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: 811-05547
Laudus Trust
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
(Address of principal executive offices)     (Zip code)
Marie Chandoha
Laudus Trust
211 Main Street, San Francisco, California 94105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 636-7000
Date of fiscal year end: March 31
Date of reporting period: September 30, 2012
 
 
Item 1: Report(s) to Shareholders.

 

 

     
Semiannual Report
September 30, 2012 		  (LAUDUS FUNDS LOGO)
 
 
 
 
 
COMMAND PERFORMANCE TM  

 
Laudus Mondrian Funds tm
 
Laudus Mondrian International Equity Fund
 
Laudus Mondrian Global Equity Fund (closed to new investors)
 
Laudus Mondrian Emerging Markets Fund
 
Laudus Mondrian International Fixed Income Fund
 
Laudus Mondrian Global Fixed Income Fund
 
Adviser
Charles Schwab Investment Management, Inc.
 
Subadviser
Mondrian Investment Partners Limited
 
 

 

 
Laudus Mondrian Funds
 
In This Report
 
     
     
  3
     
  4
     
Performance and Fund Facts
   
     
  6
     
  8
     
  10
     
  12
     
  14
     
  16
     
   
     
  17
     
  25
     
  33
     
  41
     
  48
     
  56
     
  66
     
  70
     
  73
 
 
 
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM).
Distributor: ALPS Distributors, Inc.
 
The industry/sector classification of the funds’ portfolio holdings uses the Global Industry Classification Standard (GICS) which was developed by and is the exclusive property of MSCI and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by CSIM and certain affiliates. Charles Schwab & Co, Inc. and ALPS Distributors, Inc. are unaffiliated entities.
 

 

 
Performance at a Glance
 
 
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value will fluctuate so that an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. To obtain performance information current to the most recent month end, please visit www.laudus.com .
 
         
Total Return for the Report Period 1  
   
Laudus Mondrian International Equity Fund 2        
 
 
Investor Shares (Ticker Symbol: LIEQX)
    -1.39%  
Select Shares (Ticker Symbol: LIEFX)
    -1.11%  
Institutional Shares (Ticker Symbol: LIEIX)
    -1.25%  
 
 
MSCI EAFE Index ® (Net)     -0.70%  
 
 
Performance Details     pages 6-7  
 
 
 
Laudus Mondrian Global Equity Fund 2        
 
 
Investor Shares (Ticker Symbol: LGEQX)
    -0.34%  
Select Shares (Ticker Symbol: LGESX)
    -0.23%  
Institutional Shares (Ticker Symbol: LGEVX)
    -0.11%  
 
 
MSCI World ® Index (Net)     1.30%  
 
 
Performance Details     pages 8-9  
 
 
 
Laudus Mondrian Emerging Markets Fund 2        
 
 
Investor Shares (Ticker Symbol: LEMIX)
    -2.11%  
Select Shares (Ticker Symbol: LEMSX)
    -2.11% *
Institutional Shares (Ticker Symbol: LEMNX)
    -2.00%  
 
 
MSCI Emerging Markets Index (Net)     -1.84%  
 
 
Performance Details     pages 10-11  
 
 
 
Laudus Mondrian International Fixed Income Fund (Ticker Symbol: LIFNX)     5.28%  
 
 
Citigroup non-U.S. Dollar World Government Bond Index     4.18%  
 
 
Performance Details     pages 12-13  
 
 
 
Laudus Mondrian Global Fixed Income Fund 3 (Ticker Symbol: LMGDX)     2.86%  
 
 
Citigroup World Government Bond Index     3.25%  
 
 
Performance Details     pages 14-15  
 
 
 
 
 
All fund and index figures on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
Fund expenses may have been partially absorbed by CSIM. Without these reductions, the funds’ returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
 
There are risks associated with investing in securities of foreign issuers, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements. Investing in emerging markets accentuates these risks. Investments in emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries.
 
Bond funds are subject to increased risk of loss of principal during periods of volatile interest rates.
 
Please see prospectus for further detail and investor eligibility requirements.
 
* Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.
1 The report period covers the six months beginning April 1, 2012 through September 30, 2012, except where noted.
2 The fund’s performance relative to the indices may be affected by fair-value pricing, see financial note 2 for more information.
3 Total returns are since the fund’s inception date of July 10, 2012.
 
 
 
Laudus Mondrian Funds  3

 

 
From the President
 

CHANDOHA PHOTO
 
Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

 
Dear Shareholder,
 
As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment objectives, and for reading this important report concerning the Laudus Mondrian Funds. For the six months ended September 30, 2012, international headwinds and lackluster economic growth provided a backdrop for moderate gains by bonds in U.S. dollar terms, while stocks generated a narrow range of modestly positive to slightly negative returns.
 
The euro zone’s ongoing sovereign debt crisis represented a significant obstacle, particularly for global equities. With concerns rising regarding elections in Greece and worries that the crisis might spread to the debt markets of Italy and Spain, stocks endured particularly sharp losses in May. Subsequently, European leaders achieved meaningful progress, and stocks began to recover.
 
U.S. and international bonds experienced intermittent periods of strength and weakness, while global economic growth decelerated. The European Central Bank, Bank of England, Bank of Japan, and U.S. Federal Reserve were among the world’s widely watched central banks that adopted or maintained policies aimed at improving their region’s or country’s economic prospects, helping to keep interest rates and yields for fixed-income securities historically low.
 
Bonds generated positive returns, while stock performance was comparatively mixed, as was the performance of the U.S. dollar. International bonds generally outperformed U.S. bonds in U.S. dollar terms, as gauged by the 4.2% return of the Citigroup Non-U.S. Dollar World Government Bond Index compared with the 3.7% return of the Barclays U.S. Aggregate Bond Index. The performance in stocks was reversed: the U.S. stock market performed better than international equities in U.S. dollar terms. Specifically, the Russell 1000 Index returned 3.0%, outperforming the -0.7% return of the MSCI EAFE Index (Net), which illustrates the performance of international developed markets, and the -1.8% return of the MSCI Emerging Markets Index (Net).
 
Thank you for investing in the Laudus Mondrian Funds. This product lineup now includes the Laudus Mondrian Global Fixed Income Fund, which launched in July. We believe that this new fund enhances our suite of investment solutions, while representing another important opportunity for investors to diversify. Information about the fund is contained in this report.
 
 
 
4  Laudus Mondrian Funds

 

 
From the President
 

For the six months ended September 30, 2012, international headwinds and lackluster economic growth provided a backdrop for moderate gains by bonds in U.S. dollar terms, while stocks generated a narrow range of modestly positive to slightly negative returns.

 
The Laudus Mondrian Global Equity Fund closed to new investors effective October 2, 2012—after the report period ended—and will redeem all of its outstanding shares on or shortly after November 30, 2012.
 
We encourage you to review your investment portfolio regularly to ensure that it meets your current financial plan. For answers to frequently asked questions about the Laudus Mondrian Funds or for more information, please visit www.laudus.com. We are also happy to hear from you at 1-800-447-3332.
 
Sincerely,
 
-S- MARIE CHANDOHA

 
Indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Index figures assume dividends and distributions were reinvested.
 
For definitions of the referenced indices, please see the Glossary.

 
 
 
Laudus Mondrian Funds  5

 

 
Laudus Mondrian International Equity Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Average Annual Total Returns 1
 
                                         
Class and Inception Date   6 Months   1 Year   3 Years   Since Inception
 
 
Investor Shares (6/16/08)
    -1.39 %       8.87 %       0.87 %       -5.44 %  
Select Shares (6/16/08)
    -1.11 %       9.20 %       1.17 %       -5.19 %  
Institutional Shares (6/16/08)
    -1.25 %       9.25 %       1.23 %       -5.12 %  
MSCI EAFE Index ® (Net) 2
    -0.70 %       13.75 %       2.12 %       -3.85 %  
 
Fund Expense Ratios 3 : Investor Shares: Net 1.40%; Gross 1.63% / Select Shares: Net 1.12%; Gross 1.40% /
            Institutional Shares: Net 1.05%; Gross 1.23%
 
 
 Fund Characteristics
         
Number of Companies 4
    38  
Weighted Average Market Cap ($ x 1,000,000)
    $59,041  
Price/Earnings Ratio (P/E)
    15.48  
Price/Book Ratio (P/B)
    1.34  
Portfolio Turnover
(One year trailing)
    25%  
 
 Fund Overview
 
             
    Investor Shares   Select Shares   Institutional Shares
 
 
Minimum Initial Investment
  $100   $50,000   $500,000
Inception Date
  6/16/2008   6/16/2008   6/16/2008
Ticker Symbol
  LIEQX   LIEFX   LIEIX
Cusip
  51855Q614   51855Q564   51855Q580
NAV
  $7.09   $7.12   $7.13
 
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.
 
