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2011 Annual Report

Our Firm

Your Advantage

Great Outcomes. Done Well.

At Baird, we have the advantage of being independent and employee-owned. That’s why we can afford a long-term commitment to providing what truly makes a difference to our clients. Like objective advice you can trust, professional relationships you can count on and global capabilities that are the foundation of great outcomes. That’s why Baird’s advantage is your advantage.

A Message from Paul Purcell

Being the best for our clients

Baird’s sole mission is to give our clients great advice and outstanding service while Being a great place to work. everything else follows.

The primary advantage Baird gains from being independent and employee-owned is our freedom to focus on what makes a meaningful difference to our clients. In 2011, faced again with volatile markets and economic uncertainties, clients looked to Baird for the expert advice, enduring relationships and creative solutions that help them keep moving toward their objectives, even during challenging times.

The trust clients place in us is the very foundation of our business, and we care passionately about the results and quality of experience we create for them. Market forces and client expectations will influence the definition of “great outcomes” in Baird’s mantra,

“Great outcomes. Done well.” But a job “done well” is always in our hands. We are fully responsible for the care, communication, teamwork and understanding that define the best investing, advisory and working relationships. It’s a responsibility I am proud to say Baird associates enthusiastically embrace and one that our associate ownership fully supports. It is the “secret sauce” that makes Baird such a satisfying place to work and to work with.

Strong Performance

Across all of our businesses, we build strong client relationships by keeping our clients’ best interests at heart. In 2011, those relationships drove record results

in Baird’s Private Wealth Management, Equity Capital Markets and Asset Management businesses. Within Equity Capital Markets, our Institutional Equities & Research team produced its 17th consecutive year of increased revenues, while Investment Banking’s record revenues were 42% higher than its previous record, set in 2007. Private Equity recorded one of its best years ever. Fixed Income Capital Market’s results were down as expected in the context of historically low interest rates. Baird nevertheless maintained its position as the nation’s leading underwriter of municipal bonds, based on the number of issues.

Protect and grow the assets in our care

Across each of our five businesses, Baird’s primary product is quality advice and the deep expertise that stands behind it. While others have downsized, Baird has added hundreds of senior professionals and expanded growth opportunities for all of our associates. Today, we are better positioned than ever to provide the trusted, objective advice our clients need.

Firmwide Client AssetsBaird managed or oversaw more than $87 billion in client assets at the end of 2011.

These results in an often difficult year point once again to the strategic value of Baird’s platform of five strong and complementary businesses.

Unlike most of the financial services industry, Baird posted record revenues and strong earnings during 2011. Net revenues totaled $925 million, up 9% from 2010. Operating income of $86 million was 2% higher than the previous year.1 Earnings before taxes were 6% higher than a year ago, primarily because of our reduced long-term financing costs. Baird’s return on equity was 10%. Our continuing profitability – Baird has been profitable throughout the global financial crisis that began in late 2007 – enabled us to retire the remaining debt from our associate-led

buyback three years early and pay a sizable cash dividend in 2011. We ended the year with a strong balance sheet, considerable excess capital and a prudent amount of debt.

The 11% compound annual growth in Baird’s book value over the past 10 years, compared to the industry’s substantial decline in stock price value over the same period (see chart on Baird’s Stock Value), is more than a strong validation of our business model. Sustainable profits enable us to make investments that deepen our capabilities for those we serve. That Baird is privately held and employee-owned – and therefore has the strategic leeway to make these investments when and how we choose – has proven to be a

distinct competitive advantage. More importantly, it has proven to be a distinct client advantage.

Our firm is your advantage

Baird’s strong relative performance can be summed up in a relatively simple statement: Our sole mission is to give our clients great advice and outstanding service, while being a great place to work. As a private firm of employee owners, we put our own money at risk every day. How we utilize it has a direct impact on us collectively, so we manage conservatively and push continually to excel at what we do.

1 Financial results do not reflect the consolidation of certain private equity partnerships.

Global Capabilities for the middle market

Comprehensive advice is the foundation of all Baird businesses. Advice you can trust to span the globe, deepen understanding and capture the best opportunities for your portfolio or company.

Watch Video: Steve Booth (Director, Investment Banking) Watch Video: Gordon Pan (Managing partner, Private Equity) Watch Video: Mike Schroeder (President, Private Wealth Management)

Baird has more than 100 locations globally, as well as operating partners in strategic locations.

That’s why, in just the past five years, we have:

  • Hired hundreds of experienced Financial Advisors and opened 21 new Private Wealth Management offices across the United States
  • Grown our Research coverage by 33%
  • Expanded our Investment Banking team by 74%
  • Raised $1 billion in capital for our global private equity funds
  • Increased our Fixed Income Capital Markets teams by 60%
  • Grown our Asset Management capabilities, leading to a 25% increase in assets under management

Our ability to undertake investments such as these is one of the significant advantages Baird enjoys. We can make commitments when others cannot, whether that is to keep our teams together during down markets for the benefit of clients or to add expertise by hiring men and women looking for a place where their contribution will be valued.

Investing in our team

Since the beginning of 2007, for example, Baird employment has increased more than 25% while the U.S. securities industry has reduced employment by nearly 4% and announced further industry layoffs for 2012 and beyond. This has created an opportunity for us to deepen our talent pool. And, in fact, more than 40% of our employment growth in the past five years

has been among senior professionals, at the Director level or higher.

We have also invested in geographic expansion to better serve corporations, institutions and individuals across the United States and throughout North America, Europe and Asia. And we have committed considerable resources – an increase of more than 35% in both headcount and budgets over the past two years – to build out Baird’s information technology infrastructure. Our technology investment is not only to harness the explosion of business data for the benefit of clients and our business, but also to ensure we have a world-class platform as our businesses grow.

