Less distributions from:
Net investment income		0.23		0.49		0.49			0.30
Net realized gain		—		—		—			—
Total distributions		0.23		0.49		0.49			0.30
Net asset value, end of year	$	10.62	$	10.31	$	9.72		$	10.04
Total return (%)*		5.29		11.40		1.72			3.50
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.50		0.50		0.50			0.50
Expenses, before waivers and reimbursements		0.56		0.58		0.71			0.67
Net investment income (loss), net of waivers and reimbursements		4.64		4.92		4.90			4.95
Net investment income (loss), before waivers and reimbursements		4.58		4.84		4.69			4.78

	Period Ended June  30,		Period Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	188,664	$	147,344	$	74,613	$	68,483
Portfolio turnover rate (%)*		17		29		52		38

(a) For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     137

Financial Highlights

Income Fund

	Class N
	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008			2007			2006			2005
Net asset value, beginning of year	$	9.07	$	8.69	$	9.29		$	9.74		$	9.83		$	10.19
Income (loss) from investment operations:
Net investment income (loss)		0.20		0.40		0.37			0.45			0.44			0.47
Net realized and unrealized gain (loss) on investments		0.15		0.44		(0.59	)		(0.35	)		(0.04	)		(0.30	)
Total from investment operations		0.35		0.84		(0.22	)		0.10			0.40			0.17
Less distributions from:
Net investment income		0.18		0.46		0.38			0.55			0.49			0.53
Net realized gain		—		—		—			—			—			—
Total distributions		0.18		0.46		0.38			0.55			0.49			0.53
Net asset value, end of year	$	9.24	$	9.07	$	8.69		$	9.29		$	9.74		$	9.83
Total return (%)*		3.94		9.88		(2.46	)		1.08			4.25			1.71
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.85		0.85		0.90			0.79			0.74			0.73
Expenses, before waivers and reimbursements		0.88		0.93		0.93			0.81			0.80			0.73
Net investment income (loss), net of waivers and reimbursements		4.43		4.48		4.38			4.73			4.54			4.09
Net investment income (loss), before waivers and reimbursements		4.40		4.41		4.35			4.71			4.48			4.09

	Class I
	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008			2007			2006			2005
Net asset value, beginning of year	$	9.00	$	8.64	$	9.30		$	9.69		$	9.82		$	10.15
Income (loss) from investment operations:
Net investment income (loss)		0.21		0.41		0.39			0.47			0.45			0.52
Net realized and unrealized gain (loss) on investments		0.15		0.43		(0.59	)		(0.34	)		(0.04	)		(0.33	)
Total from investment operations		0.36		0.84		(0.20	)		0.13			0.41			0.19
Less distributions from:
Net investment income		0.19		0.48		0.46			0.52			0.54			0.52
Net realized gain		—		—		—			—			—			—
Total distributions		0.19		0.48		0.46			0.52			0.54			0.52
Net asset value, end of year	$	9.17	$	9.00	$	8.64		$	9.30		$	9.69		$	9.82
Total return (%)*		4.06		9.89		(2.26	)		1.36			4.33			1.92
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.65		0.66		0.72			0.60			0.62			0.58
Net investment income (loss), net of waivers and reimbursements		4.62		4.67		4.57			4.91			4.66			4.24

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	117,613	$	117,608	$	140,435	$	204,630	$	297,077	$	310,496
Portfolio turnover rate (%)*		13		40		38		34		33		41

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

138     Semi-Annual Report June 30, 2010

Financial Highlights

Low Duration Bond Fund

	Class N
	Periods Ended
	June 30,		December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.06		0.01
Net realized and unrealized gain (loss) on investments		0.08		(0.07	)
Total from investment operations		0.14		(0.06	)
Less distributions from:
Net investment income		0.09		0.01
Net realized gain		—		—
Total distributions		0.09		0.01
Net asset value, end of year	$	9.98	$	9.93
Total return (%)*		1.43		(0.60	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.70		0.70
Expenses, before waivers and reimbursements		0.76		0.94
Net investment income (loss), net of waivers and reimbursements		1.30		1.27
Net investment income (loss), before waivers and reimbursements		1.24		1.03

	Class I
	Periods Ended
	June 30,		December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.07		0.01
Net realized and unrealized gain (loss) on investments		0.08		(0.07	)
Total from investment operations		0.15		(0.06	)
Less distributions from:
Net investment income		0.10		0.01
Net realized gain		—		—
Total distributions		0.10		0.01
Net asset value, end of year	$	9.98	$	9.93
Total return (%)*		1.49		(0.59	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.55		0.55
Expenses, before waivers and reimbursements		0.61		0.79
Net investment income (loss), net of waivers and reimbursements		1.45		1.39
Net investment income (loss), before waivers and reimbursements		1.39		1.15

	Periods Ended
	June 30,		December 31,
	2010		2009(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	132,353	$	95,134
Portfolio turnover rate (%)*		31		—

(a) For the period December 1, 2009 (Commencement of Operations) to December 31, 2009.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     139

Financial Highlights

Ready Reserve Fund

	Class N
	Period Ended June 30,			Years Ended December 31,
	2010			2009			2008		2007		2006		2005
Net asset value, beginning of year	$	1.00		$	1.00		$	1.00	$	1.00	$	1.00	$	1.00
Income (loss) from investment operations:
Net investment income (loss)		0.00^			0.00^			0.02		0.05		0.04		0.03
Net realized and unrealized gain (loss) on investments		—			—			—		—		—		—
Total from investment operations		0.00^			0.00^			0.02		0.05		0.04		0.03
Less distributions from:
Net investment income		0.00^			0.00^			0.02		0.05		0.04		0.03
Net realized gain		—			—			—		—		—		—
Total distributions		0.00^			0.00^			0.02		0.05		0.04		0.03
Net asset value, end of year	$	1.00		$	1.00		$	1.00	$	1.00	$	1.00	$	1.00
Total return (%)*		0.00			0.10			2.20		4.75		4.47		2.62
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.25			0.46			0.60		0.63		0.63		0.64
Expenses, before waivers and reimbursements		0.62			0.66			0.60		0.63		0.63		0.64
Net investment income (loss), net of waivers and reimbursements		0.01			0.11			2.12		4.63		4.38		2.57
Net investment income (loss), before waivers and reimbursements		(0.36	)		(0.09	)		2.12		4.63		4.38		2.57

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,273,717	$	1,352,901	$	1,841,189	$	1,399,537	$	1,195,593	$	1,091,854

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

140     Semi-Annual Report June 30, 2010

Trustees and Officers (Unaudited). The trustees and officers of the William Blair Funds, their year of birth, their principal occupations during the last five years, their affiliations, if any, with William Blair & Company, L.L.C., and other significant affiliations are set forth below. The address of each trustee and officer is 222 West Adams Street, Chicago, Illinois 60606.

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee/Officer
Interested Trustees
Michelle R. Seitz, 1965*	Chairperson of the Board of Trustees and President	Since 2010 Since 2007	Principal, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)	19	N/A
Richard W. Smirl, 1967	Trustee and Senior Vice President	Trustee Since 2010 and Senior Vice President Since 2008	Principal, William Blair & Company, L.L.C.	19	N/A
Non-Interested Trustees
Ann P. McDermott, 1939	Trustee	Since 1996	Board member and officer for various civic and charitable organizations over the past thirty years; professional experience prior thereto, registered representative for New York Stock Exchange firm	19	Northwestern University, Women’s Board; Rush Presbyterian St. Luke’s Medical Center, Women’s Board; University of Chicago, Women’s Board; Visiting Nurses Association, Honorary Director
Phillip O. Peterson, 1944	Trustee	Since 2007	Trustee of Strong Funds Liquidating Trusts since 2005 and President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	19	The Hartford Group of Mutual Funds (87 portfolios)
Donald J. Reaves, 1946	Trustee	Since 2004	Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002-2007.	19	American Student Assistance Corp., guarantor of student loans; Amica Mutual Insurance Company
Donald L. Seeley, 1944	Trustee	Since 2003	Retired; formerly, Director, Applied Investment Management Program, University of Arizona Department of Finance, prior thereto, Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm	19	Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)
Thomas J. Skelly, 1951	Trustee	Since 2007	Advisory Board Member for various U.S. Companies; Director and Investment Committee Chairman of the US Accenture Foundation, Inc.; prior to 2005, Managing Partner of various divisions at Accenture	19	First MetLife Investors Insurance Company
Robert E. Wood II, 1938	Trustee	Since 1999	Retired; formerly, Executive Vice President, Morgan Stanley Dean Witter	19	Chairman, Add-Vision, Inc., manufacturer of surface animation systems; Chairman Micro-Combustion, LLC

June 30, 2010 William Blair Funds     141

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years(2)	Other Directorships Held by Trustee/Officer
Officers
Michael P. Balkin, 1959	Senior Vice President Vice President	Since 2009 2008-2009	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Chief Investment Officer, Magnetar Investment Management	N/A
Karl W. Brewer, 1966	Senior Vice President	Since 2000	Principal, William Blair & Company, L.L.C.	N/A
David C. Fording, 1967	Senior Vice President Vice President	Since 2009 2006-2009	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.; former Portfolio Manager, TIAA-CREF.	N/A
James S. Golan, 1961	Senior Vice President	Since 2005	Principal, William Blair & Company, L.L.C.	N/A
W. George Greig, 1952	Senior Vice President	Since 1996	Principal, William Blair & Company, L.L.C.	N/A
Michael A. Jancosek, 1959	Senior Vice President	Since 2004	Principal, William Blair & Company L.L.C.	N/A
John F. Jostrand, 1954	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A
Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	Chairman, AG. Med, Inc.
Mark T. Leslie, 1967	Senior Vice President Vice President	Since 2008 2005-2008	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C. formerly, U.S. Bancorp Asset Management	N/A
Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
Todd M. McClone, 1968	Senior Vice President Vice President	Since 2006 2005-2006	Principal, William Blair & Company, L.L.C. Associate, William Blair & Company, L.L.C.	N/A N/A
Tracy McCormick, 1954	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
David Merjan, 1960	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A

142     Semi-Annual Report June 30, 2010

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years(2)	Other Directorships Held by Trustee/Officer
David S. Mitchell, 1960	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A
David P. Ricci, 1958	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A
Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Principal, William Blair & Company, L.L.C.	N/A
Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A
Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.	N/A
Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A
Paul J. Sularz, 1967	Vice President	Since 2009	Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A
Walter R. Randall, Jr., 1960	Chief Compliance Officer	Since 2009	Associate, William Blair & Company, L.L.C.; Associate Counsel and Chief Compliance Officer, Calamos Investments; Assistant General Counsel, American Century Investments.	N/A
Colette M. Garavalia, 1961	Treasurer	Since 2009	Associate, William Blair & Company, L.L.C.	N/A
	Secretary	2000-2009	Associate, William Blair & Company, L.L.C.;	N/A
Andrew T. Pfau, 1970	Secretary	Since 2009	Associate, William Blair & Company, L.L.C.; Associate, Bell, Boyd & Lloyd, LLP; Associate, Sidley Austin LLP	N/A

* Ms. Seitz and Mr. Smirl are interested persons of the William Blair Funds because each is a principal of William Blair & Company, L.L.C., the Funds’ investment advisor, principal underwriter and distributor.

(1) Each Trustee serves until the election and qualification of a successor, or until death, resignation or retirement or removal as provided in the Fund’s Declaration of Trust. Retirement for non-interested Trustees occurs no later than at the conclusion of the first regularly scheduled Board meeting of the Fund’s fiscal year that occurs after the Trustee’s 72nd birthday. The Fund’s officers except the Chief Compliance Officer, are elected annually by the Trustees. The Fund’s Chief Compliance Officer is designated by the Board of Trustees and may only be removed by action of the Board of Trustees, including a majority of the non-interested Trustees.

(2) In November 2008, all current principals of William Blair & Company, L.L.C. also became limited partners in WB Holdings, L.P.

The Statement of Additional Information for the William Blair Funds includes additional information about the trustees and is available without charge by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840) or by writing the Fund.

June 30, 2010 William Blair Funds     143

Renewal of the Trust’s Management Agreement

On April 27, 2010, the Board of Trustees (the “Board”) of the William Blair Funds (the “Trust”), including the Trustees who are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the renewal for an additional one-year term of the Trust’s Management Agreement with William Blair & Company, L.L.C. (the “Advisor”), on behalf of each of the William Blair Growth Fund, the William Blair Large Cap Growth Fund, the William Blair Small Cap Growth Fund, the William Blair Mid Cap Growth Fund, the William Blair Small-Mid Cap Growth Fund, the William Blair Global Growth Fund, the William Blair International Growth Fund, the William Blair International Equity Fund, the William Blair International Small Cap Growth Fund, the William Blair Emerging Markets Growth Fund, the William Blair Emerging Leaders Growth Fund, the William Blair Value Discovery Fund, the William Blair Bond Fund, the William Blair Income Fund and the William Blair Ready Reserves Fund (each, a “Fund” and collectively, the “Funds”). In deciding to approve the renewal of the Management Agreement, the Board did not identify any single factor or group of factors as all-important or controlling and considered all factors together.

The information in this summary outlines the Board’s considerations associated with its renewal of the Management Agreement. In connection with its deliberations regarding the continuation of the Management Agreement, the Board considered such information and factors as it believed to be relevant. As described below, the Board considered the nature, extent and quality of the services performed by the Advisor under the existing Management Agreement; comparative management fees and expense ratios as prepared by an independent provider (Lipper Inc.); the estimated profits realized by the Advisor; the extent to which the Advisor realizes economies of scale as a Fund grows; and whether any fall-out benefits are being realized by the Advisor. In addition, the Independent Trustees discussed the renewal of the Management Agreement with Fund management and in private sessions with independent legal counsel at which no representatives of the Advisor were present.

The Board, including the Independent Trustees, considered the renewal of the Management Agreement pursuant to a process that concluded at the Board’s April 27, 2010 meeting. In preparation for the review process, the Independent Trustees met with independent legal counsel and discussed the type and nature of information to be requested and independent legal counsel sent a formal request for information to Trust management. The Advisor provided extensive information in response to the request. After reviewing the information received, the Independent Trustees requested supplemental information, which the Advisor provided in writing and/or orally. The Independent Trustees reviewed comparative performance and comparative advisory fees and expense ratios for a peer group and a peer universe of funds provided by Lipper for each Fund. In addition, the Independent Trustees considered: (i) materials describing the nature, quality and extent of services provided by the Advisor; (ii) information comparing the performance of each Fund to one or more relevant securities indexes; (iii) information comparing advisory fees of each Fund to fees charged by the Advisor to other funds and client accounts with similar investment strategies; (iv) the estimated allocated direct or indirect costs of services provided and estimated profits realized by the Advisor for both the Trust as a whole and each Fund individually; and (v) information describing other benefits to the Advisor resulting from its relationship with the Funds. The Independent Trustees also noted that they receive information from the Advisor regarding the Funds throughout the year in connection with regular Board meetings, including presentations from portfolio managers. The Independent Trustees also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Management Agreement. Finally, the Advisor made an in-person presentation to the Independent Trustees regarding the contract review information, including addressing the supplemental information requests, and answered questions from the Independent Trustees.

On April 14, 26 and 27, 2010, the Independent Trustees met independently of Trust management and of the interested Trustees to review and discuss with independent legal counsel the information provided by the Advisor, Lipper and independent legal counsel. The Independent Trustees noted that in evaluating the Management Agreement, they were taking into account their accumulated experience as Trustees in working with the Advisor on matters relating to the Funds. Based on their review, the Independent Trustees concluded that it was in the best interest of each Fund to renew the Management Agreement and recommended to the Board the renewal of the Management Agreement. The Board considered the recommendation of the Independent Trustees along with the other factors that the Board deemed relevant.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Funds, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high-quality people and has a long association with the Funds, in each case other than the Growth Fund, since the inception of the Funds. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Funds knowing that the Advisor managed the Funds and knowing the investment advisory fee. The Board considered biographical information about the Trust’s officers and each Fund’s portfolio

144     Semi-Annual Report June 30, 2010

manager(s), the administrative services performed by the Advisor, financial information regarding the Advisor, the Advisor’s execution quality and use of soft dollars, the compliance regime overseen by the Advisor, and the Advisor’s expense limitations in place for certain Funds. The Board was also provided with information pertaining to the Advisor’s organizational structure and senior management. The Board noted that the Advisor pays the compensation of all of the officers and interested Trustees of the Trust. The Board also noted that the Advisor voluntarily reduces the advisory fees of the Funds by an amount equal to the advisory fee and service fee paid by the Ready Reserves Fund on the cash of the Funds invested in the Ready Reserves Fund.

The Board reviewed information on the annualized total returns of each Fund for the one-, three-, five- and ten-year periods ended December 31, 2009, as applicable, along with annualized total return information for the Lipper performance peer universe of funds and one or more relevant securities indexes. The Lipper performance peer universe for each Fund included all funds with a similar investment style as classified by Lipper regardless of asset size or primary channel of distribution. The Board noted that the information provided indicated that the Growth Fund, the Small Cap Growth Fund, the Mid Cap Growth Fund, the Small-Mid Cap Growth Fund, the Global Growth Fund, the International Growth Fund, the International Small Cap Growth Fund, the Emerging Leaders Growth Fund, the Value Discovery Fund, the Bond Fund and the Ready Reserves Fund generally performed satisfactorily on the whole relative to its Lipper performance peer universe during the periods reviewed. The Board noted that the information provided indicated that the International Equity Fund, the Emerging Markets Growth Fund and the Income Fund each performed satisfactorily relative to its Lipper performance peer universe during the one-year period, but generally lagged the Lipper performance peer universe on a relative basis over the other periods reviewed. The Trustees requested and reviewed with the Advisor additional information regarding the performance of the International Equity Fund, the Emerging Markets Growth Fund and the Income Fund. Finally, the Board noted that the information provided indicated that the Large Cap Growth Fund generally lagged its Lipper performance peer universe on a relative basis during the periods reviewed. The Trustees requested and reviewed with the Advisor additional information regarding the performance of the Large Cap Growth Fund and considered the Advisor’s statements regarding the actions that have been taken and are being considered to address underperformance of the Large Cap Growth Fund, including a change in the management of the Advisor’s research department.

Based on all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Fund were satisfactory.

Fees and Expenses. The Board reviewed each Fund’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper expense peer group and Lipper expense peer universe for each Fund. The Lipper expense peer group for each Fund consisted of a group of funds with a similar investment style as classified by Lipper, distribution channel and asset size as the Fund. The Lipper expense peer universe for each Fund consisted of all funds with a similar investment style as classified by Lipper and distribution channel as the Fund. The Board considered that the Advisor had proposed to contractually limit total expenses for the Large Cap Growth Fund, the Small Cap Growth Fund, the Mid Cap Growth Fund, the Small-Mid Cap Growth Fund, the Global Growth Fund, the International Growth Fund, the International Equity Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Value Discovery Fund, the Bond Fund and the Income Fund. The Board also considered that the Advisor intended to continue to voluntarily waive or reimburse certain operating expenses of the Ready Reserves Fund to maintain a positive yield for the Fund. For each Fund, the Board also reviewed amounts charged by the Advisor to other registered funds and funds for which the Advisor acts as a sub-advisor, and the Advisor’s fee schedule for institutional separate accounts. With respect to sub-advised funds and institutional separate accounts, the Board considered the Advisor’s view that the advisory fees for institutional separate accounts and sub-advisory services are less relevant to the Board’s consideration of the Funds’ advisory fees because both the mix of services provided to the Funds and the additional regulatory responsibilities associated with registered investment companies were greater as compared to the Advisor’s obligations for sub-advised funds and separate accounts. In addition, the Board considered the Advisor’s statement that institutional separate accounts are distributed differently, operate under different investment and regulatory structures and have different business risks as compared to the Funds.

In considering the information, the Board noted that the advisory fees for the Growth Fund, the Large Cap Growth Fund, the Mid Cap Growth Fund, the Global Growth Fund, the International Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund, the Bond Fund, the Income Fund and the Ready Reserves Fund were below or within an acceptable range of the average advisory fees of their Lipper expense peer group and Lipper expense peer universe. The Board also noted that the advisory fees for the Small-Mid Cap Growth Fund and the Value Discovery Fund were within an acceptable range of the average advisory fees of their Lipper expense peer group and Lipper expense peer universe after giving effect to the expense limitation proposed for 2010. Finally, the Board noted that the advisory fees for the Small Cap Growth Fund and the International Equity Fund were above the average advisory fees of

June 30, 2010 William Blair Funds     145

their Lipper expense peer group and Lipper expense peer universe, but that such advisory fees were within an acceptable range of the average advisory fees of their Lipper expense peer group and Lipper expense peer universe and consistent with reasonable expectations in light of the nature, quality and extent of services provided by the Advisor. With respect to the International Growth Fund, the Board considered that the Advisor had agreed to introduce additional breakpoints into the Fund’s advisory fee schedule. On the basis of the information provided, the Board concluded that each Fund’s advisory fee, coupled with applicable expense limitations, was reasonable in light of the nature, quality and extent of services provided by the Advisor.

Profitability. With respect to the profitability of the Management Agreement to the Advisor, the Board considered the overall fees paid under the Management Agreement, including the estimated allocated costs of the services provided and profits realized by the Advisor from its relationship with the Trust as a whole and each Fund individually. The Board concluded that the estimated profits realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of investors. The Board noted the Advisor’s representation that certain Fund expenses are relatively fixed and unrelated to asset size and that the Advisor may enjoy some economies of scale as a Fund’s assets grow. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board reviewed each Fund’s asset size, breakpoints for those Funds with breakpoints in the advisory fee schedule where applicable (including the additional breakpoints for the International Growth Fund agreed to by the Advisor), the Fund’s total and net expense ratios and the expense limitations in place and/or proposed, and concluded that in the aggregate they reasonably reflect appropriate recognition of any economies of scale.

Other Benefits to the Advisor. The Board considered benefits derived by the Advisor from its relationship with the Funds, including (i) non-advisory fee revenue from the Funds in the form of shareholder administration fees, service fees and/or distribution fees and the payment of some or all of those revenues to affiliates or third parties, (ii) soft dollars, which pertain primarily to the Funds investing in equity securities, and (iii) favorable media coverage. The Board concluded that, taking into account these benefits, each Fund’s advisory fee was reasonable.

Conclusion. Based on all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement continue to be fair and reasonable and that the continuation of the Management Agreement is in the best interests of each Fund.

146     Semi-Annual Report June 30, 2010

Approval of the William Blair Mid Cap Value Fund’s Management Agreement

On April 27, 2010, the Board of Trustees (the “Board”) of the William Blair Funds (the “Trust”), including the Trustees who are not interested persons of the Trust as defined by the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the Management Agreement between the Trust, on behalf of the William Blair Mid Cap Value Fund (the “Fund”), and William Blair & Company, L.L.C. (the “Advisor”). On February 18, April 26 and 27, 2010, the Board met to consider the approval of the Management Agreement. On April 26 and 27, 2010, the Independent Trustees also met independently of Trust management and the interested Trustees of the Trust to consider the approval of the Management Agreement. The Independent Trustees reviewed materials provided by the Advisor for the approval of the Management Agreement and were assisted by independent legal counsel in making their determination. The Board considered the following factors in making its determination, but did not identify any single factor or group of factors as all-important or controlling and considered all factors together.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of services expected to be provided by the Advisor to the Fund, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high-quality people. The Board considered biographical information about the Fund’s portfolio managers, financial information regarding the Advisor, the compliance regime created by the Advisor and the proposed financial support of the Fund. The Board considered the Advisor’s past experience managing the William Blair Value Discovery Fund, a small cap value fund, and the Advisor’s experience in managing new funds. Based on all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Advisor to the Fund are expected to be satisfactory.

Fees and Expenses. The Board reviewed the proposed advisory fee for the Fund and reviewed information comparing the advisory fee to a peer universe of funds provided by Lipper Inc. The Lipper peer universe for the Fund consisted of other no-load mid cap value funds. In considering the information, the Board noted that the proposed advisory fee for the Fund was slightly above the median of the Lipper peer universe. The Board also considered that the Advisor has proposed to limit total expenses, including waiving advisory fees, if necessary, for each share class of the Fund. On the basis of the information provided, the Board concluded that the proposed advisory fee was reasonable and appropriate in light of the nature, quality and extent of services expected to be provided by the Advisor.

Profitability. With respect to the estimated profitability of the Management Agreement to the Advisor, the Board considered the proposed advisory fee, that the Fund was newly organized and had no assets and the Advisor’s agreement to limit total expenses. The Board concluded that the expected profits to be realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale. The Board considered whether the proposed advisory fee was reasonable in relation to the projected asset size of the Fund. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board reviewed the Fund’s advisory fee compared to peer funds, the Fund’s projected asset size, the Fund’s estimated expense ratios and the Advisor’s agreement to limit total expenses, and concluded that the advisory fee was reasonable.

Other Benefits to the Advisor. The Board considered benefits to be derived by the Advisor from its relationship with the Fund. The Board concluded that, after taking into account these benefits, the proposed advisory fee was reasonable.

Conclusion. Based on all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement are fair and reasonable and that the approval of the Management Agreement is in the best interests of the Fund.

June 30, 2010 William Blair Funds     147

(unaudited)

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840), at www.williamblairfunds.com and on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules

Each Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended March 31 and September 30) on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are also available on the Fund’s website at www.williamblairfunds.com.

Additional Federal Income Tax Information: (unaudited)

The following table provides the percentage of the 2009 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:

Portfolio	Dividend Received Deduction%		Qualified Dividend Income%
Growth	100.00	%	100.00	%
Large Cap Growth	100.00	%	100.00	%
Small Cap Growth	0.00	%	0.00	%
Mid Cap Growth	0.00	%	0.00	%
Small-Mid Cap Growth	14.95	%	100.00	%
Global Growth	100.00	%	100.00	%
International Growth	0.00	%	100.00	%
International Equity	1.73	%	100.00	%
International Small Cap Growth	0.00	%	100.00	%
Emerging Markets Growth	0.00	%	69.26	%
Emerging Leaders Growth	0.00	%	57.56	%
Small Cap Value	100.00	%	100.00	%
Bond	0.00	%	0.00	%
Income	0.00	%	0.00	%
Low Duration	0.00	%	0.00	%
Ready Reserves	0.00	%	0.00	%

In January 2010, you were notified on IRS Form 1099-Div or substitute 1099 DIV as to the Federal tax status of the distributions received by you in the calendar year 2009.

148     Semi-Annual Report June 30, 2010

Useful Information About Your Report (unaudited)

Please refer to this information when reviewing the Expense Example for each Portfolio.

Expense Example

As a shareholder of a Portfolio, you incur two types of costs: (1) transaction costs such as redemption fees and (2) ongoing costs, including management fees, distribution (12b-1) fees (for Class N shares except for the Ready Reserves Portfolio), service fees (for Class N shares of the Ready Reserves Portfolio), shareholder administration fees (for Class N and Class I shares of the Global Growth Portfolio, the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, the Bond Portfolio and the Low Duration Portfolio) and other Portfolio expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Portfolio’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2010 to June 30, 2010.

Actual Expenses

In each example, the first line for each share class in the table provides information about the actual account values and actual expenses. These expenses reflect the effect of any expense cap applicable to the share class during the period. Without this expense cap, the costs shown in the table would have been higher. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

In each example, the second line for each share class in the table provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses. This is not the Portfolio’s 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 Portfolio to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in both examples are meant to highlight your ongoing costs only and do not reflect any transactional costs or account type fees, such as redemption fees and IRA Fiduciary Administration fees, respectively. These fees are fully described in the prospectus. Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs or account fees were included, your costs would have been higher.

June 30, 2010 William Blair Funds     149

Fund Expenses (unaudited)

The examples below show you the ongoing costs (in dollars) of investing in your fund and allows you to compare these costs with those of other mutual funds. Please refer to the previous page for a detailed explanation of the information presented on this chart.