1 Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2 The MSCI Europe, Australasia, Far East (MSCI EAFE ® ) Index (Net) is a free float-adjusted market capitalization index that is designed to measure market equity performance in 22 developed market countries, excluding the U.S. and Canada. This series approximates the minimum possible dividend reinvestment. Investors cannot invest directly in any index and index figures do not include trading and management costs.
3 As stated in the prospectus. Net Expenses: Reflects expenses expected to be charged to shareholders through at least 7/30/14. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. Gross Expenses: Reflects the total annual fund operating expenses without the effect of contractual fee waivers. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
4 Short-term investments are not included.
 
 
 
6  Laudus Mondrian Funds

 

 
 Laudus Mondrian International Equity Fund

 
Performance and Fund Facts   as of 09/30/12 continued
 
 Sector Weightings % of Equities
         
Consumer Staples
    18.0%  
Financials
    16.9%  
Health Care
    15.4%  
Telecommunication Services
    12.4%  
Energy
    12.0%  
Information Technology
    7.9%  
Utilities
    7.5%  
Consumer Discretionary
    5.2%  
Industrials
    4.7%  
Total
    100.0%  
 
 Top Equity Holdings % of Net Assets 1
         
RWE AG
    3.7%  
Tesco plc
    3.4%  
Sanofi
    3.3%  
Taiwan Semiconductor Manufacturing Co., Ltd.
    3.3%  
Unilever plc
    3.3%  
Novartis AG – Reg’d
    3.2%  
Royal Dutch Shell plc, Class A
    3.2%  
GlaxoSmithKline plc
    3.2%  
Takeda Pharmaceutical Co., Ltd.
    3.2%  
Canon, Inc.
    3.1%  
Total
    32.9%  
 
 Country Weightings % of Investments
         
United Kingdom
    20.1%  
Japan
    19.3%  
France
    15.7%  
Switzerland
    8.1%  
Spain
    6.7%  
Germany
    6.4%  
Netherlands
    5.0%  
Australia
    4.4%  
Singapore
    4.1%  
Italy
    3.6%  
Taiwan
    3.3%  
Other Countries
    3.3%  
Total
    100.0%  
 
 
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements.
 
Portfolio holdings may have changed since the report date.
 
1 This list is not a recommendation of any security by the investment adviser.
 
 
 
Laudus Mondrian Funds  7

 

 
Laudus Mondrian Global Equity Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Average Annual Total Returns 1
 
                                         
Class and Inception Date   6 Months   1 Year   3 Years   Since Inception
 
 
Investor Shares (6/16/08)
    -0.34 %       16.88 %       5.97 %       -0.66 %  
Select Shares (6/16/08)
    -0.23 %       17.15 %       6.26 %       -0.38 %  
Institutional Shares (6/16/08)
    -0.11 %       17.37 %       6.36 %       -0.30 %  
MSCI World ® Index (Net) 2
    1.30 %       21.59 %       7.48 %       -0.39 %  
 
Fund Expense Ratios 3 : Investor Shares: Net 1.40%; Gross 5.14% / Select Shares: Net 1.12%; Gross 4.90% /
            Institutional Shares: Net 1.05%; Gross 4.75%
 
 
 Fund Characteristics
         
Number of Companies 4
    61  
Weighted Average Market Cap ($ x 1,000,000)
    $77,533  
Price/Earnings Ratio (P/E)
    14.72  
Price/Book Ratio (P/B)
    1.81  
Portfolio Turnover
(One year trailing)
    29%  
 
 Fund Overview
 
             
    Investor Shares   Select Shares   Institutional Shares
 
 
Minimum Initial Investment
  $100   $50,000   $500,000
Inception Date
  6/16/2008   6/16/2008   6/16/2008
Ticker Symbol
  LGEQX   LGESX   LGEVX
Cusip
  51855Q598   51855Q556   51855Q572
NAV
  $8.76   $8.79   $8.80
 
At a meeting held on September 25, 2012, the Board of Trustees of the Trust approved the closing and liquidation of the fund. Accordingly, effective October 2, 2012, the fund was closed to new investors, and the fund will redeem all of its outstanding shares on or shortly after November 30, 2012. See Financial Note 12 for more information.
 
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.
 
1 Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2 The MSCI World Index (Net) is a free float-adjusted market capitalization index that is designed to measure global developed markets equity performance. This series approximates the minimum possible dividend reinvestment. Investors cannot invest directly in any index and index figures do not include trading and management costs.
3 As stated in the prospectus. Net Expenses: Reflects expenses expected to be charged to shareholders through at least 7/30/14. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. Gross Expenses: Reflects the total annual fund operating expenses without the effect of contractual fee waivers. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
4 Short-term investments are not included.
 
 
 
8  Laudus Mondrian Funds

 

 
 Laudus Mondrian Global Equity Fund

 
Performance and Fund Facts   as of 09/30/12 continued
 
 Sector Weightings % of Equities
         
Health Care
    21.7%  
Consumer Staples
    20.4%  
Financials
    15.0%  
Industrials
    8.7%  
Energy
    7.6%  
Telecommunication Services
    7.1%  
Consumer Discretionary
    7.1%  
Information Technology
    6.1%  
Utilities
    5.3%  
Materials
    1.0%  
Total
    100.0%  
 
 Top Equity Holdings % of Net Assets 1
         
Pfizer, Inc.
    2.7%  
Total S.A.
    2.4%  
ConAgra Foods, Inc.
    2.3%  
Wal-Mart Stores, Inc.
    2.3%  
Johnson & Johnson
    2.2%  
Eni S.p.A.
    2.2%  
RWE AG
    2.2%  
Baxter International, Inc.
    2.2%  
Merck & Co., Inc.
    2.2%  
Northern Trust Corp.
    2.2%  
Total
    22.9%  
 
 Country Weightings % of Investments
         
United States
    48.4%  
United Kingdom
    10.2%  
France
    8.4%  
Japan
    6.4%  
Germany
    6.0%  
Switzerland
    5.4%  
Australia
    3.0%  
Singapore
    2.8%  
Netherlands
    2.6%  
Spain
    2.5%  
Other Countries
    4.3%  
Total
    100.0%  
 
 
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements.
 
Portfolio holdings may have changed since the report date.
 
1 This list is not a recommendation of any security by the investment adviser.
 
 
 
Laudus Mondrian Funds  9

 

 
Laudus Mondrian Emerging Markets Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Average Annual Total Returns 1
 
                                         
Class and Inception Date   6 Months   1 Year   3 Years   Since Inception
 
 
Investor Shares (11/2/07)
    -2.11 %       20.05 %       5.35 %       -0.34 %  
Select Shares (11/2/07)
    -2.11 % *     20.41 %       5.65 %       -0.06 %  
Institutional Shares (11/2/07)
    -2.00 %       20.51 %       5.72 %       -0.02 %  
MSCI Emerging Markets Index (Net) 2
    -1.84 %       16.93 %       5.64 %       -2.99 %  
 
Fund Expense Ratios 3 : Investor Shares: Net 1.80%; Gross 1.90% / Select Shares: Net 1.52%; Gross 1.66% /
            Institutional Shares: Net 1.45%; Gross 1.50%
 
 
 Fund Characteristics
         
Number of Companies 4
    46  
Weighted Average Market Cap ($ x 1,000,000)
    $38,138  
Price/Earnings Ratio (P/E)
    10.10  
Price/Book Ratio (P/B)
    1.69  
Portfolio Turnover
(One year trailing)
    39%  
 
 Fund Overview
 
             
    Investor Shares   Select Shares   Institutional Shares
 
 
Minimum Initial Investment
  $100   $50,000   $500,000
Inception Date
  11/2/2007   11/2/2007   11/2/2007
Ticker Symbol
  LEMIX   LEMSX   LEMNX
Cusip
  51855Q648   51855Q630   51855Q622
NAV
  $9.28   $9.30   $9.30
 
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.
 
* Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.
1 Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2 The MSCI Emerging Markets Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment. Investors cannot invest directly in any index and index figures do not include trading and management costs.
3 As stated in the prospectus. Net Expenses: Reflects expenses expected to be charged to shareholders through at least 7/30/14. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. Gross Expenses: Reflects the total annual fund operating expenses without the effect of contractual fee waivers. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
4 Short-term investments are not included.
 