While a certain scale of business is necessary, the pertinent fact about our ongoing investments is this: Baird is our firm. We put our own capital and reputation on the line, and we care deeply about the quality of outcomes we provide for clients. That quality is highly regarded, as a few of the many highlights of 2011 show:

  • For the eighth consecutive year, Baird ranked No. 1 for “most trusted” research in the annual Greenwich Associates’ survey of U.S. small-cap and mid-cap fund managers.
  • Our Investment Banking team won three major accolades from The M&A Advisor in 2011, including “Investment Banking Firm of the year.”
  • For the fourth consecutive year, Baird Capital Partners was recognized among the Top 20 “Consistent Performers” in Private Equity Intelligence Ltd.’s global survey of private equity funds.
  • Despite a challenging year for markets of all types, our businesses posted a 6% increase in the value of assets we manage and oversee for clients.

Staying True

We have substantially expanded our business in recent years while fiercely guarding the integrity of the culture for which Baird is respected. The people we hire are motivated by the same values we are and, as a team, Baird associates are tremendously capable and engaged. We provide a professional environment in which their work matters; they have a say in what we do and how we do it. In fact, our aspiration is to create a meaningful work/life environment in which every associate can say, “I made a difference today.”

The intensity with which senior management believes in that goal is arguably among the foremost reasons Baird’s voluntary turnover rate is significantly lower than that of the U.S. securities industry and why FORTUNE magazine has ranked Baird among the nation’s 100 Best Companies to Work For® nine years in a row.

We manage responsibly to grow consistently

With our own money on the line every day, we manage conservatively and for the long term. Baird’s sustained profitability through even the most challenging markets gives us the flexibility to make ongoing investments to serve our clients more effectively.

Growth in Baird’s Stock Value*

Those are great validations for us. But they are even better for our clients, who benefit from strong, stable relationships and a motivated workforce of owners with a view to the long term.

Developing Leaders

We have been fortunate to have tremendous continuity and single-mindedness of purpose among our senior leadership team.

That has helped us maintain the focus and values that underpin Baird’s success. One of our top priorities, and one to which we have already committed significant resources, is developing the next layers of leadership. Through a variety of programs – skill building, mentoring, coaching – we are capturing our leadership potential more quickly across all of our businesses and support services.

The quality of our talent is the future of Baird, and I have every expectation that the next generation of leaders and associates will be even more capable than the current one.

*Baird stock performance is based on the change in book value per share for Baird Holding Company common stock and includes a $7.50 per share dividend paid December 22, 2011. Baird is privately held and no public market exists for its shares. Baird can repurchase shares of Baird stock at book value when associates leave the firm. Past performance does not guarantee future results.

The Dow Jones Industrial Average, Standard & Poor’s 500 Stock Index and Standard & Poor’s 500 Financials Sector Index are unmanaged common stock indices used to measure and report value changes in the stocks comprising these indices. Indices performance information is obtained from Capital IQ and excludes dividends paid during the periods shown. Baird stock is not included in these indices.

Teamwork is built on deeply shared values

Baird’s success is built on the strong alignment of our practices with our values. Values like putting the interests of clients before our own, working in real collaboration to achieve the best possible outcomes, communicating with honesty and respect, and seeking a balance among work, home and community. We believe that the practical application of these values, coupled with broad associate ownership, has created a distinct competitive advantage that sets Baird apart.

Employment growth – Baird / U.S. Securities Industry

Increasing diversity throughout the firm also continues to be a top priority. All of our Associate Resource Groups are doing an excellent job of furthering their objectives and giving voice and leadership opportunities to an increasing number of associates. One measure of progress came in 2011 when our Women Associate Resource Group received a Diversity Award for Emerging Leadership from the Securities Industry and Financial Markets Association. This is great acknowledgment of important work because the Women ARG aims to create a work environment that will attract and retain women at all levels of Baird.

Our Firm

I can say without reservation that Baird’s great advantage is the self-determination that comes from our ownership of the firm. It drives a passion among associates for doing the right thing, day after day, for clients and for each other. And that responsibility drives an understanding that the right thing will always be the advice and execution that protect the best interests of our clients. That is our franchise, and it is the core value that will enable Baird to become the world’s leading middle-market financial services firm. Simply put, our success is due to our clients, and, in a very tangible way, it is for them.

Signed: Paul E Purcell. Chairman, President, & Cheif Executive Officer

Businesses

at a Glance

Baird is a privately held, employee-owned financial services company that oversees or manages more than $87 billion in client assets. Over our 92-year history, we’ve built a strong platform of five complementary businesses that help diversify and balance revenue through all types

of market conditions. This gives us the financial strength to make ongoing investments in the professional capabilities and distinctive culture that make Baird a trusted partner for individuals, corporations and institutions across the United States, Europe and Asia.


STRUCTURED FOR SUCCESS

Baird’s independence and employee ownership give us the freedom to focus on what we believe is in the best long-term interests of our clients. While most of the financial services industry has downsized in recent years, we’ve made sizable investments in deepening our expertise and broadening our reach, while maintaining substantial capital and a strong balance sheet. Nearly half of all Baird associates own shares in the company, which promotes a very close alignment with the interests of our clients.

Private Wealth Management

 

Watch Video: Mike Schroeder (President, Private Wealth Management)

Joe Hoon, Financial Advisor, Roseville / John Fitzgibbons, Financial Advisor, San Francisco /
Joyce Linker, Financial Advisor, San Francisco

Baird’s Private Wealth Management professionals provide comprehensive wealth management strategies and solutions for high-net-worth individuals and their families across the United States.

  • Nearly $68 billion in client assets overseen or managed by 694 highly skilled Financial Advisors and their teams
  • Approximately 60 in-house specialists provide objective advice for all aspects of wealth management, retirement planning, charitable giving and wealth transfer
  • Serves clients coast to coast from 69 branch offices in 23 states
  • Barron’s Top Wealth Managers list, 2007–2011
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Our Financial Advisors believe that building and protecting wealth has some basic requirements. Like expert advice, conflict-free solutions, risk that’s carefully managed, and a partnership clients can trust to be there through all of life’s changes.

Wealth Management Takes a Team

Wealth management is an increasingly complex undertaking. It can encompass income planning, retirement and estate planning, philanthropic activities and wealth transfer to future generations. All of these can be dramatically impacted by volatile markets, low interest rates and an uncertain tax and regulatory environment.

