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: December 31, 2016

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, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. (ss) 3507.

Item 1. February 24, 2017 Annual Reports transmitted to shareholders.

	December 31, 2016
William Blair Funds Annual Report

Table of Contents

U.S. Growth Market Review and Outlook	6
U.S. Value Market Review and Outlook	7
Growth Fund
An Overview from the Portfolio Managers	8
Portfolio of Investments	10
Large Cap Growth Fund	11
An Overview from the Portfolio Managers	13
Portfolio of Investments
Mid Cap Growth Fund	14
An Overview from the Portfolio Managers	16
Portfolio of Investments
Mid Cap Value Fund	17
An Overview from the Portfolio Managers	19
Portfolio of Investments
Small-Mid Cap Growth Fund	21
An Overview from the Portfolio Managers	23
Portfolio of Investments
Small-Mid Cap Value Fund	24
An Overview from the Portfolio Managers	26
Portfolio of Investments
Small Cap Growth Fund	28
An Overview from the Portfolio Managers	30
Portfolio of Investments
Small Cap Value Fund	32
An Overview from the Portfolio Managers	34
Portfolio of Investments
Global Markets Review and Outlook	36
Global Leaders Fund	37
An Overview from the Portfolio Managers	39
Portfolio of Investments
International Leaders Fund	41
An Overview from the Portfolio Managers	43
Portfolio of Investments
International Equity Fund	45
An Overview from the Portfolio Managers	47
Portfolio of Investments
Institutional International Equity Fund	49
An Overview from the Portfolio Managers	51
Portfolio of Investments
International Growth Fund	53
An Overview from the Portfolio Managers	55
Portfolio of Investments
Institutional International Growth Fund	60
An Overview from the Portfolio Managers	62
Portfolio of Investments

December 31, 2016 William Blair Funds 1

International Small Cap Growth Fund	67
An Overview from the Portfolio Managers	69
Portfolio of Investments
Emerging Markets Leaders Fund	73
An Overview from the Portfolio Managers	75
Portfolio of Investments
Emerging Markets Growth Fund	78
An Overview from the Portfolio Managers	80
Portfolio of Investments
Emerging Markets Small Cap Growth Fund	84
An Overview from the Portfolio Managers	86
Portfolio of Investments
Fixed Income Market Review and Outlook	90
Bond Fund	91
An Overview from the Portfolio Managers	93
Portfolio of Investments
Income Fund	97
An Overview from the Portfolio Manager	99
Portfolio of Investments
Low Duration Fund	101
An Overview from the Portfolio Managers	103
Portfolio of Investments
Macro Allocation Fund	106
An Overview from the Portfolio Managers	108
Portfolio of Investments
Financial Statements	112
Notes to Financial Statements	130
Financial Highlights	154
Report of Independent Registered Public Accounting Firm	185
Board of Trustees and Officers	186
Fund Expenses	192

The views expressed in the commentary for each Fund reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The portfolio management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Statements involving predictions, assessments, analyses, or outlook for individual securities, industries, market sectors, and/or markets involve risks and uncertainties, and there is no guarantee they will come to pass.

This report is submitted for the general information of the shareholders of William Blair Funds. It is not authorized for distribution to prospective investors unless accompanied or preceded by a prospectus of 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.

2 Annual Report December 31, 2016

Performance as of December 31, 2016—Class N Shares (Unaudited)

					10 yr		Overall
					(or since	Inception	Morningstar
	1 yr		3 yr	5 yr	inception)	Date	Rating
Growth Fund
Class N	(0.98	)	3.59	11.66	6.65	3/20/1946	***
Morningstar Large Growth	3.23		5.70	12.94	6.91		Among 1,315
Russell 3000® Growth Index	7.39		8.27	14.44	8.28		Large Growth Funds
S&P 500® Index	11.96		8.87	14.66	6.95
Large Cap Growth Fund
Class N	1.97		7.65	14.44	6.98	12/27/1999	****
Morningstar Large Growth	3.23		5.70	12.94	6.91		Among 1,315
Russell 1000® Growth Index	7.08		8.55	14.50	8.33		Large Growth Funds
Mid Cap Growth Fund
Class N	0.23		2.46	8.97	7.02	2/1/2006	***
Morningstar Mid-Cap Growth	6.03		4.03	11.79	6.79		Among 588
Russell Midcap® Growth Index	7.33		6.23	13.51	7.83		Mid-Cap Growth Funds
Mid Cap Value Fund
Class N	14.49		7.49	13.14	10.96	5/3/2010	***
Morningstar Mid-Cap Blend	14.14		5.89	13.32	—		Among 371
Russell Midcap® Value Index	20.00		9.45	15.70	12.48		Mid-Cap Blend Funds
Small-Mid Cap Growth Fund
Class N	6.45		6.41	13.85	8.94	12/29/2003	****
Morningstar Mid-Cap Growth	6.03		4.03	11.79	6.79		Among 588
Russell 2500TM Growth Index	9.73		5.45	13.88	8.24		Mid-Cap Growth Funds
Small-Mid Cap Value Fund
Class N	20.69		6.96	13.30	14.16	12/15/2011	***
Morningstar Small Blend	20.78		5.89	13.52	—		Among 626
Russell 2500® Value Index	25.20		8.22	15.04	15.82		Small Blend Funds
Small Cap Growth Fund
Class N	18.89		5.25	16.04	6.45	12/27/1999	***
Morningstar Small Growth	11.20		3.55	12.33	7.08		Among 599
Russell 2000® Growth Index	11.32		5.05	13.74	7.76		Small Growth Funds
Small Cap Value Fund
Class N	26.19		7.50	14.19	7.66	12/23/1996	****
Morningstar Small Blend	20.78		5.89	13.52	6.79		Among 626
Russell 2000® Value Index	31.74		8.31	15.07	6.26		Small Blend Funds

December 31, 2016 William Blair Funds 3

Performance as of December 31, 2016—Class N Shares (Unaudited)—continued

						10 yr		Overall
						(or since	Inception	Morningstar
	1 yr		3 yr		5 yr	inception)	Date	Rating
Global Leaders Fund
Class N	0.62		2.28		8.68	2.34	10/15/2007	***
Morningstar World Stock	5.54		2.10		9.24	—		Among 848
MSCI ACW IMI (net)	8.36		3.25		9.61	2.47		World Stock Funds
International Leaders Fund
Class N	0.88		1.35		—	6.86	8/16/2012	*****
Morningstar Foreign Large Growth	(2.14	)	(1.83	)	—	—		Among 312
MSCI ACW Ex-U.S. IMI (net)	4.41		(1.44	)	—	4.37		Foreign Large Growth Funds
International Equity Fund
Class N	(0.27	)	(0.62	)	6.63	0.64	5/24/2004	***
Morningstar Foreign Large Growth	(2.14	)	(1.83	)	6.15	1.43		Among 312
MSCI World Ex-U.S. Index (net)	2.75		(1.59	)	6.07	0.86		Foreign Large Growth Funds
International Growth Fund
Class N	(2.88	)	(2.12	)	6.58	1.24	10/1/1992	***
Morningstar Foreign Large Growth	(2.14	)	(1.83	)	6.15	1.43		Among 312
MSCI ACW Ex-U.S. IMI (net)	4.41		(1.44	)	5.35	1.22		Foreign Large Growth Funds
International Small Cap Growth Fund
Class N	(4.60	)	(1.42	)	7.79	3.25	11/1/2005	***
Morningstar Foreign Small/Mid Growth	(2.98	)	(0.63	)	8.87	3.12		Among 107
MSCI ACW Ex-U.S.								Foreign Small/Mid Growth Funds
Small Cap Index (net)	3.91		0.76		7.74	2.90
Emerging Markets Leaders Fund
Class N	1.42		(3.98	)	1.13	0.12	5/3/2010	***
Morningstar Diversified Emerging								Among 606
Markets	8.47		(3.18	)	1.61	—		Diversified Emerging Markets Funds
MSCI Emerging Markets Index (net)	11.19		(2.55	)	1.28	0.12
Emerging Markets Growth Fund
Class N	1.49		(3.75	)	1.69	0.18	6/6/2005	***
Morningstar Diversified Emerging								Among 606
Markets	8.47		(3.18	)	1.61	1.32		Diversified Emerging Markets Funds
MSCI Emerging Markets IMI (net)	9.90		(2.40	)	1.54	2.07
Emerging Markets Small Cap Growth Fund
Class N	(5.33	)	0.46		9.64	8.70	10/24/2011	*****
Morningstar Diversified Emerging								Among 606
Markets	8.47		(3.18	)	1.61	—		Diversified Emerging Markets Funds
MSCI Emerging Markets Small Cap Index (net)	2.28		(1.27	)	3.51	2.09

4 Annual Report December 31, 2016

Performance as of December 31, 2016—Class N Shares (Unaudited)—continued

					10 yr		Overall
					(or since	Inception	Morningstar
	1 yr	3 yr		5 yr	inception)	Date	Rating
Bond Fund
Class N	4.40	3.06		3.18	4.86	5/1/2007	****
Morningstar Intermediate-Term Bond	3.23	2.73		2.61	—		Among 869
Bloomberg Barclays U.S. Aggregate Bond Index	2.65	3.03		2.23	4.28		Intermediate-Term Bond Funds
Income Fund
Class N	2.44	1.96		2.03	2.94	10/1/1990	****
Morningstar Short-Term Bond	2.08	1.06		1.46	2.55		Among 445
Bloomberg Barclays Intermediate							Short-Term Bond Funds
Government/Credit Bond Index	2.08	2.09		1.85	3.84
Low Duration Fund
Class N	1.16	0.79		0.90	1.06	12/1/2009	***
Morningstar Ultrashort Bond	1.41	0.67		0.95	—		Among 128
Bank of America Merrill Lynch							Ultrashort Bond Funds
1-Year U.S. Treasury Note Index	0.76	0.36		0.32	0.40
Macro Allocation Fund
Class N	2.01	(0.64	)	4.85	5.30	11/29/2011	***
Morningstar Multialternative	1.38	0.61		3.14	—		Among 239
Bank of America Merrill Lynch							Multialternative Funds
3-Month U.S. Treasury Bill Index	0.33	0.14		0.12	0.12
Long-Term Comparative Index	3.68	2.36		3.84	3.85

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 investment adviser 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 typically fall and bond funds may become more volatile. Class N shares are available to the general public without a sales load.

Morningstar Ratings^TM are as of 12/31/2016 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 1,315/1,154/809 large growth funds; Mid Cap Growth Fund ***/**/*** and Small-Mid Cap Growth Fund ****/****/**** out of 588/504/368 mid-cap growth funds; Mid Cap Value Fund ***/***/NA, out of 371/332/NA mid-cap blend funds; Small Cap Growth Fund ***/*****/**, out of 599/531/389 small growth funds; Small-Mid Cap Value Fund ***/*** /NA and Small Cap Value Fund ***/***/**** out of 626/534/360 small blend funds; Global Leaders Fund ***/***/NA out of 848/669/NA world stock funds; International Equity Fund ****/***/**, International Growth Fund ***/***/**, and International Leaders Fund *****/NA/NA out of 312/260/182 foreign large growth funds; International Small Cap Growth Fund ***/***/*** out of 107/97/55 foreign small/mid growth funds; Emerging Markets Leaders Fund ***/***/NA, Emerging Markets Growth Fund ***/***/**, and Emerging Markets Small Cap Growth *****/*****/NA out of 606/425/173 diversified emerging markets funds; Bond Fund ****/****/NA out of 869/759/NA intermediate-term bond funds; Income Fund ****/****/*** out of 445/357/252 short-term bond funds; Low Duration Fund ****/***/NA out of 128/91/NA ultrashort bond funds; and Macro Allocation Fund **/****/NA out of 239/141/NA multialternative 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.

December 31, 2016 William Blair Funds 5

U.S. Growth Market Review and Outlook

The strength of U.S. equity market returns in 2016 masked some sharp but short-lived downdrafts during the year. This dynamic resulted in a style environment where both more defensive and more cyclical areas of the market exhibited leadership at different times over the course of the year.

In the first six weeks of 2016, the market declined precipitously, driven by concern that the U.S. could be headed into a recession given weakness in the manufacturing segment of the economy, falling oil prices and persistent headwinds from global economic growth challenges. In this environment, equity investors gravitated toward the perceived safety of high dividend yielding stocks (a dominant factor in the performance of larger cap indices during this period) and away from more speculative areas of the market such as biotechnology (a dominant factor in the performance of smaller-cap indices during this period). The mid-February market reversal, wherein leadership shifted to more cyclical companies, was spurred by further easing of monetary policy by foreign central banks and improving macroeconomic data points globally. From that point forward, with only a brief pause following the results of the Brexit vote, generally positive U.S. economic data carried the market higher.

While fourth quarter returns were positive overall, the market softened somewhat in October, likely due to anxiety ahead of the U.S. presidential election as a solid third quarter earnings season indicated health among U.S. corporations. The surprise election of Donald Trump, whose proposed policies of lower taxes, increased fiscal spending and looser regulations are generally perceived as reflationary and pro-U.S. growth, provided a tailwind for more economically sensitive areas of the market. At the same time, U.S. economic data surpassed expectations. U.S. retail sales, housing starts, unemployment claims and wages were all among positively trending data points. Accordingly, 10 year Treasury yields moved higher as investor confidence rose. With a backdrop of continued low unemployment, rising wages and inflation moving higher, the Federal Reserve, in what had become a widely anticipated move, raised the federal funds rate by 25 basis points in December.

The new administration will take office with the U.S. economy moving into the latter half of its eighth year of expansion and the Fed poised to enact further interest rate increases. In terms of Republican initiatives, lower regulatory burden, higher fiscal spending and lower taxes are generally considered to be favorable for economic growth. However, it remains to be seen how quickly the new administration’s proposed policies can be implemented. While more restrictive monetary policy in the U.S. could hinder economic growth, the Fed has thus far exhibited a cautious pace of rate increases relative to a more normalized cycle and global central bank policies remain stimulative. Conversely, Trump’s proposed policies reinforce already rising inflation, increasing the potential that the Fed could move too slowly in raising rates. Additional risks in the U.S. include potential geo-political missteps and trade ramifications from protectionist policies.

Absolute valuations moved up with the market during the year. For instance, the S&P 500 Index forward price-to-earnings multiple expand from 16.2 to 17.5 times earnings over the course of 2016. However, as of December 31, 2016, growth style indices were trading at only modest premiums to historical median levels. At the same time, relative to value indices, growth style indices were trading considerably below historical median premiums. Given this backdrop, our general view is that opportunity remains for U.S. growth equities. Further, the prospect of lower corporate taxes, repatriation of overseas cash, reduced regulations, and fiscal stimulus could lead to positive earnings revisions. Conversely, potentially offsetting factors include continued strength in the U.S. dollar and wage inflation.

As always, we believe broad investor focus on near-term events creates opportunities for investors such as ourselves who analyze companies over a long-term time horizon in an effort to achieve excess returns. We remain focused on identifying companies with durable growth drivers, independent of policy outcomes, whose stocks present compelling risk/reward opportunities.

6 Annual Report December 31, 2016

U.S. Value Market Review and Outlook

The domestic equity markets delivered positive returns in 2016, though there was a significant dispersion of returns between growth and value style indices. Following several years of outperformance by growth stock indices, value indices considerably outperformed during the year.

Investors experienced one of the worst starts to a new year on record for the domestic equity markets as investor sentiment during the first six weeks of 2016 seemed hysterically negative and recessionary fears ran rampant. Concerns over slowing U.S. and global growth, further weakening of commodities, strengthening of the U.S. dollar, and renewed fears of a slowdown in China pushed most equity markets into correction territory. The mid-February reversal was spurred by better domestic economic data helping to alleviate investor angst of an impending recession. Also, dovish comments by the Federal Reserve helped spark a risk-on rally from mid-February through the end of the third quarter, with a slight pause following the results of the Brexit vote. This rally was led by smaller, lower quality, and less expensive stocks.

The hard-charging domestic equity markets paused briefly in October after posting robust returns since the mid-February lows as U.S. economic expansion continued to progress, albeit at a slow and uneven pace. Similar to what transpired at the end of the second quarter following the surprising Brexit vote, market volatility spiked in early November heading into the U.S. presidential election. Better economic data and generally perceived reflationary and pro-growth policy initiatives, including increased fiscal spending, tax reform, and deregulation, helped push volatility back to near-historic lows and ultimately ignited a post-election rally that propelled the equity markets higher in the fourth quarter. The post-election rally was primarily driven by smaller cap stocks that are expected to be beneficiaries of the pro-growth initiatives of the newly elected president. The decision by OPEC ministers to cut oil production more than anticipated helped drive oil prices higher, further fueling the strong market returns during the fourth quarter.

With all of the post-election rhetoric focused on the protectionist, pro-growth initiatives of President-elect Trump and an improved U.S. economic outlook, domestic interest rates rose along with the U.S. dollar. With the backdrop of continued low unemployment, rising wages, and inflation appearing to perk up, the Federal Reserve raised the federal funds rate by 25 basis points in December.

The improvement in domestic economic data continues to support the view that U.S. economic expansion is progressing. With Donald Trump taking office early in 2017, the prospects for lower taxes, repatriation of overseas cash, increased fiscal spending, deregulation, and higher interest rates could lead to positive earnings revisions, further extending this market cycle. Some potential offsetting factors to these policy initiatives include continued strength of the U.S. dollar and wage inflation. Investor optimism is high for Trump’s pro-growth initiatives; however, there is the possibility for investor disappointment resulting from the gap between what is anticipated and actual policy results, which could lead to increased market volatility. Volatility continues to be at or near historic lows and we continue to anticipate higher volatility going forward given the uncertainty created by Brexit, concerns over a slowdown in China, policies and priorities of the newly elected U.S. president, and geopolitical tensions. There is a strong correlation between volatility and the performance of high quality companies, and higher volatility should benefit our strategy given our higher quality bias within the Funds.

While the Federal Reserve was able to squeeze in only one interest rate increase late in the year, we continue to believe that the Fed will be prudent with future rate increases and that the trajectory of interest rates will be lower than they would during a more normalized cycle. The beneficiaries of the universally accommodative monetary policy and ample liquidity during the current bull market have been the more highly leveraged companies. However, if interest rates rise faster than expected and lending standards continue to tighten, companies with conservative balance sheets and sufficient cash cushions, or those generating ample free cash flow should fare better than companies reliant on the capital markets to grow. This could provide a tailwind for our strategy as these higher quality companies with better balance sheets and solid cash flows should outperform under this scenario.

While we are cognizant of these macroeconomic variables, we are persistently seeking to identify attractive risk reward opportunities based on individual company fundamentals. From our bottom up perspective, we remain constructive on corporate earnings, albeit against a backdrop of lower revenue growth and increasing margin pressure from higher wages. As always, our focus remains on identifying quality companies at discount prices and corporate transformation opportunities, and we continue to find good ideas across all sectors. Given our investment approach, we believe the Funds are well-suited to withstand a variety of market scenarios and add value over the long-term.

December 31, 2016 William Blair Funds 7

	Growth Fund
	The Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
David C. Fording John F. Jostrand	The William Blair Growth Fund (Class N shares) posted a 0.98% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 3000® Growth Index (the “Index”), increased 7.39%. Underperformance for 2016 versus the Index was due to a combination of style and stock-specific factors. From a style perspective, there were headwinds early in the year when investor preference for high dividend-yielding stocks dominated the market. While the preference for dividend yield was most pronounced at the beginning of the year, relative performance of high dividend-yielding stocks did not subside for the remainder of 2016 and high dividend-yielding stocks materially outperformed low dividend-yielding stocks in 2016. More economically-sensitive areas of the market also outperformed for the year, particularly in the third quarter and following the U.S. presidential election. The Fund tends to be significantly underweight high dividend- yielding and more economically-sensitive companies, preferring sustainable growth companies with substantial reinvestment opportunities that enable superior, durable long-term growth. From a stock-specific perspective, the largest detractor from the Fund’s relative performance was healthcare technology solutions provider Cerner after the company reported financial results below consensus expectations late in the year amid lower IT spending by hospitals, the company’s primary customers. Grocery retailer Kroger was a top detractor from relative performance for the year. The company experienced deflationary pressures on items such as milk, eggs and meat which negatively affected company earnings for much of 2016. However, fears of further deflation eased following the U.S. presidential election, and the stock was able to recover. Other top detractors from the Fund’s relative performance were Red Hat (Information Technology), BorgWarner (Consumer Discretionary) and Mead Johnson Nutrition (Consumer Staples). Top contributors for the year were rail operator Union Pacific and semiconductor manufacturer Texas Instruments. Union Pacific outperformed the Index mostly in the second half of 2016 due to improving trends in its underlying business. The stock performed particularly well following the election as investors gravitated to companies that would benefit the most from an improvement in the U.S. economy. Other top contributors to relative performance were Akamai Technologies (Information Technology), Vantiv (Information Technology) and NeuStar (Information Technology). Please refer to the U.S. Growth Market Review and Outlook relating to the Fund on page 6.

8 Annual Report December 31, 2016

Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		(0.98	)%		3.59	%		11.66	%		6.65	%
Class I		(0.69	)		3.93			12.02			7.01
Russell 3000® Growth Index		7.39			8.27			14.44			8.28
S&P 500® Index		11.96			8.87			14.66			6.95

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 Investment Management, LLC and 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 December 31, 2016. 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.

December 31, 2016 William Blair Funds 9

Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Information Technology—35.1%
*	Adobe Systems, Inc.		81,300	$	8,370
*	Akamai Technologies, Inc.		174,487		11,635
*	Alphabet, Inc. Class “A”		51,680		40,954
	Booz Allen Hamilton Holding Corporation		129,522		4,672
*	CoStar Group, Inc.		28,357		5,345
	CSRA, Inc.		275,807		8,782
*	Facebook, Inc.		155,700		17,913
*	Guidewire Software, Inc.		78,800		3,887
	j2 Global, Inc.		89,300		7,305
	Mastercard, Inc.		198,600		20,505
	Microsoft Corporation		563,600		35,022
*	Red Hat, Inc.		186,706		13,013
	Texas Instruments, Inc.		197,200		14,390
*	Vantiv, Inc.		188,039		11,211
					203,004
	Health Care—17.8%
*	Align Technology, Inc.		39,900		3,836
*	Allergan plc†		35,700		7,497
*	Biogen, Inc.		39,800		11,286
*	BioMarin Pharmaceutical, Inc.		57,600		4,772
	Bristol-Myers Squibb Co.		260,100		15,200
*	Cerner Corporation		261,800		12,401
	Danaher Corporation		152,900		11,902
*	Edwards Lifesciences Corporation		75,553		7,079
*	Mednax, Inc.		157,830		10,521
	Shire plc—ADR		34,000		5,793
	Zoetis, Inc.		233,600		12,505
					102,792
	Consumer Discretionary—16.2%
*	Amazon.com, Inc.		32,100		24,071
	Dollar General Corporation		184,200		13,644
	Hanesbrands, Inc.		268,079		5,782
	Lowe’s Cos., Inc.		248,700		17,688
	Newell Brands, Inc.		198,600		8,867
	Starbucks Corporation		215,200		11,948
*	Steven Madden, Ltd.		80,901		2,892
	Vail Resorts, Inc.		13,695		2,209
	VF Corporation		122,100		6,514
					93,615
	Industrials—11.1%
	BWX Technologies, Inc.		116,500		4,625
	Fastenal Co.		185,800		8,729
	Raytheon Co.		72,400		10,281
	The Dun & Bradstreet Corporation		76,200		9,244
	TransDigm Group, Inc.		35,580		8,858
	Union Pacific Corporation		146,400		15,179
*	Verisk Analytics, Inc.		90,020		7,307
					64,223

	Issuer	Shares or Principal Amount		Value
	Common Stocks—(continued)
	Consumer Staples—9.2%
	Costco Wholesale Corporation		102,800	$	16,460
*	Herbalife, Ltd.†		69,200		3,331
	Mead Johnson Nutrition Co.		139,300		9,857
*	Sprouts Farmers Market, Inc.		192,600		3,644
	The Kroger Co.		425,300		14,677
	Tyson Foods, Inc.		85,300		5,261
					53,230
	Financials—7.2%
*	Affiliated Managers Group, Inc.		31,200		4,533
	Intercontinental Exchange, Inc.		318,900		17,992
*	Signature Bank		47,600		7,150
	Willis Towers Watson plc†		94,800		11,592
					41,267
	Energy—1.5%
	Schlumberger, Ltd.†		104,600		8,781
	Materials—1.4%
	PPG Industries, Inc.		82,828		7,849
	Total Common Stocks—99.5% (cost $475,512)				574,761
	Repurchase Agreement
	Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $4,823, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	4,823		4,823
	Total Repurchase Agreement—0.8% (cost $4,823)				4,823
	Total Investments—100.3% (cost $480,335)				579,584
	Liabilities, plus cash and other assets—(0.3)%				(1,778	)
	Net assets—100.0%			$	577,806

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

10 Annual Report December 31, 2016

	Large Cap Growth Fund
	The Large Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
James S. Golan David P. Ricci	The William Blair Large Cap Growth Fund (Class N shares) posted a 1.97% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 1000® Growth Index (the “Index”), increased 7.08%. Underperformance for 2016 versus the Index was primarily due to style headwinds. Headwinds were most pronounced early in the year when investor preference for high dividend-yielding stocks dominated the market. While this preference was concentrated mainly in January and February, relative performance of high dividend-yielding stocks did not subside for the remainder of 2016 and high dividend-yielding stocks materially outperformed low dividend-yielding stocks in 2016. Cheaper and more cyclical areas of the market also outperformed for the year, particularly following the U.S. presidential election. The Fund tends to be significantly underweight high dividend-yielding, low valuation and low growth companies, preferring companies with substantial reinvestment opportunities that enable superior, durable long-term growth. From a stock-specific perspective, the largest detractor from the Fund’s relative performance was grocery retailer Kroger. The company experienced deflationary pressures on items such as milk, eggs and meat which negatively affected company earnings for much of 2016. However, as stated above, fears of further deflation eased following the U.S. presidential election, and the stock was able to recover. Healthcare technology solutions provider Cerner was also a top detractor from the Fund’s relative performance for the year after reporting financial results below consensus expectations late in the year amid lower IT spending by hospitals, the company’s primary customers. Other top detractors were Apple (Information Technology), Red Hat (Information Technology) and Chipotle Mexican Grill (Consumer Discretionary). Top contributors to the Fund’s performance were rail operator Union Pacific and semiconductor manufacturer Texas Instruments. Union Pacific outperformed the Index mostly in the second half of 2016 due to improving trends in its underlying business. The stock performed particularly well following the election as investors gravitated to companies that would benefit the most from an improvement in the U.S. economy. Texas Instruments outperformed the Index for the year after several consecutive quarters in which it reported earnings that beat consensus expectations, primarily driven by continued improvement in operating margins. The Fund’s positions in IDEXX Laboratories and UnitedHealth Group were the primary drivers of positive stock selection effect in the Heath Care sector, and the Fund’s position in Schlumberger (Energy) was also a top contributor to the Fund’s performance. Please refer to the U.S. Growth Market Review and Outlook relating to the Fund on page 6.

December 31, 2016 William Blair Funds 11

Large Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year		3 Year		5 Year		10 Year
Class N	1.97	%	7.65	%	14.44	%	6.98	%
Class I	2.22		7.92		14.75		7.23
Russell 1000® Growth Index	7.08		8.55		14.50		8.33

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 December 31, 2016. 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 Annual Report December 31, 2016

Large Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Information Technology—32.5%
	Accenture plc†		21,770	$	2,550
*	Adobe Systems, Inc.		34,320		3,533
*	Alphabet, Inc. Class “A”		6,940		5,500
*	Alphabet, Inc. Class “C”		4,466		3,447
*	Facebook, Inc.		38,560		4,436
	Mastercard, Inc.		48,710		5,029
	Microsoft Corporation		123,330		7,664
*	Red Hat, Inc.		44,780		3,121
	Texas Instruments, Inc.		61,430		4,483
					39,763
	Health Care—19.0%
*	Biogen, Inc.		14,100		3,998
	Bristol-Myers Squibb Co.		54,270		3,172
*	Cerner Corporation		49,200		2,331
	Danaher Corporation		32,850		2,557
*	IDEXX Laboratories, Inc.		11,521		1,351
	UnitedHealth Group, Inc.		33,860		5,419
	Zoetis, Inc.		83,390		4,464
					23,292
	Consumer Discretionary—17.9%
*	Amazon.com, Inc.		8,550		6,411
*	Chipotle Mexican Grill, Inc.		5,500		2,075
*	O’Reilly Automotive, Inc.		12,560		3,497
	Starbucks Corporation		81,470		4,523
	The Home Depot, Inc.		40,390		5,416
					21,922
	Industrials—10.9%
	Fortive Corporation		36,250		1,944
	TransDigm Group, Inc.		11,780		2,933
	Union Pacific Corporation		56,260		5,833
*	Verisk Analytics, Inc.		31,860		2,586
					13,296
	Consumer Staples—9.6%
	Mead Johnson Nutrition Co.		42,060		2,976
*	Monster Beverage Corporation		50,750		2,250
	The Estee Lauder Cos., Inc.		19,850		1,518
	The Kroger Co.		144,000		4,970
					11,714
	Financials—3.6%
*	Affiliated Managers Group, Inc.		17,860		2,595
	Intercontinental Exchange, Inc.		31,120		1,756
					4,351
	Telecommunication Services—2.1%
*	SBA Communications Corporation		24,530		2,533
	Materials—1.8%
	PPG Industries, Inc.		23,380		2,215

Issuer	Shares or Principal Amount		Value
Common Stocks—(continued)
Energy—1.5%
Schlumberger, Ltd.†		22,560	$	1,894
Total Common Stocks—98.9% (cost $106,780)				120,980
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $1,176, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	1,176		1,176
Total Repurchase Agreement—1.0% (cost $1,176)				1,176
Total Investments—99.9% (cost $107,956)				122,156
Cash and other assets, less liabilities—0.1%				179
Net assets—100.0%			$	122,335

† = U.S. listed foreign security

* = Non-income producing securities

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 13

	Mid Cap Growth Fund
	The Mid Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Daniel Crowe Robert C. Lanphier, IV David P. Ricci	The William Blair Mid Cap Growth Fund (Class N shares) posted a 0.23% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell Midcap® Growth Index (the “Index”), increased 7.33%. Underperformance for 2016 versus the Index was due to a combination of style and stock-specific factors. From a style perspective, there were headwinds early in the year when investor preference for high dividend-yielding stocks dominated the market. While the preference for dividend yield was most pronounced at the beginning of the year, relative performance of high dividend-yielding stocks did not subside for the remainder of 2016 and high dividend-yielding stocks materially outperformed low dividend-yielding stocks in 2016. More economically-sensitive areas of the market also outperformed for the year, particularly in the third quarter and following the U.S. presidential election. The Fund tends to be significantly underweight high dividend yielding and more economically-sensitive companies, preferring sustainable growth companies with substantial reinvestment opportunities that enable superior, durable long-term growth. From a stock-specific perspective, the largest detractor from the Fund’s relative performance was apparel company Hanesbrands. The stock underperformed the Index for the year as issues related to inventory restocking and soft organic growth were exacerbated by concerns late in the year regarding risks related to international manufacturing. Drugmaker Perrigo was also a top detractor for the year. CEO turnover and weakness in its European consumer healthcare business were the primary causes for the stock lagging in 2016. Other top detractors from relative performance were Cerner (Health Care), Mead Johnson Nutrition (Consumer Staples) and Red Hat (Information Technology). Top contributors to relative performance for the year were trucking company Old Dominion Freight Line and aggregates producer Vulcan Materials. Old Dominion Freight Line outperformed the Index mainly due to better-than-expected earnings in the latter half of the year. Also, the stock outperformed the index as investors gravitated towards more economically-sensitive stocks. Vulcan Materials outperformed the Index after reporting strong volumes and pricing mid-year and amid investor optimism late in 2016 that infrastructure spending in the U.S will likely rise in the short to intermediate term. Other top contributors to the Fund’s relative performance were Akamai Technologies (Information Technology), Vantiv (Information Technology) and Align Technology (Health Care). Please refer to the U.S. Growth Market Review and Outlook relating to the Fund on page 6.

14 Annual Report December 31, 2016

Mid Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		0.23	%		2.46	%		8.97	%		7.02	%
Class I		0.48			2.72			9.25			7.30
Russell Midcap® Growth Index		7.33			6.23			13.51			7.83

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 medium capitalization companies involves special risks, including higher volatility and lower liquidity. Medium capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 December 31, 2016. 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 secuities.

December 31, 2016 William Blair Funds 15

Mid Cap Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Information Technology—25.0%
*	Akamai Technologies, Inc.		53,979	$	3,599
*	Arista Networks, Inc.		10,700		1,035
	Booz Allen Hamilton Holding Corporation		69,300		2,500
*	Check Point Software Technologies, Ltd.†		29,900		2,525
*	CoStar Group, Inc.		21,092		3,976
	CSRA, Inc.		109,400		3,483
*	Genpact, Ltd.†		99,952		2,433
*	Guidewire Software, Inc.		43,020		2,122
*	IPG Photonics Corporation		12,200		1,204
	MAXIMUS, Inc.		42,211		2,355
*	Red Hat, Inc.		64,430		4,491
*	Vantiv, Inc.		70,824		4,223
					33,946
	Consumer Discretionary—20.1%
	BorgWarner, Inc.		43,743		1,725
	Dollar General Corporation		29,865		2,212
	Hanesbrands, Inc.		137,500		2,966
	Newell Brands, Inc.		83,200		3,715
*	O’Reilly Automotive, Inc.		12,684		3,531
*	Panera Bread Co.		6,382		1,309
	Ross Stores, Inc.		59,500		3,903
	Six Flags Entertainment Corporation		55,380		3,321
	Tractor Supply Co.		48,900		3,707
	Vail Resorts, Inc.		5,411		873
					27,262
	Health Care—17.1%
*	ABIOMED, Inc.		9,700		1,093
*	Align Technology, Inc.		14,680		1,411
*	BioMarin Pharmaceutical, Inc.		25,531		2,115
*	Centene Corporation		50,700		2,865
*	Cerner Corporation		35,300		1,672
	DENTSPLY SIRONA, Inc.		25,559		1,475
	HealthSouth Corporation		34,000		1,402
*	Mednax, Inc.		51,760		3,450
*	Mettler-Toledo International, Inc.		4,775		1,999
	Perrigo Co. plc†		14,500		1,207
*	Veeva Systems, Inc.		32,500		1,323
	Zoetis, Inc.		58,300		3,121
					23,133
	Industrials—14.7%
*	Copart, Inc.		62,700		3,474
	Equifax, Inc.		10,400		1,230
*	Old Dominion Freight Line, Inc.		34,686		2,976
	The Dun & Bradstreet Corporation		13,800		1,674
*	The Middleby Corporation		17,470		2,250
	TransDigm Group, Inc.		9,175		2,284
*	Verisk Analytics, Inc.		46,280		3,757
	Wabtec Corporation		27,500		2,283
					19,928

	Issuer	Shares or Principal Amount		Value
	Common Stocks—(continued)
	Financials—8.6%
*	Affiliated Managers Group, Inc.		8,955	$	1,301
	East West Bancorp, Inc.		26,900		1,367
	Intercontinental Exchange, Inc.		26,875		1,516
	Nasdaq, Inc.		25,500		1,712
*	Signature Bank		26,456		3,974
	Willis Towers Watson plc†		14,190		1,735
					11,605
	Materials—5.7%
*	Axalta Coating Systems, Ltd.†		59,500		1,619
	Ball Corporation		47,200		3,543
	Vulcan Materials Co.		20,800		2,603
					7,765
	Consumer Staples—4.9%
*	Herbalife, Ltd.†		17,700		852
	Mead Johnson Nutrition Co.		38,200		2,703
	Tyson Foods, Inc.		49,900		3,078
					6,633
	Telecommunication Services—1.8%
*	SBA Communications Corporation		23,850		2,463
	Energy—0.9%
*	Concho Resources, Inc.		9,520		1,262
	Total Common Stocks—98.8% (cost $118,887)				133,997
	Repurchase Agreement
	Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $352, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	352		352
	Total Repurchase Agreement—0.2% (cost $352)				352
	Total Investments—99.0% (cost $119,239)				134,349
	Cash and other assets, less liabilities—1.0%				1,309
	Net assets—100.0%			$	135,658

* = Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

16 Annual Report December 31, 2016

	Mid Cap Value Fund
	The Mid Cap Value Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Chad M. Kilmer Mark T. Leslie David S. Mitchell	The William Blair Mid Cap Value Fund (Class N shares) posted a 14.49% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell Midcap® Value Index (the “Index”), increased 20.00%. The Fund’s underperformance relative to the Index was driven by a combination of style factors and stock selection. The risk-on rally that began in mid-February continued on through the end of the year, led by smaller cap stocks and companies with slower growth. As such, our relative value style, which typically has a higher growth profile than the Index and an underweight to deep value stocks, was a headwind for the Fund. In addition, the worst performing stocks over the twelve months heading into the back half of 2016 rallied and the Fund’s lack of exposure to this segment was a headwind. At the sector level, Consumer Discretionary was the most significant detractor from the Fund’s relative performance due to stock selection within Specialized Consumer Services, Homebuilding, and Housewares & Specialties. Within the Real Estate sector, stock selection in Real Estate Services and Retail REITs contributed to the Fund’s underperformance. In general, REITs underperformed the rest of the market for the year due to the move up in interest rates during the back half of the year. The Industrials sector also detracted from the Fund’s relative performance during the year, mainly driven by the Fund’s lack of exposure to Airline stocks, which benefitted from better economic data and travel estimates given the pickup in business confidence. Broadly speaking, our higher quality bias and lack of exposure to the more cyclically exposed companies contributed to the Fund’s relative underperformance within Industrials as well. Financials was the most significant sector contributor to the Fund’s relative performance for the year due to stock selection within Property & Casualty Insurance. The Fund’s lack of exposure to Biotech and Pharmaceutical stocks contributed to the Fund’s outperformance within the Health Care sector during the period. With our focus on free cash flow and return on invested capital, most companies in these industries fail to meet our criteria. Looking specifically at stock selection, the Fund’s largest detractors from relative performance were Jones Lang LaSalle (Real Estate), Kroger (Consumer Staples), and H&R Block (Consumer Discretionary). Offsetting these detractors were our investments in Steel Dynamics (Materials), Patterson-UTI Energy (Energy), and Belden (Information Technology), which contributed to the Fund’s relative performance. Please refer to the U.S. Value Market Review and Outlook relating to the Fund on page 7.

December 31, 2016 William Blair Funds 17

Mid Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			Since Inception(a)
Class N		14.49	%		7.49	%		13.14	%		10.96	%
Class I		14.75			7.78			13.43			11.24
Russell Midcap® Value Index		20.00			9.45			15.70			12.48

(a) For the period from May 3, 2010 (Commencement of Operations) to December 31, 2016.

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 medium capitalization companies involves special risks, including higher volatility and lower liquidity. Medium capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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^® Value Index consists of mid-capitalization companies with below average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on December 31, 2016. 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.

18 Annual Report December 31, 2016

Mid Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Financials—20.9%
	Allied World Assurance Co. Holdings, Ltd.†		813	$	44
	Ameriprise Financial, Inc.		231		26
*	Arch Capital Group, Ltd.†		458		39
	Assured Guaranty, Ltd.†		920		35
*	E*TRADE Financial Corporation		1,149		40
	East West Bancorp, Inc.		1,037		53
	FNF Group		798		27
	Hanover Insurance Group, Inc.		438		40
	Hartford Financial Services Group, Inc.		885		42
	Northern Trust Corporation		609		54
	PacWest Bancorp		853		46
	Principal Financial Group, Inc.		684		40
*	Signature Bank		162		24
	SunTrust Banks, Inc.		695		38
*	SVB Financial Group		231		40
	Zions Bancorporation		988		42
					630
	Real Estate—13.6%
	American Campus Communities, Inc.		920		46
	Boston Properties, Inc.		208		26
	DDR Corporation		1,942		30
	Douglas Emmett, Inc.		585		21
*	Equity Commonwealth		699		21
	Equity Residential		436		28
	Essex Property Trust, Inc.		184		43
	General Growth Properties, Inc.		1,393		35
	National Retail Properties, Inc.		664		29
	Pebblebrook Hotel Trust		477		14
	Prologis, Inc.		642		34
	SL Green Realty Corporation		202		22
	Taubman Centers, Inc.		371		27
	Ventas, Inc.		514		32
					408
	Industrials—11.8%
	Carlisle Cos., Inc.		307		34
	Fortune Brands Home & Security, Inc.		550		29
	Hubbell, Inc.		270		32
	Ingersoll-Rand plc†		498		37
	Johnson Controls International plc†		1,122		46
	Kansas City Southern		447		38
	Manpowergroup, Inc.		250		22
	Parker Hannifin Corporation		327		46
*	United Continental Holdings, Inc.		508		37
	Wabtec Corporation		407		34
					355
	Energy—10.5%
	Baker Hughes, Inc.		720		47
	Cimarex Energy Co.		254		34
*	Gulfport Energy Corporation		1,160		25
	Hess Corporation		644		40
	Noble Energy, Inc.		1,091		41

	Issuer	Shares		Value
	Common Stocks—(continued)
	Energy—(continued)
	Patterson-UTI Energy, Inc.		1,174	$	32
	Pioneer Natural Resources Co.		243		44
	Range Resources Corporation		681		23
*	Rice Energy, Inc.		930		20
*	Whiting Petroleum Corporation		813		10
					316
	Utilities—9.9%
	American Water Works Co., Inc.		545		39
	Atmos Energy Corporation		517		38
	CMS Energy Corporation		939		39
	Eversource Energy		817		45
	Pinnacle West Capital Corporation		523		41
	WEC Energy Group, Inc.		819		48
	Xcel Energy, Inc.		1,167		48
					298
	Information Technology—8.6%
*	Akamai Technologies, Inc.		565		38
	Belden, Inc.		540		40
*	Cadence Design Systems, Inc.		1,753		44
*	CommScope Holding Co., Inc.		898		34
*	Genpact, Ltd.†		792		19
	Juniper Networks, Inc.		915		26
*	NXP Semiconductors N.V.†		210		21
	TE Connectivity, Ltd.†		536		37
					259
	Consumer Discretionary—8.4%
	Darden Restaurants, Inc.		517		37
	Dick’s Sporting Goods, Inc.		616		33
	Leggett & Platt, Inc.		737		36
*	MGM Resorts International		1,233		35
	Newell Brands, Inc.		849		38
	Vail Resorts, Inc.		258		42
	VF Corporation		594		32
					253
	Materials—6.6%
	Carpenter Technology Corporation		1,069		39
	Eastman Chemical Co.		623		47
	FMC Corporation		783		44
	Steel Dynamics, Inc.		1,916		68
					198
	Health Care—5.6%
	CIGNA Corporation		173		23
*	Hologic, Inc.		875		35
*	Mednax, Inc.		493		33
*	Mettler-Toledo International, Inc.		101		43
	Zimmer Biomet Holdings, Inc.		351		36
					170
	Consumer Staples—4.0%
	Conagra Brands, Inc.		758		30
	Ingredion, Inc.		336		42
*	Lamb Weston Holdings, Inc.		252		10
	The Kroger Co.		1,103		38
					120

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 19

Mid Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Value
Total Common Stocks—99.9% (cost $2,385)	$	3,007
Total Investments—99.9% (cost $2,385)		3,007
Cash and other assets, less liabilities—0.1%		2
Net assets—100.0%	$	3,009

† = U.S. listed foreign security

* = Non-income producing securities

See accompanying Notes to Financial Statements.

20 Annual Report December 31, 2016

	Small-Mid Cap Growth Fund
	The Small-Mid Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Karl W. Brewer Daniel Crowe   Robert C. Lanphier, IV	The William Blair Small-Mid Cap Growth Fund (Class N shares) posted a 6.45% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 2500TM Growth Index (the “Index”), increased 9.73%. Underperformance for 2016 versus the Index was mostly due to individual stock dynamics as style factors were largely offsetting. From a style perspective, the Fund’s typical larger market cap profile relative to the Index was a headwind to performance as the smaller end of the Fund’s capitalization range outperformed. Further, more economically-sensitive areas of the market outperformed for the year. This dynamic was a headwind to the Fund’s investment style as the Fund’s emphasis on companies with durable growth drivers typically results in a portfolio with less cyclicality than the Index. The impact of these style headwinds was most pronounced in the third quarter, during which the Fund underperformed by more than it did for the year as a whole. Mostly offsetting the aforementioned headwinds was a benefit from the Fund’s typical underweight to Biotechnology and Pharmaceuticals, which underperformed in 2016 following several years of strong returns. From a stock-specific perspective, Information Technology was an area of weakness for the year, including the Fund’s positions in Guidewire Software and Cvent. Given the stock’s higher valuation multiple and several sources of near-term business uncertainty, Guidewire Software underperformed. Other notable detractors from relative performance included Jones Lang LaSalle (Real Estate), Centene (Health Care) and Tractor Supply Company (Consumer Discretionary). Shares of Jones Lang LaSalle declined as investors began to fear a peak in earnings associated with extended strength in the commercial real estate market. Conversely, stock selection within the Health Care sector contributed positively to the Fund’s relative returns. IDEXX Laboratories and Align Technology were among the top Health Care sector contributors. Shares of IDEXX Laboratories advanced following the company’s successful transition to a direct selling model and an acceleration in organic growth. Other strong performing holdings included Old Dominion Freight Line (Industrials), Nu Skin Enterprises (Consumer Staples) and Diamondback Energy (Energy). Old Dominion Freight Line outperformed the Index due to better-than-expected earnings in the latter half of the year and as investors gravitated towards more economically-sensitive stocks. Please refer to the U.S. Growth Market Review and Outlook relating to the Fund on page 6.

December 31, 2016 William Blair Funds 21

Small-Mid Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		6.45	%		6.41	%		13.85	%		8.94	%
Class I		6.72			6.68			14.12			9.22
Russell 2500TM Growth Index		9.73			5.45			13.88			8.24

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. Smaller and medium capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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^TM 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 December 31, 2016. 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 Annual Report December 31, 2016

Small-Mid Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Information Technology—21.2%
*	2U, Inc.		494,745	$	14,916
*	Akamai Technologies, Inc.		301,730		20,119
*	Arista Networks, Inc.		143,590		13,895
	Booz Allen Hamilton Holding Corporation		767,248		27,675
*	CoStar Group, Inc.		165,440		31,184
	CSRA, Inc.		680,540		21,668
*	Guidewire Software, Inc.		469,264		23,149
	j2 Global, Inc.		361,315		29,556
	MAXIMUS, Inc.		485,750		27,100
*	Pandora Media, Inc.		632,333		8,246
*	Take-Two Interactive Software, Inc.		321,990		15,871
*	Vantiv, Inc.		387,720		23,116
*	WNS Holdings, Ltd.—ADR		412,280		11,358
					267,853
	Health Care—18.6%
*	ABIOMED, Inc.		149,118		16,803
*	Akorn, Inc.		812,296		17,733
*	Align Technology, Inc.		137,883		13,255
*	Amedisys, Inc.		293,344		12,505
*	Cambrex Corporation		401,270		21,649
*	Centene Corporation		361,340		20,419
*	Exact Sciences Corporation		1,154,070		15,418
*	Glaukos Corporation		381,550		13,087
	HealthSouth Corporation		378,664		15,616
*	IDEXX Laboratories, Inc.		104,502		12,255
*	Ligand Pharmaceuticals, Inc.		236,229		24,003
*	Mettler-Toledo International, Inc.		62,930		26,340
*	Repligen Corporation		101,935		3,142
*	Veeva Systems, Inc.		540,600		22,002
					234,227
	Industrials—17.0%
	BWX Technologies, Inc.		566,930		22,507
*	Copart, Inc.		430,360		23,846
	HEICO Corporation		226,630		15,388
	Hexcel Corporation		357,650		18,398
*	Old Dominion Freight Line, Inc.		422,101		36,212
*	SiteOne Landscape Supply, Inc.		279,190		9,696
	The Dun & Bradstreet Corporation		112,670		13,669
*	The Middleby Corporation		167,662		21,597
	The Toro Co.		292,556		16,369
	TransDigm Group, Inc.		86,015		21,414
	Wabtec Corporation		188,140		15,619
					214,715
	Financials—12.2%
*	Affiliated Managers Group, Inc.		155,431		22,584
	Bank of the Ozarks, Inc.		470,750		24,757
	CBOE Holdings, Inc.		174,110		12,865
*	Encore Capital Group, Inc.		399,491		11,445
	FactSet Research Systems, Inc.		94,854		15,502
	FirstCash, Inc.		304,323		14,303
	Iberiabank Corporation		108,890		9,120
	OM Asset Management plc†		641,858		9,307
*	Signature Bank		178,370		26,791
	Virtu Financial, Inc.		420,212		6,702
					153,376

	Issuer	Shares/ Principal Amount		Value
	Common Stocks—(continued)
	Consumer Discretionary—11.8%
	Cable One, Inc.		12,230	$	7,604
	DeVry Education Group, Inc.		503,570		15,711
*	IMAX Corporation†		513,643		16,129
	Six Flags Entertainment Corporation		564,246		33,832
	Tractor Supply Co.		447,690		33,939
*	Ulta Salon Cosmetics & Fragrance, Inc.		75,530		19,256
*	Universal Electronics, Inc.		238,486		15,394
	Vail Resorts, Inc.		45,993		7,419
					149,284
	Materials—5.4%
*	Axalta Coating Systems, Ltd.†		541,150		14,719
	Ball Corporation		244,030		18,319
	Celanese Corporation		239,850		18,886
	Martin Marietta Materials, Inc.		75,040		16,624
					68,548
	Consumer Staples—3.6%
*	Blue Buffalo Pet Products, Inc.		484,780		11,654
*	Herbalife, Ltd.†		210,230		10,121
	Nu Skin Enterprises, Inc.		133,234		6,366
	WD-40 Co.		145,520		17,011
					45,152
	Real Estate—2.8%
	Colliers International Group, Inc.†		221,794		8,151
	FirstService Corporation†		329,662		15,652
	Jones Lang LaSalle, Inc.		112,591		11,376
					35,179
	Energy—2.3%
*	Carrizo Oil & Gas, Inc.		254,360		9,500
*	Diamondback Energy, Inc.		194,790		19,686
					29,186
	Telecommunication Services—1.8%
*	SBA Communications Corporation		222,920		23,019
	Total Common Stocks—96.7% (cost $1,060,058)				1,220,539
	Repurchase Agreement
	Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $50,017, collateralized by U.S. Treasury Note, 2.750%, due 2/15/24	$	50,017		50,017
	Total Repurchase Agreement—3.9% (cost $50,017)				50,017
	Total Investments—100.6% (cost $1,110,075)				1,270,556
	Liabilities, plus cash and other assets—(0.6)%				(7,979	)
	Net assets—100.0%			$	1,262,577

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 23

	Small-Mid Cap Value Fund
	The Small-Mid Cap Value Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Chad M. Kilmer Mark T. Leslie David S. Mitchell	The William Blair Small-Mid Cap Value Fund (Class N shares) posted a 20.69% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 2500™ Value Index (the “Index”), increased 25.20%. The Fund’s underperformance relative to the Index was driven by a combination of style factors and stock selection. The risk-on rally that began in mid-February continued on through the end of the year, led by smaller cap, lower quality and higher beta stocks. As such, our relative value style, lower beta exposure, and underweight to the smallest market cap stocks in the universe, relative to the Index, were headwinds for the Fund. In addition, the worst performing stocks over the twelve months heading into the back half of 2016 rallied and the Fund’s lack of exposure to this segment was a headwind. At the sector level, Real Estate, specifically REITs, was the largest detractor from the Fund’s relative performance due to stock selection as REITs in general were pressured by the move up in interest rates during the back half of the year. Within REITs, an overweight to and stock selection within Retail REITs was the main driver of underperformance. While the Industrials sector represented a significant detractor from the Fund’s relative performance due to stock selection throughout most industries within the sector, our stock selection in the Aerospace & Defense industry was one of the largest contributors to relative performance in 2016. Broadly speaking, our higher quality bias and lack of exposure to the more cyclically exposed companies contributed to the Fund’s relative underperformance within Industrials as well. While the Fund’s cash position is a residual of our investment process, the robust market return for the year created a notable cash drag on relative performance. Information Technology was the most significant sector contributor to relative performance during the year due to strong stock selection within Semiconductors, where the Fund benefitted from the acquisition of portfolio holding Intersil earlier in the year. The Consumer Discretionary sector was another notable contributor to the Fund’s relative performance, mainly due to stock selection within Media and Hotels, Restaurants & Leisure. Looking specifically at stock selection, the Fund’s largest detractors from relative performance were Jones Lang LaSalle (Real Estate), Gulfport (Energy), and Integer (Health Care). Offsetting these detractors were investments in Inphi (Information Technology), Intersil (Information Technology), and Children’s Place (Consumer Discretionary), which contributed to the Fund’s relative performance. Please refer to the U.S. Value Market Review and Outlook relating to the Fund on page 7.

24 Annual Report December 31, 2016

Small-Mid Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			Since Inception(a)
Class N		20.69	%		6.96	%		13.30	%		14.16	%
Class I		21.00			7.25			13.61			14.47
Russell 2500TM Value Index		25.20			8.22			15.04			15.82

(a) For the period from December 15, 2011 (Commencement of Operations) to December 31, 2016.

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. Smaller and medium capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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.

Russell 2500^TM Value Index consists of mid-capitalization companies with below average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on December 31, 2016. 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.

December 31, 2016 William Blair Funds 25

Small-Mid Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Financials—28.0%
	Allied World Assurance Co. Holdings, Ltd.†		816	$	44
*	Arch Capital Group, Ltd.†		530		46
	Assured Guaranty, Ltd.†		977		37
	Bank of the Ozarks, Inc.		836		44
	Banner Corporation		371		21
	Boston Private Financial Holdings, Inc.		902		15
	CNO Financial Group, Inc.		1,314		25
	CVB Financial Corporation		710		16
*	E*TRADE Financial Corporation		1,257		44
	East West Bancorp, Inc.		1,013		52
	First American Financial Corporation		769		28
	Glacier Bancorp, Inc.		1,050		38
	Hanover Insurance Group, Inc.		420		38
	Home BancShares, Inc.		1,011		28
	Iberiabank Corporation		410		34
	Mid-America Apartment Communities, Inc.		372		36
	PacWest Bancorp		832		45
	Prosperity Bancshares, Inc.		501		36
	Radian Group, Inc.		2,360		42
	Renasant Corporation		588		25
	Selective Insurance Group, Inc.		836		36
*	Signature Bank		182		27
*	SVB Financial Group		185		32
	Tanger Factory Outlet Centers, Inc.		935		33
	Umpqua Holdings Corporation		1,360		26
*	Western Alliance Bancorp		611		30
	WSFS Financial Corporation		880		41
	Zions Bancorporation		1,071		46
					965
	Industrials—12.1%
	Brady Corporation		681		26
	Carlisle Cos., Inc.		306		34
	CIRCOR International, Inc.		314		20
	Curtiss-Wright Corporation		265		26
	EMCOR Group, Inc.		509		36
	Fortune Brands Home & Security, Inc.		389		21
*	FTI Consulting, Inc.		572		26
	Hubbell, Inc.		225		26
	Interface, Inc.		1,681		31
*	Lydall, Inc.		379		23
	Manpowergroup, Inc.		286		25
	Matson, Inc.		594		21
	Simpson Manufacturing Co., Inc.		434		19
	Standex International Corporation		329		29
	Valmont Industries, Inc.		177		25
	Wabtec Corporation		348		29
					417
	Real Estate—11.1%
	Acadia Realty Trust		1,143		37
	American Assets Trust, Inc.		863		37
	American Campus Communities, Inc.		629		31
	Care Capital Properties, Inc.		819		21

	Issuer	Shares		Value
	Common Stocks—(continued)
	Real Estate—(continued)
	DDR Corporation		2,205	$	34
	Douglas Emmett, Inc.		1,061		39
	Education Realty Trust, Inc.		628		27
*	EPR Properties		313		22
	Equity Commonwealth		804		24
	Highwoods Properties, Inc.		474		24
	National Retail Properties, Inc.		569		25
	Pebblebrook Hotel Trust		531		16
	Taubman Centers, Inc.		399		30
	Terreno Realty Corporation		633		18
					385
	Information Technology—10.6%
*	Acxiom Corporation		1,744		47
	ADTRAN, Inc.		851		19
	Belden, Inc.		520		39
	Booz Allen Hamilton Holding Corporation		1,007		36
*	Cadence Design Systems, Inc.		1,815		46
*	CommScope Holding Co., Inc.		756		28
	CSRA, Inc.		1,231		39
*	Genpact, Ltd.†		1,008		25
*	Inphi Corporation		980		44
	j2 Global, Inc.		532		43
					366
	Consumer Discretionary—9.8%
	American Eagle Outfitters, Inc.		1,059		16
*	Cavco Industries, Inc.		183		18
	Children’s Place, Inc.		344		35
	Churchill Downs, Inc.		158		24
	Columbia Sportswear Co.		294		17
	Dana, Inc.		1,336		25
	Darden Restaurants, Inc.		312		23
*	Dave & Buster’s Entertainment, Inc.		561		32
	Dick’s Sporting Goods, Inc.		380		20
	Ethan Allen Interiors, Inc.		472		17
*	Genesco, Inc.		282		17
	Leggett & Platt, Inc.		486		24
	Meredith Corporation		476		28
	Vail Resorts, Inc.		134		22
	Wolverine World Wide, Inc.		942		21
					339
	Energy—7.2%
*	Exterran Corporation		722		17
*	Gulfport Energy Corporation		1,375		30
*	Helix Energy Solutions Group, Inc.		1,948		17
*	Parsley Energy, Inc.		1,357		48
	Patterson-UTI Energy, Inc.		717		19
*	PDC Energy, Inc.		613		45
	Range Resources Corporation		619		21
*	Rice Energy, Inc.		1,567		33
*	Whiting Petroleum Corporation		1,552		19
					249

See accompanying Notes to Financial Statements.

26 Annual Report December 31, 2016

Small-Mid Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Utilities—6.5%
	Atmos Energy Corporation		515	$	38
	IDACORP, Inc.		413		33
	Pinnacle West Capital Corporation		488		38
	PNM Resources, Inc.		768		26
	Portland General Electric Co.		619		27
	Southwest Gas Corporation		372		29
	Spire, Inc.		499		32
					223
	Materials—5.2%
	Carpenter Technology Corporation		460		17
	FMC Corporation		361		20
	Minerals Technologies, Inc.		439		34
	PolyOne Corporation		907		29
	Sensient Technologies Corporation		354		28
	Silgan Holdings, Inc.		309		16
	Steel Dynamics, Inc.		1,046		37
					181
	Health Care—5.2%
	Analogic Corporation		201		17
	CONMED Corporation		359		16
	HealthSouth Corporation		661		27
*	Hologic, Inc.		454		18
*	Integer Holdings Corporation		372		11
*	Magellan Health, Inc.		247		19
*	Mednax, Inc.		460		31
*	Mettler-Toledo International, Inc.		94		39
					178
	Consumer Staples—2.5%
*	Darling Ingredients, Inc.		910		12
	Ingredion, Inc.		394		49
	J&J Snack Foods Corporation		202		27
					88
	Total Common Stocks—98.2% (cost $2,527)				3,391
	Total Investments—98.2% (cost $2,527)				3,391
	Cash and other assets, less liabilities—1.8%				62
	Net assets—100.0%			$	3,453

† = U.S. listed foreign security

* = Non-income producing securities

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 27

	Small Cap Growth Fund
	The Small Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Michael P. Balkin Karl W. Brewer Ward D. Sexton	The William Blair Small Cap Growth Fund (Class N shares) posted an 18.89% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 2000® Growth Index (the “Index”), increased 11.32%. Significant outperformance in 2016 versus the Index was the result of both strong stock selection and style tailwinds for the Fund. From a style perspective, the Fund’s typical smaller market capitalization profile, relative to the Index, was a modest benefit while the Fund’s underweight allocations to Biotechnology and Pharmaceuticals provided a more significant tailwind as those industries underperformed in 2016. What had been a headwind to performance in prior years became a substantial tailwind in 2016 given the magnitude of our Biotechnology and Pharmaceuticals underweight, which has historically been driven by the relatively limited number of companies in those industries that satisfy our quality growth mandate. On a stock specific basis, selection was positive across several sectors, most notably in Health Care where ExamWorks, which was acquired in 2016, was the top contributor to the Fund’s relative performance. Other standout performers included Hudson Technologies (Industrials), Stillwater Mining Company (Materials), MaxLinear (Information Technology) and Xactly (Information Technology). Hudson Technologies outperformed after winning a large contract for new business and on optimism for continued strength in business fundamentals. Conversely, top detractors from relative performance during the year were Akorn (Health Care), Hortonworks (Information Technology), Virtu Financial (Financials), Air Methods Corporation (Health Care) and Guidewire Software (Information Technology). Akorn underperformed in part on investor concerns related to the restatement of the company’s financials while Hortonworks underperformed after announcing a dilutive secondary offering. Please refer to the U.S. Growth Market Review and Outlook relating to the Fund on page 6.

28 Annual Report December 31, 2016

Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		18.89	%		5.25	%		16.04	%		6.45	%
Class I		19.22			5.52			16.33			6.74
Russell 2000® Growth Index		11.32			5.05			13.74			7.76

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. Smaller capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 is an unmanaged composite of the smallest 2000 stocks of the Russell 3000^® Growth Index. This report identifies the Fund’s investments on December 31, 2016. 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.