 
 
10  Laudus Mondrian Funds

 

 
 Laudus Mondrian Emerging Markets Fund

 
Performance and Fund Facts   as of 09/30/12 continued
 
 Sector Weightings % of Equities
         
Financials
    24.2%  
Energy
    17.2%  
Consumer Discretionary
    13.3%  
Information Technology
    9.1%  
Industrials
    9.1%  
Utilities
    8.0%  
Telecommunication Services
    7.4%  
Consumer Staples
    6.3%  
Materials
    5.4%  
Total
    100.0%  
 
 Top Equity Holdings % of Net Assets 1
         
Samsung Electronics Co., Ltd.
    3.4%  
Hyundai Mobis
    3.4%  
Credicorp Ltd.
    3.2%  
Belle International Holdings Ltd.
    3.1%  
Larsen & Toubro Ltd.
    2.9%  
Taiwan Semiconductor Manufacturing Co., Ltd.
    2.9%  
Grupo Mexico S.A.B. de C.V., Series B
    2.8%  
Redecard S.A.
    2.7%  
Grupo Financiero Santander Mexico SAB de CV, Class B
    2.6%  
PTT PCL
    2.6%  
Total
    29.6%  
 
 Country Weightings % of Investments
         
China
    18.1%  
Brazil
    15.5%  
India
    10.4%  
Republic of Korea
    8.6%  
Mexico
    7.0%  
Indonesia
    6.6%  
Turkey
    4.9%  
Thailand
    4.4%  
Russia
    4.3%  
Peru
    3.2%  
Taiwan
    2.9%  
South Africa
    2.8%  
United States*
    2.6%  
Philippines
    2.6%  
Hong Kong
    2.4%  
Other Countries
    3.7%  
Total
    100.0%  
 
 
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements. Investing in emerging markets accentuates these risks. Investments in emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries.
 
Portfolio holdings may have changed since the report date.
 
* This represents an investment in a money market fund which invests primarily in U.S. government securities.
1 This list is not a recommendation of any security by the investment adviser.
 
 
 
Laudus Mondrian Funds  11

 

 
Laudus Mondrian International Fixed Income Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Average Annual Total Returns 1,2
 
                                         
Fund and Inception Date   6 Months   1 Year   3 Years   Since Inception
 
 
Fund: Laudus Mondrian International Fixed Income Fund (11/2/07)
    5.28 %       3.93 %       4.54 %       7.23 %  
Citigroup non-U.S. Dollar World Government Bond Index 3
    4.18 %       3.46 %       4.02 %       6.15 %  
 
Fund Expense Ratio 4 : 0.71%
 
 
 Fund Characteristics
         
Number of Issues 5
    42  
Weighted Average Maturity 6
    7.1 Yrs  
Weighted Average Duration 6
    5.8 Yrs  
Portfolio Turnover
(One year trailing)
    33%  
 
 Fund Overview
 
     
    Fund
 
 
Minimum Initial Investment
  $100
Inception Date
  11/2/2007
Ticker Symbol
  LIFNX
Cusip
  51855Q655
NAV
  $12.13
 
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
1 Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2 On July 27, 2009, the Investor Share class, Select Share class and Institutional Share class of the fund were combined into a single class of shares of the fund. The performance and financial history of the fund is that of the fund’s former Institutional Shares. Accordingly, the past performance shown is that of the fund’s former Institutional Shares.
3 The Citigroup non-US Dollar World Government Bond Index measures the total rate of return performance for the government bonds of 22 countries, excluding the U.S., with a remaining maturity of at least one year. Investors cannot invest directly in any index and index figures do not include trading and management costs.
4 As stated in the prospectus. Reflects expenses expected to be charged to shareholders through at least 7/30/14. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
5 Short-term investments are not included.
6 See Glossary for definitions of maturity and duration.
 
 
 
12  Laudus Mondrian Funds

 

 
 Laudus Mondrian International Fixed Income Fund

 
Performance and Fund Facts   as of 09/30/12 continued
 
 Sector Weightings % of Investments
         
Government Bonds
    63.5%  
Government Agency Obligations
    16.8%  
Supranational
    13.1%  
Corporate Bonds
    4.4%  
Other Investment Companies
    2.2%  
Total
    100.0%  
 
 Top Holdings % of Net Assets 1
         
Japan Government Ten Year Bond, 1.50%, 09/20/18
    5.8%  
Bayerische Landesbank, 1.40%, 04/22/13
    5.2%  
Japan Government Five Year Bond, 0.40%, 09/20/15
    5.2%  
Nordic Investment Bank, 1.70%, 04/27/17
    4.8%  
Kreditanstalt fuer Wiederaufbau, 2.05%, 02/16/26
    4.7%  
Austria Government Bond, 6.25%, 07/15/27
    4.6%  
Japan Government Ten Year Bond, 1.90%, 06/20/16
    4.5%  
Denmark Government International Bond, 3.13%, 03/17/14
    4.4%  
Poland Government Bond, 5.75%, 09/23/22
    4.3%  
Japan Government Thirty Year Bond, 2.40%, 12/20/34
    4.2%  
Total
    47.7%  
 
 Country Weightings % of Investments 2
         
Japan
    22.3%  
Germany
    16.6%  
Poland
    7.8%  
United Kingdom
    5.4%  
Austria
    4.6%  
Finland
    4.6%  
Denmark
    4.4%  
Mexico
    4.4%  
France
    3.8%  
Sweden
    3.0%  
South Africa
    2.9%  
Netherlands
    2.7%  
Norway
    2.2%  
United States*
    2.2%  
Supranational**
    13.1%  
Total
    100.0%  
 
 Currency Weightings % of Investments 3
         
Japanese Yen
    51.1%  
Euro
    18.5%  
British Pound
    7.7%  
Polish Zloty
    7.6%  
Mexican Peso
    4.3%  
Swedish Krona
    2.9%  
South African Rand
    5.8%  
United States Dollar
    2.1%  
Total
    100.0%  
 
 
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements.
 
Portfolio holdings may have changed since the report date.
 
* This represents an investment in a money market fund which invests primarily in U.S. government securities.
** Supranational bonds represent the debt of international organizations or institutions such as the World Bank, the International Monetary Fund, regional multilateral development banks and others. Bonds are issued and held in Japanese yen.
1 This list is not a recommendation of any security by the investment adviser.
2 Country weights may include issues via Samurai bonds issued in Japanese yen by non-Japanese entities and/or Yankee bonds issued in U.S. dollars by non-U.S. entities.
3 Includes forward foreign currency exposure.
 
 
 
Laudus Mondrian Funds  13

 

 
Laudus Mondrian Global Fixed Income Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Total Returns 1
 
           
Fund and Inception Date   Since Inception
 
 
Fund: Laudus Mondrian Global Fixed Income Fund (7/10/12)
    2.86 %  
Citigroup World Government Bond Index 2
    3.25 %  
 
Fund Expense Ratios 3 : Net 0.85%; Gross 1.03%
 
 
 Fund Characteristics
         
Number of Issues 4
    77  
Weighted Average Maturity 5
    6.1 Yrs  
Weighted Average Duration 5
    5.2 Yrs  
Portfolio Turnover
(One year trailing)
    --  
 
 Fund Overview
 
     
    Fund
 
 
Minimum Initial Investment
  $100
Inception Date
  7/10/2012
Ticker Symbol
  LMGDX
Cusip
  51855Q119
NAV
  $10.28
 
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
1 Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2 The Citigroup World Government Bond Index measures the total rate of return performance for the government bonds of 23 countries with a remaining maturity of at least one year. Investors cannot invest directly in any index and index figures do not include trading and management costs.
3 As stated in the prospectus. Net Expenses: Reflects expenses expected to be charged to shareholders for at least two years from commencement of operations. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. For the period 7/11/12 through 1/10/13, the investment adviser has agreed to waive the funds net operating expenses to 0.00% (excluding interest, taxes, and certain non-routine expenses). Gross Expenses: Reflects the total annual fund operating expenses without the effect of contractual fee waivers. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
4 Short-term investments are not included.
5 See Glossary for definitions of maturity and duration.
 