For most of the affluent clients Baird serves – executives, professionals, business owners and multi-generational families – it takes a team to develop comprehensive answers for the range of life-cycle and market-cycle issues they face. Baird Financial Advisors bring an average of 18 years of financial industry experience to the sophisticated solutions they create for clients. All of our Financial Advisors have direct access to a highly skilled, in-house team of approximately 60 specialists in areas such as investment research, tax and estate planning and risk-management strategies, as well as services for business owners and corporate executives. More than half of our advisors work on teams to leverage each other’s expertise and broaden the skills they offer. In addition, our Financial Advisors frequently work with our clients’ outside advisors, including attorneys and tax professionals, to ensure that clients receive integrated advice on all aspects of managing their wealth.

Expert Advice, Clear Accountability

Low interest rates, volatile equity markets and sluggish economic growth have left many clients reticent to actively manage their wealth. While that may be understandable, the risk of doing nothing, or doing nothing differently, can be substantial. Baird Financial Advisors are skilled in developing long-term wealth management strategies that respond to their clients’ circumstances and attitudes. And they are supported by Private Wealth Management’s products and services specialists, who offer the expert advice and rigorous analysis needed for a customized asset allocation strategy clients can trust.

After extensive research, we expanded the types of solutions Financial Advisors can offer clients to include investments that can be effective in dynamic markets. Our fee-based advisory programs now embrace tactical portfolio allocation and alternative asset strategies as well as traditional asset classes. We’re also delivering new tools to enhance client reporting. In late 2011, Private Wealth Management rolled out a significant technology enhancement that allows a sharper focus on wealth creation and protection. The new Baird Wealth Report is a powerful suite of reports that can be customized to each client’s needs. This new tool enables Financial Advisors and their clients to monitor performance on all of their accounts in order to facilitate well-informed, timely decisions.

Investing for Great Outcomes

In the current business climate, more senior investment professionals are re-evaluating their situation to make certain the firm they work for offers the stability, resources and culture their clients need. That has given Baird an unprecedented opportunity to recruit some of the most talented and successful Financial Advisors across the country. In the past three years, we have hired 234 advisors and branch managers, strengthening existing offices and opening new offices from coast to coast.

Nearly a third of our Financial Advisors hold professional designations in areas such as financial planning and asset management. In addition, we provide advanced training for all Financial Advisors to support them in addressing the complex needs of wealthy clients. We also offer training and coaching in best practices so that advisors can focus their energy on building strong, long-term relationships with clients. Technology continues to be a major investment as well. In addition to the 2011 launch of the Baird Wealth Report, in 2012 Private Wealth Management will introduce a Unified Managed Account solution that allows Financial Advisors to build sophisticated managed portfolios that combine asset classes and investment solutions in a streamlined, client-friendly account structure.

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Equity Capital Markets

Institutional Equities & Research • Investment Banking

Watch Video: Steve Booth (Director, Investment Banking)

Anthony Siu, Investment Banker, Shanghai / Gary Page, Investment Banker, London /
Joachim Beickler, Investment Banker, Frankfurt

Baird’s Institutional Equities & Research team delivers research, sales and trading expertise to institutional equity investors globally. Our Investment Banking group provides equity underwriting and mergers and acquisitions advisory services to middle-market companies.

  • 671 companies under research coverage
  • Ranked No. 1 once again for “most trusted” and “most important” research firm in 2011 Greenwich small/mid-cap survey*
  • Advised on more than 150 financings and global M&A transactions in 2011 with a total value of $33.7 billion
  • Earned 2011 “Investment Banking Firm of the Year” award along with equity and M&A transaction honors from The M&A Advisor

*Greenwich Associates U.S. Equity Investors – Small/Mid-Cap Funds, April 2011. Surveys conducted with 98 U.S. small-cap and mid-cap fund managers. Rankings based on top 10 research firms in survey.

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Ensuring our Equity Capital Markets clients receive the advice, execution and continuity they can trust is a commitment that does not fluctuate with the markets. That’s why we continue to deepen the expertise that leads to great outcomes.

An unrelenting focus on our clients’ interests

Despite very challenging markets in recent years, Equity Capital Markets has continued to invest in what our corporate and institutional clients value most about their relationships with Baird – best-in-class research, deep expertise in trading, capital markets and advisory services, and a strong, stable team of senior professionals. During 2011, in sharp contrast to most competitors, we expanded research coverage, deepened the skills available through our sales and trading desks, and added significantly to our banking expertise in key sectors.

By all measures, these multi-year investments in our platform produced exceptional results, including record revenues in 2011. Even more gratifying are the third-party acknowledgments of the quality advice and execution Baird delivers. Institutional Equities & Research topped the annual Greenwich Associates’ survey1 of small-cap and mid-cap fund managers, again ranking No. 1 among all U.S. investment firms for “most trusted research” and “most important” research firm. Investment Banking capped off an outstanding year with several awards from The M&A Advisor that cited the high-quality advisory and equity origination services that distinguish Baird. Among these honors was the coveted “Investment Banking Firm of the Year.”

1 Greenwich Associates U.S. Equity Investors – Small/Mid-Cap Funds, April 2011. Surveys conducted with 98 U.S. small-cap and mid-cap fund managers. Rankings based on top 10 research firms in survey.

Institutional equities & research

Baird made one of the largest investments ever in its research platform during 2011. We expanded our research team to 122 and significantly increased our coverage of Energy Exploration and Production and Energy Master Limited Partnerships. We also initiated coverage of the Internet and Interactive Media industry. Baird now publishes research on 671 companies representing 41% of total U.S. market capitalization. Over the past five years, we have increased our research coverage by 33%.

Institutional clients trust Baird to deliver objective fundamental research as well as superior access to company management teams through conferences, field trips and management visits. Their confidence was demonstrated once again in the results of the 2011 Greenwich Associates survey of small-cap and mid-cap fund managers. Among the 14 No. 1 rankings earned by Baird were “most useful conferences and seminars” and “best access to management.” In 2011, we held six major investor conferences. These brought together institutional and private equity investors with senior executives from 515 leading middle-market companies in formal presentations and thousands of one-on-one meetings. Baird also hosted more than 450 corporate management trips, including 109 in international markets.