December 31, 2016 William Blair Funds 29

Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Information Technology—23.5%
*	2U, Inc.		147,580	$	4,450
*	Acxiom Corporation		138,290		3,706
*	Callidus Software, Inc.		244,517		4,108
*	CardConnect Corporation		404,920		5,143
	CSRA, Inc.		181,600		5,782
*	Envestnet, Inc.		101,230		3,568
*	Guidewire Software, Inc.		92,686		4,572
*	Inphi Corporation		106,370		4,746
	j2 Global, Inc.		139,031		11,373
	MAXIMUS, Inc.		71,650		3,997
*	MaxLinear, Inc.		220,661		4,810
*	OSI Systems, Inc.		69,300		5,275
*	Pandora Media, Inc.		358,340		4,673
*	Planet Payment, Inc.		451,815		1,843
*	Q2 Holdings, Inc.		89,090		2,570
*	RealPage, Inc.		164,890		4,947
*	Take-Two Interactive Software, Inc.		94,240		4,645
*	USA Technologies, Inc.		980,102		4,215
*	WNS Holdings, Ltd.—ADR		201,994		5,565
*	Xactly Corporation		129,190		1,421
					91,409
	Health Care—18.9%
*	Accelerate Diagnostics, Inc.		116,780		2,423
*	Air Methods Corporation		153,046		4,875
*	Akorn, Inc.		229,880		5,018
*	Amedisys, Inc.		87,105		3,713
*	AtriCure, Inc.		238,043		4,659
*	Cambrex Corporation		129,595		6,992
*	Entellus Medical, Inc.		18,947		359
*	Exact Sciences Corporation		313,964		4,195
*	Glaukos Corporation		110,376		3,786
	HealthSouth Corporation		86,685		3,575
	LeMaitre Vascular, Inc.		152,735		3,870
*	LHC Group, Inc.		97,460		4,454
*	Ligand Pharmaceuticals, Inc.		69,210		7,032
*	NeoGenomics, Inc.		419,891		3,598
*	NxStage Medical, Inc.		221,716		5,811
*	Repligen Corporation		113,470		3,497
*	Veeva Systems, Inc.		137,410		5,593
					73,450
	Consumer Discretionary—17.1%
*	Bridgepoint Education, Inc.		178,940		1,813
	Cable One, Inc.		8,200		5,098
	Collectors Universe, Inc.		134,122		2,847
	DeVry Education Group, Inc.		115,410		3,601
*	Gentherm, Inc.		164,730		5,576
	Golden Entertainment, Inc.		369,428		4,474
*	Grand Canyon Education, Inc.		63,600		3,717
*	IMAX Corporation†		179,447		5,635
	Lithia Motors, Inc.		43,160		4,179
	Nutrisystem, Inc.		137,310		4,758
	Six Flags Entertainment Corporation		152,342		9,134
*	Steven Madden, Ltd.		119,390		4,268
*	U.S. Auto Parts Network, Inc.		1,256,773		4,424
*	Universal Electronics, Inc.		106,499		6,875
					66,399

	Issuer	Shares		Value
	Common Stocks—(continued)
	Industrials—13.5%
	Albany International Corporation		46,270	$	2,142
	BWX Technologies, Inc.		127,780		5,073
	ESCO Technologies, Inc.		125,290		7,098
*	GP Strategies Corporation		120,667		3,451
	HEICO Corporation		109,150		7,411
*	Hudson Technologies, Inc.		478,316		3,832
*	ICF International, Inc.		69,041		3,811
	John Bean Technologies Corporation		62,155		5,342
*	Mercury Systems, Inc.		190,545		5,758
	Ritchie Bros. Auctioneers, Inc.†		73,880		2,512
*	SiteOne Landscape Supply, Inc.		82,600		2,869
	The Dun & Bradstreet Corporation		25,930		3,146
					52,445
	Financials—10.7%
	A-Mark Precious Metals, Inc.		25,384		495
	B. Riley Financial, Inc.		199,504		3,681
*	BofI Holding, Inc.		116,560		3,328
*	Cowen Group, Inc.		233,086		3,613
*	Encore Capital Group, Inc.		134,726		3,860
	FirstCash, Inc.		154,566		7,264
	Iberiabank Corporation		40,490		3,391
	Meta Financial Group, Inc.		58,000		5,968
	Pacific Continental Corporation		173,000		3,780
	Virtu Financial, Inc.		386,952		6,172
					41,552
	Consumer Staples—4.1%
	MGP Ingredients, Inc.		79,900		3,994
	Nu Skin Enterprises, Inc.		101,655		4,857
*	USANA Health Sciences, Inc.		56,520		3,459
	WD-40 Co.		30,431		3,557
					15,867
	Real Estate—1.9%
	Colliers International Group, Inc.†		74,653		2,743
	FirstService Corporation†		101,929		4,840
					7,583
	Energy—1.9%
*	Callon Petroleum Co.		173,330		2,664
*	Carrizo Oil & Gas, Inc.		76,093		2,842
*	Gulfport Energy Corporation		86,387		1,870
					7,376
	Telecommunication Services—1.4%
*	ORBCOMM, Inc.		659,002		5,450
	Materials—0.4%
*	Codexis, Inc.		385,210		1,772
	Total Common Stocks—93.4% (cost $291,689)				363,303
	Exchange-Traded Fund
	iShares Russell 2000 Growth Index Fund		62,260		9,584
	Total Exchange-Traded Fund—2.5% (cost $7,935)				9,584

See accompanying Notes to Financial Statements.

30 Annual Report December 31, 2016

Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Principal
Issuer	Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $16,760, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	16,760	$	16,760
Total Repurchase Agreement—4.3% (cost $16,760)				16,760
Total Investments—100.2% (cost $316,384)				389,647
Liabilities, plus cash and other assets—(0.2)%				(749	)
Net assets—100.0%			$	388,898

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

If a fund’s portfolio holdings represent ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined in the Investment Company Act of 1940. The Fund had the following transactions during the year ended December 31, 2016 with companies deemed affiliated during the year or at December 31, 2016.

	Share Activity								Year Ended December 31, 2016
Security Name	Balance 12/31/2015		Purchases		Sales		Balance 12/31/2016		Value			Dividend Income			Net realized gain (loss)			Change in net unrealized appreciation (depreciation)
Hudson Technologies, Inc.		1,681,784		173,110		1,376,578		478,316		$	3,832		$	—		$	3,587		$	2,483
										$	3,832		$	—		$	3,587		$	2,483

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 31

	Small Cap Value Fund
	The Small Cap Value Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Chad M. Kilmer Mark T. Leslie David S. Mitchell	The William Blair Small Cap Value Fund (Class N shares) posted a 26.19% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Russell 2000® Value Index (the “Index”), increased 31.74%. The Fund’s underperformance relative to the Index was driven by a combination of style factors and stock selection. The risk-on rally that began in mid-February continued on through the end of the year, led by smaller cap, lower quality and higher beta stocks. As such, our larger market cap, higher quality biases and lower beta exposure were headwinds for the Fund. In addition, the worst performing stocks over the twelve months heading into the back half of 2016 rallied and the Fund’s lack of exposure to this segment was a headwind. At the sector level, Materials was the largest detractor from the Fund’s relative performance primarily due to a lack of exposure to Silver. An underweight to Steel, and stock selection within Steel, also detracted from relative performance. The Real Estate sector, specifically REITs, was another detractor from performance due to stock selection as REITs in general were pressured by the move up in interest rates during the back half of the year. While the Fund’s cash position is a residual of our investment process, the robust market return for the year created a notable cash drag on relative performance. Consumer Discretionary was the most significant sector contributor to the Fund’s relative performance during the year due to positive stock selection throughout the sector. The Energy sector was another notable contributor to relative performance, mainly due to stock selection within Oil, Gas & Consumable Fuels. Looking specifically at stock selection, the Fund’s largest detractors from relative performance were Integer (Health Care), Matson (Industrials), and TETRA Technologies (Energy). Offsetting these detractors were our investments in G&K Services (Industrials), Inphi (Information Technology), and Krispy Kreme Doughnuts (Consumer Discretionary), which contributed to the Fund’s relative performance. Please refer to the U.S. Value Market Review and Outlook relating to the Fund on page 7.

32 Annual Report December 31, 2016

Small Cap Value Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		26.19	%		7.50	%		14.19	%		7.66	%
Class I		26.46			7.78			14.48			7.91
Russell 2000® Value Index		31.74			8.31			15.07			6.26

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. Smaller capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 consists of small-capitalization companies with below average price-to-book ratios and forecasted growth rates.

This report identifies the Fund’s investments on December 31, 2016. 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.

December 31, 2016 William Blair Funds 33

Small Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Financials—30.6%
	Bank of the Ozarks, Inc.		198,445	$	10,436
	Banner Corporation		145,360		8,113
	Berkshire Hills Bancorp, Inc.		231,342		8,525
	Boston Private Financial Holdings, Inc.		405,363		6,709
	CNO Financial Group, Inc.		367,366		7,035
	CoBiz Financial, Inc.		517,441		8,740
	CVB Financial Corporation		273,355		6,268
	First American Financial Corporation		178,147		6,525
	Glacier Bancorp, Inc.		284,319		10,301
	Hancock Holding Co.		224,720		9,685
	Hanover Insurance Group, Inc.		90,428		8,230
	Home BancShares, Inc.		301,578		8,375
	Iberiabank Corporation		132,661		11,110
	National Bank Holdings Corporation		198,012		6,315
	PacWest Bancorp		178,341		9,709
	Prosperity Bancshares, Inc.		134,940		9,686
	Radian Group, Inc.		633,231		11,385
	Renasant Corporation		207,782		8,773
*	Safeguard Scientifics, Inc.		179,553		2,415
	Selective Insurance Group, Inc.		206,588		8,894
	Sterling Bancorp		228,085		5,337
	Tanger Factory Outlet Centers, Inc.		184,770		6,611
	Umpqua Holdings Corporation		442,818		8,316
*	Western Alliance Bancorp		220,919		10,761
	WSFS Financial Corporation		214,624		9,948
	Yadkin Financial Corporation		250,774		8,591
					216,793
	Industrials—12.5%
	Brady Corporation		181,405		6,812
	CIRCOR International, Inc.		113,230		7,346
	Curtiss-Wright Corporation		74,232		7,302
	EMCOR Group, Inc.		136,330		9,647
*	FTI Consulting, Inc.		157,085		7,081
	Interface, Inc.		435,132		8,072
	Kadant, Inc.		108,212		6,623
*	Lydall, Inc.		110,450		6,831
	Matson, Inc.		151,983		5,379
*	Northwest Pipe Co.		230,862		3,975
	Simpson Manufacturing Co., Inc.		113,335		4,958
	Standex International Corporation		85,564		7,517
	Valmont Industries, Inc.		48,090		6,776
					88,319
	Information Technology—11.2%
*	Acxiom Corporation		382,977		10,264
	ADTRAN, Inc.		248,492		5,554
	Belden, Inc.		116,267		8,693
	Booz Allen Hamilton Holding Corporation		230,386		8,310
*	CommScope Holding Co., Inc.		209,194		7,782
	CSRA, Inc.		279,760		8,908
*	Inphi Corporation		192,954		8,610
	Intersil Corporation		241,220		5,379
*	Intralinks Holdings, Inc.		465,549		6,294
	j2 Global, Inc.		115,727		9,466
					79,260

	Issuer	Shares		Value
	Common Stocks—(continued)
	Consumer Discretionary—10.1%
	American Eagle Outfitters, Inc.		235,250	$	3,569
*	Cavco Industries, Inc.		54,280		5,420
	Children’s Place, Inc.		82,397		8,318
	Churchill Downs, Inc.		41,685		6,271
	Columbia Sportswear Co.		75,450		4,399
	Dana, Inc.		421,103		7,992
*	Dave & Buster’s Entertainment, Inc.		126,040		7,096
	Ethan Allen Interiors, Inc.		151,526		5,584
*	Genesco, Inc.		88,043		5,467
	Meredith Corporation		120,612		7,134
	Vail Resorts, Inc.		26,271		4,238
	Wolverine World Wide, Inc.		276,609		6,072
					71,560
	Real Estate—8.5%
	Acadia Realty Trust		250,121		8,174
	American Assets Trust, Inc.		191,607		8,254
	American Campus Communities, Inc.		139,176		6,927
	Care Capital Properties, Inc.		157,631		3,941
	Education Realty Trust, Inc.		195,909		8,287
	EPR Properties		71,974		5,166
*	Equity Commonwealth		158,931		4,806
	Highwoods Properties, Inc.		120,717		6,158
	Pebblebrook Hotel Trust		168,377		5,009
	Terreno Realty Corporation		127,665		3,637
					60,359
	Utilities—6.1%
	Chesapeake Utilities Corporation		91,080		6,098
	IDACORP, Inc.		99,877		8,045
	PNM Resources, Inc.		205,396		7,045
	Portland General Electric Co.		173,153		7,503
	Southwest Gas Corporation		96,835		7,419
	Spire, Inc.		111,818		7,218
					43,328
	Energy—5.3%
	Archrock, Inc.		464,418		6,130
*	Exterran Corporation		146,775		3,508
*	Helix Energy Solutions Group, Inc.		471,040		4,154
*	PDC Energy, Inc.		114,423		8,305
*	Rice Energy, Inc.		318,300		6,796
*	RSP Permian, Inc.		199,750		8,913
					37,806
	Health Care—4.6%
	Analogic Corporation		60,795		5,043
	CONMED Corporation		164,900		7,284
	HealthSouth Corporation		184,445		7,606
*	Integer Holdings Corporation		194,974		5,742
*	Magellan Health, Inc.		90,538		6,813
					32,488

See accompanying Notes to Financial Statements.

34 Annual Report December 31, 2016

Small Cap Value Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Shares or
	Principal
Issuer	Amount		Value
Common Stocks—(continued)
Materials—4.4%
Carpenter Technology Corporation		131,685	$	4,763
Minerals Technologies, Inc.		103,676		8,009
PolyOne Corporation		168,917		5,412
Sensient Technologies Corporation		97,488		7,661
Silgan Holdings, Inc.		107,083		5,480
				31,325
Consumer Staples—3.4%
*Darling Ingredients, Inc.		448,135		5,785
J&J Snack Foods Corporation		68,174		9,096
SpartanNash Co.		233,273		9,224
				24,105
Total Common Stocks—96.7% (cost $503,160)				685,343
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $20,650, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	20,650		20,650
Total Repurchase Agreement—2.9% (cost $20,650)				20,650
Total Investments—99.6% (cost $523,810)				705,993
Cash and other assets, less liabilities—0.4%				2,638
Net assets—100.0%			$	708,631

* = Non-income producing securities

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 35

Global Markets Review and Outlook

Global equities overcame repeated slumps in 2016 amid an environment of heightened political risk and fragile growth. Stock markets around the world sustained a swift and painful correction to start the year, driven by concerns about global growth and the plummeting oil price. China’s economic slowdown and ongoing rebalancing also weighed on sentiment, compounded by worries about the weaker renminbi and opaque government policy measures. These fears quickly abated, and markets rallied strongly off their February lows into mid-year, when the U.K. referendum on European Union membership came into focus.

Although Brexit-induced losses in late June were quickly recovered on expectations of prolonged central bank stimulus measures, the environment for equities remained tenuous heading into the second half of 2016, with uncertainty about the longer-term Brexit ramifications for U.K. and European economic activity. In addition to the surprise referendum outcome and its implications for growth, investors were confronted with renewed worries about systemic risk in the European banking system as Deutsche Bank’s share price retreated on news that the U.S. Department of Justice was seeking $14 billion to settle a mortgage-abuse case. Expectations that these concerns would give the Federal Open Market Committee more reason to delay interest rate normalization, or convince the European Central Bank to expand its stimulus measures, contributed to a risk-on environment during the third quarter, broadly propelling equities higher.

In what was perhaps the defining moment of 2016, Donald Trump’s election victory shifted the market’s focus from monetary policy to fiscal expansion, igniting a strong rally in reflationary assets through the end of the year. U.S. equities, the dollar and commodities were among the primary beneficiaries of expected infrastructure spending increases and tax cuts under the new administration, while rising inflation and interest rate expectations led to a sharp repricing of sovereign bond yields.

Emerging Markets equities outperformed Developed Markets in 2016, benefiting from reasonable valuations versus Developed Markets, stabilizing fund flows and currencies, moderating political risk, and the rebound in commodity prices. Despite stumbling in the fourth quarter on Trump-related worries about a stronger dollar, higher U.S. interest rates and protectionism, the MSCI Emerging Markets Index (net) gained 9.90% in USD terms for the year. Consistent with the market’s preference for low valuation stocks, previously out-of-favor countries and sectors rallied significantly during the year. Brazilian and Russian equities outperformed in this environment, gaining 66.10% and 56.95%, respectively, in USD terms, driven largely by currency appreciation. From a sector perspective within Emerging Markets, Energy and Materials gained 35.41% and 29.65%, respectively, leading other sectors by a wide margin.

The broadening global growth and inflationary backdrop contributed to the substantial outperformance of value-oriented stocks across regions, sectors, and market capitalizations in 2016. This trend accelerated after the U.S. Presidential election, to the detriment of not only growth-oriented companies, but those with higher quality attributes including balance sheet strength and low earnings volatility.

At our recent Global Market Outlook presentation to clients, we noted that financial markets have been correctly reacting to the global economic environment. Inflation has returned to pre-crisis levels in the U.S., while real growth has stabilized for the world economy overall – albeit at relatively low levels. This stabilization is remarkable because it comes on the back of two and a half years of a sharp and protracted deceleration in growth. Combined with sequentially rising inflation, this stabilization means nominal growth for the world as a whole is gradually increasing.

Now that inflation is becoming more apparent, we believe that re-pricing in the bond market has only just begun. Higher inflation also matters for equity returns. At a minimum, higher inflation implies higher interest rates, which influences the discount rate for future cash flows. In practical terms, we have already seen a sharp rotation toward “value” stocks, including cyclical sectors such as Industrials and Financials which had underperformed for several years before 2016, making them relatively “cheap” or “value-like”.

Valuation sensitivity has increased across geographies and sectors. Looking at the traditional discounted cash flow framework, the three main elements are suddenly working against investors with long-life assets: the terminal multiple is probably coming down; the cost of capital seems to be heading up; and free cash flows are under pressure from taxes and protectionism. In this environment, we have been adding to high-quality companies with a focus on lower valuations. Our preference remains for high-quality growth, but we believe the available opportunity set has expanded, and some of those companies are in cheaper areas of the market.

Despite near-term uncertainty surrounding how a Trump administration and Republican majority may actually govern, we expect a continuation of the recent reflationary market environment in 2017. From a global portfolio strategy perspective, we continue to expect higher nominal growth and have generally positioned toward companies with rising earnings prospects that we believe are not fairly reflected in valuations. In addition to the Industrials, Energy and Materials sectors, we continue to be constructive on Financials, supported by higher rates and steeper yield curves – which we believe are likely to persist.

Specific to Emerging Markets, several factors are supportive of our 2017 outlook. Valuations remain attractive, with Emerging Markets equities overall trading at a 25% discount to Developed Markets (based on forward P/E multiples), about one standard deviation below their long-term average. After stagnating over the last few years, Emerging Market corporate earnings are forecast to increase at a low double-digit pace this year. From an external balance perspective (the difference between exports of goods and services and imports of goods and services), Emerging Markets currencies have already depreciated and current account deficits have moderated.

Key risk factors for Emerging Markets that bear close monitoring are a strengthening U.S. dollar and acceleration in U.S. interest rate hikes, in addition to protectionist measures that impede global trade. China’s capital outflows and currency management policy, as well as the lingering effects of India’s demonetization on local economic activity, will also be important risk considerations for Emerging Markets investors in 2017.

36 Annual Report December 31, 2016

	Global Leaders Fund
	The Global Leaders Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Andrew G. Flynn   Kenneth J. McAtamney	The William Blair Global Leaders Fund (Class N shares) posted a 0.62% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI All Country World IMI Index (net) (the “Index”), increased 8.36%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective relative to the Index, stock selection in Materials, Real Estate, Healthcare and Industrials were significant detractors from the Fund’s relative performance for the year. These effects were mitigated by positive stock selection in Energy and the Fund’s underweight position to Consumer Staples. Within Materials, the Fund’s performance was hampered by a lack of exposure to Metals & Mining stocks, which rallied strongly on global growth recovery prospects and the market’s rotation into value orientated stocks. Chemicals holdings also detracted from the Fund’s relative performance in the Materials sector. Within the Real Estate sector, property developer China Overseas Land & Investment’s share price was hampered by concerns about policy tightening measures in Shanghai and other mainland cities. U.S.-based commercial real estate company Jones Lang LaSalle also detracted from relative performance, as weaker investment sales, elevated expenses and currency effects weighed on financial results. Within the Health Care sector, U.S. managed care provider Centene’s share price weakened amid policy uncertainty following the Republican party sweep in November. Partially offsetting these effects were positive contributions to the Fund’s performance from Oil & Gas holdings, including Canadian oil sands producer Suncor Energy, which reported solid financial results driven by higher production and operational improvements. U.S.-based shale driller EOG Resources also contributed to the Fund’s relative performance, bolstered by better than expected crude oil production results, as well as production growth guidance. From a geographic attribution perspective, the primary detractor from relative performance in 2016 was U.S. stock selection, as the Fund’s U.S. Financials, Information Technology and Real Estate holdings lagged. In contrast, stock selection in Japan was positive, supported by the outperformance of the Japanese Industrials, Information Technology and Financials sectors, relative to the Index. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 37

Global Leaders Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016

										Since
	1 Year			3 Year			5 Year			Inception
Class N(a)		0.62	%		2.28	%		8.68	%		2.34	%
Class I(a)		0.98			2.60			8.99			2.63
MSCI ACW IMI (net)(a)		8.36			3.25			9.61			2.47
Institutional Class(b)		1.03			2.70			—			6.90
MSCI ACW IMI (net)(b)		8.36			3.25			—			7.82

(a)	Since inception is for the period from October 15, 2007 (Commencement of Operations) to December 31, 2016.
(b)	Since inception is for the period from December 19, 2012 (Commencement of Operations) to December 31, 2016.

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. Smaller and medium capitalization 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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution fees (12b-1). Institutional Class shares are available to institutional investors 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 (ACW) 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 December 31, 2016. 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.

38 Annual Report December 31, 2016

Global Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Western Hemisphere—59.0%
	Canada—5.0%
	Alimentation Couche Tard, Inc. Class “B” (Food & staples retailing)		38,740	$	1,757
	Brookfield Asset Management, Inc. Class “A” (Capital markets)†		66,686		2,201
	Intact Financial Corporation (Insurance)		25,190		1,803
	Suncor Energy, Inc. (Oil, gas & consumable fuels)		96,264		3,148
					8,909
	United States—54.0%
*	Adobe Systems, Inc. (Software)		19,595		2,017
*	Affiliated Managers Group, Inc. (Capital markets)		11,638		1,691
*	Akamai Technologies, Inc. (Internet software & services)		43,237		2,883
*	Align Technology, Inc. (Health care equipment & supplies)		12,873		1,238
*	Alphabet, Inc. Class “A” (Internet software & services)		5,306		4,205
*	Amazon.com, Inc. (Internet & direct marketing retail)		6,008		4,505
*	ANSYS, Inc. (Software)		9,768		904
	Apogee Enterprises, Inc. (Building products)		33,124		1,774
	BlackRock, Inc. (Capital markets)		11,264		4,286
*	Boston Scientific Corporation (Health care equipment & supplies)		104,698		2,265
	Brunswick Corporation (Leisure products)		25,007		1,364
	Costco Wholesale Corporation (Food & staples retailing)		11,618		1,860
	Danaher Corporation (Health care equipment & supplies)		26,390		2,054
*	Edwards Lifesciences Corporation (Health care equipment & supplies)		23,526		2,204
	EOG Resources, Inc. (Oil, gas & consumable fuels)		18,357		1,856
	Equifax, Inc. (Professional services)		17,024		2,013
*	Facebook, Inc. (Internet software & services)		21,758		2,503
	Fifth Third Bancorp (Banks)		100,775		2,718
	Hess Corporation (Oil, gas & consumable fuels)		34,518		2,150
	Honeywell International, Inc. (Industrial conglomerates)		19,328		2,239
	Intercontinental Exchange, Inc. (Capital markets)		51,352		2,897
	JPMorgan Chase & Co. (Banks)		49,616		4,281
	Mastercard, Inc. Class “A” (IT services)		27,006		2,788
	NIKE, Inc. Class “B” (Textiles, apparel & luxury goods)		60,381		3,069
	*O’Reilly Automotive, Inc. (Specialty retail)		6,344		1,766
	Pioneer Natural Resources Co. (Oil, gas & consumable fuels)		7,456		1,343
	PPG Industries, Inc. (Chemicals)		18,685		1,771
	Raytheon Co. (Aerospace & defense)		24,924		3,539

	Issuer	Shares		Value
	Common Stocks—(continued)
	Western Hemisphere—(continued)
	United States—(continued)
*	Red Hat, Inc. (Software)		23,713	$	1,653
*	salesforce.com, Inc. (Software)		14,407		986
	Schlumberger, Ltd. (Energy equipment & services)†		33,036		2,773
	Simon Property Group, Inc. (Equity real estate investment trusts (REITs))		4,811		855
	The Goldman Sachs Group, Inc. (Capital markets)		14,692		3,518
	The Home Depot, Inc. (Specialty retail)		28,274		3,791
	Thermo Fisher Scientific, Inc. (Life sciences tools & services)		17,748		2,504
*	Ulta Salon Cosmetics & Fragrance, Inc. (Specialty retail)		7,534		1,921
	Vail Resorts, Inc. (Hotels, restaurants & leisure)		14,610		2,357
*	Vantiv, Inc. Class “A” (IT services)		41,824		2,494
*	VCA, Inc. (Health care providers & services)		34,058		2,338
	Watsco, Inc. (Trading companies & distributors)		13,961		2,068
					95,441
	Europe—13.3%
	France—4.3%
	BNP Paribas S.A. (Banks)		53,369		3,402
	Valeo S.A. (Auto components)		71,351		4,101
					7,503
	Germany—1.1%
	Siemens AG (Industrial conglomerates)		14,980		1,842
	Ireland—1.1%
	Paddy Power Betfair PLC (Hotels, restaurants & leisure)		18,835		2,012
	Netherlands—2.7%
	Koninklijke Philips N.V. (Industrial conglomerates)		59,613		1,820
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		109,606		2,998
					4,818
	Spain—1.0%
	Industria de Diseno Textil S.A. (Specialty retail)		50,763		1,733
	Sweden—1.9%
	Assa Abloy AB Class “B” (Building products)		90,157		1,673
	SKF AB Class “B” (Machinery)		93,050		1,712
					3,385
	Switzerland—1.2%
	Partners Group Holding AG (Capital markets)		4,563		2,139

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 39

Global Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Japan—7.8%
	Daikin Industries, Ltd. (Building products)		33,500	$	3,077
	FANUC Corporation (Machinery)		12,800		2,170
	Fuji Heavy Industries, Ltd. (Automobiles) .		79,300		3,238
	Keyence Corporation (Electronic equipment, instruments & components)		3,300		2,264
	ORIX Corporation (Diversified financial services)		198,300		3,095
					13,844
	Emerging Asia—7.3%
	China—3.5%
*	Alibaba Group Holding, Ltd.—ADR (Internet software & services)		27,970		2,456
	Tencent Holdings, Ltd. (Internet software & services)		85,000		2,080
*	Yum China Holdings, Inc. (Hotels, restaurants & leisure)		63,521		1,659
					6,195
	India—1.5%
	HDFC Bank, Ltd.—ADR (Banks)		43,512		2,640
	Taiwan—2.3%
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		142,725		4,103
	Asia—6.6%
	Australia—2.4%
	CSL, Ltd. (Biotechnology)		22,967		1,664
	Macquarie Group, Ltd. (Capital markets)		41,017		2,579
					4,243
	Hong Kong—2.4%
	AIA Group, Ltd. (Insurance)		441,600		2,491
	Sands China, Ltd. (Hotels, restaurants & leisure)		383,600		1,667
					4,158
	Singapore—1.8%
	Broadcom, Ltd. (Semiconductors & semiconductor equipment)†		18,038		3,189
	United Kingdom—4.7%
	Compass Group plc (Hotels, restaurants & leisure)		157,096		2,906
	Rio Tinto plc (Metals & mining)		68,576		2,669
	WPP plc (Media)		120,617		2,700
					8,275

	Shares or
	Principal
Issuer	Amount		Value
Common Stocks—(continued)
Emerging Europe, Mid-East, Africa—0.5%
South Africa—0.5%
Bid Corporation, Ltd. (Food & staples retailing)		48,946	$	873
Total Common Stocks—99.2% (cost $155,496)				175,302
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $1,481, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	1,481		1,481
Total Repurchase Agreement—0.8% (cost $1,481)				1,481
Total Investments—100.0% (cost $156,977)				176,783
Liabilities, plus cash and other assets—0.0%				(52	)
Net assets—100.0%			$	176,731

ADR = American Depository Receipt

† = U.S. listed foreign security

* = Non-income producing securities

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	22.8	%
Consumer Discretionary	22.1	%
Information Technology	19.7	%
Industrials	13.6	%
Energy	8.1	%
Health Care	8.1	%
Consumer Staples	2.6	%
Materials	2.5	%
Real Estate	0.5	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

U.S. Dollar	63.7	%
Euro	10.2	%
Japanese Yen	7.9	%
British Pound Sterling	4.7	%
Canadian Dollar	3.8	%
Hong Kong Dollar	3.6	%
Australian Dollar	2.4	%
Swedish Krona	2.0	%
Swiss Franc	1.2	%
All Other Currencies	0.5	%
Total	100.0	%

See accompanying Notes to Financial Statements.

40 Annual Report December 31, 2016

	International Leaders Fund
	The International Leaders Fund seeks long-term capital appreciation.
Simon Fennell   Kenneth J. McAtamney	AN OVERVIEW FROM THE PORTFOLIO MANAGERS The William Blair International Leaders Fund (Class N shares) posted a 0.88% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI All Country World ex-U.S. IMI Index (net) (the “Index”), increased 4.41%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Financials, Materials, Real Estate and Consumer Staples were significant detractors from the Fund’s performance relative to the Index for the year. These effects were mitigated by positive stock selection in Healthcare and Consumer Discretionary, the Fund’s underweight position in Consumer Staples and overweight in Information Technology. Financials stock selection detracted from the Fund’s relative performance partially due to holdings in Intesa Sanpaolo (Italy) and Sumitomo Mitsui Financial Group (Japan), which declined on concerns about profitability amid the low interest rate environment. Within the Materials sector, the Fund’s performance was hampered by a lack of exposure to Metals & Mining stocks, which rallied strongly on global growth recovery prospects and the market’s rotation into value orientated stocks. Automobile catalyst chemical maker Johnson Matthey (U.K.) also detracted from the Fund’s performance, as the shares were hit by general Brexit-related concerns and the impact of weaker platinum prices on its metals refining business. Within the Real Estate sector, property developer China Overseas Land & Investment’s share price was weighed down by concerns about policy tightening measures in Shanghai and other mainland cities. Finally, within Consumer Staples, Wal-Mart de Mexico’s shares came under pressure in the second half of 2016 amid decelerating top line growth and general concerns about the impact of Donald Trump’s policies on the Mexican economy. Mitigating these negative effects were positive stock selection effects in the Healthcare sector, as Swiss biotechnology company Actelion benefited from positive sales trends in its pulmonary arterial hypertension (PAH) drugs Uptravi and Opsumit, in addition to news that the company was in merger talks with French pharmaceutical company Sanofi after Johnson & Johnson dropped its own takeover offer for Actelion. Regarding stock selection within the Consumer Discretionary sector, Japanese home furnishings retailer Nitori’s share price was supported by positive sales trends on a combination of new store openings, same-store sales growth and online sales growth. From a geographic attribution perspective, stock selection was weakest in Canada and Latin America for the year, partially mitigated by good stock selection in Japan and Emerging Asia. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 41

International Leaders Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016

							Since
	1 Year			3 Year			Inception
Class N(a)		0.88	%		1.35	%		6.86	%
Class I(a)		1.10			1.55			7.10
MSCI ACW Ex-U.S. IMI (net)(a)		4.41			(1.44	)		4.37
Institutional Class(b)		1.25			1.68			7.02
MSCI ACW Ex-U.S. IMI (net)(b)		4.41			(1.44	)		3.65

(a)	Since inception is for the period from August 16, 2012 (Commencement of Operations) to December 31, 2016.
(b)	Since inception is for the period from November 2, 2012 (Commencement of Operations) to December 31, 2016.

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. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Smaller and medium capitalization 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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors without a sales load or distribution (12b-1) or service fees.

The performance highlights 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 (ACW) 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 December 31, 2016. 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.

42 Annual Report December 31, 2016

International Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe—34.5%
	Finland—2.7%
	Kone Oyj Class ‘‘B’’ (Machinery)		67,249	$	3,013
	Sampo Oyj Class ‘‘A’’ (Insurance)		87,360		3,917
					6,930
	France—8.0%
	Arkema S.A. (Chemicals)		39,238		3,839
	BNP Paribas S.A. (Banks)		82,911		5,284
	Total S.A. (Oil, gas & consumable fuels)		83,586		4,287
	Valeo S.A. (Auto components)		101,187		5,817
	Vinci S.A. (Construction & engineering)		17,549		1,195
					20,422
	Germany—2.7%
	Rational AG (Machinery)		3,279		1,463
	Siemens AG (Industrial conglomerates)		44,056		5,417
					6,880
	Ireland—4.2%
	Kingspan Group plc (Building products)		137,053		3,722
	Paddy Power Betfair PLC (Hotels, restaurants & leisure)		24,134		2,579
*	Ryanair Holdings plc—ADR (Airlines)		53,902		4,488
					10,789
	Italy—1.9%
	Luxottica Group SpA (Textiles, apparel & luxury goods)		88,174		4,743
	Netherlands—3.6%
	Koninklijke Philips N.V. (Industrial conglomerates)		125,667		3,836
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		192,895		5,276
					9,112
	Spain—2.9%
	Amadeus IT Group S.A. (IT services)		69,111		3,141
	Industria de Diseno Textil S.A. (Specialty retail)		127,162		4,341
					7,482
	Sweden—2.5%
	Atlas Copco AB Class “A” (Machinery)		107,293		3,268
	Hexagon AB Class “B” (Electronic equipment, instruments & components)		84,916		3,034
					6,302
	Switzerland—6.0%
*	Actelion, Ltd. (Biotechnology)		25,040		5,422
	Geberit AG (Building products)		9,671		3,877
*	Lonza Group AG (Life sciences tools & services)		16,072		2,782
	Partners Group Holding AG (Capital markets)		7,041		3,300
					15,381

	Issuer	Shares		Value
	Common Stocks—(continued)
	Japan—17.4%
	Daikin Industries, Ltd. (Building products)		54,800	$	5,033
	Daito Trust Construction Co., Ltd. (Real estate management & development)		20,100		3,023
	FANUC Corporation (Machinery)		26,500		4,493
	Fuji Heavy Industries, Ltd. (Automobiles)		118,959		4,857
	Hoya Corporation (Health care equipment & supplies)		62,000		2,605
	Keyence Corporation (Electronic equipment, instruments & components)		6,500		4,460
	Makita Corporation (Machinery)		53,100		3,557
	Mitsubishi UFJ Financial Group, Inc. (Banks)		708,300		4,365
	Nippon Prologis REIT, Inc. (Equity real estate investment trusts (REITs))		1,258		2,572
	Nitori Holdings Co., Ltd. (Specialty retail)		31,500		3,601
	ORIX Corporation (Diversified financial services)		297,200		4,638
	Park24 Co., Ltd. (Commercial services & supplies)		42,200		1,145
					44,349
	United Kingdom—16.3%
	BAE Systems plc (Aerospace & defense)		510,278		3,720
	Compass Group plc (Hotels, restaurants & leisure)		300,517		5,559
	Experian plc (Professional services)		250,034		4,850
	IG Group Holdings plc (Capital markets)		245,413		1,494
	Johnson Matthey plc (Chemicals)		95,333		3,739
	Micro Focus International plc (Software)		88,152		2,367
	RELX plc (Professional services)		222,367		3,971
	Rio Tinto plc (Metals & mining)		114,710		4,465
	St James’s Place plc (Insurance)		213,614		2,669
	Wolseley plc (Trading companies & distributors)		73,322		4,484
	WPP plc (Media)		194,718		4,358
					41,676
	Emerging Asia—12.7%
	China—6.2%
*	Alibaba Group Holding, Ltd.—ADR (Internet software & services)		56,361		4,949
	China Overseas Land & Investment, Ltd. (Real estate management & development)		678,000		1,797
	NetEase, Inc.—ADR (Internet software & services)		16,948		3,650
	Tencent Holdings, Ltd. (Internet software & services)		128,500		3,143
*	Yum China Holdings, Inc. (Hotels, restaurants & leisure)		90,811		2,372
					15,911

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 43

International Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Shares		Value
Common Stocks—(continued)
Emerging Asia—(continued)
India—4.0%
Hero MotoCorp, Ltd. (Automobiles)		84,954	$	3,795
Housing Development Finance Corporation, Ltd. (Thrifts & mortgage finance)		157,854		2,934
Tata Motors, Ltd.—ADR (Automobiles)		104,007		3,577
				10,306
Taiwan—2.5%
Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & semiconductor equipment)		1,106,000		6,229
Western Hemisphere—10.4%
Canada—8.8%
Alimentation Couche Tard, Inc. Class “B” (Food & staples retailing)		77,761		3,526
Brookfield Asset Management, Inc. Class “A” (Capital markets)†		161,684		5,337
Constellation Software, Inc. (Software)		9,062		4,118
Suncor Energy, Inc. (Oil, gas & consumable fuels)		139,556		4,563
The Toronto-Dominion Bank (Banks)		98,054		4,836
				22,380
United States—1.6%
Shire plc (Biotechnology)		71,935		4,153
Asia—4.3%
Australia—1.7%
Macquarie Group, Ltd. (Capital markets)		67,965		4,273
Hong Kong—2.6%
AIA Group, Ltd. (Insurance)		848,600		4,788
Sands China, Ltd. (Hotels, restaurants & leisure)		440,800		1,915
				6,703
Emerging Latin America—1.4%
Brazil—1.0%
Cielo S.A. (IT services)		293,100		2,512
Mexico—0.4%
Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		579,900		1,038
Emerging Europe, Mid-East, Africa—0.9%
South Africa—0.9%
Bid Corporation, Ltd. (Food & staples retailing)		124,599		2,224
Total Common Stocks—97.9% (cost $236,896)				249,795

	Principal
Issuer	Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $2,645, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	2,644	$	2,644
Total Repurchase Agreement—1.0% (cost $2,644)				2,644
Total Investments—98.9% (cost $239,540)				252,439
Cash and other assets, less liabilities—1.1%				2,783
Net assets—100.0%			$	255,222

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Industrials	24.6	%
Financials	19.1	%
Consumer Discretionary	19.0	%
Information Technology	15.1	%
Health Care	6.0	%
Energy	5.7	%
Materials	4.8	%
Real Estate	3.0	%
Consumer Staples	2.7	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	24.8	%
British Pound Sterling	18.3	%
Japanese Yen	17.7	%
U.S. Dollar	9.8	%
Canadian Dollar	6.8	%
Swiss Franc	6.2	%
Hong Kong Dollar	4.7	%
Indian Rupee	2.7	%
Swedish Krona	2.5	%
New Taiwan Dollar	2.5	%
Australian Dollar	1.7	%
Brazilian Real	1.0	%
All Other Currencies	1.3	%
Total	100.0	%

See accompanying Notes to Financial Statements.

44 Annual Report December 31, 2016

	International Equity Fund
	The International Equity Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
David Merjan John C. Murphy	The William Blair International Equity Fund (Class N shares) posted a 0.27% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI World ex-U.S. Index (net) (the “Index”), increased 2.75%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Industrials, Financials and Consumer Staples were significant detractors from the Fund’s performance relative to the Index for the year. These effects were mitigated by positive stock selection in Energy and Real Estate, along with the Fund’s overweight position and stock selection in Information Technology. Within the Industrials sector, U.K. holdings were the primary detractor from the Fund’s relative performance during the year. British home improvement retailer Travis Perkins’s share price was hurt by Brexit concerns mid-year, followed by sluggish sales in the company’s plumbing and heating division during the third quarter. Within Financials, Japanese Commercial Bank Mitsubishi UFJ Financial Group detracted from the Fund’s performance during the first half of the year, amid concerns about the impact of the Bank of Japan’s (BOJ’s) negative interest rate policy on earnings. Stock selection within Consumer Staples, specifically the Fund’s position in Belgium-based brewing giant Anheuser-Busch Inbev which reported disappointing third quarter earnings results mainly due to its Brazil business, detracted from performance. Within Brazil, Anheuser-Busch Inbev attributed its difficulties to several factors including the continued challenging consumer environment, negative currency hedging impact, delayed price increases and higher marketing expenses. Offsetting these detractors were positive contributions to the Fund’s relative performance from North American Oil & Gas producers Enerplus and Canadian Natural Resources, which were supported by rising commodity prices and improving production growth outlooks. Specific to Enerplus, the prospect of a potential sale of the company’s Marcellus shale assets was viewed favorably, with expectations that the sale proceeds would be used for debt reduction or an earnings-accretive acquisition. Among the Fund’s Real Estate holdings, Japan-based REIT Nippon Prologis’s share price was bolstered by the BOJ’s negative interest rate policy, which was expected to support margins by ensuring a favorable spread between financing costs and rental yields. The company also reported better-than-expected financial results for the first half of 2016, benefiting from high occupancy levels and positive rental growth for its logistics facilities. From a geographic attribution perspective, the primary detractors from the Fund’s relative performance in 2016 were stock selection within Japan and an overweighting in the U.K. These effects were partially mitigated by positive stock selection in Canada, along with the Fund’s Emerging Markets exposure. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 45

International Equity Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year		3 Year		5 Year		10 Year
Class N	(0.27	)%	(0.62	)%	6.63	%	0.64	%
Class I	(0.02	)	(0.36	)	6.91		0.89
MSCI World Ex-U.S. Index (net)	2.75		(1.59	)	6.07		0.86

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. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Smaller and medium capitalization 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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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) World Ex-U.S. Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on December 31, 2016. 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.

46 Annual Report December 31, 2016

International Equity Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe—34.0%
	Belgium—2.8%
	Anheuser-Busch InBev N.V. (Beverages)		10,272	$	1,087
	UCB S.A. (Pharmaceuticals)		20,601		1,321
					2,408
	Finland—1.1%
	Kone Oyj Class “B” (Machinery)		20,706		928
	France—8.6%
	AXA S.A. (Insurance)		54,376		1,373
	BNP Paribas S.A. (Banks)		20,351		1,297
	Thales S.A. (Aerospace & defense)		16,088		1,560
	Total S.A. (Oil, gas & consumable fuels)		31,221		1,601
	Valeo S.A. (Auto components)		28,877		1,660
					7,491
	Germany—7.7%
	Fresenius Medical Care AG & Co. KGaA (Health care providers & services)		18,342		1,553
	Fresenius SE & Co. KGaA (Health care providers & services)		19,476		1,523
	Infineon Technologies AG (Semiconductors & semiconductor equipment)		49,655		863
	MTU Aero Engines AG (Aerospace & defense)		12,496		1,444
	Siemens AG (Industrial conglomerates)		10,818		1,330
					6,713
	Ireland—2.3%
	Accenture plc Class “A” (IT services)†		7,105		832
*	Ryanair Holdings plc-ADR (Airlines)		13,990		1,165
					1,997
	Italy—2.7%
	Intesa Sanpaolo SpA (Banks)		359,754		919
	Luxottica Group SpA (Textiles, apparel & luxury goods)		27,029		1,454
					2,373
	Netherlands—1.9%
*	NXP Semiconductors N.V. (Semiconductors & semiconductor equipment)†		3,800		372
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		48,324		1,322
					1,694
	Sweden—5.0%
	Assa Abloy AB Class “B” (Building products)		50,837		944
	Atlas Copco AB Class “A” (Machinery)		31,224		951
	Boliden AB (Metals & mining)		31,215		815
	Swedbank AB Class “A” (Banks)		68,871		1,665
					4,375
	Switzerland—1.9%
	Novartis AG (Pharmaceuticals)		12,006		874
	Straumann Holding AG (Health care equipment & supplies)		2,067		807
					1,681

Issuer	Shares		Value
Common Stocks—(continued)
United Kingdom—24.8%
Babcock International Group plc (Commercial services & supplies)		71,054	$	835
BAE Systems plc (Aerospace & defense)		159,855		1,165
Compass Group plc (Hotels, restaurants & leisure)		109,945		2,034
Diageo plc (Beverages)		57,893		1,505
Experian plc (Professional services)		72,836		1,413
GlaxoSmithKline plc (Pharmaceuticals)		107,983		2,079
ITV plc (Media)		493,796		1,256
Johnson Matthey plc (Chemicals)		24,119		946
Prudential plc (Insurance)		80,228		1,609
Reckitt Benckiser Group plc (Household products)		17,235		1,463
RELX plc (Professional services)		89,875		1,605
Rio Tinto plc (Metals & mining)		29,518		1,149
Schroders plc (Capital markets)		30,110		1,112
UBM plc (Media)		68,018		613
Unilever N.V. (Personal products)		38,003		1,565
WPP plc (Media)		57,964		1,297
				21,646
Japan—18.7%
Daikin Industries, Ltd. (Building products)		15,818		1,453
Daito Trust Construction Co., Ltd. (Real estate management & development)		5,900		887
Denso Corporation (Auto components)		23,100		1,001
Fuji Heavy Industries, Ltd. (Automobiles)		41,672		1,701
GLP J-Reit (Equity real estate investment trusts (REITs))		1,047		1,206
Hoya Corporation (Health care equipment & supplies)		26,700		1,122
Japan Exchange Group, Inc. (Capital markets)		72,600		1,037
Keyence Corporation (Electronic equipment, instruments & components)		1,905		1,307
Mitsui Fudosan Co., Ltd. (Real estate management & development)		41,000		949
Nihon M&A Center, Inc. (Capital markets)		15,840		441
Nippon Prologis REIT, Inc. (Equity real estate investment trusts (REITs))		386		789
Nitori Holdings Co., Ltd. (Specialty retail)		6,000		686
ORIX Corporation (Diversified financial services)		105,929		1,653
SCSK Corporation (IT services)		28,563		1,000
Suruga Bank, Ltd. (Banks)		51,200		1,143
				16,375
Canada—9.4%
Canadian Apartment Properties REIT (Equity real estate investment trusts (REITs))		27,464		642
Canadian National Railway Co. (Road & rail)†		20,044		1,351
Canadian Natural Resources, Ltd. (Oil, gas & consumable fuels)		45,437		1,448

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 47

International Equity Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Canada—(continued)
	Enerplus Corporation (Oil, gas & consumable fuels)		99,794	$	947
*	Lundin Mining Corporation (Metals & mining)		217,057		1,034
	Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		14,107		349
	Silver Wheaton Corporation (Metals & mining)†		30,339		586
	The Toronto-Dominion Bank (Banks)†		36,941		1,823
					8,180
	Emerging Asia—5.3%
	India—1.2%
	HDFC Bank, Ltd.—ADR (Banks)		16,999		1,031
	Taiwan—3.4%
	Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		7,000		823
	Novatek Microelectronics Corporation (Semiconductors & semiconductor equipment)		172,000		569
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		56,458		1,623
					3,015
	Thailand—0.7%
	CP ALL PCL (Food & staples retailing)		350,200		611
	Asia—4.3%
	Australia—2.7%
	BHP Billiton, Ltd.—ADR (Metals & mining)		36,530		1,307
	Macquarie Group, Ltd. (Capital markets)		16,086		1,011
					2,318
	Hong Kong—1.6%
	AIA Group, Ltd. (Insurance)		250,586		1,414
	Emerging Latin America—1.8%
	Mexico—1.1%
	Grupo Financiero Santander Mexico S.A.B. de C.V. Class “B” (Banks)		696,100		1,001
	Peru—0.7%
	Credicorp, Ltd. (Banks)†		3,886		613
	Total Common Stocks—98.3% (cost $78,887)				85,864

	Principal
Issuer	Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $1,380, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	1,380	$	1,380
Total Repurchase Agreement—1.6% (cost $1,380)				1,380
Total Investments—99.9% (cost $80,267)				87,244
Cash and other assets, less liabilities—0.1%				93
Net assets—100.0%			$	87,337

ADR = American Depository Receipt

† = U.S. listed foreign security

* = Non-income producing securities

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	22.3	%
Industrials	18.8	%
Consumer Discretionary	13.6	%
Health Care	10.8	%
Information Technology	8.6	%
Consumer Staples	7.3	%
Materials	6.8	%
Energy	6.6	%
Real Estate	5.2	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	26.5	%
British Pound Sterling	23.4	%
Japanese Yen	19.1	%
U.S. Dollar	12.5	%
Canadian Dollar	5.1	%
Swedish Krona	5.1	%
Swiss Franc	2.0	%
Hong Kong Dollar	1.6	%
New Taiwan Dollar	1.6	%
Australian Dollar	1.2	%
Mexican Peso	1.2	%
All Other Currencies	0.7	%
Total	100.0	%

See accompanying Notes to Financial Statements.

48 Annual Report December 31, 2016

	Institutional International Equity Fund
	The Institutional International Equity Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
David Merjan John C. Murphy	The William Blair Institutional International Equity Fund posted a 0.27% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI World ex-U.S. Index (net) (the “Index”), increased 2.75%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Industrials, Financials and Consumer Staples were significant detractors from the Fund’s performance relative to the Index for the year. These effects were mitigated by positive stock selection in Energy and Real Estate, along with the Fund’s overweight position and stock selection in Information Technology. Within the Industrials sector, U.K. holdings were the primary detractor from the Fund’s relative performance during the year. British home improvement retailer Travis Perkins’s share price was hurt by Brexit concerns mid-year, followed by a soft sales forecast for the third quarter due to sluggish sales in the company’s plumbing and heating division. Within Financials, Japanese Commercial Bank Mitsubishi UFJ Financial Group detracted from the Fund’s performance during the first half of the year, amid concerns about the impact of the Bank of Japan’s (BOJ’s) negative interest rate policy on earnings. Stock selection within Consumer Staples, specifically the Fund’s position in Belgium-based brewing giant Anheuser-Busch Inbev which reported disappointing third quarter earnings results mainly due to its Brazil business, detracted from performance. Within Brazil, Anheuser-Busch Inbev attributed its difficulties to several factors including the continued challenging consumer environment, negative currency hedging impact, delayed price increases and higher marketing expenses. Offsetting these detractors were positive contributions to the Fund’s relative performance from North American Oil & Gas producers Enerplus and Canadian Natural Resources, which were supported by rising commodity prices and improving production growth outlooks. Specific to Enerplus, the prospect of a potential sale of the company’s Marcellus shale assets was viewed favorably, with expectations that the sale proceeds would be used for debt reduction or an earnings-accretive acquisition. Among the Fund’s Real Estate holdings, Japan-based REIT Nippon Prologis’s share price was bolstered by the BOJ’s negative interest rate policy, which was expected to support margins by ensuring a favorable spread between financing costs and rental yields. The company also reported better-than-expected financial results for the First half of 2016, benefiting from high occupancy levels and positive rental growth for its logistics facilities. From a geographic attribution perspective, the primary detractors from the Fund’s relative performance in 2016 were stock selection within Japan and an overweighting in the U.K. These effects were partially mitigated by positive stock selection in Canada, along with the Fund’s Emerging Markets exposure. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 49

Institutional International Equity Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year		3 Year		5 Year		10 Year
Institutional Class	(0.27	)%	(0.64	)%	6.80	%	0.77	%
MSCI World Ex-U.S. Index (net)	2.75		(1.59	)	6.07		0.86

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. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Smaller and medium capitalization 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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, performance would be lower. Shares of the Fund are available 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) World Ex-U.S. Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the United States. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on December 31, 2016. 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.

50 Annual Report December 31, 2016

Institutional International Equity Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe—34.2%
	Belgium—2.8%
	Anheuser-Busch InBev S.A. (Beverages)		1,956	$	207
	UCB S.A. (Pharmaceuticals)		3,928		252
					459
	Finland—1.1%
	Kone Oyj Class ‘‘B’’ (Machinery)		3,950		177
	France—8.6%
	AXA S.A. (Insurance)		10,373		262
	BNP Paribas S.A. (Banks)		3,883		247
	Thales S.A. (Aerospace & defense)		3,069		298
	Total S.A. (Oil, gas & consumable fuels)		5,956		305
	Valeo S.A. (Auto components)		5,509		317
					1,429
	Germany—7.7%
	Fresenius Medical Care AG & Co. KGaA (Health care providers & services)		3,495		296
	Fresenius SE & Co. KGaA (Health care providers & services)		3,711		290
	Infineon Technologies AG (Semiconductors & semiconductor equipment)		9,473		164
	MTU Aero Engines AG (Aerospace & defense)		2,377		275
	Siemens AG (Industrial conglomerates)		2,064		254
					1,279
	Ireland—2.3%
	Accenture plc Class “A” (IT services)†		1,352		159
	*Ryanair Holdings plc—ADR (Airlines)		2,669		222
					381
	Italy—2.7%
	Intesa Sanpaolo SpA (Banks)		68,546		175
	Luxottica Group SpA (Textiles, apparel & luxury goods)		5,149		277
					452
	Netherlands—2.0%
*	NXP Semiconductors N.V. (Semiconductors & semiconductor equipment)†		872		86
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		9,215		252
					338
	Sweden—5.1%
	Assa Abloy AB Class “B” (Building products)		9,698		180
	Atlas Copco AB Class “A” (Machinery)		5,956		181
	Boliden AB (Metals & mining)		5,952		155
	Swedbank AB Class “A” (Banks)		13,138		318
					834
	Switzerland—1.9%
	Novartis AG (Pharmaceuticals)		2,284		166
	Straumann Holding AG (Health care equipment & supplies)		394		154
					320

Issuer	Shares		Value
Common Stocks—(continued)
United Kingdom—24.9%
Babcock International Group plc (Commercial services & supplies)		13,556	$	159
BAE Systems plc (Aerospace & defense)		30,412		222
Compass Group plc (Hotels, restaurants & leisure)		20,973		388
Diageo plc (Beverages)		11,040		287
Experian plc (Professional services)		13,894		270
GlaxoSmithKline plc (Pharmaceuticals)		20,591		396
ITV plc (Media)		94,197		240
Johnson Matthey plc (Chemicals)		4,595		180
Prudential plc (Insurance)		15,304		307
Reckitt Benckiser Group plc (Household products)		3,288		279
RELX plc (Professional services)		17,145		306
Rio Tinto plc (Metals & mining)		5,631		219
Schroders plc (Capital markets)		5,744		212
UBM plc (Media)		12,975		117
Unilever N.V. (Personal products)		7,247		298
WPP plc (Media)		11,057		248
				4,128
Japan—19.0%
Daikin Industries, Ltd. (Building products)		3,006		276
Daito Trust Construction Co., Ltd. (Real estate management & development)		1,100		166
Denso Corporation (Auto components)		4,400		191
Fuji Heavy Industries, Ltd. (Automobiles)		7,900		323
GLP J-Reit (Equity real estate investment trusts (REITs))		199		229
Hoya Corporation (Health care equipment & supplies)		5,100		214
Japan Exchange Group, Inc. (Capital markets)		13,800		197
Keyence Corporation (Electronic equipment, instruments & components)		400		275
Mitsui Fudosan Co., Ltd. (Real estate management & development)		8,000		185
Nihon M&A Center, Inc. (Capital markets)		3,000		83
Nippon Prologis REIT, Inc. (Equity real estate investment trusts (REITs))		74		151
Nitori Holdings Co., Ltd. (Specialty retail)		1,100		126
ORIX Corporation (Diversified financial services)		20,212		315
SCSK Corporation (IT services)		5,483		192
Suruga Bank, Ltd. (Banks)		9,800		219
				3,142
Canada—9.4%
Canadian Apartment Properties REIT (Equity real estate investment trusts (REITs))		5,240		122
Canadian National Railway Co. (Road & rail)†		3,824		258
Canadian Natural Resources, Ltd. (Oil, gas & consumable fuels)		8,654		276

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 51

Institutional International Equity Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Canada—(continued)
	Enerplus Corporation (Oil, gas & consumable fuels)		19,006	$	180
*	Lundin Mining Corporation (Metals & mining)		41,408		197
	Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		2,691		67
	Silver Wheaton Corporation (Metals & mining)†		5,787		112
	The Toronto-Dominion Bank (Banks)†		7,047		348
					1,560
	Emerging Asia—5.1%
	India—1.2%
	HDFC Bank, Ltd.—ADR (Banks)		3,243		197
	Taiwan—3.2%
	Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		1,000		117
	Novatek Microelectronics Corporation (Semiconductors & semiconductor equipment)		33,000		109
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		10,770		310
					536
	Thailand—0.7%
	CP ALL PCL (Food & staples retailing)		66,600		116
	Asia—4.3%
	Australia—2.7%
	BHP Billiton, Ltd.—ADR (Metals & mining)		6,966		249
	Macquarie Group, Ltd. (Capital markets)		3,068		193
					442
	Hong Kong—1.6%
	AIA Group, Ltd. (Insurance)		47,871		270
	Emerging Latin America—1.9%
	Mexico—1.2%
	Grupo Financiero Santander Mexico S.A.B. de C.V. Class “B” (Banks)		132,300		190
	Peru—0.7%
	Credicorp, Ltd. (Banks)†		741		117
	Total Common Stocks—98.8% (cost $15,038)				16,367

	Principal
Issuer	Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $206, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	206	$	206
Total Repurchase Agreement—1.2% (cost $206)				206
Total Investments—100.0% (cost $15,244)				16,573
Liabilities, plus cash and other assets—0.0%				(8	)
Net assets—100.0%			$	16,565

ADR = American Depository Receipt

† = U.S. listed foreign security

* = Non-income producing securities

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	22.3	%
Industrials	18.8	%
Consumer Discretionary	13.6	%
Health Care	10.8	%
Information Technology	8.6	%
Consumer Staples	7.3	%
Materials	6.8	%
Energy	6.6	%
Real Estate	5.2	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	26.5	%
British Pound Sterling	23.4	%
Japanese Yen	19.2	%
U.S. Dollar	12.6	%
Canadian Dollar	5.1	%
Swedish Krona	5.1	%
Swiss Franc	2.0	%
Hong Kong Dollar	1.6	%
New Taiwan Dollar	1.4	%
Australian Dollar	1.2	%
Mexican Peso	1.2	%
All Other Currencies	0.7	%
Total	100.0	%

See accompanying Notes to Financial Statements.

52 Annual Report December 31, 2016

	International Growth Fund
	The International Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Stephanie G. Braming Simon Fennell Jeffrey A. Urbina	The William Blair International Growth Fund (Class N shares) posted a 2.88% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI All Country World ex-U.S. IMI Index (net) (the “Index”), increased 4.41%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Financials, Materials and Real Estate were significant detractors from the Fund’s performance relative to the Index for the year. These effects were mitigated by positive stock selection in Healthcare, along with an overweight position in Information Technology and underweight positions in Real Estate and Utilities. Within Financials, stock selection in Banks and Insurance detracted from the Fund’s relative performance. Within Materials, the Fund’s performance was hampered by a lack of exposure to Metals & Mining stocks, which rallied strongly on global growth recovery prospects and the market’s rotation into value orientated stocks. Chemicals holdings also detracted from the Fund’s relative performance in the Materials sector. Within the Real Estate sector, U.K. REIT Derwent London, which owns, develops and refurbishes properties in central London, was negatively impacted by concerns of slowing demand for London office space due to Brexit. Property developer China Overseas Land & Investment’s share price was hampered by concerns about lending policy tightening measures in Shanghai and other mainland cities, despite the company’s strong revenue and operating profit growth trends. Within the Healthcare sector, Swiss biotechnology company Actelion benefited from positive sales trends in its pulmonary arterial hypertension (PAH) drugs Uptravi and Opsumit, in addition to news that the company was in merger talks with French pharmaceutical company Sanofi after Johnson & Johnson dropped its own takeover offer for Actelion. From a geographic attribution perspective, the primary detractors from the Fund’s relative performance in 2016 were stock selection within Japan, notably within Japanese Consumer Discretionary stocks, and the U.K., as the Fund’s U.K. Financials holdings lagged. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 53

International Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		(2.88	)%		(2.12	)%		6.58	%		1.24	%
Class I		(2.54	)		(1.82	)		6.89			1.55
MSCI ACW Ex-U.S. IMI (net)		4.41			(1.44	)		5.35			1.22

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. Smaller and medium capitalization 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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 (ACW) 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 December 31, 2016. 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.