Expense Example	Beginning Account Value 1/1/2010		Ending Account Value 6/30/2010		Expenses Paid during the Period(a)		Annualized Expense Ratio
Growth Fund
Class N—actual return	$	1,000.00	$	919.10	$	5.43	1.14	%
Class N—hypothetical 5% return		1,000.00		1,019.14		5.71	1.14
Class I—actual return		1,000.00		919.90		4.04	0.85
Class I—hypothetical 5% return		1,000.00		1,020.58		4.26	0.85
Large Cap Growth Fund
Class N—actual return		1,000.00		915.60		5.79	1.22
Class N—hypothetical 5% return		1,000.00		1,018.74		6.11	1.22
Class I—actual return		1,000.00		914.30		4.60	0.97
Class I—hypothetical 5% return		1,000.00		1,019.98		4.86	0.97
Small Cap Growth Fund
Class N—actual return		1,000.00		963.50		7.25	1.49
Class N—hypothetical 5% return		1,000.00		1,017.41		7.45	1.49
Class I—actual return		1,000.00		965.10		5.85	1.20
Class I—hypothetical 5% return		1,000.00		1,018.84		6.01	1.20
Mid Cap Growth Fund
Class N—actual return		1,000.00		974.20		6.66	1.36
Class N—hypothetical 5% return		1,000.00		1,018.05		6.80	1.36
Class I—actual return		1,000.00		975.50		5.44	1.11
Class I—hypothetical 5% return		1,000.00		1,019.29		5.56	1.11
Small-Mid Cap Growth Fund
Class N—actual return		1,000.00		969.30		6.64	1.36
Class N—hypothetical 5% return		1,000.00		1,018.05		6.80	1.36
Class I—actual return		1,000.00		970.70		5.42	1.11
Class I—hypothetical 5% return		1,000.00		1,019.29		5.56	1.11
Global Growth Fund
Class N—actual return		1,000.00		942.60		7.22	1.50
Class N—hypothetical 5% return		1,000.00		1,017.36		7.50	1.50
Class I—actual return		1,000.00		944.00		6.03	1.25
Class I—hypothetical 5% return		1,000.00		1,018.60		6.26	1.25
International Growth Fund
Class N—actual return		1,000.00		958.00		6.94	1.43
Class N—hypothetical 5% return		1,000.00		1,017.70		7.15	1.43
Class I—actual return		1,000.00		959.90		5.49	1.13
Class I—hypothetical 5% return		1,000.00		1,019.19		5.66	1.13
International Equity Fund
Class N—actual return		1,000.00		907.90		6.86	1.45
Class N—hypothetical 5% return		1,000.00		1,017.60		7.25	1.45
Class I—actual return		1,000.00		909.50		5.68	1.20
Class I—hypothetical 5% return		1,000.00		1,018.84		6.01	1.20
International Small Cap Growth Fund
Class N—actual return		1,000.00		976.90		7.65	1.56
Class N—hypothetical 5% return		1,000.00		1,017.06		7.80	1.56
Class I—actual return		1,000.00		978.10		6.18	1.26
Class I—hypothetical 5% return		1,000.00		1,018.55		6.31	1.26
Emerging Markets Growth Fund
Class N—actual return		1,000.00		957.30		8.10	1.67
Class N—hypothetical 5% return		1,000.00		1,016.51		8.35	1.67
Class I—actual return		1,000.00		959.10		6.65	1.37
Class I—hypothetical 5% return		1,000.00		1,018.00		6.85	1.37

150     Semi-Annual Report June 30, 2010

Expense Example	Beginning Account Value 1/1/2010		Ending Account Value 6/30/2010		Expenses Paid during the Period(a)		Annualized Expense Ratio
Emerging Leaders Growth Fund
Class N—actual return(b)	$	1,000.00	$	938.60	$	3.88	1.65	%
Class N—hypothetical 5% return (6 month period)		1,000.00		1,016.61		8.25	1.65
Class I—actual return		1,000.00		958.20		6.80	1.40
Class I—hypothetical 5% return		1,000.00		1,017.85		7.00	1.40
Small Cap Value Fund
Class N—actual return		1,000.00		1,003.80		6.51	1.31
Class N—hypothetical 5% return		1,000.00		1,018.30		6.56	1.31
Class I—actual return		1,000.00		1,004.70		5.42	1.09
Class I—hypothetical 5% return		1,000.00		1,019.39		5.46	1.09
Mid Cap Value Fund
Class N—actual return(b)		1,000.00		942.50		3.18	1.35
Class N—hypothetical 5% return (6 month period)		1,000.00		1,018.10		6.76	1.35
Class I—actual return(b)		1,000.00		943.50		2.59	1.10
Class I—hypothetical 5% return (6 month period)		1,000.00		1,019.34		5.51	1.10
Bond Fund
Class N—actual return		1,000.00		1,052.70		3.31	0.65
Class N—hypothetical 5% return		1,000.00		1,021.57		3.26	0.65
Class I—actual return		1,000.00		1,052.90		2.55	0.50
Class I—hypothetical 5% return		1,000.00		1,022.32		2.51	0.50
Income Fund
Class N—actual return		1,000.00		1,039.40		4.30	0.85
Class N—hypothetical 5% return		1,000.00		1,020.58		4.26	0.85
Class I—actual return		1,000.00		1,040.60		3.29	0.65
Class I—hypothetical 5% return		1,000.00		1,021.57		3.26	0.65
Low Duration Fund
Class N—actual return		1,000.00		1,014.30		3.50	0.70
Class N—hypothetical 5%		1,000.00		1,021.32		3.51	0.70
Class I—actual return		1,000.00		1,014.90		2.75	0.55
Class I—hypothetical 5%		1,000.00		1,022.07		2.76	0.55
Ready Reserve Fund
Class N—actual return		1,000.00		1,000.00		1.24	0.25
Class N—hypothetical 5% return		1,000.00		1,023.55		1.25	0.25

(a) Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period 181, and divided by 365 (to reflect the one-half year period).

(b) For the period May 3, 2010 (Commencement of Operations) to June 30, 2010.

June 30, 2010 William Blair Funds     151

BOARD OF TRUSTEES

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, Chairperson and President

Principal, William Blair & Company, L.L.C.,

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl

Senior Vice President, Principal, William Blair & Company L.L.C.

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Michael P. Balkin, Senior Vice President

Karl W. Brewer, Senior Vice President

David C. Fording, Senior Vice President

James S. Golan, Senior Vice President

W. George Greig, Senior Vice President

Michael A. Jancosek, Senior Vice President

John F. Jostrand, Senior Vice President

Robert C. Lanphier, IV, Senior Vice President

Mark T. Leslie, Senior Vice President

Matthew A. Litfin, Senior Vice President

Kenneth J. McAtamney, Senior Vice President

Todd M. McClone, Senior Vice President

Tracy McCormick, Senior Vice President

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Chad M. Kilmer, Vice President

Kathleen M. Lynch, Vice President

Paul J. Sularz, Vice President

Walter R. Randall, Jr., Chief Compliance Officer

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Legal Counsel

Vedder Price P.C.

Transfer Agent

Boston Financial Data Services, Inc.

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

152     Semi-Annual Report June 30, 2010

EQUITY	GLOBAL EQUITY	FIXED-INCOME
Growth Fund	Global Growth Fund	Bond Fund
Large Cap Growth Fund		Income Fund
Small Cap Growth Fund	INTERNATIONAL EQUITY	Low Duration
Mid Cap Growth Fund	International Growth Fund
Small-Mid Cap Growth Fund	International Equity Fund	MONEY MARKET
Small Cap Value Fund	International Small Cap Growth Fund	Ready Reserves Fund
Mid Cap Value Fund	Emerging Markets Growth Fund
	Emerging Leaders Growth Fund

222 West Adams Street

Chicago, IL 60606

800.742.7272   Ÿ  www.williamblairfunds.com

^© William Blair & Company, L.L.C., distributor

INSTITUTIONAL

SEMI-ANNUAL REPORT

JUNE 30, 2010

Table of Contents

Global Markets Overview	2
Institutional International Growth Fund
An Overview from the Portfolio Manager	4
Portfolio of Investments	6
Institutional International Equity Fund
An Overview from the Portfolio Managers	11
Portfolio of Investments	13
International Small Cap Growth Fund
An Overview from the Portfolio Manager	16
Portfolio of Investments	18
Emerging Markets Growth Fund
An Overview from the Portfolio Managers	21
Portfolio of Investments	23
Emerging Leaders Growth Fund
An Overview from the Portfolio Managers	26
Portfolio of Investments	28
Fixed-Income Overview	30
Bond Fund
An Overview from the Portfolio Managers	32
Portfolio of Investments	34
Low Duration Fund
An Overview from the Portfolio Managers	37
Portfolio of Investments	39
Financial Statements	42
Notes to Financial Statements	48
Board of Trustees and Officers	65
Approval of Fund’s Management Agreement	69
Fund Expense	74

This report is submitted for the general information of the shareholders of the William Blair Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by a prospectus of the William Blair Funds. Please consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling 1-800-742-7272. Read it carefully before you invest or send money. William Blair & Company, LLC., distributor.

June 30, 2010 William Blair Funds    1

GLOBAL MARKETS OVERVIEW

Summary

Year to date, the global equity market fell 8.65% as measured by the MSCI AC World IMI (net), with the MSCI World Ex-U.S. Index falling 11.78%. Developed non-U.S. markets underperformed Emerging markets, which fell 5.68%, as measured by the MSCI Emerging Markets IMI (net). The U.S. also underperformed other Developed equity markets, falling 6.28%, as measured by the MSCI US IMI (net), as significant U.S. dollar appreciation particularly hurt European, U.K. and Pacific Ex-Japan returns to U.S. dollar investors. In addition, investor sentiment was hampered by concerns regarding the debt crisis in Europe and the response to it, coupled with concerns about a “double dip” recession. Emerging markets were led by Asia, particularly Indonesia and India, which offset relative weakness from China, while Latin America underperformed, due to weakness in Brazil. Within Emerging Europe, Middle East and Africa (EMEA), South Africa, Egypt and Turkey outperformed Russia and the Central/Eastern European countries. Year to date developed small cap stocks were down 6.31%, as small cap stocks outperformed their larger cap counterparts across most regions. Sectorally, global Consumer and Industrials stocks led relative results, each falling between 3.5% and 4.0%, while Energy fell nearly 16%, and Materials and Utilities were each down approximately 11%. Commodity-related sectors underperformed as the Chinese monetary authorities tightened policy in an attempt to constrain speculation in that market, and the market became concerned about the sustainability of prices amidst potentially softening near term demand.

Outlook

As we enter a more mature phase of recovery, we have seen economic readings begin to weaken throughout the second quarter. Composite leading indicators are rolling over, with the evidence of a potential peak in growth strongest in China. This potential deceleration should not be surprising given the Chinese government’s efforts to restrain real estate markets, but it has become a cause for concern in the markets given China’s important role in global growth. Producer Manufacturing Indices (PMIs) in China and elsewhere are still pointing to growth but are now declining.

Stimulus is fading in the U.S. and employment is stagnant. Sovereign debt concerns have at times threatened to overwhelm Europe and the ECB (European Central Bank) is supporting austerity measures. Fears of a double-dip have re-emerged, and the uncertainties regarding global growth have led to a shift away from risky assets. This risk-off tone has been evidenced by the rally in U.S. Treasuries, the strength of the dollar and the rising price of gold. Despite a fiscal deficit and total debt to GDP ratios that are similar to the worst of the European offenders, the U.S. dollar has appreciated as it is considered to be the best of a dodgy breed.

While the odds of a slowdown have increased and the risks to global growth are now to the downside, double-dips are indeed rare. Indicators are not pointing to negative growth and the reality is that we have likely entered a soft patch as slower growth in the second half will follow the better than expected growth in the first half. We believe that China will avoid a hard landing, the U.S. will maintain positive growth, albeit at a slower rate, and Europe will continue to muddle through.

Earlier this year, with a bubble forming in sections of the residential property market, China put the brakes on lending to moderate prices. While it is possible that they overshoot to the downside, we believe that a hard landing will be averted as policy measures to moderate the housing market are implemented and growth slows from 11.9% in the first quarter to 8-9% in the 2^nd half. China’s removal of the U.S. dollar peg was applauded by global leaders and is a

2     Semi-Annual Report June 30, 2010

positive for the Chinese consumer. China’s inflation rose slightly above target but is very moderate at 3.1% especially given its growth and is expected to stay below 4%. Commodity prices (ex-gold) have retreated promoting lower inflation rates.

Economic readings in the U.S. have become more mixed and fears of a double-dip in housing have resurfaced. Data were strong through the quarter spurred by the $8,000 tax credit but starts and sales plummeted after its expiration. But while purchase applications are depressed, record low mortgage rates have stimulated refinancing activity. U.S. employment data disappointed throughout the quarter. At 9.5%, the unemployment rate is now flat versus a year ago but the most recent decline came from lower participation and not job creation. With the small business recovery yet to come, improvements in the NFIB small business optimism index are a promising sign that we can hope to see a new leg of growth and employment gains. The weak outlook for jobs is negatively impacting confidence but has not flowed through to consumer spending as much as expected. Consumers are also less leveraged than they were going into the crisis.

The sovereign debt crisis in Europe has created pressure for countries to set forth fiscal consolidation plans and some austerity measures have already been imposed. While these measures threaten to weaken already subdued growth, a Euro area double-dip is not the consensus view. The southern countries have remained weak but the German recovery remains intact as industrial production has been strong and exports, as well as those of the rest of the Euro-area have been helped by weakness of the Euro. A weaker exchange rate should be broadly expansionary as strong exports will help to boost government tax receipts and will support employment providing a much needed growth driver.

Aggressive fiscal policy around the world was quite effective during the crisis and prevented a prolonged global recession. Policy makers in the developed economies now face difficult decisions as they must face the deficit positions that they have created or exacerbated. A global debate is heating up between proponents of fiscal austerity and continued stimulative spending. The sovereign debt crisis in Europe has shifted the bias towards tightening while the U.S. has not jumped on the austerity bandwagon and is unlikely to do so ahead of the mid-term elections. Emerging markets do not face the same conflict as their debt-to-GDP ratios are considerably lower.

Monetary policy decisions in the developed world are much simpler as high unemployment persists while near-term inflation threats are benign. Additionally, there are no looming asset bubbles because the impairments in the financial system have prevented excess liquidity from flowing into the system. Central banks are expected to err on the side of tightening too late versus too early given the fragility of growth prospects. This “looser for longer” bias is pro-growth and could be a positive for equity markets.

Earnings expectations have rebounded around the globe. New highs in earnings are predicted for the current fiscal year in the emerging markets regions. Estimates for the developed world still remain 10-40% below prior peaks but earnings revisions going forward will likely slow. Of the cyclical sectors, technology has had the strongest rebound especially in the U.S. Multiples have contracted in every region as macro concerns dominated company fundamentals. Dividend yields are above 3% in Europe (including the U.K.) and companies around the world have substantial cash balances which could be used for future buybacks and/or incremental dividends. Uncertainties remain, but attractive valuations and strong balance sheets create an opportunity for solid returns going forward.

June 30, 2010 William Blair Funds     3

W. George Greig

INSTITUTIONAL INTERNATIONAL GROWTH FUND

The Institutional International Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Please see page 2 for the Global Markets Overview.

The Institutional International Growth Fund posted a 4.34% decrease for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), declined 10.41%.

Year to date, the Fund’s stock selection was strong in virtually every sector, with the exception of the Fund’s one Utilities holding. In particular, Consumer Discretionary stock selection was strong, added by performance by a number of the Fund’s auto- and transportation-related holdings, coupled with strong performance within the U.K.. Energy stock selection augmented results, as the Fund’s holdings outpaced the Index by nearly 10%. Strong Financials stock selection was driven by the significant underweighting in European Financials stocks, coupled with limited exposure to commercial banks and capital markets companies within the European Union. Moreover, the Fund’s tilt towards Financials with significant Emerging Markets exposure added value. Strong performance in U.K. and Emerging Markets Industrials was also positive. Somewhat detracting from results was performance by EDF Energies Nouvelles S.A., the French alternative Utilities company, which was hampered by concerns about demand and subsidies within the alternative energy space. Regionally, stock selection was strong across most regions, with the exception of Pacific Ex-Japan and Canada. In addition, the Fund’s currency hedging strategy also added just shy of 1% to relative performance.

The Fund’s overall positioning did not substantially change since year end, with its focus remaining in Consumer Discretionary and Industrials at the expense of Materials and Financials. Regionally, the Fund remained underweighted in Developed Market Financials due not only to concerns emanating from the European situation and potential regulatory changes, but also from a growth perspective relative to other opportunities. While the European Financial sector was slightly underweighted versus the Index, the European geographic weighting increased from approximately 23% as of year end, due to the reclassification of Israel (and Teva Pharmaceutical Industries, Ltd.) into Europe from Emerging Europe, Middle East, and Africa (EMEA), coupled with an increase in Consumer Discretionary, Energy and Materials. Emerging Markets exposure was 27.5%, slightly below the 29.3% weighting as of year end, although the complexion of the underlying Emerging Markets regional exposures changed. In particular, we reduced exposure in Emerging Asian Consumer Staples, Industrials, Information Technology and Materials holdings due to concerns about a slowdown in these economies amidst potential overheating concerns, as well as specific valuation concerns. Conversely, exposure in Emerging Latin American Energy, Industrials and Telecommunication Services companies increased. After increasing currency hedges against the Pound Sterling, Euro and Japanese Yen in the first quarter of the year, we began unwinding most exposure following the European debt crisis when the Euro and Sterling significantly depreciated. As a result, as of June 30, the only hedge against U.S. dollar appreciation we maintained in the Fund was a partial hedge against the Japanese Yen. This hedge represented approximately 4% of the Fund’s Net Assets at June 30.

4     Semi-Annual Report June 30, 2010

Institutional International Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Institutional International Growth Fund	(4.34	)%	16.80	%	(11.43	)%	2.99	%	8.42	%
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49		(10.50	)	3.63		9.52

(a) For the period July 26, 2002 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     5

Institutional International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—29.2%%
Belgium—0.6%
Colruyt S.A. (Food & staples retailing)	35,361	$	8,318
Denmark—2.0%
Coloplast A/S (Health care equipment & supplies)	59,537		5,910
FLSmidth & Co. A/S (Construction & engineering)	92,574		5,974
Novo Nordisk A/S (Pharmaceuticals)	103,850		8,390
Novozymes A/S (Chemicals)	50,788		5,419
SimCorp A/S (Software)	13,817		2,201
			27,894
Finland—1.1%
Kone Oyj (Machinery)	251,899		10,030
Nokian Renkaat Oyj (Auto components)	214,077		5,239
			15,269
France—5.4%
Air Liquide S.A. (Chemicals)	140,388		14,177
bioMerieux (Health care equipment & supplies)	47,019		4,828
Cie Generale des Etablissements Michelin (Auto components)	159,092		11,084
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)	131,246		4,440
Essilor International S.A. (Health care equipment & supplies)	143,563		8,531
Hermes International (Textiles, apparel & luxury goods)	52,216		6,922
L’Oreal S.A. (Personal products)	139,060		13,616
Schneider Electric S.A. (Electrical equipment)	105,875		10,693
			74,291
Germany—4.6%
BASF SE (Chemicals)	382,240		20,886
*Daimler AG (Automobiles)	237,422		12,010
Fielmann AG (Specialty retail)	42,713		3,233
Lanxess AG (Chemicals)	86,657		3,648
MAN SE (Machinery)	80,411		6,629
SAP AG (Software)	323,493		14,385
Wincor Nixdorf AG (Computers & peripherals)	30,402		1,699
			62,490
Ireland—0.3%
Paddy Power plc (Hotels, restaurants & leisure)	117,546		3,652
Israel—2.0%
Bezeq Israeli Telecommunication Corp., Ltd. (Diversified telecommunication services)	3,127,532		6,836
Israel Chemicals, Ltd. (Chemicals)	830,376		8,651
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)	218,407		11,355
			26,842
Italy—0.8%
Ansaldo STS SpA (Transportation infrastructure)	217,351		3,489
DiaSorin SpA (Health care equipment & supplies)	90,547		3,317

Issuer	Shares	Value
Common Stocks—Europe—29.2%—(continued)
Italy—(continued)
Saipem SpA (Energy equipment & services)	154,166	$	4,696
			11,502
Norway—1.4%
*Norwegian Air Shuttle ASA (Airlines)	113,400		1,813
Statoil ASA (Oil, gas & consumable fuels)	866,100		16,685
			18,498
Portugal—0.4%
Jeronimo Martins SGPS S.A. (Food & staples retailing)	586,442		5,373
Spain—2.2%
Banco Santander S.A. (Commercial banks)	1,753,178		18,384
Inditex S.A. (Specialty retail)	124,610		7,106
Tecnicas Reunidas S.A. (Energy equipment & services)	102,781		4,674
			30,164
Sweden—0.2%
Elekta AB (Health care equipment & supplies)	106,420		2,693
Switzerland—8.2%
*ABB, Ltd. (Electrical equipment)	299,514		5,215
Cie Financiere Richemont S.A. (Textiles, apparel & luxury goods)	503,829		17,590
Credit Suisse Group AG (Capital markets)	112,384		4,225
Geberit AG (Building products)	38,747		6,029
Kuehne + Nagel International AG (Marine)	62,258		6,409
Novartis AG (Pharmaceuticals)	293,701		14,234
*Orascom Development Holding AG (Hotels, restaurants & leisure)	35,102		1,947
Partners Group Holding AG (Capital markets)	68,907		8,314
Roche Holding AG (Pharmaceuticals)	31,415		4,564
SGS S.A. (Professional services)	9,014		12,166
Sika AG (Chemicals)	3,188		5,651
Sonova Holding AG (Health care equipment & supplies)	62,518		7,672
Zurich Financial Services AG (Insurance)	81,289		17,917
			111,933
United Kingdom—19.9%
Abcam plc (Biotechnology)	124,603		2,276
Admiral Group plc (Insurance)	454,251		9,513
Aggreko plc (Commercial services & supplies)	258,383		5,424
AMEC plc (Energy equipment & services)	483,350		5,922
Amlin plc (Insurance)	967,136		5,566
Aveva Group plc (Software)	200,765		3,369
Babcock International Group plc (Commercial services & supplies)	979,515		8,702
Barclays plc (Commercial banks)	3,321,008		13,256
BHP Billiton plc (Metals & mining)	700,787		18,170
BlueBay Asset Management plc (Capital markets)	632,156		2,707
Britvic plc (Beverages)	571,851		4,053
Burberry Group plc (Textiles, apparel & luxury goods)	372,825		4,211

See accompanying Notes to Financial Statements.

6     Semi-Annual Report June 30, 2010

Institutional International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—United Kingdom—19.9%—(continued)
*Cairn Energy plc (Oil, gas & consumable fuels)	962,878	$	5,915
Chemring Group plc (Aerospace & defense)	120,944		5,348
Compass Group plc (Hotels, restaurants & leisure)	1,083,698		8,244
*Dana Petroleum plc (Oil, gas & consumable fuels)	269,502		4,537
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)	472,118		2,667
Experian plc (Professional services)	630,862		5,486
*Heritage Oil plc (Oil, gas & consumable fuels)	591,125		3,462
HSBC Holdings plc (Commercial banks)	160,800		1,474
Inmarsat plc (Diversified telecommunication services)	377,150		3,999
Intertek Group plc (Professional services)	264,293		5,666
Johnson Matthey plc (Chemicals)	304,863		6,773
Lancashire Holdings, Ltd. (Insurance)	361,540		2,680
Meggitt plc (Aerospace & defense)	610,075		2,843
Michael Page International plc (Professional services)	793,748		4,394
Micro Focus International plc (Software)	259,345		1,630
Mothercare plc (Multiline retail)	231,229		1,962
Next plc (Multiline retail)	449,983		13,416
Petrofac, Ltd. (Energy equipment & services)	475,966		8,374
Rightmove plc (Media)	220,224		2,066
*Rolls-Royce Group plc (Aerospace & defense)	1,834,171		15,310
Rotork plc (Machinery)	331,740		6,339
RPS Group plc (Commercial services & supplies)	908,148		2,528
Serco Group plc (Commercial services & supplies)	799,937		6,986
Smith & Nephew plc (Health care equipment & supplies)	687,499		6,495
Spirax-Sarco Engineering plc (Machinery)	169,564		3,455
Standard Chartered plc (Commercial banks)	847,148		20,629
*Telecity Group plc (Internet software & services)	308,987		1,841
*The Berkeley Group Holdings plc (Household durables)	379,541		4,306
The Capita Group plc (Professional services)	661,453		7,287
The Weir Group plc (Machinery)	370,299		5,689
Ultra Electronics Holdings plc (Aerospace & defense)	180,123		4,114
Vedanta Resources plc (Metals & mining)	261,214		8,207
Victrex plc (Chemicals)	214,804		3,494
VT Group plc (Commercial services & supplies)	177,811		2,046
			272,831
Emerging Asia—14.0%
China—3.7%
China Yurun Food Group, Ltd. (Food products)	1,182,000		3,717
China Zhongwang Holdings, Ltd. (Metals & mining)	6,908,000		4,376
CNOOC, Ltd. (Oil, gas & consumable fuels)	11,870,000		20,175

Issuer	Shares	Value
Common Stocks—Emerging Asia—14.0%—(continued)
China—(continued)
Dongfeng Motor Group Co., Ltd. (Automobiles)	5,062,000	$	5,872
Industrial and Commercial Bank of China (Commercial banks)	18,219,000		13,242
Lonking Holdings, Ltd. (Machinery)	2,880,000		1,908
Minth Group, Ltd. (Auto components)	1,764,000		2,084
			51,374
India—3.8%
Asian Paints, Ltd. (Chemicals)	85,251		4,202
Axis Bank, Ltd. (Commercial banks)	112,159		2,973
Housing Development Finance Corporation (Thrifts & mortgage finance)	122,387		7,713
Infosys Technologies, Ltd. (IT services)	206,735		12,335
Jindal Steel & Power, Ltd. (Metals & mining)	567,437		7,577
Lupin, Ltd. (Pharmaceuticals)	88,009		3,705
Reliance Industries, Ltd. (Oil, gas & consumable fuels)	253,324		5,896
Tata Motors, Ltd. (Machinery)	339,105		5,615
Yes Bank, Ltd. (Commercial banks)	251,217		1,440
			51,456
Indonesia—2.9%
PT Astra International Tbk (Automobiles)	2,876,500		15,198
PT Bank Rakyat Indonesia (Commercial banks)	12,675,000		12,868
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)	3,509,500		3,184
PT United Tractors Tbk (Machinery)	3,925,500		8,046
			39,296
Malaysia—0.2%
Top Glove Corporation Bhd (Health care equipment & supplies)	521,400		2,204
Papua New Guinea—0.2%
Oil Search, Ltd. (Oil, gas & consumable fuels)	672,070		3,092
South Korea—1.7%
Hyundai Mobis (Auto components)	36,316		6,091
Hyundai Motor Co. (Automobiles)	142,368		16,658
			22,749
Taiwan—1.3%
Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & semiconductor equipment)	7,498,000		14,014
Tripod Technology Corporation (Electronic equipment, instruments & components)	590,000		2,182
Wistron Corporation (Computers & peripherals)	1,602,000		2,347
			18,543
Thailand—0.2%
CP ALL PCL (Food & staples retailing)	3,817,700		3,389
Japan—12.9%
ABC-Mart, Inc. (Specialty retail)	41,900		1,644
Canon, Inc. (Office electronics)	579,500		21,598

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     7

Institutional International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Japan—12.9%—(continued)
Dena Co., Ltd. (Internet & catalog retail)	65,300	$	1,724
Exedy Corporation (Auto components)	85,100		2,182
F.C.C. Co., Ltd. (Auto components)	68,252		1,275
Fanuc, Ltd. (Machinery)	151,600		17,119
*Gree, Inc. (Internet software & services)	49,800		3,977
Hoya Corporation (Electronic equipment, instruments & components)	346,900		7,381
K’s Holdings Corporation (Specialty retail)	146,800		3,001
kabu.com Securities Co., Ltd. (Capital markets)	399,400		1,873
Kakaku.com, Inc. (Internet software & services)	545		2,251
Keyence Corporation (Electronic equipment, instruments & components)	45,700		10,568
Komatsu, Ltd. (Machinery)	415,400		7,480
Makita Corporation (Machinery)	167,200		4,474
Miraca Holdings, Inc. (Health care providers & services)	93,900		2,811
MISUMI Group, Inc. (Trading companies & distributors)	177,900		3,285
Murata Manufacturing Co., Ltd. (Electronic equipment, instruments & components)	132,900		6,338
Nabtesco Corporation (Machinery)	149,000		2,297
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)	571,000		6,540
Nitori Co., Ltd. (Specialty retail)	62,330		5,373
Osaka Securities Exchange Co., Ltd. (Diversified financial services)	482		2,047
Park24 Co., Ltd. (Commercial services & supplies)	275,100		2,951
Point, Inc. (Specialty retail)	57,560		3,157
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)	25,600		2,449
Softbank Corporation (Wireless telecommunication services)	616,900		16,362
Sony Financial Holdings, Inc. (Insurance)	1,125		3,753
Terumo Corporation (Health care equipment & supplies)	87,300		4,181
USS Co., Ltd. (Specialty retail)	52,960		3,783
Yahoo! Japan Corporation (Internet software & services)	44,448		17,716
Yamada Denki Co., Ltd. (Specialty retail)	108,000		7,057
			176,647
Emerging Latin America—9.8%
Brazil—5.4%
Amil Participacoes S.A. (Insurance)	180,100		1,462
BR Malls Participacoes S.A. (Real estate management & development)	172,300		2,243
BR Properties S.A. (Real estate management & development)	415,178		2,956
Cyrela Brazil Realty S.A. (Household durables)	500,600		5,411
Diagnosticos da America S.A. (Health care providers & services)	294,800		2,775
*GP Investments, Ltd. (Capital markets)	454,085		1,514
Localiza Rent a Car S.A. (Road & rail)	446,600		5,184
Lojas Renner S.A. (Multiline retail)	193,200		5,245
*Mills Estruturas e Servicos de Engenharia S.A. (Trading companies & distributors)	314,539		2,379

Issuer	Shares	Value
Common Stocks—Emerging Latin America—9.8%—(continued)
Brazil—(continued)
MRV Engenharia e Participacoes S.A. (Household durables)	346,579	$	2,440
Natura Cosmeticos S.A. (Personal products)	491,200		10,885
OdontoPrev S.A. (Health care providers & services)	62,600		2,182
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	773,700		7,167
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	296,000		2,499
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)	897,752		15,418
SLC Agricola S.A. (Food products)	199,200		1,479
Totvs S.A. (Software)	29,500		2,189
			73,428
Chile—0.9%
Banco Santander Chile—ADR (Commercial banks)	97,775		6,560
Lan Airlines S.A. (Airlines)	337,638		6,307
			12,867
Colombia—0.8%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	474,689		10,639
Mexico—2.0%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)	279,130		13,259
Banco Compartamos S.A. de C.V. (Consumer finance)	570,700		2,966
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	414,231		1,376
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	834,500		1,981
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	3,215,200		7,122
			26,704
Panama—0.2%
Copa Holdings S.A. Class “A” (Airlines)†	56,981		2,520
Peru—0.5%
Credicorp, Ltd. (Commercial banks)†	82,644		7,511
Canada—4.7%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†	511,670		11,574
Canadian Western Bank (Commercial banks)	126,103		2,800
Crescent Point Energy Corporation (Oil, gas & consumable fuels)	185,209		6,465
First Quantum Minerals, Ltd. (Metals & mining)	58,373		2,936
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	182,900		5,254
Home Capital Group, Inc. (Thrifts & mortgage finance)	34,215		1,356
Niko Resources, Ltd. (Oil, gas & consumable fuels)	96,487		8,974
PetroBakken Energy, Ltd. Class “A” (Oil, gas & consumable fuels)	299,649		5,962
Petrominerales, Ltd. (Oil, gas & consumable fuels)	86,507		2,019

See accompanying Notes to Financial Statements.