 
 
14  Laudus Mondrian Funds

 

 
 Laudus Mondrian Global Fixed Income Fund

 
Performance and Fund Facts   as of 09/30/12 continued
 
 Sector Weightings % of Investments
         
Government Bonds
    62.6%  
U.S. Government Securities
    18.0%  
Government Agency Obligations
    7.5%  
Supranational
    5.2%  
Corporate Bonds
    4.7%  
Other Investment Companies
    2.0%  
Total
    100.0%  
 
 Top Holdings % of Net Assets 1
         
Japan Government Ten Year Bond, 1.40%, 03/20/18
    3.8%  
Japan Government Ten Year Bond, 1.40%, 06/20/19
    3.6%  
European Investment Bank, 1.90%, 01/26/26
    3.5%  
Japan Government Ten Year Bond, 0.80%, 09/20/20
    3.3%  
U.S. Treasury Notes, 3.63%, 08/15/19
    3.1%  
Japan Government Ten Year Bond, 1.50%, 09/20/18
    3.0%  
Bank Nederlandse Gemeenten, 1.85%, 11/07/16
    3.0%  
Landwirtschaftliche Rentenbank, 1.38%, 04/25/13
    2.8%  
Bayerische Landesbank, 1.40%, 04/22/13
    2.7%  
Japan Government Twenty Year Bond, 1.90%, 03/22/21
    2.6%  
Total
    31.4%  
 
 Country Weightings % of Investments 2
         
Japan
    21.8%  
United States
    20.0%  
Germany
    9.7%  
Australia
    7.9%  
Sweden
    6.3%  
United Kingdom
    5.6%  
Brazil
    4.0%  
Netherlands
    4.0%  
Poland
    3.1%  
Mexico
    2.4%  
Denmark
    2.2%  
Hungary
    2.1%  
South Africa
    2.0%  
Israel
    1.2%  
Malaysia
    1.0%  
Qatar
    0.9%  
Turkey
    0.3%  
Colombia
    0.3%  
Supranational*
    5.2%  
Total
    100.0%  
 
 Currency Weightings % of Investments 3
         
Japanese Yen
    37.5%  
United States Dollar
    22.3%  
Euro
    8.1%  
Swedish Krona
    6.6%  
British Pound
    5.0%  
Brazilian Real
    4.2%  
Polish Zloty
    3.3%  
Mexican Peso
    2.5%  
Chinese Yuan Renminbi
    2.3%  
Hungarian Forint
    2.2%  
South African Rand
    2.1%  
Israeli Shekel
    1.2%  
Malaysian Ringgit
    1.0%  
Chilean Peso
    0.8%  
Turkish Lira
    0.4%  
Colombian Peso
    0.4%  
Australian Dollar
    0.1%  
Total
    100.0%  
 
 
There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability, fluctuations in currency and exchange rates, and an increased risk of price volatility associated with less uniformity in accounting and reporting requirements.
 
Portfolio holdings may have changed since the report date.
 
* Supranational bonds represent the debt of international organizations or institutions such as the World Bank, the International Monetary Fund, regional multilateral development banks and others. Bonds are issued and held in Japanese yen and euro.
1 This list is not a recommendation of any security by the investment adviser.
2 Country weights may include issues via Samurai bonds issued in Japanese yen by non-Japanese entities and/or Yankee bonds issued in U.S. dollars by non-U.S. entities.
3 Includes forward foreign currency exposure.
 
 
 
Laudus Mondrian Funds  15

 

 
Fund Expenses  (Unaudited)
 
 Examples for a $1,000 Investment
 
As a fund shareholder, you incur two types of costs: transaction costs, such as redemption fees; and, ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.
 
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for the period beginning April 1, 2012 (except where noted below) and held through September 30, 2012.
 
Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ¸  $1,000 = 8.6), then multiply the result by the number given for your fund or share class under the heading entitled “Expenses Paid During Period.”
 
Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s or share class’ actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.
 
You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
 
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as redemption fees. If these transactional costs were included, your costs would have been higher.
 
                                 
            Ending
   
            Account Value
   
    Expense Ratio 1
  Beginning
  (Net of Expenses)
  Expenses Paid
    (Annualized)   Account Value   at 9/30/12   During Period
 
Laudus Mondrian International Equity Fund 2                                
Investor Shares                                
Actual Return
    1.40%     $ 1,000     $ 986.10     $ 6.97  
Hypothetical 5% Return
    1.40%     $ 1,000     $ 1,018.05     $ 7.08  
Select Shares                                
Actual Return
    1.12%     $ 1,000     $ 988.90     $ 5.58  
Hypothetical 5% Return
    1.12%     $ 1,000     $ 1,019.45     $ 5.67  
Institutional Shares                                
Actual Return
    1.05%     $ 1,000     $ 987.50     $ 5.23  
Hypothetical 5% Return
    1.05%     $ 1,000     $ 1,019.80     $ 5.32  
 
Laudus Mondrian Global Equity Fund 2                                
Investor Shares                                
Actual Return
    1.37%     $ 1,000     $ 996.60     $ 6.86  
Hypothetical 5% Return
    1.37%     $ 1,000     $ 1,018.20     $ 6.93  
Select Shares                                
Actual Return
    1.10%     $ 1,000     $ 997.70     $ 5.51  
Hypothetical 5% Return
    1.10%     $ 1,000     $ 1,019.55     $ 5.57  
Institutional Shares                                
Actual Return
    1.03%     $ 1,000     $ 998.90     $ 5.16  
Hypothetical 5% Return
    1.03%     $ 1,000     $ 1,019.90     $ 5.22  
 
Laudus Mondrian Emerging Markets Fund 2                                
Investor Shares                                
Actual Return
    1.80%     $ 1,000     $ 978.90     $ 8.93  
Hypothetical 5% Return
    1.80%     $ 1,000     $ 1,016.04     $ 9.10  
Select Shares                                
Actual Return
    1.52%     $ 1,000     $ 980.00     $ 7.54  
Hypothetical 5% Return
    1.52%     $ 1,000     $ 1,017.45     $ 7.69  
Institutional Shares                                
Actual Return
    1.45%     $ 1,000     $ 980.00     $ 7.20  
Hypothetical 5% Return
    1.45%     $ 1,000     $ 1,017.80     $ 7.33  
 
Laudus Mondrian International Fixed Income Fund 2                                
Actual Return
    0.69%     $ 1,000     $ 1,052.80     $ 3.55  
Hypothetical 5% Return
    0.69%     $ 1,000     $ 1,021.61     $ 3.50  
 
Laudus Mondrian Global Fixed Income Fund 3                                
Actual Return
    0.00%     $ 1,000     $ 1,028.60     $ 0.00  
Hypothetical 5% Return
    0.00%     $ 1,000     $ 1,025.07     $ 0.00  
 
 
1 Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
2 Expenses for each fund or share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 183 days of the period, and divided by 365 days of the fiscal year.
3 Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 82 days of the period (from 7/11/12 through 9/30/12) and divided by 365 days of the fiscal year.
 
 
 
16  Laudus Mondrian Funds

 

Laudus Mondrian International Equity Fund
 
 
Financial Statements
 
Financial Highlights
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Investor Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    7.19       7.73       7.52       5.43       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.18 2     0.26 2     0.16 2     0.18 2     0.07      
Net realized and unrealized gains (losses)
    (0.28 )     (0.45 )     0.28       2.02       (4.59 )    
   
Total from investment operations
    (0.10 )     (0.19 )     0.44       2.20       (4.52 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.30 )     (0.23 )     (0.11 )     (0.05 )    
Distributions from net realized gains
    —       (0.05 )     —       —       (0.00 ) 3    
   
Total distributions
    —       (0.35 )     (0.23 )     (0.11 )     (0.05 )    
   
Net asset value at end of period
    7.09       7.19       7.73       7.52       5.43      
   
Total return (%)
    (1.39 ) 4     (2.02 )     5.94       40.53       (45.31 ) 4    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.40 5     1.40       1.40       1.40       1.39 5,6    
Gross operating expenses
    1.53 5     1.63       1.63       1.60       2.78 5    
Net investment income (loss)
    5.16 5     3.49       2.19       2.47       2.46 5    
Portfolio turnover rate
    7 4     35       33       14       8 4    
Net assets, end of period ($ x 1,000)
    1,048       1,048       1,009       403       168      
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Select Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    7.20       7.75       7.53       5.44       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.18 2     0.26 2     0.21 2     0.18 2     0.12      
Net realized and unrealized gains (losses)
    (0.26 )     (0.44 )     0.25       2.03       (4.63 )    
   
Total from investment operations
    (0.08 )     (0.18 )     0.46       2.21       (4.51 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.32 )     (0.24 )     (0.12 )     (0.05 )    
Distributions from net realized gains
    —       (0.05 )     —       —       (0.00 ) 3    
   
Total distributions
    —       (0.37 )     (0.24 )     (0.12 )     (0.05 )    
   
Net asset value at end of period
    7.12       7.20       7.75       7.53       5.44      
   
Total return (%)
    (1.11 ) 4     (1.82 )     6.20       40.68       (45.16 ) 4    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.12 5     1.12       1.12       1.12       1.12 5    
Gross operating expenses
    1.27 5     1.40       1.36       1.31       3.10 5    
Net investment income (loss)
    5.34 5     3.51       2.86       2.43       2.22 5    
Portfolio turnover rate
    7 4     35       33       14       8 4    
Net assets, end of period ($ x 1,000)
    936       938       542       458       90      
 

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Distribution from realized gains is less than $0.01.
4  Not annualized.
5  Annualized.
6  The ratio of net operating expenses would have been 1.40% for the Investor Shares, if custody credits had not been included.
 