54 Annual Report December 31, 2016

International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe, Mid-East—38.1%
	Austria—0.1%
	Lenzing AG (Chemicals)		16,503	$	1,998
	Belgium—1.5%
	Bekaert S.A. (Metals & mining)		106,246		4,304
	Colruyt S.A. (Food & staples retailing)		124,927		6,181
	KBC Groep N.V. (Banks)		566,366		35,074
					45,559
	Denmark—1.0%
	DSV A/S (Road & rail)		258,268		11,490
	Pandora A/S (Textiles, apparel & luxury goods)		137,977		18,052
					29,542
	Finland—0.9%
	Huhtamaki Oyj (Containers & packaging)		118,902		4,416
	Kone Oyj Class “B” (Machinery)		529,428		23,724
					28,140
	France—15.5%
	Arkema S.A. (Chemicals)		194,046		18,984
	Atos SE (IT services)		216,696		22,868
	AXA S.A. (Insurance)		2,166,884		54,709
	bioMerieux (Health care equipment & supplies)		33,334		4,979
	BNP Paribas S.A. (Banks)		879,916		56,084
	Christian Dior SE (Textiles, apparel & luxury goods)		76,030		15,947
	Cie Generale des Etablissements Michelin (Auto components)		212,318		23,624
	Cie Plastic Omnium S.A. (Auto components)		229,705		7,334
	Hermes International (Textiles, apparel & luxury goods)		26,015		10,680
	Ipsen S.A. (Pharmaceuticals)		72,994		5,279
*	Nexity S.A. (Real estate management & development)		84,547		3,957
	Rubis SCA (Gas utilities)		58,394		4,815
	Schneider Electric SE (Electrical equipment)		655,382		45,608
	SEB S.A. (Household durables)		31,505		4,270
	Sodexo S.A. (Hotels, restaurants & leisure)		133,041		15,293
	Technicolor S.A. (Media)		568,568		3,076
	Technip S.A. (Energy equipment & services)		168,663		12,039
	Thales S.A. (Aerospace & defense)		382,241		37,070
	Total S.A. (Oil, gas & consumable fuels)		929,944		47,692
	Valeo S.A. (Auto components)		454,468		26,125
	Vinci S.A. (Construction & engineering)		595,463		40,555
					460,988
	Germany—2.4%
	Bechtle AG (IT services)		41,122		4,278
	Deutsche Telekom AG (Diversified telecommunication services)		1,458,514		25,110
	Evonik Industries AG (Chemicals)		266,911		7,974

	Issuer	Shares		Value
	Common Stocks—(continued)
	Europe, Mid-East—(continued)
	Germany—(continued)
	KION Group AG (Machinery)		88,332	$	4,915
	MTU Aero Engines AG (Aerospace & defense)		103,082		11,914
	TUI AG (Hotels, restaurants & leisure)		864,944		12,123
	Wirecard AG (IT services)		124,129		5,343
					71,657
	Ireland—1.9%
	CRH plc (Construction materials)		902,898		31,322
	Greencore Group plc (Food products)		2,396,660		7,281
*	ICON plc (Life sciences tools & services)†		141,079		10,609
	Kingspan Group plc (Building products)		249,883		6,786
					55,998
	Israel—0.8%
*	Check Point Software Technologies, Ltd. (Software)†		281,098		23,742
	Italy—1.8%
	Azimut Holding SpA (Capital markets)		298,574		4,985
	Banca Generali SpA (Capital markets)		384,667		9,175
	Brembo SpA (Auto components)		74,365		4,501
	Interpump Group SpA (Machinery)		414,442		6,784
	Intesa Sanpaolo SpA (Banks)		9,026,140		23,050
	Recordati SpA (Pharmaceuticals)		168,109		4,764
					53,259
	Luxembourg—0.2%
	Eurofins Scientific SE (Life sciences tools & services)		14,023		5,978
	Netherlands—2.2%
	Randstad Holding N.V. (Professional services)		168,369		9,133
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		2,048,076		56,021
					65,154
	Norway—0.2%
	Gjensidige Forsikring ASA (Insurance)		458,825		7,279
	Portugal—0.2%
	Jeronimo Martins SGPS S.A. (Food & staples retailing)		338,425		5,251
	Spain—2.8%
	Aena S.A. (Transportation infrastructure)		108,115		14,755
	Amadeus IT Group S.A. (IT services)		479,673		21,798
	Bankinter S.A. (Banks)		2,399,491		18,590
	Industria de Diseno Textil S.A. (Specialty retail)		692,716		23,647
	Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		650,374		4,067
					82,857

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 55

International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Europe, Mid-East—(continued)
	Sweden—3.5%
	BillerudKorsnas AB (Containers & packaging)		250,953	$	4,214
	Boliden AB (Metals & mining)		412,198		10,763
	Fabege AB (Real estate management & development)		266,464		4,355
	Hexpol AB (Chemicals)		480,537		4,449
	Hufvudstaden AB Class “A” (Real estate management & development)		278,171		4,394
	Husqvarna AB Class “B” (Household durables)		547,392		4,257
	Intrum Justitia AB (Commercial services & supplies)		206,088		6,954
	SKF AB Class “B” (Machinery)		987,230		18,161
	Swedbank AB Class “A” (Banks)		2,008,285		48,562
					106,109
	Switzerland—3.1%
*	Actelion, Ltd. (Biotechnology)		131,238		28,418
	Adecco Group AG (Professional services)		141,349		9,251
*	Cembra Money Bank AG (Consumer finance)		62,432		4,549
*	dormakaba Holding AG (Building products)		6,185		4,598
	Logitech International S.A. (Technology hardware, storage & peripherals)		179,957		4,489
*	Lonza Group AG (Life sciences tools & services)		97,466		16,874
*	Luxoft Holding, Inc. (IT services)†		65,262		3,668
	Partners Group Holding AG (Capital markets)		44,732		20,965
					92,812
	Japan—19.5%
	Ain Holdings, Inc. (Food & staples retailing)		3,400		225
	Alps Electric Co., Ltd. (Electronic equipment, instruments & components)		368,100		8,901
	Asahi Intecc Co., Ltd. (Health care equipment & supplies)		89,200		3,614
	Asahi Kasei Corporation (Chemicals)		2,535,000		22,113
	Daifuku Co., Ltd. (Machinery)		292,326		6,235
	Daikin Industries, Ltd. (Building products)		471,700		43,326
	Daito Trust Construction Co., Ltd. (Real estate management & development)		51,600		7,761
	Daiwa House Industry Co., Ltd. (Real estate management & development)		515,500		14,097
	FANUC Corporation (Machinery)		209,100		35,451
	Fuji Electric Co., Ltd. (Electrical equipment)		1,014,000		5,258
	Fuji Heavy Industries, Ltd. (Automobiles)		1,184,500		48,363
	Fujitsu General, Ltd. (Household durables)		200,000		4,234
	Haseko Corporation (Household durables)		581,000		5,911
	Hitachi Chemical Co., Ltd. (Chemicals)		147,000		3,676
	ITOCHU Corporation (Trading companies & distributors)		869,000		11,540

	Issuer	Shares		Value
	Common Stocks—(continued)
	Japan—(continued)
	Keyence Corporation (Electronic equipment, instruments & components)		37,200	$	25,527
*	LINE Corporation—ADR (Software)		114,200		3,884
	Lion Corporation (Household products)		291,000		4,780
	M3, Inc. (Health care technology)		175,300		4,417
	MISUMI Group, Inc. (Trading companies & distributors)		223,500		3,679
	Mitsubishi Electric Corporation (Electrical equipment)		1,678,000		23,395
	Mitsubishi UFJ Financial Group, Inc. (Banks)		6,545,600		40,335
	Mitsui Mining & Smelting Co., Ltd. (Metals & mining)		975,649		2,471
	Nichias Corporation (Building products)		368,000		3,552
	Nihon M&A Center, Inc. (Capital markets)		138,400		3,849
	Nippon Prologis REIT, Inc. (Equity real estate investment trusts (REITs))		2,172		4,440
	Nissan Chemical Industries, Ltd. (Chemicals)		230,700		7,708
	Nitori Holdings Co., Ltd. (Specialty retail)		129,300		14,780
	Oracle Corporation Japan (Software)		72,600		3,659
	ORIX Corporation (Diversified financial services)		2,733,300		42,657
	Park24 Co., Ltd. (Commercial services & supplies)		249,500		6,767
	Pola Orbis Holdings, Inc. (Personal products)		87,600		7,233
	SCSK Corporation (IT services)		163,700		5,729
	Shimamura Co., Ltd. (Specialty retail)		36,000		4,494
	Shionogi & Co., Ltd. (Pharmaceuticals)		489,300		23,440
	SoftBank Group Corporation (Wireless telecommunication services)		368,400		24,476
	Sumitomo Mitsui Financial Group, Inc. (Banks)		953,800		36,397
	Taisei Corporation (Construction & engineering)		1,615,000		11,303
	Temp Holdings Co., Ltd. (Professional services)		308,600		4,787
	TIS, Inc. (IT services)		197,800		4,231
	Tokio Marine Holdings, Inc. (Insurance)		717,100		29,426
	Tsuruha Holdings, Inc. (Food & staples retailing)		87,300		8,291
	Zenkoku Hosho Co., Ltd. (Diversified financial services)		125,200		4,022
					580,434
	United Kingdom—14.7%
	3i Group plc (Capital markets)		1,336,773		11,598
	Babcock International Group plc (Commercial services & supplies)		532,571		6,255
	BAE Systems plc (Aerospace & defense)		2,968,041		21,636
	Bellway plc (Household durables)		245,506		7,491
	Berendsen plc (Commercial services & supplies)		292,548		3,139
	BHP Billiton plc (Metals & mining)		2,211,621		35,610

See accompanying Notes to Financial Statements.

56 Annual Report December 31, 2016

International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	United Kingdom—(continued)
	British American Tobacco plc (Tobacco)		427,799	$	24,365
	Bunzl plc (Trading companies & distributors)		510,753		13,275
	Cineworld Group plc (Media)		559,315		3,895
	Close Brothers Group plc (Capital markets)		202,618		3,608
	Compass Group plc (Hotels, restaurants & leisure)		1,690,273		31,267
	Domino’s Pizza Group plc (Hotels, restaurants & leisure)		981,549		4,365
	GlaxoSmithKline plc (Pharmaceuticals)		1,249,659		24,056
	Halma plc (Electronic equipment, instruments & components)		381,453		4,219
	Hiscox, Ltd. (Insurance)		613,309		7,687
	Informa plc (Media)		2,099,312		17,593
	Intermediate Capital Group plc (Capital markets)		613,099		5,289
	Intertek Group plc (Professional services)		170,115		7,298
	John Wood Group plc (Energy equipment & services)		441,497		4,766
	Johnson Matthey plc (Chemicals)		391,116		15,338
	Jupiter Fund Management plc (Capital markets)		709,691		3,880
	Micro Focus International plc (Software)		370,904		9,960
	Moneysupermarket.com Group plc (Internet software & services)		918,324		3,328
	Playtech plc (Software)		529,829		5,394
	Provident Financial plc (Consumer finance)		165,977		5,828
	Renishaw plc (Electronic equipment, instruments & components)		130,246		4,058
	Rio Tinto, Ltd. (Metals & mining)		1,260,186		54,474
	Spirax-Sarco Engineering plc (Machinery)		148,601		7,662
*	Subsea 7 S.A. (Energy equipment & services)		401,827		5,086
	The Sage Group plc (Software)		1,502,603		12,129
	UBM plc (Media)		917,382		8,270
	Unilever plc (Personal products)		113,638		4,611
	Victrex plc (Chemicals)		208,886		4,971
	WH Smith plc (Specialty retail)		287,380		5,518
	Wolseley plc (Trading companies & distributors)		429,743		26,280
	WPP plc (Media)		1,109,115		24,822
					439,021
	Emerging Asia—10.4%
	China—3.5%
	Anhui Conch Cement Co., Ltd. Class “H” (Construction materials)		3,064,500		8,339
	China Overseas Land & Investment, Ltd. (Real estate management & development)		6,518,000		17,273
	ENN Energy Holdings, Ltd. (Gas utilities)		1,578,000		6,491
	Industrial and Commercial Bank of China, Ltd. Class “H” (Banks)		50,844,000		30,489
	PICC Property & Casualty Co., Ltd. Class “H” (Insurance)		6,718,000		10,465

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	China—(continued)
	Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		5,936,500	$	29,704
*	Xinyi Solar Holdings, Ltd. (Semiconductors & semiconductor equipment)		10,204,000		3,316
					106,077
	India—2.6%
	Bharat Petroleum Corporation, Ltd. (Oil, gas & consumable fuels)		715,157		6,680
	Britannia Industries, Ltd. (Food products)		94,461		4,012
	Eicher Motors, Ltd. (Machinery)		15,041		4,826
	HCL Technologies, Ltd. (IT services)		659,054		8,013
	HDFC Bank, Ltd. (Banks)		790,298		14,007
	IndusInd Bank, Ltd. (Banks)		464,860		7,582
	Maruti Suzuki India, Ltd. (Automobiles)		126,727		9,925
	Motherson Sumi Systems, Ltd. (Auto components)		930,128		4,457
	UPL, Ltd. (Chemicals)		525,349		5,007
	Voltas, Ltd. (Construction & engineering)		794,643		3,817
	Yes Bank, Ltd. (Banks)		511,044		8,697
					77,023
	Indonesia—0.5%
	PT Bank Central Asia Tbk (Banks)		13,634,600		15,686
	South Korea—2.8%
	Samsung Electronics Co., Ltd. (Technology hardware, storage & peripherals)		32,539		48,547
*	SK Hynix, Inc. (Semiconductors & semiconductor equipment)		912,680		33,778
					82,325
	Taiwan—1.0%
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		1,023,819		29,435
	Western Hemisphere—8.0%
	Canada—7.1%
	Alimentation Couche Tard, Inc. Class “B” (Food & staples retailing)		224,641		10,186
	Brookfield Asset Management, Inc. Class “A” (Capital markets)†		163,146		5,385
	Canadian National Railway Co. (Road & rail)		376,385		25,331
	Canadian Natural Resources, Ltd. (Oil, gas & consumable fuels)		1,016,851		32,407
*	CGI Group, Inc. Class “A” (IT services)		399,974		19,197
	Constellation Software, Inc. (Software)		24,820		11,279
	Dollarama, Inc. (Multiline retail)		234,770		17,202
	Finning International, Inc. (Trading companies & distributors)		215,990		4,229
	Intact Financial Corporation (Insurance)		135,429		9,693
	Suncor Energy, Inc. (Oil, gas & consumable fuels)		741,900		24,257
	The Toronto-Dominion Bank (Banks)		1,048,391		51,707
					210,873

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 57

International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Western Hemisphere—(continued)
	United States—0.9%
	Shire plc (Biotechnology)		484,550	$	27,971
	Asia—3.3%
	Australia—2.2%
	Domino’s Pizza Enterprises, Ltd. (Hotels, restaurants & leisure)		88,823		4,166
	Downer EDI, Ltd. (Commercial services & supplies)		1,050,836		4,618
	JB Hi-Fi, Ltd. (Specialty retail)		292,648		5,922
	Macquarie Group, Ltd. (Capital markets)		755,756		47,515
	Vicinity Centres (Equity real estate investment trusts (REITs))		1,902,671		4,105
					66,326
	Hong Kong—0.9%
	AIA Group, Ltd. (Insurance)		4,620,200		26,067
*	China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§		6,597,000		—
					26,067
	New Zealand—0.2%
	Spark New Zealand, Ltd. (Diversified telecommunication services)		2,088,923		4,948
	Emerging Europe, Mid-East, Africa—1.8%
	Hungary—0.2%
	MOL Hungarian Oil & Gas plc (Oil, gas & consumable fuels)		70,810		4,974
	South Africa—0.9%
	Bid Corporation, Ltd. (Food & staples retailing)		286,848		5,120
	Bidvest Group, Ltd. (Industrial conglomerates)		286,848		3,786
	RMB Holdings, Ltd. (Diversified financial services)		985,828		4,766
	Sanlam, Ltd. (Insurance)		1,524,969		6,984
	The Spar Group, Ltd. (Food & staples retailing)		460,800		6,663
					27,319
	Turkey—0.3%
	Turkiye Garanti Bankasi A.S. (Banks)		4,133,437		8,930
	United Arab Emirates—0.4%
	Dubai Islamic Bank PJSC (Banks)		7,302,445		11,074
	Emerging Latin America—1.3%
	Brazil—0.6%
	BB Seguridade Participacoes S.A. (Insurance)		1,684,100		14,643
	Engie Brasil Energia S.A. (Independent power & renewable electricity producers)		366,900		3,946
					18,589

		Shares or
		Principal
	Issuer	Amount		Value
	Common Stocks—(continued)
	Emerging Latin America—(continued)
	Mexico—0.3%
	Arca Continental S.A.B. de C.V. (Beverages)		1,497,175	$	7,789
	Peru—0.4%
	Credicorp, Ltd. (Banks)†		84,043		13,267
	Total Common Stocks—97.1% (cost $2,690,422)				2,894,451
	Preferred Stocks
	Brazil—1.3%
	Itau Unibanco Holding S.A. (Banks)		1,443,040		15,008
*	Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		5,064,800		23,140
					38,148
	Germany—0.1%
	Sartorius AG (Health care equipment & supplies)		58,300		4,327
	Total Preferred Stocks—1.4% (cost $43,939)				42,475
	Affiliated Fund
	China—0.0%
	William Blair China A-Share Fund, LLC§		10,158		164
	Total Affiliated Fund—0.0% (cost $102)				164
	Repurchase Agreement
	Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $47,301, collateralized by U.S. Treasury Bond, 3.375%, due 5/15/44	$	47,300		47,300
	Total Repurchase Agreement—1.6% (cost $47,300)				47,300
	Total Investments—100.1% (cost $2,781,763)				2,984,390
	Liabilities, plus cash and other assets—(0.1)%				(3,145	)
	Net assets—100.0%			$	2,981,245

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures approved by the Board of Trustees. This holding represents 0.00% of the Fund’s net assets at December 31, 2016.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.01% of the Fund’s net assets at December 31, 2016.

See accompanying Notes to Financial Statements.

58 Annual Report December 31, 2016

International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	27.5	%
Industrials	18.5	%
Consumer Discretionary	13.3	%
Information Technology	11.3	%
Materials	8.4	%
Energy	7.4	%
Health Care	5.6	%
Consumer Staples	3.5	%
Real Estate	2.1	%
Telecommunication Services	1.9	%
Utilities	0.5	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	29.4	%
Japanese Yen	19.6	%
British Pound Sterling	14.1	%
Canadian Dollar	7.0	%
Hong Kong Dollar	4.5	%
Australian Dollar	4.1	%
Swedish Krona	3.6	%
U.S. Dollar	3.1	%
Swiss Franc	3.1	%
South Korean Won	2.8	%
Indian Rupee	2.6	%
Brazilian Real	1.9	%
Danish Krone	1.0	%
All Other Currencies	3.2	%
Total	100.0	%

As of December 31, 2016, the Fund invested in William Blair China A-Share Fund, LLC, an affiliated fund. There are no unfunded commitments to the affiliated fund. The Fund is subject to repatriation and other redemption restrictions imposed on the William Blair China A-Share Fund, LLC by the Chinese government.

	Share Activity				Year Ended December 31, 2016
Security Name	Balance 12/31/2015	Purchases	Sales	Balance 12/31/2016	Value	Dividend Income	Net realized gain (loss)	Change in net unrealized appreciation (depreciation)
William Blair China A-Share Fund, LLC	223,614	—	213,456	10,158	$164	$—	$1,574	$(1,630)

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 59

	Institutional International Growth Fund
	The Institutional International Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Stephanie G. Braming Simon Fennell Jeffrey A. Urbina	The William Blair Institutional International Growth Fund posted a 2.40% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI All Country World ex-U.S. IMI Index (net) (the “Index”), increased 4.41%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Financials, Materials and Real Estate were significant detractors from the Fund’s performance relative to the Index for the year. These effects were mitigated by positive stock selection in Healthcare, along with an overweight position in Information Technology and underweight positions in Real Estate and Utilities. Within Financials, stock selection in Banks and Insurance detracted from the Fund’s relative performance. Within Materials, the Fund’s performance was hampered by a lack of exposure to Metals & Mining stocks, which rallied strongly on global growth recovery prospects and the market’s rotation into value orientated stocks. Chemicals holdings also detracted from the Fund’s relative performance in the Materials sector. Within the Real Estate sector, U.K. REIT Derwent London, which owns, develops and refurbishes properties in central London, was negatively impacted by concerns of slowing demand for London office space due to Brexit. Property developer China Overseas Land & Investment’s share price was hampered by concerns about policy tightening measures in Shanghai and other mainland cities, despite the company’s strong revenue and operating profit growth trends. Within the Healthcare sector, Swiss biotechnology company Actelion benefited from positive sales trends in its pulmonary arterial hypertension (PAH) drugs Uptravi and Opsumit, in addition to news that the company was in merger talks with French pharmaceutical company Sanofi after Johnson & Johnson dropped its own takeover offer for Actelion. From a geographic attribution perspective, the primary detractors from the Fund’s relative performance in 2016 were stock selection within Japan, notably within Japanese Consumer Discretionary stocks, and the U.K., as the Fund’s U.K. Financials holdings lagged. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

60 Annual Report December 31, 2016

Institutional International Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Institutional Class		(2.40	)%		(1.66	)%		7.01	%		1.69	%
MSCI ACW Ex-U.S. IMI (net)		4.41			(1.44	)		5.35			1.22

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. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Smaller and medium capitalization 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. Shares of the Fund are available 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 (ACW) 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 December 31, 2016. 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.

December 31, 2016 William Blair Funds 61

Institutional International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe, Mid-East—38.4%
	Austria—0.1%
	Lenzing AG (Chemicals)		11,389	$	1,379
	Belgium—1.5%
	Bekaert S.A. (Metals & mining)		73,546		2,979
	Colruyt S.A. (Food & staples retailing)		86,477		4,279
	KBC Groep N.V. (Banks)		391,971		24,274
					31,532
	Denmark—1.0%
	DSV A/S (Road & rail)		178,774		7,953
	Pandora A/S (Textiles, apparel & luxury goods)		95,511		12,496
					20,449
	Finland—0.9%
	Huhtamaki Oyj (Containers & packaging)		82,306		3,057
	Kone Oyj Class “B” (Machinery)		366,480		16,422
					19,479
	France—15.2%
	Arkema S.A. (Chemicals)		134,322		13,141
	Atos SE (IT services)		150,001		15,829
	AXA S.A. (Insurance)		1,499,960		37,871
	bioMerieux (Health care equipment & supplies)		23,074		3,447
	BNP Paribas S.A. (Banks)		609,095		38,822
	Christian Dior SE (Textiles, apparel & luxury goods)		52,497		11,011
	Cie Generale des Etablissements Michelin (Auto components)		146,961		16,352
	Cie Plastic Omnium S.A. (Auto components)		159,007		5,077
	Hermes International (Textiles, apparel & luxury goods)		18,008		7,393
	Ipsen S.A. (Pharmaceuticals)		50,528		3,654
*	Nexity S.A. (Real estate management & development)		58,525		2,739
	Rubis SCA (Gas utilities)		40,422		3,333
	Schneider Electric SE (Electrical equipment)		453,668		31,571
	SEB S.A. (Household durables)		21,813		2,956
	Sodexo S.A. (Hotels, restaurants & leisure)		92,094		10,586
	Technicolor S.A. (Media)		393,574		2,129
	Technip S.A. (Energy equipment & services)		116,752		8,334
	Thales S.A. (Aerospace & defense)		264,595		25,661
	Total S.A. (Oil, gas & consumable fuels)		643,725		33,013
	Valeo S.A. (Auto components)		314,592		18,084
	Vinci S.A. (Construction & engineering)		412,191		28,073
					319,076
	Germany—2.4%
	Bechtle AG (IT services)		28,465		2,961
	Deutsche Telekom AG (Diversified telecommunication services)		1,009,612		17,382
	Evonik Industries AG (Chemicals)		184,761		5,520
	KION Group AG (Machinery)		61,145		3,402

	Issuer	Shares		Value
	Common Stocks—(continued)
	Europe, Mid-East—(continued)
	Germany—(continued)
	MTU Aero Engines AG (Aerospace & defense)		71,355	$	8,247
	TUI AG (Hotels, restaurants & leisure)		598,732		8,392
	Wirecard AG (IT services)		85,925		3,698
					49,602
	Ireland—2.8%
	CRH plc (Construction materials)		625,004		21,681
	Greencore Group plc (Food products)		1,647,714		5,006
*	ICON plc (Life sciences tools & services)†		97,658		7,344
	Kingspan Group plc (Building products)		172,974		4,698
	Shire plc (Biotechnology)		335,415		19,362
					58,091
	Israel—0.8%
*	Check Point Software Technologies, Ltd. (Software)†		194,581		16,434
	Italy—1.7%
	Azimut Holding SpA (Capital markets)		206,679		3,450
	Banca Generali SpA (Capital markets)		266,274		6,351
	Brembo SpA (Auto components)		51,477		3,116
	Interpump Group SpA (Machinery)		286,885		4,696
	Intesa Sanpaolo SpA (Banks)		6,219,512		15,883
	Recordati SpA (Pharmaceuticals)		116,368		3,298
					36,794
	Luxembourg—0.2%
	Eurofins Scientific SE (Life sciences tools & services)		9,707		4,138
	Netherlands—2.1%
	Randstad Holding N.V. (Professional services)		116,548		6,322
	Royal Dutch Shell plc Class “A” (Oil, gas & consumable fuels)		1,417,719		38,779
					45,101
	Norway—0.2%
	Gjensidige Forsikring ASA (Insurance)		317,686		5,040
	Portugal—0.2%
	Jeronimo Martins SGPS S.A. (Food & staples retailing)		234,343		3,636
	Spain—2.7%
	Aena S.A. (Transportation infrastructure)		74,839		10,214
	Amadeus IT Group S.A. (IT services)		332,039		15,089
	Bankinter S.A. (Banks)		1,660,975		12,868
	Industria de Diseno Textil S.A. (Specialty retail)		479,512		16,369
	Prosegur Cia de Seguridad S.A. (Commercial services & supplies)		450,201		2,815
					57,355
	Sweden—3.5%
	BillerudKorsnas AB (Containers & packaging)		173,715		2,917
	Boliden AB (Metals & mining)		285,331		7,451

See accompanying Notes to Financial Statements.

62 Annual Report December 31, 2016

Institutional International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Europe, Mid-East—(continued)
	Sweden—(continued)
	Fabege AB (Real estate management &
	development)		184,451	$	3,015
	Hexpol AB (Chemicals)		332,637		3,080
	Hufvudstaden AB Class “A” (Real estate management & development)		192,555		3,041
	Husqvarna AB Class “B” (Household durables)		378,916		2,947
	Intrum Justitia AB (Commercial services & supplies)		142,658		4,813
	SKF AB Class “B” (Machinery)		683,380		12,572
	Swedbank AB Class “A” (Banks)		1,390,174		33,615
					73,451
	Switzerland—3.1%
*	Actelion, Ltd. (Biotechnology)		90,845		19,672
	Adecco Group AG (Professional services)		97,844		6,404
*	Cembra Money Bank AG (Consumer finance)		43,217		3,149
*	dormakaba Holding AG (Building products)		4,282		3,183
	Logitech International S.A. (Technology hardware, storage & peripherals)		124,570		3,107
*	Lonza Group AG (Life sciences tools & services)		67,468		11,681
*	Luxoft Holding, Inc. (IT services)†		45,176		2,539
	Partners Group Holding AG (Capital markets)		30,955		14,508
					64,243
	Japan—19.2%
	Ain Holdings, Inc. (Food & staples retailing)		2,300		152
	Alps Electric Co., Ltd. (Electronic equipment, instruments & components)		254,800		6,161
	Asahi Intecc Co., Ltd. (Health care equipment & supplies)		61,800		2,504
	Asahi Kasei Corporation (Chemicals)		1,755,000		15,309
	Daifuku Co., Ltd. (Machinery)		202,400		4,317
	Daikin Industries, Ltd. (Building products)		326,500		29,989
	Daito Trust Construction Co., Ltd. (Real estate management & development)		35,800		5,385
	Daiwa House Industry Co., Ltd. (Real estate management & development)		356,900		9,760
	FANUC Corporation (Machinery)		144,700		24,532
	Fuji Electric Co., Ltd. (Electrical equipment)		702,000		3,640
	Fuji Heavy Industries, Ltd. (Automobiles)		819,900		33,476
	Fujitsu General, Ltd. (Household durables)		139,000		2,942
	Haseko Corporation (Household durables) .		402,200		4,092
	Hitachi Chemical Co., Ltd. (Chemicals)		102,200		2,556
	ITOCHU Corporation (Trading companies & distributors)		601,500		7,987
	Keyence Corporation (Electronic equipment, instruments & components)		25,800		17,704
*	LINE Corporation—ADR (Software)		79,052		2,689
	Lion Corporation (Household products)		202,000		3,318

Issuer	Shares		Value
Common Stocks—(continued)
Japan—(continued)
M3, Inc. (Health care technology)		121,300	$	3,056
MISUMI Group, Inc. (Trading companies & distributors)		154,700		2,547
Mitsubishi Electric Corporation (Electrical equipment)		1,163,600		16,223
Mitsubishi UFJ Financial Group, Inc. (Banks)		4,531,000		27,921
Mitsui Mining & Smelting Co., Ltd. (Metals & mining)		675,250		1,710
Nichias Corporation (Building products)		257,000		2,480
Nihon M&A Center, Inc. (Capital markets)		95,800		2,664
Nippon Prologis REIT, Inc. (Equity real estate investment trusts (REITs))		1,504		3,074
Nissan Chemical Industries, Ltd. (Chemicals)		159,700		5,336
Nitori Holdings Co., Ltd. (Specialty retail) .		89,500		10,231
Oracle Corporation Japan (Software)		50,300		2,535
ORIX Corporation (Diversified financial services)		1,892,100		29,529
Park24 Co., Ltd. (Commercial services & supplies)		172,700		4,684
Pola Orbis Holdings, Inc. (Personal products)		60,700		5,012
SCSK Corporation (IT services)		113,300		3,965
Shimamura Co., Ltd. (Specialty retail)		24,900		3,108
Shionogi & Co., Ltd. (Pharmaceuticals)		338,700		16,226
SoftBank Group Corporation (Wireless telecommunication services)		255,000		16,942
Sumitomo Mitsui Financial Group, Inc. (Banks)		660,200		25,194
Taisei Corporation (Construction & engineering)		1,118,000		7,825
Temp Holdings Co., Ltd. (Professional services)		213,600		3,313
TIS, Inc. (IT services)		136,900		2,928
Tokio Marine Holdings, Inc. (Insurance)		496,400		20,370
Tsuruha Holdings, Inc. (Food & staples retailing)		60,500		5,746
Zenkoku Hosho Co., Ltd. (Diversified financial services)		86,700		2,786
				401,918
United Kingdom—14.5%
3i Group plc (Capital markets)		925,341		8,028
Babcock International Group plc (Commercial services & supplies)		368,656		4,330
BAE Systems plc (Aerospace & defense)		2,054,536		14,977
Bellway plc (Household durables)		169,659		5,177
Berendsen plc (Commercial services & supplies)		202,507		2,172
BHP Billiton plc (Metals & mining)		1,531,463		24,658
British American Tobacco plc (Tobacco)		296,131		16,866
Bunzl plc (Trading companies & distributors)		353,553		9,189
Cineworld Group plc (Media)		387,169		2,696
Close Brothers Group plc (Capital markets)		139,824		2,490

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 63

Institutional International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	United Kingdom—(continued)
	Compass Group plc (Hotels, restaurants & leisure)		1,171,734	$	21,675
	Croda International plc (Chemicals)		1,600		63
	Domino’s Pizza Group plc (Hotels, restaurants & leisure)		679,447		3,021
	GlaxoSmithKline plc (Pharmaceuticals)		865,709		16,665
	Halma plc (Electronic equipment, instruments & components)		264,049		2,921
	Hiscox, Ltd. (Insurance)		424,544		5,321
	Informa plc (Media)		1,453,185		12,178
	Intermediate Capital Group plc (Capital markets)		424,399		3,661
	Intertek Group plc (Professional services)		117,757		5,052
	John Wood Group plc (Energy equipment & services)		305,613		3,299
	Johnson Matthey plc (Chemicals)		270,738		10,617
	Jupiter Fund Management plc (Capital markets)		491,262		2,686
	Micro Focus International plc (Software)		256,747		6,895
	Moneysupermarket.com Group plc (Internet software & services)		635,682		2,304
	Playtech plc (Software)		366,758		3,733
	Provident Financial plc (Consumer finance)		114,918		4,035
	Renishaw plc (Electronic equipment, instruments & components)		90,159		2,809
	Rio Tinto, Ltd. (Metals & mining)		872,628		37,721
	Spirax-Sarco Engineering plc (Machinery) .		102,865		5,304
*	Subsea 7 S.A. (Energy equipment & services)		278,153		3,521
	The Sage Group plc (Software)		1,040,131		8,396
	UBM plc (Media)		635,030		5,725
	Unilever plc (Personal products)		78,808		3,198
	Victrex plc (Chemicals)		144,595		3,441
	WH Smith plc (Specialty retail)		198,930		3,820
	Wolseley plc (Trading companies & distributors)		297,476		18,191
	WPP plc (Media)		767,751		17,183
					304,018
	Emerging Asia—10.3%
	China—3.5%
	Anhui Conch Cement Co., Ltd. Class “H” (Construction materials)		2,121,500		5,772
	China Overseas Land & Investment, Ltd. (Real estate management & development)		4,512,000		11,957
	ENN Energy Holdings, Ltd. (Gas utilities) .		1,092,000		4,492
	Industrial and Commercial Bank of China, Ltd. Class “H” (Banks)		35,195,000		21,105
	PICC Property & Casualty Co., Ltd. Class “H” (Insurance)		4,650,000		7,244
	Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		4,109,500		20,562
*	Xinyi Solar Holdings, Ltd. (Semiconductors & semiconductor equipment)		7,064,000		2,296
					73,428

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	India—2.6%
	Bharat Petroleum Corporation, Ltd. (Oil, gas & consumable fuels)		495,046	$	4,624
	Britannia Industries, Ltd. (Food products)		65,388		2,778
	Eicher Motors, Ltd. (Machinery)		10,411		3,340
	HCL Technologies, Ltd. (IT services)		456,210		5,547
	HDFC Bank, Ltd. (Banks)		547,060		9,696
	IndusInd Bank, Ltd. (Banks)		321,611		5,246
	Maruti Suzuki India, Ltd. (Automobiles)		87,723		6,870
	Motherson Sumi Systems, Ltd. (Auto components)		643,853		3,085
	UPL, Ltd. (Chemicals)		363,657		3,466
	Voltas, Ltd. (Construction & engineering)		550,067		2,642
	Yes Bank, Ltd. (Banks)		353,755		6,020
					53,314
	Indonesia—0.5%
	PT Bank Central Asia Tbk (Banks)		9,438,200		10,859
	South Korea—2.7%
	Samsung Electronics Co., Ltd. (Technology hardware, storage & peripherals)		22,543		33,634
*	SK Hynix, Inc. (Semiconductors & semiconductor equipment)		631,770		23,381
					57,015
	Taiwan—1.0%
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		708,708		20,375
	Canada—7.0%
	Alimentation Couche Tard, Inc. Class “B” (Food & staples retailing)		155,501		7,051
	Brookfield Asset Management, Inc. Class “A” (Capital markets)†		112,185		3,703
	Canadian National Railway Co. (Road & rail)		260,541		17,534
	Canadian Natural Resources, Ltd. (Oil, gas & consumable fuels)		703,884		22,433
*	CGI Group, Inc. Class “A” (IT services)		276,870		13,288
	Constellation Software, Inc. (Software)		17,181		7,807
	Dollarama, Inc. (Multiline retail)		162,513		11,908
	Finning International, Inc. (Trading companies & distributors)		149,661		2,930
	Intact Financial Corporation (Insurance)		93,747		6,710
	Suncor Energy, Inc. (Oil, gas & consumable fuels)		513,500		16,790
	The Toronto-Dominion Bank (Banks)		725,717		35,793
					145,947
	Asia—3.2%
	Australia—2.2%
	Domino’s Pizza Enterprises, Ltd. (Hotels, restaurants & leisure)		61,485		2,884
	Downer EDI, Ltd. (Commercial services & supplies)		727,409		3,197

See accompanying Notes to Financial Statements.

64 Annual Report December 31, 2016

Institutional International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued
	Asia—(continued)
	JB Hi-Fi, Ltd. (Specialty retail)		202,577	$	4,099
	Macquarie Group, Ltd. (Capital markets)		523,149		32,890
	Vicinity Centres (Equity real estate investment trusts (REITs))		1,317,066		2,842
					45,912
	Hong Kong—0.8%
	AIA Group, Ltd. (Insurance)		3,198,263		18,044
*	China High Precision Automation Group, Ltd. (Electronic equipment, instruments & components)**§		3,373,000		—
					18,044
	New Zealand—0.2%
	Spark New Zealand, Ltd. (Diversified telecommunication services)		1,445,993		3,426
	Emerging Europe, Mid-East, Africa—1.8%
	Hungary—0.2%
	MOL Hungarian Oil & Gas plc (Oil, gas & consumable fuels)		49,078		3,447
	South Africa—0.9%
	Bid Corporation, Ltd. (Food & staples retailing)		198,562		3,544
	Bidvest Group, Ltd. (Industrial conglomerates)		198,562		2,620
	RMB Holdings, Ltd. (Diversified financial services)		682,409		3,299
	Sanlam, Ltd. (Insurance)		1,055,613		4,835
	The Spar Group, Ltd. (Food & staples retailing)		319,000		4,613
					18,911
	Turkey—0.3%
	Turkiye Garanti Bankasi A.S. (Banks)		2,861,246		6,182
	United Arab Emirates—0.4%
	Dubai Islamic Bank PJSC (Banks)		5,054,896		7,666
	Emerging Latin America—1.3%
	Brazil—0.6%
	BB Seguridade Participacoes S.A. (Insurance)		1,165,700		10,136
	Engie Brasil Energia S.A. (Independent power & renewable electricity producers)		253,900		2,730
					12,866
	Mexico—0.3%
	Arca Continental S.A.B. de C.V. (Beverages)		1,036,374		5,392
	Peru—0.4%
	Credicorp, Ltd. (Banks)†		58,177		9,184
	Total Common Stocks—95.7% (cost $1,875,101)				2,003,704

		Shares or
		Principal
	Issuer	Amount			Value
	Preferred Stocks
	Brazil—1.3%
	Itau Unibanco Holding S.A. (Banks)		998,900	$	10,389
*	Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		3,491,800		15,953
					26,342
	Germany—0.1%
	Sartorius AG (Health care equipment & supplies)		40,357		2,995
	Total Preferred Stocks—1.4% (cost $30,369)				29,337
	Affiliated Fund
	China—0.0%
	William Blair China A-Share Fund, LLC§		6,312		102
	Total Affiliated Fund—0.0% (cost $63)				102
	Repurchase Agreement
	Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $48,624, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	48,624		48,624
	Total Repurchase Agreement—2.3% (cost $48,624)				48,624
	Total Investments—99.4% (cost $1,954,157)				2,081,767
	Cash and other assets, less liabilities—0.6%				12,204
	Net assets—100.0%			$	2,093,971

ADR = American Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

** = Fair valued pursuant to Valuation Procedures approved by the Board of Trustees. This holding represents 0.00% of the Fund’s net assets at December 31, 2016.

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. These holdings represent 0.00% of the Fund’s net assets at December 31, 2016.

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.

December 31, 2016 William Blair Funds 65

Institutional International Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

At December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	27.4	%
Industrials	18.5	%
Consumer Discretionary	13.3	%
Information Technology	11.3	%
Materials	8.5	%
Energy	7.4	%
Health Care	5.6	%
Consumer Staples	3.5	%
Real Estate	2.1	%
Telecommunication Services	1.9	%
Utilities	0.5	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	29.4	%
Japanese Yen	19.7	%
British Pound Sterling	14.1	%
Canadian Dollar	7.0	%
Hong Kong Dollar	4.5	%
Australian Dollar	4.1	%
Swedish Krona	3.6	%
U.S. Dollar	3.1	%
Swiss Franc	3.0	%
South Korean Won	2.8	%
Indian Rupee	2.6	%
Brazilian Real	1.9	%
Danish Krone	1.0	%
All Other Currencies	3.2	%
Total	100.0	%

As of December 31, 2016, the Fund invested in William Blair China A-Share Fund, LLC, an affiliated fund. There are no unfunded commitments to the affiliated fund. The Fund is subject to repatriation and other redemption restrictions imposed on the William Blair China A-Share Fund, LLC by the Chinese government.

	Share Activity				Year Ended December 31, 2016
Security Name	Balance 12/31/2015	Purchases	Sales	Balance 12/31/2016	Value	Dividend Income	Net realized gain (loss)	Change in net unrealized appreciation (depreciation)
William Blair China A-Share Fund, LLC	138,952	—	132,640	6,312	$ 102	$—	$978	$(1,012)

See accompanying Notes to Financial Statements.

66 Annual Report December 31, 2016

	International Small Cap Growth Fund
	The International Small Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Stephanie G. Braming Andrew G. Flynn	The William Blair International Small Cap Growth Fund (Class N shares) posted a 4.60% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI All Country World ex-U.S. Small Cap Index (net) (the “Index”), increased 3.91%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of low valuation market leadership. From a sector attribution perspective, stock selection in Real Estate and Information Technology (IT) were the largest detractors from the Fund’s performance relative to the Index for the year. The Fund’s Real Estate stock selection was adversely impacted by holdings in U.K. Real Estate Investment Trusts, including Workspace Group and Big Yellow Group, both of which suffered from uncertainty surrounding Britain’s referendum on European Union membership and Brexit’s potentially detrimental impact on U.K. real estate activity. Within the IT sector, exposure to Electronic Equipment, Internet Software and Semiconductor companies weighed on the Fund’s relative performance. U.K.-based price comparison website Moneysupermarket.com was a primary detractor within the Internet Software industry, hampered by earnings downgrades following the Brexit vote and the announced departure of its CEO. Helping to offset these negative effects was the Fund’s positive stock selection in the Energy and Healthcare sectors, combined with its underweightings in Real Estate and IT. Within Energy, oil services company Canadian Energy Services was the primary contributor to the Fund’s performance, benefiting from analyst upgrades on an improving outlook for drilling activity. Within Healthcare, positive stock selection was supported by Japanese medical information services company M3, which benefited from strength in its medical portal division and improving profitability overseas. From a geographic attribution perspective, stock selection in Japan was the primary detractor from the Fund’s relative performance in 2016, mostly within the IT, Consumer Discretionary and Consumer Staples sectors. These negative effects were mitigated by favorable stock selection in Emerging Asia, as the Fund’s holdings in China and India outperformed. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 67

International Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		(4.60	)%		(1.42	)%		7.79	%		3.25	%
Class I		(4.41	)		(1.14	)		8.09			3.57
Institutional Class		(4.31	)		(1.02	)		8.28			3.75
MSCI ACW Ex-U.S. Small Cap Index (net)		3.91			0.76			7.74			2.90

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, performance would be lower. Smaller capitalization 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. 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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 (ACW) 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 December 31, 2016. 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.

68 Annual Report December 31, 2016

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Europe, Mid-East—33.0%
	Austria—0.4%
	Schoeller-Bleckmann Oilfield Equipment AG (Energy equipment & services)		24,469	$	1,971
	Denmark—0.7%
	Royal Unibrew A/S (Beverages)		97,682		3,770
	Finland—1.3%
	Huhtamaki Oyj (Containers & packaging)		89,831		3,336
	Tieto Oyj (IT services)		115,629		3,155
					6,491
	France—7.0%
	Alten S.A. (IT services)		74,621		5,241
	Ipsen S.A. (Pharmaceuticals)		93,805		6,784
	Metropole Television S.A. (Media)		220,148		4,095
*	Nexity S.A. (Real estate management & development)		84,404		3,950
	Rubis SCA (Gas utilities)		64,368		5,307
	Sartorius Stedim Biotech (Health care equipment & supplies)		37,999		2,399
	SEB S.A. (Household durables)		19,226		2,605
	Teleperformance (Professional services)		57,884		5,807
					36,188
	Germany—3.0%
	AURELIUS Equity Opportunities SE & Co KGaA (Capital markets)		115,042		6,736
	KION Group AG (Machinery)		96,335		5,360
	Norma Group SE (Machinery)		80,495		3,436
					15,532
	Ireland—2.6%
	Greencore Group plc (Food products)		1,075,954		3,269
*	ICON plc (Life sciences tools & services)†		62,644		4,711
	Kingspan Group plc (Building products)		192,843		5,237
					13,217
	Israel—2.0%
	Elbit Systems, Ltd. (Aerospace & defense)		59,128		5,986
	Mizrahi Tefahot Bank, Ltd. (Banks)		141,815		2,075
*	Orbotech, Ltd. (Electronic equipment, instruments & components)†		75,041		2,507
					10,568
	Italy—4.9%
	Banca IFIS SpA (Diversified financial services)		123,332		3,376
	Brembo SpA (Auto components)		74,894		4,533
	Cerved Information Solutions SpA (Diversified financial services)		669,116		5,557
	DiaSorin SpA (Health care equipment & supplies)		50,949		3,017
	Industria Macchine Automatiche SpA (Machinery)		84,414		5,118
	Recordati SpA (Pharmaceuticals)		138,652		3,929
					25,530

	Issuer	Shares		Value
	Common Stocks—(continued)
	Europe, Mid-East—(continued)
	Luxembourg—0.3%
*	Stabilus S.A. (Machinery)		31,824	$	1,710
	Spain—1.5%
	Atresmedia Corporation de Medios de Comunicaion S.A. (Media)		226,980		2,482
	Cia de Distribucion Integral Logista Holdings S.A. (Air freight & logistics)		223,917		5,186
					7,668
	Sweden—7.3%
	Bilia AB Class “A” (Specialty retail)		107,193		2,465
	BillerudKorsnas AB (Containers & packaging)		236,109		3,965
	Boliden AB (Metals & mining)		258,564		6,752
	Granges AB (Metals & mining)		338,261		3,193
	Indutrade AB (Trading companies & distributors)		213,758		4,294
	Intrum Justitia AB (Commercial services & supplies)		201,340		6,793
	Loomis AB Class “B” (Commercial services & supplies)		105,407		3,137
*	NetEnt AB (Internet software & services)		605,167		4,670
	Thule Group AB (Leisure products)		163,888		2,563
					37,832
	Switzerland—2.0%
*	Cembra Money Bank AG (Consumer finance)		59,239		4,317
*	dormakaba Holding AG (Building products)		1,325		985
*	Luxoft Holding, Inc. (IT services)†		37,873		2,128
	Straumann Holding AG (Health care equipment & supplies)		7,133		2,784
					10,214
	Japan—19.1%
	BML, Inc. (Health care providers & services)		102,200		2,436
	Daifuku Co., Ltd. (Machinery)		174,100		3,714
	Daiichikosho Co., Ltd. (Media)		69,600		2,751
	Dowa Holdings Co., Ltd. (Metals & mining)		468,000		3,580
	Fuji Electric Co., Ltd. (Electrical equipment)		490,000		2,541
	GLP J-Reit (Equity real estate investment trusts (REITs))		4,342		5,000
	Haseko Corporation (Household durables)		294,600		2,997
	Hitachi Chemical Co., Ltd. (Chemicals)		167,900		4,199
	Hoshizaki Corp. (Machinery)		30,400		2,406
	Kose Corporation (Personal products)		35,600		2,958
	Meitec Corporation (Professional services)		110,300		4,223
	MISUMI Group, Inc. (Trading companies & distributors)		198,800		3,273
	Nihon M&A Center, Inc. (Capital markets)		133,100		3,701
	Nissan Chemical Industries, Ltd. (Chemicals)		181,700		6,071

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 69

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Shares		Value
Common Stocks—(continued)
Japan—(continued)
NS Solutions Corporation (IT services)		182,800	$	3,291
Okamoto Industries, Inc. (Chemicals)		133,000		1,227
Oracle Corporation Japan (Software)		63,400		3,195
Park24 Co., Ltd. (Commercial services & supplies)		111,600		3,027
Pola Orbis Holdings, Inc. (Personal products)		46,000		3,798
Relo Group, Inc. (Real estate management & development)		26,700		3,806
Shimamura Co., Ltd. (Specialty retail)		20,800		2,596
Start Today Co., Ltd. (Internet & direct marketing retail)		182,800		3,158
Suruga Bank, Ltd. (Banks)		322,700		7,204
Temp Holdings Co., Ltd. (Professional services)		262,100		4,066
TIS, Inc. (IT services)		141,800		3,033
Tokyo Century Corporation (Diversified financial services)		88,500		3,029
Tsuruha Holdings, Inc. (Food & staples retailing)		44,700		4,245
Zenkoku Hosho Co., Ltd. (Diversified financial services)		98,700		3,171
				98,696
United Kingdom—14.0%
Abcam plc (Biotechnology)		261,722		2,474
Beazley plc (Insurance)		1,212,534		5,791
Berendsen plc (Commercial services & supplies)		365,258		3,918
Big Yellow Group plc (Equity real estate investment trusts (REITs))		280,859		2,373
Domino’s Pizza Group plc (Hotels, restaurants & leisure)		624,755		2,778
Elementis plc (Chemicals)		925,572		3,164
Halma plc (Electronic equipment, instruments & components)		286,559		3,170
Hays plc (Professional services)		1,219,867		2,243
IG Group Holdings plc (Capital markets)		315,619		1,922
Inchcape plc (Distributors)		442,082		3,825
Intermediate Capital Group plc (Capital markets)		436,632		3,767
John Wood Group plc (Energy equipment & services)		250,307		2,702
Jupiter Fund Management plc (Capital markets)		664,405		3,632
Micro Focus International plc (Software)		231,558		6,218
Playtech plc (Software)		305,647		3,111
Rentokil Initial plc (Commercial services & supplies)		1,926,440		5,275
Spirax-Sarco Engineering plc (Machinery)		50,537		2,606
SSP Group plc (Hotels, restaurants & leisure)		1,049,741		5,009
Ted Baker plc (Textiles, apparel & luxury goods)		83,765		2,905
Ultra Electronics Holdings plc (Aerospace & defense)		223,429		5,345
				72,228

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—11.0%
	China—2.6%
	Beijing Capital International Airport Co., Ltd. Class “H” (Transportation infrastructure)		2,486,000	$	2,513
*	China Lodging Group, Ltd.—ADR (Hotels, restaurants & leisure)		85,033		4,408
	Hollysys Automation Technologies, Ltd. (Electronic equipment, instruments & components)†		180,041		3,298
	Huaneng Renewables Corporation, Ltd. Class “H” (Independent power & renewable electricity producers)		10,024,000		3,258
					13,477
	India—3.2%
	Indiabulls Housing Finance, Ltd. (Thrifts & mortgage finance)		444,366		4,249
	Motherson Sumi Systems, Ltd. (Auto components)		565,599		2,710
	UPL, Ltd. (Chemicals)		396,135		3,775
	Yes Bank, Ltd. (Banks)		334,808		5,698
					16,432
	Indonesia—0.5%
	PT Bank Negara Indonesia Persero Tbk (Banks)		7,046,500		2,890
	South Korea—1.1%
*	BGF retail Co., Ltd. (Food & staples retailing)		11,351		769
*	Kangwon Land, Inc. (Hotels, restaurants & leisure)		93,320		2,762
*	S-1 Corporation (Commercial services & supplies)		28,948		2,102
					5,633
	Taiwan—3.6%
	Advantech Co., Ltd. (Technology hardware, storage & peripherals)		304,000		2,401
	E.Sun Financial Holding Co., Ltd. (Banks)		6,833,345		3,891
	Novatek Microelectronics Corporation (Semiconductors & semiconductor equipment)		472,000		1,560
	PChome Online, Inc. (Internet software & services)		283,000		2,485
	Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		1,163,000		3,139
	Silicon Motion Technology Corporation— ADR (Semiconductors & semiconductor equipment)		71,262		3,027
	Tripod Technology Corporation (Electronic equipment, instruments & components)		902,000		2,037
					18,540

See accompanying Notes to Financial Statements.

70 Annual Report December 31, 2016

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Asia—7.7%
	Australia—6.1%
	Challenger, Ltd. (Diversified financial services)		651,734	$	5,286
	DuluxGroup, Ltd. (Chemicals)		1,147,633		5,168
	JB Hi-Fi, Ltd. (Specialty retail)		273,918		5,543
	Magellan Financial Group, Ltd. (Capital markets)		221,763		3,804
	Orora, Ltd. (Containers & packaging)		2,985,594		6,442
	The Star Entertainment Group, Ltd. (Hotels, restaurants & leisure)		1,347,105		5,026
					31,269
	Hong Kong—0.8%
	Man Wah Holdings, Ltd. (Household durables)		6,121,200		4,144
	New Zealand—0.1%
	Ryman Healthcare, Ltd. (Health care providers & services)		108,855		614
	Singapore—0.7%
	SATS, Ltd. (Transportation infrastructure)		1,140,000		3,818
	Canada—5.0%
	Canadian Energy Services & Technology Corporation (Energy equipment & services)		785,457		4,481
	Finning International, Inc. (Trading companies & distributors)		222,388		4,354
	Linamar Corporation (Auto components)		67,394		2,896
	Peyto Exploration & Development Corporation (Oil, gas & consumable fuels)		136,882		3,386
*	Raging River Exploration, Inc. (Oil, gas & consumable fuels)		669,202		5,263
	Whitecap Resources, Inc. (Oil, gas & consumable fuels)		584,532		5,294
					25,674
	Emerging Europe, Mid-East, Africa—4.4%
	Czech Republic—0.7%
*	Moneta Money Bank A.S. (Banks)		1,178,012		3,800
	Hungary—0.7%
	Richter Gedeon Nyrt (Pharmaceuticals)		182,157		3,850
	South Africa—2.1%
	AVI, Ltd. (Food products)		675,883		4,496
	Bidvest Group, Ltd. (Industrial conglomerates)		264,240		3,487
	RMB Holdings, Ltd. (Diversified financial services)		582,424		2,816
					10,799

Issuer		Shares or Principal Amount		Value
Common Stocks—(continued)
Emerging Europe, Mid-East, Africa—(continued)
Turkey—0.9%
Arcelik A.S. (Household durables)		395,600	$	2,378
Turkiye Sinai Kalkinma Bankasi A.S. (Banks)		5,246,711		2,098
				4,476
Emerging Latin America—4.2%
Brazil—1.8%
CVC Brasil Operadora e Agencia de Viagens S.A. (Hotels, restaurants & leisure)		375,100		2,731
EDP - Energias do Brasil S.A. (Electric utilities)		884,100		3,640
Localiza Rent a Car S.A. (Road & rail)		269,500		2,834
				9,205
Mexico—2.4%
Gentera S.A.B. de C.V. (Consumer finance)		3,609,700		5,806
Grupo Aeroportuario del Centro Norte S.A.B. de C.V. (Transportation infrastructure)		564,100		2,428
Grupo Aeroportuario del Sureste S.A.B. de C.V.—ADR (Transportation infrastructure)		26,058		3,749
Promotora y Operadora de Infraestructura S.A.B. de C.V. (Transportation infrastructure)		52,800		441
				12,424
Total Common Stocks—98.4% (cost $476,252)				508,660
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $8,208, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	8,207		8,207
Total Repurchase Agreement—1.6% (cost $8,207)				8,207
Total Investments—100.0% (cost $484,459)				516,867
Liabilities, plus cash and other assets—0.0%				(234	)
Net assets—100.0%			$	516,633

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.

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 71

International Small Cap Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

At December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Industrials	23.9	%
Financials	18.6	%
Consumer Discretionary	15.2	%
Information Technology	11.3	%
Materials	10.0	%
Health Care	6.5	%
Consumer Staples	4.6	%
Energy	4.5	%
Real Estate	3.0	%
Utilities	2.4	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

Euro	19.7	%
Japanese Yen	19.4	%
British Pound Sterling	14.8	%
Swedish Krona	7.4	%
Australian Dollar	6.1	%
Canadian Dollar	5.1	%
U.S. Dollar	4.7	%
Indian Rupee	3.2	%
New Taiwan Dollar	3.1	%
South African Rand	2.1	%
Hong Kong Dollar	2.0	%
Brazilian Real	1.8	%
Mexican Peso	1.7	%
Swiss Franc	1.6	%
Israeli Shekel	1.6	%
South Korean Won	1.1	%
All Other Currencies	4.6	%
Total	100.0	%

See accompanying Notes to Financial Statements.

72 Annual Report December 31, 2016

	Emerging Markets Leaders Fund
	The Emerging Markets Leaders Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Todd M. McClone John C. Murphy Jeffrey A. Urbina	The William Blair Emerging Markets Leaders Fund (Class N shares) posted a 1.42% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI Emerging Markets Index (net) (the “Index”), increased 11.19%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of significant low valuation market leadership. From a sector attribution perspective stock selection in Financials and Materials, an underweight to Energy, and an overweight to Consumer Staples were the primary detractors from the Fund’s performance relative to the Index for the year. Within Financials, the Fund’s Bank holdings did not keep pace with the Index, hampered partially by the position in Turkiye Garanti Bankasi, which stumbled on broader macroeconomic and political risk in Turkey. Mexican bank exposure, including Grupo Financiero Inbursa which was sold from the Fund in the second quarter due to slowing loan growth, and Grupo Financiero Banorte which weakened along with Mexican banks following Donald Trump’s election victory, also detracted from the Fund’s relative performance as a result of concerns about corporate credit quality and a potential increase in non-performing loans. Within Materials, the Fund’s lack of exposure to Metals & Mining stocks was a significant detractor from relative performance during the year. These effects more than offset the positive contributions from the Fund’s stock selection in the Industrials sector and its underweight positions in Healthcare, Telecommunication Services and Materials. From a geographic attribution perspective, stock selection within Russia and Brazil were the largest detractors from the Fund’s relative performance in 2016, driven by a lack of exposure to strong performing Index holdings in the Metals & Mining and Oil & Gas industries. These effects offset positive contributions from the Fund’s stock selection in Malaysia, the Philippines and Taiwan, along with its underweight to China and overweights to Thailand and Peru. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

December 31, 2016 William Blair Funds 73

Emerging Markets Leaders Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			Since Inception
Class N(b)		1.42	%		(3.98	)%		1.13	%	0.12	%
MSCI Emerging Markets Index – (net)(b)		11.19			(2.55	)		1.28		0.12
Class I(a)		1.82			(3.64	)		1.42		(1.01	)
Institutional Class(a)		1.74			(3.60	)		1.53		(0.90	)
MSCI Emerging Markets Index (net)(a)		11.19			(2.55	)		1.28		(0.41	)

(a)	Since inception is for the period from March 26, 2008 (Commencement of Operations) to December 31, 2016.
(b)	Since inception is for the period from May 3, 2010 (Commencement of Operations) to December 31, 2016.

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. These risks may be magnified when investing in emerging markets. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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) Emerging Markets Index (net) is a free float-adjusted market-capitalization-weighted index that is designed to measure equity market performance of emerging markets. This series approximates the minimum possible dividend reinvestment.

This report identifies the Fund’s investments on December 31, 2016. 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.

74 Annual Report December 31, 2016

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Emerging Asia—65.7%
	China—21.0%
*	Alibaba Group Holding, Ltd.—ADR (Internet software & services)		101,933	$	8,951
	Anhui Conch Cement Co., Ltd. Class “H” (Construction materials)		1,761,500		4,793
*	Baidu, Inc.—ADR (Internet software & services)		18,809		3,092
	China Mobile, Ltd. (Wireless telecommunication services)		293,000		3,106
	CNOOC, Ltd. (Oil, gas & consumable fuels)		6,358,000		7,953
	Industrial and Commercial Bank of China, Ltd. Class “H” (Banks)		13,814,000		8,284
	NetEase, Inc.—ADR (Internet software & services)		13,053		2,811
*	New Oriental Education & Technology Group, Inc.—ADR (Diversified consumer services)		35,616		1,499
	Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		1,460,000		7,305
	Sinopharm Group Co., Ltd. Class “H” (Health care providers & services)		345,200		1,422
	*TAL Education Group—ADR (Diversified consumer services)		23,985		1,682
	Tencent Holdings, Ltd. (Internet software & services)		424,500		10,385
*	Yum China Holdings, Inc. (Hotels, restaurants & leisure)		109,251		2,854
					64,137
	India—12.5%
	Asian Paints, Ltd. (Chemicals)		149,360		1,960
	Bharat Petroleum Corporation, Ltd. (Oil, gas & consumable fuels)		420,200		3,925
	HDFC Bank, Ltd. (Banks)		177,687		3,149
	HDFC Bank, Ltd.—ADR (Banks)		66,481		4,034
	Hero MotoCorp, Ltd. (Automobiles)		129,600		5,790
	Housing Development Finance Corporation, Ltd. (Thrifts & mortgage finance)		322,475		5,993
	IndusInd Bank, Ltd. (Banks)		230,806		3,765
	Maruti Suzuki India, Ltd. (Automobiles)		50,522		3,957
	Tata Motors, Ltd. (Automobiles)		474,860		3,288
	Vedanta, Ltd. (Metals & mining)		689,583		2,198
					38,059
	Indonesia—6.4%
	PT Astra International Tbk (Automobiles)		8,140,800		5,000
	PT Bank Rakyat Indonesia Persero Tbk (Banks)		4,467,600		3,872
	PT Kalbe Farma Tbk (Pharmaceuticals)		18,044,100		2,029
	PT Telekomunikasi Indonesia Persero Tbk (Diversified telecommunication services)		20,191,600		5,965
	PT Unilever Indonesia Tbk (Household products)		955,500		2,752
					19,618

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	Malaysia—1.4%
	Public Bank Bhd (Banks)		984,400	$	4,327
	Philippines—0.6%
	SM Prime Holdings, Inc. (Real estate management & development)		3,194,500		1,822
	South Korea—11.7%
*	Amorepacific Corporation (Personal products)		4,947		1,317
*	Hankook Tire Co., Ltd. (Auto components)		81,670		3,922
*	NAVER Corporation (Internet software & services)		7,550		4,844
	Samsung Electronics Co., Ltd. (Technology hardware, storage & peripherals)		10,330		15,412
*	Shinhan Financial Group Co., Ltd. (Banks)		136,644		5,119
*	SK Hynix, Inc. (Semiconductors & semiconductor equipment)		141,250		5,228
					35,842
	Taiwan—8.7%
	Fubon Financial Holding Co., Ltd. (Diversified financial services)		2,747,000		4,347
	Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		44,000		5,174
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		540,138		15,529
	Uni-President Enterprises Corporation (Food products)		871,000		1,443
					26,493
	Thailand—3.4%
	Airports of Thailand PCL (Transportation infrastructure)		411,200		4,570
	Bangkok Dusit Medical Services PCL Class “F” (Health care providers & services)		3,315,000		2,138
	CP ALL PCL (Food & staples retailing)		2,101,400		3,668
					10,376
	Emerging Latin America—12.3%
	Argentina—1.0%
	MercadoLibre, Inc. (Internet software & services)		19,594		3,059
	Brazil—5.6%
	BB Seguridade Participacoes S.A. (Insurance)		195,400		1,699
	BM&F BOVESPA S.A. (Capital markets)		494,600		2,507
	Kroton Educacional S.A. (Diversified consumer services)		920,400		3,770
	Raia Drogasil S.A. (Food & staples retailing)		202,900		3,815
	Ultrapar Participacoes S.A. (Oil, gas & consumable fuels)		153,400		3,226
	Vale S.A.—ADR (Metals & mining)		253,232		1,930
					16,947

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 75

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Latin America—continued)
	Mexico—3.7%
*	Cemex S.A.B. de C.V.—ADR (Construction materials)		422,457	$	3,392
	Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		30,037		2,289
	Grupo Financiero Banorte S.A.B. de C.V. Class “O” (Banks)		1,033,000		5,088
	Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		330,200		591
					11,360
	Peru—2.0%
	Credicorp, Ltd. (Banks)†		38,914		6,143
	Emerging Europe, Mid-East, Africa—12.1%
	Hungary—1.1%
	OTP Bank plc (Banks)		122,351		3,498
	Russia—2.3%
	Magnit PJSC—GDR (Food & staples retailing)		76,425		3,374
*	Yandex N.V. Class “A” (Internet software & services)†		177,486		3,573
					6,947
	South Africa—7.0%
	Bid Corporation, Ltd. (Food & staples retailing)		219,645		3,921
	Bidvest Group, Ltd. (Industrial conglomerates)		306,181		4,041
	FirstRand, Ltd. (Diversified financial services)		1,251,083		4,843
	Naspers, Ltd. (Media)		58,381		8,562
					21,367
	Turkey—1.2%
	KOC Holding A.S. (Industrial conglomerates)		994,486		3,891
	United Arab Emirates—0.5%
	Emaar Properties PJSC (Real estate management & development)		766,287		1,488
	Total Common Stocks—90.1% (cost $269,841)				275,374
	Preferred Stocks
	Brazil—6.8%
	Itau Unibanco Holding S.A. (Banks)		829,150		8,624
*	Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		2,666,000		12,180
					20,804
	Total Preferred Stocks—6.8% (cost $20,349)				20,804

	Principal
Issuer	Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $9,400, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	9,399	$	9,399
Total Repurchase Agreement—3.1% (cost $9,399)				9,399
Total Investments—100.0% (cost $299,589)				305,577
Liabilities, plus cash and other assets—0.0%				(74	)
Net assets—100.0%			$	305,503

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	27.9	%
Information Technology	26.4	%
Consumer Discretionary	13.6	%
Energy	9.2	%
Consumer Staples	7.8	%
Materials	4.8	%
Industrials	4.2	%
Telecommunication Services	3.1	%
Health Care	1.9	%
Real Estate	1.1	%
Total	100.0	%

See accompanying Notes to Financial Statements.

76 Annual Report December 31, 2016

Emerging Markets Leaders Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

U.S. Dollar	21.7	%
Hong Kong Dollar	14.6	%
South Korean Won	12.1	%
Brazilian Real	12.1	%
Indian Rupee	11.5	%
South African Rand	7.2	%
Indonesian Rupiah	6.6	%
New Taiwan Dollar	3.7	%
Thai Baht	3.5	%
Mexican Peso	1.9	%
Malaysian Ringgit	1.5	%
Turkish Lira	1.3	%
Hungarian Forint	1.2	%
All Other Currencies	1.1	%
Total	100.0	%

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 77

	Emerging Markets Growth Fund
	The Emerging Markets Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Todd M. McClone Casey K. Preyss Jeffrey A. Urbina	The William Blair Emerging Markets Growth Fund (Class N shares) posted a 1.49% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI Emerging Markets IMI Index (net) (the “Index”), increased 9.90%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of significant low valuation market leadership. From a sector attribution perspective, stock selection in Financials and Materials, an underweight to Energy, and an overweight to Consumer Staples were the primary detractors from the Fund’s performance relative to the Index for the year. Within Financials, the Fund’s Bank holdings did not keep pace with the Index, hampered partially by the position in Turkiye Garanti Bankasi which stumbled on broader macroeconomic and political risk in Turkey. Mexican bank exposure, including Grupo Financiero Inbursa which was sold from the Fund in the third quarter due to slowing loan growth, and Grupo Financiero Santander Mexico which weakened along with Mexican banks following Donald Trump’s election victory, also detracted from the Fund’s relative performance as a result of concerns about corporate credit quality and a potential increase in non-performing loans. Within Materials, the lack of exposure to Metals & Mining stocks was a significant detractor from the Fund’s performance during the year. These effects more than offset the positive contributions from the Fund’s stock selection in the Consumer Discretionary, Industrials, Telecommunication Services and Utilities sectors. India’s Tata Motors was a notable contributor within the Consumer Discretionary sector, bolstered by accelerating volume growth within its Jaguar division. Within Industrials, South African conglomerate Bidvest Group benefited from investors’ favorable reaction to the spin-off of the company’s food business. From a geographic attribution perspective, stock selection within Russia and Brazil were the largest detractors from the Fund’s relative performance in 2016, driven by a lack of exposure to strong performing Index holdings in the Metals & Mining and Oil & Gas Industries. These effects offset positive contributions from the Fund’s stock selection in India and Malaysia, along with underweights to China and Korea. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

78 Annual Report December 31, 2016

Emerging Markets Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		1.49	%		(3.75)	%		1.69	%		0.18	%
Class I		1.73			(3.52	)		1.95			0.44
Institutional Class		1.71			(3.40	)		2.10			0.59
MSCI Emerging Markets IMI (net)		9.90			(2.40	)		1.54			2.07

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. These risks may be magnified when investing in emerging markets. 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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) 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 December 31, 2016. 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.