8     Semi-Annual Report June 30, 2010

Institutional International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Canada—4.7%—(continued)
The Toronto-Dominion Bank (Commercial banks)	146,040	$	9,463
Tim Hortons, Inc. (Hotels, restaurants & leisure)	220,292		7,052
			63,855
Emerging Europe, Mid-East, Africa—3.7%
Egypt—0.4%
Commercial International Bank Egypt S.A.E. (Commercial banks)	239,736		2,806
Egyptian Financial Group-Hermes Holding (Capital markets)	441,048		2,225
			5,031
South Africa—2.0%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)	598,025		5,905
Clicks Group, Ltd. (Multiline retail)	469,128		2,064
Shoprite Holdings, Ltd. (Food & staples retailing)	650,166		6,990
Standard Bank Group, Ltd. (Commercial banks)	723,431		9,594
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)	231,833		3,300
			27,853
Turkey—1.1%
BIM Birlesik Magazalar A.S. (Food & staples retailing)	296,617		8,221
Turkiye Garanti Bankasi A.S. (Commercial banks)	1,685,416		7,014
			15,235
United Arab Emirates—0.2%
First Gulf Bank PJSC (Commercial banks)	746,620		3,020
Asia—3.2%
Australia—0.8%
Seek, Ltd. (Professional services)	236,322		1,376
Wesfarmers, Ltd. (Food & staples retailing)	283,207		6,769
WorleyParsons, Ltd. (Energy equipment & services)	155,191		2,855
			11,000
Hong Kong—1.7%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)	337,500		2,622
Li & Fung, Ltd. (Distributors)	2,956,000		13,225
Noble Group, Ltd. (Trading companies & distributors)	6,274,229		7,584
			23,431
Singapore—0.7%
CapitaLand, Ltd. (Real estate management & development)	1,854,000		4,727
CapitaMalls Asia, Ltd. (Real estate management & development)	3,251,000		4,861
			9,588
Total Common Stocks—97.4% (cost $1,241,555)			1,333,182

Issuer	Shares or Principal Amount		Value
Convertible Bond
Brazil—0.0%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	941	$	535
Total Convertible Bond—0.0% (cost $488)				535
Exchange-Traded Fund
China—0.7%
iShares FTSE/Xinhua A50 China Index		7,009,700		10,334
Total Exchange-Traded Fund—0.7% (cost $11,287)				10,334
Investment in Affiliate
William Blair Ready Reserves Fund		4,535,679		4,536
Total Investment in Affiliate—0.3% (cost $4,536)				4,536
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	1,000		1,000
Total Short-Term Investment—0.1% (cost $1,000)				1,000
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $8,062, collateralized by FFCB, 1.625%, due 3/7/13	$	8,062		8,062
Total Repurchase Agreement—0.6% (cost $8,062)				8,062
Total Investments—99.1% (cost $1,266,928)				1,357,649
Cash and other assets, less liabilities—0.9%				11,751
Net assets—100.0%			$	1,369,400

ADR = American Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.04% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.04% of the net assets at June 30, 2010.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     9

Institutional International Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Industrials	18.0%
Financials	17.5%
Consumer Discretionary	16.7%
Energy	10.6%
Information Technology	10.2%
Materials	8.6%
Health Care	8.1%
Consumer Staples	6.2%
Telecommunication Services	3.0%
Exchange-Traded Fund	0.8%
Utilities	0.3%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	20.2%
Euro	15.7%
Japanese Yen	13.1%
Swiss Franc	8.3%
Hong Kong Dollar	5.9%
Brazilian Real	5.5%
Canadian Dollar	4.7%
U.S. Dollar	3.9%
Indian Rupee	3.8%
Indonesian Rupiah	2.9%
Danish Krone	2.1%
South African Rand	2.1%
South Korean Won	1.7%
New Taiwan Dollar	1.4%
Norwegian Krone	1.4%
Singapore Dollar	1.3%
Israeli Shekel	1.2%
Turkish Lira	1.1%
Australian Dollar	1.0%
Mexican Peso	1.0%
All Other Currencies	1.7%
Total	100.0%

See accompanying Notes to Financial Statements.

10     Semi-Annual Report June 30, 2010

W. George Greig

David Merjan

INSTITUTIONAL INTERNATIONAL EQUITY FUND

The Institutional International Equity Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 2 for the Global Markets Overview.

The Institutional International Equity Fund posted a 9.25% decrease for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country World Ex-U.S. IMI Index (net), declined 10.41%.

Year to date stock selection was particularly strong in Discretionary, Energy and Financials. Within Financials, the Fund’s underweighting and stock selection in Europe Ex-U.K. added value, as the Fund eschewed a number of the E.U. commercial banks and capital markets financial institutions, given concerns about debt within the peripheral E.U. economies and ramifications for cross-border financial institutions. Emerging markets Financials performance also augmented results during the first half, as these holdings were not weighed down by slowdown concerns. Regionally, Developed European stock selection added value as did strong performance within Canada and Emerging Asia. The key detractor from performance year to date was Japanese Discretionary and Industrials stock selection.

As of June 30, the Fund maintained its focus in Industrials at 22.6% of the Fund, nearly double that of the MSCI ACWI Ex-U.S. IMI. Financials, while underweighted versus the Index, represented 20.6% of the Fund. Consumer Discretionary and Information Technology each represented approximately 12% of the Fund, above Index weightings. The Fund was most significantly underweighted in Materials, Telecommunication Services and Utilities at quarter end. These exposures did not appreciably change during the six month period. Regionally, the Fund maintained its focus in Developed Europe and Canada at the expense of Developed Asia. Within Europe Ex-U.K., specifically, the Fund was significantly overweighted in Healthcare and Industrials, sectors that generally benefit from a weak euro, and significantly underweighted in Financials, with no exposure in Materials, Telecommunication Services and Utilities. Emerging markets represented 18.7% of the Fund, below the Index weighting of 23.5%, and a decrease since year end, due largely to an underweighting in Emerging Asia, and a reclassification of Israel into Europe Ex-U.K. during the quarter, as one of our largest Emerging Markets Europe, Mid-East and Africa holdings was reclassified.

June 30, 2010 William Blair Funds     11

Institutional International Equity Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		5 Year		Since Inception(a)
Institutional International Equity Fund	(9.25	)%	9.61	%	(13.05	)%	0.48	%	0.82	%
MSCI All Country World Ex-U.S. IMI (net)	(10.41	)	11.49		(10.50	)	3.63		4.03

(a) For the period May 24, 2004 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

12     Semi-Annual Report June 30, 2010

Institutional International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—30.1%
Denmark—1.8%
Novo Nordisk A/S (Pharmaceuticals)	72,307	$	5,842
Finland—1.2%
Kone Oyj (Machinery)	94,902		3,779
France—5.2%
AXA S.A. (Insurance)	146,476		2,238
Cie Generale des Etablissements Michelin (Auto components)	45,867		3,196
L’Oreal S.A. (Personal products)	42,676		4,178
Schneider Electric S.A. (Electrical equipment)	45,191		4,564
Vinci S.A. (Construction & engineering)	61,601		2,558
			16,734
Germany—4.6%
*Infineon Technologies AG (Semiconductors & semiconductor equipment)	312,418		1,811
MAN SE (Machinery)	60,411		4,980
*QIAGEN N.V. (Life sciences tools & services)	164,794		3,206
SAP AG (Software)	107,466		4,779
			14,776
Ireland—1.6%
*Ryanair Holdings plc—ADR (Airlines)	197,488		5,350
Israel—2.1%
Teva Pharmaceutical Industries, Ltd.—ADR (Pharmaceuticals)	127,781		6,643
Italy—1.7%
Saipem SpA (Energy equipment & services)	176,410		5,373
Spain—2.4%
Banco Santander S.A. (Commercial banks)	260,319		2,730
Inditex S.A. (Specialty retail)	87,384		4,983
			7,713
Switzerland—9.5%
*ABB, Ltd. (Electrical equipment)	229,047		3,988
*Actelion, Ltd. (Biotechnology)	60,529		2,266
Credit Suisse Group AG (Capital markets)	115,512		4,343
Julius Baer Group, Ltd. (Capital markets)	54,213		1,546
Nestle S.A. (Food products)	132,227		6,376
Roche Holding AG (Pharmaceuticals)	36,736		5,056
Sonova Holding AG (Health care equipment & supplies)	18,671		2,291
Zurich Financial Services AG (Insurance)	22,336		4,923
			30,789
United Kingdom—20.6%
Amlin plc (Insurance)	290,149		1,670
*Autonomy Corporation plc (Software)	144,498		3,939
Barclays plc (Commercial banks)	926,088		3,696
BG Group plc (Oil, gas & consumable fuels)	330,358		4,913
British Sky Broadcasting Group plc (Media)	483,708		5,051
Burberry Group plc (Textiles, apparel & luxury goods)	282,199		3,187
Compass Group plc (Hotels, restaurants & leisure)	531,135		4,041
Experian plc (Professional services)	306,334		2,664
HSBC Holdings plc (Commercial banks)	318,176		2,917
Johnson Matthey plc (Chemicals)	113,532		2,522
Petrofac, Ltd. (Energy equipment & services)	178,558		3,141

Issuer	Shares	Value
Common Stocks—United Kingdom—20.6%—(continued)
Reckitt Benckiser Group plc (Household products)	148,277	$	6,897
*Rolls-Royce Group plc (Aerospace & defense)	537,161		4,484
Rotork plc (Machinery)	94,187		1,800
Standard Chartered plc (Commercial banks)	211,205		5,143
The Capita Group plc (Professional services)	286,336		3,155
Tullow Oil plc (Oil, gas & consumable fuels)	259,495		3,860
Vedanta Resources plc (Metals & mining)	103,107		3,239
			66,319
Japan—13.3%
Canon, Inc. (Office electronics)	87,300		3,254
Daikin Industries, Ltd. (Building products)	86,400		2,634
Fanuc, Ltd. (Machinery)	44,600		5,036
Hoya Corporation (Electronic equipment, instruments & components)	137,300		2,921
Keyence Corporation (Electronic equipment, instruments & components)	18,700		4,324
Komatsu, Ltd. (Machinery)	200,800		3,616
Makita Corporation (Machinery)	49,900		1,335
Mitsubishi Corporation (Trading companies & distributors)	216,400		4,477
Mitsubishi UFJ Financial Group, Inc. (Commercial banks)	753,600		3,422
Nippon Electric Glass Co., Ltd. (Electronic equipment, instruments & components)	230,000		2,634
Softbank Corporation (Wireless telecommunication services)	98,700		2,618
Terumo Corporation (Health care equipment & supplies)	47,100		2,256
Yahoo! Japan Corporation (Internet software & services)	6,244		2,489
Yamada Denki Co., Ltd. (Specialty retail)	28,980		1,894
			42,910
Emerging Asia—11.4%
China—3.2%
China Life Insurance Co., Ltd. (Insurance)	896,000		3,919
CNOOC, Ltd. (Oil, gas & consumable fuels)	2,555,000		4,343
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	619,000		2,028
			10,290
India—4.5%
Bharat Heavy Electricals, Ltd. (Electrical equipment)	84,678		4,461
*Cairn India, Ltd. (Oil, gas & consumable fuels)	434,387		2,813
HDFC Bank, Ltd.—ADR (Commercial banks)	17,225		2,463
Infosys Technologies, Ltd. (IT services)	77,758		4,639
			14,376
Indonesia—0.8%
PT Bank Rakyat Indonesia (Commercial banks)	2,642,500		2,683
South Korea—1.5%
Hyundai Motor Co. (Automobiles)	40,349		4,721

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     13

Institutional International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—11.4%—(continued)
Taiwan—1.4%
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	765,000	$	2,681
MediaTek, Inc. (Semiconductors & semiconductor equipment)	138,462		1,933
			4,614
Canada—8.2%
Brookfield Asset Management, Inc. Class “A” (Real estate management & development)†	164,368		3,719
Canadian National Railway Co. (Road & rail)†	93,872		5,386
Goldcorp, Inc. (Metals & mining)†	99,602		4,368
Royal Bank of Canada (Commercial banks)	62,444		2,974
The Toronto-Dominion Bank (Commercial banks)	55,437		3,592
Thomson Reuters Corporation (Media)	73,040		2,614
Tim Hortons, Inc. (Hotels, restaurants & leisure)	120,748		3,866
			26,519
Asia—5.3%
Australia—1.7%
BHP Billiton, Ltd.—ADR (Metals & mining)	51,348		3,183
WorleyParsons, Ltd. (Energy equipment & services)	115,905		2,133
			5,316
Hong Kong—2.9%
ASM Pacific Technology, Ltd. (Semiconductors & semiconductor equipment)	247,700		1,924
Li & Fung, Ltd. (Distributors)	1,000,000		4,474
Noble Group, Ltd. (Trading companies & distributors)	2,411,090		2,914
			9,312
Singapore—0.7%
CapitaLand, Ltd. (Real estate management & development)	931,000		2,374
Emerging Latin America—4.7%
Brazil—3.7%
BM&F BOVESPA S.A. (Diversified financial services)	592,871		3,810
Petroleo Brasileiro S.A.—ADR (Oil, gas & consumable fuels)	40,399		1,387
Vale S.A.—ADR (Metals & mining)	153,101		3,728
Weg S.A. (Machinery)	327,800		3,033
			11,958
Mexico—1.0%
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	1,395,900		3,092
Emerging Europe, Mid-East, Africa—1.7%
South Africa—0.8%
Standard Bank Group, Ltd. (Commercial banks)	196,724		2,609

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—1.7%—(continued)
Turkey—0.9%
Turkiye Garanti Bankasi A.S. (Commercial banks)		722,881	$	3,008
Total Common Stocks—95.3% (cost $272,584)				307,100
Preferred Stock
Brazil—0.9%
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		209,979		3,124
Total Preferred Stock—0.9% (cost $2,179)				3,124
Investment in Affiliate
William Blair Ready Reserves Fund		952,724		953
Total Investment in Affiliate—0.3% (cost $953)				953
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $10,919, collateralized by FHLMC, 2.000%, due 4/15/13	$	10,919		10,919
Total Repurchase Agreement—3.4% (cost $10,919)				10,919
Total Investments—99.9% (cost $286,635)				322,096
Cash and other assets, less liabilities—0.1%				221
Net assets—100.0%			$	322,317

ADR = American Depository Receipt

*Non-income producing securities

† = U.S. listed foreign security

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Industrials	22.6%
Financials	20.6%
Consumer Discretionary	12.6%
Information Technology	12.1%
Energy	10.0%
Health Care	9.2%
Consumer Staples	6.6%
Materials	5.5%
Telecommunication Services	0.8%
Total	100.0%

See accompanying Notes to Financial Statements.

14     Semi-Annual Report June 30, 2010

Institutional International Equity Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	20.4%
Euro	15.6%
Japanese Yen	13.8%
U.S. Dollar	12.0%
Swiss Franc	9.9%
Hong Kong Dollar	6.3%
Canadian Dollar	4.0%
Indian Rupee	3.8%
Brazilian Real	3.2%
Danish Krone	1.9%
Singapore Dollar	1.7%
South Korean Won	1.5%
New Taiwan Dollar	1.5%
All Other Currencies	4.4%
Total	100.0%

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     15

Jeffery A. Urbina

INTERNATIONAL SMALL CAP GROWTH FUND

The International Small Cap Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGER

Please see page 2 for the Global Markets Overview.

The International Small Cap Growth Fund decreased 2.09% (Institutional Class) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI All Country Ex-U.S. Small Cap Index (net), declined 5.32%.

Sector stock selection drove year to date outperformance, coupled with good performance across most regions, except for Emerging Asia. Within Consumer Discretionary, Japanese internet website Start Today Co., Ltd. performed well, as did footwear retailer ABC-Mart, Inc. U.K. Consumer Discretionary stock selection was strong, outperforming by nearly 21%, while Emerging Europe, Middle East and Africa (EMEA) and Latin American stocks also added value. Consumer Staples stock selection benefited from good performance by Unicharm Petcare Corporation as its parent company made a tender offer for the remaining outstanding publicly traded shares. Industrials stock selection was bolstered by strong Developed Europe and Emerging Markets stock selection, particularly within the defense, services, and transportation industries. Materials and Energy stock selection was also additive to results for the year to date period, as the Fund’s Materials holdings outperformed by over 31%, and Energy by nearly 13% versus the Index. Somewhat detracting from year to date results was Financials, Information Technology, and Utilities stock selection. Within Financials, the Fund’s underweighting and stock selection in Europe was more than offset by underperformance in Asian Financials holdings and U.K. asset management firms. Information Technology stock selection was hampered by several stock-specific issues, while EDF Energies Nouvelles S.A., the sole Utilities holding, underperformed the sector as a whole, as investors were concerned about the timing of wind farm development in the U.S., coupled with potentially reduced subsidies for alternative energy within Europe as a result of austerity measures.

As of June 30, the Fund maintained its focus in Consumer Discretionary at 26.6% of the Fund, with just over 7% within emerging markets specifically, well above the 16.5% Index weighting, and an increase since year end. Industrials was the second largest sector at 19.1% of the Fund, albeit underweighted versus the Index’s 21.74% weighting. Information Technology and Healthcare represented 15.0% and 13.5% of the Fund, respectively, well above Index weightings. We increased exposure to Emerging Markets and U.K. Healthcare holdings during the period, at the expense of Japanese Industrials. Since year end, we reduced our already underweighted Financials exposure from 12.6% to 9.9%. Materials, representing 4.1% of the Funds remained significantly underweighted versus the market throughout the six month period. Regionally, the Fund was overweighted in Developed European stocks, due largely to Healthcare, Information Technology and Consumer Discretionary weightings within Europe Ex-U.K. and Industrials holdings within the U.K. Emerging markets represented 22.8% of the Fund at June 30, above the 18.8% as of year end, but lower than the Index weighting, due largely to an underweighting in the emerging Asian region.

16     Semi-Annual Report June 30, 2010

International Small Cap Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year to Date		1 Year		3 Year		Since Inception(a)
Institutional Class	(2.09	)%	23.52	%	(9.46	)%	2.99	%
MSCI All Country World Ex-U.S. Small Cap Index (net)	(5.32	)	19.98		(9.68	)	3.76

(a) For the period November 1, 2005 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) All Country World Ex-U.S. Small Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of small capitalization developed and emerging markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     17

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Europe—27.1%
Austria—0.4%
Schoeller-Bleckmann Oilfield Equipment AG (Energy equipment & services)	40,651	$	1,843
Denmark—1.7%
FLSmidth & Co. A/S (Construction & engineering)	99,420		6,416
SimCorp A/S (Software)	5,318		847
			7,263
Finland—2.0%
Nokian Renkaat Oyj (Auto components)	361,056		8,836
France—3.0%
bioMerieux (Health care equipment & supplies)	58,739		6,031
*Boursorama (Capital markets)	152,766		1,518
EDF Energies Nouvelles S.A. (Independent power producers & energy traders)	49,132		1,662
Gemalto N.V. (Computers & peripherals)	108,366		4,078
			13,289
Germany—3.9%
Aixtron AG (Semiconductors & semiconductor equipment)	247,766		5,857
CTS Eventim AG (Media)	43,054		2,074
Fielmann AG (Specialty retail)	44,923		3,401
Wincor Nixdorf AG (Computers & peripherals)	50,204		2,806
Wirecard AG (IT services)	365,197		3,111
			17,249
Ireland—1.5%
*Norkom Group plc (Software)	215,133		347
Paddy Power plc (Hotels, restaurants & leisure)	195,972		6,088
			6,435
Italy—2.5%
Ansaldo STS SpA (Transportation infrastructure)	217,207		3,487
DiaSorin SpA (Health care equipment & supplies)	99,945		3,661
Trevi Finanziaria SpA (Construction & engineering)	266,974		3,831
			10,979
Luxembourg—1.0%
Oriflame Cosmetics S.A. (Personal products)	83,200		4,321
Netherlands—0.5%
BinckBank N.V. (Capital markets)	179,314		2,231
Norway—0.7%
*Norwegian Air Shuttle ASA (Airlines)	95,256		1,523
Opera Software ASA (Internet software & services)	171,405		590
*Pronova BioPharma A/S (Pharmaceuticals)	510,609		1,006
			3,119
Spain—1.6%
Tecnicas Reunidas S.A. (Energy equipment & services)	158,310		7,200
Sweden—1.6%
Elekta AB (Health care equipment & supplies)	283,883		7,184

Issuer	Shares	Value
Common Stocks—Europe—27.1%—(continued)
Switzerland—6.7%
*Dufry Group (Specialty retail)	55,866	$	4,178
*Orascom Development Holding AG (Hotels, restaurants & leisure)	39,856		2,211
Partners Group Holding AG (Capital markets)	78,830		9,512
Sika AG (Chemicals)	2,919		5,174
*Temenos Group AG (Software)	357,555		8,608
			29,683
United Kingdom—22.1%
Abcam plc (Biotechnology)	141,429		2,583
Aggreko plc (Commercial services & supplies)	214,055		4,494
Amlin plc (Insurance)	1,009,467		5,810
Ashmore Group plc (Capital markets)	589,384		2,127
*ASOS plc (Internet & catalog retail)	154,303		1,973
Aveva Group plc (Software)	201,540		3,382
Babcock International Group plc (Commercial services & supplies)	814,504		7,236
*Blinkx plc (Internet software & services)	2,006,326		1,109
BlueBay Asset Management plc (Capital markets)	199,031		852
Britvic plc (Beverages)	735,535		5,213
*Ceres Power Holdings plc (Electrical equipment)	262,261		295
Chemring Group plc (Aerospace & defense)	75,742		3,349
*Dana Petroleum plc (Oil, gas & consumable fuels)	359,274		6,048
Domino’s Pizza UK & IRL plc (Hotels, restaurants & leisure)	255,283		1,442
*EnQuest plc (Oil, gas & consumable fuels)	299,681		445
Intertek Group plc (Professional services)	113,091		2,424
Lancashire Holdings, Ltd. (Insurance)	232,960		1,727
Meggitt plc (Aerospace & defense)	784,642		3,657
Michael Page International plc (Professional services)	799,923		4,429
Micro Focus International plc (Software)	544,439		3,421
Mothercare plc (Multiline retail)	264,430		2,244
Petrofac, Ltd. (Energy equipment & services)	257,082		4,523
*Promethean World plc (Diversified consumer services)	350,726		953
Rightmove plc (Media)	248,521		2,331
RPS Group plc (Commercial services & supplies)	316,754		882
Serco Group plc (Commercial services & supplies)	978,331		8,544
Spirax-Sarco Engineering plc (Machinery)	158,159		3,222
*Telecity Group plc (Internet software & services)	338,559		2,017
The Weir Group plc (Machinery)	536,643		8,244
Victrex plc (Chemicals)	166,542		2,709
			97,685
Japan—16.7%
ABC-Mart, Inc. (Specialty retail)	232,414		9,117
Aeon Delight Co., Ltd. (Commercial services & supplies)	83,700		1,629
CyberAgent, Inc. (Media)	1,378		2,042
Dena Co., Ltd. (Internet & catalog retail)	173,700		4,587
Disco Corporation (Semiconductors & semiconductor equipment)	53,900		3,410

See accompanying Notes to Financial Statements.