 
 
See financial notes  17

 

 
 Laudus Mondrian International Equity Fund
 

 
Financial Highlights  continued
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Institutional Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    7.22       7.76       7.54       5.44       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.18 2     0.29 2     0.23 2     0.21 2     0.08      
Net realized and unrealized gains (losses)
    (0.27 )     (0.46 )     0.24       2.02       (4.59 )    
   
Total from investment operations
    (0.09 )     (0.17 )     0.47       2.23       (4.51 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.32 )     (0.25 )     (0.13 )     (0.05 )    
Distributions from net realized gains
    —       (0.05 )     —       —       (0.00 ) 3    
   
Total distributions
    —       (0.37 )     (0.25 )     (0.13 )     (0.05 )    
   
Net asset value at end of period
    7.13       7.22       7.76       7.54       5.44      
   
Total return (%)
    (1.25 ) 4     (1.63 )     6.28       40.90       (45.15 ) 4    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.05 5     1.05       1.05       1.05       1.05 5    
Gross operating expenses
    1.12 5     1.23       1.21       1.24       2.11 5    
Net investment income (loss)
    5.38 5     3.92       3.08       2.90       2.52 5    
Portfolio turnover rate
    7 4     35       33       14       8 4    
Net assets, end of period ($ x 1,000)
    128,295       119,049       126,758       85,424       18,694      

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Distribution from realized gains is less than $0.01.
4  Not annualized.
5  Annualized.
 
 
 
18  See financial notes

 

 
 Laudus Mondrian International Equity Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  98 .4%   Common Stock     129,061,462       128,265,750  
  1 .1%   Other Investment Company     1,409,114       1,409,114  
 
 
  99 .5%   Total Investments     130,470,576       129,674,864  
  0 .5%   Other Assets and Liabilities, Net             603,981  
 
 
  100 .0%   Net Assets             130,278,845  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  98.4% of net assets
 
Australia 4.4%
                 
 
Insurance 4.4%
AMP Ltd.
    582,260       2,601,412  
QBE Insurance Group Ltd.
    235,538       3,145,678  
                 
              5,747,090  
 
France 15.6%
                 
 
Banks 1.3%
Societe Generale S.A.  *
    60,534       1,715,407  
                 
 
Capital Goods 2.7%
Compagnie de Saint-Gobain
    101,188       3,541,796  
                 
 
Energy 3.0%
Total S.A.
    77,292       3,845,269  
                 
 
Food & Staples Retailing 2.5%
Carrefour S.A.
    156,918       3,255,045  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.3%
Sanofi
    50,357       4,309,375  
                 
 
Telecommunication Services 2.8%
France Telecom S.A.
    301,948       3,656,462  
                 
              20,323,354  
 
Germany 6.4%
                 
 
Telecommunication Services 2.7%
Deutsche Telekom AG - Reg’d
    282,089       3,469,065  
                 
 
Utilities 3.7%
RWE AG
    108,844       4,870,556  
                 
              8,339,621  
 
Israel 2.2%
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 2.2%
Teva Pharmaceutical Industries Ltd. ADR
    68,400       2,832,444  
 
Italy 3.6%
                 
 
Banks 1.1%
Intesa Sanpaolo S.p.A.
    940,990       1,434,863  
                 
 
Energy 2.5%
Eni S.p.A.
    150,734       3,304,612  
                 
              4,739,475  
 
Japan 19.2%
                 
 
Automobiles & Components 3.0%
Toyota Motor Corp.
    99,500       3,901,325  
                 
 
Food & Staples Retailing 2.6%
Seven & I Holdings Co., Ltd.
    108,900       3,337,055  
                 
 
Household & Personal Products 3.1%
Kao Corp.
    136,700       4,019,154  
                 
 
Insurance 2.8%
Tokio Marine Holdings, Inc.
    145,600       3,705,021  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.2%
Takeda Pharmaceutical Co., Ltd.
    89,900       4,136,081  
                 
 
Semiconductors & Semiconductor Equipment 1.4%
Tokyo Electron Ltd.
    43,900       1,870,140  
                 
 
Technology Hardware & Equipment 3.1%
Canon, Inc.
    125,300       4,021,839  
                 
              24,990,615  
 
Netherlands 5.0%
                 
 
Food & Staples Retailing 2.9%
Koninklijke Ahold N.V.
    303,938       3,806,691  
                 
 
Media 2.1%
Reed Elsevier N.V.
    204,145       2,722,834  
                 
              6,529,525  
 
Singapore 4.0%
                 
 
Banks 2.6%
United Overseas Bank Ltd.
    218,535       3,484,975  
                 
 
Telecommunication Services 1.4%
Singapore Telecommunications Ltd.
    694,000       1,807,139  
                 
              5,292,114  
 
Spain 6.7%
                 
 
Banks 1.4%
Banco Santander S.A.  *
    253,316       1,890,852  
                 
 
Telecommunication Services 2.6%
Telefonica S.A.
    252,439       3,374,009  
                 
 
Utilities 2.7%
Iberdrola S.A.
    763,879       3,463,434  
                 
              8,728,295  
 
 
 
See financial notes  19

 

 
 Laudus Mondrian International Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
Switzerland 8.0%
                 
 
Capital Goods 1.9%
ABB Ltd. - Reg’d  *
    131,035       2,458,631  
                 
 
Insurance 2.9%
Zurich Insurance Group AG  *
    15,006       3,741,106  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.2%
Novartis AG - Reg’d
    69,541       4,256,150  
                 
              10,455,887  
 
Taiwan 3.3%
                 
 
Semiconductors & Semiconductor Equipment 3.3%
Taiwan Semiconductor Manufacturing Co., Ltd.
    1,388,154       4,270,342  
 
United Kingdom 20.0%
                 
 
Energy 6.3%
BP plc
    569,046       4,011,703  
Royal Dutch Shell plc, Class A
    122,410       4,238,372  
                 
              8,250,075  
                 
 
Food & Staples Retailing 3.4%
Tesco plc
    822,563       4,417,172  
                 
 
Food, Beverage & Tobacco 3.3%
Unilever plc
    116,032       4,236,549  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.2%
GlaxoSmithKline plc
    180,506       4,166,549  
                 
 
Telecommunication Services 2.8%
Vodafone Group plc
    1,286,333       3,655,283  
                 
 
Utilities 1.0%
National Grid plc
    117,068       1,291,360  
                 
              26,016,988  
                 
Total Common Stock
(Cost $129,061,462)     128,265,750  
         
                 
                 
 
 Other Investment Company  1.1% of net assets
 
United States 1.1%
State Street Institutional U.S. Government Money Market Fund
    1,409,114       1,409,114  
                 
Total Other Investment Company
(Cost $1,409,114)     1,409,114  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $133,496,146 and the unrealized appreciation and depreciation were $8,464,489 and ($12,285,771), respectively, with a net unrealized depreciation of ($3,821,282).
 
At 09/30/12, the values of certain foreign securities held by the fund aggregating $125,433,306 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)
 
* Non-income producing security.
 