December 31, 2016 William Blair Funds 79

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Emerging Asia—69.0%
	China—18.5%
*	Alibaba Group Holding, Ltd.—ADR (Internet software & services)		372,851	$	32,740
*	Baidu, Inc.—ADR (Internet software & services)		60,183		9,895
	CNOOC, Ltd. (Oil, gas & consumable fuels)		17,399,000		21,764
	CSPC Pharmaceutical Group, Ltd. (Pharmaceuticals)		3,448,000		3,682
*	Ctrip.com International, Ltd.—ADR (Internet & direct marketing retail)		219,818		8,793
	Geely Automobile Holdings, Ltd. (Automobiles)		4,535,000		4,334
	Huaneng Renewables Corporation, Ltd. Class “H” (Independent power & renewable electricity producers)		8,985,932		2,920
	NetEase, Inc.—ADR (Internet software & services)		60,365		12,999
*	New Oriental Education & Technology Group, Inc.—ADR (Diversified consumer services)		98,181		4,133
	Ping An Insurance Group Co. of China, Ltd. Class “H” (Insurance)		1,973,500		9,874
	Sinopharm Group Co., Ltd. Class “H” (Health care providers & services)		898,200		3,701
	Sunny Optical Technology Group Co., Ltd. (Electronic equipment, instruments & components)		930,000		4,072
*	TAL Education Group—ADR (Diversified consumer services)		62,996		4,419
	Tencent Holdings, Ltd. (Internet software & services)		1,762,660		43,120
	Travelsky Technology, Ltd. Class “H” (IT services)		1,384,000		2,909
	Weichai Power Co., Ltd. Class “H” (Machinery)		2,405,000		3,703
					173,058
	India—16.6%
	Asian Paints, Ltd. (Chemicals)		404,678		5,310
	Bajaj Finance, Ltd. (Consumer finance)		317,273		3,944
*	Bharat Financial Inclusion, Ltd. (Consumer finance)		387,301		3,362
	Bharat Petroleum Corporation, Ltd. (Oil, gas & consumable fuels)		461,164		4,308
	Bosch, Ltd. (Auto components)		9,437		2,948
	Britannia Industries, Ltd. (Food products)		53,038		2,253
	Eicher Motors, Ltd. (Machinery)		13,067		4,192
	Godrej Consumer Products, Ltd. (Personal products)		126,083		2,813
	Havells India, Ltd. (Electrical equipment)		435,870		2,191
	HDFC Bank, Ltd. (Banks)		1,323,171		23,451
	Hero MotoCorp, Ltd. (Automobiles)		130,325		5,823
	Hindustan Unilever, Ltd. (Household products)		352,707		4,291

Issuer	Shares		Value
Common Stocks—(continued)
Emerging Asia—(continued)
India—(continued)
Housing Development Finance Corporation, Ltd. (Thrifts & mortgage finance)		783,268	$	14,557
Indraprastha Gas, Ltd. (Gas utilities)		289,279		3,892
IndusInd Bank, Ltd. (Banks)		842,771		13,746
ITC, Ltd. (Tobacco)		1,444,740		5,126
Maruti Suzuki India, Ltd. (Automobiles)		154,077		12,067
Max Financial Services, Ltd. (Insurance)		610,998		4,986
Motherson Sumi Systems, Ltd. (Auto components)		764,916		3,665
Petronet LNG, Ltd. (Oil, gas & consumable fuels)		538,905		2,912
Pidilite Industries, Ltd. (Chemicals)		240,121		2,082
Shree Cement, Ltd. (Construction materials)		14,337		3,105
Tata Motors, Ltd. (Automobiles)		866,454		5,999
UPL, Ltd. (Chemicals)		381,131		3,632
Yes Bank, Ltd. (Banks)		659,385		11,221
Zee Entertainment Enterprises, Ltd. (Media)		487,660		3,255
				155,131
Indonesia—5.2%
PT Astra International Tbk (Automobiles)		13,570,200		8,335
PT Bank Rakyat Indonesia Persero Tbk (Banks)		14,552,421		12,611
PT Gudang Garam Tbk (Tobacco)		823,500		3,906
PT Indofood CBP Sukses Makmur Tbk (Food products)		3,761,200		2,394
PT Kalbe Farma Tbk (Pharmaceuticals)		27,156,215		3,054
PT Matahari Department Store Tbk (Multiline retail)		3,602,500		4,044
PT Telekomunikasi Indonesia Persero Tbk (Diversified telecommunication services)		30,851,600		9,114
PT Unilever Indonesia Tbk (Household products)		1,463,200		4,214
PT United Tractors Tbk (Oil, gas & consumable fuels)		670,800		1,058
				48,730
Malaysia—1.2%
Public Bank Bhd (Banks)		2,586,100		11,368
Papua New Guinea—0.4%
Oil Search, Ltd. (Oil, gas & consumable fuels)		627,467		3,247
Philippines—3.1%
Ayala Land, Inc. (Real estate management & development)		6,912,200		4,449
BDO Unibank, Inc. (Banks)		2,221,870		5,010
GT Capital Holdings, Inc. (Diversified financial services)		92,635		2,367
International Container Terminal Services, Inc. (Transportation infrastructure)		643,530		932
Jollibee Foods Corporation (Hotels, restaurants & leisure)		644,780		2,516

See accompanying Notes to Financial Statements.

80 Annual Report December 31, 2016

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	Philippines—(continued)
	Metro Pacific Investments Corporation (Diversified financial services)		18,904,400	$	2,533
	Robinsons Retail Holdings, Inc. (Food & staples retailing)		1,558,100		2,327
	Security Bank Corporation (Banks)		541,170		2,068
	SM Investments Corporation (Industrial conglomerates)		337,605		4,448
	Universal Robina Corporation (Food products)		630,600		2,074
					28,724
	South Korea—10.5%
*	Amorepacific Corporation (Personal products)		13,358		3,556
	Halla Visteon Climate Control Corporation (Auto components)		255,261		2,177
	Hana Financial Group, Inc. (Banks)		343,780		8,895
*	Hankook Tire Co., Ltd. (Auto components)		92,955		4,464
*	Hanssem Co., Ltd. (Household durables)		14,570		2,401
*	KT&G Corporation (Tobacco)		46,752		3,909
*	LG Household & Health Care, Ltd.(Personal products)		8,806		6,248
*	Mando Corporation (Auto components)		12,008		2,331
*	NAVER Corporation (Internet software & services)		18,527		11,888
*	Samsung Biologics Co., Ltd. (Life sciences tools & services)		30,375		3,797
	Samsung Electronics Co., Ltd. (Technology hardware, storage & peripherals)		25,389		37,880
*	Samsung Fire & Marine Insurance Co., Ltd. (Insurance)		18,641		4,144
*	Shinhan Financial Group Co., Ltd. (Banks)		173,999		6,519
					98,209
	Taiwan—9.0%
	Advantech Co., Ltd. (Technology hardware, storage & peripherals)		329,145		2,599
	China Life Insurance Co., Ltd. (Insurance)		3,085,000		3,068
	E.Sun Financial Holding Co., Ltd. (Banks)		9,787,860		5,573
	Ennoconn Corporation (Technology hardware, storage & peripherals)		204,000		2,608
	Fubon Financial Holding Co., Ltd. (Diversified financial services)		4,197,000		6,641
	Largan Precision Co., Ltd. (Electronic equipment, instruments & components)		68,000		7,997
	Nien Made Enterprise Co., Ltd. (Household durables)		204,000		2,105
	President Chain Store Corporation (Food & staples retailing)		635,000		4,551
	Taiwan Semiconductor Manufacturing Co., Ltd. (Semiconductors & semiconductor equipment)		2,972,000		16,737
	Taiwan Semiconductor Manufacturing Co., Ltd.—ADR (Semiconductors & semiconductor equipment)		942,857		27,107

Issuer	Shares		Value
Common Stocks—(continued)
Emerging Asia—(continued)
Taiwan—(continued)
Uni-President Enterprises Corporation (Food products)		2,677,000	$	4,435
				83,421
Thailand—4.5%
Airports of Thailand PCL (Transportation infrastructure)		592,100		6,581
Bangkok Dusit Medical Services PCL Class “F” (Health care providers & services)		6,739,700		4,348
Central Pattana PCL (Real estate management & development)		5,458,000		8,649
CP ALL PCL (Food & staples retailing)		6,599,100		11,517
Home Product Center PCL (Specialty retail)		12,293,000		3,501
Minor International PCL (Hotels, restaurants & leisure)		2,992,200		2,987
Thai Beverage PCL (Beverages)		7,640,500		4,485
				42,068
Emerging Latin America—13.4%
Argentina—1.0%
Banco Macro S.A.—ADR (Banks)		46,822		3,013
MercadoLibre, Inc. (Internet software & services)†		43,306		6,762
				9,775
Brazil—6.4%
AMBEV S.A.—ADR (Beverages)		794,633		3,902
BB Seguridade Participacoes S.A. (Insurance)		757,100		6,583
BM&F BOVESPA S.A. (Capital markets)		1,331,200		6,749
Cielo S.A. (IT services)		700,320		6,001
Engie Brasil Energia S.A. (Independent power & renewable electricity producers)		301,900		3,247
Kroton Educacional S.A. (Diversified consumer services)		1,509,600		6,183
Localiza Rent a Car S.A. (Road & rail)		379,700		3,992
Lojas Renner S.A. (Multiline retail)		757,100		5,390
Raia Drogasil S.A. (Food & staples retailing)		361,400		6,794
Ultrapar Participacoes S.A. (Oil, gas & consumable fuels)		292,000		6,141
WEG S.A. (Machinery)		958,400		4,564
				59,546
Chile—1.4%
Banco Santander Chile—ADR (Banks)		336,532		7,360
S.A.C.I. Falabella (Multiline retail)		696,997		5,535
				12,895
Mexico—3.4%
Fomento Economico Mexicano S.A.B. de C.V.—ADR (Beverages)		83,073		6,331

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 81

Emerging Markets Growth Fund

Portfolio of Investments, December 31 2016 (all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Latin America—(continued)
	Mexico—(continued)
	Grupo Aeroportuario del Pacifico S.A.B. de C.V. Class “B” (Transportation infrastructure)		466,600	$	3,835
	Grupo Aeroportuario del Sureste S.A.B. de C.V.—ADR (Transportation infrastructure)		25,952		3,734
	Grupo Bimbo S.A.B. de C.V. Class “A” (Food products)		1,063,200		2,404
	Grupo Financiero Santander Mexico S.A.B. de C.V. Class “B” (Banks)		1,968,700		2,831
	Grupo Mexico S.A.B. de C.V. Class “B” (Metals & mining)		1,312,900		3,565
	Infraestructura Energetica Nova S.A.B. de C.V. (Gas utilities)		644,300		2,807
	Promotora y Operadora de Infraestructura S.A.B. de C.V. (Transportation infrastructure)		69,700		582
	Wal-Mart de Mexico S.A.B. de C.V. (Food & staples retailing)		3,518,400		6,297
					32,386
	Peru—1.2%
	Credicorp, Ltd. (Banks)†		70,074		11,062
	Emerging Europe, Mid-East, Africa—12.0%
	Hungary—1.2%
	OTP Bank plc (Banks)		297,877		8,517
	Richter Gedeon Nyrt (Pharmaceuticals)		105,758		2,236
					10,753
	Qatar—0.4%
	Qatar National Bank S.A.Q. (Banks)		91,926		4,112
	Russia—1.7%
	Magnit PJSC—GDR (Food & staples retailing)		124,110		5,480
*	X5 Retail Group N.V.—GDR (Food & staples retailing)		118,380		3,841
*	Yandex N.V. Class “A” (Internet software & services)†		305,431		6,148
					15,469
	South Africa—6.8%
	Aspen Pharmacare Holdings, Ltd. (Pharmaceuticals)		154,553		3,191
	Bid Corporation, Ltd. (Food & staples retailing)		372,080		6,642
	Bidvest Group, Ltd. (Industrial conglomerates)		298,104		3,934
	Capitec Bank Holdings, Ltd. (Banks)		107,504		5,440
	FirstRand, Ltd. (Diversified financial services)		2,987,729		11,567
	Naspers, Ltd. (Media)		171,635		25,171
	Steinhoff International Holdings N.V. (Household durables)		1,374,190		7,132
					63,077

	Shares or
	Principal
Issuer	Amount		Value
Common Stocks—(continued)
Emerging Europe, Mid-East, Africa—(continued)
Turkey—0.6%
Arcelik A.S. (Household durables)		457,262	$	2,749
Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		475,364		3,321
				6,070
United Arab Emirates—1.3%
Emaar Malls PJSC (Real estate management & development)		2,987,396		2,131
Emaar Properties PJSC (Real estate management & development)		3,392,474		6,586
First Gulf Bank PJSC (Banks)		1,113,700		3,896
				12,613
Total Common Stocks—94.4% (cost $829,154)				881,714
Preferred Stocks
Brazil—4.4%
Itau Unibanco Holding S.A. (Banks)		1,524,660		15,857
*Petroleo Brasileiro S.A. (Oil, gas & consumable fuels)		5,482,600		25,049
				40,906
Total Preferred Stocks—4.4% (cost $41,374)				40,906
Affiliated Fund
Emerging Asia—0.0%
China—0.0%
William Blair China A-Share Fund, LLC§		12,462		201
Total Affiliated Fund—0.0% (cost $125)				201
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $3,898, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	3,898		3,898
Total Repurchase Agreement—0.4% (cost $3,898)				3,898
Total Investments—99.2% (cost $874,551)				926,719
Cash and other assets, less liabilities—0.8%				7,024
Net assets—100.0%			$	933,743

See accompanying Notes to Financial Statements.

82 Annual Report December 31, 2016

Emerging Markets Growth Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

† = U.S. listed foreign security

§ = Deemed illiquid pursuant to Liquidity Procedures approved by the Board of Trustees. This holding represents 0.02% of the Fund’s net assets at December 31, 2016.

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):

Financials	26.3	%
Information Technology	25.1	%
Consumer Discretionary	15.8	%
Consumer Staples	11.9	%
Energy	7.0	%
Industrials	4.6	%
Health Care	2.6	%
Real Estate	2.4	%
Materials	1.9	%
Utilities	1.4	%
Telecommunication Services	1.0	%
Total	100.0	%

At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):

U.S. Dollar	17.1	%
Indian Rupee	16.8	%
Hong Kong Dollar	10.9	%
South Korean Won	10.6	%
Brazilian Real	10.5	%
South African Rand	6.8	%
New Taiwan Dollar	6.1	%
Indonesian Rupiah	5.3	%
Thai Baht	4.1	%
Philippine Peso	3.1	%
Mexican Peso	2.4	%
UAE Dirham	1.4	%
Malaysian Ringgit	1.2	%
Hungarian Forint	1.2	%
All Other Currencies	2.5	%
Total	100.0	%

As of December 31, 2016, the Fund invested in William Blair China A-Share Fund, LLC, an affiliated fund. There are no unfunded commitments to the affiliated fund. The Fund is subject to repatriation and other redemption restrictions imposed on the William Blair China A-Share Fund, LLC by the Chinese government.

	Share Activity				Year Ended December 31, 2016
Security Name	Balance 12/31/2015	Purchases	Sales	Balance 12/31/2016	Value	Dividend Income	Net realized gain (loss)	Change in net unrealized appreciation (depreciation)
William Blair China A-Share Fund, LLC	274,339	—	261,877	12,462	$201	$—	$1,931	$(2,000)

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 83

	Emerging Markets Small Cap Growth Fund
	The Emerging Markets Small Cap Growth Fund seeks long-term capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Todd M. McClone Casey K. Preyss	The William Blair Emerging Markets Small Cap Growth Fund (Class N shares) posted a 5.33% decrease, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the MSCI Emerging Markets Small Cap Index (net) (the “Index”), increased 2.28%. Adverse style effects broadly detracted from the Fund’s calendar year 2016 performance versus the Index. The Fund’s overweight to higher growth, higher valuation companies with relatively strong earnings trends was detrimental amid an environment of significant low valuation market leadership. From a sector attribution perspective, stock selection in Industrials, Materials, Real Estate and Utilities were the primary detractors from the Fund’s performance relative to the Index for the year. Within the Industrials sector, the Fund’s Airline holdings underperformed, including Mexican low-cost carrier Controladora Vuela Compania de Aviacion (“Volaris”), which declined significantly in November on concerns about President-elect Trump’s policies potentially hurting future travel demand. Panamanian airline Copa Holdings also detracted from the Fund’s performance due to share price weakness in the first half of 2016 amid poor operating conditions and a tough macroeconomic backdrop, and lingering concerns about the company’s impending write down of its Venezuelan cash balance. Within the Materials sector, the Fund’s lack of Metals & Mining exposure detracted from relative performance. In addition, stock selection in Chemicals detracted from performance, as Berger Paints India’s share price pulled back in November due to worries about a slowdown in consumer spending related to the Indian government’s abrupt removal of high denomination currency notes from circulation. From a geographic attribution perspective, stock selection in Korea, Taiwan and China were the primary detractors from the Fund’s relative performance in 2016, although partially mitigated by underweight positions in each country. These negative stock selection effects offset positive contributions from stock selection in India, Turkey, and the United Arab Emirates, in addition to the positive contributions from the Fund’s exposure to Pakistan and overweight in Brazil. Please refer to the Global Markets Review and Outlook relating to the Fund on page 36.

84 Annual Report December 31, 2016

Emerging Markets Small Cap Growth Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
										Since
	1 Year			3 Year			5 Year			Inception
Class N(a)		(5.33	)%		0.46	%		9.64	%		8.70	%
Class I(a)		(5.11	)		0.76			9.95			9.00
MSCI Emerging Markets  Small Cap Index (net)(a)		2.28			(1.27	)		3.51			2.09
Institutional Class(b)		(5.05	)		0.84			—			5.00
MSCI Emerging Markets Small Cap Index (net)(b)		2.28			(1.27	)		—			(0.34	)

(a)	Since inception is for the period from October 24, 2011 (Commencement of Operations) to December 31, 2016.
(b)	Since inception is for the period from December 20, 2012 (Commencement of Operations) to December 31, 2016

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, performance would be lower. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. These risks may be magnified when investing in emerging markets. Smaller capitalization stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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) Emerging Markets Small Cap Index (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 December 31, 2016. 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.

December 31, 2016 William Blair Funds 85

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks
	Emerging Asia—71.1%
	China—15.0%
	Beijing Capital International Airport Co., Ltd. Class “H” (Transportation infrastructure)		1,272,000	$	1,286
*	China Lodging Group, Ltd.—ADR (Hotels, restaurants & leisure)		96,402		4,998
	China Oilfield Services, Ltd. Class “H” (Energy equipment & services)		1,896,000		1,760
	Fuyao Glass Industry Group Co. Ltd. Class “H” (Auto components)		1,612,400		5,001
	Haitian International Holdings, Ltd. (Machinery)		1,054,000		2,069
	Huadian Fuxin Energy Corporation, Ltd. Class “H” (Independent power & renewable electricity producers)		2,040,000		453
	Huaneng Renewables Corporation, Ltd. Class “H” (Independent power & renewable electricity producers)		4,212,000		1,369
	Lonking Holdings, Ltd. (Machinery)		6,041,000		1,285
*	Microport Scientific Corporation (Health care equipment & supplies)		397,486		299
	Minth Group, Ltd. (Auto components)		918,000		2,859
	Shenzhou International Group Holdings, Ltd. (Textiles, apparel & luxury goods)		520,000		3,289
	Silergy Corporation (Semiconductors & semiconductor equipment)		97,000		1,366
	Sinotruk Hong Kong, Ltd. (Machinery)		1,961,000		1,398
	Sunny Optical Technology Group Co., Ltd. (Electronic equipment, instruments & components)		498,000		2,180
*	TAL Education Group—ADR (Diversified consumer services)		38,983		2,735
	Tarena International, Inc.—ADR (Diversified consumer services)		240,108		3,599
	Tongda Group Holdings, Ltd. (Electronic equipment, instruments & components)		8,080,000		2,084
	Travelsky Technology, Ltd. Class “H” (IT services)		977,000		2,054
	Weichai Power Co., Ltd. Class “H” (Machinery)		1,614,000		2,485
					42,569
	India—23.2%
	AIA Engineering, Ltd. (Machinery)		84,899		1,615
	Ajanta Pharma, Ltd. (Pharmaceuticals)		81,472		2,131
	Amara Raja Batteries, Ltd. (Electrical equipment)		107,961		1,384
	Bajaj Finance, Ltd. (Consumer finance)		344,154		4,278
	Berger Paints India, Ltd. (Chemicals)		328,296		1,020
	Can Fin Homes, Ltd. (Thrifts & mortgage finance)		61,919		1,444
	Cholamandalam Investment and Finance Co., Ltd. (Consumer finance)		159,975		2,225
	City Union Bank, Ltd. (Banks)		928,958		1,767
*	Crompton Greaves Consumer Electricals, Ltd. (Household durables)		385,707		826

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	India—(continued)
	Dr. Lal PathLabs, Ltd. (Health care providers & services)		91,129	$	1,426
	Eicher Motors, Ltd. (Machinery)		8,725		2,799
	Finolex Industries, Ltd. (Chemicals)		200,083		1,291
	Godrej Consumer Products, Ltd. (Personal products)		92,260		2,058
	Gruh Finance, Ltd. (Thrifts & mortgage finance)		714,154		3,393
	Havells India, Ltd. (Electrical equipment)		397,360		1,998
	Indiabulls Housing Finance, Ltd. (Thrifts & mortgage finance)		172,976		1,654
	Indraprastha Gas, Ltd. (Gas utilities)		269,608		3,628
	Kajaria Ceramics, Ltd. (Building products)		214,281		1,467
	LIC Housing Finance, Ltd. (Thrifts & mortgage finance)		199,033		1,633
	Mahanagar Gas, Ltd. (Gas utilities)		269,767		3,116
	Max Financial Services, Ltd. (Insurance)		154,185		1,258
	Motherson Sumi Systems, Ltd. (Auto components)		194,859		934
	Petronet LNG, Ltd. (Oil, gas & consumable fuels)		365,355		1,974
	PI Industries, Ltd. (Chemicals)		104,441		1,277
	Pidilite Industries, Ltd. (Chemicals)		128,700		1,116
	Repco Home Finance, Ltd. (Consumer finance)		98,065		808
*	SKS Microfinance, Ltd. (Consumer finance)		398,268		3,457
	Supreme Industries, Ltd. (Chemicals)		106,662		1,422
	Syngene International Ltd. (Life sciences tools & services)		236,400		1,949
	UPL, Ltd. (Chemicals)		264,135		2,517
	Vakrangee, Ltd. (IT services)		605,155		2,444
	Vedanta, Ltd. (Metals & mining)		1,224,927		3,904
	Voltas, Ltd. (Construction & engineering)		276,193		1,327
					65,540
	Indonesia—3.8%
	PT Ace Hardware Indonesia Tbk (Specialty retail)		3,148,200		195
	PT Bank Tabungan Negara Persero Tbk (Banks)		27,472,100		3,548
	PT Ciputra Development Tbk (Real estate management & development)		7,168,000		710
	PT Indofood CBP Sukses Makmur Tbk (Food products)		2,694,300		1,715
	PT Mitra Keluarga Karyasehat Tbk (Health care providers & services)		5,471,900		1,044
	PT Pakuwon Jati Tbk (Real estate management & development)		52,163,000		2,188
	PT Summarecon Agung Tbk (Real estate management & development)		562,300		55
	PT Waskita Karya Persero Tbk (Construction & engineering)		6,358,400		1,204
					10,659

See accompanying Notes to Financial Statements.

86 Annual Report December 31, 2016

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Asia—(continued)
	Malaysia—0.2%
	My EG Services Bhd (IT services)		2,104,800	$	709
	Pakistan—4.4%
	D.G. Khan Cement Co., Ltd. (Construction materials)		949,000		2,015
	Honda Atlas Cars Pakistan, Ltd. (Automobiles)		16,000		103
	Lucky Cement, Ltd. (Construction materials)		423,000		3,501
	Maple Leaf Cement Factory, Ltd. (Construction materials)		1,768,121		2,153
	Pakistan Oilfields, Ltd. (Oil, gas & consumable fuels)		194,500		997
	United Bank, Ltd. (Banks)		1,611,500		3,682
					12,451
	Philippines—2.7%
	D&L Industries, Inc. (Chemicals)		6,895,800		1,581
	GT Capital Holdings, Inc. (Diversified financial services)		30,650		783
	Jollibee Foods Corporation (Hotels, restaurants & leisure)		182,530		712
	Manila Water Co., Inc. (Water utilities)		949,300		554
	Metro Pacific Investments Corporation (Diversified financial services)		7,076,000		948
	Security Bank Corporation (Banks)		802,070		3,066
					7,644
	South Korea—4.6%
*	Advanced Process Systems Corporation (Semiconductors & semiconductor equipment)		60,844		1,504
*	BGF retail Co., Ltd. (Food & staples retailing)		977		66
	Halla Climate Control Corporation (Auto components)		96,358		822
*	Hanssem Co., Ltd. (Household durables)		25,710		4,236
*	Interojo Co., Ltd. (Health care equipment & supplies)		30,340		954
*	Mando Corporation (Auto components)		11,419		2,217
*	Samsung Biologics Co., Ltd. (Life sciences tools & services)		8,120		1,015
*	Vieworks Co., Ltd. (Health care equipment & supplies)		43,782		2,168
					12,982
	Taiwan—10.7%
	Advantech Co., Ltd. (Technology hardware, storage & peripherals)		163,000		1,287
	Airtac International Group (Machinery)		195,000		1,555
	ASPEED Technology, Inc. (Semiconductors & semiconductor equipment)		105,000		1,541
	China Life Insurance Co., Ltd. (Insurance)		1,979,000		1,968
	Chunghwa Precision Test Tech Co., Ltd. (Electronic equipment, instruments & components)		42,000		1,551

Issuer	Shares		Value
Common Stocks—(continued)
Emerging Asia—(continued)
Taiwan—(continued)
Ennoconn Corporation (Technology hardware, storage & peripherals)		201,000	$	2,570
Grape King Bio, Ltd. (Personal products)		172,000		998
Kung Long Batteries Industrial Co., Ltd. (Electrical equipment)		254,000		1,241
Nien Made Enterprise Co., Ltd. (Household durables)		179,000		1,847
Posiflex Technology, Inc. (Electronic equipment, instruments & components)		269,749		1,481
Powertech Technology, Inc. (Semiconductors & semiconductor equipment)		938,000		2,532
Poya Co., Ltd. (Multiline retail)		110,651		1,282
Silicon Motion Technology Corporation— ADR (Semiconductors & semiconductor equipment)		42,758		1,816
Sinbon Electronics Co., Ltd. (Electronic equipment, instruments & components)		597,274		1,301
Taiwan Paiho, Ltd. (Textiles, apparel & luxury goods)		570,000		1,687
Tong Yang Industry Co., Ltd. (Auto components)		568,000		1,119
Tripod Technology Corporation (Electronic equipment, instruments & components)		700,000		1,581
Voltronic Power Technology Corporation (Electrical equipment)		82,109		1,135
Win Semiconductors Corporation (Semiconductors & semiconductor equipment)		459,000		1,295
Wistron NeWeb Corporation (Communications equipment)		181,000		485
				30,272
Thailand—6.1%
Bangkok Chain Hospital PCL (Health care providers & services)		5,939,100		2,455
Beauty Community PCL (Specialty retail)		4,770,100		1,558
Carabao Group PCL Class “F” (Beverages)		1,459,200		3,107
Central Plaza Hotel PCL (Hotels, restaurants & leisure)		1,250,900		1,388
Home Product Center PCL (Specialty retail)		3,916,100		1,115
KCE Electronics PCL (Electronic equipment, instruments & components)		684,800		2,333
Kiatnakin Bank PCL (Banks)		1,195,600		1,970
Minor International PCL (Hotels, restaurants & leisure)		1,573,201		1,571
Tisco Financial Group PCL (Banks)		1,022,200		1,720
				17,217
Vietnam—0.4%
Vietnam Dairy Products JSC (Food products)		183,360		1,011

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 87

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Europe, Mid-East, Africa—15.6%
	Czech Republic—0.9%
*	Moneta Money Bank A.S. (Banks)		773,264	$	2,494
	Egypt—0.5%
*	Global Telecom Holding S.A.E.—GDR (Wireless telecommunication services)		692,450		1,288
	Georgia—0.7%
	BGEO Group plc (Banks)		57,673		2,121
	Greece—0.6%
	JUMBO S.A. (Specialty retail)		47,470		753
	OPAP S.A. (Hotels, restaurants & leisure)		110,978		981
					1,734
	Hungary—1.6%
	Magyar Telekom Telecommunications plc (Diversified telecommunication services)		768,784		1,303
	MOL Hungarian Oil & Gas plc (Oil, gas & consumable fuels)		18,041		1,267
	Richter Gedeon Nyrt (Pharmaceuticals)		92,457		1,955
					4,525
	Kenya—1.3%
	Safaricom, Ltd. (Wireless telecommunication services)		20,336,400		3,800
	Poland—1.1%
	KRUK S.A. (Consumer finance)		53,529		3,032
	Romania—1.0%
	Banca Transilvania S.A. (Banks)		5,268,834		2,914
	Russia—0.6%
	TCS Group Holding plc—GDR (Banks)		167,655		1,769
	South Africa—5.0%
	AVI, Ltd. (Food products)		432,777		2,879
	Capitec Bank Holdings, Ltd. (Banks)		77,566		3,925
	Cashbuild, Ltd. (Specialty retail)		54,120		1,356
	Clicks Group, Ltd. (Food & staples retailing)		230,262		1,936
*	Dis-Chem Pharmacies, Ltd. (Food & staples retailing)		1,059,181		1,728
	Famous Brands, Ltd. (Hotels, restaurants & leisure)		126,386		1,440
	PSG Group, Ltd. (Diversified financial services)		53,350		849
					14,113
	Turkey—0.9%
	Arcelik A.S. (Household durables)		126,778		762
	Tofas Turk Otomobil Fabrikasi A.S. (Automobiles)		261,772		1,829
					2,591
	United Arab Emirates—1.4%
	NMC Health plc (Health care providers & services)		208,078		3,959

	Issuer	Shares		Value
	Common Stocks—(continued)
	Emerging Latin America—12.5%
	Argentina—1.4%
	Banco Macro S.A.—ADR (Banks)		21,784	$	1,402
*	Pampa Energia S.A.—ADR (Electric utilities)		72,304		2,517
					3,919
	Brazil—6.5%
	Cia de Saneamento Basico do Estado de Sao Paulo (Water utilities)		165,300		1,462
	CVC Brasil Operadora e Agencia de Viagens S.A. (Hotels, restaurants & leisure)		450,000		3,277
	EcoRodovias Infraestrutura e Logistica S.A. (Transportation infrastructure)		1,249,000		3,162
	EDP - Energias do Brasil S.A. (Electric utilities)		461,000		1,898
	Linx S.A. (Software)		185,400		988
	Lojas Renner S.A. (Multiline retail)		193,700		1,379
	MRV Engenharia e Participacoes S.A. (Household durables)		400,300		1,346
	Raia Drogasil S.A. (Food & staples retailing)		165,600		3,113
	Ser Educacional S.A. (Diversified consumer services)		331,700		1,903
					18,528
	Chile—1.4%
	Aguas Andinas S.A. Class “A” (Water utilities)		3,089,565		1,614
	Parque Arauco S.A. (Real estate management & development)		1,019,337		2,283
					3,897
	Mexico—3.2%
	Alsea S.A.B. de C.V. (Hotels, restaurants & leisure)		395,000		1,128
	Banregio Grupo Financiero S.A.B. de C.V. (Banks)		526,524		2,934
	Grupo Aeroportuario del Centro Norte S.A.B. de C.V. (Transportation infrastructure)		274,609		1,182
	Grupo Aeroportuario del Pacifico S.A.B. de C.V. Class “B” (Transportation infrastructure)		171,900		1,413
	Infraestructura Energetica Nova S.A.B. de C.V. (Gas utilities)		530,100		2,309
					8,966
	Total Common Stocks—99.2% (cost $266,225)				280,704
	Preferred Stocks
	Brazil—1.5%
	Bradespar S.A. (Metals & mining)		432,000		1,971
*	Metalurgica Gerdau S.A. (Metals & mining)		1,614,800		2,381
					4,352
	Total Preferred Stocks—1.5% (cost $4,792)				4,352

See accompanying Notes to Financial Statements.

88 Annual Report December 31, 2016

Emerging Markets Small Cap Growth Fund

Portfolio of Investments, December 31, 2016(all dollar amounts in thousands)

Issuer	Principal Amount		Value
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $161, collateralized by U.S. Treasury Bond, 3.000%, due 5/15/45	$	161	$	161
Total Repurchase Agreement—0.1% (cost $161)				161
Total Investments—100.8% (cost $271,178)				285,217
Liabilities, plus cash and other assets—(0.8)%				(2,355	)
Net assets—100.0%			$	282,862

ADR = American Depository Receipt

GDR = Global Depository Receipt

* = Non-income producing securities

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 December 31, 2016, the Fund’s Portfolio of Investments includes the following industry categories (as a percentage of long-term investments):
Financials	21.5	%
Consumer Discretionary	21.2	%
Information Technology	11.6	%
Industrials	10.5	%
Materials	9.2	%
Health Care	6.8	%
Utilities	6.6	%
Consumer Staples	6.5	%
Telecommunication Services	2.2	%
Energy	2.1	%
Real Estate	1.8	%
Total	100.0	%
At December 31, 2016, the Fund’s Portfolio of Investments includes the following currency categories (as a percentage of long-term investments):
Indian Rupee	23.0	%
Hong Kong Dollar	10.5	%
New Taiwan Dollar	10.5	%
Brazilian Real	8.0	%
U.S. Dollar	7.1	%
Thai Baht	6.0	%
South African Rand	4.9	%
South Korean Won	4.6	%
Pakistan Rupee	4.4	%
Indonesian Rupiah	3.7	%
Mexican Peso	3.1	%
Philippine Peso	2.7	%
British Pound Sterling	2.1	%
Hungarian Forint	1.6	%
Chilean Peso	1.4	%
Kenyan Shilling	1.3	%
Polish Zloty	1.1	%
Romanian Leu	1.0	%
All Other Currencies	3.0	%
Total	100.0	%

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 89

Fixed Income Market Review and Outlook

The Bloomberg Barclays U.S. Aggregate Index (the “Index”) gained 2.65% during 2016, and interest rates rose in small magnitude across the yield curve. This perhaps-unspectacular headline masks the volatility experienced during the year. During the first six months of the year, interest rates plummeted to levels near historical lows and the Index gained 5.31%. During the last six months of the year, interest rates rose, the fourth quarter was the worst-performing calendar quarter for the Index in over 30 years, and the Index declined 2.53%.

The Federal Reserve did, in fact, raise the federal funds rate, although not at the pace predicted at the beginning of 2016. In January 2016, the Eurodollar futures market predicted four interest rate hikes during the calendar year. The Federal Open Market Committee (“FOMC”) did increase the target range of the federal funds rate once during the year by 0.25%, to a range of 0.50% -0.75%, at its December meeting. The FOMC cited strengthening labor market conditions that were supported by both the decline in the unemployment rate and an increase in wage inflation. However, the FOMC also stated that monetary policy remains accommodative to allow some further strengthening in labor market conditions, and that future increases in the federal funds rate are expected to be gradual. At the end of 2016, interest rates in the eurodollar futures market predicted three FOMC interest rate hikes during calendar year 2017.

The FOMC also stated that it will continue its practice of reinvesting principal payments from its holdings of Treasuries, agency debt, and agency mortgage-backed securities (“MBS”). These purchases influence longer-term interest rates and MBS risk spreads. While the FOMC is striking a hawkish tone on the direction of short-term rates, these purchases provide stable or downward pressure on longer-term interest rates. Meanwhile, the risk spreads of lower-coupon MBS that the FOMC is purchasing are lower than those of other MBS coupons that are being determined by more-traditional market forces.

Fixed-rate Treasuries underperformed the other major segments of the Index during the year. U.S. Treasury Inflation-Protected Securities (“TIPS”) outperformed fixed-rate Treasuries as market-implied inflation expectations rose. The MBS Index underperformed Treasuries after controlling for the effects of duration, but higher-coupon segments of the MBS market outperformed comparable-duration Treasuries. Corporate securities outperformed Treasuries on a duration-adjusted basis. High yield corporate bonds generated a robust gain of 17.13% during the year.

We believe that the FOMC will raise the federal funds rate gradually in 2017. The U.S. economy is growing; forecasters predict a real GDP growth rate of approximately 2.0% during 2016 and 2017. In addition, the U.S. labor market is adding jobs at a robust pace. Wage inflation increased throughout 2016, and estimates peg wage growth at 3.5% – 4.0% year-over-year, a level above the 2.5% upper bound of the FOMC’s target inflation range. Macroeconomic theory predicts that a robust labor market creates wage inflation, which in turn spurs broader inflation. We believe that the FOMC will raise the federal funds rate if market conditions remain normal and wage inflation takes hold.

TIPS have market-implied breakeven inflation rates slightly below the FOMC’s stated target range of 2.0% – 2.5%, and they are also below recent wage inflation estimates. We believe TIPS are an attractive alternative to fixed-rate Treasuries for mitigating the effects of rising rates driven by accelerating inflationary pressures.

We believe that spread sectors are poised to lead the market over the longer term. Corporate risk premiums are at levels above their longer-term averages, and risk premiums of higher-coupon segments of the agency MBS market remain attractive. In addition, we believe Treasuries are likely to struggle as the FOMC embarks on a tightening cycle.

We believe that higher-coupon segments (coupon rates of 5.0% and above for 30-year) of the agency MBS market offer compelling value. These segments of the agency MBS market offer attractive spreads and a defensive duration profile. The key risk of these securities is that the underlying borrowers are in-the-money to refinance their loan. We believe this risk can be mitigated by focusing on pools comprised of borrowers that do not have the economic incentive to refinance their loans (e.g., low-loan balance pools).

We believe that the corporate bond market remains attractive. Although fundamentals have deteriorated lately, risk spreads remain at attractive levels on a historical basis. We observed an increase in leverage among industrial companies over the past year as companies secured financing at low nominal yields in the robust new issue market for corporate bonds. We remain concerned about company-specific risks, including shareholder-friendly activities such as leveraged finance mergers and acquisitions, large share repurchases, and special dividends. Importantly, we do not believe the market will enter a period of excessive leveraged buyout activity.

90 Annual Report December 31, 2016

	Bond Fund
	The Bond Fund seeks to outperform the Bloomberg Barclays U.S. Aggregate Index by maximizing total return through a combination of income and capital appreciation.
	AN OVERVIEW FROM THE PORTFOLIO MANAGERS
Paul J. Sularz Christopher T. Vincent	The William Blair Bond Fund (Class N shares) posted a 4.40% return, net of fees, for the year ended December 31, 2016. By comparison, the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Index (the “Index”), returned 2.65%. Multiple factors contributed to the Fund’s outperformance relative to the Index. Security selection among the Fund’s corporate bond holdings contributed to the Fund’s outperformance, specifically positions in bonds issued by ConocoPhillips, YUM! Brands, Petrobras, and Mexichem. Sector allocation also contributed to relative performance, as the Fund was underweight to fixed-rate Treasuries and overweight corporate bonds. The Fund experienced positive security selection results from its agency mortgage-backed securities holdings. Finally, the Fund held a position in U.S. Treasury Inflation-Protected Securities that was additive to performance. Detracting from the Fund’s relative performance in 2016 were exposures to bonds issued by Embraer and Credit Suisse. Please refer to the Fixed Income Market Review and Outlook relating to the Fund on page 90 for additional information.

December 31, 2016 William Blair Funds 91

Bond Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year		3 Year		5 Year		Since Inception (a)
Class N	4.40	%	3.06	%	3.18	%	4.86	%
Class I	4.55		3.26		3.36		5.03
Institutional Class	4.61		3.36		3.46		5.16
Bloomberg Barclays U.S. Aggregate Index	2.65		3.03		2.23		4.28

(a) For the period from May 1, 2007 (Commencement of Operations) to December 31, 2016.

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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 Bloomberg Barclays U.S. Aggregate Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on December 31, 2016. 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.

92 Annual Report December 31, 2016

Bond Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Principal
Issuer	Amount		Value
U.S. Government and U.S. Government Agency—52.7%
U.S. Treasury Inflation Indexed Notes/Bonds—6.1%
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/19 (a)	$	4,959	$	5,282
U.S. Treasury Inflation Indexed Bond, 3.875%, due 4/15/29		20,456		27,999
Total U.S. Treasury Inflation Indexed Notes/Bonds				33,281
U.S. Treasury—0.7%
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		3,981		3,772
Federal Home Loan Mortgage Corp. (FHLMC)—13.4%
#E90398, 7.000%, due 5/1/17		2		2
#G90027, 6.000%, due 11/17/17		1		1
#G30093, 7.000%, due 12/1/17		1		1
#O20005, 6.500%, due 1/1/18		1		1
#E96940, 4.500%, due 6/1/18		11		11
#B13747, 5.000%, due 4/1/19		143		147
#G30254, 6.500%, due 5/1/19		3		3
#G11697, 5.500%, due 4/1/20		257		267
#G12113, 5.500%, due 5/1/21		241		253
#J02986, 6.500%, due 7/1/21		13		14
#G30255, 7.000%, due 7/1/21		2		2
#G30243, 6.000%, due 12/1/21		3		4
#G12720, 5.500%, due 6/1/22		33		35
#D95621, 6.500%, due 7/1/22		24		26
#G14150, 4.500%, due 4/1/26		1,786		1,907
#J16051, 4.500%, due 7/1/26		780		835
#G02210, 7.000%, due 12/1/28		72		82
#G02183, 6.500%, due 3/1/30		19		22
#G01728, 7.500%, due 7/1/32		113		134
#C01385, 6.500%, due 8/1/32		91		105
#G01551, 6.000%, due 4/1/33		1,965		2,287
#C01623, 5.500%, due 9/1/33		111		125
#A15039, 5.500%, due 10/1/33		2		2
#A17603, 5.500%, due 1/1/34		2,030		2,330
#G01705, 5.500%, due 6/1/34		814		935
#G01843, 6.000%, due 6/1/35		21		24
#G02141, 6.000%, due 3/1/36		607		707
#G02883, 6.000%, due 4/1/37		1,926		2,207
#A62179, 6.000%, due 6/1/37		251		292
#G03711, 6.000%, due 6/1/37		779		898
#G04126, 6.000%, due 6/1/37		2,182		2,534
#A63539, 6.000%, due 7/1/37		339		395
#A62858, 6.500%, due 7/1/37		121		139
#G03170, 6.500%, due 8/1/37		263		306
#A66843, 6.500%, due 10/1/37		862		980
#G07837, 6.500%, due 2/1/38		2,848		3,232
#G04053, 5.500%, due 3/1/38		539		608
#A78138, 5.500%, due 6/1/38		335		382
#G04466, 5.500%, due 7/1/38		16,022		18,389
#G04544, 6.000%, due 8/1/38		669		768
#A81799, 6.500%, due 9/1/38		456		515
#G05723, 6.500%, due 11/1/38		1,504		1,700
#G05124, 6.000%, due 12/1/38		1,450		1,673
#A86143, 5.000%, due 5/1/39		49		53
#G05810, 5.000%, due 2/1/40		14,478		16,119

	Principal
Issuer	Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal Home Loan Mortgage Corp. (FHLMC)—(continued)
#G05875, 5.500%, due 2/1/40	$	699	$	795
#G07300, 6.000%, due 4/1/40		6,339		7,404
#G06017, 5.500%, due 6/1/40		170		193
#C03665, 9.000%, due 4/1/41		742		905
#G06583, 5.000%, due 6/1/41		1,866		2,085
Total FHLMC Mortgage Obligations				72,834
Federal National Mortgage Association (FNMA)—32.5%
#683100, 5.500%, due 2/1/18		29		30
#689612, 5.000%, due 5/1/18		19		19
#695910, 5.000%, due 5/1/18		49		50
#697593, 5.000%, due 5/1/18		44		45
#704049, 5.500%, due 5/1/18		102		103
#735357, 5.500%, due 5/1/18		123		125
#735003, 5.500%, due 7/1/18		119		121
#251960, 6.000%, due 9/1/18		1		1
#745498, 7.000%, due 11/1/18		23		23
#770395, 5.000%, due 4/1/19		2		2
#788424, 5.500%, due 9/1/19		9		10
#835563, 7.000%, due 10/1/20		11		12
#900725, 6.000%, due 8/1/21		31		33
#888555, 5.500%, due 9/1/21		3,065		3,227
#893325, 7.000%, due 9/1/21		9		10
#735104, 7.000%, due 5/1/22		1		1
#949589, 5.500%, due 8/1/22		2,309		2,476
#949592, 6.000%, due 8/1/22		3,625		3,909
#AA2924, 4.500%, due 4/1/24		221		235
#931299, 4.500%, due 6/1/24		517		553
#AC1848, 4.500%, due 9/1/24		320		342
#AC5410, 4.500%, due 10/1/24		256		273
#932095, 4.000%, due 11/1/24		1,213		1,294
#932100, 4.500%, due 11/1/24		213		227
#AL8529, 6.000%, due 11/1/24		5,833		6,339
#AC9560, 5.000%, due 1/1/25		1,586		1,694
#AD8164, 4.000%, due 8/1/25		546		583
#AB1459, 4.000%, due 9/1/25		238		254
#255956, 5.500%, due 10/1/25		17		19
#AH2671, 4.000%, due 1/1/26		933		995
#AI4872, 4.500%, due 6/1/26		353		378
#AL2851, 4.000%, due 8/1/26		1,670		1,785
#AI9811, 4.500%, due 8/1/26		287		307
#AJ3203, 4.000%, due 10/1/26		100		108
#AJ7724, 4.000%, due 12/1/26		724		774
#AK7384, 4.000%, due 3/1/27		882		945
#AB4818, 4.000%, due 4/1/27		594		637
#AL2590, 4.000%, due 7/1/27		3,718		3,974
#AV6413, 4.000%, due 2/1/29		2,816		2,967
#252925, 7.500%, due 12/1/29		1		1
#535977, 6.500%, due 4/1/31		8		9
#253907, 7.000%, due 7/1/31		1		2
#545339, 6.500%, due 11/1/31		45		53
#587849, 6.500%, due 11/1/31		11		12
#618547, 6.500%, due 11/1/31		4,997		5,846
#545437, 7.000%, due 2/1/32		52		61
#545759, 6.500%, due 7/1/32		472		548

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 93

Bond Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	Principal
Issuer	Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#545869, 6.500%, due 7/1/32	$	1,462	$	1,667
#670385, 6.500%, due 9/1/32		730		829
#254548, 5.500%, due 12/1/32		48		53
#677290, 6.000%, due 1/1/33		2,091		2,434
#684601, 6.000%, due 3/1/33		533		620
#703391, 5.000%, due 5/1/33		166		184
#708993, 5.000%, due 6/1/33		29		32
#730131, 5.000%, due 8/1/33		56		62
#741850, 5.500%, due 9/1/33		543		616
#739243, 6.000%, due 9/1/33		671		781
#739331, 6.000%, due 9/1/33		354		412
#555800, 5.500%, due 10/1/33		53		60
#756153, 5.500%, due 11/1/33		568		645
#AL3455, 5.500%, due 11/1/33		6,703		7,718
#763798, 5.500%, due 3/1/34		86		97
#725611, 5.500%, due 6/1/34		116		130
#787816, 6.000%, due 7/1/34		331		386
#745563, 5.500%, due 8/1/34		651		740
#794474, 6.000%, due 10/1/34		45		52
#745092, 6.500%, due 7/1/35		367		428
#357944, 6.000%, due 9/1/35		22		25
#843487, 6.000%, due 10/1/35		107		125
#AD0979, 7.500%, due 10/1/35		82		99
#745349, 6.500%, due 2/1/36		319		361
#888305, 7.000%, due 3/1/36		11		13
#895637, 6.500%, due 5/1/36		87		102
#831540, 6.000%, due 6/1/36		29		34
#745802, 6.000%, due 7/1/36		166		195
#886220, 6.000%, due 7/1/36		297		342
#AL3449, 6.000%, due 7/1/36		1,652		1,934
#893318, 6.500%, due 8/1/36		24		27
#310037, 6.500%, due 10/1/36		198		224
#831926, 6.000%, due 12/1/36		10		12
#902974, 6.000%, due 12/1/36		238		273
#995757, 6.000%, due 2/1/37		2,484		2,900
#AB0265, 6.000%, due 2/1/37		15,234		17,699
#938440, 6.000%, due 7/1/37		90		103
#928561, 6.000%, due 8/1/37		219		254
#948689, 6.000%, due 8/1/37		199		228
#888703, 6.500%, due 8/1/37		4,455		5,238
#888967, 6.000%, due 12/1/37		762		893
#AL0904, 5.500%, due 1/1/38		55		63
#889371, 6.000%, due 1/1/38		3,597		4,203
#962058, 6.500%, due 3/1/38		1,459		1,727
#934006, 6.500%, due 9/1/38		394		446
#986856, 6.500%, due 9/1/38		208		236
#991911, 7.000%, due 11/1/38		247		281
#AL3775, 5.000%, due 1/1/39		1,889		2,103
#AD0752, 7.000%, due 1/1/39		884		1,052
#AA7611, 5.000%, due 5/1/39		930		1,034
#AA8443, 5.000%, due 6/1/39		226		251
#931492, 6.000%, due 7/1/39		196		228
#AA6898, 6.000%, due 7/1/39		652		752
#931801, 5.000%, due 8/1/39		763		842
#AC1619, 5.500%, due 8/1/39		502		569
#AD0315, 6.500%, due 8/1/39		2,880		3,260
#932279, 5.000%, due 12/1/39		91		100

	NRSRO
	Rating	Principal
Issuer	(unaudited)	Amount			Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#AC9569, 5.000%, due 2/1/40		$	1,622	$	1,806
#932638, 5.000%, due 3/1/40			167		185
#932751, 5.000%, due 4/1/40			3,998		4,454
#AE0082, 5.000%, due 5/1/40			467		516
#AB1146, 5.000%, due 6/1/40			95		106
#AD7137, 5.500%, due 7/1/40			4,621		5,318
#AH0955, 5.000%, due 12/1/40			4,967		5,515
#AH5585, 5.000%, due 2/1/41			182		203
#AL0028, 5.000%, due 2/1/41			2,392		2,648
#AL5815, 5.500%, due 4/1/41			3,713		4,278
#AI6071, 5.000%, due 6/1/41			1,869		2,089
#AI4222, 5.000%, due 7/1/41			135		151
#AL0672, 5.000%, due 7/1/41			3,031		3,381
#AL0913, 6.000%, due 7/1/41			2,122		2,429
#AL9226, 5.500%, due 12/1/41			19,492		22,420
#AL9225, 6.000%, due 1/1/42			9,640		11,264
#AK2733, 5.000%, due 2/1/42			2,072		2,316
Total FNMA Mortgage Obligations					176,665
Asset-Backed Securities—2.3%
GE Capital Credit Card Master Note Trust, 2012-6, Tranche B, 1.830%, 8/17/20	AA+		3,000		3,009
American Express Credit Account Master Trust, 2008-2, Tranche A, 1.964%, 9/15/20, VRN	AAA		4,800		4,860
Centre Point Funding LLC—144A, 2012-2A, Tranche 1, 2.610%, 8/20/21	Baa2		2,396		2,363
SLM Private Education Loan Trust— 144A, 2011-A, Tranche A3, 3.204%, 1/15/43, VRN	AAA		2,000		2,074
Total Asset-Backed Securities					12,306
Corporate Obligations—42.0%
Toll Brothers Finance Corporation, 8.910%, due 10/15/17	BBB-		1,050		1,106
Morgan Stanley, 6.625%, due 4/1/18	A		3,400		3,597
Glencore Funding LLC—144A, 2.240%, due 1/15/19, VRN	BBB-		1,500		1,511
Petrobras Global Finance BV, 3.020%, due 1/15/19, VRN	BB		4,000		3,938
Baidu, Inc., 2.750%, due 6/9/19	A		4,000		4,061
Roper Industries, Inc., 6.250%, due 9/1/19	BBB		2,195		2,416
Republic Services, Inc., 5.500%, due 9/15/19	BBB+		1,725		1,878
Boston Properties L.P., 5.875%, due 10/15/19	A-		4,000		4,364
Toll Brothers Finance Corporation, 6.750%, due 11/1/19	BBB-		500		549
Ford Motor Credit Co. LLC, 8.125%, due 1/15/20	BBB		4,000		4,616

See accompanying Notes to Financial Statements.

94 Annual Report December 31, 2016

Bond Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	NRSRO
	Rating	Principal
Issuer	(unaudited)	Amount		Value
Corporate Obligations—(continued)
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20	A+	$	4,000	$	4,401
UBS Group AG, 6.875%, due 3/22/21, VRN	BB+		2,000		2,040
JBS USA LUX SA / JBS USA Finance, Inc.—144A, 7.250%, due 6/1/21	BB+		3,000		3,120
Capital One Financial Corporation, 4.750%, due 7/15/21	A-		3,375		3,654
O’Reilly Automotive, Inc., 4.625%, due 9/15/21	BBB+		2,855		3,067
Fresenius Medical Care US Finance II, Inc.—144A, 5.875%, due 1/31/22	BB+		2,760		3,036
Ball Corporation, 5.000%, due 3/15/22	BB+		2,500		2,628
Masco Corporation, 5.950%, due 3/15/22	BBB		4,050		4,485
Discover Financial Services, 5.200%, due 4/27/22	BBB+		3,000		3,236
Triumph Group, Inc., 5.250%, due 6/1/22	B1		2,000		1,875
Penske Automotive Group, Inc., 5.750%, due 10/1/22	B+		2,000		2,070
American Axle & Manufacturing, Inc., 6.625%, due 10/15/22	BB		3,000		3,109
Jones Lang LaSalle, Inc., 4.400%, due 11/15/22	BBB+		4,218		4,355
Jaguar Land Rover Automotive plc—144A, 5.625%, due 2/1/23	BB+		3,225		3,374
Wyndham Worldwide Corporation, 3.900%, due 3/1/23	BBB-		3,500		3,498
MGM Resorts International, 6.000%, due 3/15/23	BB-		3,000		3,248
Avis Budget Car Rental LLC, 5.500%, due 4/1/23	BB-		800		789
Toll Brothers Finance Corporation, 4.375%, due 4/15/23	BBB-		3,375		3,379
Itau Unibanco Holding S.A.—144A, 5.125%, due 5/13/23	Ba3		2,500		2,481
Wells Fargo & Co., 4.480%, due 1/16/24	A+		5,000		5,268
Fibria Overseas Finance, Ltd., 5.250%, due 5/12/24	BBB-		4,000		4,030
BRF S.A.—144A, 4.750%, due 5/22/24	BBB		2,500		2,441
Banco Inbursa S.A. Institucion de Banca Multiple—144A, 4.125%, due 6/6/24	BBB+		2,500		2,463
Grupo Bimbo S.A.B. de C.V.—144A, 3.875%, due 6/27/24	BBB		2,500		2,495
Synchrony Financial, 4.250%, due 8/15/24	BBB-		5,000		5,098
SBA Communications Corporation—144A, 4.875%, due 9/1/24	B+		3,000		2,970

	NRSRO
	Rating	Principal
Issuer	(unaudited)	Amount		Value
Corporate Obligations—(continued)
HSBC Holdings plc, 6.375%, due 9/17/24, VRN	BBB	$	3,500	$	3,452
BNP Paribas S.A., 4.250%, due 10/15/24	A		4,000		4,015
CBS Radio, Inc.—144A, 7.250%, due 11/1/24	B-		2,000		2,105
Owens Corning, 4.200%, due 12/1/24	BBB		3,200		3,284
Cemex S.A.B. de C.V.—144A, 5.700%, due 1/11/25	BB-		3,000		3,030
USG Corp.—144A, 5.500%, due 3/1/25	BB+		3,000		3,094
Simon Property Group L.P., 3.300%, due 1/15/26	A		4,500		4,483
Brookfield Finance, Inc., 4.250%, due 6/2/26	A-		4,775		4,739
Post Holdings, Inc.—144A, 5.000%, due 8/15/26	B		3,000		2,880
United Rentals North America, Inc., 5.875%, due 9/15/26	BB-		2,500		2,584
Xylem, Inc., 3.250%, due 11/1/26	BBB		1,950		1,897
The Kroger Co., 8.000%, due 9/15/29	Baa1		3,323		4,505
Yum! Brands, Inc., 6.875%, due 11/15/37	B+		2,200		2,156
JPMorgan Chase & Co., 6.400%, due 5/15/38	A+		3,500		4,544
ConocoPhillips, 6.500%, due 2/1/39	A-		4,125		5,239
Petroleos Mexicanos, 6.500%, due 6/2/41	BBB+		2,500		2,354
Express Scripts Holding Co., 6.125%, due 11/15/41	BBB+		4,700		5,377
Citigroup, Inc., 5.875%, due 1/30/42	A		4,000		4,756
Bank of America Corporation, 5.875%, due 2/7/42	A		4,000		4,852
Mexichem S.A.B. de C.V.—144A, 5.875%, due 9/17/44	BBB		3,500		3,137
Northrop Grumman Corporation, 3.850%, due 4/15/45	BBB+		4,500		4,287
ERP Operating L.P., 4.500%, due 6/1/45	A-		4,500		4,537
The Goldman Sachs Group, Inc., 4.750%, due 10/21/45	A		3,500		3,709
Anheuser-Busch InBev Finance, Inc., 4.900%, due 2/1/46	A-		5,000		5,426
Apple, Inc., 4.650%, due 2/23/46	AA+		5,000		5,412
Exxon Mobil Corporation, 4.114%, due 3/1/46	Aaa		2,275		2,336
PepsiCo, Inc., 4.450%, due 4/14/46	A1		4,500		4,805
AT&T, Inc., 4.750%, due 5/15/46	A-		5,000		4,755
Verizon Communications, Inc., 4.125%, due 8/15/46	A-		5,000		4,544

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 95

Bond Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

	NRSRO
	Rating	Principal
Issuer	(unaudited)	Amount		Value
Corporate Obligations—(continued)
Microsoft Corporation, 4.750%, due 11/3/55	AAA	$	4,950	$	5,399
Total Corporate Obligations					228,339
Total Long-Term Investments—97.0% (cost $520,864)					527,197
Repurchase Agreements
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $4,667, collateralized by U.S. Treasury Bond, 3.125%, due 2/15/43			4,667	$	4,667
Total Repurchase Agreement—0.9% (cost $4,667)					4,667
U.S. Government and U.S. Government Agency
U.S. Treasury Bill, 0.479%, due 6/22/17			500		499
Total U.S. Government and U.S. Government Agency—0.1% (cost $499)					499

	Principal
Issuer	Amount		Value
Commercial Paper
Johnson Controls, 0.010%, due 1/3/17	$	5,000	$	5,000
Total Commercial Paper—0.9% (cost $5,000)				5,000
Total Investments—98.9% (cost $531,030)				537,363
Cash and other assets, less liabilities—1.1%				5,893
Net assets—100.0%			$	543,256

144A = Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by any of 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

(a) Security, or a portion of security, is segregated as collateral for the centrally cleared credit default swap, aggregating a total of $149.

Centrally Cleared Credit Default Swap

									Unrealized
	Buy/Sell	Fixed Deal			Maturity		Notional		Appreciation
Reference Entity	Protection	Pay Rate			Date	Cleared Exchange	Amount		(Depreciation)
CDX.IG-26	Buy		1.000	%	June 2021	CME		$25,000		$(165	)

See accompanying Notes to Financial Statements.

96 Annual Report December 31, 2016

	Income Fund
	The Income Fund seeks a high level of current income with relative stability of principal.
	AN OVERVIEW FROM THE PORTFOLIO MANAGER
Christopher T. Vincent	The William Blair Income Fund (Class N shares) returned 2.44%, net of fees, for the year ended December 31, 2016. By comparison, the Fund’s benchmark, the Bloomberg Barclays Intermediate Government/Credit Bond Index (the “Index”), returned 2.08%. Multiple factors contributed to the Fund’s outperformance relative to the Index. The Fund’s positions in agency mortgage-backed securities contributed to relative performance, as those positions performed well relative to comparable-duration securities in the Index. Security selection among the Fund’s corporate bond holdings contributed to the Fund’s outperformance, specifically positions in bonds issued by ConocoPhillips, Masco, JP Morgan, Synchrony Financial, BRF SA, and Fibria Cellulose. Finally, an allocation to U.S. Treasury Inflation-Protected Securities was additive to performance. Factors that detracted from the Fund’s relative performance in 2016 included an underweight to corporate bonds and BBB-rated securities, relative to the Index, both of which performed well during the year. In addition, the Fund held positions in bonds issued by Seagate Technology and Embraer that detracted from relative performance. Please refer to the Fixed Income Market Review and Outlook relating to the Fund on page 90 for additional information.

December 31, 2016 William Blair Funds 97

Income Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			10 Year
Class N		2.44	%		1.96	%		2.03	%		2.94	%
Class I		2.78			2.20			2.27			3.17
Bloomberg Barclays Intermediate Government/Credit Bond Index		2.08			2.09			1.85			3.84

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and 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 Bloomberg Barclays Intermediate Government/Credit Bond Index indicates broad intermediate government/corporate bond market performance.

This report identifies the Fund’s investments on December 31, 2016. 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.