During the volatile markets of 2011, our equity sales and trading teams continued to focus on meeting our clients’ needs for tailored investment ideas and quality trade execution. Our clients rewarded this focus with a 7% increase in institutional trading volume compared to a substantial decline for the overall industry. And for the ninth consecutive year, our sales and trading operations were ranked No. 1 for “overall sales quality” and “provides best insights that generate alpha” in the 2011 Greenwich Associates’ survey of small-cap and mid-cap fund managers.

Baird’s continued market-share gains are a direct result of our ongoing commitment to grow and strengthen our sales and trading desks, electronic trading capabilities and international presence. During 2011, we expanded our New York and Boston-based sales and trading teams, expanded our international equity trading capabilities and launched sector-focused trading analytics and research. We also continue to invest in our full range of best execution capabilities. Our strategic partnership with Fox River Execution has contributed to significant growth in our overall algorithmic business and complements our program trading and CSA/soft dollar execution services.

Investment Banking

Baird’s Investment Banking group provides comprehensive advisory, equity financing and restructuring services through more than 200 banking professionals based in the United States, Europe and Asia. We have deep expertise in nearly a dozen industry verticals, with dedicated industry bankers supported by top-rated equity research. Two key advantages differentiate Baird from its competitors. The first is an incentive structure that encourages our bankers to work across geographies, product groups and industries to achieve the best possible outcomes for clients. The second is the strategic freedom we have to not only keep our team together when markets decline, but also make ongoing investments that deepen Investment Banking’s capabilities. Since 2007, we have recruited and promoted a total of 30 bankers at the Managing director level, expanded our platform to 13 offices worldwide and broadened our core business to growth sectors such as Consumer, Energy, Health Care, Real Estate and Technology.

These investments in banking capabilities and strong client relationships again paid significant returns in increased assignments and market share. Investment Banking posted record revenues in 2011, 42% higher than our previous record set in 2007. Clients retained us for more transactions of larger median size and across a wider span of geographies and industry verticals than ever before.

For the middle-market company contemplating a sale or acquisition, Baird offers a complete solution. Our integrated, cross-border team is skilled at developing creative solutions for clients around the world. Our bankers have deep industry knowledge, augmented by award-winning research and strong relationships with both strategic and financial buyers. Our dedicated financial sponsor group delivers our services to leading private equity firms around the world.

During 2011, we advised on a record 73 M&A assignments with an aggregate value of more than $13 billion; 42% of those transactions involved an international party. Among them was the sale of Summit Energy, a complex, global and highly successful transaction that was named “Energy Deal of the year” by The M&A Advisor.

Baird’s equity financing capabilities leverage our exceptional access to small- and mid-cap portfolio managers globally. Despite challenging equity capital markets in the second half of the year, Baird lead-managed or co-managed a record 81 financings during 2011, with a total value of more than $20 billion. Among 2011 transactions was a follow-on offering for Vera Bradley, Inc. Previously, we lead-managed Vera Bradley’s initial public offering, which received The M&A Advisor’s 2011 “Equity Financing Deal of the year” award. We finished the year with a record backlog of 34 initial public offerings on file.

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Private Equity

Baird Capital Partners • Baird Venture Partners • Baird Capital Partners Europe • Baird Capital Partners Asia

Watch Video: Gordon Pan (Managing partner, Private Equity)

Martyn Ngo, General Manager, Baird Asia / Simon Havers, Chief Executive, Baird Capital Partners Europe /
Brett Tucker, Partner, Baird Capital Partners Asia

Baird Private Equity makes venture capital, growth equity and buyout investments in lower middle-market companies in the Business Services, Healthcare/Life Sciences and Manufactured Products sectors.

  • $2.8 billion in capital raised since inception and investments made in 258 portfolio companies
  • Baird Capital Partners ranked as a Top 20 “Consistent Performer” in the 2011 Preqin survey of 782 private equity funds worldwide
  • 62 investment and operating professionals in the United States, Europe and Asia
  • 14 operating professionals in China and India support our portfolio companies
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Baird’s Private Equity team is driven by the relentless pursuit of consistent, superior returns. That means a clear focus on smaller, high-potential companies. And global operating resources and deep sector expertise to build market-leading companies.

Building value from smaller, high-performing opportunities

For the fourth consecutive year, Baird Capital Partners, one of the four fund families managed by Baird Private Equity, was recognized as one of the most “consistent performers” among international buyout managers by Private Equity Intelligence Ltd. Baird Capital Partners ranked among the Top 20 of the more than 780 funds the survey analyzed.

Our consistency is built on a strong core strategy. We have a deep understanding of smaller, high-performing companies in the Business Services, Healthcare/Life Sciences and Manufactured Products sectors across the United States, Europe and Asia. We partner with exceptional management teams and work with these leaders to provide strategies and tools to help them succeed. Our extensive global platform enables us to accelerate revenue growth and drive operating efficiencies at our portfolio companies.

Private Equity’s focus on maintaining portfolio value throughout the downturn led to outstanding performance during 2011. We exited six investments, realizing a total of $217 million for investors. We also invested $142 million across our funds, principally in 14 new companies, as well as a number of smaller, add-on acquisitions for existing portfolio companies. These new investments included nine by Baird venture Partners, a record number in a given year.

Our global platform drives growth

Baird Private Equity has built a global investment platform that is among the most extensive in the lower middle market. Our 62 investment and operating professionals collaborate in four discrete teams from offices in Chicago, London, Milwaukee and Shanghai. We complement the skill set of our portfolio companies’ entrepreneurial management teams with approximately 30 current and former senior executives who serve on sector-focused advisory boards. Similarly, our Portfolio Management Program supports our investment teams and companies by implementing portfolio-wide and company-specific programs such as global sourcing, supplier/vendor management, working capital reduction and acquisition integration. We also leverage Baird’s broad network of global contacts to provide our management teams access to industry relationships, professional talent and strategic buyers and sellers.