     
ADR —
  American Depositary Receipt
Reg’d —
  Registered
 
     
AUD —
  Australian dollar
USD —
  U.S. dollar
 
In addition to the above, the fund held the following at 09/30/12:
 
 
                                             
            Amount of
      Amount of
   
        Currency
  Currency
  Currency
  Currency
  Unrealized
        to be
  to be
  to be
  to be
  Losses
Expiration Date   Counterparty   Received   Received   Delivered   Delivered   ($)
 
 Forward Foreign Currency Exchange Contract
                                         
                                             
10/31/2012
  State Street Bank London     USD       4,733,403       AUD       4,574,500       (1,723 )
 
 
 
 
20  See financial notes

 

 
 Laudus Mondrian International Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
Assets Valuation Input
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Common Stock 1
    $—       $125,433,306       $—       $125,433,306  
Israel 1
    2,832,444       —       —       2,832,444  
Other Investment Company 1
    1,409,114       —       —       1,409,114  
                                 
Total
    $4,241,558       $125,433,306       $—       $129,674,864  
                                 
                                 
                                 
Liabilities Valuation Input
                 
 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contract 2
    ($1,723 )     $—       $—       ($1,723 )
 
     
1
  As categorized in Portfolio Holdings.
2
  Forward foreign currency exchange contracts are not included in Investments and are valued at unrealized appreciation or depreciation.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
See financial notes  21

 

 
 Laudus Mondrian International Equity Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $130,470,576)
        $129,674,864  
Foreign currency, at value (cost $184,894)
        184,495  
Receivables:
           
Dividends
        396,709  
Foreign tax reclaims
        111,725  
Fund shares sold
        20,072  
Interest
        61  
Prepaid expenses
  +     1,843  
   
Total assets
        130,389,769  
 
Liabilities
Payables:
           
Fund shares redeemed
        52,484  
Trustees’ retirement plan
        9,286  
Investment adviser fees
        9,160  
Distribution and shareholder services fees
        216  
Unrealized losses on forward foreign currency exchange contracts
        1,723  
Accrued expenses
  +     38,055  
   
Total liabilities
        110,924  
 
Net Assets
Total assets
        130,389,769  
Total liabilities
  −     110,924  
   
Net assets
        $130,278,845  
 
Net Assets by Source
Capital received from investors
        130,971,620  
Net investment income not yet distributed
        4,074,161  
Net realized capital losses
        (3,967,374 )
Net unrealized capital losses
        (799,562 )
 
Net Asset Value (NAV) by Shares Class
 
                             
            Shares
             
Share Class   Net Assets   ÷   Outstanding   =   NAV      
Investor Shares
  $1,047,556       147,781         $7.09      
Select Shares
  $936,112       131,537         $7.12      
Institutional Shares
  $128,295,177       17,991,609         $7.13      
 
 
 
22  See financial notes

 

 
 Laudus Mondrian International Equity Fund
 

Statement of
Operations
For April 1, 2012 through September 30, 2012; unaudited
 
             
 
Investment Income
Dividends (net of foreign withholding taxes of $365,051)
        $3,863,854  
Interest
  +     286  
   
Total investment income
        3,864,140  
 
Expenses
Investment adviser fees
        510,908  
Transfer agent fees
        47,620  
Custodian fees
        28,169  
Accounting and administration fees
        27,334  
Professional fees
        27,044  
Registration fees
        21,777  
Shareholder reports
        4,907  
Trustees’ fees
        4,880  
Distribution and shareholder services fees (Investor Shares)
        1,241  
Interest expense
        68  
Sub-Accounting fees:
           
Investor Shares
        744  
Select Shares
        727  
Other expenses
  +     2,817  
   
Total expenses
        678,236  
Expense reduction by adviser
  −     44,996  
   
Net expenses
  −     633,240  
   
Net investment income
        3,230,900  
 
Realized and Unrealized Gains (Losses)
Net realized gains on investments
        364,151  
Net realized losses on foreign currency transactions
  +     (16,569 )
   
Net realized gains
        347,582  
Net unrealized losses on investments
        (4,061,553 )
Net unrealized losses on foreign currency translations
  +     (103,869 )
   
Net unrealized losses
  +     (4,165,422 )
   
Net realized and unrealized losses
        (3,817,840 )
             
Decrease in net assets resulting from operations
        ($586,940 )
 
 
 
See financial notes  23

 

 
 Laudus Mondrian International Equity Fund
 

Statement of
Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
 
                     
 
Operations
                     
4/1/12-9/30/12     4/1/11-3/31/12  
Net investment income
        $3,230,900       $4,530,426  
Net realized gains (losses)
        347,582       (1,473,407 )
Net unrealized losses
  +     (4,165,422 )     (5,078,186 )
   
Decrease in net assets from operations
        (586,940 )     (2,021,167 )
 
Distributions to Shareholders
Distributions from net investment income
                   
Investor Shares
        —       (37,920 )
Select Shares
        —       (33,152 )
Institutional Shares
  +     —       (4,492,574 )
   
Total distributions from net investment income
        —       (4,563,646 )
                     
                     
Distributions from net realized gains
                   
Investor Shares
        —       (6,945 )
Select Shares
        —       (5,635 )
Institutional Shares
  +     —       (754,808 )
   
Total distributions from net realized gains
        —       (767,388 )
                     
Total distributions
        $—       ($5,331,034 )
 
Transactions in Fund Shares
                                     
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       VALUE       SHARES       VALUE  
Shares Sold
                                   
Investor Shares
        19,355       $132,474       39,428       $286,492  
Select Shares
        22,527       155,000       79,974       566,993  
Institutional Shares
  +     2,529,509       16,935,605       5,640,658       39,744,766  
   
Total shares sold
        2,571,391       $17,223,079       5,760,060       $40,598,251  
                                     
                                     
Shares Reinvested
                                   
Investor Shares
        —       $—       5,842       $38,263  
Select Shares
        —       —       4,753       31,185  
Institutional Shares
  +     —       —       175,236       1,151,298  
   
Total shares reinvested
        —       $—       185,831       $1,220,746  
                                     
                                     
Shares Redeemed
                                   
Investor Shares
        (17,367 )     ($116,365 )     (29,976 )     ($222,879 )
Select Shares
        (21,172 )     (153,904 )     (24,514 )     (174,619 )
Institutional Shares
  +     (1,035,180 )     (7,121,910 )     (5,649,094 )     (41,343,557 )
   
Total shares redeemed
        (1,073,719 )     ($7,392,179 )     (5,703,584 )     ($41,741,055 )
                                     
Net transactions in fund shares
        1,497,672       $9,830,900       242,307       $77,942  
 
Shares Outstanding and Net Assets
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       NET ASSETS       SHARES       NET ASSETS  
Beginning of period
        16,773,255       $121,034,885       16,530,948       $128,309,144  
Total increase or decrease
  +     1,497,672       9,243,960       242,307       (7,274,259 )
   
End of period
        18,270,927       $130,278,845       16,773,255       $121,034,885  
   
                                     
Net investment income not yet distributed
                $4,074,161               $843,261  
 
 
 
24  See financial notes

 

Laudus Mondrian Global Equity Fund
 
 
Financial Statements
 
Financial Highlights
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Investor Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    8.79       8.61       8.05       5.68       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.14 2     0.23 2     0.17 2     0.17 2     0.17      
Net realized and unrealized gains (losses)
    (0.17 )     0.16       0.58       2.38       (4.27 )    
   
Total from investment operations
    (0.03 )     0.39       0.75       2.55       (4.10 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.21 )     (0.19 )     (0.18 )     (0.22 )    
   
Net asset value at end of period
    8.76       8.79       8.61       8.05       5.68      
   
Total return (%)
    (0.34 ) 3     4.89       9.40       44.94       (41.35 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.37 4     1.40       1.40       1.39       1.40 4    
Gross operating expenses
    4.99 4     5.14       4.97       5.30       4.43 4    
Net investment income (loss)
    3.28 4     2.72       2.16       2.30       2.63 4    
Portfolio turnover rate
    15 3     31       26       22       14 3    
Net assets, end of period ($ x 1,000)
    117       109       91       80       34      
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Select Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    8.81       8.63       8.06       5.68       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.15 2     0.25 2     0.19 2     0.19 2     0.16      
Net realized and unrealized gains (losses)
    (0.17 )     0.17       0.58       2.39       (4.25 )    
   
Total from investment operations
    (0.02 )     0.42       0.77       2.58       (4.09 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.24 )     (0.20 )     (0.20 )     (0.23 )    
   
Net asset value at end of period
    8.79       8.81       8.63       8.06       5.68      
   
Total return (%)
    (0.23 ) 3     5.17       9.77       45.43       (41.27 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.10 4     1.12       1.12       1.11       1.12 4    
Gross operating expenses
    4.74 4     4.90       4.76       5.13       4.27 4    
Net investment income (loss)
    3.57 4     2.98       2.40       2.59       2.89 4    
Portfolio turnover rate
    15 3     31       26       22       14 3    
Net assets, end of period ($ x 1,000)
    283       284       270       182       33      
 

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Not annualized.
4  Annualized.
 