98 Annual Report December 31, 2016

Income Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Principal Amount		Value
U.S. Government and U.S. Government Agency—55.5%
U.S. Treasury Inflation Indexed Notes/Bonds—5.3%
U.S. Treasury Inflation Indexed Note, 1.875%, due 7/15/19	$	2,264	$	2,412
U.S. Treasury Inflation Indexed Note, 1.125%, due 1/15/21		3,315		3,480
Total U.S. Treasury Inflation Indexed  Notes/Bonds				5,892
U.S. Treasury—0.9%
U.S. Treasury Strip Principal, 0.000%, due 5/15/20		1,000		948
Federal Home Loan Mortgage Corp. (FHLMC)—7.4%
#E90398, 7.000%, due 5/1/17		14		14
#E97112, 4.000%, due 5/1/18		15		15
#D95621, 6.500%, due 7/1/22		623		677
#J13022, 4.000%, due 9/1/25		394		418
#J16051, 4.500%, due 7/1/26		895		957
#A17603, 5.500%, due 1/1/34		711		816
#A45790, 7.500%, due 5/1/35		133		150
#G02141, 6.000%, due 3/1/36		304		354
#G03201, 6.500%, due 6/1/37		180		211
#A66843, 6.500%, due 10/1/37		275		313
#A81799, 6.500%, due 9/1/38		255		289
#G06964, 5.500%, due 11/1/38		1,058		1,216
#G05875, 5.500%, due 2/1/40		140		159
#G07300, 6.000%, due 4/1/40		504		588
#C03665, 9.000%, due 4/1/41		360		439
#G06583, 5.000%, due 6/1/41		1,469		1,641
Total FHLMC Mortgage Obligations				8,257
Federal National Mortgage Association (FNMA)—41.9%
#643217, 6.500%, due 6/1/17		11		11
#679247, 7.000%, due 8/1/17		13		13
#695910, 5.000%, due 5/1/18		51		52
#740847, 6.000%, due 10/1/18		42		43
#323501, 6.500%, due 1/1/19		13		15
#751313, 5.000%, due 3/1/19		77		79
#852864, 7.000%, due 7/1/20		281		294
#458147, 10.000%, due 8/15/20		20		21
#835563, 7.000%, due 10/1/20		120		127
#831430, 5.500%, due 3/1/21		187		197
#888555, 5.500%, due 9/1/21		1,226		1,291
#735574, 8.000%, due 3/1/22		101		107
#679253, 6.000%, due 10/1/22		317		360
FNR G93-19 SH, 11.234%,due 4/25/23, VRN		11		14
#982878, 4.500%, due 5/1/23		174		186
#AC5124, 4.000%, due 11/1/24		616		658
#932095, 4.000%, due 11/1/24		3,431		3,660
#932100, 4.500%, due 11/1/24		814		870
#AL8529, 6.000%, due 11/1/24		7,471		8,120
#AC6257, 4.000%, due 12/1/24		696		742
#AC0596, 4.000%, due 12/1/24		185		196
#AD4073, 4.000%, due 5/1/25		89		95
#935995, 4.000%, due 6/1/25		86		90
#AD4677, 4.000%, due 6/1/25		561		598
#AE1176, 4.000%, due 8/1/25		273		293

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
U.S. Government and U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#255956, 5.500%, due 10/1/25		$	51	$	56
#AL2851, 4.000%, due 8/1/26			2,088		2,231
#AI9811, 4.500%, due 8/1/26			403		431
#AJ3203, 4.000%, due 10/1/26			1,005		1,076
#AJ7724, 4.000%, due 12/1/26			772		826
#256639, 5.000%, due 2/1/27			10		11
#AB4818, 4.000%, due 4/1/27			1,838		1,969
#AL2590, 4.000%, due 7/1/27			1,317		1,408
#806458, 8.000%, due 6/1/28			108		121
#880155, 8.500%, due 7/1/29			208		239
#797846, 7.000%, due 3/1/32			82		87
#745519, 8.500%, due 5/1/32			59		66
#654674, 6.500%, due 9/1/32			61		69
#733897, 6.500%, due 12/1/32			232		260
#254693, 5.500%, due 4/1/33			8		9
#555531, 5.500%, due 6/1/33			77		87
#711736, 5.500%, due 6/1/33			99		113
#555591, 5.500%, due 7/1/33			13		14
#AL3455, 5.500%, due 11/1/33			1,969		2,267
#776964, 5.000%, due 4/1/34			349		388
#725424, 5.500%, due 4/1/34			80		90
#888884, 5.500%, due 12/1/35			174		197
#886220, 6.000%, due 7/1/36			211		244
#AL3449, 6.000%, due 7/1/36			944		1,105
#888703, 6.500%, due 8/1/37			941		1,106
#928658, 6.500%, due 9/1/37			31		35
#962058, 6.500%, due 3/1/38			505		597
#991911, 7.000%, due 11/1/38			158		180
#AD0315, 6.500%, due 8/1/39			304		344
#AC3237, 5.000%, due 10/1/39			139		154
#AC9569, 5.000%, due 2/1/40			216		241
#AL0028, 5.000%, due 2/1/41			1,021		1,130
#AL5815, 5.500%, due 4/1/41			701		807
#AL9226, 5.500%, due 12/1/41			6,335		7,286
#AL9225, 6.000%, due 1/1/42			2,651		3,098
Total FNMA Mortgage Obligations					46,474
Asset-Backed Securities—9.8%
Mercedes Benz Auto Lease Trust, 2016-A, Tranche A2B, 1.264%, 7/16/18, VRN	Aaa		813		814
Ford Credit Auto Owner Trust, 2016-A, Tranche A2B, 1.104%, 12/15/18, VRN	AAA		1,669		1,670
Harley-Davidson Motorcycle Trust, 2015-2, Tranche A2B, 0.954%, 1/15/19, VRN	AAA		295		295
Capital One Multi-Asset Execution Trust, 2007-A1, Tranche A1, 0.754%, 11/15/19, VRN	AAA		1,700		1,700
Citibank Credit Card Issuance Trust, 2008-A2, Tranche A2, 1.905%, 1/23/20, VRN	AAA		1,225		1,238
GE Capital Credit Card Master Note Trust, 2012-6, Tranche B, 1.830%, 8/17/20	AA+		1,705		1,710

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 99

Income Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
Asset-Backed Securities—(continued)
American Express Credit Account Master Trust, 2008-2, Tranche A, 1.964%, 9/15/20, VRN	AAA	$	1,000	$	1,013
Capital One Multi-Asset Execution Trust, 2016-A1, Tranche A1, 1.154%, 2/15/22, VRN	AAA		1,850		1,858
SLM Private Education Loan Trust—144A, 2011-A, Tranche A3, 3.204%, 1/15/43, VRN	AAA		500		518
Total Asset-Backed Securities					10,816
Corporate Obligations—33.2%
Macquarie Group Ltd.—144A, 4.875%, due 8/10/17	A3		1,000		1,018
Morgan Stanley, 6.625%, due 4/1/18	A		1,000		1,058
Bank of America Corporation, 6.875%, due 11/15/18	A		1,000		1,088
Baidu, Inc., 2.750%, due 6/9/19	A		750		761
JPMorgan Chase & Co., 5.000%, due 7/1/19, VRN	BBB-		1,000		999
PNC Bank NA, 1.450%, due 7/29/19	A+		1,000		987
Burlington Northern Santa Fe LLC, 4.700%, due 10/1/19	A		1,000		1,076
Boston Properties L.P., 5.875%, due 10/15/19	A-		1,000		1,091
Petroleos Mexicanos, 6.000%, due 3/5/20	BBB+		1,000		1,057
PepsiCo, Inc., 2.150%, due 10/14/20	A1		1,000		1,002
Georgia-Pacific LLC—144A, 5.400%, due 11/1/20	A+		1,000		1,100
Mitsubishi UFJ Financial Group, Inc., 2.950%, due 3/1/21	A1		1,000		1,007
Capital One Financial Corporation, 4.750%, due 7/15/21	A-		1,000		1,083
Apple, Inc., 1.550%, due 8/4/21	AA+		1,000		967
General Electric Capital Corporation, 4.650%, due 10/17/21	AA-		1,000		1,098
Verizon Communications, Inc., 3.500%, due 11/1/21	A-		1,000		1,033
Ryder System, Inc., 3.450%, due 11/15/21	A-		900		923
Gilead Sciences, Inc., 4.400%, due 12/1/21	A		1,000		1,077
Masco Corporation, 5.950%, due 3/15/22	BBB		1,000		1,107
Bancolombia S.A., 5.125%, due 9/11/22	BBB-		750		766
Jones Lang LaSalle, Inc., 4.400%, due 11/15/22	BBB+		750		774
Anheuser-Busch InBev Finance, Inc., 3.300%, due 2/1/23	A-		1,000		1,019
Wyndham Worldwide Corporation, 3.900%, due 3/1/23	BBB-		750		750
Toll Brothers Finance Corporation, 4.375%, due 4/15/23	BBB-		500		501

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
Corporate Obligations—(continued)
Wells Fargo & Co., 4.480%, due 1/16/24	A+	$	1,000	$	1,054
The Goldman Sachs Group, Inc., 4.000%, due 3/3/24	A		1,000		1,039
Fibria Overseas Finance, Ltd., 5.250%, due 5/12/24	BBB-		1,000		1,008
BRF S.A.—144A, 4.750%, due 5/22/24	BBB		750		732
Grupo Bimbo S.A.B. de C.V.—144A, 3.875%, due 6/27/24	BBB		1,000		998
Synchrony Financial, 4.250%, due 8/15/24	BBB-		1,000		1,020
BNP Paribas S.A., 4.250%, due 10/15/24	A		750		753
ERP Operating L.P., 3.375%, due 6/1/25	A-		1,000		995
Intercontinental Exchange, Inc., 3.750%, due 12/1/25	A		1,000		1,026
Simon Property Group L.P., 3.300%, due 1/15/26	A		1,000		996
ConocoPhillips Co., 4.950%, due 3/15/26	A-		900		995
Brookfield Finance, Inc., 4.250%, due 6/2/26	A-		750		744
Xylem, Inc., 3.250%, due 11/1/26	BBB		1,000		973
Crown Castle Towers LLC—144A, 6.113%, due 1/15/40	A2		1,000		1,084
Total Corporate Obligations					36,759
Total Long-Term Investments—98.5% (cost $109,149)					109,146
Repurchase Agreement
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $279, collateralized by U.S. Treasury Bond, 3.375%,due 5/15/44			279		279
Total Repurchase Agreement—0.2% (cost $279)					279
Total Investments—98.7% (cost $109,428)					109,425
Cash and other assets, less liabilities—1.3%					1,445
Net assets—100.0%				$	110,870

144A = Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by any of 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

See accompanying Notes to Financial Statements.

100 Annual Report December 31, 2016

	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
Paul J. Sularz Christopher T. Vincent	The William Blair Low Duration Fund (Class N shares) returned 1.16%, net of fees, for the year ended December 31, 2016. By comparison, the Fund’s benchmark, the Bank of America Merrill Lynch 1-Year U.S. Treasury Note Index (the “Index”), returned 0.76%. Multiple factors contributed to the Fund’s outperformance relative to the Index. The Fund is designed to assume slightly more interest rate risk than the risk-free rate, and the Fund’s interest rate exposures contributed to relative performance as shorter-term interest rates generated positive returns during the year. Fund holdings in agency mortgage-backed securities were a contributing source of performance. Finally, allocations to floating-rate asset-backed and investment-grade corporate securities had a positive impact on performance. Factors that detracted from the Fund’s relative performance in 2016 included interest rate risk hedging and residual cash. Please refer to the Fixed Income Market Review and Outlook relating to the Fund on page 90 for additional information.

December 31, 2016 William Blair Funds 101

Low Duration Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			Since Inception (a)
Class N		1.16	%		0.79	%		0.90	%		1.06	%
Class I		1.40			0.98			1.08			1.22
Institutional Class		1.43			1.02			1.17			1.34
Bank of America Merrill Lynch 1-Year U.S. Treasury Note Index		0.76			0.36			0.32			0.40

(a) For the period from December 1, 2009 (Commencement of Operations) to December 31, 2016.

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 adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution (12b-1) fees. Institutional Class shares are available to institutional investors 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 Bank of America 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 December 31, 2016. 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.

102 Annual Report December 31, 2016

Low Duration Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Principal Amount		Value
U.S. Government Agency—44.3%
Federal Home Loan Mortgage Corp. (FHLMC)—14.6%
#E95760, 4.500%, due 4/1/18	$	3	$	3
#E99582, 5.000%, due 9/1/18		5		5
#E99684, 5.000%, due 10/1/18		127		131
#B11362, 5.500%, due 12/1/18		13		13
#B11849, 5.500%, due 1/1/19		32		32
#B13870, 4.500%, due 5/1/19		28		29
#G11604, 5.000%, due 7/1/19		33		34
#G11596, 5.500%, due 8/1/19		28		29
#G11605, 5.500%, due 9/1/19		17		17
#B17294, 5.000%, due 11/1/19		80		82
#B19222, 4.500%, due 4/1/20		73		75
#G11697, 5.500%, due 4/1/20		72		75
#J02537, 5.000%, due 9/1/20		33		35
#G11836, 5.500%, due 12/1/20		11		12
#G12113, 5.500%, due 5/1/21		86		90
#G12395, 6.000%, due 10/1/21		371		395
#E02322, 5.500%, due 5/1/22		23		25
#G12725, 6.000%, due 6/1/22		149		161
#G13124, 6.000%, due 12/1/22		124		135
#J06871, 5.500%, due 1/1/23		74		78
#J08450, 5.500%, due 7/1/23		37		39
#J08703, 5.500%, due 9/1/23		67		72
#E02614, 4.000%, due 4/1/24		2,303		2,434
#J10351, 4.000%, due 7/1/24		123		130
#C00351, 8.000%, due 7/1/24		46		51
#J10600, 4.000%, due 8/1/24		8		9
#G13695, 4.000%, due 9/1/24		570		606
#J11208, 5.000%, due 11/1/24		80		85
#G00363, 8.000%, due 6/1/25		79		88
#J12853, 4.000%, due 8/1/25		158		168
#C80329, 8.000%, due 8/1/25		17		19
#J13022, 4.000%, due 9/1/25		158		167
#J14491, 4.000%, due 2/1/26		2,992		3,186
#J16051, 4.500%, due 7/1/26		2,018		2,159
#G30348, 6.000%, due 7/1/27		1,049		1,205
#G07290, 6.000%, due 6/1/34		2,118		2,420
#G07837, 6.500%, due 2/1/38		1,545		1,753
#G04424, 6.000%, due 6/1/38		663		762
#G04778, 6.000%, due 7/1/38		90		105
#A81372, 6.000%, due 8/1/38		246		281
#G04544, 6.000%, due 8/1/38		335		384
#G04687, 6.000%, due 9/1/38		94		109
#G04745, 6.000%, due 9/1/38		290		337
#A81799, 6.500%, due 9/1/38		240		271
#G06085, 6.500%, due 9/1/38		101		114
#G06964, 5.500%, due 11/1/38		3,157		3,627
#G05723, 6.500%, due 11/1/38		1,367		1,545
#G05124, 6.000%, due 12/1/38		4,639		5,355
#G07480, 6.000%, due 5/1/39		3,138		3,603
#G07300, 6.000%, due 4/1/40		5,185		6,055
#G06017, 5.500%, due 6/1/40		1,113		1,261
#4122, Tranche FP, 1.104%, due 10/15/42, VRN		886		882
Total FHLMC Mortgage Obligations				40,738
Federal National Mortgage Association (FNMA)—29.7%
#672953, 5.000%, due 12/1/17		3		3
#695838, 5.500%, due 4/1/18		9		9
#697593, 5.000%, due 5/1/18		29		30
#656573, 5.000%, due 6/1/18		20		20

Issuer	Principal Amount		Value
U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#709848, 5.000%, due 6/1/18	$	19	$	19
#705741, 5.000%, due 6/1/18		18		19
#728715, 5.000%, due 7/1/18		38		39
#711991, 5.000%, due 8/1/18		24		24
#257378, 5.000%, due 9/1/18		6		6
#743183, 5.000%, due 10/1/18		11		11
#749596, 5.000%, due 11/1/18		47		48
#753866, 6.000%, due 12/1/18		55		57
#761246, 5.000%, due 1/1/19		64		65
#766059, 5.500%, due 2/1/19		57		59
#766276, 5.000%, due 3/1/19		146		150
#751313, 5.000%, due 3/1/19		34		35
#779363, 5.000%, due 6/1/19		17		17
#785259, 5.000%, due 8/1/19		68		70
#788424, 5.500%, due 9/1/19		38		39
#761489, 5.500%, due 9/1/19		42		44
#725953, 5.000%, due 10/1/19		22		23
#AL5831, 5.000%, due 1/1/20		2,023		2,075
#745877, 5.000%, due 1/1/20		62		64
#357865, 5.000%, due 7/1/20		53		54
#888105, 5.000%, due 8/1/20		2		3
#357978, 5.000%, due 9/1/20		512		535
#844026, 6.000%, due 11/1/20		252		264
#745735, 5.000%, due 3/1/21		208		218
#879607, 5.500%, due 4/1/21		37		39
#831497, 6.000%, due 4/1/21		122		128
#831525, 5.500%, due 6/1/21		45		47
#888555, 5.500%, due 9/1/21		1,542		1,623
#880993, 6.000%, due 1/1/22		8		9
#888982, 6.000%, due 12/1/22		142		153
#972934, 5.500%, due 2/1/23		147		158
#982878, 4.500%, due 5/1/23		158		168
#889670, 5.500%, due 6/1/23		45		47
#555734, 5.000%, due 7/1/23		345		376
#AE0011, 5.500%, due 9/1/23		58		62
#747339, 5.500%, due 10/1/23		178		198
#995395, 6.000%, due 12/1/23		129		140
#934808, 4.500%, due 3/1/24		90		94
#AA4519, 4.500%, due 3/1/24		569		607
#AA5028, 4.500%, due 4/1/24		155		165
#AA5999, 4.500%, due 5/1/24		906		968
#190988, 9.000%, due 6/1/24		37		40
#AC1848, 4.500%, due 9/1/24		341		364
#AC6600, 4.500%, due 11/1/24		35		37
#AL8529, 6.000%, due 11/1/24		27,164		29,523
#935795, 4.500%, due 12/1/24		604		644
#AL3422, 5.000%, due 1/1/25		600		645
#AL3889, 4.000%, due 5/1/25		250		267
#AE1176, 4.000%, due 8/1/25		512		548
#AI4872, 4.500%, due 6/1/26		53		57
#AI4856, 4.500%, due 6/1/26		1,290		1,380
#AL2851, 4.000%, due 8/1/26		2,004		2,142
#AK7384, 4.000%, due 3/1/27		375		402
#AL2590, 4.000%, due 7/1/27		2,195		2,347
#555933, 7.000%, due 6/1/32		645		745
#759336, 6.000%, due 1/1/34		1,444		1,686
#AL3449, 6.000%, due 7/1/36		1,511		1,768
#886762, 7.000%, due 9/1/36		354		423
#831926, 6.000%, due 12/1/36		678		783
#928574, 6.000%, due 7/1/37		120		136
#948637, 6.500%, due 8/1/37		426		482

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 103

Low Duration Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
U.S. Government Agency—(continued)
Federal National Mortgage Association (FNMA)—(continued)
#888703, 6.500%, due 8/1/37		$	3,515	$	4,133
#889371, 6.000%, due 1/1/38			822		961
#965534, 6.000%, due 1/1/38			43		49
#975649, 6.000%, due 7/1/38			130		150
#995712, 6.000%, due 8/1/38			1,908		2,234
#AD0100, 7.000%, due 12/1/38			940		1,114
#AD0315, 6.500%, due 8/1/39			660		748
#AC3270, 5.500%, due 9/1/39			1,624		1,868
#AL5815, 5.500%, due 4/1/41			3,503		4,035
#AL9226, 5.500%, due 12/1/41			6,822		7,847
#AL9225, 6.000%, due 1/1/42			5,784		6,759
Total FNMA Mortgage Obligations					83,299
Asset-Backed Securities—24.1%
Volvo Financial Equipment LLC—144A, 2015-1A, Tranche A2, 0.950%, 11/15/17	Aaa		61		61
John Deere Owner Trust, 2015-A, Tranche A2B, 0.974%, 2/15/18, VRN	Aaa		93		93
Mercedes-Benz Auto Receivables Trust, 2015-1, Tranche A2B, 0.974%, 6/15/18, VRN	AAA		537		537
Mercedes Benz Auto Lease Trust, 2016-A, Tranche A2B, 1.264%, 7/16/18, VRN	Aaa		2,277		2,279
Nissan Auto Lease Trust, 2016-A, Tranche A2B, 1.084%, 8/15/18, VRN	Aaa		2,939		2,943
Ford Credit Auto Lease Trust, 2016-A, Tranche A2B, 1.244%, 11/15/18, VRN	AAA		535		536
Ford Credit Auto Owner Trust, 2016-A, Tranche A2B, 1.104%, 12/15/18, VRN	AAA		2,520		2,522
Nissan Auto Lease Trust, 2016-B, Tranche A2B, 0.984%, 12/17/18, VRN	Aaa		2,150		2,152
Harley-Davidson Motorcycle Trust, 2015-2, Tranche A2B, 0.954%, 1/15/19, VRN	AAA		295		295
Ford Credit Floorplan Master Owner  Trust A, 2014-1, Tranche A2, 1.104%, 2/15/19, VRN	AAA		2,750		2,751
Nissan Auto Receivables 2016-A  Owner Trust, 2016-A, Tranche A2B, 1.054%, 2/15/19, VRN	Aaa		3,188		3,192
Ford Credit Auto Owner Trust, 2016-B, Tranche A2B, 1.014%, 3/15/19, VRN	AAA		4,370		4,372
Nissan Auto Receivables Owner  Trust, 2016-B, Tranche A2B, 1.004%, 4/15/19, VRN	Aaa		3,000		3,002
Discover Card Master Trust, 2012-A4, Tranche A, 0.370%, 11/15/19, VRN	AAA		2,000		2,002
Toyota Auto Receivables 2016-D  Owner Trust, 2016-D, Tranche A2B, 0.834%, 5/15/19, VRN	AAA		2,025		2,025

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
Asset-Backed Securities—(continued)
American Express Issuance Trust II, 2013-2, Tranche A, 1.134%, 8/15/19, VRN	AAA	$	1,993	$	2,001
Capital One Multi-Asset Execution  Trust, 2007-A1, Tranche A1, 0.754%, 11/15/19, VRN	AAA		2,000		2,000
Bank of America Credit Card Trust, 2007-A11, Tranche A11, 0.774%, 12/15/19, VRN	AAA		915		915
Capital One Multi-Asset Execution  Trust, 2007-A2, Tranche A2, 0.784%, 12/16/19, VRN	AAA		1,815		1,815
Citibank Credit Card Issuance Trust, 2008-A2, Tranche A2, 1.905%, 1/23/20, VRN	AAA		2,980		3,011
Mercedes-Benz Master Owner  Trust—144A, 2015-BA, Tranche A, 1.084%, 4/15/20, VRN	Aaa		1,500		1,500
Mercedes-Benz Master Owner  Trust—144A, 2016-AA, Tranche A, 1.284%, 5/15/20, VRN	Aaa		1,405		1,410
Citibank Credit Card Issuance Trust, 2013-A2, Tranche A2, 1.036%, 5/26/20, VRN	AAA		2,820		2,824
BMW Floorplan Master Owner  Trust—144A, 2015-1A, Tranche A, 1.204%, 7/15/20, VRN	AAA		2,575		2,576
Chase Issuance Trust, 2013-A6, Tranche A6, 1.124%, 7/15/20, VRN	AAA		2,000		2,007
Discover Card Execution Note Trust, 2015-A1, Tranche A1, 1.054%, 8/17/20, VRN	AAA		3,000		3,005
American Express Credit Account  Master Trust, 2008-2, Tranche A, 1.964%, 9/15/20, VRN	AAA		2,200		2,228
Chase Issuance Trust, 2016-A1, Tranche A, 1.114%, 5/17/21, VRN	AAA		2,000		2,007
Bank of America Credit Card Trust, 2014-A1, Tranche A, 1.084%, 6/15/21, VRN	AAA		1,000		1,003
MBNA Credit Card Master Note  Trust, 2004-A3, Tranche A3, 0.964%, 8/16/21, VRN	AAA		3,000		2,999
Capital One Multi-Asset Execution  Trust, 2014-A3, Tranche A3, 1.084%, 1/18/22, VRN	AAA		1,110		1,111
Capital One Multi-Asset Execution  Trust, 2016-A1, Tranche A1, 1.154%, 2/15/22, VRN	AAA		2,750		2,763
SLM Student Loan Trust, 2008-4, Tranche A4, 2.532%, 7/25/22, VRN	AAA		976		982
Sierra Timeshare 2012-2 Receivables Funding LLC—144A, 2012-2A, Tranche A, 2.380%, 3/20/29	A+		216		216
SLM Private Education Loan  Trust—144A, 2011-A, Tranche A3, 3.204%, 1/15/43, VRN	AAA		2,250		2,333
Total Asset-Backed Securities					67,468

See accompanying Notes to Financial Statements.

104 Annual Report December 31, 2016

Low Duration Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	NRSRO Rating (unaudited)	Principal Amount		Value
Corporate Obligations—32.7%
Bank of America NA, 1.372%, due 2/14/17, VRN	A+	$	2,600	$	2,601
JPMorgan Chase & Co., 1.426%, due 2/15/17, VRN	A+		3,000		3,002
Barclays Bank plc, 1.486%, due 2/17/17, VRN	A1		1,620		1,621
Citigroup, Inc., 1.493%, due 3/10/17, VRN	A		3,000		3,002
Mizuho Bank Ltd.—144A, 1.310%, due 4/16/17, VRN	A1		1,000		1,001
Tencent Holdings Ltd.—144A, 2.000%, due 5/2/17	A+		1,200		1,201
Branch Banking & Trust Co., 1.220%, due 5/23/17, VRN	A2		3,000		3,000
American Express Credit Corporation, 1.212%, due 6/5/17, VRN	A2		750		751
Standard Chartered plc—144A, 1.291%, due 9/8/17, VRN	A1		2,000		1,998
Royal Bank of Canada, 1.138%, due 10/13/17, VRN	AA		1,925		1,925
Chevron Corporation, 1.247%, due 11/9/17, VRN	Aa2		3,000		3,007
Canadian National Railway Co., 1.072%, due 11/14/17, VRN	A		700		701
General Electric Capital Corporation, 1.448%, due 12/7/17, VRN	AA-		500		499
International Business Machines  Corporation, 1.071%, due 2/6/18, VRN	AA-		3,150		3,154
Exxon Mobil Corporation, 1.537%, due 2/28/18, VRN	Aaa		3,000		3,019
The Bank of Tokyo-Mitsubishi  UFJ, Ltd.—144A, 1.492%, due 3/5/18, VRN	A+		1,400		1,399
Bank of Montreal, 1.476%, due 4/9/18, VRN	Aa3		2,580		2,590
NBCUniversal Enterprise, Inc.—144A, 1.565%, due 4/15/18, VRN	A-		3,075		3,094
Wells Fargo & Co., 1.512%, due 4/23/18, VRN	AA-		3,000		3,012
Morgan Stanley, 2.162%, due 4/25/18, VRN	A		4,000		4,043
The Goldman Sachs Group, Inc., 2.087%, due 4/30/18, VRN	A		3,084		3,111
Merck & Co., Inc., 1.269%, due 5/18/18, VRN	AA		3,175		3,188
KeyBank NA, 1.451%, due 6/1/18, VRN	A-		5,200		5,208
PNC Bank NA, 1.351%, due 6/1/18, VRN	A+		1,035		1,037
Pfizer, Inc., 1.263%, due 6/15/18, VRN	AA		3,275		3,284
Sumitomo Mitsui Banking Corporation, 1.548%, due 10/19/18, VRN	A1		1,000		1,004
PNC Bank NA, 1.351%, due 12/7/18, VRN	A+		3,000		3,002
Toyota Motor Credit Corporation, 1.731%, due 2/19/19, VRN	AA-		1,000		1,012
American Honda Finance Corporation, 1.741%, due 2/22/19, VRN	A+		1,616		1,632
Apple, Inc., 1.740%, due 2/22/19, VRN	AA+		2,243		2,275

Issuer	NRSRO Rating (unaudited)	Principal Amount			Value
Corporate Obligations—(continued)
PepsiCo, Inc., 1.506%, due 2/22/19, VRN	A1	$	1,000		$	1,008
Johnson & Johnson, 1.201%, due 3/1/19, VRN	AAA		2,785			2,796
Westpac Banking Corporation, 1.612%, due 5/13/19, VRN	Aa2		1,000			1,004
Bank of Montreal, 1.532%, due 7/18/19, VRN	Aa3		1,000			1,003
Apple, Inc., 1.016%, due 8/2/19, VRN	AA+		1,737			1,736
American Express Credit Corporation, 1.396%, due 8/15/19, VRN	A2		1,000			1,002
Shell International Finance BV, 1.303%, due 9/12/19, VRN	Aa2		3,263			3,265
PepsiCo, Inc., 1.268%, due 10/4/19, VRN	A1		2,000			2,003
Mondelez International Holdings  Netherlands BV—144A, 1.500%, due 10/28/19, VRN	A3		4,000			4,010
American Express Credit Corporation, 1.457%, due 10/30/19, VRN	A2		250			251
Daimler Finance North  America LLC—144A, 1.515%, due 10/30/19, VRN	A		1,000			1,003
United Technologies Corporation, 1.236%, due 11/1/19, VRN	A-		1,150			1,153
The Goldman Sachs Group, Inc., 1.757%, due 12/13/19, VRN	A		2,000			2,001
Total Corporate Obligations						91,608
Total Long-Term Investments—101.1% (cost $283,937)						283,113
Total Investments—101.1% (cost $283,937)						283,113
Securities  Sold Short, Not Yet Purchased
U.S. Government Agency—(5.4)%
Federal National Mortgage Association (FNMA)—(5.4)%
TBA, 2.500%, due 1/23/32		$	(15,000	)		(15,025	)
Total Securities Sold Short, Not Yet Purchased—(5.4)% (proceeds $15,033)						(15,025	)
Cash and other assets, less liabilities—4.3%						11,985
Net assets—100.0%					$	280,073

144A = Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

NRSRO = Nationally Recognized Statistical Rating Organization—The credit quality ratings of the securities in the Fund reflect the highest category rating by any of 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.

TBA = To Be Announced—TBAs are mortgage-backed securities traded under delayed delivery commitments, settling after December 31, 2016. The term TBA comes from the fact that the specific mortgage-backed security that will be delivered to fulfill a TBA trade is not designated at the time the trade is made.

VRN = Variable Rate Note

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 105

Macro Allocation Fund AN OVERVIEW FROM THE PORTFOLIO MANAGERS

Thomas Clarke Brian D. Singer

The William Blair Macro Allocation Fund (Class N shares) posted a 2.01% increase, net of fees, for the twelve months ended December 31, 2016. By comparison, the Fund’s benchmark index, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index and the Long-Term Comparative Index (40% Bloomberg Barclays U.S. Aggregate Index, 30% MSCI All Country World Index (net) and 30% Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index), increased 0.33% and 3.68%, respectively. The Fund had flat performance from its market strategy (i.e., equity and fixed income) and positive performance from its currency strategy. Detractors from the Fund’s market-oriented exposures included positioning within U.S. equities, which mostly resulted from the Fund’s preference for large cap equities over small cap equities, and short exposure to Japanese equities. Long exposure to European equities contributed to the Fund’s gains, particularly a preference for European financial sector equities in the second half of the year. The Fund also benefitted from long exposure to U.S. credit. Within currency, long exposures to emerging currencies were beneficial to the Fund’s performance, with strong performance coming from exposures to the Russian ruble, Brazilian real, and Indonesian rupiah. This was partially offset by a negative contribution from long exposure to the Mexican peso and Malaysian ringgit. 2016 was a year filled with geopolitical uncertainty and a year in which thematic influences (such as Populism) remained quite intense. Areas of geopolitical focus that warranted navigation included the UK as it wrestled with the Brexit vote and the second Spanish election, both taking place in late June. Additional areas of focus were the U.S. presidential election and the Italian referendum, both of which took place late in the year. We feel compelled to remain relatively cautious in the domain of systematic (or beta-like) market risk, and to maintain lower risk exposures to attractive emerging markets currencies than would otherwise be the case due to our assessment that the forward-looking risk environment still remains somewhat elevated in general. However, we have begun to increase risk in the Fund’s portfolio in some places where shorter-term macro-thematic and geopolitical headwinds have abated. The Fund’s market strategy remains moderately long in equities with exposures to Europe, U.K., and emerging markets, while also moving to a slightly long exposure in the U.S. The market strategy is also slightly short in fixed income securities, with long exposure to emerging markets debt offset by short exposure to European government bonds. Within currencies, the Fund’s strategy remains long in emerging currencies and short in developed currencies, which is in line with fundamental valuation. The Fund’s long currency positions include the Colombian peso, Mexican peso, and Philippine peso, and the largest short positions are in the Swiss franc, New Zealand dollar, and Canadian dollar.

106 Annual Report December 31, 2016

Macro Allocation Fund

Performance Highlights (Unaudited)

Average Annual Total Return at 12/31/2016
	1 Year			3 Year			5 Year			Since Inception
Class N(a)		2.01	%		(0.64	)%		4.85	%		5.30	%
Class I(a)		2.26			(0.39	)		5.11			5.56
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index(a)		0.33			0.14			0.12			0.12
Long-Term Comparative Index(a)		3.68			2.36			3.84			3.85
Institutional Class(b)		2.44			(0.26	)		—			0.35
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index(b)		0.33			0.14			—			0.43
Long-Term Comparative Index(b)		3.68			2.36			—			2.45

(a)	For the period from November 29, 2011 (Commencement of Operations) to December 31, 2016.
(b)	For the period from October 21, 2013 (Commencement of Operations) to December 31, 2016.

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. The Fund involves a high level of risk and may not be appropriate for everyone. You could lose money by investing in the Fund. There can be no assurance that the Fund’s investment objective will be achieved or that the Fund’s investment strategies will be successful. The Fund is not a complete investment program. From time to time, the investment adviser may waive fees or reimburse expenses for the Fund. Without these waivers/reimbursements, 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 Investment Management, LLC and William Blair & Company, L.L.C., without a sales load or distribution fee (12b-1 fee). Institutional Class shares are available to institutional investors 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 Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index measures total return on cash, including price and interest income, based on short-term government Treasury Bills of about 90-day maturity. The Index is unmanaged, does not incur fees or expenses, and cannot be invested in directly.

The Long-Term Comparative Index return is comprised of the following indices: 40% Bloomberg Barclays Capital U.S. Aggregate Index, 30% Morgan Stanley Capital International (MSCI) All Country World Index (net), and 30% BofA Merrill Lynch 3-month U.S. Treasury Bill Index.

This report identifies the Fund’s investments on December 31, 2016. 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.

Portfolio Allocation (Unaudited)

The table below provides the allocation of the Fund’s holdings as a percent of net assets as of December 31, 2016.

Category	%
Equity Exchange-Traded Funds	49.2	%
Fixed Income Exchange-Traded Funds	10.9	%
U.S. Government	8.6	%
Foreign Government Bond	2.3	%
Purchased Options	0.1	%
Repurchase Agreements	26.2	%
Written Option	(0.1	)%
Cash and Other Assets, Less Liabilities	2.8	%
Net Assets	100.0	%

December 31, 2016 William Blair Funds 107

Macro Allocation Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Issuer	Shares or Principal Amount		Value
Exchange-Traded Funds—60.1%
Equity Exchange-Traded Funds—49.2%
Consumer Staples Select Sector SPDR Fund		312,000	$	16,134
Financial Select Sector SPDR Fund		343,000		7,975
Global X MSCI Greece ETF		2,126,000		16,562
iShares Global Energy ETF		486,000		16,913
iShares MSCI Chile Capped ETF		434,800		16,270
iShares MSCI Frontier 100 ETF		983,000		24,428
iShares MSCI Japan ETF		504,000		24,625
iShares MSCI Switzerland Capped ETF(a)		345,000		10,164
iShares Russell 1000 Growth ETF		466,000		48,883
iShares Russell 1000 Value ETF		1,734,000		194,260
SPDR S&P 500 ETF Trust		1,576,000		352,283
Utilities Select Sector SPDR Fund		650,000		31,570
VanEck Vectors Russia ETF		809,000		17,167
Total Equity Exchange-Traded Funds				777,234
Fixed Income Exchange-Traded Funds—10.9%
iShares iBoxx $ Investment Grade Corporate Bond ETF		660,000		77,339
iShares JP Morgan USD Emerging Markets Bond ETF(a)		294,000		32,405
SPDR Barclays High Yield Bond ETF		1,417,000		51,649
WisdomTree Emerging Markets Local Debt Fund ETF		326,500		11,679
Total Fixed Income Exchange-Traded Funds .				173,072
Total Exchange-Traded Funds—60.1% (cost $906,266)				950,306
Foreign Government Bond—2.3%
Malaysia
Malaysia Government Bond, 3.580%, due 9/28/18	$	161,563		35,980
Total Foreign Government Bonds—2.3% (cost $36,703)				35,980
Repurchase Agreement—26.2%
Fixed Income Clearing Corporation, 0.030% dated 12/30/16, due 1/3/17, repurchase price $413,730, collateralized  by U.S. Treasury Bonds, 3.000%-3.375%, due 5/15/44-5/15/45		413,728		413,728
Total Repurchase Agreement—26.2% (cost $413,728)				413,728
U.S. Government—8.6%
U.S. Treasury Bill, 0.463%, due 1/5/17		35,000		34,999
U.S. Treasury Bill, 0.527%, due 2/2/17(b)		10,000		9,997
U.S. Treasury Bill, 0.659%, due 3/2/17(b)		10,000		9,992

Issuer	Principal Amount/ Contracts			Value
U.S. Government—(continued)
U.S. Treasury Bill, 0.610%, due 3/30/17(a)(b)	$	10,000		$	9,988
U.S. Treasury Bill, 0.592%, due 4/27/17(a)(b)		10,000			9,983
U.S. Treasury Bill, 0.672%, due 5/25/17(b)		8,000			7,981
U.S. Treasury Bill, 0.560%, due 6/22/17(b)		8,000			7,977
U.S. Treasury Bill, 0.552%, due 7/20/17(a)(b)		8,000			7,972
U.S. Treasury Bill, 0.580%, due 8/17/17(b)		8,000			7,966
U.S. Treasury Bill, 0.614%, due 9/14/17(b)		7,000			6,966
U.S. Treasury Bill, 0.684%, due 10/12/17(b)		8,000			7,953
U.S. Treasury Bill, 0.681%, due 11/9/17(b)		8,000			7,945
U.S. Treasury Bill, 0.833%, due 12/7/17(b)		7,000			6,946
Total U.S. Government—8.6% (cost $136,679)					136,665
Purchased Options—0.1%
S&P 500 Index, February 2017, Strike $2,180, Put		358			861
S&P 500 Index, February 2017, Strike $2,315, Call		358			268
S&P 500 Index, January 2017, Strike $2,180, Put		380			374
Total Purchased Options—0.1% (cost $2,759)					1,503
Total Investments in Securities—97.3% (cost $1,496,135)					1,538,182
Written Options—(0.1)%
S&P 500 Index, January 2017, Strike $2,240, Call		(380	)		(900	)
Total Written Options—(0.1)% (premiums received $513)					(900	)
Cash and other assets, less Liabilities—2.8%					43,636
Net assets—100.0%				$	1,580,918

(a) Security, or portion of security, is pledged as collateral for OTC swap contracts and a listed written option aggregating a total value of $8,694 (in thousands).

(b) Security, or portion of security, is segregated as collateral for centrally cleared swaps and to cover initial margin requirements on open futures contracts aggregating a total value of $87,253 (in thousands).

See accompanying Notes to Financial Statements.

108 Annual Report December 31, 2016

Macro Allocation Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

If a fund’s portfolio holdings represent ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined in the Investment Company Act of 1940. The Fund had the following transactions during the year ended December 31, 2016 with companies deemed affiliated during the year or at December 31, 2016.

		Share Activity								Year Ended December 31, 2016
	Security Name	Balance 12/31/2015		Purchases		Sales		Balance 12/31/2016		Value			Dividend Income			Net realized gain (loss)				Change in net unrealized appreciation (depreciation)
π	Global X MSCI Greece ETF		1,987,000		855,000		716,000		2,126,000		$	16,562		$	337		$	(1,545	)		$	1,978
	iShares MSCI Frontier 100 ETF		—		1,068,000		85,000		983,000			24,428			27			(4	)			(109	)
π	WisdomTree Emerging Markets Local Debt Fund ETF		415,000		—		88,500		326,500			11,679			673			(945	)			1,683
											$	52,669		$	1,037		$	(2,494	)		$	3,552

π = Affiliated company at December 31, 2016. The Fund’s total value in companies deemed to be affiliated at December 31, 2016 was $28,241.

Forward Foreign Currency Contracts

Settlement Date	Deliver/Receive	Counterparty	Local Currency (in thousands)		Current Value			Net Unrealized Appreciation (Depreciation)
Purchased
3/15/17	Brazilian Real	Citibank N.A. London		95,498		$	28,737		$	703
3/15/17	Chinese Yuan Renminbi	Citibank N.A. London		341,588			48,089			(668	)
3/15/17	Colombian Peso	Citibank N.A. London		128,893,841			42,385			(579	)
3/15/17	Czech Koruna	Citibank N.A. London		106,185			4,153			14
3/15/17	British Pound Sterling	Citibank N.A. London		60,858			75,143			(2,344	)
3/15/17	Hong Kong Dollar	Citibank N.A. London		20,271			2,615			—
3/15/17	Indonesian Rupiah	Citibank N.A. London		417,211,765			30,558			(503	)
3/15/17	Indian Rupee	Citibank N.A. London		1,868,978			27,278			(174	)
3/15/17	Japanese Yen	Citibank N.A. London		367,328			3,155			(5	)
3/15/17	Mexican Peso	Citibank N.A. London		1,327,291			63,387			(1,687	)
3/15/17	Norwegian Krone	Citibank N.A. London		295,483			34,235			(680	)
3/15/17	New Zealand Dollar	Citibank N.A. London		7,116			4,932			(9	)
3/15/17	Philippine Peso	Citibank N.A. London		2,824,174			56,661			307
3/15/17	Polish Zloty	Citibank N.A. London		196,994			47,013			(252	)
3/15/17	Singapore Dollar	Citibank N.A. London		97,483			67,290			(1,168	)
3/15/17	Thai Baht	Citibank N.A. London		240,533			6,714			(2	)
3/15/17	New Turkish Lira	Citibank N.A. London		50,259			14,022			(232	)
3/15/17	South African Rand	Citibank N.A. London		560,748			40,258			(148	)
3/16/17	Hungarian Forint	Citibank N.A. London		14,216,114			48,485			73
									$	(7,354	)
Sold
3/15/17	Australian Dollar	Citibank N.A. London		70,959		$	51,114		$	2,098
3/15/17	Canadian Dollar	Citibank N.A. London		130,456			97,250			2,532
3/15/17	Swiss Franc	Citibank N.A. London		142,701			140,802			1,363
3/15/17	Chilean Peso	Citibank N.A. London		11,227,559			16,675			(77	)
3/15/17	Chinese Yuan Renminbi	Citibank N.A. London		16,531			2,327			(2	)
3/15/17	Czech Koruna	Citibank N.A. London		1,851,810			72,424			1,073
3/15/17	Euro	Citibank N.A. London		126,913			134,105			1,402
3/15/17	British Pound Sterling	Citibank N.A. London		3,379			4,172			(21	)
3/15/17	Hong Kong Dollar	Citibank N.A. London		688,563			88,820			(43	)
3/15/17	Japanese Yen	Citibank N.A. London		4,849,486			41,650			711
3/15/17	South Korean Won	Citibank N.A. London		8,960,418			7,420			275
3/15/17	Norwegian Krone	Citibank N.A. London		26,786			3,103			(8	)
3/15/17	New Zealand Dollar	Citibank N.A. London		121,963			84,537			3,324
3/15/17	Philippine Peso	Citibank N.A. London		119,111			2,390			(11	)
3/15/17	Russian Ruble	Citibank N.A. London		101,376			1,623			(9	)
3/15/17	Singapore Dollar	Citibank N.A. London		4,261			2,941			(1	)
3/15/17	Thai Baht	Citibank N.A. London		4,211,508			117,564			673
3/15/17	New Turkish Lira	Citibank N.A. London		10,687			2,982			4
3/15/17	Taiwan Dollar	Citibank N.A. London		972,328			30,015			698
3/15/17	South African Rand	Citibank N.A. London		37,638			2,702			24
3/16/17	Hungarian Forint	Citibank N.A. London		1,277,172			4,356			(43	)
									$	13,962

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 109

Macro Allocation Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Futures Contracts
Number of Contracts	Description	Expiration Date	Local Currency	Notional Amount (Local, in Thousands)		Net Unrealized Appreciation (Depreciation)
Long
48	Amsterdam Index	January 2017	Euro		4,638	$	105
313	CAC 40 Index	January 2017	Euro		15,221		276
1,446	IBEX 35 Index	January 2017	Euro		134,672		2,840
181	MSCI Taiwan Index	January 2017	U.S. Dollar		6,223		86
141	H-Shares Index	January 2017	Hong Kong Dollar		66,185		67
48	HANG SENG Index	January 2017	Hong Kong Dollar		52,709		93
1,844	MSCI Singapore ETS Index	January 2017	Singapore Dollar		58,971		(194	)
209	KOSPI 200 Index	March 2017	South Korean Won		27,175,225		890
446	10YR JGB Mini	March 2017	Japanese Yen		6,702,488		24
181	SPI 200 Index	March 2017	Australian Dollar		25,480		427
24	DAX Index	March 2017	Euro		6,879		187
9,073	EURO STOXX 600 Banks Index	March 2017	Euro		75,986		(2,206	)
602	FTSE 100 Index	March 2017	British Pound Sterling		42,441		1,265
819	FTSE MIB Index	March 2017	Euro		78,645		2,012
						$	5,872
Short
482	OMXS 30 Index	January 2017	Swedish Krona		73,216	$	99
12	EURO-BTP	March 2017	Euro		1,624		(37	)
193	EURO-OAT*	March 2017	Euro		29,301		(483	)
783	NIKKEI 225 Index	March 2017	Japanese Yen		7,465,905		(2,884	)
241	TOPIX Index	March 2017	Japanese Yen		3,658,380		(1,155	)
2,157	FTSE/JSE Top 40 Index	March 2017	South African Rand		955,681		844
386	S&P TSX 60 Index	March 2017	Canadian Dollar		69,241		(106	)
940	EURO STOXX 50 Index	March 2017	Euro		30,804		(512	)
2,265	MEX BOLSA Index	March 2017	Mexican Peso		1,037,008		1,087
747	Russell 2000 Mini Index	March 2017	U.S. Dollar		50,680		119
3,315	S&P 500 E Mini Index	March 2017	U.S. Dollar		370,650		925
566	10YR Can Bond	March 2017	Canadian Dollar		77,842		565
819	10YR US Treasury Notes*	March 2017	U.S. Dollar		101,786		376
133	Long Gilt	March 2017	British Pound Sterling		16,735		(348	)
446	5YR US Treasury Notes*	March 2017	U.S. Dollar		52,478		206
						$	(1,304	)

* Exposure to Futures Contract is achieved through the use of a swap contract with Credit Suisse.

Centrally Cleared Interest Rate Swap

Floating Rate Reference	Pay/Receive Floating Rate	Fixed Rate		Maturity Date	Cleared Exchange	Notional Amount (in thousands)		Unrealized Appreciation (Depreciation)
6 Month Swiss Franc LIBOR Rate	Receive	0.000%	December 2026		CME		43,680 CHF	$	1,710

Total Return Swaps
Reference Entity	Pay/Receive Floating Rate	Floating Rates	Maturity Dates	Counterparty	Notional Amount (in thousands)		Unrealized Appreciation (Depreciation)
Euro STOXX Bank Gross Return Index	Receive	3 Month EURIBOR minus 12 bp	Mar 2017	Credit Suisse International		7,836	$	159
Dow Jones US Telecommunications Total Return Index	Receive	3 Month LIBOR minus 41 bp	Mar 2017	Goldman Sachs International		32,948		(585	)
Dow Jones US Healthcare Total Return Index	Receive	3 Month LIBOR plus 10 bp	Mar 2017	Citibank N.A.		24,763		293
Dow Jones US Technology Total Return Index	Receive	3 Month LIBOR plus 10 bp	Mar 2017	Citibank N.A.		48,701		925
Consumer Discretionary Select Sector Total Return Index	Receive	3 Month LIBOR minus 46 bp	Mar 2017	Goldman Sachs International		56,766		958

See accompanying Notes to Financial Statements.

110 Annual Report December 31, 2016

Macro Allocation Fund

Portfolio of Investments, December 31, 2016 (all dollar amounts in thousands)

Total Return Swaps (continued)
Reference Entity	Pay/Receive Floating Rate	Floating Rates	Maturity Dates	Counterparty	Notional Amount (in thousands)		Unrealized Appreciation (Depreciation)
MSCI China Small Cap Index (Net)	Pay	3 Month LIBOR plus 35 bp	Dec 2017	Goldman Sachs International		10,770	$	(233	)
MSCI China Small Cap Index (Net)	Pay	1 Month LIBOR plus 75 bp	Mar 2017	Credit Suisse International		3,068		238
MSCI China Small Cap Index (Net)	Pay	1 Month LIBOR plus 20 bp - 40 bp	May 2017 to Aug 2017	Citibank N.A.		14,950		474
MSCI China Small Cap Index (Net)	Pay	3 Month LIBOR plus 20 bp	Dec 2017	Citibank N.A.		6,597		(257	)
MSCI Emerging Markets Small Cap (Net)	Pay	3 Month LIBOR plus 81 bp	Dec 2017	Credit Suisse International		16,479		122
MSCI Emerging Markets Small Cap (Net)	Pay	1 Month LIBOR plus 96 bp	Mar 2017	Credit Suisse International		13,655		1,456
MSCI Vietnam Daily Total Return Index	Pay	3 Month LIBOR plus 100 bp	Mar 2017	Goldman Sachs International		8,293		(123	)
Vietnam Equity Basket	Pay	3 Month LIBOR plus 100 bp	Mar 2017	Goldman Sachs International		8,345		122
							$	3,549

Centrally Cleared Credit Default Swap
Reference Entity	Buy/Sell Protection	Fixed Deal Pay Rate		Maturity Date	Cleared Exchange	Notional Amount (in thousands)		Unrealized Appreciation (Depreciation)
iTRAXX Europe S26	Sell	1.000	%	Dec 2021	ICE		$42,451		$	(58	)
iTRAXX Europe Crossover S26	Sell	5.000	%	Dec 2021	ICE		13,038			160
									$	102
Variance Swap
Reference Entity	Pay/Receive Floating Rate	Variance Strike Price		Maturity Date	Counterparty	Notional Amount (in thousands)		Unrealized Appreciation (Depreciation)
Euro Stoxx 50	Pay	910.2289		Dec 2017	Citibank N.A.		757		$	4,775
		Total Net Unrealized Appreciation (Depreciation) on Swaps							$	10,136

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 111

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

			Large Cap			Mid Cap			Mid Cap
	Growth		Growth			Growth			Value
	Fund		Fund			Fund			Fund
Assets
Investments in securities, at cost	$	480,335	$	107,956		$	119,239		$	2,385
Investments in securities, at value	$	579,584	$	122,156		$	134,349		$	3,007
Cash		—		—			—			27
Receivable for securities sold		—		71			2,260			—
Receivable for fund shares sold		435		278			80			1
Receivable from Adviser		—		5			8			7
Dividend and interest receivable		303		33			52			5
Total assets		580,322		122,543			136,749			3,047
Liabilities
Payable for investment securities purchased		1,698		—			836			—
Payable for fund shares redeemed		221		84			64			—
Management fee payable		373		73			113			3
Distribution fee payable		14		3			4			—
Other payables and accrued expenses		210		48			74			35
Total liabilities		2,516		208			1,091			38
Net assets	$	577,806	$	122,335		$	135,658		$	3,009
Capital
Composition of net assets
Par value of shares of beneficial interest	$	47	$	11		$	12		$	—
Capital paid in excess of par value		444,755		108,201			124,059			2,328
Accumulated net investment income (loss)		—		—			—			—
Accumulated net realized gain (loss)		33,755		(77	)		(3,523	)		59
Net unrealized appreciation (depreciation) of investments and foreign currencies		99,249		14,200			15,110			622
Net assets	$	577,806	$	122,335		$	135,658		$	3,009
Class N shares
Net assets	$	62,936	$	11,860		$	16,234		$	362
Shares outstanding		5,514,642		1,156,473			1,519,217			34,863
Net asset value per share	$	11.41	$	10.26		$	10.69		$	10.38
Class I shares
Net assets	$	514,870	$	110,475		$	119,424		$	2,647
Shares outstanding		41,563,387		10,325,120			10,665,738			255,414
Net asset value per share	$	12.39	$	10.70		$	11.20		$	10.36

See accompanying Notes to Financial Statements.

112 Annual Report December 31, 2016

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

				Large Cap			Mid Cap			Mid Cap
	Growth			Growth			Growth			Value
	Fund			Fund			Fund			Fund
Investment income
Dividends	$	7,907		$	1,044		$	1,252		$	58
Interest		3			—			1			1
Total income		7,910			1,044			1,253			59
Expenses
Investment advisory fees		5,384			606			1,516			30
Distribution fees		275			30			51			2
Custodian fees		41			28			45			36
Transfer agent fees		90			14			21			1
Sub-transfer agent fees
Class N		178			15			24			1
Class I		632			49			143			—
Professional fees		71			34			39			27
Registration fees		43			35			50			30
Shareholder reporting fees		20			5			32			—
Trustee fees		56			5			13			—
Other expenses		46			6			10			4
Total expenses before expense limitation		6,836			827			1,944			131
Expenses waived or reimbursed by the Adviser		—			(104	)		(217	)		(97	)
Net expenses		6,836			723			1,727			34
Net investment income (loss)		1,074			321			(474	)		25
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities		66,007			1,326			(1,862	)		227
Total net realized gain (loss)		66,007			1,326			(1,862	)		227
Change in net unrealized appreciation (depreciation) of:
Investments in securities		(71,577	)		1,381			1,967			214
Change in net unrealized appreciation (depreciation)		(71,577	)		1,381			1,967			214
Net increase (decrease) in net assets resulting from operations	$	(4,496	)	$	3,028		$	(369	)	$	466

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 113

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

							Large Cap						Mid Cap						Mid Cap
	Growth Fund						Growth Fund						Growth Fund						Value Fund
	2016			2015			2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	1,074		$	(250	)	$	321		$	(4	)	$	(474	)	$	(1,275	)	$	25		$	22
Net realized gain (loss) on investments, and other assets and liabilities		66,007			57,036			1,326			4,789			(1,862	)		36,493			227			661
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(71,577	)		(9,544	)		1,381			(463	)		1,967			(30,371	)		214			(671	)
Net increase (decrease) in net assets resulting from operations		(4,496	)		47,242			3,028			4,322			(369	)		4,847			466			12
Distributions to shareholders from
Net investment income
Class N		—			—			(9	)		—			—			—			(2	)		(2	)
Class I		(1,133	)		—			(334	)		—			—			—			(27	)		(10	)
Net realized gain
Class N		(5,224	)		(18,526	)		(98	)		(971	)		(912	)		(5,530	)		(30	)		(149	)
Class I		(38,810	)		(80,435	)		(863	)		(5,265	)		(6,417	)		(35,853	)		(218	)		(438	)
Total distributions		(45,167	)		(98,961	)		(1,304	)		(6,236	)		(7,329	)		(41,383	)		(277	)		(599	)
Capital stock transactions
Net proceeds from sale of shares		75,891			122,787			75,429			17,152			20,647			33,162			1,094			661
Shares issued in reinvestment of income dividends and capital gain distributions		44,227			95,837			1,134			5,376			7,111			39,576			277			573
Less cost of shares redeemed		(339,147	)		(281,210	)		(25,433	)		(10,742	)		(84,124	)		(176,266	)		(1,219	)		(1,747	)
Net increase (decrease) in net assets resulting from capital share transactions		(219,029	)		(62,586	)		51,130			11,786			(56,366	)		(103,528	)		152			(513	)
Increase (decrease) in net assets		(268,692	)		(114,305	)		52,854			9,872			(64,064	)		(140,064	)		341			(1,100	)
Net assets
Beginning of period		846,498			960,803			69,481			59,609			199,722			339,786			2,668			3,768
End of period	$	577,806		$	846,498		$	122,335		$	69,481		$	135,658		$	199,722		$	3,009		$	2,668
Accumulated net investment income (loss) at the end of the period	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	5

See accompanying Notes to Financial Statements.

114 Annual Report December 31, 2016

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

	Small-Mid			Small-Mid			Small Cap		Small Cap
	Cap Growth			Cap Value			Growth		Value
	Fund			Fund			Fund		Fund
Assets
Investments in securities, at cost	$	1,110,075		$	2,527		$	316,384	$	523,810
Investments in securities, at value	$	1,270,556		$	3,391		$	389,647	$	705,993
Receivable for securities sold		31,489			103			4,763		8,880
Receivable for fund shares sold		8,746			14			623		2,047
Receivable from Adviser		82			11			—		12
Dividend and interest receivable		325			5			104		1,046
Total assets		1,311,198			3,524			395,137		717,978
Liabilities
Payable for investment securities purchased		5,124			5			5,030		2,386
Payable for fund shares redeemed		42,052			2			619		6,167
Payable to custodian		—			19			—		—
Management fee payable		1,105			3			368		666
Distribution fee payable		42			—			25		7
Other payables and accrued expenses		298			42			197		121
Total liabilities		48,621			71			6,239		9,347
Net assets	$	1,262,577		$	3,453		$	388,898	$	708,631
Capital
Composition of net assets
Par value of shares of beneficial interest	$	63		$	—		$	15	$	34
Capital paid in excess of par value		1,103,158			2,603			305,422		525,593
Accumulated net investment income (loss)		—			—			—		—
Accumulated net realized gain (loss)		(1,125	)		(14	)		10,198		821
Net unrealized appreciation (depreciation) of investments and foreign currencies		160,481			864			73,263		182,183
Net assets	$	1,262,577		$	3,453		$	388,898	$	708,631
Class N shares
Net assets	$	171,638		$	267		$	117,068	$	33,359
Shares outstanding		8,937,999			18,367			4,637,793		1,653,137
Net asset value per share	$	19.20		$	14.53		$	25.24	$	20.18
Class I shares
Net assets	$	1,090,939		$	3,186		$	271,830	$	675,272
Shares outstanding		54,483,480			220,155			9,944,201		32,653,205
Net asset value per share	$	20.02		$	14.47		$	27.34	$	20.68

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 115

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

	Small-Mid			Small-Mid			Small Cap			Small Cap
	Cap Growth			Cap Value			Growth			Value
	Fund			Fund			Fund			Fund
Investment income
Dividends	$	10,147		$	67		$	2,590		$	10,438
Less foreign tax withheld		(32	)		—			(10	)		—
Interest		11			—			3			4
Total income		10,126			67			2,583			10,442
Expenses
Investment advisory fees		12,281			40			3,985			6,681
Distribution fees		499			2			270			80
Custodian fees		38			38			35			36
Transfer agent fees		79			1			50			33
Sub-transfer agent fees
Class N		262			—			130			40
Class I		1,133			2			223			783
Professional fees		101			35			56			58
Registration fees		72			36			50			37
Shareholder reporting fees		212			—			73			40
Trustee fees		79			—			25			40
Other expenses		47			5			16			55
Total expenses before expense limitation		14,803			159			4,913			7,883
Expenses waived or reimbursed by the Adviser		(817	)		(112	)		(117	)		(210	)
Net expenses		13,986			47			4,796			7,673
Net investment income (loss)		(3,860	)		20			(2,213	)		2,769
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities		25,506			159			35,282	(1)		24,542
Redemptions in-kind		52,031			—			—			—
Total net realized gain (loss)		77,537			159			35,282			24,542
Change in net unrealized appreciation (depreciation) of:
Investments in securities		12,814			522			30,352	(2)		117,767
Change in net unrealized appreciation (depreciation)		12,814			522			30,352			117,767
Net increase (decrease) in net assets resulting from operations	$	86,491		$	701		$	63,421		$	145,078

(1)	Includes $3,587 from companies deemed affiliated during the year.
(2)	Includes $2,483 from companies deemed affiliated during the year.

See accompanying Notes to Financial Statements.

116 Annual Report December 31, 2016

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

	Small-Mid						Small-Mid						Small Cap						Small Cap
	Cap Growth Fund						Cap Value Fund						Growth Fund						Value Fund
	2016			2015			2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	(3,860	)	$	(3,239	)	$	20		$	21		$	(2,213	)	$	(3,146	)	$	2,769		$	2,407
Net realized gain (loss) on investments, and other assets and liabilities		77,537			61,943			159			129			35,282			27,594			24,542			6,099
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		12,814			(21,167	)		522			(280	)		30,352			(39,914	)		117,767			(41,101	)
Net increase (decrease) in net assets resulting from operations		86,491			37,537			701			(130	)		63,421			(15,466	)		145,078			(32,595	)
Distributions to shareholders from
Net investment income
Class N		—			—			(1	)		(1	)		—			—			(58	)		—
Class I		—			—			(23	)		(10	)		—			—			(2,771	)		(1,363	)
Net realized gain
Class N		(5,332	)		(8,564	)		(10	)		(44	)		(6,573	)		(9,437	)		(1,334	)		(107	)
Class I		(28,097	)		(50,588	)		(129	)		(162	)		(14,099	)		(20,150	)		(26,512	)		(1,836	)
Total distributions		(33,429	)		(59,152	)		(163	)		(217	)		(20,672	)		(29,587	)		(30,675	)		(3,306	)
Capital stock transactions
Net proceeds from sale of shares		533,654			428,159			640			435			51,636			94,104			133,395			174,197
Shares issued in reinvestment of income dividends and capital gain distributions		33,051			57,336			164			136			20,471			28,974			28,779			3,045
Less cost of shares redeemed		(546,329	)		(151,577	)		(1,964	)		(502	)		(99,171	)		(217,254	)		(180,307	)		(114,166	)
Net increase (decrease) in net assets resulting from capital share transactions		20,376			333,918			(1,160	)		69			(27,064	)		(94,176	)		(18,133	)		63,076
Increase (decrease) in net assets		73,438			312,303			(622	)		(278	)		15,685			(139,229	)		96,270			27,175
Net assets
Beginning of period		1,189,139			876,836			4,075			4,353			373,213			512,442			612,361			585,186
End of period	$	1,262,577		$	1,189,139		$	3,453		$	4,075		$	388,898		$	373,213		$	708,631		$	612,361
Accumulated net investment income (loss) at the end of the period	$	—		$	—		$	—		$	4		$	—		$	—		$	—		$	236

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 117

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

										Institutional
	Global			International			International			International
	Leaders			Leaders			Equity			Equity
	Fund			Fund			Fund			Fund
Assets
Investments in securities, at cost	$	156,977		$	239,540		$	80,267		$	15,244
Investments in securities, at value	$	176,783		$	252,439		$	87,244		$	16,573
Cash		—			—			4			1
Foreign currency, at value (cost $415; $1,182; $187; $50)		414			1,180			186			50
Receivable for securities sold		—			1,433			20			5
Receivable for fund shares sold		—			1,356			—			—
Receivable from Adviser or an affiliate		23			24			14			11
Dividend and interest receivable		149			290			134			33
Total assets		177,369			256,722			87,602			16,673
Liabilities
Payable for investment securities purchased		403			1,175			116			27
Payable for fund shares redeemed		11			15			—			—
Management fee payable		150			202			65			13
Shareholder administration fee payable		7			4			—			—
Distribution fee payable		1			1			1			—
Foreign capital gains tax liability		—			1			—			—
Other payables and accrued expenses		66			102			83			68
Total liabilities		638			1,500			265			108
Net assets	$	176,731		$	255,222		$	87,337		$	16,565
Capital
Composition of net assets
Par value of shares of beneficial interest	$	15		$	20		$	6		$	1
Capital paid in excess of par value		159,039			243,708			157,009			106,278
Accumulated net investment income (loss)		488			(956	)		816			(112	)
Accumulated net realized gain (loss)		(2,611	)		(429	)		(77,465	)		(90,929	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		19,800			12,879			6,971			1,327
Net assets	$	176,731		$	255,222		$	87,337		$	16,565
Class N shares
Net assets	$	5,760		$	2,922		$	2,954			—
Shares outstanding		496,400			226,890			215,956			—
Net asset value per share	$	11.60		$	12.88		$	13.68			—
Class I shares
Net assets	$	45,772		$	30,944		$	84,383			—
Shares outstanding		3,939,470			2,395,167			6,111,821			—
Net asset value per share	$	11.62		$	12.92		$	13.81			—
Institutional Class shares
Net assets	$	125,199		$	221,356			—		$	16,565
Shares outstanding		10,774,086			17,138,983			—			1,398,687
Net asset value per share	$	11.62		$	12.92			—		$	11.84

See accompanying Notes to Financial Statements.