With 14 operating professionals in China and India, we have one of the largest operating teams in Asia supporting a lower middle-market private equity group. Baird Asia works extensively with select portfolio companies, leveraging its on-the-ground team to develop and implement strategies such as creating sourcing relationships, building supply chains, establishing Asian operations and selling in Asia. Our Asia team has worked with more than 20 portfolio companies and helped generate more than $15 million in operating improvements.

Creating value from companies and investors

Baird Private Equity makes venture capital, growth equity and buyout investments through a series of limited partnerships. Our active portfolio has combined revenue in excess of $2 billion and more than 10,000 employees. We generate strong deal flow each year and look to partner with companies committed to enhancing processes, expanding product offerings and attracting new customers globally. During 2011, we sourced approximately 1,700 potential investment opportunities across our funds.

United States. Baird Capital Partners makes buyout investments in lower middle-market companies in the Business Services, Healthcare and Manufactured Products sectors. Baird Venture Partners invests in early-stage and expansion-stage companies in the Business Services and Life Sciences sectors. During 2011, Baird Capital Partners V held its final closing, raising nearly $300 million in total and completing three new investments.

Europe. Baird Capital Partners Europe makes buyout investments in lower middle-market companies in the Business Services, Healthcare and Manufactured Products sectors in the United Kingdom.

Asia. Baird Capital Partners Asia provides growth equity capital to smaller, high-potential companies in China or to those with substantial operations and growth opportunities in China.

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Fixed Income Capital Markets

Fixed Income Sales And Trading • Public Finance

Alan Denton, Institutional Sales, Chicago / Pete Klebba, Institutional Sales, Milwaukee /
Maria Chase, Manager of FICM Administration, Milwaukee

Baird’s Fixed Income Sales and Trading team provides investment ideas and trade execution for institutional clients in the United States. Our Public Finance professionals meet the debt underwriting and advisory needs of public- and private-sector clients.

  • 110 institutional sales, trading and analytics professionals in 27 offices across the United States
  • $250 billion in taxable and tax-exempt bonds traded in 2011
  • 63 Public Finance banking professionals in 11 offices nationally
  • A leading U.S. municipal underwriter: in 2011, Top 10 in issues under $100 million and Top 5 in competitive underwritings of all sizes, based on par value, according to Thomson Reuters

*Based on number of issues, according to Thomson Reuters

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As competitors have downsized or exited the business, Fixed Income Capital Markets has continued to hire experienced professionals who are broadening our account coverage, deepening our analytical skills and expanding our product offerings.

Broader Reach, Deeper Relationships

Through some of the strongest and weakest fixed income markets in recent memory, Baird has continued to build its Fixed Income Sales and Trading and Public Finance teams nationwide for the benefit of our clients. With interest rates at historic lows and decreased activity in municipal underwriting during 2011, our teams focused on what they do best: finding innovative ways to add value to their client relationships.

With the addition of new offices in Portland and Atlanta during 2011, Fixed Income Sales and Trading has grown to 27 offices and 110 institutional sales, trading and analytics professionals across the country. Public Finance has also built its national presence, operating from 11 offices – including a new office in Portland – with a team of 63 banking professionals. This combination of knowledgable professionals and continuous commitment to fixed income markets has substantially increased not only our sales and trading volumes but also our national ranking among municipal underwriters. According to Thomson Reuters, in 2011 Baird ranked among the Top 10 underwriters of issues of $100 million or less and among the Top 5 in competitive underwritings of all sizes, based on par value of issues.

Fixed income sales and trading

The combination of historically low yields and investors’ reluctance to lengthen the average term of their bond holdings affected all participants in the fixed income markets during 2011. Reduced trading activity nationwide pushed down volumes compared to 2010, causing many firms to continue the downsizing they began in 2007. These broad industry issues coincided with Baird’s ongoing commitment to invest in building our trading desks, analytics group, institutional sales team and national network of offices. In addition to opening two new sales offices during 2011, we added three new taxable traders in New York. We now serve institutional clients nationwide from 27 offices across the country with a seasoned team of sales and trading professionals who average 15 years of experience. This includes a senior group of traders and underwriters who have built Baird into one of the country’s leading managers of negotiated and competitively bid syndicates for municipal underwritings.

This combination of deep expertise and continuous commitment to fixed income markets has enhanced Baird’s national profile as well as our ability to offer clients innovative solutions. As a result, during 2011 Fixed Income Sales and Trading enjoyed strong relative performance in challenging industry conditions.

Public Finance

2011 was a challenging year for municipalities across the country. With both tax and state-shared revenues uncertain, and taxpayers wary of approving bond initiatives, many infrastructure projects were deferred. Even with bond issuance down, Baird’s Public Finance bankers continued to work actively with clients, helping them manage their economic challenges by providing value-added advice on current budgets, five-year forecasts of revenues and legislative strategies to assist distressed communities.

Over the past five years, Baird has made substantial investments in our Public Finance capabilities to provide more service to a broader range of clients. As we expanded our banking team by 60%, we added experienced professionals in new markets and new skills in specialized areas of financing. These investments are generating results for our clients and us. In 2011, for the fourth time since 2005, Baird was the advisor or underwriter to a public finance transaction honored as a “Deal of the Year” by The Bond Buyer. The 2011 transaction was a groundbreaking solution for the city of Ecorse, Michigan, which had been operating under receivership of the state. Baird bankers, collaborating across offices and with city and state officials, created an innovative bond structure that allowed the city access to the market while providing significant bondholder protections. The deal received an “A” rating from Standard & Poor’s.

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Asset Management

Baird Advisors • Baird Investment Management • Baird Public Investment Advisors

Mary Ellen Stanek, Director of Asset Management / Chuck Severson, Senior Portfolio Manager, Baird Investment Management – Growth / Michelle Stevens, Senior Portfolio Manager, Baird Investment Management – Value

Baird’s experienced fixed income and equity portfolio managers offer disciplined investing and outstanding service to institutional investors and high-net-worth individuals through customized portfolios and mutual funds.