 
 
See financial notes  25

 

 
 Laudus Mondrian Global Equity Fund
 

 
Financial Highlights  continued
 
                                             
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  6/16/08 1 –
   
 Institutional Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    8.81       8.63       8.06       5.68       10.00      
   
Income (loss) from investment operations:
                                           
Net investment income (loss)
    0.15 2     0.26 2     0.20 2     0.20 2     0.16      
Net realized and unrealized gains (losses)
    (0.16 )     0.16       0.58       2.38       (4.25 )    
   
Total from investment operations
    (0.01 )     0.42       0.78       2.58       (4.09 )    
Less distributions:
                                           
Distributions from net investment income
    —       (0.24 )     (0.21 )     (0.20 )     (0.23 )    
   
Net asset value at end of period
    8.80       8.81       8.63       8.06       5.68      
   
Total return (%)
    (0.11 ) 3     5.25       9.84       45.49       (41.25 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                           
Net operating expenses
    1.03 4     1.05       1.05       1.03       1.05 4    
Gross operating expenses
    4.59 4     4.75       4.57       4.96       4.08 4    
Net investment income (loss)
    3.64 4     3.05       2.55       2.68       2.74 4    
Portfolio turnover rate
    15 3     31       26       22       14 3    
Net assets, end of period ($ x 1,000)
    4,770       4,777       4,539       4,132       2,840      

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Not annualized.
4  Annualized.
 
 
 
26  See financial notes

 

 
 Laudus Mondrian Global Equity Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  98 .6%   Common Stock     5,099,539       5,100,006  
  1 .7%   Other Investment Company     84,764       84,764  
 
 
  100 .3%   Total Investments     5,184,303       5,184,770  
  (0 .3)%   Other Assets and Liabilities, Net             (14,190 )
 
 
  100 .0%   Net Assets             5,170,580  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  98.6% of net assets
 
Australia 3.0%
                 
 
Insurance 3.0%
AMP Ltd.
    15,370       68,670  
QBE Insurance Group Ltd.
    6,353       84,846  
                 
              153,516  
 
France 8.4%
                 
 
Capital Goods 0.9%
Vallourec S.A.
    1,097       46,348  
                 
 
Energy 2.4%
Total S.A.
    2,530       125,867  
                 
 
Food & Staples Retailing 1.7%
Carrefour S.A.
    4,077       84,572  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 1.7%
Sanofi
    1,047       89,599  
                 
 
Telecommunication Services 1.7%
France Telecom S.A.
    7,267       88,000  
                 
              434,386  
 
Germany 6.0%
                 
 
Automobiles & Components 1.9%
Daimler AG - Reg’d
    1,995       96,828  
                 
 
Telecommunication Services 1.9%
Deutsche Telekom AG - Reg’d
    8,124       99,907  
                 
 
Utilities 2.2%
RWE AG
    2,593       116,032  
                 
              312,767  
 
Israel 2.1%
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 2.1%
Teva Pharmaceutical Industries Ltd. ADR
    2,600       107,666  
 
Italy 2.2%
                 
 
Energy 2.2%
Eni S.p.A.
    5,305       116,304  
 
Japan 6.4%
                 
 
Food & Staples Retailing 1.7%
Seven & I Holdings Co., Ltd.
    2,800       85,801  
                 
 
Insurance 1.1%
Tokio Marine Holdings, Inc.
    2,300       58,527  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 1.0%
Astellas Pharma, Inc.
    1,000       50,680  
                 
 
Software & Services 1.3%
Trend Micro, Inc.
    2,500       69,705  
                 
 
Technology Hardware & Equipment 1.3%
Canon, Inc.
    2,100       67,405  
                 
              332,118  
 
Netherlands 2.6%
                 
 
Food & Staples Retailing 1.8%
Koninklijke Ahold N.V.
    7,413       92,845  
                 
 
Media 0.8%
Reed Elsevier N.V.
    3,221       42,961  
                 
              135,806  
 
Singapore 2.8%
                 
 
Banks 1.6%
United Overseas Bank Ltd.
    5,083       81,058  
                 
 
Telecommunication Services 1.2%
Singapore Telecommunications Ltd.
    24,000       62,495  
                 
              143,553  
 
Spain 2.5%
                 
 
Telecommunication Services 1.1%
Telefonica S.A.
    4,242       56,697  
                 
 
Utilities 1.4%
Iberdrola S.A.
    15,584       70,658  
                 
              127,355  
 
Switzerland 5.4%
                 
 
Capital Goods 1.5%
ABB Ltd. - Reg’d  *
    4,080       76,554  
                 
 
Commercial & Professional Supplies 0.5%
SGS S.A. - Reg’d
    13       26,734  
                 
 
Insurance 1.4%
Zurich Insurance Group AG  *
    298       74,293  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 2.0%
Novartis AG - Reg’d
    1,697       103,862  
                 
              281,443  
 
 
 
See financial notes  27

 

 
 Laudus Mondrian Global Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
United Kingdom 10.3%
                 
 
Banks 2.1%
HSBC Holdings plc
    11,787       109,498  
                 
 
Energy 2.8%
BP plc
    14,525       102,400  
Royal Dutch Shell plc, Class A
    1,213       41,999  
                 
              144,399  
                 
 
Food & Staples Retailing 2.1%
Tesco plc
    20,060       107,722  
                 
 
Food, Beverage & Tobacco 1.4%
Unilever plc
    1,982       72,367  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 1.9%
GlaxoSmithKline plc
    4,230       97,640  
                 
              531,626  
 
United States 46.9%
                 
 
Banks 1.6%
U.S. Bancorp
    800       27,440  
Wells Fargo & Co.
    1,655       57,147  
                 
              84,587  
                 
 
Capital Goods 3.3%
3M Co.
    900       83,178  
General Electric Co.
    3,900       88,569  
                 
              171,747  
                 
 
Commercial & Professional Supplies 1.0%
Waste Management, Inc.
    1,600       51,328  
                 
 
Consumer Services 2.2%
Las Vegas Sands Corp.
    2,400       111,288  
                 
 
Diversified Financials 3.9%
Northern Trust Corp.
    2,400       111,396  
TD Ameritrade Holding Corp.
    5,900       90,683  
                 
              202,079  
                 
 
Food & Staples Retailing 4.4%
Sysco Corp.
    3,500       109,445  
Wal-Mart Stores, Inc.
    1,600       118,080  
                 
              227,525  
                 
 
Food, Beverage & Tobacco 5.2%
ConAgra Foods, Inc.
    4,300       118,637  
H.J. Heinz Co.
    800       44,760  
Kraft Foods, Inc., Class A  *
    2,600       107,510  
                 
              270,907  
                 
 
Health Care Equipment & Services 5.6%
Baxter International, Inc.
    1,900       114,494  
UnitedHealth Group, Inc.
    1,900       105,279  
WellPoint, Inc.
    1,200       69,612  
                 
              289,385  
                 
 
Household & Personal Products 1.9%
The Procter & Gamble Co.
    1,400       97,104  
                 
 
Materials 1.0%
Air Products & Chemicals, Inc.
    600       49,620  
                 
 
Media 1.0%
The Interpublic Group of Cos., Inc.
    4,600       51,152  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 7.1%
Johnson & Johnson
    1,700       117,147  
Merck & Co., Inc.
    2,500       112,750  
Pfizer, Inc.
    5,565       138,290  
                 
              368,187  
                 
 
Retailing 1.2%
The Home Depot, Inc.
    1,000       60,370  
                 
 
Semiconductors & Semiconductor Equipment 1.6%
Intel Corp.
    3,700       83,916  
                 
 
Software & Services 1.7%
Microsoft Corp.
    3,000       89,340  
                 
 
Telecommunication Services 1.1%
AT&T, Inc.
    1,500       56,550  
                 
 
Transportation 1.4%
United Parcel Service, Inc., Class B
    1,000       71,570  
                 
 
Utilities 1.7%
Edison International
    1,900       86,811  
                 
              2,423,466  
                 
Total Common Stock
(Cost $5,099,539)     5,100,006  
         
                 
                 
 
 Other Investment Company  1.7% of net assets
 
United States 1.7%
State Street Institutional U.S. Government Money Market Fund
    84,764       84,764  
                 
Total Other Investment Company
(Cost $84,764)     84,764  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $5,188,936 and the unrealized appreciation and depreciation were $523,676 and ($527,842), respectively, with a net unrealized depreciation of ($4,166).
 
At 09/30/12, the values of certain foreign securities held by the fund aggregating $2,568,874 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)
 
* Non-income producing security.
 