118 Annual Report December 31, 2016

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

										Institutional
	Global			International			International			International
	Leaders			Leaders			Equity			Equity
	Fund			Fund			Fund			Fund
Investment income
Dividends	$	3,020		$	3,914		$	1,917		$	465
Less foreign tax withheld		(204	)		(352	)		(164	)		(39	)
Interest		1			2			1			—
Total income		2,817			3,564			1,754			426
Expenses
Investment advisory fees		1,774			1,823			683			142
Distribution fees		14			2			7			—
Shareholder administration fees		77			33			—			—
Custodian fees		53			66			52			48
Transfer agent fees		8			4			3			—
Sub-transfer agent fees
Class N		6			1			3			—
Class I		24			19			59			—
Professional fees		54			64			67			64
Registration fees		47			53			34			20
Shareholder reporting fees		4			1			1			—
Trustee fees		12			9			4			1
Other expenses		14			16			6			4
Total expenses before expense limitation		2,087			2,091			919			279
Expenses waived or reimbursed by the Adviser or an affiliate		(271	)		(246	)		(196	)		(122	)
Net expenses		1,816			1,845			723			157
Net investment income (loss)		1,001			1,719			1,031			269
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities, net of foreign taxes, if applicable		(1,893	)		(261	)		(2,405	)		(823	)
Foreign currency transactions		(45	)		(101	)		(60	)		(10	)
Total net realized gain (loss)		(1,938	)		(362	)		(2,465	)		(833	)
Change in net unrealized appreciation (depreciation) of:
Investments in securities		2,131			2,423			1,793			514
Foreign currency translations		20			(7	)		1			1
Change in net unrealized appreciation (depreciation)		2,151			2,416			1,794			515
Net increase (decrease) in net assets resulting from operations	$	1,214		$	3,773		$	360		$	(49	)

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 119

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

	Global Leaders Fund						International Leaders Fund						International Equity Fund						Institutional International Equity Fund
	2016			2015			2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	1,001		$	848		$	1,719		$	857		$	1,031		$	875		$	269		$	194
Net realized gain (loss) on investments, and other assets and liabilities		(1,938	)		7,126			(362	)		(149	)		(2,465	)		1,894			(833	)		417
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		2,151			(3,415	)		2,416			4,684			1,794			(1,349	)		515			(426	)
Net increase (decrease) in net assets resulting from operations		1,214			4,559			3,773			5,392			360			1,420			(49	)		185
Distributions to shareholders from
Net investment income
Class N		—			(3	)		(23	)		(1	)		(29	)		(26	)		—			—
Class I		(124	)		(152	)		(293	)		(22	)		(823	)		(750	)		—			—
Institutional Class		(403	)		(552	)		(2,350	)		(323	)		—			—			(336	)		(156	)
Net realized gain
Class N		(27	)		(252	)		—			(2	)		—			—			—			—
Class I		(206	)		(2,063	)		—			(73	)		—			—			—			—
Institutional Class		(559	)		(6,144	)		—			(578	)		—			—			—			—
Total distributions		(1,319	)		(9,166	)		(2,666	)		(999	)		(852	)		(776	)		(336	)		(156	)
Capital stock transactions
Net proceeds from sale of shares		32,576			41,785			158,486			24,052			25,707			5,655			967			2,425
Shares issued in reinvestment of income dividends and capital gain distributions		1,244			8,986			1,783			773			780			706			336			156
Less cost of shares redeemed		(45,952	)		(20,858	)		(22,232	)		(1,102	)		(2,564	)		(11,608	)		(383	)		(1,154	)
Net increase (decrease) in net assets resulting from capital share transactions		(12,132	)		29,913			138,037			23,723			23,923			(5,247	)		920			1,427
Increase (decrease) in net assets		(12,237	)		25,306			139,144			28,116			23,431			(4,603	)		535			1,456
Net assets
Beginning of period		188,968			163,662			116,078			87,962			63,906			68,509			16,030			14,574
End of period	$	176,731		$	188,968		$	255,222		$	116,078		$	87,337		$	63,906		$	16,565		$	16,030
Accumulated net investment income (loss) at the end of the period	$	488		$	(40	)	$	(956	)	$	92		$	816		$	586		$	(112	)	$	(62	)

See accompanying Notes to Financial Statements.

120 Annual Report December 31, 2016

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

				Institutional			International
	International			International			Small Cap
	Growth			Growth			Growth
	Fund			Fund			Fund
Assets
Investments in securities, at cost	$	2,781,661		$	1,954,094		$	484,459
Investment in affiliated companies, at cost		102			63			—
Investments in securities, at value	$	2,984,226		$	2,081,665		$	516,867
Investment in affiliated companies, at value		164			102			—
Cash		93			64			—
Foreign currency, at value (cost $51, $36, $52)		51			36			52
Receivable for securities sold		7,996			5,940			724
Receivable for fund shares sold		4,110			16,550			446
Receivable from Adviser or an affiliate		—			—			40
Dividend and interest receivable		8,772			3,864			818
Total assets		3,005,412			2,108,221			518,947
Liabilities
Payable for investment securities purchased		11,663			8,055			1,436
Payable for fund shares redeemed		8,899			3,979			242
Management fee payable		2,555			1,652			435
Shareholder administration fee payable		—			—			40
Distribution fee payable		154			—			2
Foreign capital gains tax liability		262			113			—
Other payables and accrued expenses		634			451			159
Total liabilities		24,167			14,250			2,314
Net assets	$	2,981,245		$	2,093,971		$	516,633
Capital
Composition of net assets
Par value of shares of beneficial interest	$	123		$	144		$	40
Capital paid in excess of par value		3,205,605			2,051,567			487,164
Accumulated net investment income (loss)		9,881			13,670			(2,734	)
Accumulated net realized gain (loss)		(436,525	)		(98,769	)		(192	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		202,161			127,359			32,355
Net assets	$	2,981,245		$	2,093,971		$	516,633
Class N shares
Net assets	$	729,544			—		$	10,361
Shares outstanding		30,571,311			—			805,330
Net asset value per share	$	23.86			—		$	12.87
Class I shares
Net assets	$	2,251,701			—		$	306,526
Shares outstanding		92,207,650			—			23,570,043
Net asset value per share	$	24.42			—		$	13.00
Institutional Class shares
Net assets		—		$	2,093,971		$	199,746
Shares outstanding		—			143,931,501			15,281,277
Net asset value per share		—		$	14.55		$	13.07

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 121

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

				Institutional			International
	International			International			Small Cap
	Growth			Growth			Growth
	Fund			Fund			Fund
Investment income
Dividends	$	82,104		$	51,493		$	13,298
Less foreign tax withheld		(7,926	)		(4,974	)		(1,111	)
Interest.		9			6			2
Total income		74,187			46,525			12,189
Expenses
Investment advisory fees		32,534			19,533			5,519
Distribution fees		1,999			—			27
Shareholder administration fees		—			—			515
Custodian fees		335			240			123
Transfer agent fees		184			57			25
Sub-transfer agent fees
Class N		1,056			—			12
Class I		2,024			—			256
Professional fees		307			232			112
Registration fees		93			23			55
Shareholder reporting fees		179			46			36
Trustee fees		239			153			39
Other expenses		123			169			23
Total expenses before expense limitation		39,073			20,453			6,742
Expenses waived or reimbursed by the Adviser or an affiliate		—			—			(515	)
Net expenses		39,073			20,453			6,227
Net investment income (loss)		35,114			26,072			5,962
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities, net of foreign taxes, if applicable		(27,938	)(1)		(51,315	)(1)		3,087
Redemptions in-kind		—			23,687			—
Foreign currency transactions		(2,189	)		(1,606	)		(324	)
Total net realized gain (loss)		(30,127	)		(29,234	)		2,763
Change in net unrealized appreciation (depreciation) of:
Investments in securities		(107,518	)(2)		(62,876	)(2)		(31,854	)
Foreign currency translations		(346	)		(86	)		28
Change in net unrealized appreciation (depreciation)		(107,864	)		(62,962	)		(31,826	)
Net increase (decrease) in net assets resulting from operations	$	(102,877	)	$	(66,124	)	$	(23,101	)

(1)	Includes $1,574 and $978 related to an affiliated fund (William Blair China A-Share Fund, LLC) for International Growth Fund and Institutional International Growth Fund, respectively.
(2)	Includes $(1,630) and $(1,012) related to an affiliated fund (William Blair China A-Share Fund, LLC) for International Growth Fund and Institutional International Growth Fund, respectively.

See accompanying Notes to Financial Statements.

122 Annual Report December 31, 2016

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

							Institutional						International
	International						International						Small Cap
	Growth Fund						Growth Fund						Growth Fund
	2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	35,114		$	35,683		$	26,072		$	28,606		$	5,962		$	4,240
Net realized gain (loss) on investments, and other assets and liabilities		(30,127	)		(23,531	)		(29,234	)		(30,439	)		2,763			18,659
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		(107,864	)		(14,462	)		(62,962	)		6,930			(31,826	)		36,257
Net increase (decrease) in net assets resulting from operations		(102,877	)		(2,310	)		(66,124	)		5,097			(23,101	)		59,156
Distributions to shareholders from
Net investment income
Class N		(10,938	)		(9,482	)		—			—			(5	)		(195	)
Class I		(40,501	)		(30,923	)		—			—			(1,063	)		(7,300	)
Institutional Class		—			—			(23,809	)		(13,779	)		(845	)		(4,603	)
Net realized gain
Class N		—			—			—			—			(2	)		(29	)
Class I		—			—			—			—			(57	)		(919	)
Institutional Class		—			—			—			(15,858	)		(37	)		(557	)
Total distributions		(51,439	)		(40,405	)		(23,809	)		(29,637	)		(2,009	)		(13,603	)
Capital stock transactions
Net proceeds from sale of shares		437,982			837,025			237,672			297,180			63,344			78,346
Shares issued in reinvestment of income dividends and capital gain distributions		48,138			36,885			22,693			28,849			1,827			11,877
Less cost of shares redeemed		(1,029,303	)		(835,938	)		(412,093	)		(305,026	)		(98,028	)		(184,116	)
Net increase (decrease) in net assets resulting from capital share transactions		(543,183	)		37,972			(151,728	)		21,003			(32,857	)		(93,893	)
Increase (decrease) in net assets		(697,499	)		(4,743	)		(241,661	)		(3,537	)		(57,967	)		(48,340	)
Net assets
Beginning of period		3,678,744			3,683,487			2,335,632			2,339,169			574,600			622,940
End of period	$	2,981,245		$	3,678,744		$	2,093,971		$	2,335,632		$	516,633		$	574,600
Accumulated net investment income (loss) at the end of the period	$	9,881		$	21,204		$	13,670		$	7,048		$	(2,734	)	$	(7,282	)

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 123

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

	Emerging			Emerging			Emerging
	Markets			Markets			Markets
	Leaders			Growth			Small Cap
	Fund			Fund			Growth Fund
Assets
Investments in securities, at cost	$	299,589		$	874,426		$	271,178
Investment in affiliated companies, at cost		—			125			—
Investments in securities, at value	$	305,577		$	926,518		$	285,217
Investment in affiliated companies, at value		—			201			—
Foreign currency, at value (cost $—; $332; $21)		—			332			21
Receivable for securities sold		366			7,432			2,524
Receivable for fund shares sold		141			219			1,180
Receivable from Adviser or an affiliate		53			13			36
Dividend and interest receivable		332			827			766
Total assets		306,469			935,542			289,744
Liabilities
Payable for investment securities purchased		436			196			350
Payable for fund shares redeemed		28			315			5,778
Management fee payable		287			879			273
Shareholder administration fee payable		4			13			21
Distribution fee payable		1			2			2
Foreign capital gains tax liability		—			—			182
Other payables and accrued expenses		210			394			276
Total liabilities		966			1,799			6,882
Net assets	$	305,503		$	933,743		$	282,862
Capital
Composition of net assets
Par value of shares of beneficial interest	$	39		$	84		$	21
Capital paid in excess of par value		326,255			1,021,046			307,658
Accumulated net investment income (loss)		(390	)		4,148			(7,782	)
Accumulated net realized gain (loss)		(26,389	)		(143,713	)		(30,941	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		5,988			52,178			13,906
Net assets	$	305,503		$	933,743		$	282,862
Class N shares
Net assets	$	2,479		$	8,488		$	9,263
Shares outstanding		316,154			772,639			674,670
Net asset value per share	$	7.84		$	10.99		$	13.73
Class I shares
Net assets	$	30,346		$	93,668		$	147,949
Shares outstanding		3,857,496			8,440,416			10,742,348
Net asset value per share	$	7.87		$	11.10		$	13.77
Institutional Class shares
Net assets	$	272,678		$	831,587		$	125,650
Shares outstanding		34,677,922			74,368,343			9,108,955
Net asset value per share	$	7.86		$	11.18		$	13.79

See accompanying Notes to Financial Statements.

124 Annual Report December 31, 2016

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

							Emerging
	Emerging			Emerging			Markets
	Markets			Markets			Small Cap
	Leaders			Growth			Growth
	Fund			Fund			Fund
Investment income
Dividends	$	4,149		$	20,028		$	7,203
Less foreign tax withheld		(442	)		(2,265	)		(656	)
Interest		—			3			—
Total income		3,707			17,766			6,547
Expenses
Investment advisory fees		2,444			10,960			3,297
Distribution fees		4			23			26
Shareholder administration fees		46			169			257
Custodian fees		147			443			267
Transfer agent fees		9			40			57
Sub-transfer agent fees
Class N		1			6			12
Class I		15			75			85
Professional fees		136			197			165
Registration fees		200			56			61
Shareholder reporting fees		11			11			30
Trustee fees		9			61			20
Other expenses		17			39			29
Total expenses before expense limitation		3,039			12,080			4,306
Expenses waived or reimbursed by the Adviser or an affiliate		(242	)		(169	)		(435	)
Net expenses		2,797			11,911			3,871
Net investment income (loss)		910			5,855			2,676
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities, net of foreign taxes, if applicable		(14,648	)		(77,113	)(1)		(25,946	)
Foreign currency transactions		(865	)		(1,003	)		(893	)
Total net realized gain (loss)		(15,513	)		(78,116	)		(26,839	)
Change in net unrealized appreciation (depreciation) of:
Investments in securities		12,085			83,290	(2)		7,317
Foreign currency translations		2			14			48
Change in net unrealized appreciation (depreciation)		12,087			83,304			7,365
Net increase (decrease) in net assets resulting from operations	$	(2,516	)	$	11,043		$	(16,798	)

(1)	Includes $1,931 related to an affiliated fund (William Blair China A-Share Fund, LLC).
(2)	Includes $(2,000) related to an affiliated fund (William Blair China A-Share Fund, LLC).

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 125

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

													Emerging Markets
	Emerging Markets						Emerging Markets						Small Cap
	Leaders Fund						Growth Fund						Growth Fund
	2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	910		$	575		$	5,855		$	5,753		$	2,676		$	902
Net realized gain (loss) on investments, and other assets and liabilities		(15,513	)		(10,580	)		(78,116	)		(53,698	)		(26,839	)		3,803
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		12,087			(9,023	)		83,304			(91,961	)		7,365			(24,287	)
Net increase (decrease) in net assets resulting from operations		(2,516	)		(19,028	)		11,043			(139,906	)		(16,798	)		(19,582	)
Distributions to shareholders from
Net investment income
Class N		—			—			(18	)		—			(210	)		—
Class I		(41	)		(105	)		(416	)		—			(4,177	)		—
Institutional Class		(513	)		(331	)		(4,354	)		—			(3,339	)		(1	)
Net realized gain
Class N		—			(2	)		—			(107	)		—			(474	)
Class I		—			(44	)		—			(1,427	)		—			(6,262	)
Institutional Class		—			(126	)		—			(8,324	)		—			(4,988	)
Total distributions		(554	)		(608	)		(4,788	)		(9,858	)		(7,726	)		(11,725	)
Capital stock transactions
Net proceeds from sale of shares		242,042			81,180			375,603			315,208			61,779			123,362
Shares issued in reinvestment of income dividends and capital gain distributions		549			549			4,054			8,609			7,014			9,559
Less cost of shares redeemed		(61,696	)		(40,597	)		(331,280	)		(280,776	)		(58,248	)		(58,676	)
Net increase (decrease) in net assets resulting from capital share transactions		180,895			41,132			48,377			43,041			10,545			74,245
Increase (decrease) in net assets		177,825			21,496			54,632			(106,723	)		(13,979	)		42,938
Net assets
Beginning of period		127,678			106,182			879,111			985,834			296,841			253,903
End of period	$	305,503		$	127,678		$	933,743		$	879,111		$	282,862		$	296,841
Accumulated net investment income (loss) at the end of the period	$	(390	)	$	59		$	4,148		$	3,196		$	(7,782	)	$	(2,799	)

See accompanying Notes to Financial Statements.

126 Annual Report December 31, 2016

Statements of Assets and Liabilities

As of December 31, 2016 (dollar amounts in thousands)

							Low			Macro
	Bond			Income			Duration			Allocation
	Fund			Fund			Fund			Fund
Assets
Investments in securities, at cost	$	526,363		$	109,149		$	283,937		$	1,026,470
Investments in affiliated companies, at cost		—			—			—			55,937
Repurchase agreement, at cost		4,667			279			—			413,728
Investments in securities, at value	$	532,696		$	109,146		$	283,113		$	1,071,785
Investments in affiliated companies, at value		—			—			—			52,669
Repurchase agreement, at value		4,667			279			—			413,728
Receivable for securities sold		—			—			15,033			33,930
Receivable for fund shares sold		2,865			1,445			3,742			3,177
Receivable for futures variation margin		—			—			—			3,061
Receivable for variation margin on centrally cleared swaps		—			—			—			19
Receivable from Adviser or an affiliate		69			—			22			132
Dividend and interest receivable		4,265			632			735			3,115
Unrealized appreciation on swap contracts		—			—			—			8,324
Unrealized appreciation on forward foreign currency contracts		—			—			—			6,608
Total assets		544,562			111,502			302,645			1,596,548
Liabilities
Securities sold, not yet purchased (proceeds $—; $—; $15,033; $—)		—			—			15,025			—
Option written, at value (proceeds $—; $—; $—; $513)		—			—			—			900
Payable for variation margin on centrally cleared swaps		4			—			—			—
Payable for investment securities purchased		—			—			—			3,935
Payable for fund shares redeemed		954			559			2,294			9,228
Payable to custodian		—			—			5,060			—
Management fee payable		136			34			73			1,103
Shareholder administration fee payable		56			—			30			132
Distribution fee payable		16			7			1			14
Distributions payable to shareholders		21			5			38			—
Other payables and accrued expenses		119			27			51			318
Total liabilities		1,306			632			22,572			15,630
Net assets	$	543,256		$	110,870		$	280,073		$	1,580,918
Capital
Composition of net assets
Par value of shares of beneficial interest	$	53		$	13		$	31		$	139
Capital paid in excess of par value		544,556			118,312			300,198			1,749,215
Accumulated net investment income (loss)		35			10			20			(6,584	)
Accumulated net realized gain (loss)		(7,557	)		(7,462	)		(19,360	)		(224,902	)
Net unrealized appreciation (depreciation) of investments and foreign currencies		6,169			(3	)		(816	)		63,050
Net assets	$	543,256		$	110,870		$	280,073		$	1,580,918
Class N shares
Net assets	$	125,866		$	52,710		$	7,237		$	61,376
Shares outstanding		12,094,998			5,947,999			797,867			5,410,589
Net asset value per share	$	10.41		$	8.86		$	9.07		$	11.34
Class I shares
Net assets	$	322,174		$	58,160		$	219,714		$	937,244
Shares outstanding		31,278,896			6,610,454			24,230,478			82,312,114
Net asset value per share	$	10.30		$	8.80		$	9.07		$	11.38
Institutional Class shares
Net assets	$	95,216			—		$	53,122		$	582,298
Shares outstanding		9,251,575			—			5,856,352			51,075,629
Net asset value per share	$	10.29			—		$	9.07		$	11.40

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 127

Statements of Operations

For the Year Ended December 31, 2016 (all amounts in thousands)

							Low			Macro
	Bond			Income			Duration			Allocation
	Fund			Fund			Fund			Fund
Investment income
Dividends	$	—		$	—		$	—		$	26,801	(1)
Interest		17,508			2,559			2,949			1,480
Total income		17,508			2,559			2,949			28,281
Expenses
Investment advisory fees		1,619			373			540			13,699
Distribution fees		216			57			11			256
Shareholder administration fees		660			—			226			1,756
Custodian fees		81			44			57			136
Transfer agent fees		52			11			11			497
Sub-transfer agent fees
Class N		210			42			9			84
Class I		183			21			54			853
Professional fees		56			34			39			199
Registration fees		77			34			43			173
Shareholder reporting fees		62			8			3			79
Trustee fees		33			6			9			118
Other expenses		22			10			14			382
Total expenses before expense limitation		3,271			640			1,016			18,232
Expenses waived or reimbursed by the Adviser or an affiliate		(774	)		—			(226	)		(1,756	)
Net expenses		2,497			640			790			16,476
Net investment income (loss)		15,011			1,919			2,159			11,805
Realized and unrealized gain (loss)
Net realized gain (loss) on transactions from:
Investments in securities		608			231			85			12,112	(2)
Options		(95	)		(47	)		(95	)		(20,451	)
Futures contracts		—			—			—			(71,523	)
Swaps		(247	)		—			—			(27,217	)
Forward foreign currency contracts		—			—			—			29,084
Foreign currency transactions		—			—			—			(231	)
Total net realized gain (loss)		266			184			(10	)		(78,226	)
Change in net unrealized appreciation (depreciation) of:
Investments in securities		8,561			216			(325	)		76,264	(3)
Options		93			46			93			7,317
Futures contracts		—			—			—			1,940
Swaps		(128	)		—			—			13,920
Forward foreign currency contracts		—			—			—			4,875
Foreign currency translations		—			—			—			221
Change in net unrealized appreciation (depreciation)		8,526			262			(232	)		104,537
Net increase (decrease) in net assets resulting from operations	$	23,803		$	2,365		$	1,917		$	38,116

(1)	Includes $1,037 from companies deemed affiliated during the year.
(2)	Includes $(2,494) from companies deemed affiliated during the year.
(3)	Includes $3,552 from companies deemed affiliated during the year.

See accompanying Notes to Financial Statements.

128 Annual Report December 31, 2016

Statements of Changes in Net Assets

For the Years Ended December 31, 2016 and 2015 (all amounts in thousands)

													Low Duration						Macro Allocation
	Bond Fund						Income Fund						Fund						Fund
	2016			2015			2016			2015			2016			2015			2016			2015
Operations
Net investment income (loss)	$	15,011		$	9,519		$	1,919		$	1,862		$	2,159		$	1,409		$	11,805		$	10,368
Net realized gain (loss) on investments, and other assets and liabilities		266			514			184			(88	)		(10	)		(652	)		(78,226	)		(107,732	)
Change in net unrealized appreciation (depreciation) on investments, and other assets and liabilities		8,526			(11,340	)		262			(1,268	)		(232	)		(267	)		104,537			(40,618	)
Net increase (decrease) in net assets resulting from operations		23,803			(1,307	)		2,365			506			1,917			490			38,116			(137,982	)
Distributions to shareholders from
Net investment income
Class N		(5,237	)		(1,822	)		(1,079	)		(1,007	)		(149	)		(95	)		(1,182	)		(915	)
Class I		(11,452	)		(6,812	)		(1,868	)		(1,971	)		(3,331	)		(2,839	)		(21,809	)		(10,747	)
Institutional Class		(3,903	)		(3,598	)		—			—			(694	)		(1,185	)		(13,553	)		(4,368	)
Total distributions		(20,592	)		(12,232	)		(2,947	)		(2,978	)		(4,174	)		(4,119	)		(36,544	)		(16,030	)
Capital stock transactions
Net proceeds from sale of shares		197,394			300,131			37,313			24,005			220,929			47,534			600,557			1,559,297
Shares issued in reinvestment of income dividends and capital gain distributions		18,617			9,535			2,760			2,686			3,628			3,096			34,074			14,020
Less cost of shares redeemed		(156,760	)		(78,860	)		(24,285	)		(27,409	)		(73,939	)		(92,786	)		(787,172	)		(646,104	)
Net increase (decrease) in net assets resulting from capital share transactions		59,251			230,806			15,788			(718	)		150,618			(42,156	)		(152,541	)		927,213
Increase (decrease) in net assets		62,462			217,267			15,206			(3,190	)		148,361			(45,785	)		(150,969	)		773,201
Net assets
Beginning of period		480,794			263,527			95,664			98,854			131,712			177,497			1,731,887			958,686
End of period	$	543,256		$	480,794		$	110,870		$	95,664		$	280,073		$	131,712		$	1,580,918		$	1,731,887
Accumulated net investment income (loss) at the end of the period	$	35		$	24		$	10		$	10		$	20		$	22		$	(6,584	)	$	(10,874	)

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 129

Notes to Financial Statements

(1) Organization

(a) Description of the Trust

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

Domestic Equity Funds	International Equity Funds
Growth Large Cap Growth Mid Cap Growth Mid Cap Value Small-Mid Cap Growth Small-Mid Cap Value Small Cap Growth Small Cap Value Global Equity Fund Global Leaders Multi-Asset and Alternative Fund Macro Allocation	International Leaders International Equity Institutional International Equity International Growth Institutional International Growth International Small Cap Growth Emerging Markets Leaders Emerging Markets Growth Emerging Markets Small Cap Growth Fixed Income Funds Bond Income Low Duration

Prior to July 1, 2015, William Blair & Company, L.L.C. (“WBC” or the “Distributor”) served as both the Trust’s investment adviser and the Trust’s principal underwriter and distributor. Effective July 1, 2015, WBC transferred the management agreement for the Trust to William Blair Investment Management, LLC (“WBIM”). There were no changes to the Funds’ portfolio management teams or principal investment strategies as a result of the transfer. Any reference to the “Adviser” prior to July 1, 2015 should be read to mean WBC; any reference to the “Adviser” subsequent to July 1, 2015 should be read to mean WBIM. WBC continues to serve as the principal underwriter and distributor of the Trust.

(b) Share Classes

Three different classes of shares currently exist: N, I and Institutional.

Class N shares are offered to the general public, either directly through the Trust’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 Domestic Equity, Global Equity, International Equity and Multi-Asset and Alternative Funds and 0.15% for the Fixed Income Funds), a sub-transfer agent fee that is not a fixed rate and may vary by Fund and class, and an annual shareholder administration fee (0.15% for Global Leaders, International Leaders, International Small Cap Growth, Emerging Markets Leaders, Emerging Markets Growth, Emerging Markets Small Cap Growth, Bond, Low Duration and Macro Allocation Funds). The shareholder administration fee is currently being waived. This waiver will not be removed without approval of the Board of Trustees.

Class I shares are offered to a limited group of investors. They do not carry any sales load or distribution fees and generally have lower ongoing expenses than Class N shares. Class I shares have a sub-transfer agent fee that is not a fixed rate and may vary by Fund and class, and an annual shareholder administration fee (0.15% for Global Leaders, International Leaders, International Small Cap Growth, Emerging Markets Leaders, Emerging Markets Growth, Emerging Markets Small Cap Growth, Bond, Low Duration and Macro Allocation Funds). The shareholder administration fee is currently being waived. This waiver will not be removed without approval of the Board of Trustees.

Institutional Class shares are offered to institutional investors, including but not limited to employee benefit plans, endowments, foundations, trusts and corporations, who are able to meet the share class’s high minimum investment requirement. The minimum initial investment required is $5 million. They do not carry any sales load, distribution fees or sub-transfer agents fees and generally have lower ongoing expenses than Class N and Class I shares.

130 Annual Report December 31, 2016

Sub-transfer agent fees: For Class N and Class I shares, the Funds may reimburse WBC for fees paid to intermediaries such as banks, broker-dealers, financial advisers or other financial institutions for sub-administration, sub-transfer agency and other services provided to investors whose shares of record are held in omnibus, other group accounts, retirement plans or accounts traded through registered securities clearing agents. These fees may vary based on, for example, the nature of services provided, but generally range up to 0.15% of the assets of the class serviced or maintained by the intermediary or up to $15 per sub-account maintained by the intermediary.

(c) Fund Objectives

The investment objectives of the Funds are as follows:

Domestic 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).
Multi-Asset and Alternative	Maximize long-term risk-adjusted total return.

(2) Significant Accounting Policies

The following is a summary of the Trust’s significant accounting policies in effect during the periods covered by the financial statements, which are in accordance with U.S. generally accepted accounting principles, which includes the accounting and reporting guidelines under Accounting Standards Topic 946, Financial Services—Investment Companies.

(a) Investment income and transactions

Investment income, realized and unrealized gains and losses, and certain Fund 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 Funds have equal rights with respect to voting, subject to class specific arrangements.

Dividend income and expense are 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 accretion of 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 Macro Allocation Funds were the rates in effect on December 31, 2016. Put bonds may be redeemed at the discretion of the holder on specified dates prior to maturity.

Premiums and discounts are amortized and accreted 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-backed and asset-backed securities are treated as an adjustment to interest income. For the year ended December 31, 2016, the Bond, Income and Low Duration Funds recognized a reduction of interest income and a corresponding decrease of net realized loss of $5,803, $1,027 and $2,014, respectively (in thousands). This reclassification had no effect on the net asset value or the net assets of the Funds.

December 31, 2016 William Blair Funds 131

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

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 year 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 Funds no longer own the applicable securities, the proceeds are recorded as realized gains.

(b) Share Valuation and Distributions 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 Fund’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 (the “NYSE”), which is generally 4:00 p.m. Eastern time, on each day the NYSE is open.

Distributions from net investment income, if any, for all Equity and Multi-Asset and Alternative Funds are declared and paid at least annually. Distributions from net investment income for the Bond, Income and Low Duration Funds are declared daily and paid monthly. Capital gain distributions, if any, for all Funds, are declared and paid at least annually in December. Distributions payable to shareholders are recorded on the ex-dividend date.

(c) Foreign Currency Translation

The Funds 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, 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 Fund’s Net Asset Value, typically 4:00 p.m. Eastern time on days when there is regular trading on the NYSE. 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.

(d) Income Taxes

Each Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code, as amended (the “Code”) available to regulated investment companies. Each Fund 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.

Certain Funds may be subject to foreign income taxes imposed on realized gains on securities of issuers from certain foreign countries. Such taxes, if applicable, are included within net realized gain (loss) on transactions from investments in securities on the Statement of Operations.

Management has evaluated all of the uncertain tax positions of the Funds and has determined that no liability is required to be recorded in the financial statements.

The statute of limitations on the Funds’ prior three years tax returns remain open and the returns are subject to examination.

132 Annual Report December 31, 2016

Adjustments to the cost of investments for tax purposes are due to the deferred loss associated with current and prior year wash sales, income recognition from investments in real estate investment trusts and partnerships, and the Funds’ election to mark-to-market their investments in Passive Foreign Investment Companies (“PFICs”). The cost of investments for federal income tax purposes and related gross unrealized appreciation (depreciation) and net unrealized appreciation/(depreciation) at December 31, 2016, were as follows (in thousands):

Fund	Cost of Investments		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Net Unrealized Appreciation/ (Depreciation)
Growth	$	481,416	$	102,473	$	4,305	$	98,168
Large Cap Growth		109,172		14,760		1,776		12,984
Mid Cap Growth		120,718		17,429		3,798		13,631
Mid Cap Value		2,427		628		48		580
Small-Mid Cap Growth		1,113,065		181,182		23,691		157,491
Small-Mid Cap Value		2,555		884		48		836
Small Cap Growth		320,726		75,830		6,909		68,921
Small Cap Value		526,850		188,326		9,183		179,143
Global Leaders		158,851		20,587		2,655		17,932
International Leaders		240,783		17,090		5,434		11,656
International Equity		80,974		7,552		1,282		6,270
Institutional International Equity		15,398		1,474		299		1,175
International Growth		2,795,186		259,789		70,585		189,204
Institutional International Growth		1,960,192		171,577		50,002		121,575
International Small Cap Growth		486,202		51,726		21,061		30,665
Emerging Markets Leaders		301,580		13,042		9,045		3,997
Emerging Markets Growth		894,229		64,413		31,923		32,490
Emerging Markets Small Cap Growth		276,054		17,781		8,618		9,163
Bond		531,165		10,107		3,909		6,198
Income		109,430		947		952		(5	)
Low Duration		283,940		453		1,280		(827	)
Macro Allocation		1,499,002		61,844		22,664		39,180

In addition, the Funds 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 the tax treatment of net operating losses, Section 988 currency gains and losses, PFIC gains and losses, expiration of capital loss carryforward, paydown gains and losses, investments in real estate investment trusts and partnerships, redemptions in-kind, distribution reclassifications, income on derivatives, capital gain taxes, and utilization of earnings and profits distributed to shareholders on redemption of shares. These reclassifications have no impact on the net asset values of the Funds. Accordingly, at December 31, 2016, the following reclassifications were recorded (in thousands):

December 31, 2016 William Blair Funds 133

Fund	Accumulated Undistributed Net Investment Income (Loss)				Accumulated Undistributed Net Realized Gain/(Loss)				Capital Paid in Excess of Par Value
Growth		$	59			$	(58	)	$	(1	)
Large Cap Growth			22				(20	)		(2	)
Mid Cap Growth			474				(1	)		(473	)
Mid Cap Value			(1	)			(1	)		2
Small-Mid Cap Growth			3,860				(50,980	)		47,120
Small-Mid Cap Value			—				(47	)		47
Small Cap Growth			2,213				(2,123	)		(90	)
Small Cap Value			(176	)			176			—
Global Leaders			54				(55	)		1
International Leaders			(101	)			100			1
International Equity			51				(51	)		—
Institutional International Equity			17				(18	)		1
International Growth			5,002				(5,003	)		1
Institutional International Growth			4,359				(25,337	)		20,978
International Small Cap Growth			499				(503	)		4
Emerging Markets Leaders			(805	)			862			(57	)
Emerging Markets Growth			(115	)			114			1
Emerging Markets Small Cap Growth			67				170			(237	)
Bond			5,592				(5,576	)		(16	)
Income			1,028				13,431			(14,459	)
Low Duration			2,013				(2,015	)		2
Macro Allocation			29,029				(29,029	)		—

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.

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 distributions paid during 2016 and 2015 was as follows (in thousands):

	Distributions Paid in 2016								Distributions Paid in 2015
	Ordinary Income				Long-Term Capital Gains				Ordinary Income				Long-Term Capital Gains
Fund	Class N		Class I		Class N		Class I		Class N		Class I		Class N		Class I
Growth	$	—	$	1,075	$	5,224	$	38,868	$	416	$	1,808	$	18,110	$	78,627
Large Cap Growth		8		313		99		884		17		89		954		5,176
Mid Cap Growth		—		—		912		6,417		—		—		5,530		35,853
Mid Cap Value		2		20		30		225		2		10		149		438
Small-Mid Cap Growth		—		—		5,332		28,097		13		75		8,551		50,513
Small-Mid Cap Value		1		24		9		129		1		10		44		162
Small Cap Growth		—		—		6,573		14,099		—		—		9,437		20,150
Small Cap Value		105		3,363		1,287		25,920		—		1,363		107		1,836
Global Leaders		—		124		27		206		3		152		252		2,063
International Leaders		23		293		—		—		1		22		2		73
International Equity		29		823		—		—		26		750		—		—
International Growth		10,938		40,501		—		—		9,482		30,923		—		—
International Small Cap Growth		5		1,063		2		57		195		7,300		29		919

134 Annual Report December 31, 2016

	Distributions Paid in 2016							Distributions Paid in 2015
	Ordinary				Long-Term			Ordinary				Long-Term
	Income				Capital Gains			Income				Capital Gains
Fund		Class N		Class I		Class N	Class I		Class N		Class I		Class N		Class I
Emerging Markets Leaders	$	—	$	41		—	—	$	—	$	105	$	2	$	44
Emerging Markets Growth		18		416		—	—		—		—		107		1,427
Emerging Markets Small Cap Growth		210		4,177		—	—		—		—		474		6,262
Bond		5,237		11,452		—	—		1,822		6,812		—		—
Income		1,079		1,868		—	—		1,007		1,971		—		—
Low Duration		149		3,331		—	—		95		2,839		—		—
Macro Allocation		1,182		21,809		—	—		915		10,747		—		—

	Distributions Paid in 2016				Distributions Paid in 2015
	Ordinary Income		Long-Term Capital Gains		Ordinary Income		Long-Term Capital Gains
	Institutional		Institutional		Institutional		Institutional
Global Leaders	$	403	$	559	$	552	$	6,144
International Leaders		2,350		—		323		578
Institutional International Equity		336		—		156		—
Institutional International Growth		23,809		—		13,779		15,858
International Small Cap Growth		845		37		4,603		557
Emerging Markets Leaders		513		—		331		126
Emerging Markets Growth		4,354		—		—		8,324
Emerging Markets Small Cap Growth		3,339		—		1		4,988
Bond		3,903		—		3,598		—
Low Duration		694		—		1,185		—
Macro Allocation		13,553		—		4,368		—

As of December 31, 2016, the components of distributable earnings on a tax basis were as follows (in thousands):

Fund	Undistributed Ordinary Income		Accumulated Capital and Other Losses			Undistributed Long-Term Capital Gain		Net Unrealized Appreciation/ (Depreciation)
Growth	$	—	$	—		$	34,836	$	98,168
Large Cap Growth		—		—			1,139		12,984
Mid Cap Growth		—		(2,044	)		—		13,631
Mid Cap Value		—		—			101		580
Small-Mid Cap Growth		—		—			1,865		157,491
Small-Mid Cap Value		—		—			14		836
Small Cap Growth		2,967		—			11,573		68,921
Small Cap Value		—		—			3,861		179,143
Global Leaders		738		(986	)		—		17,925
International Leaders		4		(146	)		—		11,636
International Equity		1,249		(77,191	)		—		6,264
Institutional International Equity		—		(90,887	)		—		1,173
International Growth		15,222		(428,448	)		—		188,743
Institutional International Growth		15,907		(94,978	)		—		121,331
International Small Cap Growth		—		(2,137	)		953		30,613
Emerging Markets Leaders		—		(24,790	)		—		3,999
Emerging Markets Growth		4,992		(124,879	)		—		32,500
Emerging Markets Small Cap Growth		—		(33,848	)		—		9,031
Bond		—		(7,544	)		—		6,191
Income		19		(7,460	)		—		(14	)
Low Duration		59		(19,396	)		—		(819	)
Macro Allocation		140		(224,190	)		—		55,614

December 31, 2016 William Blair Funds 135

As of December 31, 2016, the Funds may have unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. Under current law, the Funds may carry forward net capital losses indefinitely to use to offset capital gains realized in future years. Previous law limited the carry forward of capital losses to the eight tax years following the year the capital loss was realized. If a Fund has capital losses that are subject to current law and also has capital losses subject to prior law, the losses realized under current law will be utilized to offset capital gains before any of the losses governed by prior law can be used. As a result of these ordering rules, capital losses realized under previous law may be more likely to expire unused. Capital losses realized under current law will carry forward retaining their classification as long-term or short-term losses; as compared to under prior law in which all capital losses were carried forward as short term capital losses.

The following table details the Funds’ available capital loss carryforwards as of December 31, 2016, the capital loss carryforwards utilized by the Funds in 2016, and the capital loss carryforwards that expired in 2016 (in thousands):

	Available Capital Loss Carryforwards										Capital Loss		Capital Loss
	Limited by Year of Expiration				Unlimited				Total		Carryforwards		Carryforwards
Fund	2017		2018		Short Term		Long Term		Available		Utilized in 2016		Expired in 2016
Mid Cap Growth	$	—	$	—	$	2,044	$	—	$	2,044	$	—	$	—
Global Leaders		—		—		986		—		986		—		—
International Leaders		—		—		146		—		146		—		—
International Equity		74,815		—		2,376		—		77,191		—		—
Institutional International Equity		90,030		—		571		221		90,822		—		—
International Growth		358,606		—		69,842		—		428,448		—		—
Institutional International Growth		—		—		94,978		—		94,978		—		—
Emerging Markets Leaders		—		—		20,800		1,697		22,497		—		—
Emerging Markets Growth		—		—		116,463		—		116,463		—		—
Emerging Markets Small Cap Growth		—		—		19,850		—		19,850		—		—
Bond		—		—		4,790		1,778		6,568		—		—
Income		4,577		—		1,011		1,690		7,278		—		14,459
Low Duration		—		955		9,113		9,090		19,158		—		—
Macro Allocation		—		—		135,208		61,095		196,303		—		—

In order to meet certain excise tax distribution requirements, the Funds are required to measure and distribute annually, net capital gains realized during a twelve month period ending October 31 and net investment income earned during a twelve month period ending December 31. In connection with this, the Funds are permitted for tax purposes to defer into their next fiscal year qualified late year losses. Qualified late year capital losses are any short term or long term capital losses incurred between November 1 and the end of their fiscal year, December 31, 2016. Qualified late year ordinary losses are comprised of losses related to foreign currency and PFICs incurred between November 1 and the end of their fiscal year, December 31, 2016.

As of December 31, 2016, the following Funds deferred, on a tax basis, qualified late year losses of (in thousands):

	Qualified Late Year Losses
Fund	Ordinary Income		Net Capital
Institutional International Equity	$	18	$	47
International Small Cap Growth		2,137		—
Emerging Markets Leaders		354		1,939
Emerging Markets Growth		—		8,416
Emerging Markets Small Cap Growth		4,418		9,580
Bond		101		854
Income		—		182
Low Duration		—		200
Macro Allocation		—		27,887

136 Annual Report December 31, 2016

(e) Repurchase Agreements

In a repurchase agreement, a Fund buys a security at one price and at the time of sale, the seller agrees to repurchase the security 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 collateral. The Adviser monitors, on an ongoing basis, the value of the underlying collateral to ensure that the value always equals or exceeds the repurchase price plus accrued interest. Repurchase agreements may 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 Fund’s ability to dispose of the underlying collateral. The risk to a Fund 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 Fund is entitled to sell the underlying collateral. The loss, if any, to a Fund 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 Fund may be delayed or limited. The Funds have master repurchase agreements which allow the Funds to offset amounts owed to a counterparty with amounts owed from the same counterparty, including any collateral, in the event the counterparty defaults. As of December 31, 2016, each Fund’s outstanding repurchase agreements, if any, and related collateral, are shown on the Fund’s Portfolio of Investments. Although no definitive creditworthiness criteria are used, the Adviser reviews the creditworthiness of the banks and non-bank dealers with which a Fund enters into repurchase agreements to evaluate those risks. A Fund may, for tax purposes, deem repurchase agreements collateralized by U.S. Government securities to be investments in U.S. Government securities.

(f) TBA Securities

The Fixed Income Funds may invest in mortgage pass-through securities eligible to be sold in the “to-be announced” market (“TBAs”). TBAs provide for the forward or delayed delivery of the underlying instrument with settlement up to 180 days. The term TBA comes from the fact that the specific mortgage-backed security that will be delivered to fulfill a TBA trade is not designated at the time the trade is made, but rather is generally announced 48 hours before the settlement date. When a Fund sells TBAs, it incurs a risk of loss because it could have to purchase the securities at a price that is higher than the price at which it sold the securities. A Fund generally has the ability to close out a TBA obligation on or before the settlement date, rather than take delivery of the security.

(g) Securities Sold, Not Yet Purchased

A Fund may sell a security it does not own in anticipation of a decline in the fair value of that security. When a fund sells a security short, it must borrow the security sold short and deliver it to the broker through which it made the short sale. A gain, limited to the price at which the fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of the short sale. A fund is also subject to the risk that it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the price it sold the security short.

(h) 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.

(i) Indemnification

In the normal course of business, the Funds have entered into contracts in which the Funds agree to indemnify the other party or parties against various potential costs or liabilities. The Funds’ maximum exposure under these arrangements is unknown. No claim has been made for indemnification pursuant to any such agreement of the Funds.

(j) Redemption In-Kind

In accordance with the Trust’s prospectus, the Funds may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). For financial reporting purposes, the Fund recognizes a gain or loss on the transfer of securities depending on the value of those securities on the date of redemption. Gains and losses realized on in-kind redemptions may not be recognized for tax purposes and are reclassified from accumulated net realized gain (loss) to capital paid in excess of par value. During the year ended December 31, 2016, the Small-Mid Cap Growth and Institutional International Growth Funds redeemed in-kind fund share redemptions of $159,125 and $210,330 (in thousands), respectively, with securities rather than cash and recognized net realized gains of $52,031 and $23,687 (in thousands), respectively, on the securities distributed to shareholders.

December 31, 2016 William Blair Funds 137

(3) Valuation

(a) Investment Valuation

The value of domestic equity securities, including exchange-traded funds, 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 mean between the last reported bid and ask prices.

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 mean between the last reported bid and ask prices. The Board of Trustees has determined that the passage of time between when the foreign exchanges or markets close and when the Funds 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 Funds may use an independent pricing service to fair value price the security as of the close of regular trading on the NYSE. As a result, a Fund’s value for a security may be different from the last sale price (or the mean between the last reported bid and ask prices). As of December 31, 2016, fair valuation estimates for foreign equity securities were not obtained.

Fixed income securities are generally valued using evaluated prices provided by an independent pricing service. The evaluated prices are formed using various market inputs that the pricing service believes accurately represent the market value of a security at a particular point in time. The pricing service determines evaluated prices for fixed income securities using inputs including, but not limited to, recent transaction prices, dealer quotes, transaction prices for securities with similar characteristics, collateral characteristics, credit quality, payment history, liquidity and market conditions.

Repurchase agreements are valued at cost, which approximates fair value.

Option contracts on securities, currencies and other financial instruments traded on one or more exchanges are valued at their most recent sale price on the exchange on which they are traded most extensively. Option contracts on foreign indices are valued at the settlement price. Futures contracts (and options and swaps thereon) are valued at the most recent settlement price on the exchange on which they are traded most extensively. Forward foreign currency contracts are valued on the basis of the value of the underlying currencies at the prevailing currency exchange rate as supplied by an independent pricing service.

Over-the-Counter (“OTC”) swap contracts are valued by an independent pricing service. Depending on the product and the terms of the transaction, the independent pricing service may use a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates.

Centrally cleared swaps listed or settled on a multilateral or trade facility platform, such as a registered exchange, are valued at the daily settlement price determined by the respective exchange. For centrally cleared credit default swaps the clearing facility requires its members to provide actionable price levels across complete term structures. These levels along with external third-party prices are used to produce daily settlement prices.

Investments in other investment funds that are not exchange-traded funds are valued at the underlying fund’s ending net asset value on the date of valuation.

Securities, and other assets, 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 Valuation Procedures approved by the Board of Trustees. The value of fair valued securities may be different from the last sale price (or the mean between the last reported bid and ask prices), and there is no guarantee that a fair valued security will be sold at the price at which a Fund is carrying the security.

As of December 31, 2016, there were securities held in the International Growth and Institutional International Growth Funds requiring fair valuation pursuant to the Valuation Procedures approved by the Board of Trustees.

(b) Fair Value Measurements

Fair value is defined as the price that a Fund 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 Fund’s investments. A three-tier hierarchy of inputs is used to classify fair value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:

138 Annual Report December 31, 2016

• Level 1—Quoted prices (unadjusted) 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 at which 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.

A description of the valuation technique applied to the Funds’ major categories of assets and liabilities measured at fair value on a recurring basis as follows:

Exchange-Traded Securities

Securities traded on a national securities exchange (or reported on the NASDAQ national market), including exchange-traded funds, are stated at the last reported sales price on the day of valuation. Other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the mean between the last reported bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities traded on inactive markets or valued by reference to similar instruments are generally categorized as Level 2 of the fair value hierarchy.

Fixed Income Securities

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, asset-backed securities and non-U.S. bonds are generally valued using evaluated prices provided by an independent pricing service. The evaluated prices are formed using various market inputs that the pricing service believes accurately represent the fair value of a security at a particular point in time. The pricing service determines evaluated prices for fixed income securities using inputs including, but not limited to, recent transaction prices, dealer quotes, transaction prices for securities with similar characteristics, collateral characteristics, credit quality, payment history, liquidity and market conditions. Securities that use similar valuation techniques and observable inputs as described above are categorized as Level 2 of the fair value hierarchy.

Short-Term Investments

Repurchase agreements are valued at cost, which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

Derivative Instruments

Listed derivatives, such as certain options and futures contracts, that are actively traded are valued based on quoted prices from the exchange on which they are traded most extensively and are categorized as Level 1 of the fair value hierarchy. OTC derivative contracts include forward foreign currency contracts, swap and certain option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices, or commodity prices. Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments and the pricing inputs are observed from actively quoted markets, as is the case of forward foreign currency contracts and interest rate swaps. A substantial majority of OTC derivative products valued by a Fund using pricing models fall into this category and are categorized as Level 2 of the fair value hierarchy.

Any transfers between Level 1 and Level 2 are disclosed, effective as of the beginning of the period, in the following tables with the reasons for the transfers disclosed in a note to the tables, if applicable. Transfer amounts are based on end of period values.

December 31, 2016 William Blair Funds 139

As of December 31, 2016, the hierarchical input levels of securities in each Fund, segregated by security class or other financial instruments, are shown below (in thousands). There were no transfers between Levels as of December 31, 2016.

Investments in securities	Growth		Large Cap Growth		Mid Cap Growth		Mid Cap Value
Level 1—Quoted prices
Common Stocks	$	574,761	$	120,980	$	133,997	$	3,007
Level 2—Other significant observable inputs
Short-Term Investments		4,823		1,176		352		—
Level 3—Significant unobservable inputs
None		—		—		—		—
Total investments in securities	$	579,584	$	122,156	$	134,349	$	3,007

Investments in securities	Small-Mid Cap Growth		Small-Mid Cap Value		Small Cap Growth		Small Cap Value
Level 1—Quoted prices
Common Stocks	$	1,220,539	$	3,391	$	363,303	$	685,343
Exchange-Traded Fund		—		—		9,584		—
Level 2—Other significant observable inputs
Short-Term Investments		50,017		—		16,760		20,650
Level 3—Significant unobservable inputs
None		—		—		—		—
Total investments in securities	$	1,270,556	$	3,391	$	389,647	$	705,993

Investments in securities	Global Leaders		International Leaders		International Equity		Institutional International Equity		International Growth
Level 1—Quoted prices
Common Stocks	$	175,302	$	249,795	$	85,253	$	16,251	$	2,894,451
Preferred Stocks		—		—		—		—		42,475
Level 2—Other significant observable inputs
Affiliated Fund		—		—		—		—		164
Common Stocks		—		—		611		116		—
Short-Term Investments		1,481		2,644		1,380		206		47,300
Level 3—Significant unobservable inputs
Common Stocks		—		—		—		—		—
Total investments in securities	$	176,783	$	252,439	$	87,244	$	16,573	$	2,984,390

Investments in securities	Institutional International Growth		International Small Cap Growth		Emerging Markets Leaders		Emerging Markets Growth		Emerging Markets Small Cap Growth
Level 1—Quoted prices
Common Stocks	$	2,003,704	$	508,660	$	264,998	$	844,131	$	263,487
Preferred Stocks		29,337		—		20,804		40,906		4,352
Level 2—Other significant observable inputs
Affiliated Fund		102		—		—		201		—
Common Stocks		—		—		10,376		37,583		17,217
Short-Term Investments		48,624		8,207		9,399		3,898		161
Level 3—Significant unobservable inputs
Common Stocks		—		—		—		—		—
Total investments in securities	$	2,081,767	$	516,867	$	305,577	$	926,719	$	285,217

140 Annual Report December 31, 2016

Investments in securities	Bond			Income		Low Duration			Macro Allocation
Assets
Level 1—Quoted Prices
Exchange-Traded Funds	$	—		$	—	$	—		$	950,306
Purchased Options		—			—		—			1,503
Level 2—Other significant observable inputs
Asset-Backed Securities		12,306			10,816		67,468			—
Commercial Paper		5,000			—		—			—
Corporate Obligation/Notes		228,339			36,759		91,608			—
Short-Term Investments		4,667			279		—			413,728
U.S. Government and U.S. Government Agency		287,051			61,571		124,037			136,665
Foreign Government		—			—		—			35,980
Level 3—Significant unobservable inputs
None		—			—		—			—
Liabilities
Level 1—Quoted Prices
Written Options		—			—		—			(900	)
Level 2—Other significant observable inputs
None		—			—		—			—
Level 3—Significant unobservable inputs
None		—			—		—			—
Total investments in securities	$	537,363		$	109,425	$	283,113		$	1,537,282
Other financial instruments
Assets
Level 1—Quoted Prices
Futures Contracts	$	—		$	—	$	—		$	11,911
Level 2—Other significant observable inputs
Forward Foreign Currency Contracts		—			—		—			15,274
Futures Contracts		—			—		—			582
Swaps		—			—		—			11,392
Level 3—Significant unobservable inputs
None		—			—		—			—
Liabilities
Level 1—Quoted Prices
Futures Contracts		—			—		—			(7,442	)
Level 2—Other significant observable inputs
Forward Foreign Currency Contracts		—			—		—			(8,666	)
Futures Contracts		—			—		—			(483	)
Swaps		(165	)		—		—			(1,256	)
U.S. Government Agency		—			—		(15,025	)		—
Level 3—Significant unobservable inputs
None		—			—		—			—
Total Other Financial Instruments	$	(165	)	$	—	$	(15,025	)	$	21,312

Level 1 Common Stocks are exchange-traded securities with a quoted price. See Portfolio of Investments for Sector Classification.

The fair value estimates for the Level 3 securities in the International Growth and Institutional International Growth Funds were determined in good faith by the Pricing Committee, pursuant to the Valuation Procedures approved 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 and market trends that influence its performance. Level 3 securities represented 0.00% and 0.00% as a percentage of net assets in the International Growth and Institutional International Growth Funds, respectively. The change in net unrealized gain (loss) related to those securities held at December 31, 2016 is included in the change in net unrealized appreciation (depreciation) of investments on the Statements of Operations.

December 31, 2016 William Blair Funds 141

(4) Transactions with Affiliates

(a) Management and Expense Limitation Agreements

Each Fund has a management agreement with the Adviser for investment management, clerical, bookkeeping and administrative services. Each Fund pays the Adviser 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:

Domestic Equity Funds
Growth	0.75	%
Large Cap Growth	0.70	%
Mid Cap Growth	0.95	%
Mid Cap Value	0.95	%
Small-Mid Cap Growth	1.00	%
Small-Mid Cap Value	1.00	%
Small Cap Growth	1.10	%
Small Cap Value	1.10	%
Fixed Income Funds
Bond	0.30	%
Income1:
First $250 million	0.25	%
In excess of $250 million	0.20	%
Low Duration	0.30	%
Multi-Asset and Alternative Fund
Macro Allocation	0.80	%
Global Equity Fund
Global Leaders	1.00	%

International Equity Funds
International Leaders	0.95	%
International Equity:
First $250 million	1.00	%
In excess of $250 million	0.90	%
Institutional International Equity:
First $500 million	0.90	%
Next $500 million	0.85	%
In excess of $1 billion	0.80	%
International Growth:
First $250 million	1.10	%
Next $2.25 billion	1.00	%
Next $2.5 billion	0.975	%
Next $5 billion	0.95	%
Next $5 billion	0.925	%
In excess of $15 billion	0.90	%
Institutional International Growth:
First $500 million	1.00	%
Next $500 million	0.95	%
Next $1.5 billion	0.90	%
Next $2.5 billion	0.875	%
Next $5 billion	0.85	%
Next $5 billion	0.825	%
In excess of $15 billion	0.80	%
International Small Cap Growth	1.00	%
Emerging Markets Leaders	1.10	%
Emerging Markets Growth	1.10	%
Emerging Markets Small Cap Growth	1.10	%

1 Management fee also includes a charge of 5% of gross income.

142 Annual Report December 31, 2016

Some of the Funds have also entered into an Amended and Restated Expense Limitation Agreement with the Adviser. Under the terms of the agreement, the Adviser will waive its management fee and/or reimburse a Fund for expenses in excess of the agreed upon rate. The amount the Adviser owes a Fund as of the reporting date is recorded as Receivable from Adviser on the Statements of Assets and Liabilities. The Adviser reimburses the Funds on a monthly basis. Under the terms of the agreement, the Adviser has agreed to waive its management fees and/or absorb other operating expenses through April 30, 2017, if total expenses for each class of the following Funds exceed the following rates (as a percentage of average daily net assets):

	Class N				Class I				Institutional Class
	Effective May 1, 2016 through April 30,		Effective May 1, 2015 through April 30,		Effective May 1, 2016 through April 30,		Effective May 1, 2015 through April 30,		Effective May 1, 2016 through April 30,		Effective May 1, 2015 through April 30,
Fund	2017		2016		2017		2016		2017		2016
Growth		N/A		N/A		N/A		N/A		N/A		N/A
Large Cap Growth		1.05%		1.05%		0.80%		0.80%		N/A		N/A
Mid Cap Growth		1.30%		1.30%		1.05%		1.05%		N/A		N/A
Mid Cap Value		1.30%		1.30%		1.05%		1.05%		N/A		N/A
Small-Mid Cap Growth		1.35%		1.35%		1.10%		1.10%		N/A		N/A
Small-Mid Cap Value		1.35%		1.35%		1.10%		1.10%		N/A		N/A
Small Cap Growth		1.50%		1.50%		1.25%		1.25%		N/A		N/A
Small Cap Value		1.50%		1.50%		1.25%		1.25%		N/A		N/A
Global Leaders		1.40%		1.40%		1.15%		1.15%		1.00%		1.00%
International Leaders		1.35%		1.35%		1.10%		1.10%		0.95%		0.95%
International Equity		1.30%		1.30%		1.05%		1.05%		N/A		N/A
Institutional International Equity		N/A		N/A		N/A		N/A		1.00%		1.00%
International Growth		1.45%		1.45%		1.20%		1.20%		N/A		N/A
Institutional International Growth		N/A		N/A		N/A		N/A		N/A		N/A
International Small Cap Growth		1.65%		1.65%		1.40%		1.40%		1.25%		1.25%
Emerging Markets Leaders		1.65%		1.65%		1.40%		1.40%		1.25%		1.25%
Emerging Markets Growth		1.70%		1.70%		1.45%		1.45%		1.30%		1.30%
Emerging Markets Small Cap Growth		1.65%		1.65%		1.40%		1.40%		1.25%		1.25%
Bond		0.65%		0.65%		0.50%		0.50%		0.35%		0.35%
Income		0.85%		0.85%		0.70%		0.70%		N/A		N/A
Low Duration		0.70%		0.70%		0.55%		0.55%		0.40%		0.40%
Macro Allocation		1.35%		1.35%(a)		1.10%		1.10%(a)		0.95%		0.95%(a)

(a) Effective March 1, 2015 through April 30, 2016.

December 31, 2016 William Blair Funds 143

For the year ended December 31, 2016, the fee waivers and/or reimbursements received by each Fund (including the expense limitation described above and the shareholder administration fee waiver described below) were as follows (in thousands):

	Fund		Class N		Class I
	Level		Specific		Specific		Total
Fund	Waiver		Waiver		Waiver		Waiver
Large Cap Growth	$	40	$	15	$	49	$	104
Mid Cap Growth		50		24		143		217
Mid Cap Value		96		1		—		97
Small-Mid Cap Growth		—		167		650		817
Small-Mid Cap Value		110		—		2		112
Small Cap Growth		—		59		58		117
Small Cap Value		—		9		201		210
Global Leaders		194		9		68		271
International Leaders		213		1		32		246
International Equity		134		3		59		196
Institutional International Equity		122		—		—		122
International Small Cap Growth		—		16		499		515
Emerging Markets Leaders		196		3		43		242
Emerging Markets Growth		—		14		155		169
Emerging Markets Small Cap Growth		178		16		241		435
Bond		114		216		444		774
Low Duration		—		11		215		226
Macro Allocation		—		153		1,603		1,756

(b) Underwriting, Distribution Services, and Shareholder Administration Agreements

Pursuant to separate Underwriting and Distribution Agreements, WBC is the principal underwriter and distributor for the continuous offering of shares of the Trust and acts as agent of the Trust in the sale of its shares. The Underwriting Agreement provides that the Distributor will use its best efforts to distribute the Trust’s shares. The Distributor is not compensated under the Underwriting Agreement.

Each Fund, except the Institutional International Equity Fund and Institutional International Growth Fund, has a Distribution Agreement with WBC for distribution services to the Funds’ Class N shares. Each Fund pays WBC 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 Funds except the Bond, Income and Low Duration Funds, which is 0.15%. Pursuant to the Distribution Agreement, WBC enters into related selling group agreements with various firms at various rates for sales of the Funds’ Class N shares.

The Global Leaders, International Leaders, International Small Cap Growth, Emerging Markets Leaders, Emerging Markets Growth, Emerging Markets Small Cap Growth, Bond, Low Duration and Macro Allocation Funds have a Shareholder Administration Agreement with WBC to provide shareholder administration services to Class N and Class I shares. Class N and Class I shares of the Funds have agreed to pay an annual fee, payable monthly, of 0.15% of average daily net assets attributable to each class, respectively. Beginning in 2013, the SEC conducted a limited scope examination of a number of mutual fund sponsors, including WBC, regarding distribution and servicing of mutual fund shares through intermediaries. In November 2014, the SEC informed WBC that it had opened a non-public investigation with respect to shareholder administration fees paid by the applicable Funds. The investigation does not involve the investment management operations of the Funds. In December 2015, the SEC staff sent WBC a notification that staff intended to recommend an enforcement action against WBC to the SEC Commissioners (Wells Notice), and WBC has submitted a response. At this time, it is unclear whether or not the Commission will allow the matter to enter enforcement proceedings. While WBC believes that any possible claims made by the staff would be without merit, WBC cannot predict the outcome of any enforcement proceeding the SEC may choose to bring. The shareholder administration fee for each Fund is currently being waived by WBC. This waiver will not be removed without approval of the Board of Trustees.