18     Semi-Annual Report June 30, 2010

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Japan—16.7%—(continued)
EPS Co., Ltd. (Life sciences tools & services)	560	$	1,416
Exedy Corporation (Auto components)	148,800		3,815
F.C.C. Co., Ltd. (Auto components)	160,709		3,003
*Gree, Inc. (Internet software & services)	60,130		4,802
kabu.com Securities Co., Ltd. (Capital markets)	201,900		947
Kakaku.com, Inc. (Internet software & services)	614		2,537
Miraca Holdings, Inc. (Health care providers & services)	294,500		8,815
Nabtesco Corporation (Machinery)	244,000		3,761
Nitori Co., Ltd. (Specialty retail)	59,950		5,168
Osaka Securities Exchange Co., Ltd. (Diversified financial services)	1,367		5,805
Point, Inc. (Specialty retail)	71,440		3,919
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals)	26,300		2,517
Start Today Co., Ltd. (Internet & catalog retail)	245		671
USS Co., Ltd. (Specialty retail)	82,050		5,861
			73,822
Emerging Asia—14.6%
China—8.1%
361 Degrees International, Ltd. (Textiles, apparel & luxury goods)	6,448,000		4,594
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)	2,613,559		3,736
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)	1,796,429		2,005
China Green (Holdings), Ltd. (Food products)	1,754,556		1,761
China High Speed Transmission Equipment Group Co., Ltd. (Electrical equipment)	1,056,000		2,218
Comba Telecom Systems Holdings, Ltd. (Communications equipment)	1,752,998		1,932
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)	99,812		595
Golden Eagle Retail Group, Ltd. (Multiline retail)	285,000		595
Haitian International Holdings, Ltd. (Machinery)	1,481,496		1,034
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	1,278,373		4,189
Lonking Holdings, Ltd. (Machinery)	4,126,000		2,733
Minth Group, Ltd. (Auto components)	2,463,384		2,911
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)	5,779,000		3,806
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)	300,800		1,310
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)	1,132,865		2,398
			35,817
India—3.0%
Ipca Laboratories, Ltd. (Pharmaceuticals)	378,865		2,368
Lupin, Ltd. (Pharmaceuticals)	178,480		7,514
Yes Bank, Ltd. (Commercial banks)	598,128		3,428
			13,310

Issuer	Shares	Value
Common Stocks—Emerging Asia—14.6%—(continued)
Indonesia—1.1%
*PT Ciputra Development Tbk (Real estate management & development)	14,294,000	$	523
PT Kalbe Farma Tbk (Pharmaceuticals)	10,314,500		2,368
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Food products)	2,159,000		1,959
			4,850
Taiwan—2.4%
Chicony Electronics Co., Ltd. (Computers & peripherals)	1,306,000		2,895
Tripod Technology Corporation (Electronic equipment, instruments & components)	1,041,000		3,849
Wistron Corporation (Computers & peripherals)	2,441,000		3,577
			10,321
Canada—6.0%
*Bankers Petroleum, Ltd. (Oil, gas & consumable fuels)	191,809		1,265
Canadian Western Bank (Commercial banks)	143,600		3,189
*Consolidated Thompson Iron Mines, Ltd. (Metals & mining)	403,378		2,751
*Gildan Activewear, Inc. (Textiles, apparel & luxury goods)	240,700		6,914
Home Capital Group, Inc. (Thrifts & mortgage finance)	54,147		2,145
*Legacy Oil + Gas, Inc. (Oil, gas & consumable fuels)	200,562		2,163
Petrominerales, Ltd. (Oil, gas & consumable fuels)	121,785		2,843
*Red Back Mining, Inc. (Metals & mining)	203,289		5,138
			26,408
Emerging Latin America—4.6%
Brazil—2.5%
Brasil Brokers Participacoes S.A. (Real estate management & development)	319,800		1,031
Localiza Rent a Car S.A. (Road & rail)	201,400		2,338
Lojas Renner S.A. (Multiline retail)	146,900		3,988
OdontoPrev S.A. (Health care providers & services)	38,700		1,349
Positivo Informatica S.A. (Computers & peripherals)	213,000		2,002
Tegma Gestao Logistica S.A. (Road & rail)	44,455		376
			11,084
Colombia—1.1%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	225,671		5,058
Mexico—1.0%
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	668,910		2,221
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)	789,787		2,064
			4,285

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     19

International Small Cap Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—3.6%
South Africa—2.5%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		259,678	$	2,564
Clicks Group, Ltd. (Multiline retail)		1,192,055		5,244
Mr Price Group, Ltd. (Specialty retail)		395,587		2,297
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)		48,854		696
				10,801
Turkey—1.1%
Asya Katilim Bankasi A.S. (Commercial banks)		877,427		2,003
BIM Birlesik Magazalar A.S. (Food & staples retailing)		100,074		2,774
				4,777
Asia—3.5%
Australia—2.5%
Cochlear, Ltd. (Health care equipment & supplies)		80,252		4,999
JB Hi-Fi, Ltd. (Specialty retail)		256,719		4,084
Seek, Ltd. (Professional services)		366,928		2,136
				11,219
Singapore—1.0%
Midas Holdings, Ltd. (Metals & mining)		3,017,000		1,952
Olam International, Ltd. (Food & staples retailing)		1,284,700		2,358
				4,310
Total Common Stocks—98.2% (cost $392,593)				433,379
Convertible Bond
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	959		545
Total Convertible Bond—0.1% (cost $497)				545
Investment in Affiliate
William Blair Ready Reserves Fund		488,907		489
Total Investment in Affiliate—0.1% (cost $489)				489
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	500		500
Total Short-Term Investment—0.1% (cost $500)				500
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $7,130, collateralized by FHLMC, 2.000%, due 4/15/13	$	7,130	$	7,130
Total Repurchase Agreement—1.6% (cost $7,130)				7,130

Issuer	Value
Total Investments—100.1% (cost $401,209)		442,043
Liabilities, plus cash and other assets—(0.1)%		(454	)
Net assets—100.0%	$	441,589

ADR = American Depository Receipt

VRN = Variable Rate Note

* Non-income producing securities

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.12% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.12% of the net assets at June 30, 2010.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Consumer Discretionary	26.6%
Industrials	19.1%
Information Technology	15.0%
Health Care	13.5%
Financials	9.9%
Energy	7.2%
Consumer Staples	4.2%
Materials	4.1%
Utilities	0.4%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

British Pound Sterling	22.5%
Japanese Yen	17.0%
Euro	15.7%
Hong Kong Dollar	8.1%
Canadian Dollar	7.3%
Swiss Franc	6.8%
Indian Rupee	3.1%
Brazilian Real	2.7%
Swedish Krona	2.6%
Australian Dollar	2.6%
South African Rand	2.5%
New Taiwan Dollar	2.4%
Danish Krone	1.7%
Indonesian Rupiah	1.1%
Turkish Lira	1.1%
All Other Currencies	2.8%
Total	100.0%

See accompanying Notes to Financial Statements.

20     Semi-Annual Report June 30, 2010

Todd M. McClone

Jeffrey A. Urbina

EMERGING MARKETS GROWTH FUND

The Emerging Markets Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 2 for the Global Markets Overview.

The Emerging Markets Growth Fund posted a 4.07% decrease (Institutional Class) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets IMI Index, declined 5.68%.

The emerging markets growth strategy outpaced the Index year to date as stock selection was strong across most sectors and regions, due largely to second quarter performance. In particular, the Fund added significant value in Consumer, Financials, and Industrials. Within Consumer, the Fund’s focus in Asian auto companies and Consumer Staples added value, as did stock selection within Latin America. Emerging Markets Europe, Mid-East and Africa (EMEA) grocery holdings augmented results, as did Brazilian Consumer Staples performance. Financials stock selection was strong across regions, while transportation and infrastructure-related Asian Industrials added value. The Fund outperformed across each emerging markets region, benefiting largely from individual stock selection, rather than overall sector positioning within regions. Somewhat detracting from performance was Materials stock selection, which was focused on mining and fertilizers, areas which underperformed due to concerns about demand for commodities amidst a slowdown in China property development specifically and a potential global slowdown in general.

As of June 30, the Fund maintained its focus in Consumer stocks with 34.5% of the Fund invested across Consumer Discretionary and Consumer Staples names, a slight increase since year end. Financials was the largest single sector within the portfolio at 25.2%. While Asian Financials represented approximately 10% of the overall exposure, the weighting was significantly lower than the Index. We reduced Information Technology from a 13.7% weighting as of year end to 8.8% during the second quarter, as a result of concerns about near-intermediate term earnings sustainability. Materials and Telecommunication Services were also significantly underweighted versus the Index, and remained relatively stable during the period. Regionally, while 48.2% of the Fund was in Emerging Asian stocks, it remained very underweighted versus the Index, due largely to lower exposure in Korea and Taiwan. Conversely, the Fund was significantly overweighted in Latin America at 26.7% of the Fund, particularly in the Consumer, Energy and Financials sectors.

June 30, 2010 William Blair Funds     21

Emerging Markets Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year To Date		1 Year		3 Year		5 Year		Since Inception(a)
Institutional Class	(4.07	)%	25.68	%	(8.67	)%	11.37	%	11.79	%
MSCI Emerging Markets IMI (net)	(5.68	)	24.57		(2.17	)	12.98		13.20

(a) For the period June 6, 2005 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Investable Market Index (IMI) (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

22     Semi-Annual Report June 30, 2010

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%
China—18.6%
361 Degrees International, Ltd. (Textiles, apparel & luxury goods)	3,259,000	$	2,322
AAC Acoustic Technologies Holdings, Inc. (Communications equipment)	1,511,949		2,161
Ajisen China Holdings, Ltd. (Hotels, restaurants & leisure)	2,175,078		2,428
*Baidu, Inc.—ADR (Internet software & services)	177,193		12,063
China Dongxiang Group Co. (Textiles, apparel & luxury goods)	4,154,000		2,769
China Green (Holdings), Ltd. (Food products)	2,409,000		2,417
China High Speed Transmission Equipment Group Co., Ltd. (Electrical equipment)	1,708,000		3,588
China Life Insurance Co., Ltd. (Insurance)	4,004,000		17,510
China Shenhua Energy Co., Ltd. (Oil, gas & consumable fuels)	3,693,406		13,325
China Vanke Co., Ltd. (Real estate management & development)	1,345,426		1,411
China Yurun Food Group, Ltd. (Food products)	2,479,000		7,796
CNOOC, Ltd. (Oil, gas & consumable fuels)	18,107,000		30,776
Comba Telecom Systems Holdings, Ltd. (Communications equipment)	1,964,600		2,165
*Concord Medical Services Holdings, Ltd.—ADR (Health care providers & services)	150,368		896
*Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	154,717		5,811
Dongfeng Motor Group Co., Ltd. (Automobiles)	13,550,000		15,717
Golden Eagle Retail Group, Ltd. (Multiline retail)	1,754,000		3,662
Haitian International Holdings, Ltd. (Machinery)	1,960,185		1,368
Hengan International Group Co., Ltd. (Personal products)	987,000		7,992
Industrial and Commercial Bank of China (Commercial banks)	47,465,000		34,500
Li Ning Co., Ltd. (Textiles, apparel & luxury goods)	1,035,000		3,391
Lonking Holdings, Ltd. (Machinery)	4,894,000		3,242
Mindray Medical International, Ltd.—ADR (Health care equipment & supplies)	108,484		3,409
Minth Group, Ltd. (Auto components)	1,004,000		1,186
Peak Sport Products, Ltd. (Textiles, apparel & luxury goods)	3,331,000		2,194
Shandong Weigao Group Medical Polymer Co., Ltd. (Health care equipment & supplies)	640,700		2,791
Zhuzhou CSR Times Electric Co., Ltd. (Electrical equipment)	784,861		1,662
			188,552
India—13.3%
Asian Paints, Ltd. (Chemicals)	63,367		3,123
Axis Bank, Ltd. (Commercial banks)	391,009		10,366
Bharat Heavy Electricals, Ltd. (Electrical equipment)	248,597		13,098
*Cairn India, Ltd. (Oil, gas & consumable fuels)	807,585		5,229

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%—(continued)
India—(continued)
Dabur India, Ltd. (Personal products)	849,316	$	3,830
Financial Technologies (India), Ltd. (Software)	71,919		2,054
Hero Honda Motors, Ltd. (Automobiles)	86,847		3,810
Housing Development Finance Corporation (Thrifts & mortgage finance)	135,622		8,547
Infosys Technologies, Ltd. (IT services)	354,841		21,171
Jindal Steel & Power, Ltd. (Metals & mining)	691,867		9,238
Larsen & Toubro, Ltd. (Construction & engineering)	439,205		16,987
Lupin, Ltd. (Pharmaceuticals)	137,292		5,780
Sterlite Industries India, Ltd. (Metals & mining)	4,299,728		15,518
Sun TV Network, Ltd. (Media)	277,889		2,598
Tata Motors, Ltd. (Machinery)	607,261		10,056
Yes Bank, Ltd. (Commercial banks)	619,020		3,548
			134,953
Indonesia—3.9%
PT Astra International Tbk (Automobiles)	2,998,500		15,842
PT Bank Rakyat Indonesia (Commercial banks)	10,504,000		10,664
*PT Ciputra Development Tbk (Real estate management & development)	54,385,456		1,991
PT Unilever Indonesia Tbk (Household products)	2,137,500		3,986
PT United Tractors Tbk (Machinery)	3,545,000		7,266
			39,749
Malaysia—1.3%
CIMB Group Holdings Bhd (Commercial banks)	4,551,200		9,799
Top Glove Corporation Bhd (Health care equipment & supplies)	708,900		2,996
			12,795
Papua New Guinea—0.7%
Oil Search, Ltd. (Oil, gas & consumable fuels)	1,451,850		6,680
South Korea—6.8%
Amorepacific Corporation (Personal products)	7,331		6,237
Hyundai Mobis (Auto components)	106,180		17,809
Hyundai Motor Co. (Automobiles)	252,022		29,489
LG Household & Health Care, Ltd. (Household products)	19,694		5,593
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)	15,020		9,421
			68,549
Taiwan—2.8%
Chicony Electronics Co., Ltd. (Computers & peripherals)	1,056,000		2,341
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	2,721,100		9,538
MediaTek, Inc. (Semiconductors & semiconductor equipment)	627,142		8,753

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     23

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—48.2%—(continued)
Taiwan—(continued)
Tripod Technology Corporation (Electronic equipment, instruments & components)	809,000	$	2,991
Wistron Corporation (Computers & peripherals)	2,888,000		4,232
			27,855
Thailand—0.8%
CP ALL PCL (Food & staples retailing)	8,734,700		7,753
Minor International PCL (Hotels, restaurants & leisure)	2,544,400		794
			8,547
Emerging Latin America—26.7%
Brazil—14.0%
Amil Participacoes S.A. (Insurance)	696,384		5,652
Anhanguera Educacional Participacoes S.A. (Diversified consumer services)	162,800		2,461
BR Malls Participacoes S.A. (Real estate management & development)	601,900		7,836
BR Properties S.A. (Real estate management & development)	305,241		2,173
Brasil Brokers Participacoes S.A. (Real estate management & development)	438,200		1,413
Cia de Bebidas das Americas—ADR (Beverages)	204,409		20,647
Cyrela Brazil Realty S.A. (Household durables)	423,400		4,577
Diagnosticos da America S.A. (Health care providers & services)	971,600		9,145
*Hypermarcas S.A. (Personal products)	601,228		7,721
Localiza Rent a Car S.A. (Road & rail)	677,500		7,864
Lojas Renner S.A. (Multiline retail)	334,000		9,067
M Dias Branco S.A. (Food products)	112,934		2,440
MRV Engenharia e Participacoes S.A. (Household durables)	1,129,880		7,956
Natura Cosmeticos S.A. (Personal products)	525,200		11,639
OdontoPrev S.A. (Health care providers & services)	61,900		2,157
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	987,300		9,146
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	583,500		4,927
Positivo Informatica S.A. (Computers & peripherals)	242,700		2,282
Totvs S.A. (Software)	62,800		4,660
Vale S.A.—ADR (Metals & mining)	747,662		18,206
			141,969
Chile—1.9%
Banco Santander Chile—ADR (Commercial banks)	133,920		8,985
Lan Airlines S.A. (Airlines)	254,122		4,747
S.A.C.I. Falabella (Multiline retail)	912,778		5,942
			19,674
Colombia—0.6%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	266,540		5,974

Issuer	Shares	Value
Common Stocks—Emerging Latin America—26.7%—(continued)
Mexico—8.1%
America Movil S.A.B. de C.V. (Wireless telecommunication services)	12,208,300	$	28,885
Banco Compartamos S.A. de C.V. (Consumer finance)	884,400		4,597
*Genomma Lab Internacional S.A.B. de C.V. (Pharmaceuticals)	748,917		2,487
*Grupo Comercial Chedraui S.A. de C.V. (Food & staples retailing)	1,163,002		3,040
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	4,028,428		9,563
Grupo Televisa S.A.—ADR (Media)	371,363		6,465
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	12,396,300		27,461
			82,498
Panama—0.5%
Copa Holdings S.A. Class “A” (Airlines)†	102,809		4,546
Peru—1.6%
Credicorp, Ltd. (Commercial banks)†	177,258		16,111
Emerging Europe, Mid-East, Africa—14.0%
Egypt—0.6%
Commercial International Bank Egypt S.A.E. (Commercial banks)	406,718		4,761
Egyptian Financial Group-Hermes Holding (Capital markets)	282,784		1,427
			6,188
Qatar—1.4%
Qatar National Bank S.A.Q. (Commercial banks)	386,845		14,219
Russia—1.8%
Magnit OAO (Food & staples retailing)†	120,984		8,048
*X5 Retail Group N.V.—GDR (Food & staples retailing)	304,600		10,222
			18,270
South Africa—6.3%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)	516,628		5,102
Clicks Group, Ltd. (Multiline retail)	904,081		3,977
Mr Price Group, Ltd. (Specialty retail)	538,924		3,130
Naspers, Ltd. (Media)	227,587		7,664
Shoprite Holdings, Ltd. (Food & staples retailing)	955,130		10,269
Standard Bank Group, Ltd. (Commercial banks)	1,758,112		23,314
Truworths International, Ltd. (Specialty retail)	1,095,500		7,625
Wilson Bayly Holmes-Ovcon, Ltd. (Construction & engineering)	169,068		2,407
			63,488
Turkey—3.4%
Asya Katilim Bankasi A.S. (Commercial banks)	2,012,230		4,594

See accompanying Notes to Financial Statements.

24     Semi-Annual Report June 30, 2010

Emerging Markets Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—14.0%—(continued)
Turkey—(continued)
BIM Birlesik Magazalar A.S. (Food & staples retailing)		240,426	$	6,664
Turkiye Garanti Bankasi A.S. (Commercial banks)		5,611,846		23,354
				34,612
United Arab Emirates—0.5%
First Gulf Bank PJSC (Commercial banks)		1,173,086		4,745
Total Common Stocks—88.9% (cost $746,081)				899,974
Preferred Stocks
Brazil—4.6%
Itau Unibanco Holding S.A. (Commercial banks)		955,854		17,211
Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		1,764,180		26,252
Randon Participacoes S.A. (Machinery)		662,300		3,776
				47,239
Total Preferred Stocks—4.6% (cost $48,102)				47,239
Investment in Warrants
Thailand—0.0%
*Minor International PCL 2013, $13.00 (Hotels, restaurants & leisure)		575,650		43
Total Warrants—0.0% (cost $0)				43
Convertible Bond
Brazil—0.1%
Lupatech S.A., 6.500%, due 4/15/18 (Machinery)**§	$	1,602		910
Total Convertible Bond—0.1% (cost $831)				910
Investment in Affiliate
William Blair Ready Reserves Fund		66,217		66
Total Investment in Affiliate—0.0% (cost $66)				66
Short-Term Investment
American Express Credit Corporation Demand Note, VRN, 0.191%, due 7/1/10	$	2,000		2,000
Total Short-Term Investment—0.2% (cost $2,000)				2,000

Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.000% dated 6/30/10, due 7/1/10, repurchase price $44,125, collateralized by FFCB, 1.625%, due 3/7/13	$	44,125	$	44,125
Total Repurchase Agreement—4.4% (cost $44,125)				44,125
Total Investments—98.2% (cost $841,205)				994,357
Cash and other assets, less liabilities—1.8%				18,124
Net Assets—100.0%			$	1,012,481

ADR = American Depository Receipt

GDR = Global Depository Receipt

VRN = Variable Rate Note

*Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.09% of the Fund’s net assets at June 30, 2010.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.09% of the net assets at June 30, 2010.

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	25.2%
Consumer Discretionary	18.6%
Consumer Staples	15.9%
Energy	10.3%
Information Technology	8.8%
Industrials	8.6%
Materials	5.9%
Health Care	3.7%
Telecommunication Services	3.0%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	17.5%
Brazilian Real	16.0%
Indian Rupee	14.2%
U.S. Dollar	12.2%
Mexican Peso	8.0%
South Korean Won	7.2%
South African Rand	6.7%
Indonesian Rupiah	4.2%
Turkish Lira	3.7%
New Taiwan Dollar	2.9%
Qatari Rial	1.5%
Malaysian Ringgit	1.4%
Chilean Peso	1.1%
All Other Currencies	3.4%
Total	100.0%

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     25

Todd M. McClone

Jeffrey A. Urbina

EMERGING LEADERS GROWTH FUND

The Emerging Leaders Growth Fund seeks long-term capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 2 for the Global Markets Overview.

The Emerging Leaders Growth Fund posted a 2.02% decrease (Institutional Class) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the MSCI Emerging Markets Large Cap Index (net) declined 6.11%.

Year to date performance was augmented by the Fund’s significant weighting in Consumer Discretionary and Staples stocks at the expense of Materials and Information Technology (IT). Stock selection was also a key determinant of outperformance during the first half of 2010 across regions and sectors. The Fund’s Staples holdings were up just over 13%, significantly outpacing the Index, due primarily to strong performance in the Fund’s Emerging Asian consumer products and grocery holdings, coupled with strong Emerging Europe, Middle East, and Africa (EMEA) grocery/discount performance. Industrials stock selection was also particularly strong, with infrastructure related holdings driving results. Regionally, the Fund benefited from good performance across most sectors within Emerging Asia, as well as the overweighting in Consumer Discretionary and Staples at the expense of Asian IT and Materials stocks. EMEA value added was largely within the Consumer Staples sector, while Emerging Latin America performance benefited from the underweighting and stock performance within Energy, coupled with strong Financials stock selection.

As of June 30, the Fund maintained its significant exposure in Consumer Discretionary and Staples stocks, with 28.0% in Consumer Staples and another 14.8% in Consumer Discretionary, compared to the 5.94% and 4.36% Index weightings, respectively. Consumer Staples exposure increased by nearly 10% since year end, particularly in Emerging Asia and Emerging Latin America, while Consumer Discretionary decreased by nearly 5%. The Fund maintained its marginal overweighting of Financials at 28.2% of the Fund, with higher weightings in EMEA and Emerging Latin America offset by an underweighting in Asian Financials. The Fund was most significantly underweighted in Energy stocks, which represented 8.0% of the Fund, compared with nearly 16.0% in the Index, and in IT and Materials, which were also significantly underweighted. IT decreased by approximately 9% during the six month period, while Materials decreased by approximately 8%, as we sold holdings in these sectors due to deteriorating short-intermediate term earnings growth in favor of Consumer Staples holdings and, to some extent, cash equivalents.

26     Semi-Annual Report June 30, 2010

Emerging Leaders Growth Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year To Date		1 Year		Since Inception(a)
Institutional Class	(2.02	)%	28.73	%	(7.42	)%
MSCI Emerging Markets Large Cap (net)	(6.55	)	21.93		(6.11	)

(a) For the period March 26, 2008 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. International investing includes special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Morgan Stanley Capital International (MSCI) Emerging Markets Large Cap Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure market performance of large capitalization on stocks in emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all stocks in the Fund performed the same, nor is there any guarantee that these stocks will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total long-term securities.

June 30, 2010 William Blair Funds     27

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares	Value
Common Stocks—Emerging Asia—55.8%
China—19.7%
*Baidu, Inc.—ADR (Internet software & services)	12,159	$	828
Belle International Holdings, Ltd. (Specialty retail)	865,000		1,227
China Dongxiang Group Co. (Textiles, apparel & luxury goods)	1,304,000		869
China Life Insurance Co., Ltd. (Insurance)	270,000		1,181
China Oilfield Services, Ltd. (Energy equipment & services)	638,000		742
China Yurun Food Group, Ltd. (Food products)	280,000		880
CNOOC, Ltd. (Oil, gas & consumable fuels)	1,463,000		2,487
*Ctrip.com International, Ltd.—ADR (Hotels, restaurants & leisure)	17,354		652
Dongfeng Motor Group Co., Ltd. (Automobiles)	536,000		622
Golden Eagle Retail Group, Ltd. (Multiline retail)	470,000		981
Hengan International Group Co., Ltd. (Personal products)	116,000		939
Industrial and Commercial Bank of China (Commercial banks)	3,181,000		2,312
Want Want China Holdings, Ltd. (Food products)	1,410,000		1,183
			14,903
India—17.1%
Axis Bank, Ltd. (Commercial banks)	40,528		1,075
Bharat Heavy Electricals, Ltd. (Electrical equipment)	18,157		957
*Cairn India, Ltd. (Oil, gas & consumable fuels)	153,377		993
Dabur India, Ltd. (Personal products)	249,748		1,126
HDFC Bank, Ltd. (Commercial banks)	35,862		1,473
Housing Development Finance Corporation (Thrifts & mortgage finance)	8,191		516
Infosys Technologies, Ltd. (IT services)	22,404		1,337
ITC, Ltd. (Tobacco)	140,246		915
Jindal Steel & Power, Ltd. (Metals & mining)	85,364		1,140
Larsen & Toubro, Ltd. (Construction & engineering)	39,463		1,526
Nestle India, Ltd. (Food products)	14,634		908
Tata Motors, Ltd. (Machinery)	58,945		976
			12,942
Indonesia—7.1%
PT Astra International Tbk (Automobiles)	281,000		1,485
PT Bank Rakyat Indonesia (Commercial banks)	1,326,000		1,346
PT Unilever Indonesia Tbk (Household products)	667,000		1,244
PT United Tractors Tbk (Machinery)	644,000		1,320
			5,395
Malaysia—2.7%
CIMB Group Holdings Bhd (Commercial banks)	957,500		2,062
South Korea—6.4%
Hyundai Mobis (Auto components)	7,579		1,271
Hyundai Motor Co. (Automobiles)	13,180		1,542

Issuer	Shares	Value
Common Stocks—Emerging Asia—55.8%—(continued)
South Korea—(continued)
LG Household & Health Care, Ltd. (Household products)	4,198	$	1,192
Samsung Electronics Co., Ltd. (Semiconductors & semiconductor equipment)	1,280		803
			4,808
Taiwan—1.0%
*Hon Hai Precision Industry Co., Ltd. (Electronic equipment, instruments & components)	222,000		778
Thailand—1.8%
CP ALL PCL (Food & staples retailing)	1,504,200		1,335
Emerging Latin America—21.2%
Brazil—8.4%
Cia de Bebidas das Americas—ADR (Beverages)	14,721		1,487
Cyrela Brazil Realty S.A. (Household durables)	14,500		157
*Hypermarcas S.A. (Personal products)	123,100		1,581
Natura Cosmeticos S.A. (Personal products)	45,800		1,015
*OGX Petroleo e Gas Participacoes S.A. (Oil, gas & consumable fuels)	57,000		528
PDG Realty S.A. Empreendimentos e Participacoes (Household durables)	55,900		472
Vale S.A.—ADR (Metals & mining)	44,252		1,077
			6,317
Chile—3.9%
Banco Santander Chile—ADR (Commercial banks)	13,259		890
Lan Airlines S.A. (Airlines)	49,913		932
S.A.C.I. Falabella (Multiline retail)	172,523		1,123
			2,945
Colombia—1.2%
*Pacific Rubiales Energy Corporation (Oil, gas & consumable fuels)	40,415		906
Mexico—6.1%
America Movil S.A.B. de C.V.—ADR (Wireless telecommunication services)	31,637		1,503
Grupo Financiero Banorte S.A.B. de C.V. (Commercial banks)	229,400		869
Grupo Mexico S.A.B. de C.V. Series “B” (Metals & mining)	317,626		754
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)	664,800		1,473
			4,599
Peru—1.6%
Credicorp, Ltd. (Commercial banks)†	13,436		1,221
Emerging Europe, Mid-East, Africa—13.7%
Egypt—0.9%
Commercial International Bank Egypt S.A.E. (Commercial banks)	55,505		650
Russia—4.0%
*Magnit OJSC—144A—GDR (Food & staples retailing)	53,628		751

See accompanying Notes to Financial Statements.

28     Semi-Annual Report June 30, 2010

Emerging Leaders Growth Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Shares or Principal Amount		Value
Common Stocks—Emerging Europe, Mid-East, Africa—13.7%—(continued)
Russia—(continued)
Sberbank of Russian Federation (Commercial banks)†		425,545	$	1,022
*X5 Retail Group N.V.—GDR (Food & staples retailing)		36,350		1,227
				3,000
South Africa—4.3%
*Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		86,313		852
Shoprite Holdings, Ltd. (Food & staples retailing)		117,179		1,260
Standard Bank Group, Ltd. (Commercial banks)		88,959		1,180
				3,292
Turkey—4.0%
BIM Birlesik Magazalar A.S. (Food & staples retailing)		43,371		1,202
Turkiye Garanti Bankasi A.S. (Commercial banks)		435,175		1,811
				3,013
United Arab Emirates—0.5%
First Gulf Bank PJSC (Commercial banks)		99,024		400
Total Common Stocks—90.7% (cost $59,694)				68,566
Preferred Stock
Brazil—2.4%
Itau Unibanco Holding S.A. (Commercial banks)		101,085	$	1,820
Total Preferred Stock—2.4% (cost $1,494)				1,820
Investment in Affiliate
William Blair Ready Reserves Fund		440,296		440
Total Investment in Affiliate—0.6% (cost $440)				440
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $2,709, collateralized by FHLB, 4.375% due 9/17/10	$	2,709		2,709
Total Repurchase Agreement—3.6% (cost $2,709)				2,709
Total Investments—97.3% (cost $64,337)				73,535
Cash and other assets, less liabilities—2.7%				2,074
Net assets—100.0%			$	75,609

ADR = American Depository Receipt

GDR = Global Depository Receipt

* Non-income producing securities

† = U.S. listed foreign security

For securities primarily traded on exchanges or markets that close before the close of regular trading on the New York Stock Exchange, the Fund may use an independent pricing service to fair value price the securities pursuant to Valuation Procedures approved by the Board of Trustees.