  • $15.7 billion in institutional fixed income portfolios and mutual funds under management by Baird Advisors
  • $1 billion under management for municipalities and school districts by Baird Public Investment Advisors
  • $504 million in equity portfolios and mutual funds managed by Baird Investment Management
  • Minority interest in RiverFront Investment Group, which manages $3 billion
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In the volatile, low-yield markets of 2011, our Asset Management team focused on the fundamentals behind solid outcomes. Disciplined investing for the long term. And responsive service backed by direct access to senior portfolio managers.

Baird Advisors

It was another exceptionally challenging year for fixed income markets in 2011. The Baird Advisors team focused on what clients expect them to do exceptionally well year after year – manage assets and relationships with consistency and continuity.

For nearly 30 years, Baird Advisors’ senior portfolio managers have worked together to build a consistent approach to fixed income portfolio management. Beginning with a duration-neutral strategy, we focus on adding value over benchmark returns through yield-curve positioning, sector allocation, security selection and competitive execution. This disciplined and risk-controlled approach has generated consistent, competitive performance over complete market cycles. During 2011, it enabled Baird Advisors to generate strong absolute and relative investment results. As always, our senior portfolio managers provided responsive, hands-on service, meeting with clients across the country to reaffirm the long-term objectives for their fixed income portfolios.

The five Baird Bond Funds are managed with the same commitment to strategy, discipline and service we provide on separately managed portfolios. The strong track records and competitive costs for the Funds attracted numerous new distribution channels during the year. That helped drive a 16% increase in assets, which totaled $5.4 billion at year end. Total assets under management by Baird Advisors increased to $15.7 billion.

Baird Investment Management

From our nationally recognized research to investment banking and private equity, Baird understands what makes a great mid-market company. Baird Investment Management has long demonstrated this understanding. Our mid-cap growth investments, guided by the same portfolio manager since the strategy’s inception in 1993, are focused on delivering competitive, consistent performance against benchmarks, with lower-than-average volatility.

For our mutual funds, as well as our separately managed accounts, Baird Investment Management analysts and portfolio managers pursue detailed, bottom-up research to identify companies with strong fundamentals, positive industry trends and quality management. Protecting capital and minimizing volatility relative to benchmarks are key goals of our process. We also ensure clients have direct access to our senior portfolio managers, which has enabled us to forge strong long-term partnerships.

Adding breadth to our equity asset management is a key strategic priority for Baird. At the end of 2011, we announced the addition of a small- and mid-cap value investment team that has successfully managed these equity strategies since 2004. The team brings a disciplined value focus and strong track record to the management of institutional and individual equity portfolios. We expect to broaden the Baird Funds offering in 2012.

Asset Management Initiatives

Baird Public Investment Advisors. With municipalities and school districts experiencing ongoing revenue challenges, prudent investment of public funds is essential. Baird Public Investment Advisors provides rigorous analysis of investment policy, risk tolerance, and historical and expected cash flows. We also conduct investment reviews and provide comprehensive investment reporting and analysis. Our portfolio managers work directly with clients’ administrative teams to develop investment portfolios that seek to maximize interest earnings while maintaining safety and liquidity. Despite the low-interest-rate environment, assets under management – a mix of construction bond funds and operating reserve assets – remained at more than $1 billion at the end of 2011. The business has grown to serve more than 100 clients in five states.

RiverFront Investment Group, an employee-owned, independent investment advisor, was formed in 2008 with Baird as a minority investor. RiverFront offers numerous asset allocation and exchange-traded fund portfolios designed to address an array of investment strategies. These portfolios are available in a combination of mutual funds and separately managed accounts. The group has experienced substantial growth in assets since inception, ending 2011 with $3 billion in assets under management.

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Living Values

Baird associates are dedicated to creating great outcomes for their communities. Many of our associates have leadership roles in civic and charitable causes, bringing considerable experience and energy to helping these organizations achieve their goals.

Our Community Involvement Associate Resource Group inaugurated Baird Gives Back Day in 2009 to encourage collaborative volunteering. By 2011, the event spanned an entire week and involved more than 700 associates from nearly 40 Baird offices across the United States and in Asia.

Caring Service

Our commitment to the communities where we work and live mirrors the caring, service and teamwork that Baird associates share at work. We encourage that commitment throughout the year with our Baird Cares program, which offers paid time off for volunteer activities. Baird Gives Back Week creates companywide volunteer activities where hundreds of associates come together to benefit their local communities.

Giving Generously

In addition to their volunteer activities, Baird associates reached deeply into their own pockets during 2011 to assist those in need. United Way donations set another record as Milwaukee-area associates surpassed $1 million for the second consecutive campaign. Chicago and Cincinnati also set new high-water marks. In each of these workplace campaigns, associate participation once again topped 95%.

Baird Foundation

Baird has a long-standing tradition of giving back to the communities we serve and supporting our associates’ efforts to do the same. Through matching gift programs in the United States, Europe and Asia, Baird supports associates’ volunteer and charitable activities. Baird Foundation also makes contributions in the areas of health, education, the arts and diversity. In 2011, Baird Foundation granted more than 2,200 gifts totaling nearly $2.6 million.

Baird associates’ volunteer activities make a difference across a broad span of community life. During 2011, we lent a hand at ecology centers, local parks and an urban farm. We helped the homeless, built homes for deserving families and gave assistance to neighbors in need, from children to the elderly.