144 Annual Report December 31, 2016

For the year ended December 31, 2016, the following shareholder administration fees were incurred and waived (in thousands):

									Net Total
									Shareholder
							Total		Administration
Fund	Class N		Class I		Total		Waived		Fee
Global Leaders	$	9	$	68	$	77	$	77		$—
International Leaders		1		32		33		33		—
International Small Cap Growth		16		499		515		515		—
Emerging Markets Leaders		3		43		46		46		—
Emerging Markets Growth		14		155		169		169		—
Emerging Markets Small Cap Growth		16		241		257		257		—
Bond		216		444		660		660		—
Low Duration		11		215		226		226		—
Macro Allocation		153		1,603		1,756		1,756		—

(5) Investment Transactions

Investment transactions, excluding U.S. government securities and securities whose maturities or expiration dates at the time of purchase were one year or less, for the year ended December 31, 2016, were as follows (in thousands):

Fund	Purchases		Sales
Growth	$	557,776	$	812,472
Large Cap Growth		87,663		37,643
Mid Cap Growth		94,492		158,927
Mid Cap Value		1,931		2,026
Small-Mid Cap Growth		785,196		816,618
Small-Mid Cap Value		1,760		3,062
Small Cap Growth		320,460		375,877
Small Cap Value		200,302		251,227
Global Leaders		131,245		140,730
International Leaders		244,985		108,562
International Equity		71,719		47,856
Institutional International Equity		12,523		11,777
International Growth		3,252,812		3,738,214
Institutional International Growth		2,162,997		2,298,437
International Small Cap Growth		396,051		411,940
Emerging Markets Leaders		462,171		289,104
Emerging Markets Growth		1,079,352		1,030,658
Emerging Markets Small Cap Growth		476,127		465,799
Bond		194,683		87,484
Income		52,059		20,711
Low Duration		330,004		148,009
Macro Allocation		509,300		733,254

Investment transactions in U.S. government securities whose maturities at the time of purchase were more than one year for the year ended December 31, 2016, were as follows (in thousands):

Fund	Purchases		Sales
Bond	$	6,401	$	144
Income		1,203		—
Low Duration		—		—

December 31, 2016 William Blair Funds 145

Transactions in written call and put options for Macro Allocation Fund for the year ended December 31, 2016 were as follows:

	# of Contracts			Premium (in thousands)
Balance at December 31, 2015		4,746			$	652
Sales		72,700				17,143
Closing Buys		(30,860	)			(8,865	)
Assigned		(11	)			(1	)
Expirations		(46,195	)			(8,416	)
Balance at December 31, 2016		380			$	513

(6) Financial Derivative Instruments

Each Fund may use derivative instruments to maintain liquidity, to provide hedging, or in anticipation of changes in the composition of its portfolio holdings or as otherwise provided in each Fund’s prospectus. Macro Allocation Fund may also use derivative instruments to obtain investment exposures. The derivative instruments held as of December 31, 2016, as disclosed in each Fund’s Portfolios of Investments, are representative of each Fund’s derivative instrument trading activity during the year ended December 31, 2016.

Derivative transactions carry counterparty risk as they are based on contracts between a Fund and the applicable counterparty. For exchange-traded or cleared derivative contracts, such counterparty risk is limited due to the role of the exchange or clearinghouse. OTC derivative contracts, however, are exposed to counterparty risk in the amount of unrealized gains, net of collateral held, for the duration of the contract.

Macro Allocation Fund is subject to certain netting arrangements through International Swaps and Derivatives Association, Inc. Master Agreements and Credit Support Annexes (“ISDAs”). The ISDAs maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. The ISDAs cover certain OTC derivative securities entered into by Macro Allocation Fund with various counterparties and allow Macro Allocation Fund to close out and net its total exposure to a counterparty in the event of a default.

Futures Contracts

A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument for a specified price at a designated date, time and place. An index futures contract is an agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index futures contract was originally written. If the offsetting purchase price is less than the original sale price, a Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, a Fund realizes a gain; if it is less, a Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If a Fund is not able to enter into an offsetting transaction, a Fund will continue to be required to maintain the margin deposits on the futures contract.

Upon entering into a futures contract, a Fund is required to pledge to the broker an amount of cash, U.S. government securities, or other liquid assets equal to a certain percentage of the contract amount (“initial margin deposit”). Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by a Fund and a cash payment is either made to or received from the broker. Futures held through swaps are marked to market daily, however, a Fund does not make or receive cash payments to/from the broker. Gains or losses are recognized but not considered realized until the contracts expire or are closed and are included in the Statement of Operations.

Options

The purchase or sale of an option by a Fund involves the payment or receipt of a premium by the investor and the corresponding right or obligation, as the case may be, either to purchase or sell the underlying security, commodity, or other instrument for a specific price at a certain time or during a certain period. Purchasing options involves the risk that the underlying instrument will not change price in the manner expected, so the investor loses its premium. Writing options involves potentially greater risk because the investor is exposed to the extent of the actual price movement in the underlying security rather than only the amount of the premium paid (which could result in a potentially unlimited loss). OTC options also involve counterparty credit risk. Purchased options are shown as an asset on the Statement of Assets and Liabilities and are included in Investments in securities. Premiums received for written options are shown as a liability on the Statement of Assets and Liabilities. Realized gains and losses on the sale, expiration or assignment of an option are disclosed on the Statement of Operations.

146 Annual Report December 31, 2016

Forward Foreign Currency Contracts

The Global Equity, International Equity and Multi-Asset and Alternative Funds may enter into forward foreign currency contracts. When entering into a forward foreign currency contract, a Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. A Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Statement of Assets and Liabilities. Realized and unrealized gains and losses are included in the Statement of Operations. These instruments may involve market risk, credit risk, or both kinds of risks in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from the price movements in currencies.

Swap Contracts

Swap agreements may include total return, interest rate, securities index, commodity, security, currency exchange rate, credit default index, volatility and variance swaps. Swap agreements typically are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to several years. Cleared swaps are transacted through futures commission merchants that are members of central clearing houses with the clearing house serving as a central counterparty similar to transactions in futures contracts. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or “swapped” between the parties are calculated with respect to a “notional amount” (i.e., the change in the value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index). Swap agreements are subject to the risk that the counterparty to the swap will default on its obligation to pay a Fund and the risk that a Fund will not be able to meet its obligations to pay the counterparty to the swap. Swap agreements may also involve fees, commissions or other costs that may reduce a Fund’s gains from a swap agreement or may cause a Fund to lose money. To the extent permitted by its investment policies and restrictions, a Fund may invest in the following types of swaps:

Credit Default Swaps—A Fund may invest in credit default swaps as a means of “buying” credit protection (i.e., attempting to mitigate the risk of default or credit quality deterioration in some portion of a Fund’s holdings) or “selling” credit protection (i.e., attempting to gain exposure to an underlying issuer’s credit quality characteristics without directly investing in that issuer). A credit default swap is a contract between a buyer and a seller of protection against a pre-defined credit event (e.g., a ratings downgrade or default) on an underlying reference obligation, which may be a single debt instrument or baskets or indices of securities. A Fund may be a buyer or seller of a credit default swap. As a seller of protection on credit default swap agreements, a Fund will generally receive from the buyer of protection a fixed rate of income throughout the term of the swap provided that there is no credit event. A Fund adds leverage to its portfolio because the Fund is subject to investment exposure on the notional amount of the swap. The maximum potential amount of future payments that a Fund as a seller of protection could be required to make under a credit default swap agreement equals the notional amount of the agreement. Notional amounts of each individual credit default swap agreement outstanding as of period end for which a Fund is the seller of protection are disclosed in Portfolio of Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for the same referenced entity or entities. For credit default swap contracts on credit indices, the quoted market prices and resulting values serve as an indicator of the payment performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent deterioration of the referenced entities’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap.

Interest Rate Swap—A Fund may invest in interest rate swaps to gain or mitigate exposure to changes in interest rates. Interest rate swap agreements involve a commitment between parties to pay either a fixed interest rate or a floating interest rate based on a notional amount of principal. The parties make payments at predetermined intervals throughout the life of the swap. As a payer, a Fund would make the fixed payment and receive the floating payment. As a receiver, a Fund would make the floating payment and receive the fixed payment.

Total Return Swap—A Fund may invest in total return swaps to gain or mitigate exposure to an underlying security, or securities. Total return swap agreements may involve commitments to pay interest in exchange for the return on the underlying security, or securities. At maturity, a net cash flow is exchanged between the parties based on the total return of the underlying security, or securities, less a financing rate. As a receiver, a Fund would receive a payment for a positive return and would make a payment for a negative return. As a payer, a Fund would make a payment for a positive return and would receive a payment for a negative return.

December 31, 2016 William Blair Funds 147

Variance Swap—A Fund may invest in variance swaps in order to gain or mitigate its exposure to an underlying reference entity such as a broad based index. A variance swap is an agreement between two parties to exchange cash flows based on the measured variance of a reference entity. The payer agrees to exchange the fixed rate, or the variance strike price of the reference entity, to the receiver for the floating rate, or realized variance price of the reference entity. At the time the trade is originated, the agreed upon variance strike price is generally set so that the fair value of the swap is near zero. At maturity, a net cash flow is exchanged between the parties based on the difference between the final realized variance price of the swap and the variance strike price multiplied by the notional, or vega amount. As a receiver of the floating rate, a Fund would receive a payment if the final realized variance price is greater than the variance strike price and would make a payment if the final realized variance price is less than the variance strike price. As a payer of the floating rate, a Fund would receive a payment if the final realized variance price is less than the variance strike price and would make a payment if the final realized variance price is greater than the variance strike price.

The following table presents the value of financial derivative instruments, by primary risk exposure, as of December 31, 2016 and their respective location on the Statements of Assets and Liabilities (in thousands):

	Assets		Liabilities
Primary Risk Exposure	Statements of Assets and Liabilities	Value	Statements of Assets and Liabilities	Value
Bond
Credit	Receivable for variation margin on centrally cleared swaps	$       —	Payable for variation margin on centrally cleared swaps	$    165
Macro Allocation
Credit	Receivable for variation margin on centrally cleared swaps	160	Payable for variation margin on centrally cleared swaps	58
Currency	Unrealized appreciation on forward currency contracts	15,274	Unrealized depreciation on forward currency contracts	8,666
Equity	Investments in securities, at value	1,503	Options written, at value	900
Equity	Receivable for variation margin on futures	11,322	Payable for variation margin on futures	7,057
Equity	Unrealized appreciation on swap contract	9,522	Unrealized depreciation on swap contract	1,198
Interest rate	Receivable for variation margin on futures	1,171	Payable for variation margin on futures	868
Interest rate	Receivable for variation margin on centrally cleared swaps	1,710	Payable for variation margin on centrally cleared swaps	—

The table above includes cumulative appreciation/(depreciation) of exchange-traded and centrally cleared derivative contracts as reported in the Portfolio of Investments. Only variation margin receivable/payable on exchange-traded and centrally cleared derivative contracts is reported within the Statements of Assets and Liabilities.

148 Annual Report December 31, 2016

The following table indicates the effect of derivatives, by primary risk exposure, on the Statements of Operations for the year ended December 31, 2016 (in thousands):

	Realized Gain (Loss)				Change in Net Unrealized Appreciation (Depreciation)
Primary Risk Exposure	Statements of Operations	Value			Statements of Operations	Value
Bond
Interest rate	Options	$	(95	)	Options	$	93
Credit	Swaps		(247	)	Swaps		(128	)
Income
Interest rate	Options		(47	)	Options		46
Low Duration
Interest rate	Options		(95	)	Options		93
Macro Allocation
Credit	Swaps		1,483		Swaps		(56	)
Currency	Forward foreign currency contracts		29,084		Forward foreign currency contracts		4,875
Currency	Options		1,233		Options		1,355
Equity	Futures contracts		(63,053	)	Futures contracts		1,168
Equity	Options		(22,830	)	Options		5,166
Equity	Swaps		(24,682	)	Swaps		11,470
Interest rate	Futures contracts		(8,470	)	Futures contracts		772
Interest rate	Options		1,146		Options		796
Interest rate	Swaps		(4,018	)	Swaps		2,506

The following table indicates gross OTC derivative asset exposure, by investment type, included in the Statements of Assets and Liabilities at December 31, 2016 (in thousands):

						Net Amounts of		Gross Amounts Not Offset
			Gross Amounts			Assets		in the Statements
	Gross		Offset in the			Presented in the		of Assets and Liabilities
	Amounts of		Statements of			Statements of				Cash
	Recognized		Assets and			Assets and		Financial		Collateral		Net
Description	Assets		Liabilities			Liabilities		Instruments		Received		Amount
Macro Allocation
Citibank N.A.
Forward foreign currency contracts		$15,274		$(8,666	)		$6,608	$	—	$	—		$6,608
Swaps		6,467		(257	)		6,210		—		—		6,210
Credit Suisse
Swaps		1,975		—			1,975		—		—		1,975
Goldman Sachs
Swaps		1,080		(941	)		139		—		—		139

The following table indicates gross OTC derivative liability exposure, by investment type, included in the Statements of Assets and Liabilities at December 31, 2016 (in thousands):

						Net Amounts of		Gross Amounts Not Offset
			Gross Amounts			Liabilities		in the Statements
	Gross		Offset in the			Presented in the		of Assets and Liabilities
	Amounts of		Statements of			Statements of				Cash		Net Amount
	Recognized		Assets and			Assets and		Financial		Collateral		(not less
Description	Liabilities		Liabilities			Liabilities		Instruments		Pledged		than zero)
Macro Allocation
Citibank N.A.
Forward foreign currency contracts		$8,666		$(8,666	)	$	—	$	—	$	—	$	—
Swaps		257		(257	)		—		—		—		—
Credit Suisse
Swaps		—		—			—		—		—		—
Goldman Sachs
Swaps		941		(941	)		—		—		—		—

December 31, 2016 William Blair Funds 149

(7) Fund Share Transactions

The following tables summarize the activity in capital shares of each Fund for the year ended December 31, 2016 (in thousands):

	Class N
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	9,467		$  5,146		$   94,833	$	(80,220	)		788		443		7,679		(6,448	)
Large Cap Growth		4,864		106		3,803		1,167			491		10		374		127
Mid Cap Growth		4,539		895		13,379		(7,945	)		406		83		1,195		(706	)
Mid Cap Value		646		32		1,115		(437	)		63		3		101		(35	)
Small-Mid Cap Growth		113,600		5,308		126,533		(7,625	)		6,197		274		6,683		(213	)
Small-Mid Cap Value		125		11		809		(673	)		9		1		60		(50	)
Small Cap Growth		12,086		6,495		25,495		(6,914	)		508		256		1,107		(344	)
Small Cap Value		7,503		1,379		14,985		(6,103	)		420		68		834		(346	)
Global Leaders		1,161		25		1,045		141			102		2		91		13
International Leaders		2,880		23		296		2,607			219		2		23		198
International Equity		610		28		652		(14	)		44		2		48		(2	)
International Growth		123,169		10,806		379,107		(245,132	)		5,287		456		16,222		(10,479	)
International Small Cap Growth		1,426		6		1,941		(509	)		111		—		147		(35	)
Emerging Markets Leaders		4,956		—		4,133		823			628		—		519		109
Emerging Markets Growth		858		16		1,801		(927	)		74		1		165		(91	)
Emerging Markets Small Cap Growth		1,900		209		3,416		(1,307	)		131		15		233		(88	)
Bond		47,846		5,196		67,665		(14,623	)		4,541		491		6,406		(1,373	)
Income		26,745		1,042		7,630		20,157			2,982		116		853		2,244
Low Duration		10,021		138		5,546		4,613			1,094		15		607		502
Macro Allocation		17,989		1,159		108,539		(89,391	)		1,604		102		9,603		(7,898	)

	Class I
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	66,424	$	39,081	$	244,314	$	(138,809	)		5,099		3,099		18,262		(10,064	)
Large Cap Growth		70,565		1,028		21,630		49,963			6,693		94		2,041		4,746
Mid Cap Growth		16,108		6,216		70,745		(48,421	)		1,384		547		6,111		(4,180	)
Mid Cap Value		448		245		104		589			42		24		10		56
Small-Mid Cap Growth		420,054		27,743		419,796		28,001			21,989		1,375		21,830		1,535
Small-Mid Cap Value		515		153		1,155		(487	)		37		11		85		(37	)
Small Cap Growth		39,550		13,976		73,676		(20,150	)		1,629		509		3,002		(863	)
Small Cap Value		125,892		27,400		165,322		(12,030	)		6,790		1,319		9,363		(1,254	)
Global Leaders		5,749		326		6,299		(224	)		532		28		578		(17	)
International Leaders		31,408		263		13,815		17,856			2,394		21		1,064		1,352
International Equity		25,097		752		1,912		23,937			1,839		55		138		1,756
International Growth		314,813		37,332		650,196		(298,051	)		12,910		1,540		26,315		(11,865	)
International Small Cap Growth		49,281		957		71,025		(20,787	)		3,795		75		5,375		(1,505	)
Emerging Markets Leaders		8,555		37		11,170		(2,578	)		1,075		5		1,466		(386	)
Emerging Markets Growth		21,878		337		57,207		(34,992	)		1,950		30		5,441		(3,461	)
Emerging Markets Small Cap Growth		43,213		3,892		47,652		(547	)		2,935		284		3,380		(160	)
Bond		138,784		9,626		64,741		83,669			13,339		918		6,186		8,070
Income		10,568		1,718		16,655		(4,369	)		1,187		193		1,872		(491	)
Low Duration		165,703		2,839		54,154		114,388			18,168		311		5,941		12,539
Macro Allocation		361,647		19,375		599,216		(218,194	)		31,812		1,704		52,704		(19,188	)

150 Annual Report December 31, 2016

	Institutional Class
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Global Leaders	$	25,666	$	893	$	38,608	$	(12,049	)		2,298		76		3,467		(1,094	)
International Leaders		124,198		1,497		8,121		117,574			9,710		117		612		9,214
Institutional International Equity		967		336		383		920			79		29		31		77
Institutional International Growth		237,672		22,693		412,093		(151,728	)		16,189		1,572		28,755		(10,994	)
International Small Cap Growth		12,637		864		25,062		(11,561	)		964		67		1,860		(830	)
Emerging Markets Leaders		228,531		512		46,393		182,650			28,514		65		5,946		22,633
Emerging Markets Growth		352,867		3,701		272,272		84,296			30,987		332		23,869		7,451
Emerging Markets Small Cap Growth		16,666		2,913		7,180		12,399			1,128		212		488		852
Bond		10,764		3,795		24,354		(9,795	)		1,038		363		2,306		(905	)
Low Duration		45,205		651		14,239		31,617			4,958		71		1,559		3,469
Macro Allocation		220,921		13,540		79,417		155,044			19,441		1,190		6,963		13,669

	Net Change in Net Assets Relating to Fund Share Activity
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	75,891	$	44,227	$	339,147	$	(219,029	)		5,887		3,542		25,941		(16,512	)
Large Cap Growth		75,429		1,134		25,433		51,130			7,184		104		2,415		4,873
Mid Cap Growth		20,647		7,111		84,124		(56,366	)		1,790		630		7,306		(4,886	)
Mid Cap Value		1,094		277		1,219		152			105		27		111		21
Small-Mid Cap Growth		533,654		33,051		546,329		20,376			28,186		1,649		28,513		1,322
Small-Mid Cap Value		640		164		1,964		(1,160	)		46		12		145		(87	)
Small Cap Growth		51,636		20,471		99,171		(27,064	)		2,137		765		4,109		(1,207	)
Small Cap Value		133,395		28,779		180,307		(18,133	)		7,210		1,387		10,197		(1,600	)
Global Leaders		32,576		1,244		45,952		(12,132	)		2,932		106		4,136		(1,098	)
International Leaders		158,486		1,783		22,232		138,037			12,323		140		1,699		10,764
International Equity		25,707		780		2,564		23,923			1,883		54		183		1,754
Institutional International Equity		967		336		383		920			79		29		31		77
International Growth		437,982		48,138		1,029,303		(543,183	)		18,197		1,996		42,537		(22,344	)
Institutional International Growth		237,672		22,693		412,093		(151,728	)		16,189		1,572		28,755		(10,994	)
International Small Cap Growth		63,344		1,827		98,028		(32,857	)		4,870		142		7,382		(2,370	)
Emerging Markets Leaders		242,042		549		61,696		180,895			30,217		70		7,931		22,356
Emerging Markets Growth		375,603		4,054		331,280		48,377			33,011		363		29,475		3,899
Emerging Markets Small Cap Growth		61,779		7,014		58,248		10,545			4,194		511		4,101		604
Bond		197,394		18,617		156,760		59,251			18,918		1,772		14,898		5,792
Income		37,313		2,760		24,285		15,788			4,169		309		2,725		1,753
Low Duration		220,929		3,628		73,939		150,618			24,220		397		8,107		16,510
Macro Allocation		600,557		34,074		787,172		(152,541	)		52,857		2,996		69,270		(13,417	)

December 31, 2016 William Blair Funds 151

The following tables summarize the activity in capital shares of each Fund for the year ended December 31, 2015 (in thousands):

	Class N
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	20,920	$	18,415	$	155,588	$	(116,253	)		1,510		1,477		11,153		(8,166	)
Large Cap Growth		3,479		966		2,462		1,983			315		96		226		185
Mid Cap Growth		5,086		4,873		16,859		(6,900	)		358		436		1,203		(409	)
Mid Cap Value		632		151		127		656			50		15		10		55
Small-Mid Cap Growth		113,394		8,500		28,874		93,020			5,722		460		1,469		4,713
Small-Mid Cap Value		72		7		100		(21	)		5		1		7		(1	)
Small Cap Growth		11,167		9,324		41,312		(20,821	)		440		416		1,662		(806	)
Small Cap Value		5,971		107		10,763		(4,685	)		344		6		616		(266	)
Global Leaders		766		246		275		737			61		21		22		60
International Leaders		226		2		8		220			18		—		1		17
International Equity		279		26		830		(525	)		19		2		57		(36	)
International Growth		359,131		9,388		312,397		56,122			14,223		378		12,310		2,291
International Small Cap Growth		2,310		205		5,668		(3,153	)		176		15		439		(248	)
Emerging Markets Leaders		6,520		2		6,488		34			751		—		746		5
Emerging Markets Growth		2,105		97		3,386		(1,184	)		164		9		289		(116	)
Emerging Markets Small Cap Growth		5,302		473		3,847		1,928			319		32		240		111
Bond		137,843		1,819		14,345		125,317			13,112		173		1,372		11,913
Income		13,105		972		14,256		(179	)		1,439		107		1,574		(28	)
Low Duration		1,525		49		3,744		(2,170	)		164		5		403		(234	)
Macro Allocation		180,974		898		162,486		19,386			14,474		79		13,669		884

	Class I
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	101,867	$	77,422	$	125,622	$	53,667			6,840		5,761		8,641		3,960
Large Cap Growth		13,673		4,410		8,280		9,803			1,213		418		736		895
Mid Cap Growth		28,076		34,703		159,407		(96,628	)		1,907		2,974		10,676		(5,795	)
Mid Cap Value		29		422		1,620		(1,169	)		2		43		124		(79	)
Small-Mid Cap Growth		314,765		48,836		122,703		240,898			15,422		2,545		6,027		11,940
Small-Mid Cap Value		363		129		402		90			27		10		30		7
Small Cap Growth		82,937		19,650		175,942		(73,355	)		3,105		816		6,445		(2,524	)
Small Cap Value		168,226		2,938		103,403		67,761			9,544		173		5,798		3,919
Global Leaders		11,928		2,130		19,402		(5,344	)		963		185		1,586		(438	)
International Leaders		4,408		96		1,095		3,409			340		7		83		264
International Equity		5,376		680		10,778		(4,722	)		365		49		730		(316	)
International Growth		477,894		27,497		523,541		(18,150	)		17,911		1,082		19,687		(694	)
International Small Cap Growth		62,196		6,895		116,983		(47,892	)		4,698		511		8,807		(3,598	)
Emerging Markets Leaders		15,832		113		5,667		10,278			1,800		15		709		1,106
Emerging Markets Growth		46,581		1,207		55,599		(7,811	)		3,709		109		4,716		(898	)
Emerging Markets Small Cap Growth		107,086		4,486		51,918		59,654			6,516		302		3,162		3,656
Bond		136,906		4,457		45,989		95,374			13,136		426		4,406		9,156
Income		10,900		1,714		13,153		(539	)		1,216		191		1,466		(59	)
Low Duration		41,356		1,978		38,076		5,258			4,452		213		4,113		552
Macro Allocation		1,054,314		8,797		456,003		607,108			85,643		772		38,103		48,312

152 Annual Report December 31, 2016

	Institutional Class
	Dollars										Shares
Fund	Sales		Reinvest		Redemptions			Total			Sales		Reinvest		Redemptions		Total
Global Leaders	$	29,091	$	6,610	$	1,181		$	34,520			2,398		574		95		2,877
International Leaders		19,418		675		(1	)		20,094			1,480		53		—		1,533
Institutional International Equity		2,425		156		1,154			1,427			187		13		91		109
Institutional International Growth		297,180		28,849		305,026			21,003			18,912		1,922		19,237		1,597
International Small Cap Growth		13,840		4,777		61,465			(42,848	)		1,040		352		4,482		(3,090	)
Emerging Markets Leaders		58,828		434		28,442			30,820			6,983		56		3,358		3,681
Emerging Markets Growth		266,522		7,305		221,791			52,036			22,032		656		17,376		5,312
Emerging Markets Small Cap Growth		10,974		4,600		2,911			12,663			660		309		186		783
Bond		25,382		3,259		18,526			10,115			2,443		311		1,756		998
Low Duration		4,653		1,069		50,966			(45,244	)		497		115		5,489		(4,877	)
Macro Allocation		324,009		4,325		27,615			300,719			26,463		379		2,365		24,477

	Net Change in Net Assets Relating to Fund Share Activity
	Dollars									Shares
Fund	Sales		Reinvest		Redemptions		Total			Sales		Reinvest		Redemptions		Total
Growth	$	122,787	$	95,837	$	281,210	$	(62,586	)		8,350		7,238		19,794		(4,206	)
Large Cap Growth		17,152		5,376		10,742		11,786			1,528		514		962		1,080
Mid Cap Growth		33,162		39,576		176,266		(103,528	)		2,265		3,410		11,879		(6,204	)
Mid Cap Value		661		573		1,747		(513	)		52		58		134		(24	)
Small-Mid Cap Growth		428,159		57,336		151,577		333,918			21,144		3,005		7,496		16,653
Small-Mid Cap Value		435		136		502		69			32		11		37		6
Small Cap Growth		94,104		28,974		217,254		(94,176	)		3,545		1,232		8,107		(3,330	)
Small Cap Value		174,197		3,045		114,166		63,076			9,888		179		6,414		3,653
Global Leaders		41,785		8,986		20,858		29,913			3,422		780		1,703		2,499
International Leaders		24,052		773		1,102		23,723			1,838		60		84		1,814
International Equity		5,655		706		11,608		(5,247	)		384		51		787		(352	)
Institutional International Equity		2,425		156		1,154		1,427			187		13		91		109
International Growth		837,025		36,885		835,938		37,972			32,134		1,460		31,997		1,597
Institutional International Growth		297,180		28,849		305,026		21,003			18,912		1,922		19,237		1,597
International Small Cap Growth		78,346		11,877		184,116		(93,893	)		5,914		878		13,728		(6,936	)
Emerging Markets Leaders		81,180		549		40,597		41,132			9,534		71		4,813		4,792
Emerging Markets Growth		315,208		8,609		280,776		43,041			25,905		774		22,381		4,298
Emerging Markets Small Cap Growth		123,362		9,559		58,676		74,245			7,495		643		3,588		4,550
Bond		300,131		9,535		78,860		230,806			28,691		910		7,534		22,067
Income		24,005		2,686		27,409		(718	)		2,655		298		3,040		(87	)
Low Duration		47,534		3,096		92,786		(42,156	)		5,113		333		10,005		(4,559	)
Macro Allocation		1,559,297		14,020		646,104		927,213			126,580		1,230		54,137		73,673

December 31, 2016 William Blair Funds 153

Financial Highlights

Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	12.52		$	13.55		$	14.79		$	12.05		$	10.73
Income (loss) from investment operations:
Net investment income (loss)		(0.02	)		(0.04	)		(0.07	)		(0.07	)		(0.01	)
Net realized and unrealized gain (loss) on investments		(0.08	)		0.75			1.03			4.25			1.69
Total from investment operations		(0.10	)		0.71			0.96			4.18			1.68
Less distributions from:
Net investment income		—			—			—			—			0.00	^
Net realized gain		1.01			1.74			2.20			1.44			0.36
Total distributions		1.01			1.74			2.20			1.44			0.36
Net asset value, end of year	$	11.41		$	12.52		$	13.55		$	14.79		$	12.05
Total return (%)		(0.98	)		5.31			6.59			35.00			15.67
Ratios to average daily net assets (%):
Expenses		1.21			1.19			1.18			1.19			1.20
Net investment income (loss)		(0.15	)		(0.29	)		(0.50	)		(0.51	)		(0.06	)
Class N net assets at end of year (in thousands)	$	62,936		$	149,754		$	272,765		$	291,326		$	248,121
Portfolio turnover rate (%)		79			78			100			52			73

	Class I
	Years Ended December 31,
	2016			2015		2014			2013			2012
Net asset value, beginning of year	$	13.50		$	14.43	$	15.56		$	12.58		$	11.18
Income (loss) from investment operations:
Net investment income (loss)		0.03			0.01		(0.03	)		(0.03	)		0.04
Net realized and unrealized gain (loss) on investments		(0.10	)		0.80		1.10			4.45			1.75
Total from investment operations		(0.07	)		0.81		1.07			4.42			1.79
Less distributions from:
Net investment income		0.03			—		—			0.00	^		0.03
Net realized gain		1.01			1.74		2.20			1.44			0.36
Total distributions		1.04			1.74		2.20			1.44			0.39
Net asset value, end of year	$	12.39		$	13.50	$	14.43		$	15.56		$	12.58
Total return (%)		(0.69	)		5.69		6.96			35.43			16.03
Ratios to average daily net assets (%):
Expenses		0.90			0.89		0.86			0.85			0.89
Net investment income (loss)		0.20			0.06		(0.20	)		(0.17	)		0.30
Class I net assets at end of year (in thousands)	$	514,870		$	696,744	$	688,038		$	623,225		$	468,124
Portfolio turnover rate (%)		79			78		100			52			73

^ Amount is less than $0.005 per share.

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

See accompanying Notes to Financial Statements.

154 Annual Report December 31, 2016

Financial Highlights

Large Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	10.15		$	10.46		$	10.03		$	8.14		$	6.88
Income (loss) from investment operations:
Net investment income (loss)		0.02			(0.02	)		(0.02	)		(0.03	)		(0.02	)
Net realized and unrealized gain (loss) on investments		0.18			0.75			1.46			2.70			1.28
Total from investment operations		0.20			0.73			1.44			2.67			1.26
Less distributions from:
Net investment income		0.01			—			—			—			—
Net realized gain		0.08			1.04			1.01			0.78			—
Total distributions		0.09			1.04			1.01			0.78			—
Net asset value, end of year	$	10.26		$	10.15		$	10.46		$	10.03		$	8.14
Total return (%)		1.97			7.04			14.29			33.00			18.31
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.05			1.07			1.13			1.20			1.20
Expenses, before waivers and reimbursements		1.23			1.28			1.31			1.46			1.57
Net investment income (loss), net of waivers and reimbursements		0.17			(0.22	)		(0.23	)		(0.36	)		(0.21	)
Net investment income (loss), before waivers and reimbursements		(0.01	)		(0.43	)		(0.41	)		(0.62	)		(0.58	)
Class N net assets at end of year (in thousands)	$	11,860		$	10,443		$	8,831		$	6,678		$	4,238
Portfolio turnover rate (%)		44			38			50			48			50

	Class I
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	10.58	$	10.84		$	10.33		$	8.35		$	7.03
Income (loss) from investment operations:
Net investment income (loss)		0.04		(0.00	)^		0.00	^		(0.01	)		0.00	^
Net realized and unrealized gain (loss) on investments		0.19		0.78			1.52			2.77			1.32
Total from investment operations		0.23		0.78			1.52			2.76			1.32
Less distributions from:
Net investment income		0.03		—			—			—			—
Net realized gain		0.08		1.04			1.01			0.78			—
Total distributions		0.11		1.04			1.01			0.78			—
Net asset value, end of year	$	10.70	$	10.58		$	10.84		$	10.33		$	8.35
Total return (%)		2.22		7.26			14.65			33.24			18.78
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.80		0.82			0.88			0.95			0.95
Expenses, before waivers and reimbursements		0.91		0.95			1.00			1.11			1.23
Net investment income (loss), net of waivers and reimbursements		0.41		0.03			0.02			(0.11	)		0.03
Net investment income (loss), before waivers and reimbursements		0.30		(0.10	)		(0.10	)		(0.27	)		(0.25	)
Class I net assets at end of year (in thousands)	$	110,475	$	59,038		$	50,778		$	40,513		$	24,175
Portfolio turnover rate (%)		44		38			50			48			50

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 155

Financial Highlights

Mid Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	11.28		$	14.20		$	15.21		$	12.65		$	11.66
Income (loss) from investment operations:
Net investment income (loss)		(0.06	)		(0.09	)		(0.12	)		(0.13	)		(0.02	)
Net realized and unrealized gain (loss) on investments		0.09			0.04			1.26			3.74			1.29
Total from investment operations		0.03			(0.05	)		1.14			3.61			1.27
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		0.62			2.87			2.15			1.05			0.28
Total distributions		0.62			2.87			2.15			1.05			0.28
Net asset value, end of year	$	10.69		$	11.28		$	14.20		$	15.21		$	12.65
Total return (%)		0.23			(0.20	)		7.53			28.77			10.90
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30			1.32			1.35			1.35			1.35
Expenses, before waivers and reimbursements		1.45			1.43			1.35			1.42			1.42
Net investment income (loss), net of waivers and reimbursements		(0.53	)		(0.65	)		(0.80	)		(0.90	)		(0.15	)
Net investment income (loss), before waivers and reimbursements		(0.68	)		(0.76	)		(0.80	)		(0.97	)		(0.22	)
Class N net assets at end of year (in thousands)	$	16,234		$	25,105		$	37,413		$	41,849		$	40,940
Portfolio turnover rate (%)		60			65			81			83			62

	Class I
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	11.76		$	14.65		$	15.58		$	12.91		$	11.87
Income (loss) from investment operations:
Net investment income (loss)		(0.03	)		(0.06	)		(0.09	)		(0.10	)		0.03
Net realized and unrealized gain (loss) on investments		0.09			0.04			1.31			3.82			1.31
Total from investment operations		0.06			(0.02	)		1.22			3.72			1.34
Less distributions from:
Net investment income		—			—			—			—			0.02
Net realized gain		0.62			2.87			2.15			1.05			0.28
Total distributions		0.62			2.87			2.15			1.05			0.30
Net asset value, end of year	$	11.20		$	11.76		$	14.65		$	15.58		$	12.91
Total return (%)		0.48			0.00			7.87			29.04			11.30
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.05			1.07			1.10			1.10			1.07
Expenses, before waivers and reimbursements		1.18			1.14			1.10			1.15			1.07
Net investment income (loss), net of waivers and reimbursements		(0.26	)		(0.41	)		(0.55	)		(0.65	)		0.19
Net investment income (loss), before waivers and reimbursements		(0.39	)		(0.48	)		(0.55	)		(0.70	)		0.19
Class I net assets at end of year (in thousands)	$	119,424		$	174,617		$	302,373		$	385,779		$	329,295
Portfolio turnover rate (%)		60			65			81			83			62

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

156 Annual Report December 31, 2016

Financial Highlights

Mid Cap Value Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	9.92		$	12.88		$	13.39		$	11.39		$	10.48
Income (loss) from investment operations:
Net investment income (loss)		0.05			0.07			0.03			0.05			0.08
Net realized and unrealized gain (loss) on investments		1.39			(0.36	)		1.40			3.50			1.34
Total from investment operations		1.44			(0.29	)		1.43			3.55			1.42
Less distributions from:
Net investment income		0.05			0.03			0.04			0.06			0.08
Net realized gain		0.93			2.64			1.90			1.49			0.43
Total distributions		0.98			2.67			1.94			1.55			0.51
Net asset value, end of year	$	10.38		$	9.92		$	12.88		$	13.39		$	11.39
Total return (%)		14.49			(2.13	)		10.83			31.46			13.54
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30			1.32			1.35			1.35			1.35
Expenses, before waivers and reimbursements		4.47			4.14			3.77			3.37			3.40
Net investment income (loss), net of waivers and reimbursements		0.50			0.59			0.23			0.36			0.70
Net investment income (loss), before waivers and reimbursements		(2.67	)		(2.23	)		(2.19	)		(1.66	)		(1.35	)
Class N net assets at end of year (in thousands)	$	362		$	694		$	189		$	232		$	79
Portfolio turnover rate (%)		62			53			33			42			63

	Class I
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	9.94		$	12.88		$	13.40		$	11.39		$	10.48
Income (loss) from investment operations:
Net investment income (loss)		0.09			0.08			0.07			0.08			0.10
Net realized and unrealized gain (loss) on investments		1.38			(0.32	)		1.39			3.51			1.35
Total from investment operations		1.47			(0.24	)		1.46			3.59			1.45
Less distributions from:
Net investment income		0.12			0.06			0.08			0.09			0.11
Net realized gain		0.93			2.64			1.90			1.49			0.43
Total distributions		1.05			2.70			1.98			1.58			0.54
Net asset value, end of year	$	10.36		$	9.94		$	12.88		$	13.40		$	11.39
Total return (%)		14.75			(1.73	)		11.04			31.82			13.77
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.05			1.07			1.10			1.10			1.10
Expenses, before waivers and reimbursements		4.11			3.77			3.08			3.04			3.13
Net investment income (loss), net of waivers and reimbursements		0.83			0.65			0.49			0.59			0.92
Net investment income (loss), before waivers and reimbursements		(2.23	)		(2.05	)		(1.49	)		(1.35	)		(1.11	)
Class I net assets at end of year (in thousands)	$	2,647		$	1,974		$	3,579		$	4,225		$	4,058
Portfolio turnover rate (%)		62			53			33			42			63

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

December 31, 2016 William Blair Funds 157

Financial Highlights

Small-Mid Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	18.53		$	18.72		$	18.80		$	14.21		$	13.00
Income (loss) from investment operations:
Net investment income (loss)		(0.09	)		(0.10	)		(0.12	)		(0.15	)		0.02
Net realized and unrealized gain (loss) on investments		1.29			0.93			1.68			6.01			1.57
Total from investment operations		1.20			0.83			1.56			5.86			1.59
Less distributions from:
Net investment income		—			—			—			—			0.02
Net realized gain		0.53			1.02			1.64			1.27			0.36
Total distributions		0.53			1.02			1.64			1.27			0.38
Net asset value, end of year	$	19.20		$	18.53		$	18.72		$	18.80		$	14.21
Total return (%)		6.45			4.47			8.33			41.49			12.20
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.35			1.35			1.35			1.35			1.35
Expenses, before waivers and reimbursements		1.43			1.42			1.38			1.46			1.47
Net investment income (loss), net of waivers and reimbursements		(0.51	)		(0.51	)		(0.63	)		(0.88	)		0.16
Net investment income (loss), before waivers and reimbursements		(0.59	)		(0.58	)		(0.66	)		(0.99	)		0.04
Class N net assets at end of year (in thousands)	$	171,638		$	169,595		$	83,047		$	73,207		$	42,015
Portfolio turnover rate (%)		66			44			49			53			82

	Class I
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	19.25		$	19.36		$	19.34		$	14.55		$	13.32
Income (loss) from investment operations:
Net investment income (loss)		(0.05	)		(0.06	)		(0.08	)		(0.11	)		0.07
Net realized and unrealized gain (loss) on investments		1.35			0.97			1.74			6.17			1.58
Total from investment operations		1.30			0.91			1.66			6.06			1.65
Less distributions from:
Net investment income		—			—			—			—			0.06
Net realized gain		0.53			1.02			1.64			1.27			0.36
Total distributions		0.53			1.02			1.64			1.27			0.42
Net asset value, end of year	$	20.02		$	19.25		$	19.36		$	19.34		$	14.55
Total return (%)		6.72			4.74			8.62			41.89			12.36
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10			1.10			1.10			1.10			1.10
Expenses, before waivers and reimbursements		1.16			1.15			1.15			1.10			1.20
Net investment income (loss), net of waivers and reimbursements		(0.28	)		(0.28	)		(0.38	)		(0.62	)		0.48
Net investment income (loss), before waivers and reimbursements		(0.34	)		(0.33	)		(0.43	)		(0.62	)		0.38	)
Class I net assets at end of year (in thousands)	$	1,090,939		$	1,019,544		$	793,789		$	617,374		$	349,345
Portfolio turnover rate (%)		66			44			49			53			82

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

158 Annual Report December 31, 2016

Financial Highlights

Small-Mid Cap Value Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	12.54		$	13.63		$	14.11		$	11.29		$	10.45
Income (loss) from investment operations:
Net investment income (loss)		0.04			0.04			0.00	^		0.00	^		0.10
Net realized and unrealized gain (loss) on investments		2.55			(0.47	)		0.64			4.06			1.15
Total from investment operations		2.59			(0.43	)		0.64			4.06			1.25
Less distributions from:
Net investment income		0.01			0.01			—			—			0.09
Net realized gain		0.59			0.65			1.12			1.24			0.32
Total distributions		0.60			0.66			1.12			1.24			0.41
Net asset value, end of year	$	14.53		$	12.54		$	13.63		$	14.11		$	11.29
Total return (%)		20.69			(3.13	)		4.66			36.29			11.95
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.35			1.37			1.40			1.40			1.40
Expenses, before waivers and reimbursements		4.15			3.93			4.50			4.50			6.34
Net investment income (loss), net of waivers and reimbursements		0.29			0.27			0.02			(0.04	)		0.87
Net investment income (loss), before waivers and reimbursements		(2.51	)		(2.29	)		(3.08	)		(3.14	)		(4.07	)
Class N net assets at end of year (in thousands)	$	267		$	855		$	946		$	1,205		$	950
Portfolio turnover rate (%)		45			35			69			61			56

	Class I
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	12.54		$	13.63		$	14.12		$	11.29		$	10.45
Income (loss) from investment operations:
Net investment income (loss)		0.08			0.07			0.05			0.03			0.13
Net realized and unrealized gain (loss) on investments		2.55			(0.47	)		0.63			4.07			1.15
Total from investment operations		2.63			(0.40	)		0.68			4.10			1.28
Less distributions from:
Net investment income		0.11			0.04			0.05			0.03			0.12
Net realized gain		0.59			0.65			1.12			1.24			0.32
Total distributions		0.70			0.69			1.17			1.27			0.44
Net asset value, end of year	$	14.47		$	12.54		$	13.63		$	14.12		$	11.29
Total return (%)		21.00			(2.86	)		4.96			36.69			12.22
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.10			1.12			1.15			1.15			1.15
Expenses, before waivers and reimbursements		3.92			3.72			4.16			4.24			5.88
Net investment income (loss), net of waivers and reimbursements		0.62			0.52			0.36			0.21			1.12
Net investment income (loss), before waivers and reimbursements		(2.20	)		(2.08	)		(2.65	)		(2.88	)		(3.61	)
Class I net assets at end of year (in thousands)	$	3,186		$	3,220		$	3,407		$	2,073		$	1,442
Portfolio turnover rate (%)		45			35			69			61			56

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 159

Financial Highlights

Small Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	22.47		$	25.61		$	30.02		$	23.68		$	20.13
Income (loss) from investment operations:
Net investment income (loss)		(0.18	)		(0.22	)		(0.30	)		(0.26	)		(0.22	)
Net realized and unrealized gain (loss) on investments		4.43			(0.93	)		1.02			12.52			3.87
Total from investment operations		4.25			(1.15	)		0.72			12.26			3.65
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		1.48			1.99			5.13			5.92			0.10
Total distributions		1.48			1.99			5.13			5.92			0.10
Net asset value, end of year	$	25.24		$	22.47		$	25.61		$	30.02		$	23.68
Total return (%)		18.89			(4.44	)		2.62			52.76			18.15
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50			1.50			1.50			1.50			1.50
Expenses, before waivers and reimbursements		1.55			1.59			1.56			1.57			1.59
Net investment income (loss), net of waivers and reimbursements		(0.79	)		(0.85	)		(1.00	)		(0.87	)		(0.96	)
Net investment income (loss), before waivers and reimbursements		(0.84	)		(0.94	)		(1.06	)		(0.94	)		(1.05	)
Class N net assets at end of year (in thousands)	$	117,068		$	111,944		$	148,201		$	211,562		$	130,382
Portfolio turnover rate (%)		90			91			82			91			89

	Class I
	Years Ended December 31,
	2016			2015			2014			2013			2012
Net asset value, beginning of year	$	24.17		$	27.32		$	31.61		$	24.66		$	20.91
Income (loss) from investment operations:
Net investment income (loss)		(0.13	)		(0.17	)		(0.23	)		(0.19	)		(0.16	)
Net realized and unrealized gain (loss) on investments		4.78			(0.99	)		1.07			13.06			4.01
Total from investment operations		4.65			(1.16	)		0.84			12.87			3.85
Less distributions from:
Net investment income		—			—			—			—			—
Net realized gain		1.48			1.99			5.13			5.92			0.10
Total distributions		1.48			1.99			5.13			5.92			0.10
Net asset value, end of year	$	27.34		$	24.17		$	27.32		$	31.61		$	24.66
Total return (%)		19.22			(4.20	)		2.87			53.13			18.43
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25			1.25			1.25			1.25			1.25
Expenses, before waivers and reimbursements		1.27			1.30			1.30			1.27			1.35
Net investment income (loss), net of waivers and reimbursements		(0.54	)		(0.61	)		(0.75	)		(0.63	)		(0.71	)
Net investment income (loss), before waivers and reimbursements		(0.56	)		(0.66	)		(0.80	)		(0.65	)		(0.81	)
Class I net assets at end of year (in thousands)	$	271,830		$	261,269		$	364,241		$	415,797		$	266,431
Portfolio turnover rate (%)		90			91			82			91			89

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

160 Annual Report December 31, 2016

Financial Highlights

Small Cap Value Fund

	Class N
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	16.68	$	17.76		$	17.63		$	13.65		$	12.26
Income (loss) from investment operations:
Net investment income (loss)		0.04		0.02			(0.03	)		(0.05	)		0.10
Net realized and unrealized gain (loss) on investments		4.34		(1.05	)		0.81			5.32			1.43
Total from investment operations		4.38		(1.03	)		0.78			5.27			1.53
Less distributions from:
Net investment income		0.04		—			—			—			0.08
Net realized gain		0.84		0.05			0.65			1.29			0.06
Total distributions		0.88		0.05			0.65			1.29			0.14
Net asset value, end of year	$	20.18	$	16.68		$	17.76		$	17.63		$	13.65
Total return (%)		26.19		(5.77	)		4.49			38.91			12.49
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50		1.50			1.50			1.49			1.43
Expenses, before waivers and reimbursements		1.53		1.54			1.53			1.55			1.60
Net investment income (loss), net of waivers and reimbursements		0.22		0.14			(0.17	)		(0.33	)		0.78
Net investment income (loss), before waivers and reimbursements		0.19		0.10			(0.20	)		(0.39	)		0.61
Class N net assets at end of year (in thousands)	$	33,359	$	33,351		$	40,223		$	55,464		$	39,084
Portfolio turnover rate (%)		33		30			39			51			51

	Class I
	Years Ended December 31,
	2016		2015			2014		2013			2012
Net asset value, beginning of year	$	17.08	$	18.17		$	18.00	$	13.88		$	12.47
Income (loss) from investment operations:
Net investment income (loss)		0.09		0.08			0.02		(0.01	)		0.14
Net realized and unrealized gain (loss) on investments		4.44		(1.08	)		0.82		5.42			1.45
Total from investment operations		4.53		(1.00	)		0.84		5.41			1.59
Less distributions from:
Net investment income		0.09		0.04			0.02		0.00	^		0.12
Net realized gain		0.84		0.05			0.65		1.29			0.06
Total distributions		0.93		0.09			0.67		1.29			0.18
Net asset value, end of year	$	20.68	$	17.08		$	18.17	$	18.00		$	13.88
Total return (%)		26.46		(5.47	)		4.73		39.31			12.73
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25		1.24			1.23		1.24			1.18
Expenses, before waivers and reimbursements		1.29		1.24			1.23		1.25			1.29
Net investment income (loss), net of waivers and reimbursements		0.47		0.43			0.12		(0.07	)		1.02
Net investment income (loss), before waivers and reimbursements		0.43		0.43			0.12		(0.08	)		0.91
Class I net assets at end of year (in thousands)	$	675,272	$	579,010		$	544,963	$	352,832		$	196,184
Portfolio turnover rate (%)		33		30			39		51			51

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 161

Financial Highlights

Global Leaders Fund

	Class N
	Years Ended December 31,
	2016			2015			2014		2013		2012
Net asset value, beginning of year	$	11.58		$	11.84		$	11.43	$	9.47	$	8.10
Income (loss) from investment operations:
Net investment income (loss)		0.03			0.02			0.02		0.02		0.03
Net realized and unrealized gain (loss) on investments		0.04			0.27			0.41		1.96		1.37
Total from investment operations		0.07			0.29			0.43		1.98		1.40
Less distributions from:
Net investment income		—			0.01			—		0.02		0.03
Net realized gain		0.05			0.54			0.02		—		—
Total distributions		0.05			0.55			0.02		0.02		0.03
Net asset value, end of year	$	11.60		$	11.58		$	11.84	$	11.43	$	9.47
Total return (%)		0.62			2.49			3.76		20.86		17.25
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.36			1.39			1.50		1.50		1.50
Expenses, before waivers and reimbursements		1.62			1.61			1.62		1.63		1.84
Net investment income (loss), net of waivers and reimbursements		0.23			0.12			0.16		0.18		0.29
Net investment income (loss), before waivers and reimbursements		(0.03	)		(0.10	)		0.04		0.05		(0.05	)
Class N net assets at end of year (in thousands)	$	5,760		$	5,588		$	5,007	$	6,403	$	5,215
Portfolio turnover rate (%)		75			55			60		70		73

	Class I
	Years Ended December 31,
	2016		2015		2014		2013		2012
Net asset value, beginning of year	$	11.59	$	11.85	$	11.42	$	9.47	$	8.09
Income (loss) from investment operations:
Net investment income (loss)		0.06		0.06		0.04		0.04		0.05
Net realized and unrealized gain (loss) on investments		0.05		0.26		0.43		1.95		1.38
Total from investment operations		0.11		0.32		0.47		1.99		1.43
Less distributions from:
Net investment income		0.03		0.04		0.02		0.04		0.05
Net realized gain		0.05		0.54		0.02		—		—
Total distributions		0.08		0.58		0.04		0.04		0.05
Net asset value, end of year	$	11.62	$	11.59	$	11.85	$	11.42	$	9.47
Total return (%)		0.98		2.77		4.08		21.05		17.64
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.05		1.10		1.25		1.25		1.25
Expenses, before waivers and reimbursements		1.31		1.32		1.33		1.35		1.56
Net investment income (loss), net of waivers and reimbursements		0.54		0.45		0.38		0.40		0.54
Net investment income (loss), before waivers and reimbursements		0.28		0.23		0.30		0.30		0.23
Class I net assets at end of year (in thousands)	$	45,772	$	45,853	$	52,090	$	53,562	$	45,757
Portfolio turnover rate (%)		75		55		60		70		73

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

162 Annual Report December 31, 2016

Financial Highlights

Global Leaders Fund

	Institutional Class
	Periods Ended December 31,
	2016		2015		2014		2013		2012(a)
Net asset value, beginning of year	$	11.59	$	11.85	$	11.42	$	9.47	$	9.50
Income (loss) from investment operations:
Net investment income (loss)		0.07		0.06		0.06		0.04		0.00	^
Net realized and unrealized gain (loss) on investments		0.05		0.27		0.43		1.97		(0.03	)
Total from investment operations		0.12		0.33		0.49		2.01		(0.03	)
Less distributions from:
Net investment income		0.04		0.05		0.04		0.06		—
Net realized gain		0.05		0.54		0.02		—		—
Total distributions		0.09		0.59		0.06		0.06		—
Net asset value, end of year	$	11.62	$	11.59	$	11.85	$	11.42	$	9.47
Total return (%)*		1.03		2.85		4.24		21.23		(0.32	)
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.00		1.03		1.10		1.10		1.10
Expenses, before waivers and reimbursements		1.11		1.11		1.13		1.14		1.26
Net investment income (loss), net of waivers and reimbursements		0.59		0.47		0.51		0.37		(0.91	)
Net investment income (loss), before waivers and reimbursements		0.48		0.39		0.48		0.33		(1.07	)
Institutional Class net assets at end of year (in thousands)	$	125,199	$	137,527	$	106,565	$	87,118	$	16,022
Portfolio turnover rate (%)*		75		55		60		70		73

(a)	For the period from December 19, 2012 (Commencement of Operations) to December 31, 2012.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.
^	Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 163

Financial Highlights

International Leaders Fund

	Class N
	Periods Ended December 31,
	2016			2015		2014			2013		2012(a)
Net asset value, beginning of year	$	12.89		$	12.25	$	12.65		$	10.81	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.03			0.07		0.13			0.03		0.00	^
Net realized and unrealized gain (loss) on investments		0.08			0.66		(0.47	)		1.99		0.82
Total from investment operations		0.11			0.73		(0.34	)		2.02		0.82
Less distributions from:
Net investment income		0.12			0.02		0.06			0.18		0.01
Net realized gain		—			0.07		—			—		—
Total distributions		0.12			0.09		0.06			0.18		0.01
Net asset value, end of year	$	12.88		$	12.89	$	12.25		$	12.65	$	10.81
Total return (%)*		0.88			6.01		(2.67	)		18.75		8.16
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.30			1.24		1.45			1.45		1.45
Expenses, before waivers and reimbursements		1.56			1.56		1.59			1.73		4.98
Net investment income (loss), net of waivers and reimbursements		0.24			0.51		1.00			0.29		0.00
Net investment income (loss), before waivers and reimbursements		(0.02	)		0.19		0.86			0.01		(3.53	)
Class N net assets at end of year (in thousands)	$	2,922		$	377	$	150		$	154	$	542
Portfolio turnover rate (%)*		59			29		79			73		16

	Class I
	Periods Ended December 31,
	2016		2015		2014			2013		2012(a)
Net asset value, beginning of year	$	12.91	$	12.25	$	12.65		$	10.81	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.10		0.10		0.16			0.12		0.01
Net realized and unrealized gain (loss) on investments		0.04		0.65		(0.47	)		1.94		0.82
Total from investment operations		0.14		0.75		(0.31	)		2.06		0.83
Less distributions from:
Net investment income		0.13		0.02		0.09			0.22		0.02
Net realized gain		—		0.07		—			—		—
Total distributions		0.13		0.09		0.09			0.22		0.02
Net asset value, end of year	$	12.92	$	12.91	$	12.25		$	12.65	$	10.81
Total return (%)*		1.10		6.18		(2.43	)		19.10		8.26
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.04		1.13		1.20			1.20		1.20
Expenses, before waivers and reimbursements		1.30		1.46		1.29			1.40		4.56
Net investment income (loss), net of waivers and reimbursements		0.74		0.75		1.25			1.06		0.22
Net investment income (loss), before waivers and reimbursements		0.48		0.42		1.16			0.86		(3.14	)
Class I net assets at end of year (in thousands)	$	30,944	$	13,474	$	9,561		$	11,629	$	4,336
Portfolio turnover rate (%)*		59		29		79			73		16

(a)	For the period from August 16, 2012 (Commencement of Operations) to December 31, 2012.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.
^	Amount is less than $0.005 per share.

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

164 Annual Report December 31, 2016

Financial Highlights

International Leaders Fund

	Institutional Class
	Periods Ended December 31,
	2016		2015		2014			2013		2012(a)
Net asset value, beginning of year	$	12.90	$	12.24	$	12.65		$	10.80	$	10.24
Income (loss) from investment operations:
Net investment income (loss)		0.12		0.11		0.17			0.15		0.00	^
Net realized and unrealized gain (loss) on investments		0.04		0.66		(0.47	)		1.94		0.58
Total from investment operations		0.16		0.77		(0.30	)		2.09		0.58
Less distributions from:
Net investment income		0.14		0.04		0.11			0.24		0.02
Net realized gain		—		0.07		—			—		—
Total distributions		0.14		0.11		0.11			0.24		0.02
Net asset value, end of year	$	12.92	$	12.90	$	12.24		$	12.65	$	10.80
Total return (%)*		1.25		6.33		(2.34	)		19.39		5.67
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		0.95		0.98		1.05			1.05		1.05
Expenses, before waivers and reimbursements		1.06		1.15		1.14			1.25		1.84
Net investment income (loss), net of waivers and reimbursements		0.92		0.88		1.33			1.31		0.01
Net investment income (loss), before waivers and reimbursements		0.81		0.71		1.24			1.11		(0.78	)
Institutional Class net assets at end of year (in thousands)	$	221,356	$	102,227	$	78,251		$	56,991	$	5,286
Portfolio turnover rate (%)*		59		29		79			73		16

(a)	For the period from November 2, 2012 (Commencement of Operations) to December 31, 2012.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.
^	Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 165

Financial Highlights

International Equity Fund

	Class N
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	13.85		$	13.76	$	14.28		$	12.05	$	10.56
Income (loss) from investment operations:
Net investment income (loss)		0.18			0.15		0.16			0.09		0.11
Net realized and unrealized gain (loss) on investments		(0.22	)		0.06		(0.60	)		2.25		1.75
Total from investment operations		(0.04	)		0.21		(0.44	)		2.34		1.86
Less distributions from:
Net investment income		0.13			0.12		0.08			0.11		0.37
Net realized gain		—			—		—			—		—
Total distributions		0.13			0.12		0.08			0.11		0.37
Net asset value, end of year	$	13.68		$	13.85	$	13.76		$	14.28	$	12.05
Total return (%)		(0.27	)		1.54		(3.09	)		19.47		17.57
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30			1.32		1.38			1.45		1.45
Expenses, before waivers and reimbursements		1.60			1.60		1.56			1.65		1.71
Net investment income (loss), net of waivers and reimbursements		1.30			1.01		1.11			0.73		0.95
Net investment income (loss), before waivers and reimbursements		1.00			0.73		0.93			0.53		0.69
Class N net assets at end of year (in thousands)	$	2,954		$	3,020	$	3,497		$	4,307	$	5,648
Portfolio turnover rate (%)		70			54		73			88		80

	Class I
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	13.98		$	13.91	$	14.43		$	12.18	$	10.67
Income (loss) from investment operations:
Net investment income (loss)		0.21			0.18		0.19			0.14		0.14
Net realized and unrealized gain (loss) on investments		(0.22	)		0.07		(0.59	)		2.26		1.77
Total from investment operations		(0.01	)		0.25		(0.40	)		2.40		1.91
Less distributions from:
Net investment income		0.16			0.18		0.12			0.15		0.40
Net realized gain		—			—		—			—		—
Total distributions		0.16			0.18		0.12			0.15		0.40
Net asset value, end of year	$	13.81		$	13.98	$	13.91		$	14.43	$	12.18
Total return (%)		(0.02	)		1.80		(2.80	)		19.74		17.89
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.05			1.07		1.13			1.20		1.20
Expenses, before waivers and reimbursements		1.34			1.34		1.32			1.41		1.44
Net investment income (loss), net of waivers and reimbursements		1.52			1.26		1.35			1.07		1.17
Net investment income (loss), before waivers and reimbursements		1.23			0.99		1.16			0.86		0.93
Class I net assets at end of year (in thousands)	$	84,383		$	60,886	$	65,012		$	75,271	$	64,536
Portfolio turnover rate (%)		70			54		73			88		80

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

166 Annual Report December 31, 2016

Financial Highlights

Institutional International Equity Fund

	Institutional Class
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	12.12		$	12.01	$	12.70		$	10.82	$	9.27
Income (loss) from investment operations:
Net investment income (loss)		0.20			0.15		0.21			0.13		0.13
Net realized and unrealized gain (loss) on investments		(0.24	)		0.08		(0.65	)		2.00		1.57
Total from investment operations		(0.04	)		0.23		(0.44	)		2.13		1.70
Less distributions from:
Net investment income		0.24			0.12		0.25			0.25		0.15
Net realized gain		—			—		—			—		—
Total distributions		0.24			0.12		0.25			0.25		0.15
Net asset value, end of year	$	11.84		$	12.12	$	12.01		$	12.70	$	10.82
Total return (%)		(0.27	)		1.91		(3.50	)		19.78		18.31
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.00			1.00		1.03			1.10		1.10
Expenses, before waivers and reimbursements		1.77			1.76		1.63			1.12		1.16
Net investment income (loss), net of waivers and reimbursements		1.69			1.23		1.61			1.12		1.28
Net investment income (loss), before waivers and reimbursements		0.92			0.47		1.01			1.10		1.22
Institutional Class net assets at end of year (in thousands)	$	16,565		$	16,030	$	14,574		$	100,805	$	109,690
Portfolio turnover rate (%)		75			54		61			84		86

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

December 31, 2016 William Blair Funds 167

Financial Highlights

International Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014			2013		2012
Net asset value, beginning of year	$	24.94		$	25.24		$	26.30		$	22.43	$	18.68
Income (loss) from investment operations:
Net investment income (loss)		0.20			0.18			0.31			0.27		0.26
Net realized and unrealized gain (loss) on investments		(0.92	)		(0.25	)		(1.15	)		3.89		4.16
Total from investment operations		(0.72	)		(0.07	)		(0.84	)		4.16		4.42
Less distributions from:
Net investment income		0.36			0.23			0.22			0.29		0.67
Net realized gain		—			—			—			—		—
Total distributions		0.36			0.23			0.22			0.29		0.67
Net asset value, end of year	$	23.86		$	24.94		$	25.24		$	26.30	$	22.43
Total return (%)		(2.88	)		(0.27	)		(3.19	)		18.57		23.67
Ratios to average daily net assets (%):
Expenses		1.43			1.42			1.44			1.44		1.44
Net investment income (loss)		0.84			0.71			1.17			1.13		1.25
Class N net assets at end of year (in thousands)	$	729,544		$	1,023,588		$	978,433		$	1,418,083	$	1,269,736
Portfolio turnover rate (%)		101			70			79			97		81

	Class I
	Years Ended December 31,
	2016			2015			2014			2013		2012
Net asset value, beginning of year	$	25.51		$	25.82		$	26.91		$	22.94	$	19.10
Income (loss) from investment operations:
Net investment income (loss)		0.29			0.27			0.36			0.35		0.32
Net realized and unrealized gain (loss) on investments		(0.94	)		(0.28	)		(1.13	)		3.99		4.25
Total from investment operations		(0.65	)		(0.01	)		(0.77	)		4.34		4.57
Less distributions from:
Net investment income		0.44			0.30			0.32			0.37		0.73
Net realized gain		—			—			—			—		—
Total distributions		0.44			0.30			0.32			0.37		0.73
Net asset value, end of year	$	24.42		$	25.51		$	25.82		$	26.91	$	22.94
Total return (%)		(2.54	)		(0.03	)		(2.86	)		18.96		23.96
Ratios to average daily net assets (%):
Expenses		1.13			1.14			1.14			1.11		1.15
Net investment income (loss)		1.16			1.02			1.36			1.43		1.51
Class I net assets at end of year (in thousands)	$	2,251,701		$	2,655,156		$	2,705,054		$	2,877,541	$	2,402,897
Portfolio turnover rate (%)		101			70			79			97		81

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

168 Annual Report December 31, 2016

Financial Highlights

Institutional International Growth Fund

	Institutional Class
	Years Ended December 31,
	2016			2015			2014			2013		2012
Net asset value, beginning of year	$	15.08		$	15.26		$	17.40		$	14.89	$	12.39
Income (loss) from investment operations:
Net investment income (loss)		0.18			0.19			0.26			0.25		0.23
Net realized and unrealized gain (loss) on investments		(0.54	)		(0.18	)		(0.71	)		2.56		2.76
Total from investment operations		(0.36	)		0.01			(0.45	)		2.81		2.99
Less distributions from:
Net investment income		0.17			0.09			0.32			0.30		0.49
Net realized gain		—			0.10			1.37			—		—
Total distributions		0.17			0.19			1.69			0.30		0.49
Net asset value, end of year	$	14.55		$	15.08		$	15.26		$	17.40	$	14.89
Total return (%)		(2.40	)		0.09			(2.66	)		18.90		24.11
Ratios to average daily net assets (%):
Expenses		0.98			0.96			0.97			0.97		0.98
Net investment income (loss)		1.25			1.18			1.50			1.58		1.64
Institutional Class net assets at end of year (in thousands)	$	2,093,971		$	2,335,632		$	2,339,169		$	2,440,149	$	1,974,130
Portfolio turnover rate (%)		105			70			83			97		83

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

December 31, 2016 William Blair Funds 169

Financial Highlights

International Small Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	13.50		$	12.56	$	16.08		$	13.46	$	11.36
Income (loss) from investment operations:
Net investment income (loss)		0.10			0.05		0.03			0.10		0.08
Net realized and unrealized gain (loss) on investments		(0.72	)		1.16		(1.38	)		3.35		2.27
Total from investment operations		(0.62	)		1.21		(1.35	)		3.45		2.35
Less distributions from:
Net investment income		0.01			0.24		0.18			0.16		0.25
Net realized gain		0.00	^		0.03		1.99			0.67		—
Total distributions		0.01			0.27		2.17			0.83		0.25
Net asset value, end of year	$	12.87		$	13.50	$	12.56		$	16.08	$	13.46
Total return (%)		(4.60	)		9.67		(8.43	)		25.80		20.73
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.44			1.47		1.58			1.59		1.61
Expenses, before waivers and reimbursements		1.59			1.62		1.58			1.59		1.61
Net investment income (loss), net of waivers and reimbursements		0.77			0.34		0.20			0.67		0.65
Net investment income (loss), before waivers and reimbursements		0.62			0.19		0.20			0.67		0.65
Class N net assets at end of year (in thousands)	$	10,361		$	11,350	$	13,676		$	18,910	$	14,771
Portfolio turnover rate (%)		73			90		127			111		76

	Class I
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	13.65		$	12.70	$	16.23		$	13.58	$	11.46
Income (loss) from investment operations:
Net investment income (loss)		0.14			0.09		0.09			0.15		0.12
Net realized and unrealized gain (loss) on investments		(0.75	)		1.18		(1.40	)		3.37		2.30
Total from investment operations		(0.61	)		1.27		(1.31	)		3.52		2.42
Less distributions from:
Net investment income		0.04			0.29		0.23			0.20		0.30
Net realized gain		0.00	^		0.03		1.99			0.67		—
Total distributions		0.04			0.32		2.22			0.87		0.30
Net asset value, end of year	$	13.00		$	13.65	$	12.70		$	16.23	$	13.58
Total return (%)		(4.41	)		10.00		(8.10	)		26.11		21.10
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.15			1.16		1.28			1.30		1.30
Expenses, before waivers and reimbursements		1.30			1.31		1.28			1.30		1.30
Net investment income (loss), net of waivers and reimbursements		1.06			0.66		0.56			0.96		0.95
Net investment income (loss), before waivers and reimbursements		0.91			0.51		0.56			0.96		0.95
Class I net assets at end of year (in thousands)	$	306,526		$	342,232	$	364,161		$	508,758	$	359,557
Portfolio turnover rate (%)		73			90		127			111		76

^ Amount is less than $0.005 per share.