At June 30, 2010, the Fund’s Portfolio of Investments includes the following industry categories:

Financials	28.2%
Consumer Staples	28.0%
Consumer Discretionary	14.8%
Industrials	8.1%
Energy	8.0%
Information Technology	5.3%
Materials	4.2%
Telecommunication Services	2.2%
Health Care	1.2%
Total	100.0%

At June 30, 2010, the Fund’s Portfolio of Investments includes the following currency categories:

Hong Kong Dollar	19.1%
Indian Rupee	18.4%
U.S. Dollar	15.1%
Brazilian Real	7.9%
Indonesian Rupiah	7.7%
South Korean Won	6.8%
South African Rand	4.7%
Mexican Peso	4.4%
Turkish Lira	4.3%
Malaysian Ringgit	2.9%
Chilean Peso	2.9%
Thai Baht	1.9%
Canadian Dollar	1.3%
New Taiwan Dollar	1.1%
All Other Currencies	1.5%
Total	100.0%

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     29

Fixed-Income Market Overview

Summary

The first half of 2010 was a tale of two quarters for the fixed-income markets.

The first quarter of 2010 reflected investor optimism about economic recovery and growth. Prices of fixed-income securities began to reflect expectations for a healthy rebound in the U.S. economy.

The second quarter was a much more challenging environment. Weaker economic data, stubbornly high unemployment and nervousness about government debt levels in the U.S. and in Europe began to undermine investor confidence. To add to these worries was news on April 16^th that the Securities and Exchange Commission (SEC) had filed a civil lawsuit accusing the Wall Street firm Goldman Sachs of securities fraud. All these factors caused investors to turn more bearish towards all “risk” assets.

There were two Federal Market Open Market Committee meetings (FOMC) that were held during the second quarter and both confirmed that the Federal Reserve Board had decided to keep short-term interest rates near zero for “an extended period.” The Fed cited impediments to economic growth, including the effect of new financial problems abroad. In its statement following its most recent meeting on June 23, the Fed said, “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

It is worth noting that among the Federal Reserve Board’s arsenal of tools for stimulating growth in the economy is to purchase higher-coupon mortgage-backed securities. The demand created by the Fed’s purchases, in turn, prompts loan originators to lower interest rates, and has driven 30-year mortgages rates to low levels that are unprecedented.

Longer-term interest rates trended lower during the second quarter, with the 10-Year U.S. Treasury Note, which finished at 3.83% at the end of the first quarter, to end the second quarter at 2.93%.

Outlook

In hindsight, during the first quarter investors were probably too optimistic about an economy which was supported by government stimulus. Conversely, this sentiment swung to extreme pessimism during the second quarter. We believe the reality is that the economy is self-sustaining, but serious headwinds remain.

We believe that U.S. GDP growth will likely remain subpar due to structural unemployment in the U.S. economy. We believe this current environment is one that should be favorable for Corporate bonds, and we intend to maintain an overweight position in that sector, as well as higher-coupon Agency Mortgage-backed securities.

It is important to note that the fundamentals for U.S. corporations—for example, corporate balance sheets—remain strong. We believe demand for Corporate bonds will remain robust, and we think Corporate bonds will perform well, based on the prospects for further stabilization in the economy.

We anticipate continued strong fixed-income demand as insurance companies, pension funds, and other investors still carry high cash balances and are looking to invest funds at yields higher than the near zero cash and money market yields offered.

30     Semi-Annual Report June 30, 2010

We remain encouraged that the fixed-income markets have been able to absorb major potential policy changes in the health care and financial services industries with relatively minor changes in risk premiums.

Interest rates are at historic lows. We don’t anticipate any major changes in Federal Reserve policy or interest rates until 2011.

As a firmer root structure emerges to the nascent economic recovery, there is the possibility that upward pressure might be placed on interest rates. While we do not expect this to materially have an impact on the prices of fixed income securities, we nonetheless believe the current structure of the portfolio will help provide protection.

June 30, 2010 William Blair Funds     31

Christopher T. Vincent

Paul J. Sularz

BOND FUND

The Bond Fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index by maximizing total return through a combination of income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 30 for the Fixed Income Market Overview.

How did the Fund preform during the past six months? How did the Fund’s performance compare to its benchmark?

The Bond Fund posted a 5.37% increase on a total return basis (Institutional Class) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Barclays Capital U.S. Aggregate Bond Index, gained 5.33%.

Which sectors enhanced the Fund’s return? What were among the best performing investments for the Fund?

The Fund’s significant overweight in investment grade Corporate securities and its roughly 10% exposure to high yield securities boosted performance during the first quarter. However, these sectors struggled during the second quarter with the paradigm shift of investor sentiment from expectations of economic growth to fears of a double-dip recession.

The Fund nearly doubled its holdings in below investment grade securities (those rated below BBB). Investment grade securities, at almost 50% of the Fund’s portfolio, were double the weight of the Fund’s benchmark Barclays Capital U.S. Aggregate Bond Index.

The Fund’s underweight in Commercial Mortgage-backed securities (which comprise 1% of the Fund and approximately 3% of the benchmark Index), was a slight drag on performance, when compared to the benchmark.

We made a conscious decision to invest in Corporate REITs, which are actively managed rather than the static pools of mortgages typically held in Commercial Mortgage-backed securities. We believe this is more prudent in the event of continued weakness in commercial real estate.

We also avoided owning U.S. Agency debentures, but instead emphasized U.S. Agency Mortgage-backed securities via higher coupon pools that are “seasoned,” as well as low loan balance pools. We believe the above-market coupons in these pools will experience slower amortization and should protect the Fund in a rising rate environment, while still providing an attractive level of current income.

We continue to position the Fund with a significant underweight to U.S. Treasuries, and maintain a very modest allocation to U.S. Treasury securities via TIPs (Treasury Inflation Protected Securities).

While we do not believe inflation is an immediate concern, we think our Fund’s positioning overall is defensive and appropriate in the event that interest rates rise sharply.

32     Semi-Annual Report June 30, 2010

Bond Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year To Date		1 Year		3 Year		Since Inception(a)
Institutional Class	5.37	%	11.70	%	7.85	%	7.04	%
Barclays Capital U.S. Aggregate Bond Index	5.33		9.50		7.55		6.77

(a) For the period May 1, 2007 (Commencement of Operations) to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower.

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Barclays Capital U.S. Aggregate Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total investments.

June 30, 2010 William Blair Funds     33

Bond Fund

Portfolio of Investments, June 30, 2010 (all amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—46.8%
U.S. Treasury Inflation Indexed Notes/Bonds—7.9%
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29	$	7,956	$	10,677
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/13		593		628
U.S. Treasury Inflation Indexed Note, 2.375%, due 1/15/17		3,243		3,580
Total U.S. Treasury Inflation Indexed Notes/Bonds				14,885
Government National Mortgage Association (GNMA)—1.0%
GNR 2004-2 M5, 4.891%, due 7/16/34		125		136
GNR 2006-67 GB, 4.324%, due 9/16/34, VRN		1,540		1,666
Total GNMA Mortgage Obligations				1,802
Federal Home Loan Mortgage Corp. (FHLMC)—8.9%
#G90024, 7.000%, due 1/20/13		49		52
#G30093, 7.000%, due 12/1/17		41		45
#G30255, 7.000%, due 7/1/21		88		97
#G12792, 4.500%, due 12/1/21		563		600
#D95897, 5.500%, due 3/1/23		292		317
#G30372, 5.000%, due 9/1/27		676		718
#G01728, 7.500%, due 7/1/32		322		368
#C01385, 6.500%, due 8/1/32		439		488
#G02141, 6.000%, due 3/1/36		2,053		2,275
#A62179, 6.000%, due 6/1/37		1,083		1,198
#A63539, 6.000%, due 7/1/37		1,401		1,542
#G03170, 6.500%, due 8/1/37		2,195		2,413
#A66843, 6.500%, due 10/1/37		1,153		1,281
#A78138, 5.500%, due 6/1/38		1,572		1,711
#A81799, 6.500%, due 9/1/38		3,309		3,682
Total FHLMC Mortgage Obligations				16,787
Federal National Mortgage Association (FNMA)—29.0%
#535559, 7.500%, due 9/1/12		126		128
#598453, 7.000%, due 6/1/15		1		1
#689612, 5.000%, due 5/1/18		479		517
#695910, 5.000%, due 5/1/18		845		915
#747903, 4.500%, due 6/1/19		438		468
#745735, 5.000%, due 3/1/21		1,036		1,112
#253847, 6.000%, due 5/1/21		290		319
#900725, 6.000%, due 8/1/21		247		271
#545437, 7.000%, due 2/1/32		227		257
#545759, 6.500%, due 7/1/32		2,495		2,785
#254548, 5.500%, due 12/1/32		1,073		1,158
#684601, 6.000%, due 3/1/33		2,307		2,591
#190340, 5.000%, due 9/1/33		2,216		2,357
#254868, 5.000%, due 9/1/33		1,083		1,152
#555800, 5.500%, due 10/1/33		485		523
#725027, 5.000%, due 11/1/33		874		930
#555880, 5.500%, due 11/1/33		568		613
#555946, 5.500%, due 11/1/33		899		980
#756153, 5.500%, due 11/1/33		2,474		2,668
#725231, 5.000%, due 2/1/34		893		950
#725205, 5.000%, due 3/1/34		1,902		2,023

Issuer	NRSRO Rating	Principal Amount		Value
Federal National Mortgage Association (FNMA)—(continued)
#725220, 5.000%, due 3/1/34		$	831	$	884
#725232, 5.000%, due 3/1/34			2,692		2,863
#725238, 5.000%, due 3/1/34			1,512		1,608
#725424, 5.500%, due 4/1/34			610		657
#725611, 5.500%, due 6/1/34			543		586
#786546, 6.000%, due 7/1/34			1,031		1,145
#787816, 6.000%, due 7/1/34			979		1,076
#190353, 5.000%, due 8/1/34			644		684
#357883, 5.000%, due 5/1/35			1,320		1,404
#745092, 6.500%, due 7/1/35			677		756
#357944, 6.000%, due 9/1/35			126		139
#829306, 6.000%, due 9/1/35			356		395
#843487, 6.000%, due 10/1/35			302		333
#849191, 6.000%, due 1/1/36			195		216
#848782, 6.500%, due 1/1/36			876		970
#745349, 6.500%, due 2/1/36			1,229		1,353
#831540, 6.000%, due 6/1/36			251		273
#745802, 6.000%, due 7/1/36			719		792
#886220, 6.000%, due 7/1/36			1,225		1,346
#893318, 6.500%, due 8/1/36			287		317
#256859, 5.500%, due 8/1/37			1,119		1,196
#928561, 6.000%, due 8/1/37			883		969
#948689, 6.000%, due 8/1/37			2,570		2,799
#888967, 6.000%, due 12/1/37			1,986		2,173
#962058, 6.500%, due 3/1/38			3,411		3,815
#934006, 6.500%, due 9/1/38			1,812		2,008
#986856, 6.500%, due 9/1/38			1,198		1,319
Total FNMA Mortgage Obligations					54,794
Non-Agency Mortgage-Backed Obligations—1.6%
Countrywide Alternative Loan Trust, 2003-11T1, Tranche M, 4.750%, 7/25/18	CCC		252		178
Lehman Structured Securities Corp.—144A, 2004-2, Tranche M2, 2.759%, 2/28/33, VRN§	CC		162		21
First Horizon Asset Securities, Inc., 2004-AR4, Tranche 3A1, 4.653%, 8/25/34, VRN	AAA		680		711
Chase Mortgage Finance Corporation, 2006-A1, Tranche 2A3, 6.000%, 9/25/36, VRN	CCC		2,460		2,074
Total Non-Agency Mortgage-Backed Obligations					2,984
Consumer Asset-Backed Securities—4.1%
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13	A2		2,000		2,225
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14	Aaa		1,800		1,919
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14	Aaa		2,230		2,324
Centre Point Funding LLC—144A, 2010-1A, Tranche 1, 5.430%, 7/20/16	A2		954		985
First Plus Home Loan Trust, 1997-4, Tranche M1, 7.640%, 9/11/23**§	C		199		119

See accompanying Notes to Financial Statements.

34     Semi-Annual Report June 30, 2010

Bond Fund

Portfolio of Investments, June 30, 2010 (all amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Consumer Asset-Backed Securities—(continued)
Renaissance Home Equity Loan Trust, 2004-2, Tranche M5, 6.455%, 7/25/34	A2	$	463	$	111
Soundview Home Equity Loan Trust, 2005-B, Tranche M1, 6.135%, 5/25/35	AA+		40		40
Total Consumer Asset-Backed Securities					7,723
Corporate Obligations—46.0%
Morgan Stanley, 6.600%, due 4/1/12	A		545		578
Wells Fargo & Co., 4.375%, due 1/31/13	AA-		350		370
Weatherford International, Ltd., 5.150%, due 3/15/13	Baa1		1,425		1,493
John Deere Capital Corporation, 4.500%, due 4/3/13	A		700		754
Citigroup, Inc., 5.500%, due 4/11/13	A+		1,500		1,559
General Electric Capital Corporation, 4.800%, due 5/1/13	AA+		600		640
Kansas City Southern de Mexico S.A. de C.V., 7.625%, due 12/1/13	BB-		1,000		1,020
CME Group, Inc., 5.750%, due 2/15/14	AA		700		779
PACCAR, Inc., 6.875%, due 2/15/14	A+		800		927
America Movil S.A.B. de C.V., 5.500%, due 3/1/14	A2		700		763
Smith International, Inc., 8.625%, due 3/15/14	BBB+		970		1,152
General Electric Capital Corporation, 5.900%, due 5/13/14	AA+		225		248
Bank of America Corporation, 7.375%, due 5/15/14	A+		700		785
American Express Co., 7.250%, due 5/20/14	A+		500		568
Capital One Financial Corporation, 7.375%, due 5/23/14	A-		1,235		1,412
Hewlett-Packard Co., 4.750%, due 6/2/14	A+		800		886
Macquarie Group Ltd.—144A, 7.300%, due 8/1/14	A2		1,000		1,102
Petrohawk Energy Corporation, 10.500%, due 8/1/14	B		1,000		1,075
AT&T, Inc., 5.100%, due 9/15/14	A		1,250		1,387
D.R. Horton, Inc., 5.625%, due 9/15/14	BB		1,000		980
Corporation Nacional del Cobre de Chile—144A, 4.750%, due 10/15/14	A1		1,350		1,457
Boeing Capital Corporation, 3.250%, due 10/27/14	A+		1,400		1,458
Crown Castle International Corporation, 9.000%, due 1/15/15	B1		1,000		1,058
EI du Pont de Nemours & Co., 3.250%, due 1/15/15	A		500		522
Georgia-Pacific LLC—144A, 7.000%, due 1/15/15	BB+		1,000		1,010

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
The Kroger Co., 4.950%, due 1/15/15	BBB	$	1,175	$	1,266
Simon Property Group L.P., 4.200%, due 2/1/15	A-		1,500		1,541
DIRECTV Holdings LLC, 3.550%, due 3/15/15	Baa2		1,600		1,611
Yum! Brands, Inc., 4.250%, due 9/15/15	BBB-		350		371
Cisco Systems, Inc., 5.500%, due 2/22/16	A+		2,000		2,304
Omnicom Group, Inc., 5.900%, due 4/15/16	A-		750		853
Yum! Brands, Inc., 6.250%, due 4/15/16	BBB-		700		800
Owens-Brockway Glass Container, Inc., 7.375%, due 5/15/16	BB+		1,250		1,303
SABMiller plc—144A, 6.500%, due 7/1/16	BBB+		700		822
Petrobras International Finance Co., 6.125%, due 10/6/16	Baa1		1,350		1,433
EI du Pont de Nemours & Co., 5.250%, due 12/15/16	A		500		570
Comcast Corporation, 6.500%, due 1/15/17	BBB+		350		401
Corrections Corporation of America, 7.750%, due 6/1/17	BB		1,250		1,297
ERP Operating L.P., 5.750%, due 6/15/17	A-		1,100		1,185
JPMorgan Chase & Co., 6.125%, due 6/27/17	A1		600		656
BB&T Corporation, 4.900%, due 6/30/17	A2		665		686
American Express Co., 6.150%, due 8/28/17	A+		1,000		1,096
IBM Corporation, 5.700%, due 9/14/17	A+		1,250		1,453
Exelon Generation Co. LLC, 6.200%, due 10/1/17	A3		1,100		1,250
Toll Brothers Finance Corporation, 8.910%, due 10/15/17	BBB-		950		1,059
Triumph Group, Inc., 8.000%, due 11/15/17	B+		1,000		955
Union Pacific Corporation, 5.750%, due 11/15/17	BBB		800		903
Wells Fargo & Co., 5.625%, due 12/11/17	AA-		1,000		1,093
Kohl’s Corporation, 6.250%, due 12/15/17	BBB+		350		408
Morgan Stanley, 6.625%, due 4/1/18	A		950		996
General Electric Capital Corporation, 5.625%, due 5/1/18	AA+		350		372
Philip Morris International, Inc., 5.650%, due 5/16/18	A		1,000		1,094
Time Warner Cable, Inc., 6.750%, due 7/1/18	BBB		1,000		1,148
Merrill Lynch & Co., Inc., 6.875%, due 11/15/18	A+		1,075		1,143
Anheuser-Busch InBev Worldwide, Inc.—144A, 7.750%, due 1/15/19	BBB+		700		850

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     35

Bond Fund

Portfolio of Investments, June 30, 2010 (all amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
FedEx Corporation, 8.000%, due 1/15/19	BBB	$	750	$	952
CSX Corporation, 7.375%, due 2/1/19	BBB-		800		980
Honeywell International, Inc., 5.000%, due 2/15/19	A		925		1,035
Pfizer, Inc., 6.200%, due 3/15/19	AA		1,250		1,486
BHP Billiton Finance USA, Ltd., 6.500%, due 4/1/19	A+		1,300		1,559
Owens Corning, 9.000%, due 6/15/19	BBB-		950		1,123
Jefferies Group, Inc., 8.500%, due 7/15/19	BBB		1,300		1,460
Discovery Communications LLC, 5.625%, due 8/15/19	Baa2		500		541
Roper Industries, Inc., 6.250%, due 9/1/19	BBB-		1,225		1,358
Boston Properties L.P., 5.875%, due 10/15/19	A-		1,500		1,605
Macquarie Group Ltd.—144A, 6.000%, due 1/14/20	A2		250		253
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20	Ba3		1,515		1,546
Jarden Corporation, 7.500%, due 1/15/20	B		1,000		978
Motiva Enterprises LLC—144A, 5.750%, due 1/15/20	A		1,500		1,650
Johnson Controls, Inc., 5.000%, due 3/30/20	BBB		1,625		1,708
United Technologies Corporation, 4.500%, due 4/15/20	A+		1,500		1,623
Iron Mountain, Inc., 8.000%, due 6/15/20	B+		1,250		1,269
HCA, Inc., 7.250%, due 9/15/20	BB		1,000		1,005
Ras Laffan Liquefied Natural Gas Co., Ltd. II—144A, 5.298%, due 9/30/20	Aa2		400		415
Southwest Airlines Co. 2007-1 Pass Through Trust, 6.150%, due 8/1/22	A		679		699

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury.

VRN = Variable Rate Note

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.07% of the net assets at June 30, 2010.

** = Fair valued pursuant to Valuation Procedures adopted by the Board of Trustees. This holding represents 0.06% of the Fund’s net assets at June 30, 2010.

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—(continued)
The Kroger Co., 8.000%, due 9/15/29	BBB	$	325	$	419
Conoco Funding Co., 7.250%, due 10/15/31	A1		400		496
Kohl’s Corporation, 6.000%, due 1/15/33	BBB+		1,000		1,069
Pacific Gas & Electric Co., 6.050%, due 3/1/34	A		750		837
Wisconsin Electric Power Co., 5.700%, due 12/1/36	A1		500		542
Comcast Corporation, 6.450%, due 3/15/37	BBB+		650		703
Yum! Brands, Inc., 6.875%, due 11/15/37	BBB-		600		689
JPMorgan Chase & Co., 6.400%, due 5/15/38	Aa3		900		1,042
COX Communications, Inc.—144A, 6.950%, due 6/1/38	Baa2		350		402
General Electric Capital Corporation, 6.875%, due 1/10/39	AA+		750		828
Burlington Northern Santa Fe LLC, 5.750%, due 5/1/40	A3		1,515		1,602
Total Corporate Obligations					86,776
Total Long-Term Investments—98.5% (cost $175,529)					185,751
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $2,878, collateralized by FHLB, 4.375%, due 9/17/10	AAA		2,878		2,878
Total Repurchase Agreement—1.5% (cost $2,878)					2,878
Total Investments—100.0% (cost $178,407)					188,629
Cash and other assets, less liabilities—0.0%					35
Net assets—100.0%				$	188,664

See accompanying Notes to Financial Statements.

36     Semi-Annual Report June 30, 2010

Christopher T. Vincent

Paul J. Sularz

LOW DURATION FUND

The Low Duration Fund seeks to maximize total return. Total return includes both income and capital appreciation.

AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Please see page 30 for the Fixed Income Market Overview.

The William Blair Low Duration Fund seeks to maximize total return by investing in a diversified portfolio of investment grade low duration debt securities.

The Low Duration Fund posted a 1.66% increase on a total return basis (Institutional Class) for the six months ended June 30, 2010. By comparison, the Fund’s benchmark, the Merrill Lynch 1-Year U.S. Treasury Note Index, gained 0.51%.

What were the most significant factors impacting Fund performance during the first half of 2010? What factors were behind the Fund’s performance versus the benchmark?

Assets in this new Fund continued to build since the Fund’s inception on December 1, 2009, with assets increasing to $132 million by June 30, 2010.

The Fund had a very positive six months, with the Fund outperforming its Merrill Lynch 1-Year U.S. Treasury Note Index benchmark. We believe the Fund has been able to accomplish this objective without sacrificing credit quality. The Fund does not own below-investment grade securities, as mandated by the Prospectus.

We are especially pleased with the way the Fund performed during the first quarter of the year. Short-term interest rate volatility is the worst enemy of a fixed income fund, and the Fund experienced a bout of rising rates at the end of March—which was preceded by a similar episode during the last week of December.

The Fund invested capital as the Fund’s asset flows grew steadily from its inception. We continued to invest in new Consumer Asset-backed securities (such as “top tier” banks and auto receivables) as well as seasoned U.S. Agency Mortgage-backed securities and Corporate Bonds.

We consider the Consumer Asset-backed securities that the Fund invests in to be highly liquid. Nearly a third of these investments are floating rate instruments that reset on monthly basis, which helps offset the negative impact of rising short-term rates on the Fund’s portfolio. The benefits of this strategy are especially evident in a rising rate environment such as the one the Fund experienced in December and March.

Similarly, the Fund’s U.S. Government-guaranteed short duration Mortgage-backed Fannie Mae and Freddie Mac securities pay monthly principal and interest, which we then are able to reinvest.

The Fund kept its exposure to cash and cash equivalents extremely low, given the very low rates currently available from money market instruments.

Finally it is worth noting that the Fund paid a total of $0.09157 per share (Class N Shares) in income distributions to shareholders of record during the first half of 2010.

June 30, 2010 William Blair Funds     37

Low Duration Fund

Performance Highlights (unaudited)

Average Annual Total Return at 6/30/2010

	Year To Date		Since Inception(a)
Institutional Class	1.66	%	1.07	%
Merrill Lynch 1-Year U.S. Treasury Note Index	0.51		0.36

(a) For the period December 1, 2009 (Commencement of Operations to June 30, 2010.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual total returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272, or visit our Web site at www.williamblairfunds.com. From time to time, the investment advisor may waive fees or reimburse expenses for the Fund. Without these waivers, performance would be lower. Class N shares are available to the general public without a sales load. Class I shares are available to certain institutional investors and advisory clients of William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1).

The performance highlights and graph presented above do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Merrill Lynch 1-Year U.S. Treasury Note Index is comprised of a single U.S. Treasury Note issue purchased at the beginning of the month and held for a full month. Each month the index is rebalanced and the issue selected is the outstanding U.S. Treasury Note that matures closest to, but not beyond one year from the rebalancing date.

This report identifies the Fund’s investments on June 30, 2010. These holdings are subject to change. Not all investments in the Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not necessarily come to pass.

Sector Diversification (unaudited)

The sector diversification shown is based on the total investments.