Financial Information

Operating
Results
Per Share
Data
Financial
Position
Capital Other Data
Net Revenue
(millions)
Operating
Income
(millions)
Book Value
(fully diluted)
Cash
Dividend
Total Assets
(millions)
Total Capital
(millions)
Associates Financial
Advisors
Private
Wealth
Offices
2011 $925 $86 $27.19 $7.50 $2,264 $716 2,752 694 69
2010 $847 $84 $31.51 $- $2,414 $741 2,629 680 66
2009 $718 $62 $28.60 $- $2,159 $703 2,458 660 62
2008 $680 $71 $26.89 $- $1,140 $699 2,407 600 58
2007 $729 $105 $24.84 $- $1,752 $614 2,282 592 58
2006 $624 $94 $21.17 $- $1,681 $556 2,191 591 60
2005 $588 $80 $18.44 $- $1,311 $554 2,234 600 61
2004 $566 $75 $16.10 $- $1,332 $475 2,309 632 64
2003 $502 $52 $14.09 $- $1,130 $483 2,324 664 68
2002 $484 $32 $12.65 $- $858 $447 2,402 713 69

Financial results do not reflect the consolidation of certain private equity partnerships.

Net Revenues: Net revenues have been restated for comparability as the result of two transactions: the 2005 sale of our UK equity capital markets business that focused on small-cap companies, affecting 2002–2005 revenues; and the completion of a correspondent clearing services contract with Northwestern Mutual Investment Services in 2006, affecting 2002–2006 revenues.

Book Value: Baird paid a cash dividend of $7.50 per share on December 22, 2011, which resulted in a corresponding decrease in book value. In addition, per share amounts have been restated to give effect for a two-for-one stock split, effective February 19, 2008.

Total Capital: Total Capital includes stockholders’ equity, consolidated noncontrolling interest in Baird Financial Corporation and Robert W. Baird & Co. (RWB) from associate ownership, consolidated subordinated debt and other consolidated debt having a maturity of at least one year. The regulatory net capital of RWB, the principal operating subsidiary of Baird Holding Company, was $192 million at the end of 2011, and RWB’s regulatory excess net capital was $187 million at the end of 2011, which is 36 times the required amount.

  • Net Revenues
  • (Millions)
  • 11$925
  • 10$847
  • 09$718
  • 08$680
  • 07$729
  • Operating Income
  • (Millions)
  • 11$86
  • 10$84
  • 09$62
  • 08$71
  • 07$105
  • Associates
  • 11 2,752
  • 102,629
  • 092,458
  • 082,407
  • 072,282
  • Book Value*
  • (Per Share)
  • 11 $27.19 $7.50 $34.69
  • 10$31.51
  • 09$28.60
  • 08$26.89
  • 07$24.84
  • *The 2011 value of Baird stock includes book value of $27.19 per share on December 31, 2011, and the $7.50 per share cash dividend paid on December 22, 2011.
  • Total Capital**
  • (Millions)
  • 11 $716
  • 10$741
  • 09$703
  • 08$699
  • 07$614
  • **The net reduction in total capital at the end of 2011 compared with 2010 was driven by the cash dividend paid to shareholders, partially offset by increases in capital-structure-related debt, net income and gross proceeds from option exercises.

Leadership

  • Executive Management
  • Paul E. Purcell
    Chairman, President & Chief Executive Officer
  • C.H. Randolph Lyon
    Richard F. Waid
    Vice Chairmen
  • Executive Committee
  • Steven G. Booth* Director, Investment Banking
  • Timothy P. Byrne Director, IT and PWM Research, Products & Services
  • Leslie H. Dixon Chief Human Capital Officer
  • Glen F. Hackmann General Counsel
  • Patrick S. Lawton* Director, Fixed Income Capital Markets
  • C.H. Randolph Lyon Vice Chairman
  • William W. Mahler* Chairman, Equity Capital Markets
  • Paul E. Purcell* Chairman, President & Chief Executive Officer
  • Mark A. Roble Director, Risk Management
  • Michael J. Schroeder* President, Private Wealth Management
  • Russell P. Schwei Chief Operations Officer
  • Mary Ellen Stanek* Director, Asset Management
  • Robert J. Venable* Head of Equities
  • Dominick P. Zarcone Chief Financial Officer

* Director of Baird Holding Company, Baird Financial Corporation and Robert W. Baird & Co.