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

170 Annual Report December 31, 2016

Financial Highlights

International Small Cap Growth Fund

	Institutional Class
	Years Ended December 31,
	2016			2015		2014			2013		2012
Net asset value, beginning of year	$	13.72		$	12.77	$	16.32		$	13.64	$	11.51
Income (loss) from investment operations:
Net investment income (loss)		0.15			0.10		0.12			0.18		0.15
Net realized and unrealized gain (loss) on investments		(0.74	)		1.18		(1.41	)		3.41		2.31
Total from investment operations		(0.59	)		1.28		(1.29	)		3.59		2.46
Less distributions from:
Net investment income		0.06			0.30		0.27			0.24		0.33
Net realized gain		0.00	^		0.03		1.99			0.67		—
Total distributions		0.06			0.33		2.26			0.91		0.33
Net asset value, end of year	$	13.07		$	13.72	$	12.77		$	16.32	$	13.64
Total return (%)		(4.31	)		10.03		(7.91	)		26.49		21.36
Ratios to average daily net assets (%):
Expenses		1.07			1.08		1.06			1.06		1.08
Net investment income (loss),		1.13			0.76		0.74			1.20		1.14
Institutional Class net assets at end of year (in thousands)	$	199,746		$	221,018	$	245,103		$	408,524	$	345,180
Portfolio turnover rate (%)		73			90		127			111		76

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 171

Financial Highlights

Emerging Markets Leaders Fund

	Class N
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	7.73	$	9.06		$	9.10		$	9.20		$	7.68
Income (loss) from investment operations:
Net investment income (loss)		0.02		0.02			0.05			(0.02	)		0.02
Net realized and unrealized gain (loss) on investments		0.09		(1.34	)		0.14			(0.05	)		1.54
Total from investment operations		0.11		(1.32	)		0.19			(0.07	)		1.56
Less distributions from:
Net investment income		—		—			0.00	^		0.03			0.04
Net realized gain		—		0.01			0.23			—			—
Total distributions		—		0.01			0.23			0.03			0.04
Net asset value, end of year	$	7.84	$	7.73		$	9.06		$	9.10		$	9.20
Total return (%)		1.42		(14.56	)		2.17			(0.74	)		20.37
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.57		1.64			1.65			1.65			1.65
Expenses, before waivers and reimbursements		1.81		1.89			1.82			1.83			2.10
Net investment income (loss), net of waivers and reimbursements		0.29		0.18			0.51			(0.23	)		0.26
Net investment income (loss), before waivers and reimbursements		0.05		(0.07	)		0.34			(0.41	)		(0.19	)
Class N net assets at end of year (in thousands)	$	2,479	$	1,599		$	1,832		$	1,959		$	249
Portfolio turnover rate (%)		135		110			131			131			94

	Class I
	Years Ended December 31,
	2016		2015			2014		2013			2012
Net asset value, beginning of year	$	7.74	$	9.08		$	9.10	$	9.18		$	7.66
Income (loss) from investment operations:
Net investment income (loss)		0.04		0.05			0.08		0.05			0.07
Net realized and unrealized gain (loss) on investments		0.10		(1.36	)		0.15		(0.10	)		1.51
Total from investment operations		0.14		(1.31	)		0.23		(0.05	)		1.58
Less distributions from:
Net investment income		0.01		0.02			0.02		0.03			0.06
Net realized gain		—		0.01			0.23		—			—
Total distributions		0.01		0.03			0.25		0.03			0.06
Net asset value, end of year	$	7.87	$	7.74		$	9.08	$	9.10		$	9.18
Total return (%)		1.82		(14.37	)		2.62		(0.60	)		20.64
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30		1.29			1.40		1.40			1.40
Expenses, before waivers and reimbursements		1.54		1.54			1.60		1.58			1.75
Net investment income (loss), net of waivers and reimbursements		0.52		0.53			0.84		0.51			0.83
Net investment income (loss), before waivers and reimbursements		0.28		0.28			0.64		0.33			0.48
Class I net assets at end of year (in thousands)	$	30,346	$	32,862		$	28,475	$	34,590		$	25,628
Portfolio turnover rate (%)		135		110			131		131			94

^ Amount is less than $0.005 per share.

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

172 Annual Report December 31, 2016

Financial Highlights

Emerging Markets Leaders Fund

	Institutional Class
	Years Ended December 31,
	2016		2015			2014		2013			2012
Net asset value, beginning of year	$	7.74	$	9.07		$	9.10	$	9.18		$	7.65
Income (loss) from investment operations:
Net investment income (loss)		0.03		0.04			0.08		0.06			0.08
Net realized and unrealized gain (loss) on investments		0.10		(1.33	)		0.16		(0.10	)		1.52
Total from investment operations		0.13		(1.29	)		0.24		(0.04	)		1.60
Less distributions from:
Net investment income		0.01		0.03			0.04		0.04			0.07
Net realized gain		—		0.01			0.23		—			—
Total distributions		0.01		0.04			0.27		0.04			0.07
Net asset value, end of year	$	7.86	$	7.74		$	9.07	$	9.10		$	9.18
Total return (%)		1.74		(14.24	)		2.68		(0.46	)		20.97
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.25		1.25			1.25		1.25			1.25
Expenses, before waivers and reimbursements		1.34		1.35			1.42		1.42			1.59
Net investment income (loss), net of waivers and reimbursements		0.39		0.49			0.83		0.68			0.90
Net investment income (loss), before waivers and reimbursements		0.30		0.39			0.66		0.51			0.56
Institutional Class net assets at end of year (in thousands)	$	272,678	$	93,217		$	75,875	$	36,509		$	43,102
Portfolio turnover rate (%)		135		110			131		131			94

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

December 31, 2016 William Blair Funds 173

Financial Highlights

Emerging Markets Growth Fund

	Class N
	Years Ended December 31,
	2016		2015			2014		2013		2012
Net asset value, beginning of year	$	10.85	$	12.91		$	13.28	$	13.40	$	11.16
Income (loss) from investment operations:
Net investment income (loss)		0.03		0.04			0.08		0.05		0.07
Net realized and unrealized gain (loss) on investments		0.13		(1.98	)		0.37		0.09		2.24
Total from investment operations		0.16		(1.94	)		0.45		0.14		2.31
Less distributions from:
Net investment income		0.02		—			0.08		0.01		0.07
Net realized gain		—		0.12			0.74		0.25		—
Total distributions		0.02		0.12			0.82		0.26		0.07
Net asset value, end of year	$	10.99	$	10.85		$	12.91	$	13.28	$	13.40
Total return (%)		1.49		(15.03	)		3.40		1.05		20.70
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.50		1.50			1.64		1.68		1.69
Expenses, before waivers and reimbursements		1.65		1.65			1.64		1.68		1.69
Net investment income (loss), net of waivers and reimbursements		0.28		0.33			0.55		0.39		0.59
Net investment income (loss), before waivers and reimbursements		0.13		0.18			0.55		0.39		0.59
Class N net assets at end of year (in thousands)	$	8,488	$	9,367		$	12,638	$	13,723	$	16,724
Portfolio turnover rate (%)		105		121			101		118		90

	Class I
	Years Ended December 31,
	2016		2015			2014		2013		2012
Net asset value, beginning of year	$	10.96	$	13.01		$	13.38	$	13.50	$	11.25
Income (loss) from investment operations:
Net investment income (loss)		0.06		0.07			0.11		0.08		0.11
Net realized and unrealized gain (loss) on investments		0.13		(2.00	)		0.37		0.10		2.25
Total from investment operations		0.19		(1.93	)		0.48		0.18		2.36
Less distributions from:
Net investment income		0.05		—			0.11		0.05		0.11
Net realized gain		—		0.12			0.74		0.25		—
Total distributions		0.05		0.12			0.85		0.30		0.11
Net asset value, end of year	$	11.10	$	10.96		$	13.01	$	13.38	$	13.50
Total return (%)		1.73		(14.83	)		3.65		1.36		21.01
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.26		1.25			1.40		1.41		1.41
Expenses, before waivers and reimbursements		1.41		1.40			1.40		1.41		1.41
Net investment income (loss), net of waivers and reimbursements		0.53		0.58			0.79		0.62		0.86
Net investment income (loss), before waivers and reimbursements		0.38		0.43			0.79		0.62		0.86
Class I net assets at end of year (in thousands)	$	93,668	$	130,491		$	166,488	$	152,588	$	144,942
Portfolio turnover rate (%)		105		121			101		118		90

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

174 Annual Report December 31, 2016

Financial Highlights

Emerging Markets Growth Fund

	Institutional Class
	Years Ended December 31,
	2016		2015			2014		2013		2012
Net asset value, beginning of year	$	11.05	$	13.09		$	13.46	$	13.59	$	11.32
Income (loss) from investment operations:
Net investment income (loss)		0.07		0.08			0.14		0.12		0.14
Net realized and unrealized gain (loss) on investments		0.12		(2.00	)		0.37		0.08		2.27
Total from investment operations		0.19		(1.92	)		0.51		0.20		2.41
Less distributions from:
Net investment income		0.06		—			0.14		0.08		0.14
Net realized gain		—		0.12			0.74		0.25		—
Total distributions		0.06		0.12			0.88		0.33		0.14
Net asset value, end of year	$	11.18	$	11.05		$	13.09	$	13.46	$	13.59
Total return (%)		1.71		(14.67	)		3.85		1.49		21.28
Ratios to average daily net assets (%):
Expenses		1.19		1.17			1.18		1.19		1.20
Net investment income (loss)		0.60		0.61			1.00		0.87		1.12
Institutional Class net assets at end of year (in thousands)	$	831,587	$	739,253		$	806,708	$	833,711	$	802,571
Portfolio turnover rate (%)		105		121			101		118		90

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

December 31, 2016 William Blair Funds 175

Financial Highlights

Emerging Markets Small Cap Growth Fund

	Class N
	Years Ended December 31,
	2016			2015			2014		2013			2012
Net asset value, beginning of year	$	14.84		$	16.52		$	15.12	$	12.99		$	9.73
Income (loss) from investment operations:
Net investment income (loss)		0.09			(0.01	)		0.04		0.05			0.06
Net realized and unrealized gain (loss) on investments		(0.88	)		(1.05	)		2.13		2.08			3.27
Total from investment operations		(0.79	)		(1.06	)		2.17		2.13			3.33
Less distributions from:
Net investment income		0.32			—			0.03		—			0.07
Net realized gain		—			0.62			0.74		0.00	^		—
Total distributions		0.32			0.62			0.77		0.00	^		0.07
Net asset value, end of year	$	13.73		$	14.84		$	16.52	$	15.12		$	12.99
Total return (%)		(5.33	)		(6.40	)		14.41		16.42			34.23
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.61			1.65			1.65		1.65			1.65
Expenses, before waivers and reimbursements		1.82			1.94			1.74		2.19			4.76
Net investment income (loss), net of waivers and reimbursements		0.62			(0.06	)		0.21		0.38			0.56
Net investment income (loss), before waivers and reimbursements		0.41			(0.35	)		0.12		(0.16	)		(2.54	)
Class N net assets at end of year (in thousands)	$	9,263		$	11,306		$	10,745	$	9,313		$	3,016
Portfolio turnover rate (%)		157			167			124		138			78

	Class I
	Years Ended December 31,
	2016			2015			2014		2013			2012
Net asset value, beginning of year	$	14.90		$	16.52		$	15.13	$	12.99		$	9.73
Income (loss) from investment operations:
Net investment income (loss)		0.13			0.05			0.02		0.05			0.08
Net realized and unrealized gain (loss) on investments		(0.89	)		(1.05	)		2.20		2.12			3.29
Total from investment operations		(0.76	)		(1.00	)		2.22		2.17			3.37
Less distributions from:
Net investment income		0.37			—			0.09		0.03			0.11
Net realized gain		—			0.62			0.74		0.00	^		—
Total distributions		0.37			0.62			0.83		0.03			0.11
Net asset value, end of year	$	13.77		$	14.90		$	16.52	$	15.13		$	12.99
Total return (%)		(5.11	)		(6.03	)		14.73		16.70			34.62
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		1.30			1.31			1.40		1.40			1.40
Expenses, before waivers and reimbursements		1.51			1.52			1.49		1.72			4.40
Net investment income (loss), net of waivers and reimbursements		0.87			0.30			0.15		0.35			0.70
Net investment income (loss), before waivers and reimbursements		0.66			0.09			0.06		0.03			(2.30	)
Class I net assets at end of year (in thousands)	$	147,949		$	162,375		$	119,662	$	58,123		$	8,763
Portfolio turnover rate (%)		157			167			124		138			78

^ Amount is less than $0.005 per share.

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

176 Annual Report December 31, 2016

Financial Highlights

Emerging Markets Small Cap Growth Fund

	Institutional Class
	Periods Ended December 31,
	2016			2015			2014		2013			2012(a)
Net asset value, beginning of year	$	14.92		$	16.53		$	15.14	$	13.00		$	12.79
Income (loss) from investment operations:
Net investment income (loss)		0.14			0.06			0.06		0.07			0.00	^
Net realized and unrealized gain (loss) on investments		(0.89	)		(1.05	)		2.18		2.11			0.21
Total from investment operations		(0.75	)		(0.99	)		2.24		2.18			0.21
Less distributions from:
Net investment income		0.38			0.00	^		0.11		0.04			—
Net realized gain		—			0.62			0.74		0.00	^		—
Total distributions		0.38			0.62			0.85		0.04			—
Net asset value, end of year	$	13.79		$	14.92		$	16.53	$	15.14		$	13.00
Total return (%)*		(5.05	)		(5.97	)		14.85		16.80			1.64
Ratios to average daily net assets (%):**
Expenses, net of waivers and reimbursements		1.25			1.25			1.25		1.25			1.25
Expenses, before waivers and reimbursements		1.31			1.31			1.34		1.56			2.32
Net investment income (loss), net of waivers and reimbursements		0.94			0.34			0.37		0.47			(0.87	)
Net investment income (loss), before waivers and reimbursements		0.88			0.28			0.28		0.16			(1.93	)
Institutional Class net assets at end of year (in thousands)	$	125,650		$	123,160		$	123,496	$	91,663		$	15,242
Portfolio turnover rate (%)*		157			167			124		138			78

(a)	For the period from December 20, 2012 (Commencement of Operations) to December 31, 2012.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.
^	Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 177

Financial Highlights

Bond Fund

	Class N
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	10.34	$	10.74		$	10.60		$	11.28		$	10.91
Income (loss) from investment operations:
Net investment income (loss)		0.27		0.27			0.31			0.32			0.36
Net realized and unrealized gain (loss) on investments		0.18		(0.29	)		0.23			(0.47	)		0.53
Total from investment operations		0.45		(0.02	)		0.54			(0.15	)		0.89
Less distributions from:
Net investment income		0.38		0.38			0.40			0.42			0.45
Net realized gain		—		—			0.00	^		0.11			0.07
Total distributions		0.38		0.38			0.40			0.53			0.52
Net asset value, end of year	$	10.41	$	10.34		$	10.74		$	10.60		$	11.28
Total return (%)		4.40		(0.23	)		5.10			(1.37	)		8.33
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.65		0.61			0.65			0.65			0.65
Expenses, before waivers and reimbursements		0.82		0.79			0.85			0.82			0.81
Net investment income (loss), net of waivers and reimbursements		2.60		2.60			2.90			2.89			3.25
Net investment income (loss), before waivers and reimbursements		2.43		2.42			2.70			2.72			3.09
Class N net assets at end of year (in thousands)	$	125,866	$	139,303		$	16,720		$	11,389		$	32,867
Portfolio turnover rate (%)		17		32			35			41			25
	Class I
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	10.24	$	10.64		$	10.49		$	11.17		$	10.80
Income (loss) from investment operations:
Net investment income (loss)		0.30		0.31			0.33			0.33			0.38
Net realized and unrealized gain (loss) on investments		0.16		(0.31	)		0.23			(0.48	)		0.52
Total from investment operations		0.46		—			0.56			(0.15	)		0.90
Less distributions from:
Net investment income		0.40		0.40			0.41			0.42			0.46
Net realized gain		—		—			0.00	^		0.11			0.07
Total distributions		0.40		0.40			0.41			0.53			0.53
Net asset value, end of year	$	10.30	$	10.24		$	10.64		$	10.49		$	11.17
Total return (%)		4.55		(0.05	)		5.37			(1.28	)		8.54
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.41		0.41			0.50			0.50			0.50
Expenses, before waivers and reimbursements		0.58		0.59			0.60			0.58			0.56
Net investment income (loss), net of waivers and reimbursements		2.83		2.93			3.07			3.05			3.45
Net investment income (loss), before waivers and reimbursements		2.66		2.75			2.97			2.97			3.39
Class I net assets at end of year (in thousands)	$	322,174	$	237,587		$	149,466		$	145,939		$	172,836
Portfolio turnover rate (%)		17		32			35			41			25

^ Amount is less than $0.005 per share.

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

178 Annual Report December 31, 2016

Financial Highlights

Bond Fund

	Institutional Class
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	10.23	$	10.63		$	10.48		$	11.16		$	10.80
Income (loss) from investment operations:
Net investment income (loss)		0.30		0.32			0.34			0.35			0.40
Net realized and unrealized gain (loss) on investments		0.17		(0.31	)		0.23			(0.48	)		0.51
Total from investment operations		0.47		0.01			0.57			(0.13	)		0.91
Less distributions from:
Net investment income		0.41		0.41			0.42			0.44			0.48
Net realized gain		—		—			0.00	^		0.11			0.07
Total distributions		0.41		0.41			0.42			0.55			0.55
Net asset value, end of year	$	10.29	$	10.23		$	10.63		$	10.48		$	11.16
Total return (%)		4.61		0.01			5.53			(1.13	)		8.61
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.35		0.35			0.35			0.35			0.35
Expenses, before waivers and reimbursements		0.37		0.38			0.41			0.39			0.38
Net investment income (loss), net of waivers and reimbursements		2.90		3.01			3.23			3.19			3.60
Net investment income (loss), before waivers and reimbursements		2.88		2.98			3.17			3.15			3.57
Institutional Class net assets at end of year (in thousands)	$	95,216	$	103,904		$	97,341		$	87,527		$	91,039
Portfolio turnover rate (%)		17		32			35			41			25

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 179

Financial Highlights

Income Fund

	Class N
	Years Ended December 31,
	2016		2015			2014		2013			2012
Net asset value, beginning of year	$	8.90	$	9.12		$	9.11	$	9.55		$	9.32
Income (loss) from investment operations:
Net investment income (loss)		0.16		0.15			0.18		0.20			0.24
Net realized and unrealized gain (loss) on investments		0.06		(0.11	)		0.10		(0.35	)		0.31
Total from investment operations		0.22		0.04			0.28		(0.15	)		0.55
Less distributions from:
Net investment income		0.26		0.26			0.27		0.29			0.32
Net realized gain		—		—			—		—			—
Total distributions		0.26		0.26			0.27		0.29			0.32
Net asset value, end of year	$	8.86	$	8.90		$	9.12	$	9.11		$	9.55
Total return (%)		2.44		0.39			3.06		(1.61	)		6.00
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.79		0.81			0.84		0.85			0.83
Expenses, before waivers and reimbursements		0.79		0.81			0.84		1.03			0.83
Net investment income (loss), net of waivers and reimbursements		1.80		1.71			1.99		2.13			2.49
Net investment income (loss), before waivers and reimbursements		1.80		1.71			1.99		1.95			2.49
Class N net assets at end of year (in thousands)	$	52,710	$	32,942		$	34,020	$	41,662		$	68,947
Portfolio turnover rate (%)		22		21			30		41			33
	Class I
	Years Ended December 31,
	2016		2015			2014		2013			2012
Net asset value, beginning of year	$	8.83	$	9.05		$	9.05	$	9.48		$	9.25
Income (loss) from investment operations:
Net investment income (loss)		0.18		0.18			0.20		0.21			0.26
Net realized and unrealized gain (loss) on investments		0.06		(0.12	)		0.09		(0.34	)		0.31
Total from investment operations		0.24		0.06			0.29		(0.13	)		0.57
Less distributions from:
Net investment income		0.27		0.28			0.29		0.30			0.34
Net realized gain		—		—			—		—			—
Total distributions		0.27		0.28			0.29		0.30			0.34
Net asset value, end of year	$	8.80	$	8.83		$	9.05	$	9.05		$	9.48
Total return (%)		2.78		0.63			3.20		(1.41	)		6.28
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.57		0.55			0.59		0.70			0.58
Expenses, before waivers and reimbursements		0.57		0.55			0.59		0.77			0.58
Net investment income (loss), net of waivers and reimbursements		2.05		1.97			2.24		2.30			2.78
Net investment income (loss), before waivers and reimbursements		2.05		1.97			2.24		2.23			2.78
Class I net assets at end of year (in thousands)	$	58,160	$	62,722		$	64,834	$	64,152		$	72,830
Portfolio turnover rate (%)		22		21			30		41			33

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

180 Annual Report December 31, 2016

Financial Highlights

Low Duration Fund

	Class N
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	9.16	$	9.38		$	9.52		$	9.83		$	9.82
Income (loss) from investment operations:
Net investment income (loss)		0.09		0.07			0.11			0.10			0.13
Net realized and unrealized gain (loss) on investments		0.02		(0.07	)		(0.00	)^		(0.16	)		0.14
Total from investment operations		0.11		—			0.11			(0.06	)		0.27
Less distributions from:
Net investment income		0.20		0.22			0.25			0.25			0.26
Net realized gain		—		—			—			—			—
Total distributions		0.20		0.22			0.25			0.25			0.26
Net asset value, end of year	$	9.07	$	9.16		$	9.38		$	9.52		$	9.83
Total return (%)		1.16		0.01			1.20			(0.62	)		2.80
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.68		0.60			0.70			0.70			0.70
Expenses, before waivers and reimbursements		0.83		0.77			0.75			0.71			0.74
Net investment income (loss), net of waivers and reimbursements		0.98		0.71			1.19			1.06			1.37
Net investment income (loss), before waivers and reimbursements		0.83		0.54			1.14			1.05			1.33
Class N net assets at end of year (in thousands)	$	7,237	$	2,712		$	4,969		$	5,158		$	11,216
Portfolio turnover rate (%)		81		106			83			56			20
	Class I
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	9.16	$	9.37		$	9.52		$	9.83		$	9.82
Income (loss) from investment operations:
Net investment income (loss)		0.11		0.08			0.13			0.12			0.15
Net realized and unrealized gain (loss) on investments		0.02		(0.05	)		(0.01	)		(0.17	)		0.14
Total from investment operations		0.13		0.03			0.12			(0.05	)		0.29
Less distributions from:
Net investment income		0.22		0.24			0.27			0.26			0.28
Net realized gain		—		—			—			—			—
Total distributions		0.22		0.24			0.27			0.26			0.28
Net asset value, end of year	$	9.07	$	9.16		$	9.37		$	9.52		$	9.83
Total return (%)		1.40		0.30			1.24			(0.47	)		2.96
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.44		0.42			0.55			0.55			0.55
Expenses, before waivers and reimbursements		0.59		0.59			0.60			0.56			0.57
Net investment income (loss), net of waivers and reimbursements		1.20		0.87			1.35			1.24			1.52
Net investment income (loss), before waivers and reimbursements		1.05		0.70			1.30			1.23			1.50
Class I net assets at end of year (in thousands)	$	219,714	$	107,137		$	104,433		$	122,583		$	157,213
Portfolio turnover rate (%)		81		106			83			56			20

^ Amount is less than $0.005 per share.

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

December 31, 2016 William Blair Funds 181

Financial Highlights

Low Duration Fund

	Institutional Class
	Years Ended December 31,
	2016		2015			2014			2013			2012
Net asset value, beginning of year	$	9.16	$	9.38		$	9.53		$	9.83		$	9.83
Income (loss) from investment operations:
Net investment income (loss)		0.11		0.09			0.14			0.13			0.17
Net realized and unrealized gain (loss) on investments		0.02		(0.07	)		(0.01	)		(0.15	)		0.12
Total from investment operations		0.13		0.02			0.13			(0.02	)		0.29
Less distributions from:
Net investment income		0.22		0.24			0.28			0.28			0.29
Net realized gain		—		—			—			—			—
Total distributions		0.22		0.24			0.28			0.28			0.29
Net asset value, end of year	$	9.07	$	9.16		$	9.38		$	9.53		$	9.83
Total return (%)		1.43		0.22			1.40			(0.20	)		3.01
Ratios to average daily net assets (%):
Expenses, net of waivers and reimbursements		0.40		0.40			0.40			0.39			0.40
Expenses, before waivers and reimbursements		0.40		0.42			0.43			0.39			0.41
Net investment income (loss), net of waivers and reimbursements		1.25		0.94			1.45			1.37			1.68
Net investment income (loss), before waivers and reimbursements		1.25		0.92			1.42			1.37			1.67
Institutional Class net assets at end of year (in thousands)	$	53,122	$	21,863		$	68,095		$	46,485		$	118,401
Portfolio turnover rate (%)		81		106			83			56			20

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

182 Annual Report December 31, 2016

Financial Highlights

Macro Allocation Fund

									Class N
	Periods Ended December 31,								Periods Ended October 31,
	2016		2015			2014(b)			2014		2013		2012(a)
Net asset value, beginning of year	$	11.32	$	12.14		$	13.07		$	12.61	$	11.28	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.04		0.04			0.04			0.02		0.05		0.11
Net realized and unrealized gain (loss) on investments		0.19		(0.80	)		(0.31	)		0.76		1.59		1.24
Total from investment operations		0.23		(0.76	)		(0.27	)		0.78		1.64		1.35
Less distributions from:
Net investment income		0.21		0.06			0.66			0.09		0.11		0.07
Net realized gain		—		—			—			0.23		0.20		—
Total distributions		0.21		0.06			0.66			0.32		0.31		0.07
Net asset value, end of year	$	11.34	$	11.32		$	12.14		$	13.07	$	12.61	$	11.28
Total return (%)*		2.01		(6.24	)		(2.00	)		6.34		14.87		13.61
Ratios to average daily net assets (%)**:
Expenses (excluding short dividend expense), net of waivers and reimbursements		1.23		1.27			1.35			1.35		1.35		1.35
Expenses, net of waivers and reimbursements		1.23		1.27			1.38			1.47		1.49		1.41
Expenses, before waivers and reimbursements		1.38		1.42			1.46			1.60		1.78		2.95
Net investment income (loss), net of waivers and reimbursements		0.32		0.32			2.06			0.20		0.37		1.18
Net investment income (loss), before waivers and reimbursements		0.17		0.17			1.98			0.07		0.08		(0.36	)
Class N net assets at end of year (in thousands)	$	61,376	$	150,606		$	150,778		$	150,785	$	97,498	$	10,045
Portfolio turnover rate (%)*		50		34			17			59		10		40

									Class I
	Periods Ended December 31,								Periods Ended October 31,
	2016		2015			2014(b)			2014		2013		2012(a)
Net asset value, beginning of year	$	11.38	$	12.22		$	13.15		$	12.66	$	11.31	$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.08		0.09			0.05			0.04		0.07		0.16
Net realized and unrealized gain (loss) on investments		0.18		(0.82	)		(0.31	)		0.78		1.60		1.22
Total from investment operations		0.26		(0.73	)		(0.26	)		0.82		1.67		1.38
Less distributions from:
Net investment income		0.26		0.11			0.67			0.10		0.12		0.07
Net realized gain		—		—			—			0.23		0.20		—
Total distributions		0.26		0.11			0.67			0.33		0.32		0.07
Net asset value, end of year	$	11.38	$	11.38		$	12.22		$	13.15	$	12.66	$	11.31
Total return (%)*		2.26		(6.00	)		(1.94	)		6.60		15.06		13.91
Ratios to average daily net assets (%)**:
Expenses (excluding short dividend expense), net of waivers and reimbursements		0.97		0.98			1.07			1.10		1.10		1.10
Expenses, net of waivers and reimbursements		0.97		0.99			1.10			1.22		1.24		1.18
Expenses, before waivers and reimbursements		1.12		1.14			1.10			1.27		1.41		2.94
Net investment income (loss), net of waivers and reimbursements		0.67		0.73			2.33			0.32		0.62		1.67
Net investment income (loss), before waivers and reimbursements		0.52		0.58			2.33			0.27		0.45		(0.09	)
Class I net assets at end of year (in thousands)	$	937,244	$	1,155,051		$	649,756		$	617,531	$	224,860	$	23,095
Portfolio turnover rate (%)*		50		34			17			59		10		40

(a)	For the period from November 29, 2011 (Commencement of Operations) to October 31, 2012.
(b)	For the period from November 1, 2014 to December 31, 2014.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.

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

December 31, 2016 William Blair Funds 183

Financial Highlights

Macro Allocation Fund

	Institutional Class
	Periods Ended December 31,								Periods Ended October 31,
	2016		2015			2014(b)			2014		2013(a)
Net asset value, beginning of year	$	11.39	$	12.23		$	13.16		$	12.66	$	12.63
Income (loss) from investment operations:
Net investment income (loss)		0.09		0.12			0.05			0.04		0.00	^
Net realized and unrealized gain (loss) on investments		0.19		(0.84	)		(0.31	)		0.79		0.03
Total from investment operations		0.28		(0.72	)		(0.26	)		0.83		0.03
Less distributions from:
Net investment income		0.27		0.12			0.67			0.10		—
Net realized gain		—		—			—			0.23		—
Total distributions		0.27		0.12			0.67			0.33		—
Net asset value, end of year	$	11.40	$	11.39		$	12.23		$	13.16	$	12.66
Total return (%)*		2.44		(5.92	)		(1.91	)		6.71		0.24
Ratios to average daily net assets (%)**:
Expenses (excluding short dividend expense), net of waivers and reimbursements		0.89		0.90			0.88			0.93		0.95
Expenses, net of waivers and reimbursements		0.89		0.90			0.91			1.05		1.00
Expenses, before waivers and reimbursements		0.89		0.90			0.91			1.05		1.11
Net investment income (loss), net of waivers and reimbursements		0.81		0.95			2.54			0.32		(0.99	)
Net investment income (loss), before waivers and reimbursements		0.81		0.95			2.54			0.32		(1.10	)
Institutional Class net assets at end of year (in thousands)	$	582,298	$	426,230		$	158,152		$	150,447	$	5,014
Portfolio turnover rate (%)*		50		34			17			59		10

(a)	For the period from October 21, 2013 (Commencement of Share Class) to October 31, 2013.
(b)	For the period from November 1, 2014 to December 31, 2014.
*	Not annualized for periods less than a year.
**	Annualized for periods less than a year.
^	Amount is less than $0.005 per share.

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

184 Annual Report December 31, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of William Blair Funds

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the William Blair Funds (comprising, respectively, the Growth Fund, Large Cap Growth Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Small-Mid Cap Growth Fund, Small-Mid Cap Value Fund, Small Cap Growth Fund, Small Cap Value Fund, Global Leaders Fund, International Leaders Fund, International Equity Fund, Institutional International Equity Fund, International Growth Fund, Institutional International Growth Fund, International Small Cap Growth Fund, Emerging Markets Leaders Fund, Emerging Markets Growth Fund, Emerging Markets Small Cap Growth Fund, Bond Fund, Income Fund, Low Duration Fund, and Macro Allocation Fund (collectively, the “Funds”)) as of December 31, 2016, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective funds constituting the William Blair Funds at December 31, 2016, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein in conformity with U.S. generally accepted accounting principles.

 

Chicago, Illinois
February 23, 2017

December 31, 2016 William Blair Funds 185

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, and other significant affiliations are set forth below. The address of each officer and trustee is 222 West Adams Street, Chicago, Illinois 60606.

				Number of
		Term of		Portfolios
		Office and		in Trust
	Position(s)	Length of	Principal	Complex
	Held with	Time	Occupation(s)	Overseen	Other Directorships
Name and Year of Birth	Trust	Served(1)	During Past 5 Years	by Trustee	Held by Trustee
Interested Trustees
Michelle R. Seitz, 1965*	Chairman of the Board of Holdings, L.P. Trustees and President	Trustee since 2002; Chairman (since 2008); since 2010 and President since 2007	Partner, William Blair; Limited Partner, WBC Member, WBC GP L.L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	22	Chairman, William Blair SICAV; Director, William Blair MAS Ltd.
Richard W. Smirl, 1967*	Trustee and Senior Vice President	Trustee since 2010 and Senior Vice President since 2008	Partner, William Blair; Limited Partner, WBC Holdings, L.P. (since 2008); Member, WBC GP L.L.P. (since November 2008); Director, William Blair International, Ltd. (U.K.) (since 2012)	22	Director, William Blair SICAV; Director, William Blair MAS Ltd.
Non-Interested Trustees
Vann A. Avedisian, 19642	Trustee	Since 2012	Principal, Highgate Holdings (hotel investments) (since 2009); formerly, co-founder and Managing Director, Oxford Capital Partners Inc. (1994 to 2006)	22	Potbelly Corporation (2001 to 2015)
Kathleen T. Barr, 1955	Trustee	Since 2013	Retired; formerly, President, Productive Capital Management, Inc. (registered investment adviser to public entities) and Owner, KT Barr Consulting, LLC (mutual fund and investment management consulting) (2010 to 2013); prior thereto, Chief Administrative Officer, Senior Vice President and Senior Managing Director of Allegiant Asset Management Company (merged with PNC Capital Advisors, LLC in 2009) (2004 to 2010); Chief Administrative Officer, Chief Compliance Officer and Senior Vice President of PNC Funds and PNC Advantage Funds (f/k/a Allegiant Funds) (2003 to 2010)	22	Council Member, Independent Directors Council; AmericaFirst Quantitative Funds (5 portfolios) (2012 to 2016)

†	William Blair Investment Management, LLC and William Blair & Company, L.L.C. are collectively referred to in this section as “William Blair”, each of which is a wholly owned subsidiary of WBC Holdings, L.P., which is wholly owned by certain William Blair employees (employee owners are referred to as ‘partners’).
*	Ms. Seitz and Mr. Smirl are interested persons of the Trust because they are partners of William Blair.

See accompanying Notes to Financial Statements.

186 Annual Report December 31, 2016

				Number of
		Term of		Portfolios
		Office and		in Trust
	Position(s)	Length of	Principal	Complex
	Held with	Time	Occupation(s)	Overseen	Other Directorships
Name and Year of Birth	Trust	Served(1)	During Past 5 Years	by Trustee	Held by Trustee
Daniel N. Leib, 19663	Trustee	Since 2016	Chief Executive Officer, Donnelley Financial Solutions, Inc. (since 2016); formerly, Executive Vice President and Chief Financial Officer, (2011 to 2016) and Group Chief Financial Officer (2009 to 2011), R.R. Donnelley & Sons Company	22	None
Phillip O. Peterson, 1944	Trustee	Since 2007	Retired; formerly, President, Strong Mutual Funds (2004 to 2005); prior thereto, Partner, KPMG LLP (1981-2000)	22	The Hartford Group of Mutual Funds (68 portfolios); Symetra Mutual Funds Trust (variable annuity funds) (2012 to 2014)
Donald J. Reaves, 19464	Trustee	Since 2004	Retired; formerly, Chancellor of Winston-Salem State University (2007 to 2014) prior thereto, Vice President for Administration and Chief Financial Officer, University of Chicago (2002 to 2007)	22	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)	22	Warnaco Group, Inc., intimate apparel, sportswear, and swimwear manufacturer (2005 to 2013); Beverly Enterprises, Inc., provider of elder care and rehabilitative services (2002 to 2006)
Thomas J. Skelly, 1951	Trustee	Since 2007	Advisory Board Member for various U.S. companies (since 2005); prior thereto, Managing Partner of various divisions at Accenture (1994-2004)	22	Mutual Trust Financial Group, provider of insurance and investment products; Advisory Board Member, First MetLife Insurance Company, NY chartered company for Metropolitan Life Insurance (2009-2016); Clayton Holdings, Inc., provider of information-based analytics, consulting and outsourced services to various financial institutions and investors (2007 to 2008)

(1)

Each Trustee serves until the election and qualification of a successor, or until death, resignation or retirement, or removal as provided in the Trust’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 calendar year that occurs after the earlier of (a) the Non-Interested Trustee’s 72nd birthday or (b) the 15th anniversary of the date that the Non-Interested Trustee became a member of the Board of Trustees. The Board of Trustees approved an exception to this retirement policy to defer the retirement of Mr. Seeley and Mr. Peterson until February 2018.

(2)

Mr. Avedisian served as a member of the Board of Directors of Potbelly Corporation (“Potbelly”) from 2001 to 2015. In October 2013, Potbelly completed an underwritten initial public offering of its common stock (the “Offering”). William Blair served as a member of the underwriting syndicate. At the time of the Offering, Mr. Avedisian, through entities he owns or controls, indirectly beneficially owned 1,607,448 shares of Potbelly common stock and warrants to purchase 241,704 shares of common stock representing approximately 8.9% of the shares before the Offering. Mr. Avedisian disclaimed beneficial ownership of the shares except to the extent of his pecuniary interest therein. Potbelly sold 8,474,869 shares and certain stockholders, including two entities affiliated with William Blair, sold 150,131 shares in the Offering at a price to the public of $14.00 per share. Neither Mr. Avedisian nor the entities he owns or controls was a selling stockholder in the Offering. A portion of the net proceeds received by Potbelly from the Offering was used to pay a previously declared cash dividend, in an aggregate amount of approximately $49.9 million, on Potbelly common and preferred shares outstanding immediately prior to the closing of the Offering, which included the outstanding shares indirectly beneficially owned by Mr. Avedisian, William Blair and the two entities affiliated with William Blair.

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 187

(3)

The Funds and William Blair use R.R. Donnelley & Sons Company (“RRD”) and Donnelley Financial Solutions, Inc. (“DFS”) for financial printing and other services. The Funds and William Blair paid RRD approximately $185,000 and $129,000 in 2015 and 2016, respectively, for the services provided. RRD’s revenue was over $11 billion in 2015. DFS is a newly formed public company resulting from a spinoff from RRD that was completed in 2016. The Funds and William Blair paid DFS approximately $11,000 for the period ended December 31, 2016 for the services provided. Mr. Leib, as former Executive Vice President and Chief Financial Officer of RRD, was not involved in any of the services provided to the Funds or William Blair and his compensation was not directly affected by the fees RRD received from the Funds and William Blair. Mr. Leib, as the Chief Executive Officer of DFS, is not involved in any of the services provided to the Funds or William Blair and his compensation is not directly affected by the fees DFS receives from the Funds and William Blair.

(4)

In his former role as Chief Financial Officer at the University of Chicago, Mr. Reaves had a working relationship with E. David Coolidge III, Vice Chairman of William Blair who is also a trustee of the University of Chicago.

		Term of Office
	Position(s) Held	and Length of	Principal Occupation(s)
Name and Year of Birth	with Trust	Time Served1	During Past 5 Years2
Officers
Michael P. Balkin, 1959	Senior Vice President	Since 2008	Partner, William Blair
Stephanie G. Braming, 1970	Senior Vice President	Since 2014	Partner, William Blair
Karl W. Brewer, 1966	Senior Vice President	Since 2000	Partner, William Blair
Thomas Clarke, 1968	Senior Vice President	Since 2011	Partner, William Blair (since 2014); formerly, Associate, William Blair (2011-2014)
Daniel Crowe, 1972	Senior Vice President	Since 2016	Partner, William Blair (since 2015); formerly, Associate, William Blair
Simon Fennell, 1969	Senior Vice President	Since 2013	Partner, William Blair (since 2013); formerly, Associate, William Blair (2011-2013)
Andrew G. Flynn, 1961	Senior Vice President	Since 2013	Partner, William Blair
David C. Fording, 1967	Senior Vice President	Since 2006	Partner, William Blair
James S. Golan, 1961	Senior Vice President	Since 2005	Partner, William Blair
Michael A. Jancosek, 1959	Senior Vice President	Since 2000	Partner, William Blair
John F. Jostrand, 1954	Senior Vice President	Since 1999	Partner, William Blair
Chad M. Kilmer, 1975	Senior Vice President	Since 2006	Partner, William Blair
Robert C. Lanphier IV, 1956	Senior Vice President	Since 2003	Partner, William Blair
Mark T. Leslie, 1967	Senior Vice President	Since 2005	Partner, William Blair

See accompanying Notes to Financial Statements.

188 Annual Report December 31, 2016

		Term of Office
	Position(s) Held	and Length of	Principal Occupation(s)
Name and Year of Birth	with Trust	Time Served1	During Past 5 Years
Kenneth J. McAtamney, 1966	Senior Vice President	Since 2008	Partner, William Blair
Todd M. McClone, 1968	Senior Vice President	Since 2005	Partner, William Blair
David Merjan, 1960	Senior Vice President	Since 2008	Partner, William Blair
David S. Mitchell, 1960	Senior Vice President	Since 2003	Partner, William Blair
John C. Murphy, 1969	Senior Vice President	Since 2014	Partner, William Blair
Casey K. Preyss, 1976	Senior Vice President	Since 2015	Partner, William Blair
David P. Ricci, 1958	Senior Vice President	Since 2006	Partner, William Blair
Ward D. Sexton, 1974	Senior Vice President	Since 2016	Partner, William Blair
Brian D. Singer, 1960	Senior Vice President	Since 2011	Partner, William Blair (since 2012); formerly, Associate, William Blair (2011-2012)
Jeffrey A. Urbina, 1955	Senior Vice President	Since 1998	Partner, William Blair
Christopher T. Vincent, 1956	Senior Vice President	Since 2002	Partner, William Blair
Paul J. Sularz, 1967	Vice President	Since 2009	Associate, William Blair (2006-2012 and since 2014); Partner, William Blair (2012-2014)
Colette M. Garavalia, 1961	Treasurer	Since 2000	Associate, William Blair
Andrew T. Pfau, 1970	Secretary	Since 2009	Associate, William Blair
John M. Raczek, 1970	Assistant Treasurer	Since 2010	Associate, William Blair
Walter R. Randall, Jr., 1960	Chief Compliance Officer and Assistant Secretary	Since 2009	Associate, William Blair
Robert J. Toner, 1967	Assistant Secretary	Since 2016	Associate, William Blair (since 2015); formerly, Managing Director and Counsel, Wellington Management & Company LLP (2007-2015)

(1) The Trust’s officers, except the Chief Compliance Officer, are elected annually by the Board of Trustees. The Trust’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 independent trustees. Length of Time Served for all officers indicates the year the individual became an officer of the Trust.

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.

See accompanying Notes to Financial Statements.

December 31, 2016 William Blair Funds 189

(Unaudited)

Proxy Voting

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds voted proxies relating to portfolio securities for the most recent 12-month period ended December 31 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 Fund 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.

Additional Federal Income Tax Information: (unaudited)

Under Section 852(b)(3)(C) of the Code, the Funds hereby designate the following amounts as capital gain dividends for the fiscal year ended December 31, 2016 (in thousands):

Fund	Capital Gain Dividend
Growth	$	44,092
Large Cap Growth		983
Mid Cap Growth		7,329
Mid Cap Value		255
Small-Mid Cap Growth		33,429
Small-Mid Cap Value		183
Small Cap Growth		20,672
Small Cap Value		27,207
Global Leaders		792
International Small Cap Growth		96

190 Annual Report December 31, 2016

Useful Information About Your Report (Unaudited)

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

Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution (12b-1) fees (for Class N shares except for the Institutional International Growth Fund and the Institutional International Equity Fund), shareholder administration fees (for Class N and Class I shares of the Global Leaders Fund, the International Leaders Fund, the International Small Cap Growth Fund, the Emerging Markets Leaders Fund, the Emerging Markets Growth Fund, the Emerging Markets Small Cap Growth Fund, the Bond Fund, the Low Duration Fund and the Macro Allocation Fund) and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare the Fund’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 July 1, 2016 to December 31, 2016.

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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. This is not the Fund’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 Fund 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 IRA administration 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. In addition, if these transactional costs or account fees were included, your costs would have been higher.

December 31, 2016 William Blair Funds 191

Fund Expenses (Unaudited)

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During	Annualized
Expense Example	7/1/2016	12/31/2016	the Period (a)	Expense Ratio
Growth Fund
Class N-actual return	$1,000.00	$1,009.54	$6.11	1.21
Class N-hypothetical 5% return	$1,000.00	$1,043.92	$6.22	1.21
Class I-actual return	$1,000.00	$1,011.06	$4.55	0.90
Class I-hypothetical 5% return	$1,000.00	$1,045.48	$4.63	0.90
Large Cap Growth Fund
Class N-actual return	$1,000.00	$1,023.76	$5.34	1.05
Class N-hypothetical 5% return	$1,000.00	$1,044.72	$5.40	1.05
Class I-actual return	$1,000.00	$1,025.14	$4.07	0.80
Class I-hypothetical 5% return	$1,000.00	$1,045.98	$4.11	0.80
Mid Cap Growth Fund
Class N-actual return	$1,000.00	$1,009.47	$6.57	1.30
Class N-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Class I-actual return	$1,000.00	$1,010.77	$5.31	1.05
Class I-hypothetical 5% return	$1,000.00	$1,044.72	$5.40	1.05
Mid Cap Value Fund
Class N-actual return	$1,000.00	$1,078.56	$6.79	1.30
Class N-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Class I-actual return	$1,000.00	$1,080.10	$5.49	1.05
Class I-hypothetical 5% return	$1,000.00	$1,044.72	$5.40	1.05
Small-Mid Cap Growth Fund
Class N-actual return	$1,000.00	$1,054.23	$6.97	1.35
Class N-hypothetical 5% return	$1,000.00	$1,043.21	$6.93	1.35
Class I-actual return	$1,000.00	$1,055.73	$5.68	1.10
Class I-hypothetical 5% return	$1,000.00	$1,044.47	$5.65	1.10
Small-Mid Cap Value Fund
Class N-actual return	$1,000.00	$1,137.13	$7.25	1.35
Class N-hypothetical 5% return	$1,000.00	$1,043.21	$6.93	1.35
Class I-actual return	$1,000.00	$1,138.31	$5.91	1.10
Class I-hypothetical 5% return	$1,000.00	$1,044.47	$5.65	1.10
Small Cap Growth Fund
Class N-actual return	$1,000.00	$1,144.07	$8.08	1.50
Class N-hypothetical 5% return	$1,000.00	$1,042.46	$7.70	1.50
Class I-actual return	$1,000.00	$1,145.71	$6.74	1.25
Class I-hypothetical 5% return	$1,000.00	$1,043.72	$6.42	1.25
Small Cap Value Fund
Class N-actual return	$1,000.00	$1,181.19	$8.22	1.50
Class N-hypothetical 5% return	$1,000.00	$1,042.46	$7.70	1.50
Class I-actual return	$1,000.00	$1,182.26	$6.86	1.25
Class I-hypothetical 5% return	$1,000.00	$1,043.72	$6.42	1.25
Global Leaders Fund
Class N-actual return	$1,000.00	$1,023.00	$6.92	1.36
Class N-hypothetical 5% return	$1,000.00	$1,043.16	$6.98	1.36
Class I-actual return	$1,000.00	$1,024.81	$5.34	1.05
Class I-hypothetical 5% return	$1,000.00	$1,044.72	$5.40	1.05
Institutional Class-actual return	$1,000.00	$1,025.34	$5.14	1.00
Institutional Class-hypothetical 5% return	$1,000.00	$1,044.97	$5.14	1.00
International Leaders Fund
Class N-actual return	$1,000.00	$1,023.11	$6.61	1.30
Class N-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Class I-actual return	$1,000.00	$1,024.48	$5.29	1.04
Class I-hypothetical 5% return	$1,000.00	$1,044.77	$5.35	1.04
Institutional Class-actual return	$1,000.00	$1,025.98	$4.84	0.95
Institutional Class-hypothetical 5% return	$1,000.00	$1,045.22	$4.88	0.95

192 Annual Report December 31, 2016

Fund Expenses (Unaudited)

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During	Annualized
Expense Example	7/1/2016	12/31/2016	the Period (a)	Expense Ratio
International Equity Fund
Class N-actual return	$1,000.00	$1,016.41	$6.59	1.30
Class N-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Class I-actual return	$1,000.00	$1,017.99	$5.33	1.05
Class I-hypothetical 5% return	$1,000.00	$1,044.72	$5.40	1.05
Institutional International Equity Fund
Institutional Class-actual return	$1,000.00	$1,014.87	$5.06	1.00
Institutional Class-hypothetical 5% return	$1,000.00	$1,044.97	$5.14	1.00
International Growth Fund
Class N-actual return	$1,000.00	$1,009.71	$7.22	1.43
Class N-hypothetical 5% return	$1,000.00	$1,042.81	$7.34	1.43
Class I-actual return	$1,000.00	$1,011.49	$5.71	1.13
Class I-hypothetical 5% return	$1,000.00	$1,044.32	$5.81	1.13
Institutional International Growth Fund
Institutional Class-actual return	$1,000.00	$1,012.27	$4.96	0.98
Institutional Class-hypothetical 5% return	$1,000.00	$1,045.07	$5.04	0.98
International Small Cap Growth Fund
Class N-actual return	$1,000.00	$   996.01	$7.22	1.44
Class N-hypothetical 5% return	$1,000.00	$1,042.76	$7.39	1.44
Class I-actual return	$1,000.00	$   996.78	$5.77	1.15
Class I-hypothetical 5% return	$1,000.00	$1,044.22	$5.91	1.15
Institutional Class-actual return	$1,000.00	$   997.64	$5.37	1.07
Institutional Class-hypothetical 5% return	$1,000.00	$1,044.62	$5.50	1.07
Emerging Markets Leaders Fund
Class N-actual return	$1,000.00	$   971.50	$7.78	1.57
Class N-hypothetical 5% return.	$1,000.00	$1,042.11	$8.06	1.57
Class I-actual return	$1,000.00	$   972.91	$6.45	1.30
Class I-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Institutional Class-actual return	$1,000.00	$  972.17	$6.20	1.25
Institutional Class-hypothetical 5% return	$1,000.00	$1,043.72	$6.42	1.25
Emerging Markets Growth Fund
Class N-actual return	$1,000.00	$   965.94	$7.41	1.50
Class N-hypothetical 5% return	$1,000.00	$1,042.46	$7.70	1.50
Class I-actual return	$1,000.00	$  967.01	$6.23	1.26
Class I-hypothetical 5% return	$1,000.00	$1,043.67	$6.47	1.26
Institutional Class-actual return	$1,000.00	$  967.17	$5.88	1.19
Institutional Class-hypothetical 5% return	$1,000.00	$1,044.02	$6.11	1.19
Emerging Markets Small Cap Growth Fund
Class N-actual return	$1,000.00	$   938.44	$7.84	1.61
Class N-hypothetical 5% return	$1,000.00	$1,041.91	$8.26	1.61
Class I-actual return	$1,000.00	$  940.08	$6.34	1.30
Class I-hypothetical 5% return	$1,000.00	$1,043.46	$6.68	1.30
Institutional Class-actual return	$1,000.00	$  940.04	$6.10	1.25
Institutional Class-hypothetical 5% return	$1,000.00	$1,043.72	$6.42	1.25
Bond Fund
Class N-actual return	$1,000.00	$   990.83	$3.25	0.65
Class N-hypothetical 5% return	$1,000.00	$1,046.73	$3.34	0.65
Class I-actual return	$1,000.00	$  991.92	$2.05	0.41
Class I-hypothetical 5% return	$1,000.00	$1,047.94	$2.11	0.41
Institutional Class-actual return	$1,000.00	$   992.22	$1.75	0.35
Institutional Class-hypothetical 5% return	$1,000.00	$1,048.24	$1.80	0.35
Income Fund
Class N-actual return	$1,000.00	$   995.14	$3.96	0.79
Class N-hypothetical 5% return	$1,000.00	$1,046.03	$4.06	0.79
Class I-actual return	$1,000.00	$   996.10	$2.86	0.57
Class I-hypothetical 5% return	$1,000.00	$1,047.13	$2.93	0.57

December 31, 2016 William Blair Funds 193

Fund Expenses (Unaudited)

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During	Annualized
Expense Example	7/1/2016	12/31/2016	the Period (a)	Expense Ratio
Low Duration Fund
Class N-actual return	$1,000.00	$1,000.33	$3.42	0.68
Class N-hypothetical 5%	$1,000.00	$1,046.58	$3.50	0.68
Class I-actual return	$1,000.00	$1,001.64	$2.21	0.44
Class I-hypothetical 5%	$1,000.00	$1,047.79	$2.26	0.44
Institutional Class-actual return	$1,000.00	$1,001.87	$2.01	0.40
Institutional Class-hypothetical 5% return	$1,000.00	$1,047.99	$2.06	0.40
Macro Allocation Fund
Class N-actual return	$1,000.00	$1,017.41	$6.24	1.23
Class N-hypothetical 5%	$1,000.00	$1,043.82	$6.32	1.23
Class I-actual return	$1,000.00	$1,018.12	$4.92	0.97
Class I-hypothetical 5%	$1,000.00	$1,045.12	$4.99	0.97
Institutional Class-actual return	$1,000.00	$1,018.99	$4.52	0.89
Institutional Class-hypothetical 5% return	$1,000.00	$1,045.53	$4.58	0.89

(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, 184, and divided by 366 (to reflect the one-half year period).

194 Annual Report December 31, 2016

BOARD OF TRUSTEES

Vann A. Avedisian

Principal, Highgate Holdings

Kathleen T. Barr

Retired Senior Managing Director, PNC Capital Advisors, LLC

Daniel N. Leib

Chief Executive Officer, Donnelley Financial Solutions, Inc.

Phillip O. Peterson

Retired Partner, KPMG LLP

Donald J. Reaves

Retired Chancellor, Winston-Salem State University

Donald L. Seeley

Retired Adjunct Lecturer and Director, University of Arizona Department of Finance

Michelle R. Seitz, Chairman and President

Partner, William Blair

Thomas J. Skelly

Retired Managing Partner, Accenture

Richard W. Smirl, Senior Vice President

Partner, William Blair

Officers

Michael P. Balkin, Senior Vice President

Stephanie G. Braming, Senior Vice President

Karl W. Brewer, Senior Vice President

Thomas Clarke, Senior Vice President

Daniel Crowe, Senior Vice President

Simon Fennell, Senior Vice President

Andrew G. Flynn, Senior Vice President

David C. Fording, Senior Vice President

James S. Golan, Senior Vice President

Michael A. Jancosek, Senior Vice President

John F. Jostrand, Senior Vice President

Chad M. Kilmer, Senior Vice President

Robert C. Lanphier, IV, Senior Vice President

Mark T. Leslie, Senior Vice President

Kenneth J. McAtamney, Senior Vice President

Todd M. McClone, Senior Vice President

David Merjan, Senior Vice President

David S. Mitchell, Senior Vice President

John C. Murphy, Senior Vice President

Casey K. Preyss, Senior Vice President

David P. Ricci, Senior Vice President

Ward D. Sexton, Senior Vice President

Brian D. Singer, Senior Vice President

Jeffrey A. Urbina, Senior Vice President

Christopher T. Vincent, Senior Vice President

Paul J. Sularz, Vice President

Colette M. Garavalia, Treasurer

Andrew T. Pfau, Secretary

John M. Raczek, Assistant Treasurer

Walter R. Randall, Jr., Chief Compliance Officer and Assistant Secretary

Robert J. Toner, Assistant Secretary

Investment Adviser

William Blair Investment Management, LLC

Distributor

William Blair & Company, L.L.C.

Independent Registered Public Accounting Firm

Ernst & Young LLP

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)

December 31, 2016 William Blair Funds 195

William Blair Funds
DOMESTIC EQUITY	GLOBAL EQUITY	FIXED INCOME
Growth Fund	Global Leaders Fund	Bond Fund
Large Cap Growth Fund		Income Fund
Mid Cap Growth Fund	INTERNATIONAL EQUITY	Low Duration Fund
Mid Cap Value Fund
Small-Mid Cap Growth Fund	International Leaders Fund
Small-Mid Cap Value Fund	International Equity Fund	MULTI-ASSET AND ALTERNATIVE
Small Cap Growth Fund	Institutional International Equity Fund
Small Cap Value Fund	International Growth Fund	Macro Allocation Fund
	Institutional International Growth Fund
	International Small Cap Growth Fund
	Emerging Markets Leaders Fund
	Emerging Markets Growth Fund
	Emerging Markets Small Cap Growth Fund

		©	William Blair & Company, L.L.C., distributor
	+1 800 742 7272		222 West Adams Street
	williamblairfunds.com		Chicago, Illinois 60606	00103188

Item 2. Code of Ethics

As of the end of the period covered by this Form N-CSR, the Registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. Such code of ethics is posted on the Registrant’s website: www.williamblairfunds.com. There were no amendments to or waivers of the code of ethics during the period covered by this report. 

Item 3. Audit Committee Financial Expert

The Registrant’s Board of Trustees has determined that the Registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. Mr. Phillip O. Peterson, the Registrant’s audit committee financial expert, is “independent” for purposes of Item 3 to Form N-CSR.

An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an “audit committee financial expert.” Further, the designation of a person as an “audit committee financial expert” does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the “audit committee financial expert” designation. Similarly, the designation of a person as an “audit committee financial expert” does not affect the duties, obligations, or liability of any other member of the audit committee or Board of Trustees. 

Item 4. Principal Accountant Fees and Services

Audit Fees

For the fiscal years ended December 31, 2015 and 2016, Ernst & Young, LLP, the Registrant’s principal accountant (“E&Y”), billed the Registrant $719,700 and $684,300, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

Audit-Related Fees

For the fiscal years ended December 31, 2015 and 2016, E&Y billed the Registrant $0 and $0, respectively, for assurance and related services that are reasonably related to the performance of the audit of the Registrant’s financial statements and that are not reported above, such as reviewing prospectuses, semiannual reports and SEC filings. For the fiscal years ended December 31, 2015 and 2016, E&Y provided no audit-related services to William Blair Investment Management, LLC, the Registrant’s investment advisor (“William Blair”) or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Tax Fees

For the fiscal years ended December 31, 2015 and 2016, E&Y billed the Registrant $311,900 and $205,850, respectively, for professional services rendered for tax compliance, tax advice and tax planning. Such services consisted of preparation of tax returns, year-end distribution review, qualifying dividend income analysis and computation of foreign tax credit pass-through. For the fiscal years ended December 31, 2015 and 2016, E&Y did not bill William Blair and its control affiliates for any services that were for engagements directly related to the Registrant’s operations and financial reporting.

All Other Fees

For the fiscal years ended December 31, 2015 and 2016, E&Y did not bill the Registrant for products and services other than the services reported above. For the fiscal year ended December 31, 2015 and 2016, E&Y provided no other services to William Blair or any of its control affiliates that were for engagements directly related to the Registrant’s operations and financial reporting.

Audit Committee Pre-Approval Policies and Procedures

Pursuant to Registrant’s Audit Committee Charter (the “Charter”), the Audit Committee is responsible for pre-approving any engagement of the principal accountant to provide non-prohibited services to the Registrant, including the fees and other compensation to be paid to the principal accountant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. Pursuant to the Charter, the Audit Committee is also responsible for pre-approving any engagement of the principal accountant, including the fees and other compensation to be paid to the principal accountant, to provide non-audit services to the Registrant’s investment advisor (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant), if the engagement relates directly to the operations and financial reporting of the Registrant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. The Chair of the Audit Committee may grant the pre-approval referenced above for non-prohibited and non-audit services. All such delegated pre-approvals will be presented to the Audit Committee no later than the next Audit Committee meeting. 

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

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: February 22, 2017

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: February 22, 2017

	/s/ Colette M. Garavalia
By:	Colette M. Garavalia
	Treasurer (Chief Financial Officer)

Date: February 22, 2017