38     Semi-Annual Report June 30, 2010

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—44.8%
Government National Mortgage Association (GNMA)—0.3%
#003438, 4.500%, due 9/20/18	$	363	$	387
Federal Home Loan Mortgage Corp. (FHLMC)—17.2%
#M80856, 4.500%, due 10/1/10		104		105
#M80898, 4.500%, due 2/1/11		191		196
#M80903, 4.000%, due 3/1/11		369		374
#M80953, 4.000%, due 12/1/11		342		350
#E70847, 5.500%, due 6/1/13		3		4
#G11320, 6.000%, due 4/1/14		761		826
#G11211, 6.000%, due 7/1/16		419		455
#G11187, 5.500%, due 9/1/16		566		614
#E86134, 5.000%, due 11/1/16		308		331
#G11337, 5.500%, due 11/1/17		2,103		2,283
#E96536, 5.000%, due 3/1/18		614		660
#E95355, 5.000%, due 4/1/18		695		747
#E01377, 4.500%, due 5/1/18		707		749
#G11618, 4.500%, due 5/1/18		3,337		3,560
#E01488, 5.000%, due 10/1/18		725		780
#E99895, 5.000%, due 10/1/18		1,483		1,594
#G12093, 4.500%, due 12/1/18		827		882
#B11386, 5.000%, due 12/1/18		324		348
#G11506, 5.500%, due 12/1/18		541		587
#G11567, 5.500%, due 12/1/18		592		643
#E01545, 5.000%, due 1/1/19		410		440
#G11766, 5.000%, due 3/1/19		295		317
#G18001, 4.500%, due 7/1/19		381		406
#G11596, 5.500%, due 8/1/19		300		326
#B16291, 5.000%, due 9/1/19		1,867		2,006
#G18045, 5.000%, due 3/1/20		329		353
#G11892, 4.000%, due 4/1/20		323		340
#G18048, 5.000%, due 4/1/20		234		251
#J08152, 5.000%, due 5/1/20		258		277
#G12827, 5.500%, due 2/1/21		765		830
#G12394, 5.000%, due 5/1/21		433		465
#G12113, 5.500%, due 5/1/21		496		538
#J06402, 5.500%, due 11/1/22		119		128
Total FHLMC Mortgage Obligations				22,765
Federal National Mortgage Association (FNMA)—27.3%
#254956, 4.000%, due 11/1/10		267		268
#255325, 4.500%, due 7/1/11		1,303		1,337
#545898, 5.500%, due 9/1/17		961		1,041
#545899, 5.500%, due 9/1/17		1,102		1,195
#735647, 5.000%, due 12/1/17		2,952		3,175
#254591, 5.500%, due 1/1/18		641		695
#681310, 4.500%, due 2/1/18		668		714
#683100, 5.500%, due 2/1/18		781		851
#675717, 5.000%, due 3/1/18		710		764
#656564, 5.000%, due 4/1/18		3,198		3,440
#555456, 5.500%, due 4/1/18		3,372		3,655
#929388, 4.500%, due 5/1/18		923		964
#704049, 5.500%, due 5/1/18		1,505		1,635
#555622, 4.500%, due 6/1/18		746		796
#656573, 5.000%, due 6/1/18		417		449
#709848, 5.000%, due 6/1/18		393		423
#713807, 4.500%, due 7/1/18		355		379

Issuer	NRSRO Rating	Principal Amount		Value
Federal National Mortgage Association (FNMA)—(continued)
#711991, 5.000%, due 8/1/18		$	370	$	398
#740444, 4.500%, due 9/1/18			567		606
#743183, 5.000%, due 10/1/18			154		166
#749596, 5.000%, due 11/1/18			512		550
#255233, 4.000%, due 5/1/19			813		860
#725445, 4.500%, due 5/1/19			915		976
#995234, 5.000%, due 7/1/19			3,335		3,587
#785259, 5.000%, due 8/1/19			630		677
#725953, 5.000%, due 10/1/19			182		196
#745240, 4.500%, due 12/1/19			875		935
#735401, 5.500%, due 3/1/20			547		593
#735646, 4.500%, due 7/1/20			1,098		1,172
#836016, 4.500%, due 9/1/20			1,799		1,916
#881284, 4.500%, due 12/1/21			1,652		1,758
Total FNMA Mortgage Obligations					36,171
Consumer Asset-Backed Securities—41.6%
BMW Vehicle Lease Trust, 2009-1, Tranche A2, 2.040%, 4/15/11	AAA		483		484
Nissan Auto Lease Trust, 2009-A, Tranche A2, 2.010%, 4/15/11	AAA		558		559
Nissan Auto Receivables Owner Trust, 2009-1, Tranche A2, 3.920%, 4/15/11	AAA		80		81
Mercedes-Benz Auto Receivables Trust, 2010-1, Tranche A1, 0.309%, 5/13/11	A-1+		763		762
Volkswagen Auto Lease Trust, 2009-A, Tranche A2, 2.870%, 7/15/11	AAA		364		365
Honda Auto Receivables Owner Trust, 2009-2, Tranche A2, 2.220%, 8/15/11	AAA		61		61
Nissan Auto Lease Trust, 2009-B, Tranche A2, 1.220%, 9/15/11	AAA		1,568		1,568
Ford Credit Auto Owner Trust, 2009-D, Tranche A2, 1.210%, 1/15/12	AAA		1,835		1,837
Honda Auto Receivables Owner Trust, 2008-1, Tranche A3, 4.470%, 1/18/12	AAA		771		779
Honda Auto Receivables Owner Trust, 2010-1, Tranche A2, 0.620%, 2/21/12	AAA		2,375		2,373
USAA Auto Owner Trust, 2009-2, Tranche A2, 0.740%, 3/15/12	AAA		165		165
Ally Auto Receivables Trust, 2010-1, Tranche A2, 0.750%, 4/15/12	AAA		1,000		999
Volkswagen Auto Lease Trust, 2009-A, Tranche A3, 3.410%, 4/16/12	AAA		1,550		1,582
CNH Equipment Trust, 2008-A, Tranche A3, 4.120%, 5/15/12	AAA		555		559
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A2, 2.520%, 5/15/12	AAA		45		45
Volkswagen Auto Loan Enhanced Trust, 2010-1, Tranche A2, 0.660%, 5/21/12	AAA		2,000		1,999

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     39

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Consumer Asset-Backed Securities—(continued)
USAA Auto Owner Trust, 2010-1, Tranche A2, 0.630%, 6/15/12	AAA	$	1,350	$	1,349
Ford Credit Auto Owner Trust, 2007-B, Tranche A4A, 5.240%, 7/15/12	AAA		530		551
Chase Issuance Trust, 2009-A6, Tranche A6, 1.200%, 7/16/12, VRN	AAA		1,300		1,300
CNH Equipment Trust, 2008-B, Tranche A3A, 4.780%, 7/16/12	AAA		442		447
CNH Equipment Trust, 2009-C, Tranche A2, 0.950%, 8/15/12	AAA		1,000		1,001
CNH Equipment Trust, 2010-A, Tranche A2, 0.810%, 8/15/12	AAA		1,000		1,000
Chase Issuance Trust, 2007-A15, Tranche A, 4.960%, 9/17/12	AAA		198		200
BMW Vehicle Owner Trust, 2010-A, Tranche A2, 0.680%, 9/25/12	AAA		1,500		1,499
Capital Auto Receivables Asset Trust, 2008-2, Tranche A3B, 1.800%, 10/15/12, VRN	AAA		840		847
Citibank Credit Card Issuance Trust, 2005-A7, Tranche A7, 4.750%, 10/22/12	AAA		200		202
MBNA Credit Card Master Note Trust, 2005-A6, Tranche A6, 4.500%, 1/15/13	AAA		150		151
CarMax Auto Owner Trust, 2009-1, Tranche A3, 4.120%, 3/15/13	AAA		421		432
Bank of America Credit Card Trust, 2008-A1, Tranche A1, 0.930%, 4/15/13, VRN	AAA		320		320
Ford Credit Auto Owner Trust, 2009-A, Tranche A3A, 3.960%, 5/15/13	AAA		600		615
Bank of America Credit Card Trust, 2007-A2, Tranche A2, 0.370%, 6/17/13, VRN	AAA		1,283		1,282
USAA Auto Owner Trust, 2009-1, Tranche A3, 3.020%, 6/17/13	AAA		1,500		1,524
American Express Issuance Trust, 2007-2, Tranche A, 0.600%, 7/15/13, VRN	AAA		373		373
Capital One Multi-Asset Execution Trust, 2003-A5, Tranche A5, 0.640%, 7/15/13, VRN	AAA		1,000		1,000
American Express Credit Account Master Trust, 2008-1, Tranche A, 0.800%, 8/15/13, VRN	AAA		1,200		1,202
American Express Credit Account Master Trust—144A, 2006-B, Tranche A, 0.390%, 8/15/13, VRN	AAA		1,070		1,070
American Express Issuance Trust, 2005-2, Tranche A, 0.420%, 8/15/13, VRN	AAA		730		727
Discover Card Master Trust I, 2006-1, Tranche A2, 0.400%, 8/16/13, VRN	AAA		354		353

Issuer	NRSRO Rating	Principal Amount		Value
Consumer Asset-Backed Securities—(continued)
Ford Credit Auto Owner Trust, 2009-D, Tranche A3, 2.170%, 10/15/13	AAA	$	1,160	$	1,176
John Deere Owner Trust, 2009-A, Tranche A3, 2.590%, 10/15/13	AAA		1,728		1,749
John Deere Owner Trust, 2009-B, Tranche A3, 1.570%, 10/15/13	AAA		865		866
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-1A, Tranche A, 9.310%, 10/20/13	A2		2,000		2,225
Harley-Davidson Motorcycle Trust, 2009-1, Tranche A3, 3.190%, 11/15/13	AAA		2,007		2,049
Avis Budget Rental Car Funding AESOP LLC—144A, 2009-2A, Tranche A, 5.680%, 2/20/14	Aaa		1,000		1,066
Capital One Multi-Asset Execution Trust, 2006-A7, Tranche A7, 0.380%, 3/17/14, VRN	AAA		1,000		998
Capital One Multi-Asset Execution Trust, 2008-A6, Tranche A6, 1.450%, 3/17/14, VRN	AAA		1,610		1,622
Hertz Vehicle Financing LLC—144A, 2009-2A, Tranche A1, 4.260%, 3/25/14	Aaa		1,765		1,839
Chase Issuance Trust, 2007-A9, Tranche A, 0.380%, 6/16/14, VRN	AAA		2,000		1,990
Nissan Auto Receivables Owner Trust, 2008-A, Tranche A4, 4.280%, 6/16/14	AAA		150		155
CNH Equipment Trust, 2010-A, Tranche A3, 1.540%, 7/15/14	AAA		550		553
Citibank Credit Card Issuance Trust, 2007-A7, Tranche A7, 0.698%, 8/20/14, VRN	AAA		200		200
American Express Credit Account Master Trust, 2007-5, Tranche A, 0.380%, 12/15/14, VRN	AAA		1,000		995
Nissan Master Owner Trust Receivables—144A, 2010-AA, Tranche A, 1.500%, 1/15/15, VRN	AAA		2,000		2,005
Capital One Multi-Asset Execution Trust, 2007-A4, Tranche A4, 0.380%, 3/16/15, VRN	AAA		620		616
Bank of America Credit Card Trust, 2010-A1, Tranche A1, 0.650%, 9/15/15, VRN	AAA		1,300		1,297
Chase Issuance Trust, 2008-A3, Tranche A, 1.450%, 3/15/16, VRN	AAA		2,000		2,054
Total Consumer Asset-Backed Securities					55,118
Corporate Obligations—11.7%
Teva Pharmaceutical Finance III LLC, 1.500%, due 6/15/12	A-		1,000		1,004
General Electric Capital Corporation, 3.500%, due 8/13/12	AA+		1,000		1,032

See accompanying Notes to Financial Statements.

40     Semi-Annual Report June 30, 2010

Low Duration Fund

Portfolio of Investments, June 30, 2010 (all dollar amounts in thousands) (unaudited)

Issuer	NRSRO Rating	Principal Amount		Value
Corporate Obligations—11.7%
Johnson & Johnson, 5.150%, due 8/15/12	AAA	$	1,900	$	2,071
Bank of America Corporation, 5.375%, due 9/11/12	A+		1,000		1,044
ConocoPhillips, 4.750%, due 10/15/12	A1		1,000		1,074
Citigroup, Inc., 5.300%, due 10/17/12	A+		1,000		1,036
Wells Fargo & Co., 5.250%, due 10/23/12	AA-		1,000		1,070
Morgan Stanley, 5.250%, due 11/2/12	A		1,000		1,040
The Walt Disney Co., 4.700%, due 12/1/12	A		1,500		1,627
Hewlett-Packard Co., 4.500%, due 3/1/13	A+		1,000		1,079
American Honda Finance Corp.—144A, 2.375%, due 3/18/13	A+		1,000		1,014
Novartis Capital Corporation, 1.900%, due 4/24/13	Aa2		1,235		1,254
American Express Co., 4.875%, due 7/15/13	A+		1,000		1,068
Total Corporate Obligations					15,413
Total Long-Term Investments—98.1% (cost $129,421)					129,854

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by either Fitch Ratings, Moody’s Investors Service Inc., or Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. The obligations of certain U. S. Government-sponsored securities are neither issued nor guaranteed by the U. S. Treasury.

VRN = Variable Rate Note

Issuer	NRSRO Rating	Principal Amount		Value
Repurchase Agreement
State Street Bank and Trust Company, 0.000% dated 6/30/10, due 7/1/10, repurchase price $10,438, collateralized by FHLB, 4.375%, due 9/17/10	AAA	$	10,438	$	10,438
Total Repurchase Agreement—7.9% (cost $10,438)					10,438
Total Investments—106.0% (cost $139,859)					140,292
Liabilities, plus cash and other assets—(6.0)%					(7,939	)
Net assets—100.0%				$	132,353

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     41

Statements of Assets and Liabilities

June 30, 2010 (dollar amounts in thousands) (unaudited)

	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
Assets
Investments in securities, at cost	$	1,262,392		$	285,682		$	400,720
Investments in Affiliated Fund, at cost		4,536			953			489
Investments in securities, at value	$	1,353,113		$	321,143		$	441,554
Investments in Affiliated Fund, at amortized cost		4,536			953			489
Foreign currency, at value (cost $8,525, $61, and $287)		8,535			61			283
Receivable for securities sold		21,836			2,216			1,532
Receivable for fund shares sold		—			—			103
Dividend and interest receivable		4,364			927			886
Total assets		1,392,384			325,300			444,847
Liabilities
Payable for investment securities purchased		21,286			2,635			2,554
Payable for fund shares redeemed		181			—			184
Unrealized depreciation on forward foreign currency contracts		103			—			26
Management fee payable		1,091			271			371
Distribution and shareholder administration fee payable		—			—			35
Other payables and accrued expenses		323			77			88
Total liabilities		22,984			2,983			3,258
Net Assets	$	1,369,400		$	322,317		$	441,589
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	117		$	36		$	43
Capital paid in excess of par value		1,637,346			474,490			554,469
Accumulated net investment income (loss)		8,903			2,406			2,169
Accumulated realized gain (loss)		(367,595	)		(190,089	)		(155,912	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		90,629			35,474			40,820
Net Assets	$	1,369,400		$	322,317		$	441,589
Net Assets	$	1,369,400		$	322,317
Shares Outstanding		117,331,769			36,091,146
Net Asset Value Per Share	$	11.67		$	8.93
Institutional Share Class
Net Assets							$	198,001
Shares Outstanding								19,208,900
Net Asset Value Per Share							$	10.31

See accompanying Notes to Financial Statements.

42     Semi-Annual Report June 30, 2010

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Institutional International Growth Fund			Institutional International Equity Fund			International Small Cap Growth Fund
Investment income
Dividends	$	21,743		$	4,639		$	5,104
Dividend income from Affiliated Fund		1			—			—
Less foreign tax withheld		(1,824	)		(417	)		(269	)
Interest		80			5			72
Total income		20,000			4,227			4,907
Expenses
Investment advisory fees		6,609			1,697			2,124
Distribution fees		—			—			20
Shareholder services fees		—			—			184
Custodian fees		181			67			77
Transfer agent fees		14			5			49
Professional fees		34			20			21
Registration fees		23			14			35
Shareholder reporting fees		10			6			23
Trustee fees		22			6			6
Other expenses		22			7			8
Total expenses		6,915			1,822			2,547
Net investment income (loss)		13,085			2,405			2,360
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		100,484			14,577			17,578
Foreign currency transactions		13,167			(314	)		113
Total net realized gain (loss)		113,651			14,263			17,691
Change in net unrealized appreciation (depreciation) of:
Investments		(180,780	)		(48,394	)		(32,179	)
Foreign currency translations		(4,574	)		(31	)		(33	)
Total change in net unrealized appreciation (depreciation)		(185,354	)		(48,425	)		(32,212	)
Net increase (decrease) in net assets resulting from operations	$	(58,618	)	$	(31,757	)	$	(12,161	)

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     43

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Institutional International Growth Fund						Institutional International Equity Fund						International Small Cap Growth Fund
	2010			2009			2010			2009			2010			2009
Operations
Net investment income (loss)	$	13,085		$	10,704		$	2,405		$	3,447		$	2,360		$	1,001
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		113,651			(117,747	)		14,263			(66,506	)		17,691			(30,308	)
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(185,354	)		519,807			(48,425	)		151,206			(32,212	)		174,254
Net increase (decrease) in net assets resulting from operations		(58,618	)		412,764			(31,757	)		88,147			(12,161	)		144,947
Distributions to shareholders from
Net investment income		—			(18,261	)		—			(2,719	)		—			(778	)
Net realized gain		—			—			—			—			—			—
		—			(18,261	)		—			(2,719	)		—			(778	)
Capital stock transactions
Net proceeds from sale of shares		125,976			165,765			24,374			20,848			121,773			139,125
Shares issued in reinvestment of income dividends and capital gain distributions		—			16,959			—			2,587			—			676
Less cost of shares redeemed		(73,806	)		(199,645	)		(35,571	)		(104,043	)		(58,874	)		(185,107	)
Net increase (decrease) in net assets resulting from capital share transactions		52,170			(16,921	)		(11,197	)		(80,608	)		62,899			(45,306	)
Increase (decrease) in net assets		(6,448	)		377,582			(42,954	)		4,820			50,738			98,863
Net assets
Beginning of year		1,375,848			998,266			365,271			360,451			390,851			291,988
End of year	$	1,369,400		$	1,375,848		$	322,317		$	365,271		$	441,589		$	390,851
Undistributed net investment income (loss) at the end of the period	$	8,903		$	(4,182	)	$	2,406		$	1		$	2,169		$	(191	)

See accompanying Notes to Financial Statements.

44     Semi-Annual Report June 30, 2010

Statements of Assets and Liabilities

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Bond Fund		Low Duration Fund
Assets
Investments in securities, at cost	$	841,139		$	63,897		$	178,407	$	139,859
Investments in Affiliated Fund, at cost		66			440			—		—
Investments in securities, at value	$	994,291		$	73,095		$	188,629	$	140,292
Investments in Affiliated Fund, at amortized cost		66			440			—		—
Foreign currency, at value (cost $15,312 and $445)		15,340			444			—		—
Receivable for securities sold		7,319			4,977			—		—
Receivable for fund shares sold		139			42			1,073		1,527
Receivable from Advisor		—			8			5		46
Dividend and interest receivable		1,866			231			1,889		422
Total assets		1,019,021			79,237			191,596		142,287
Liabilities
Payable for investment securities purchased		5,170			1,106			2,478		8,470
Payable for fund shares redeemed		108			2,379			372		1,411
Management fee payable		902			88			45		31
Distribution and shareholder administration fee payable		26			1			18		11
Other payables and accrued expenses		334			54			19		11
Total liabilities		6,540			3,628			2,932		9,934
Net Assets	$	1,012,481		$	75,609		$	188,664	$	132,353
Capital
Composition of Net Assets
Par value of shares of beneficial interest	$	81		$	9		$	18	$	13
Capital paid in excess of par value		1,022,262			76,172			178,222		132,344
Accumulated net investment income (loss)		(4,033	)		209			152		(295	)
Accumulated realized gain (loss)		(159,015	)		(9,981	)		50		(142	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		153,186			9,200			10,222		433
Net Assets	$	1,012,481		$	75,609		$	188,664	$	132,353
Institutional Share Class
Net Assets	$	843,769		$	65,154		$	34,632	$	40,410
Shares Outstanding		67,491,564			7,882,721			3,264,719		4,046,766
Net Asset Value Per Share	$	12.50		$	8.26		$	10.61	$	9.99

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     45

Statements of Operations

for the Period Ended June 30, 2010 (all amounts in thousands) (unaudited)

	Emerging Markets Growth Fund			Emerging Leaders Growth Fund			Bond Fund			Low Duration Fund
Investment income
Dividends	$	10,396		$	1,344		$	—		$	—
Less foreign tax withheld		(791	)		(140	)		—			—
Interest		94			1			4,208			1,143
Total income		9,699			1,205			4,208			1,143
Expenses
Investment advisory fees		5,526			609			246			172
Distribution fees		32			—			3			2
Shareholder services fees		148			7			105			58
Custodian fees		266			59			29			20
Transfer agent fees		69			4			10			7
Professional fees		27			16			15			15
Registration fees		40			25			29			43
Shareholder reporting fees		11			2			2			2
Trustee fees		14			2			2			1
Other expenses		15			4			6			3
Total expenses before waiver		6,148			728			447			323
Expenses reimbursed to (waived or absorbed by) the Advisor		—			(29	)		(53	)		(34	)
Net expenses		6,148			699			394			289
Net investment income (loss)		3,551			506			3,814			854
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments		71,759			22,851			1,015			(141	)
Foreign currency transactions		(2,200	)		(295	)		—			—
Total net realized gain (loss)		69,559			22,556			1,015			(141	)
Change in net unrealized appreciation (depreciation) of:
Investments		(118,023	)		(24,739	)		3,709			1,001
Foreign currency translations		(29	)		2			—			—
Total change in net unrealized appreciation (depreciation)		(118,052	)		(24,737	)		3,709			1,001
Net increase (decrease) in net assets resulting from operations	$	(44,942	)	$	(1,675	)	$	8,538		$	1,714

See accompanying Notes to Financial Statements.

46     Semi-Annual Report June 30, 2010

Statements of Changes in Net Assets

for the Period Ended June 30, 2010 (unaudited) and the Year Ended December 31, 2009 (all amounts in thousands)

	Emerging Markets Growth Fund						Emerging Leaders Growth Fund						Bond Fund						Low Duration Fund
	2010			2009			2010			2009			2010			2009			2010			2009(a)
Operations
Net investment income (loss)	$	3,551		$	3,476		$	506		$	507		$	3,814		$	6,076		$	854		$	78
Net realized gain (loss) on investments, foreign currency transactions and other assets and liabilities		69,559			(59,561	)		22,556			3,205			1,015			284			(141	)		—
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(118,052	)		461,348			(24,737	)		51,098			3,709			7,229			1,001			(568	)
Net increase (decrease) in net assets resulting from operations		(44,942	)		405,263			(1,675	)		54,810			8,538			13,589			1,714			(490	)
Distributions to shareholders from
Net investment income		—			(11,127	)		—			(1,588	)		(3,662	)		(6,213	)		(1,149	)		(86	)
Net realized gain		—			—			—			—			—			—			—			—
		—			(11,127	)		—			(1,588	)		(3,662	)		(6,213	)		(1,149	)		(86	)
Capital stock transactions
Net proceeds from sale of shares		162,010			422,203			3,502			42,409			60,462			77,912			93,547			97,472
Shares issued in reinvestment of income dividends and capital gain distributions		—			10,336			—			1,466			2,336			4,029			882			37
Less cost of shares redeemed		(142,847	)		(174,003	)		(41,354	)		(28,637	)		(26,354	)		(16,586	)		(57,775	)		(1,799	)
Net increase (decrease) in net assets resulting from capital share transactions		19,163			258,536			(37,852	)		15,238			36,444			65,355			36,654			95,710
Increase (decrease) in net assets		(25,779	)		652,672			(39,527	)		68,460			41,320			72,731			37,219			95,134
Net assets
Beginning of year		1,038,260			385,588			115,136			46,676			147,344			74,613			95,134			—
End of year	$	1,012,481		$	1,038,260		$	75,609		$	115,136		$	188,664		$	147,344		$	132,353		$	95,134
Undistributed net investment income (loss) at the end of the period	$	(4,033	)	$	(7,584	)	$	209		$	(297	)	$	152		$	—		$	(295	)	$	—

(a) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

See accompanying Notes to Financial Statements.

June 30, 2010 William Blair Funds     47

Notes to Financial Statements

(1) Significant Accounting Policies

The following is a summary of the William Blair Funds’ (the “Fund”) significant accounting policies in effect during the period covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles.

(a) Description of the Fund

William Blair Funds is a diversified mutual fund registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The number of shares authorized for this Fund is unlimited. The Fund currently consists of the following nineteen portfolios (the “Portfolios”), each with its own investment objective and policies.

Equity Portfolios	International Equity Portfolios
Growth Large Cap Growth Small Cap Growth Mid Cap Growth Small-Mid Cap Growth Small Cap Value (formerly known as Value Discovery) Mid Cap Value Global Equity Portfolio Global Growth	International Growth International Equity Institutional International Growth Institutional International Equity International Small Cap Growth Emerging Markets Growth Emerging Leaders Growth Fixed-Income Portfolios Bond Income Low Duration Money Market Portfolio Ready Reserves

The investment objectives of the Portfolios are as follows:

Equity	Long-term capital appreciation.
Global Equity	Long-term capital appreciation.
International Equity	Long-term capital appreciation.
Fixed-Income	High level of current income with relative stability of principal. (Maximize total return—Low Duration)
Money Market	Current income, a stable share price and daily liquidity.

The Institutional International Growth Portfolio, the Institutional International Equity Portfolio and the Institutional Share Classes of the International Small Cap Growth Portfolio, the Emerging Markets Growth Portfolio, the Emerging Leaders Growth Portfolio, Bond Portfolio, and the Low Duration Portfolio are the only Portfolios covered in this report.

(b) Share Classes

Three different classes of shares of the International Small Cap Growth Fund, Emerging Markets Growth Fund, Bond Fund and the Low Duration Fund currently exist: N, I and Institutional. Two different classes of shares of the Emerging Leaders Growth Fund currently exist: I and Institutional. This report includes financial information for only the Institutional Class. The Institutional share class is sold to institutional investors, including but not limited to employee benefit plans, endowments, foundations, trusts and corporations, who are able to meet the Fund’s high minimum investment requirement. The minimum initial investment required is $5 million.

Investment income realized and unrealized gains and losses, and certain Portfolio level expenses and expense reductions, if any, are allocated based on the relative net assets of each class, except for certain class specific expenses, which are charged directly to the appropriate class. Differences in class expenses may result in the payment of different per share dividends by class. All share classes of the Portfolios have equal rights with respect to voting subject to class specific arrangements.

48     Semi-Annual Report June 30, 2010

(c) Investment Valuation

The market value of domestic equity securities is determined by valuing securities traded on national securities markets or in the over-the-counter markets at the last sale price or, if applicable, the official closing price or, in the absence of a recent sale on the date of determination, at the latest bid price.

The value of foreign equity securities is generally determined based upon the last sale price on the foreign exchange or market on which it is primarily traded and in the currency of that market as of the close of the appropriate exchange or, if there have been no sales during that day, at the latest bid price. The Board of Trustees has determined that the passage of time between when the foreign exchanges or markets close and when the Portfolios compute their net asset values could cause the value of foreign equity securities to no longer be representative or accurate, and as a result, may necessitate that such securities be fair valued. Accordingly, for foreign equity securities, the Portfolios may use an independent pricing service to fair value price the security as of the close of regular trading on the New York Stock Exchange. As a result, a Portfolio’s value for a security may be different from the last sale price (or the latest bid price).

Fixed-income securities are valued by using market quotations or independent pricing services that use either prices provided by market-makers or matrixes that produce estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.

Other securities, and all other assets, including securities for which a market price is not available or is deemed unreliable, (e.g., securities affected by unusual or extraordinary events, such as natural disasters or securities affected by market or economic events, such as bankruptcy filings), or the value of which is affected by a significant valuation event, are valued at a fair value as determined in good faith by, or under the direction of, the Board of Trustees and in accordance with the Trust’s valuation procedures. The value of fair valued securities may be different from the last sale price (or the latest bid price), and there is no guarantee that a fair valued security will be sold at the price at which a Portfolio is carrying the security.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Securities held in the Ready Reserves Portfolio are valued at amortized cost, which approximates market value.

Investments in other funds are valued at the underlying fund’s net asset value on the date of valuation. Other securities, and all other assets, including securities for which a market price is not available, or the value of which is affected by a significant valuation event, are valued at fair value as determined in good faith by the Pricing Committee or Valuation Committee, in accordance with the Fund’s Valuation Procedures approved by the Board of Trustees. As of June 30, 2010, there were securities held in the Institutional International Growth, International Small Cap Growth, Emerging Markets Growth and Bond Portfolios requiring fair valuation pursuant to the Fund’s Valuation Procedures.

(d) Investment income and transactions

Dividend income is recorded on the ex-dividend date, except for those dividends from certain foreign securities that are recorded when the information is available.

Interest income is recorded on an accrual basis, adjusted for amortization of premium or discount. Variable rate bonds and floating rate notes earn interest at coupon rates that fluctuate at specific time intervals. The interest rate shown on the Portfolio of Investments for the Bond Fund and Low Duration Fund were the rates in effect on June 30, 2010. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

Premiums and discounts are accreted and amortized on a straight-line basis for short-term investments and on an effective interest method for long-term investments.

Paydown gains and losses on mortgage and asset-backed securities are treated as an adjustment to interest income. For the period ended June 30, 2010, the Bond and Low Duration Portfolios recognized an increase of interest income and a decrease of net realized loss of $(217) and $(419), respectively (in thousands). This reclassification had no effect on the net asset value of the Portfolios.

The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

June 30, 2010 William Blair Funds     49

Reported net realized foreign currency gains or losses arise from disposition of foreign currency, the difference in the foreign exchange rates between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the ex-date or accrual date and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies held at period end.

Security and shareholder transactions are accounted for no later than one business day following the trade date. However, for financial reporting purposes, security and shareholder transactions are accounted for on the trade date of the last business day of the reporting period. Realized gains and losses from securities transactions are recognized on a specifically identified cost basis.

Awards from class action litigation may be recorded as a reduction of cost. If the Portfolios no longer own the applicable securities, the proceeds are recorded as realized gains.

(e) Share Valuation and Dividends to Shareholders

Shares are sold and redeemed on a continuous basis at net asset value. The net asset value per share is determined by dividing the Portfolio’s net assets by the number of shares outstanding as of the close of regular trading on the New York Stock Exchange, which is generally 4:00 p.m. Eastern time, on each day the Exchange is open.

Dividends from net investment income, if any, are declared at least annually for all Portfolios covered by this report except the Bond Portfolio and Low Duration Portfolio which is declared monthly. At June 30, 2010, dividends from the Low Duration Portfolio are declared and paid monthly. Effective September 16, 2010 dividends from the Low Duration Portfolio will be declared daily and paid monthly. Capital gain distributions, if any, are declared at least annually in December. Dividends payable to shareholders are recorded on the ex-dividend date.

(f) Foreign Currency Translation and Foreign Currency Forward Contracts

The Portfolios (excluding the Bond Portfolio and the Low Duration Portfolio) may invest in securities denominated in foreign currencies. As such, assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the current exchange rate on the date of valuation. The values of foreign investments, forward open foreign currency contracts, and cash denominated in foreign currencies are translated into U.S. dollars using a spot market rate of exchange as of the time of the determination of each Fund’s net asset value, typically 4:00 p.m. Eastern time on days when there is regular trading on the New York Stock Exchange. Payables and receivables for securities transactions, dividends, interest income and tax reclaims are translated into U.S. dollars using a spot market rate of exchange as of 4:00 p.m. Eastern time. Settlement of purchases and sales and dividend and interest receipts are translated into U.S. dollars using a spot market rate of exchange as of 11:00 a.m. Eastern time.