  • Managing Directors
  • Asset Management
  • Mary Ellen Stanek Director
  • Baird Advisors
  • Gary A. Elfe
  • Charles B. Groeschell
  • Warren D. Pierson
  • Jay E. Schwister
  • Daniel A. Tranchita
  • Baird Investment Management
  • Reik W. Read
  • Charles F. Severson
  • Michelle E. Stevens
  • Equity Capital Markets
  • Steven G. Booth Director, Investment Banking
  • William W. Mahler Chairman, Equity Capital Markets
  • Robert J. Venable Head of Equities
  • Institutional
    Equities & Research
  • David L. AuBuchon
  • Peter S. Benedict
  • Bruce A. Bittles
  • Anthony G. Bond
  • Bart L. Breakstone
  • John F. Byrne
  • Eric W. Coldwell
  • Steven M. Dadmun
  • Richard W. Dunn
  • Richard Eastman
  • N. Gregory Gaynor
  • David A. George
  • Joseph C. Gerlach
  • Tristan Gerra
  • Gregory B. Greenhouse
  • Clare N. Hasler
  • James H. Herrick
  • Stephen J. Holt
  • Terence P. Hoy
  • Amy W. Junker
  • John T. Kennedy III
  • Craig R. Kennison
  • Barry L. Kneisel
  • David J. Koning
  • Ross J. Kopfer
  • Quintin J. Lai
  • Jon A. Langenfeld
  • David Loeb
  • Todd C. Lombra
  • Gregory J. Lutz
  • David J. Manthey
  • Marc S. Marcon
  • Bradley D. Marks
  • John S. McGregor
  • John S. McLandsborough
  • Thomas S. O’Connor
  • Ghansham Panjabi
  • Christopher Raymond
  • Daniel J. Renouard
  • John R. Roesner, Jr.
  • Brian C. Scheller
  • Todd A. Simons
  • Patrick H. Spencer
  • Daniel J. Steffes
  • David E. Tarantino
  • Brian C. Timmis
  • iNVESTMENT bANkiNG
  • Paul Bail
  • Joachim Beickler
  • Leslie Cheek IV
  • C. Christopher Coetzee
  • Joel A. Cohen
  • Brian S. Doyal
  • Louis L.R. Draper
  • John A. Fordham
  • Vinay K. Ghai
  • Steven H. Goldberg
  • Curtis H. Goot
  • Stephen B. Guy
  • Trisha K. Hansen
  • Christopher B. Harned
  • Jonathan J. Harrison
  • Christopher W. Hildreth
  • J. Michael Horwitz, Jr.
  • Gregory J. Ingram
  • Peter S. Kies
  • Thomas W. Lacy
  • Lance R. Lange
  • Thomas E. Lange
  • Howard P. Lanser
  • John R. Lanza
  • W. Andrew Martin
  • Brian P. McDonagh
  • Christopher C. McMahon
  • Mark C. Micklem
  • John M. Moriarty
  • T. Frank Murphy
  • James E. O’Brien
  • Joseph T. Packee
  • Nicholas Pavlidis
  • Joseph A. Pellegrini
  • Gary R. Placek
  • Paul T. Rogalski
  • Jeffrey F. Rogatz
  • Breton A. Schoch
  • Christopher J. Sciortino
  • Nicholas R. Sealy
  • Jeffrey M. Seaman
  • David M. Silver
  • Anthony Siu
  • Andrew K. Snow
  • Rodney L. Tyson
  • Peter G. Watson
  • William G. Welnhofer
  • David M. Wierman
  • Michael A. Wolff
  • FixED iNCOME
    CAPiTAL MARkETS
  • Patrick S. Lawton Director
  • FixED iNCOME
    SALES & TRADiNG
  • William S. Andersen
  • Alexander B. Buchler
  • Matthew S. Coburn
  • Robert P. DeBastiani
  • D. Alan Denton
  • David C. Detmer
  • Michael J. Gaynor
  • James P. Healy
  • Drew A. Kanyer
  • Kirill A. Krylov
  • Bruce B. Mason
  • Charles D. Massaro
  • John N. Reckmeyer
  • Michael J. Redmond
  • John J. Sangervasi
  • Thomas E. Swift
  • Tommy T. Wammack
  • Glenn P. Willett
  • Richard S. Williams
  • PUbLiC FiNANCE
  • Keith A. Kolb Director
  • Todd L. Barnes
  • Leslie L. Bear
  • James R. Blandford
  • Brian H. Colon
  • David J. Conley
  • Thomas J. Gavin
  • Tanya K. Hahn
  • William M. Hepworth
  • Richard D. Layton
  • John A. Mehan
  • David C. Ulbricht
  • Wayne L. Workman
  • PRiVATE EqUiTy
  • Gordon Pan Managing Partner
  • James O. Benfield
  • C. Andrew Brickman
  • Andrew Ferguson
  • Huaming Gu
  • Chris J. Harper
  • Simon W. Havers
  • Michael N. Liang
  • Randall A. Mehl
  • Robert D. Ospalik
  • James E. Pavlik
  • David P. Pelisek
  • Benedict P. Rocchio
  • Peter K. Shagory
  • Scott G. Skie
  • Brett H. Tucker
  • PRiVATE WEALTh
    MANAGEMENT
  • Michael J. Schroeder President, PWM
  • Randy R. Beeman
  • Susan C. Bellehumeur
  • Allen J. Campbell
  • Larry J. Carter
  • Gregory S. Collins
  • Douglas P. Condon
  • Anthony E. Consiglio
  • Matthew S. Curley
  • Alexander S. Cushner
  • Erik C. Dahlberg
  • Philip C. Dallman
  • Christopher G. Didier
  • David S. Epstein
  • Gerald M. Falci
  • Scott T. Falk
  • Ronald E. Farley
  • Johnathan L. Fitzgibbons
  • Robert B. Geenen, Jr.
  • Lawrence A. Gellman
  • Gerald L. Gerndt
  • Laura H. Gough
  • David A. Hackworthy
  • Mark L. Hawthorne
  • Stephen D. Hoch
  • Leah H. Hoffman
  • A. Hale Hooper III
  • William T. Johnson
  • Lisa A. Keverian-Press
  • Michael G. Klein
  • Peter Klode
  • Mark D. Laufman
  • John B. Lewenauer
  • John J. Luy
  • John M. Mabee
  • Kenneth J. Meyers
  • John Mockovciak III
  • Timothy M. Moore
  • J. Bary Morgan
  • Frank A. Moroni
  • William B. Nicholson
  • Michael H. Perrini
  • Neil J. Pinsky
  • Gary S. Pinsly
  • Patrick W. Powell
  • Robert C. Ramsey
  • Kurt A. Rivard
  • Sheldon L. Rosenberg
  • Thomas F. Schmid
  • James Schultz
  • Paul G. Sittenfeld
  • Gregory S. Smith
  • Steven W. Stroker
  • Paul Stscherban
  • Steven C. Tews
  • Donald D. Wallace
  • Michael J. Welch
  • J. Eric Wightman
  • ADMiNiSTRATiON & CORPORATE RESOURCES
  • James D. Dell
  • Timothy P. Byrne
  • Leslie H. Dixon
  • Jeffry F. Freiburger
  • Timothy J. Fuhr
  • Glen F. Hackmann
  • Elizabeth A. Kavelaris
  • Lori A. Lorenz
  • Geoffrey C. Mackey
  • Craig D. Peotter
  • Mark A. Roble
  • John D. Rumpf
  • Paul L. Schultz
  • Russell P. Schwei
  • Charles M. Weber
  • Dominick P. Zarcone

Corporate Offices

©2012 Robert W. Baird & Co. Incorporated. Member SIPC.

“Baird” is the marketing name for Robert W. Baird & Co. Incorporated and its subsidiaries and affiliates worldwide.

Robert W. Baird Limited and Baird Capital Partners Europe Limited are authorized and regulated in the United Kingdom by the Financial Services Authority (registered numbers are 124308 and 150154 respectively) and they have approved this information for distribution in the UK and Europe.

Services or products may not be available in all jurisdictions or to all persons/entities. For additional information please visit Important Disclosures at rwbaird.com.

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