(g) Income Taxes

Each Portfolio intends to comply with the provisions of Subchapter M of the Internal Revenue Code available to regulated investment companies. Each portfolio intends to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all, or substantially all, federal income and excise taxes. No provision for federal income and excise taxes has been made.

The Institutional International Growth, Institutional International Equity, International Small Cap Growth, Emerging Markets Growth, and Emerging Leaders Growth Portfolios may be subject to a tax imposed on net realized gains on securities of certain foreign countries.

Each Portfolio is subject to the provisions of Accounting Standards Codification (ASC) 740 Income Taxes, formally known as FASB (Financial Accounting Standards Board) Interpretation No. 48, Accounting for Uncertainties in Income Taxes. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. Management has evaluated the implications of ASC 740 and all of the uncertain tax positions of the Portfolios and has determined that no liability is required to be recorded in the financial statements as of December 31, 2009 and December 31, 2008.

The statute of limitations on the Funds’ tax returns for each of the tax years in the four year period ended December 31, 2009, remains open and the returns are subject to examination.

The Portfolios have elected to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”) for Federal income tax purposes. The Portfolios also treat the deferred loss associated with current and prior year wash sales as

50     Semi-Annual Report June 30, 2010

an adjustment to the cost of investments for tax purposes. The cost of investments for Federal income tax purposes and related gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) at June 30, 2010 were as follows (in thousands):

Portfolio	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ Depreciation
Institutional International Growth	$	1,277,907	$	157,715	$	78,065	$	79,650
Institutional International Equity		294,118		41,675		13,684		27,991
International Small Cap Growth		404,797		54,293		17,061		37,232
Emerging Markets Growth		859,271		155,003		19,883		135,120
Emerging Leaders Growth		65,317		9,680		1,460		8,220
Bond		178,480		10,820		671		10,149
Low Duration		139,859		608		175		433

The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal income tax regulations that may differ from U.S. generally accepted accounting principles. As a result, net investment income or loss and net realized gain or loss for a reporting period may differ from the amount distributed during such period. In addition, the Portfolios may periodically record reclassifications among certain capital accounts to reflect differences between financial reporting and income tax basis distributions. The reclassifications were reported in order to reflect the tax treatment for certain permanent differences that exist between income tax regulations and U.S. generally accepted accounting principles. The reclassifications generally relate to section 988 currency gains and losses, and recharacterization of unrealized appreciation on PFICs (Passive Foreign Investment Corporations). These reclassifications have no impact on the net asset values of the Portfolio. Accordingly, at December 31, 2009 (the Funds’ most recent fiscal year end), the following reclassifications were recorded (in thousands):

Portfolio	Accumulated Net Investment Income (Loss)			Accumulated Net Realized Gain/(Loss)			Capital Paid in Excess of Par Value
Institutional International Growth	$	1,191		$	(1,190	)	$	(1	)
Institutional International Equity		(450	)		449			1
International Small Cap Growth		(294	)		301			(7	)
Emerging Markets Growth		741			(741	)		—
Emerging Leaders Growth		836			(836	)		—
Bond		127			(120	)		(7	)
Low Duration		8			(1	)		(7	)

Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of 2010 distributions will be determined at the end of the fiscal year. The tax character of distributions paid during 2009 and 2008 was as follows (in thousands):

	Distributions Paid in 2009						Distributions Paid in 2008
Portfolio	Ordinary Income		Long-Term Capital Gains		Total Distributions		Ordinary Income		Long-Term Capital Gains		Total Distributions
Institutional International Growth	$	18,261	$	—	$	18,261	$	1,671	$	58,039	$	59,710
Institutional International Equity		2,719		—		2,719		1,947		4,542		6,489
International Small Cap Growth		778		—		778		—		4,881		4,881
Emerging Markets Growth		11,127		—		11,127		10,054		31,707		41,761
Emerging Leaders Growth		1,588		—		1,588		87		—		87
Bond		6,213		—		6,213		3,517		—		3,517
Low Duration (a)		86		—		86		—		—		—

(a) For the period from December 1, 2009 (commencement of operations) to December 31, 2009.

As of December 31, 2009, the components of distributable earnings on a tax basis were as follows (in thousands):

Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Gain		Net Unrealized Appreciation/ Depreciation
Institutional International Growth	$	5,359	$	(466,326	)	$	—	$	251,522
Institutional International Equity		—		(196,577	)		—		76,125
International Small Cap Growth		—		(168,452	)		—		67,690

June 30, 2010 William Blair Funds     51

Portfolio	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Gain		Net Unrealized Appreciation/ Depreciation
Emerging Markets Growth	$	2,427	$	(199,632	)	$	—	$	232,285
Emerging Leaders Growth		130		(29,527	)		—		30,500
Bond		—		(875	)		—		6,423
Low Duration		—		(1	)		—		(568	)

As of December 31, 2009, the Portfolios have unused capital loss carry forwards available for federal income tax purposes to be applied against future gains, if any. If not applied, the carryforward will expire as follows (in thousands):

Portfolio	2010		2011		2012		2013		2014		2015		2016		2017		Total
Institutional International Growth	$	—	$	—	$	—	$	—	$	—	$	—	$	188,201	$	278,110	$	466,311
Institutional International Equity		—		—		—		—		—		—		83,536		113,087		196,623
International Small Cap Growth		—		—		—		—		—		—		81,949		86,330		168,279
Emerging Markets Growth		—		—		—		—		—		—		84,442		115,253		199,695
Emerging Leaders Growth		—		—		—		—		—		—		21,249		8,278		29,527
Bond		—		—		—		—		—		135		559		174		868
Low Duration		—		—		—		—		—		—		—		1		1

For the period from November 1, 2009 through December 31, 2009, the following Portfolios incurred net realized capital losses, foreign currency losses or PFIC losses. Each Portfolio intends to treat this loss as having occurred in fiscal year 2010 for federal income tax purposes (in thousands):

Portfolio	Capital Amount		Currency Amount		PFIC Amount
Institutional International Growth	$	—	$	—	$	—
Institutional International Equity		—		41		—
International Small Cap Growth		—		211		—
Emerging Markets Growth		—		—		—
Emerging Leaders Growth		—		—		—
Bond		7		—		—
Low Duration		—		—		—

(h) Repurchase Agreements

In a repurchase agreement, a Portfolio buys a security at one price and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchaser’s holding period, while the seller’s obligation to repurchase is secured by the value of the underlying security. The Advisor will monitor, on an ongoing basis, the value of the underlying securities to ensure that the value always equals or exceeds the repurchase price plus accrued interest. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon a Portfolio’s ability to dispose of the underlying securities. The risk to a Portfolio is limited to the ability of the seller to pay the agreed upon sum on the delivery date. In the event of default, a repurchase agreement provides that a Portfolio is entitled to sell the underlying collateral. The loss, if any, to a Portfolio will be the difference between the proceeds from the sale and the repurchase price. However, if bankruptcy proceedings are commenced with respect to the seller of the security, disposition of the collateral by the Portfolio may be delayed or limited. Although no definitive creditworthiness criteria are used, the Advisor reviews the creditworthiness of the banks and non-bank dealers with which a Portfolio enters into repurchase agreements to evaluate those risks. The Advisor will review and monitor the creditworthiness of broker dealers and banks with which a Portfolio enters into repurchase agreements. A Portfolio may, under certain circumstances, deem repurchase agreements collateralized by U.S. Government securities to be investments in U.S. Government securities.

(i) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results may differ from those estimates.

52     Semi-Annual Report June 30, 2010

(j) Fair Value Measurements

The Portfolios are subject to ASC 820 Fair Value measurement and Disclosures, formally known as SFAS (Statement of Financial Accounting Standards) No. 157, “Fair Value Measurements”. In accordance with ASC 820, “Fair value” is defined as the price that a Portfolio would receive upon selling a security in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Various inputs are used in determining the value of a Portfolio’s investments. ASC 820 established a three-tier hierarchy of inputs to classify fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

• Level 1—Quoted prices in active markets for an identical security.

• Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. In addition, other observable inputs such as foreign exchange rates, benchmark securities indices and foreign futures contracts may be utilized in the valuation of certain foreign securities when significant events occur between the last sale on the foreign securities exchange and the time the net asset value of the Fund is calculated.

• Level 3—Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.

The Fund adopted FASB Accounting Standards Update 2010-06 “Fair Value Measurements and Disclosures (ASU 820)” which requires the Fund to disclose details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers. Any transfers between Level 1 and Level 2 are disclosed, effective beginning of the period, in the tables below with the reasons for the transfers disclosed in a footnote.

At June 30, 2010, the Portfolios held no other financial instruments, such as options or futures, that required fair valuation.

As of June 30, 2010, the hierarchical input levels of securities in each Portfolio, segregated by security class, are as follows (in thousands):

	Institutional International Growth			Institutional International Equity		International Small Cap Growth			Emerging Markets Growth		Emerging Leaders Growth
Investments in securities
Level 1—Quoted prices
Common stock	$	212,267		$	59,208	$	48,829		$	301,497	$	20,219
Warrants		—			—		—			43		—
Preferred stock		—			3,124		—			47,239		1,820
Exchange-traded fund		10,334			—		—			—		—
Short-term investments		4,536			953		489			66		440
Level 2—Other significant observable inputs
Common Stock		1,120,915			247,892		384,550			598,477		48,347
Convertible bonds		535			—		545			910		—
Short-term investments		9,062			10,919		7,630			46,125		2,709
Level 3—Significant unobservable inputs
None		—			—		—			—		—
Total investments in securities	$	1,357,649		$	322,096	$	442,043		$	994,357	$	73,535
Level 1 and Level 2 Transfers
Transfer from Level 1 to Level 2 (a)		3,945			2,009		—			—		3,063
Transfer from Level 2 to Level 1 (b)		—			—		—			—		—
Other financial instruments
Level 2—Other significant observable inputs
Forward foreign currency contracts	$	(103	)			$	(26	)

June 30, 2010 William Blair Funds     53

	Bond		Low Duration Bond
Investments in securities
Level 1—Quoted prices
None	$	—	$	—
Level 2—Other significant observable inputs
U.S. Government and agency bonds		88,268		59,323
Corporate bonds		86,776		15,413
Asset backed bonds		10,588		55,118
Short-term investments		2,878		10,438
Level 3—Significant unobservable inputs
Asset backed bonds		119		—
Total investments in securities	$	188,629	$	140,292

(a) Fair valuation estimates were obtained from the Portfolio’s pricing vendor and applied to certain foreign securities at June 30, 2010 but not on December 31, 2009 resulting in a transfer from Level 1 to Level 2.

(b) Fair valuation estimates were obtained from the Portfolio’s pricing vendor and applied to certain foreign securities at December 31, 2009 but not on June 30, 2010 resulting in a transfer from Level 2 to Level 1.

Level 1 Common Stocks are exchange traded securities with a quoted price. Typically, Level 2 Common Stocks are non-U.S. exchange traded securities with a quoted price that are fair valued by an independent pricing service approved by the Board of Trustees.

The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value:

	Balance January 1, 2010		Net Purchases/ (Sales)		Transfers to/(from) Level 3		Change in Unrealized Gain (Loss)		Realized Gain (Loss)		Balance June 30, 2010
Bond	$	—	$	—	$	119	$	—	$	—	$	119

The fair value estimate for the Level 3 security in the Bond Portfolio was determined in good faith by the Pricing Committee in consultation with the Valuation Committee, pursuant to the Valuation Procedures adopted by the Board of Trustees. There were various factors considered in reaching this fair value determination, including, but not limited to, the following: the type of security, the extent of public trading of the security, information obtained from a broker-dealer for the security, analysis of the company’s performance, market trends that influence its performance and the potential for adverse outcome in pending litigation. At June 30, 2010, this security represented 0.06%, of the net assets of the Bond Portfolio.

The First Plus bond held in the Bond Portfolio transferred from level 2 to level 3 during the period due to the lack of significant other observable inputs.

(k) Subsequent Events

On July 27, 2010, the Board of Trustees approved the following change to the William Blair Funds:

Effective September 16, 2010, the Low Duration Portfolio will begin declaring dividends on a daily basis to be paid out monthly.

(2) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

The Institutional International Growth and Institutional International Equity Portfolios have a management agreement with William Blair & Company L.L.C. (the “Company”) for investment advisory, administrative, and other accounting services. The Portfolios pay the Company an annual fee, payable monthly, based on a specified percentage of its average daily net assets. A summary of the annual rates expressed as a percentage of average daily net assets is as follows:

First $500 million	1.00	%
Next $500 million	0.95	%
In excess of $1 billion	0.90	%

54     Semi-Annual Report June 30, 2010

The International Small Cap Growth Portfolio pays the Company a 1.00% annual fee payable monthly, based on its average daily net assets. The Emerging Markets Growth Portfolio and Emerging Leaders Growth Portfolio pay the Company a 1.10% annual fee payable monthly, based on its average daily net assets. The Bond and Low Duration Portfolio pays the Company a 0.30% annual fee payable monthly, based on its average daily net assets.

All of the Portfolios, except Institutional International Growth Fund, have also entered into Expense Limitation Agreements with the Company. Under the terms of these agreements, the Advisor will waive its management fee and/or reimburse the Portfolio for expenses in excess of the agreed upon rate. The amount the Advisor owes a Portfolio as of the report date is recorded as the Receivable from Advisor on the Statement of Assets and Liabilities. The Advisor reimburses the Portfolios on an annual basis. Under the terms of these Agreements, the Company has agreed to waive its advisory fees and/or absorb other operating expenses through April 30, 2011, if total expenses of the Portfolios exceed the following rates (as a percentage of average daily net assets):

Portfolio	Effective May 1, 2010 through April 30, 2011		Effective May 1, 2009 through April 30, 2010
Institutional International Equity	1.10	%	1.10	%
International Small Cap Growth	1.25	%	1.25	%
Emerging Markets Growth	1.30	%	1.25	%
Emerging Leaders Growth	1.25	%	1.25	%
Bond	0.35	%	0.35	%
Low Duration	0.40	%	0.40	%(a)

(a) Effective December 1, 2009 through April 30, 2011.

For a period of three years subsequent to the Commencement of Operations of the Portfolio, the Company is entitled to reimbursement from the Emerging Leaders Growth and Low Duration Portfolios for previously waived fees and expenses to the extent the overall expense ratio remains below the percentages indicated. The total amount available for recapture at June 30, 2010 is $209 and $48 (in thousands) for the Emerging Leaders Growth and Low Duration Bond Portfolio respectively. As a result, the total expense ratio for a Portfolio during the period the agreement is in effect will not fall below the percentage indicated.

For the period ended June 30, 2010, the fees incurred by the Portfolio and related fee waivers were as follows (in thousands):

Portfolio	Fund Level Waiver		Class I Specific Waiver		Total Waiver
Emerging Leaders Growth	$	28	$	1	$	29
Bond		52		1		53
Low Duration		34		—		34

(b) Investments in Affiliated Portfolio

Pursuant to the rules of the 1940 Act, each of the Portfolios of the Fund may invest in the William Blair Ready Reserves Portfolio (“Ready Reserves”), an open-end money market portfolio managed by the Company. Ready Reserves Portfolio is used as a cash management option by the other Portfolios in the Fund. The Company waives management fees in an amount equal to the management fee and service fee that Ready Reserves receives based on the Portfolio’s net assets, less any waivers if applicable. The fees waived with respect to each Portfolio for the period ended June 30, 2010 are listed below. Distributions received from Ready Reserves are reflected as “Dividend income from Affiliated Fund” in each Portfolio’s Statement of Operations. Amounts relating to the Portfolios’ investments in Ready Reserves were as follows for the period ended June 30, 2010 (in thousands):

Portfolio	12/31/2009 Value		Purchases		Sales		Fees Waived		Dividend Income		6/30/2010 Value		Percent of Net Assets
Institutional International Growth	$	4,535	$	—	$	—	$	5	$	1	$	4,536	0.3	%
Institutional International Equity		953		—		—		1		—		953	0.3	%
International Small Cap Growth		489		—		—		1		—		489	0.1	%
Emerging Markets Growth		66		—		—		—		—		66	0.0	%
Emerging Leaders Growth		440		—		—		—		—		440	0.6	%

June 30, 2010 William Blair Funds     55

(3) Investment Transactions

Investment transactions, excluding money market instruments, for the period ended June 30, 2010, were as follows (in thousands):

Portfolio	Purchases		Sales
Institutional International Growth	$	680,962	$	(582,426	)
Institutional International Equity		128,634		(140,120	)
International Small Cap Growth		232,156		(164,521	)
Emerging Markets Growth		571,734		(585,505	)
Emerging Leaders Growth		82,429		(123,187	)
Bond		71,630		(35,163	)
Low Duration		106,303		(50,354	)

(4) Forward Foreign Currency Contracts

The Portfolios (excluding the Bond and Low Duration Portfolios) from time to time may enter into forward foreign currency contracts with the Fund’s custodian and other counterparties in an attempt to hedge against a decline in the value of foreign currency against the U.S. dollar. The Portfolios bear the market risk that arises from changes in foreign currency rates and bear the credit risk if the counterparty fails to perform under the contract.

For the period ended June 30, 2010, the Institutional International Growth and International Small Cap Growth Portfolios engaged in forward foreign currency contracts with total volume (in thousands) of $680,217 and $89,804, respectively.

The following table presents the value of open forward foreign currency contracts as of June 30, 2010 and their respective location on the Statement of Assets and Liabilities (values in thousands):

	Assets			Liabilities
Fund	Statement of Assets and Liabilities Location	Value		Statement of Assets and Liabilities Location	Value
Institutional International Growth	Unrealized appreciation on foreign forward currency contracts	$	—	Unrealized depreciation on foreign forward currency contracts	$	103
International Small Cap Growth	Unrealized appreciation on foreign forward currency contracts		—	Unrealized depreciation on foreign forward currency contracts		26

The effect of forward contracts on the Statements of Operations for the period ended June 30, 2010 (values in thousands):

Realized gain (loss) recognized in foreign currency transactions
Fund	Value
Institutional International Growth	$	16,055
International Small Cap Growth		723
Change in unrealized gain (loss) recognized in foreign currency translations
Fund	Value
Institutional International Growth	$	(4,616	)
International Small Cap Growth		(26	)

The following table presents open forward foreign currency contracts as of June 30, 2010 (values in thousands):

Institutional International Growth
Short Contracts	Settlement Date	Local Currency	Current Value	Unrealized Gain/(loss)
Japanese Yen	9/15/2010	4,851,260	54,732	$	(103	)
International Small Cap Growth
Japanese Yen	9/15/2010	1,610,250	18,182	$	(26	)

56     Semi-Annual Report June 30, 2010

(5) Fund Share Transactions

The following table summarizes the activity in capital shares of each Portfolio (in thousands):

	Dollars
	For the Period Ended June 30, 2010
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	125,976	$	—	$	73,806	$	52,170
Institutional International Equity		24,374		—		35,571		(11,197	)
International Small Cap Growth		48,484		—		12,370		36,114
Emerging Markets Growth		140,128		—		92,008		48,120
Emerging Leaders Growth		1		—		39,671		(39,670	)
Bond		17,436		432		118		17,750
Low Duration		43,669		392		17,211		26,850
	Dollars
	For the Year Ended December 31, 2009
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth	$	165,765	$	16,959	$	199,645	$	(16,921	)
Institutional International Equity		20,848		2,587		104,043		(80,608	)
International Small Cap Growth		30,712		427		141,722		(110,583	)
Emerging Markets Growth		347,835		8,712		138,100		218,447
Emerging Leaders Growth		38,546		1,366		27,894		12,018
Bond		5,199		772		1,064		4,907
Low Duration (a)		13,501		—		—		13,501
	Shares
	For the Period Ended June 30, 2010
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		10,565		—		6,000		4,565
Institutional International Equity		2,688		—		3,701		(1,013	)
International Small Cap Growth		4,667		—		1,164		3,503
Emerging Markets Growth		11,045		—		7,326		3,719
Emerging Leaders Growth		—		—		4,725		(4,725	)
Bond		1,659		41		11		1,689
Low Duration		4,373		39		1,725		2,687
	Shares
	For the Year Ended December 31, 2009
Portfolio	Sales		Reinvested Distributions		Redemptions		Net change in Net Assets relating to fund share activity
Institutional International Growth		16,035		1,423		20,023		(2,565	)
Institutional International Equity		2,541		270		14,163		(11,352	)
International Small Cap Growth		3,235		41		16,155		(12,879	)
Emerging Markets Growth		36,231		690		12,815		24,106
Emerging Leaders Growth		6,962		167		3,666		3,463
Bond		532		77		108		501
Low Duration (a)		1,360		—		—		1,360

(a) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2009.

June 30, 2010 William Blair Funds     57

Financial Highlights

Institutional International Growth Fund

	Institutional Class Shares
	Period Ended June 30,			Years Ended December 31,
	2010
Net asset value, beginning of year	$	12.20		$	8.66	$	19.20		$	19.39	$	18.11	$	16.06
Income (loss) from investment operations:
Net investment income (loss) (a)		0.11			0.10		0.25			0.15		0.11		0.09
Net realized and unrealized gain (loss) on investments		(0.64	)		3.61		(10.24	)		3.30		4.09		3.53
Total from investment operations		(0.53	)		3.71		(9.99	)		3.45		4.20		3.62
Less distributions from:
Net investment income		—			0.17		—			0.35		0.38		0.15
Net realized gain		—			—		0.55			3.29		2.54		1.42
Total distributions		—			0.17		0.55			3.64		2.92		1.57
Net asset value, end of year	$	11.67		$	12.20	$	8.66		$	19.20	$	19.39	$	18.11
Total Return (%)*		(4.34	)		42.83		(51.99	)		18.49		23.45		22.76
Ratios to average daily net assets (%):**
Expenses		1.00			1.01		0.98			1.02		1.03		1.05
Net investment income (loss)		1.89			0.95		1.68			0.74		0.54		0.52

	Period Ended June 30,		Years Ended December 31,
	2010								2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,369,400	$	1,375,848	$	998,266	$	2,145,312	$	1,875,341	$	1,555,414
Portfolio turnover rate (%)*		44		125		86		61		74		74

(a) Excludes $0.05, $(0.10), $0.06, $0.29, and $0.10 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

58     Semi-Annual Report June 30, 2010

Financial Highlights

Institutional International Equity Fund

	Institutional Class Shares
	Period Ended June 30,			Years Ended December 31,
	2010			2009		2008			2007		2006		2005
Net asset value, beginning of year	$	9.84		$	7.44	$	15.03		$	14.27	$	12.04	$	10.20
Income (loss) from investment operations:
Net investment income (loss) (a)		0.07			0.09		0.15			0.13		0.07		0.00	^
Net realized and unrealized gain (loss) on investments		(0.98	)		2.38		(7.60	)		2.42		2.37		1.86
Total from investment operations		(0.91	)		2.47		(7.45	)		2.55		2.44		1.86
Less distributions from:
Net investment income		—			0.07		—			0.22		0.16		0.02
Net realized gain		—			—		0.14			1.57		0.05		—
Total distributions		—			0.07		0.14			1.79		0.21		0.02
Net asset value, end of year	$	8.93		$	9.84	$	7.44		$	15.03	$	14.27	$	12.04
Total Return (%)*		(9.25	)		33.27		(49.57	)		18.36		20.22		18.26
Ratios to average daily net assets (%):**
Expenses		1.07			1.09		1.05			1.09		1.10		1.10
Expenses, before waivers and reimbursements		1.07			1.09		1.05			1.06		1.12		1.35
Net investment income (loss)		1.42			1.04		1.26			0.86		0.50		0.31
Net investment income (loss), before waivers and reimbursements		1.42			1.04		1.26			0.89		0.48		0.06

	Period Ended June 30,		Years Ended December 31,
	2010		2009		2008		2007		2006		2005
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	322,317	$	365,271	$	360,451	$	618,179	$	598,375	$	250,929
Portfolio turnover rate (%)*		39		78		91		66		79		84

(a) Excludes $0.00, $(0.07), $0.01, $0.23, and $0.27 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     59

Financial Highlights

International Small Cap Growth Fund

	Institutional Class Shares
	Period Ended June 30,			Periods Ended December 31,
	2010			2009		2008			2007		2006			2005(a)
Net asset value, beginning of year	$	10.53		$	6.69	$	14.04		$	13.43	$	11.16		$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.06			0.04		0.03			0.05		(0.01	)		0.00	^
Net realized and unrealized gain (loss) on investments		(0.28	)		3.83		(7.26	)		1.72		2.34			1.16
Total from investment operations		(0.22	)		3.87		(7.23	)		1.77		2.33			1.16
Less distributions from:
Net investment income		—			0.03		—			0.12		0.01			0.00	^
Net realized gain		—			—		0.12			1.04		0.05			—
Total distributions		—			0.03		0.12			1.16		0.06			0.00	^
Net asset value, end of year	$	10.31		$	10.53	$	6.69		$	14.04	$	13.43		$	11.16
Total Return (%)*		(2.09	)		57.84		(51.53	)		13.53		20.86			11.62
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.09			1.13		1.14			1.14		1.25			1.25
Expenses, before waivers and reimbursements		1.09			1.13		1.11			1.14		1.31			2.17
Net investment income (loss), net of waivers and reimbursements		1.21			0.48		0.28			0.32		(0.12	)		0.00
Net investment income (loss), before waivers and reimbursements		1.21			0.48		0.32			0.32		(0.18	)		0.92

	Period Ended June 30,		Periods Ended December 31,
	2010		2009		2008		2007		2006		2005(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	441,589	$	390,851	$	291,988	$	401,459	$	231,969	$	50,534
Portfolio turnover rate (%)*		40		136		78		88		109		127

(a) For the period November 1, 2005 (Commencement of Operations) to December 31, 2005.

(b) Excludes $0.01, $(0.02), $0.05, $0.00, and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

60     Semi-Annual Report June 30, 2010

Financial Highlights

Emerging Markets Growth Fund

	Institutional Class Shares
	Period Ended June 30,			Periods Ended December 31,
	2010			2009		2008			2007			2006		2005(a)
Net asset value, beginning of year	$	13.03		$	7.56	$	22.07		$	19.54		$	14.20	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.05			0.06		0.17			(0.01	)		0.02		0.01
Net realized and unrealized gain (loss) on investments		(0.58	)		5.55		(13.74	)		7.27			5.44		4.27
Total from investment operations		(0.53	)		5.61		(13.57	)		7.26			5.46		4.28
Less distributions from:
Net investment income		—			0.14		—			0.19			0.01		—
Net realized gain		—			—		0.94			4.54			0.11		0.08
Total distributions		—			0.14		0.94			4.73			0.12		0.08
Net asset value, end of year	$	12.50		$	13.03	$	7.56		$	22.07		$	19.54	$	14.20
Total Return (%)*		(4.07	)		74.33		(61.51	)		38.21			38.49		42.82
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.18			1.22		1.22			1.25			1.25		1.25
Expenses, before waivers and reimbursements		1.18			1.22		1.20			1.25			1.32		1.61
Net investment income (loss), net of waivers and reimbursements		0.75			0.54		1.08			(0.05	)		0.09		0.19
Net investment income (loss), before waivers and reimbursements		0.75			0.54		1.10			(0.05	)		0.02		(0.17	)

	Period Ended June 30,		Periods Ended December 31,
	2010		2009		2008		2007		2006		2005(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	1,012,481	$	1,038,260	$	385,588	$	1,165,854	$	813,649	$	249,348
Portfolio turnover rate (%)*		59		113		118		100		113		77

(a) For the period June 6, 2005 (Commencement of Operations) to December 31, 2005.

(b) Excludes $0.15, $(0.09), $0.21, $0.00, and $0.11 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009, 2008, 2007, 2006 and 2005, respectively.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     61

Financial Highlights

Emerging Leaders Growth Fund

	Institutional Class Shares
	Period Ended June 30,			Periods Ended December 31,
	2010			2009		2008(a)
Net asset value, beginning of year	$	8.43		$	4.78	$	10.00
Income (loss) from investment operations:
Net investment income (loss) (b)		0.04			0.04		0.04
Net realized and unrealized gain (loss) on investments		(0.21	)		3.73		(5.26	)
Total from investment operations		(0.17	)		3.77		(5.22	)
Less distributions from:
Net investment income		—			0.12		0.00	^
Net realized gain		—			—		—
Total distributions		—			0.12		0.00	^
Net asset value, end of year	$	8.26		$	8.43	$	4.78
Total Return (%)*		(2.02	)		78.93		(52.11	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.25			1.25		1.25
Expenses, before waivers and reimbursements		1.30			1.36		1.41
Net investment income (loss), net of waivers and reimbursements		0.96			0.58		0.70
Net investment income (loss), before waivers and reimbursements		0.91			0.47		0.54

	Period Ended June 30,		Periods Ended December 31,
	2010		2009		2008(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	75,609	$	115,136	$	46,676
Portfolio turnover rate (%)*		79		176		151

(a) For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

(b) Excludes $1.29 and $0.00 of PFIC mark to market which is treated as ordinary income for Federal tax purposes for the years 2009 and 2008.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

^ Amount is less than $0.005 per share.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

62     Semi-Annual Report June 30, 2010

Financial Highlights

Bond Fund

	Institutional Class Shares
	Period Ended June 30,		Periods Ended December 31,
	2010		2009		2008			2007(a)
Net asset value, beginning of year	$	10.30	$	9.72	$	10.00		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.25		0.51		0.50			0.32
Net realized and unrealized gain (loss) on investments		0.30		0.58		(0.31	)		0.03
Total from investment operations		0.55		1.09		0.19			0.35
Less distributions from:
Net investment income		0.24		0.51		0.47			0.35
Net realized gain		—		—		—			0.00
Total distributions		0.24		0.51		0.47			0.35
Net asset value, end of year	$	10.61	$	10.30	$	9.72		$	10.00
Total Return (%)*		5.37		11.47		1.95			3.57
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.35		0.34		0.35			0.35
Expenses, before waivers and reimbursements		0.42		0.43		0.56			0.52
Net investment income (loss), net of waivers and reimbursements		4.82		5.07		5.04			5.09
Net investment income (loss), before waivers and reimbursements		4.75		4.98		4.83			4.92

	Period Ended June 30,		Periods Ended December 31,
	2010		2009		2008		2007(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	188,664	$	147,344	$	74,613	$	68,483
Portfolio turnover rate (%)*		17		29		52		38

(a) For the period May 1, 2007 (Commencement of Operations) to December 31, 2007.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

June 30, 2010 William Blair Funds     63

Financial Highlights

Low Duration Bond Fund

	Institutional Class Shares
	Periods Ended
	June 30,		December 31,
	2010		2009(a)
Net asset value, beginning of year	$	9.93	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08		0.01
Net realized and unrealized gain (loss) on investments		0.08		(0.07	)
Total from investment operations		0.16		(0.06	)
Less distributions from:
Net investment income		0.10		0.01
Net realized gain		—		—
Total distributions		0.10		0.01
Net asset value, end of year	$	9.99	$	9.93
Total Return (%)*		1.66		(0.58	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.40		0.40
Expenses, before waivers and reimbursements		0.46		0.64
Net investment income (loss), net of waivers and reimbursements		1.60		1.54
Net investment income (loss), before waivers and reimbursements		1.54		1.30

	Periods Ended
	June 30,		December 31,
	2010		2009(a)
Supplemental data for all classes:
Net assets at end of year (in thousands)	$	132,353	$	95,134
Portfolio turnover rate (%)*		31		—

(a) For the period December 1, 2009 (Commencement of Operations) to December 31, 2009.

* Rates not annualized for periods that are less than a year.

** Rates are annualized for periods that are less than a year.

Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate and you may have a gain or loss when you sell shares. For the most current month-end performance information, please call 1-800-742-7272 or visit our Web site at www.williamblairfunds.com.

Note: Net investment income (loss) per share is based on the average shares outstanding during the year.

64     Semi-Annual Report June 30, 2010

Trustees and Officers (Unaudited). The trustees and officers of the William Blair Funds, their year of birth, their principal occupations during the last five years, their affiliations, if any, with William Blair & Company, L.L.C., and other significant affiliations are set forth below. The address of each trustee and officer is 222 West Adams Street, Chicago, Illinois 60606.

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee/Officer
Interested Trustees
Michelle R. Seitz, 1965*	Chairperson of the Board of Trustees and President	Since 2010 Since 2007	Principal, William Blair & Company, L.L.C.; Limited Partner, WB Holdings, L.P. (since November 2008); Member, WBC GP, L.L.P. (since November 2008)	19	N/A
Richard W. Smirl, 1967	Trustee and Senior Vice President	Trustee since 2010 and Senior Vice President since 2008	Principal, William Blair & Company, L.L.C.	19	N/A
Non-Interested Trustees
Ann P. McDermott, 1939	Trustee	Since 1996	Board member and officer for various civic and charitable organizations over the past thirty years; professional experience prior thereto, registered representative for New York Stock Exchange firm	19	Northwestern University, Women’s Board; Rush Presbyterian St. Luke’s Medical Center, Women’s Board; University of Chicago, Women’s Board; Visiting Nurses Association, Honorary Director
Phillip O. Peterson, 1944	Trustee	Since 2007	Trustee of Strong Funds Liquidating Trusts since 2005 and President, Strong Mutual Funds, 2004-2005; formerly, Partner, KPMG LLP	19	The Hartford Group of Mutual Funds (87 portfolios)
Donald J. Reaves, 1946	Trustee	Since 2004	Chancellor, Winston-Salem State University since 2007; formerly, Vice President for Administration and Chief Financial Officer, University of Chicago 2002-2007.	19	American Student Assistance Corp., guarantor of student loans; Amica Mutual Insurance Company
Donald L. Seeley, 1944	Trustee	Since 2003	Retired; formerly, Director, Applied Investment Management Program, University of Arizona Department of Finance, prior there to, Vice Chairman and Chief Financial Officer, True North Communications, Inc., marketing communications and advertising firm	19	Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer; Center for Furniture Craftsmanship (not-for-profit)

June 30, 2010 William Blair Funds     65

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years	Number of Portfolios in Fund Complex Overseen by Trustee	Other Directorships Held by Trustee/Officer
Thomas J. Skelly, 1951	Trustee	Since 2007	Advisory Board member for various U.S. companies; Director and Investment Committee Chairman of the US Accenture Foundation, Inc.; prior to 2005, Managing Partner of various divisions at Accenture	19	First MetLife Investors Insurance Company
Robert E. Wood II, 1938	Trustee	Since 1999	Retired; formerly, Executive Vice President, Morgan Stanley Dean Witter	19	Chairman, Add-Vision, Inc., manufacturer of surface animation systems; Chairman Micro-Combustion, LLC

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years(2)	Other Directorships Held by Trustee/Officer
Officers
Michael P. Balkin, 1959	Senior Vice President	Since 2009	Principal, William Blair & Company, L.L.C.	N/A
	Vice President	2008-2009	Associate, William Blair & Company, L.L.C.; former Chief Investment Officer, Magnetar Investment Management
Karl W. Brewer, 1966	Senior Vice President	Since 2000	Principal, William Blair & Company, L.L.C.	N/A
David C. Fording, 1967	Senior Vice President	Since 2009	Principal, William Blair & Company, L.L.C.	N/A
	Vice President	2006-2009	Associate, William Blair & Company, L.L.C.; former Portfolio Manager, TIAA-CREF.
James S. Golan, 1961	Senior Vice President	Since 2005	Principal, William Blair & Company, L.L.C.	N/A
W. George Greig, 1952	Senior Vice President	Since 1996	Principal, William Blair & Company, L.L.C.	N/A
Michael A. Jancosek, 1959	Senior Vice President	Since 2004	Principal, William Blair & Company L.L.C.	N/A
John F. Jostrand, 1954	Senior Vice President	Since 1999	Principal, William Blair & Company, L.L.C.	N/A
Robert C. Lanphier, IV, 1956	Senior Vice President	Since 2003	Principal, William Blair & Company, L.L.C.	Chairman, AG. Med, Inc.
Mark T. Leslie, 1967	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
	Vice President	2005-2008	Associate, William Blair & Company, L.L.C. formerly, U.S. Bancorp Asset Management

66     Semi-Annual Report June 30, 2010

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years(2)	Other Directorships Held by Trustee/Officer
Matthew A. Litfin, 1972	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
Kenneth J. McAtamney 1966	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
Todd M. McClone, 1968	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A
	Vice President	2005-2006	Associate, William Blair & Company, L.L.C.	N/A
Tracy McCormick, 1954	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
David Merjan, 1960	Senior Vice President	Since 2008	Principal, William Blair & Company, L.L.C.	N/A
David S. Mitchell, 1960	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A
David P. Ricci, 1958	Senior Vice President	Since 2006	Principal, William Blair & Company, L.L.C.	N/A
Richard W. Smirl, 1967	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A
Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Principal, William Blair & Company, L.L.C.	N/A
Christopher T. Vincent, 1956	Senior Vice President	Since 2004	Principal, William Blair & Company, L.L.C.	N/A
Chad M. Kilmer, 1975	Vice President	Since 2006	Associate, William Blair & Company, L.L.C.; former analyst and Portfolio Manager U.S. Bancorp Asset Management.	N/A
Kathleen M. Lynch, 1971	Vice President	Since 2010	Associate, William Blair & Company, L.L.C.	N/A
Paul J. Sularz, 1967	Vice President	Since 2009	Associate, William Blair & Company, L.L.C.; Vice President, J.P. Morgan Securities, Inc.	N/A
Walter R. Randall, Jr., 1960	Chief Compliance Officer	Since 2009	Associate, William Blair & Company, L.L.C.; Associate Counsel and Chief Compliance Officer, Calamos Investments; Assistant General Counsel, American Century Investments.	N/A
Colette M. Garavalia, 1961	Treasurer	Since 2009	Associate, William Blair & Company, L.L.C.	N/A
	Secretary	2000-2009	Associate, William Blair & Company, L.L.C.;	N/A

June 30, 2010 William Blair Funds     67

Name and Year of Birth	Position(s) Held with Fund	Term of Office and Length of Time Served(1)	Principal Occupation(s) During Past 5 Years(2)	Other Directorships Held by Trustee/Officer
Andrew T. Pfau, 1970	Secretary	Since 2009	Associate, William Blair & Company, L.L.C.; Associate, Bell, Boyd & Lloyd, LLP; Associate, Sidley Austin LLP	N/A

* Ms. Seitz and Mr. Smirl are interested persons of the William Blair Funds because each is a principal of William Blair & Company, L.L.C., the Funds’ investment advisor, principal underwriter and distributor.

(1) Each Trustee serves until the election and qualification of a successor, or until death, resignation or retirement or removal as provided in the Fund’s Declaration of Trust. Retirement for non-interested Trustees occurs no later than at the conclusion of the first regularly scheduled Board meeting of the Fund’s fiscal year that occurs after the Trustee’s 72nd birthday. The Fund’s officers except the Chief Compliance Officer, are elected annually by the Trustees. The Fund’s Chief Compliance Officer is designated by the Board of Trustees and may only be removed by action of the Board of Trustees, including a majority of the non-interested Trustees.

(2) In November 2008, all current principals of William Blair & Company, L.L.C. also became limited partners in WB Holdings, L.P.

The Statement of Additional Information for the William Blair Funds includes additional information about the trustees and is available without charge by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840) or by writing the Fund.

68     Semi-Annual Report June 30, 2010

Renewal of the Trust’s Management Agreement

On April 27, 2010, the Board of Trustees (the “Board”) of the William Blair Funds (the “Trust”), including the Trustees who are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”), approved the renewal for an additional one-year term of the Trust’s Management Agreement with William Blair & Company, L.L.C. (the “Advisor”), on behalf of each of the William Blair Global Growth Fund, the William Blair Institutional International Growth Fund, the William Blair Institutional International Equity Fund, the William Blair International Small Cap Growth Fund, the William Blair Emerging Markets Growth Fund, the William Blair Emerging Leaders Growth Fund and the William Blair Bond Fund (each, a “Fund” and collectively, the “Funds”). In deciding to approve the renewal of the Management Agreement, the Board did not identify any single factor or group of factors as all-important or controlling and considered all factors together.

The information in this summary outlines the Board’s considerations associated with its renewal of the Management Agreement. In connection with its deliberations regarding the continuation of the Management Agreement, the Board considered such information and factors as it believed to be relevant. As described below, the Board considered the nature, extent and quality of the services performed by the Advisor under the existing Management Agreement; comparative management fees and expense ratios as prepared by an independent provider (Lipper Inc.); the estimated profits realized by the Advisor; the extent to which the Advisor realizes economies of scale as a Fund grows; and whether any fall-out benefits are being realized by the Advisor. In addition, the Independent Trustees discussed the renewal of the Management Agreement with Fund management and in private sessions with independent legal counsel at which no representatives of the Advisor were present.

The Board, including the Independent Trustees, considered the renewal of the Management Agreement pursuant to a process that concluded at the Board’s April 27, 2010 meeting. In preparation for the review process, the Independent Trustees met with independent legal counsel and discussed the type and nature of information to be requested and independent legal counsel sent a formal request for information to Trust management. The Advisor provided extensive information in response to the request. After reviewing the information received, the Independent Trustees requested supplemental information, which the Advisor provided in writing and/or orally. The Independent Trustees reviewed comparative performance and comparative advisory fees and expense ratios for a peer group and a peer universe of funds provided by Lipper for each Fund. In addition, the Independent Trustees considered: (i) materials describing the nature, quality and extent of services provided by the Advisor; (ii) information comparing the performance of each Fund to one or more relevant securities indexes; (iii) information comparing advisory fees of each Fund to fees charged by the Advisor to other funds and client accounts with similar investment strategies; (iv) the estimated allocated direct or indirect costs of services provided and estimated profits realized by the Advisor for both the Trust as a whole and each Fund individually; and (v) information describing other benefits to the Advisor resulting from its relationship with the Funds. The Independent Trustees also noted that they receive information from the Advisor regarding the Funds throughout the year in connection with regular Board meetings, including presentations from portfolio managers. The Independent Trustees also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Management Agreement. Finally, the Advisor made an in-person presentation to the Independent Trustees regarding the contract review information, including addressing the supplemental information requests, and answered questions from the Independent Trustees.

On April 14, 26 and 27, 2010, the Independent Trustees met independently of Trust management and of the interested Trustees to review and discuss with independent legal counsel the information provided by the Advisor, Lipper and independent legal counsel. The Independent Trustees noted that in evaluating the Management Agreement, they were taking into account their accumulated experience as Trustees in working with the Advisor on matters relating to the Funds. Based on their review, the Independent Trustees concluded that it was in the best interest of each Fund to renew the Management Agreement and recommended to the Board the renewal of the Management Agreement. The Board considered the recommendation of the Independent Trustees along with the other factors that the Board deemed relevant.

Nature, Quality and Extent of Services. In evaluating the nature, quality and extent of the services provided by the Advisor to the Funds, the Board noted that the Advisor is a quality firm with a reputation for integrity and honesty that employs high-quality people and has been associated with the Funds since their inception. The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interests of shareholders and that shareholders have invested in the Funds knowing that the Advisor managed the Funds and knowing the investment advisory fee. The Board considered biographical information about the Trust’s officers and each Fund’s portfolio manager(s), the administrative services performed by the Advisor, financial information regarding the Advisor, the Advisor’s execution quality and use of soft dollars, the compliance regime overseen by the Advisor, and the Advisor’s expense limitations in place for certain Funds.

June 30, 2010 William Blair Funds     69

The Board was also provided with information pertaining to the Advisor’s organizational structure and senior management. The Board noted that the Advisor pays the compensation of all of the officers and interested Trustees of the Trust. The Board also noted that the Advisor voluntarily reduces the advisory fees of the Funds by an amount equal to the advisory fee and service fee paid by the Ready Reserves Fund on the cash of the Funds invested in the Ready Reserves Fund.

The Board reviewed information on the annualized total returns of each Fund for the one-, three-, five- and ten-year periods ended December 31, 2009, as applicable, along with annualized total return information for the Lipper performance peer universe of funds and one or more relevant securities indexes. The Lipper performance peer universe for each Fund included all funds with a similar investment style as classified by Lipper regardless of asset size or primary channel of distribution. The Board noted that the information provided indicated that the Global Growth Fund, the Institutional International Growth Fund, the International Small Cap Growth Fund, the Emerging Leaders Growth Fund and the Bond Fund generally performed satisfactorily on the whole relative to its Lipper performance peer universe during the periods reviewed. The Board noted that the information provided indicated that the Institutional International Equity Fund and the Emerging Markets Growth Fund each performed satisfactorily relative to its Lipper performance peer universe during the one-year period, but generally lagged the Lipper performance peer universe on a relative basis over the other periods reviewed. The Trustees requested and reviewed with the Advisor additional information regarding the performance of the Institutional International Equity Fund and the Emerging Markets Growth Fund.

Based on all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Advisor to each Fund were satisfactory.

Fees and Expenses. The Board reviewed each Fund’s advisory fee and expense ratio and reviewed information comparing the advisory fee and expense ratio to those of a Lipper expense peer group and Lipper expense peer universe for each Fund. The Lipper expense peer group for each Fund consisted of a group of funds with a similar investment style as classified by Lipper, distribution channel and asset size as the Fund. The Lipper expense peer universe for each Fund consisted of all funds with a similar investment style as classified by Lipper and distribution channel as the Fund. The Board considered that the Advisor had proposed to contractually limit total expenses for the Global Growth Fund, the Institutional International Equity Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund and the Bond Fund. For each Fund, the Board also reviewed amounts charged by the Advisor to other registered funds and funds for which the Advisor acts as a sub-advisor, and the Advisor’s fee schedule for institutional separate accounts. With respect to sub-advised funds and institutional separate accounts, the Board considered the Advisor’s view that the advisory fees for institutional separate accounts and sub-advisory services are less relevant to the Board’s consideration of the Funds’ advisory fees because both the mix of services provided to the Funds and the additional regulatory responsibilities associated with registered investment companies were greater as compared to the Advisor’s obligations for sub-advised funds and separate accounts. In addition, the Board considered the Advisor’s statement that institutional separate accounts are distributed differently, operate under different investment and regulatory structures and have different business risks as compared to the Funds.

In considering the information, the Board noted that the advisory fees for the Global Growth Fund, the International Small Cap Growth Fund, the Emerging Markets Growth Fund, the Emerging Leaders Growth Fund and the Bond Fund were below or within an acceptable range of the average advisory fees of their Lipper expense peer group and Lipper expense peer universe. The Board also noted that the advisory fees for the Institutional International Growth Fund and the Institutional International Equity Fund were above the average advisory fees of their Lipper expense peer group and Lipper expense peer universe, but that such advisory fees were within an acceptable range of the average advisory fees of their Lipper expense peer group and Lipper expense peer universe and consistent with reasonable expectations in light of the nature, quality and extent of services provided by the Advisor. With respect to the Institutional International Growth Fund, the Board considered that the Advisor had agreed to introduce additional breakpoints into the Fund’s advisory fee schedule. On the basis of the information provided, the Board concluded that each Fund’s advisory fee, coupled with applicable expense limitations, was reasonable in light of the nature, quality and extent of services provided by the Advisor.

Profitability. With respect to the profitability of the Management Agreement to the Advisor, the Board considered the overall fees paid under the Management Agreement, including the estimated allocated costs of the services provided and profits realized by the Advisor from its relationship with the Trust as a whole and each Fund individually. The Board concluded that the estimated profits realized by the Advisor were not unreasonable.

Economies of Scale. The Board considered the extent to which economies of scale would be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of investors. The Board noted the Advisor’s representation that certain Fund expenses are relatively fixed and unrelated to asset size and that the Advisor may enjoy some economies of

70     Semi-Annual Report June 30, 2010

scale as a Fund’s assets grow. In considering whether fee levels reflect economies of scale for the benefit of Fund investors, the Board reviewed each Fund’s asset size, breakpoints for those Funds with breakpoints in the advisory fee schedule where applicable (including the additional breakpoints for the Institutional International Growth Fund agreed to by the Advisor), the Fund’s total and net expense ratios and the expense limitations in place and/or proposed, and concluded that in the aggregate they reasonably reflect appropriate recognition of any economies of scale.

Other Benefits to the Advisor. The Board considered benefits derived by the Advisor from its relationship with the Funds, including (i) non-advisory fee revenue from the Funds in the form of shareholder administration fees, service fees and/or distribution fees and the payment of some or all of those revenues to affiliates or third parties, (ii) soft dollars, which pertain primarily to the Funds investing in equity securities, and (iii) favorable media coverage. The Board concluded that, taking into account these benefits, each Fund’s advisory fee was reasonable.

Conclusion. Based on all of the information considered and the conclusions reached, the Board determined that the terms of the Management Agreement continue to be fair and reasonable and that the continuation of the Management Agreement is in the best interests of each Fund.

June 30, 2010 William Blair Funds     71

(unaudited)

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling 1-800-635-2886 (in Massachusetts 1-800-635-2840), at www.williamblairfunds.com and on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules

Each Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended March 31 and September 30) on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are also available on the Fund’s website at www.williamblairfunds.com.

Additional Federal Income Tax Information: (unaudited)

The following table provides the percentage of the 2009 year-end distributions that qualify for the dividend received deduction, and the qualified dividend income percentage:

Portfolio	Dividend Received Deduction%		Qualified Dividend Income%
Institutional International Growth	0.00	%	100.00	%
Institutional International Equity	1.30	%	100.00	%
International Small Cap Growth	0.00	%	100.00	%
Emerging Markets Growth	0.00	%	69.26	%
Emerging Leaders Growth	0.00	%	57.56	%
Bond	0.00	%	0.00	%
Low Duration	0.00	%	0.00	%

In January 2010, you were notified on IRS Form 1099-Div or substitute 1099 DIV as to the Federal tax status of the distributions received by you in the calendar year 2009.

72     Semi-Annual Report June 30, 2010

Useful Information About Your Report (unaudited)

Please refer to this information when reviewing the Expense Example for each Portfolio.

Expense Example

As a shareholder of a Portfolio, you incur ongoing costs, including management fees and other Portfolio expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Portfolio’s 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period from January 1, 2010 to June 30, 2010.

Actual Expenses

In each example, the first line for each share class in the table provides information about the actual account values and actual expenses. These expenses reflect the effect of any expense cap applicable to the share class during the period. Without this expense cap, the costs shown in the table would have been higher. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes

In each example, the second line for each share class in the table provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses. This is not the Portfolio’s 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 Portfolio to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in both examples are meant to highlight your ongoing costs only and do not reflect any transactional costs or account type fees. These fees are fully described in the prospectus. Therefore, the second line of each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds.

June 30, 2010 William Blair Funds     73

Fund Expenses (unaudited)

The examples below show you the ongoing costs (in dollars) of investing in your fund and allows you to compare these costs with those of other mutual funds. Please refer to previous page for a detailed explanation of the information presented on this chart.

Expense Example	Beginning Account Value 1/1/2010		Ending Account Value 6/30/2010		Expenses Paid During the Period(a)		Annualized Expense Ratio
Institutional International Growth Fund
Institutional Class-actual return	$	1,000.00	$	956.60	$	4.85	1.00	%
Institutional Class-hypothetical 5% return		1,000.00		1,019.84		5.01	1.00
Institutional International Equity Fund
Class I-actual return		1,000.00		907.50		5.06	1.07
Institutional Class-hypothetical 5% return		1,000.00		1,019.49		5.36	1.07
International Small Cap Growth Fund
Institutional Class-actual return		1,000.00		979.10		5.35	1.09
Institutional Class-hypothetical 5% return		1,000.00		1,019.39		5.46	1.09
Emerging Markets Growth Fund
Institutional Class-actual return		1,000.00		959.30		5.73	1.18
Institutional Class-hypothetical 5% return		1,000.00		1,018.94		5.91	1.18
Emerging Leaders Growth Fund
Institutional Class-actual return		1,000.00		957.10		6.07	1.25
Institutional Class-hypothetical 5% return		1,000.00		1,018.60		6.26	1.25
Bond Fund
Institutional Class-actual return		1,000.00		1,053.70		1.78	0.35
Institutional Class-hypothetical 5% return		1,000.00		1,023.06		1.76	0.35
Low Duration Fund
Institutional Class-actual return		1,000.00		1,016.60		2.00	0.40
Institutional Class-hypothetical 5% return		1,000.00		1,022.81		2.01	0.40

(a) Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period 181, and divided by 365 (to reflect the one-half year period).

74     Semi-Annual Report June 30, 2010

BOARD OF TRUSTEES

Ann P. McDermott

Director and Trustee

Profit and not-for-profit organizations

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, Chairperson and President

Principal, William Blair & Company, L.L.C.,

Thomas J. Skelly

Retired Managing Partner, Accenture U.S.

Richard W. Smirl

Senior Vice President, William Blair & Company, L.L.C.,

Robert E. Wood II

Retired Executive Vice President, Morgan Stanley Dean Witter

Officers

Michael P. Balkin, Senior Vice President

Karl W. Brewer, Senior Vice President

David C. Fording, Senior Vice President

James S. Golan, Senior Vice President

W. George Greig, Senior Vice President

Michael A. Jancosek, Senior Vice President

John F. Jostrand, Senior Vice President

Robert C. Lanphier, IV, Senior Vice President

Mark T. Leslie, Senior Vice President

Matthew A. Litfin, Senior Vice President

Kenneth J. McAtamney, Senior Vice President

Todd M. McClone, Senior Vice President

Tracy McCormick, Senior Vice President

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

David P. Ricci, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Chad M. Kilmer, Vice President

Kathleen M. Lynch, Vice President

Paul J. Sularz, Vice President

Walter R. Randall, Jr., Chief Compliance Officer

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

Investment Advisor

William Blair & Company, L.L.C.

Legal Counsel

Vedder Price P.C.

Transfer Agent

Boston Financial Data Services, Inc.

P.O. Box 8506

Boston, MA 02266-8506

For customer assistance, call 1-800-635-2886

(Massachusetts 1-800-635-2840)

June 30, 2010 William Blair Funds     75

INSTITUTIONAL FUNDS

Institutional International Growth Fund

Institutional International Equity Fund

International Small Cap Growth Fund - Institutional Class Shares

Emerging Markets Growth Fund - Institutional Class Shares

Emerging Leaders Growth Fund - Institutional Class Shares

Bond Fund - Institutional Class Shares

Low Duration - Institutional Class Shares

222 West Adams Street

Chicago, IL 60606

800.742.7272   Ÿ  www.williamblairfunds.com

^© William Blair & Company, L.L.C., distributor

Item 2. Code of Ethics

Not applicable to this filing.

Item 3. Audit Committee Financial Expert

Not applicable to this filing.

Item 4. Principal Accountant Fees and Services

Not applicable to this filing.

Item 5. Audit Committee of Listed Registrants

Not Applicable to this Registrant, insofar as the Registrant is not a listed company.

Item 6. Schedule of Investments

See Schedule of Investments in Item 1

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

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 8. Portfolio Managers of Closed Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

Item 9. Purchase of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

Not applicable to this Registrant, insofar as 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 Trustees since the Registrant last provided disclosure in response to this item.

Item 11.

Controls and Procedures

(a) The Registrant’s principal executive and principal financial officer, or persons performing similar functions, have concluded that the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3 (b) under the 1940 Act (17 CFR 270.30a-3(b) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the final 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

12. (a) (1) Code of Ethics

Not applicable because it is posted on Registrant’s website.

12. (a) (2) (1)

Certification of Principal Executive Officer Required by Rule 30a-2(a) of the Investment Company Act

12. (a) (2) (2)

Certification of Principal Financial Officer Required by Rule 30a-2(a) of the Investment Company Act.

12. (a) (3)

Not applicable to this Registrant.

12. (b)

Certification of Chief Executive Officer and Certification of Chief Financial Officer Required by Rule 30a-2(b) of the Investment Company Act

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.

	William Blair Funds
	/s/ Michelle R. Seitz
By:	Michelle R. Seitz
	President (Chief Executive Officer)

Date: August 24, 2010

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

/s/ Michelle R. Seitz

By:	Michelle R. Seitz
	President (Chief Executive Officer)

Date: August 24, 2010

/s/ Colette M. Garavalia

By:	Colette M. Garavalia
	Treasurer (Chief Financial Officer)

Date: August 24, 2010