     
ADR —
  American Depositary Receipt
Reg’d —
  Registered
 
     
AUD —
  Australian dollar
USD —
  U.S. dollar
 
 
 
28  See financial notes

 

 
 Laudus Mondrian Global Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
In addition to the above, the fund held the following at 09/30/12:
 
 
                                             
            Amount of
      Amount of
   
        Currency
  Currency
  Currency
  Currency
  Unrealized
        to be
  to be
  to be
  to be
  Losses
Expiration Date   Counterparty   Received   Received   Delivered   Delivered   ($)
 
 Forward Foreign Currency Exchange Contract
                                         
                                             
10/31/2012
  State Street Bank London     USD       127,273       AUD       123,000       (46 )
 
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
Assets Valuation Input
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Common Stock 1
    $2,531,132       $—       $—       $2,531,132  
Australia 1
    —       153,516       —       153,516  
France 1
    —       434,386       —       434,386  
Germany 1
    —       312,767       —       312,767  
Italy 1
    —       116,304       —       116,304  
Japan 1
    —       332,118       —       332,118  
Netherlands 1
    —       135,806       —       135,806  
Singapore 1
    —       143,553       —       143,553  
Spain 1
    —       127,355       —       127,355  
Switzerland 1
    —       281,443       —       281,443  
United Kingdom 1
    —       531,626       —       531,626  
Other Investment Company 1
    84,764       —       —       84,764  
                                 
Total
    $2,615,896       $2,568,874       $—       $5,184,770  
                                 
                                 
                                 
Liabilities Valuation Input
                 
 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contract 2
    ($46 )     $—       $—       ($46 )
 
     
1
  As categorized in Portfolio Holdings.
2
  Forward foreign currency exchange contracts are not included in Investments and are valued at unrealized appreciation or depreciation.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
See financial notes  29

 

 
 Laudus Mondrian Global Equity Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $5,184,303)
        $5,184,770  
Foreign currency, at value (cost $18,321)
        18,336  
Receivables:
           
Investments sold
        75,806  
Dividends
        12,721  
Foreign tax reclaims
        2,082  
Due from investment adviser
        1,458  
Interest
        3  
Prepaid expenses
  +     50  
   
Total assets
        5,295,226  
 
Liabilities
Payables:
           
Investments bought
        106,600  
Trustees’ retirement plan
        310  
Distribution and shareholder services fees
        23  
Unrealized losses on forward foreign currency exchange contracts
        46  
Accrued expenses
  +     17,667  
   
Total liabilities
        124,646  
 
Net Assets
Total assets
        5,295,226  
Total liabilities
  −     124,646  
   
Net assets
        $5,170,580  
 
Net Assets by Source
Capital received from investors
        5,683,595  
Net investment income not yet distributed
        119,646  
Net realized capital losses
        (633,398 )
Net unrealized capital gains
        737  
 
Net Asset Value (NAV) by Shares Class
 
                             
            Shares
             
Share Class   Net Assets   ÷   Outstanding   =   NAV      
Investor Shares
  $117,401       13,396         $8.76      
Select Shares
  $283,063       32,189         $8.79      
Institutional Shares
  $4,770,116       542,189         $8.80      
 
 
 
30  See financial notes

 

 
 Laudus Mondrian Global Equity Fund
 

Statement of
Operations
For April 1, 2012 through September 30, 2012; unaudited
 
             
 
Investment Income
Dividends (net of foreign withholding taxes of $11,884)
        $116,006  
Interest
  +     7  
   
Total investment income
        116,013  
 
Expenses
Investment adviser fees
        21,117  
Professional fees
        26,127  
Accounting and administration fees
        25,250  
Registration fees
        17,335  
Transfer agent fees
        13,731  
Trustees’ fees
        3,852  
Shareholder reports
        2,612  
Custodian fees
        1,824  
Distribution and shareholder services fees (Investor Shares)
        133  
Sub-Accounting fees:
           
Investor Shares
        80  
Select Shares
        204  
Other expenses
  +     2,095  
   
Total expenses
        114,360  
Expense reduction by adviser
  −     88,449  
   
Net expenses
  −     25,911  
   
Net investment income
        90,102  
 
Realized and Unrealized Gains (Losses)
Net realized losses on investments
        (135,664 )
Net realized losses on foreign currency transactions
  +     (798 )
   
Net realized losses
        (136,462 )
Net unrealized gains on investments
        41,558  
Net unrealized losses on foreign currency translations
  +     (2,559 )
   
Net unrealized gains
  +     38,999  
   
Net realized and unrealized losses
        (97,463 )
             
Decrease in net assets resulting from operations
        ($7,361 )
 
 
 
See financial notes  31

 

 
 Laudus Mondrian Global Equity Fund
 

Statement of
Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
 
                     
 
Operations
                     
4/1/12-9/30/12     4/1/11-3/31/12  
Net investment income
        $90,102       $146,816  
Net realized losses
        (136,462 )     (8,157 )
Net unrealized gains
  +     38,999       116,580  
   
Increase (Decrease) in net assets from operations
        (7,361 )     255,239  
 
Distributions to Shareholders
Distributions from net investment income
                   
Investor Shares
        —       (2,685 )
Select Shares
        —       (7,427 )
Institutional Shares
  +     —       (128,107 )
   
Total distributions from net investment income
        $—       ($138,219 )
 
Transactions in Fund Shares
                                     
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       VALUE       SHARES       VALUE  
Shares Sold
                                   
Investor Shares
        1,867       $16,041       3,595       $31,650  
Select Shares
        —       —       —       —  
Institutional Shares
  +     —       —       —       —  
   
Total shares sold
        1,867       $16,041       3,595       $31,650  
                                     
                                     
Shares Reinvested
                                   
Investor Shares
        —       $—       264       $2,068  
Select Shares
        —       —       945       7,427  
Institutional Shares
  +     —       —       16,299       128,107  
   
Total shares reinvested
        —       $—       17,508       $137,602  
                                     
                                     
Shares Redeemed
                                   
Investor Shares
        (849 )     ($7,147 )     (2,104 )     ($17,449 )
Select Shares
        —       —       (2 )     (12 )
Institutional Shares
  +     —       —       —       —  
   
Total shares redeemed
        (849 )     ($7,147 )     (2,106 )     ($17,461 )
                                     
Net transactions in fund shares
        1,018       $8,894       18,997       $151,791  
 
Shares Outstanding and Net Assets
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       NET ASSETS       SHARES       NET ASSETS  
Beginning of period
        586,756       $5,169,047       567,759       $4,900,236  
Total increase
  +     1,018       1,533       18,997       268,811  
   
End of period
        587,774       $5,170,580       586,756       $5,169,047  
   
                                     
Net investment income not yet distributed
                $119,646               $29,544  
 
 
 
32  See financial notes

 

Laudus Mondrian Emerging Markets Fund
 
 
Financial Statements
 
Financial Highlights
 
                                                     
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  4/1/08–
  11/2/07 1 –
   
 Investor Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09   3/31/08    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    9.48       9.67       8.79       5.33       9.29       10.00      
   
Income (loss) from investment operations:
                                                   
Net investment income (loss)
    0.12 2     0.16 2     0.14 2     0.09 2     0.11       0.02      
Net realized and unrealized gains (losses)
    (0.32 )     (0.20 )     0.90       3.46       (4.01 )     (0.72 )    
   
Total from investment operations
    (0.20 )     (0.04 )     1.04       3.55       (3.90 )     (0.70 )    
Less distributions:
                                                   
Distributions from net investment income
    —       (0.08 )     (0.16 )     (0.09 )     (0.06 )     (0.01 )    
Distributions from net realized gains
    —       (0.07 )     —       —       —       —      
   
Total distributions
    —       (0.15 )     (0.16 )     (0.09 )     (0.06 )     (0.01 )    
   
Net asset value at end of period
    9.28       9.48       9.67       8.79       5.33       9.29      
   
Total return (%)
    (2.11 ) 3     (0.19 )     11.89       66.74       (42.02 )     (6.98 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                                   
Net operating expenses
    1.80 4     1.80       1.80       1.81 5     1.80       1.82 4,6    
Gross operating expenses
    1.89 4     1.90       1.91       2.08       2.46       2.79 4    
Net investment income (loss)
    2.73 4     1.74       1.56       1.17       1.54       0.89 4    
Portfolio turnover rate
    13 3     43       33       44       52       49 3    
Net assets, end of period ($ x 1,000)
    10,052       9,639       10,862       9,437       1,927       1,937      
 
                                                     
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  4/1/08–
  11/2/07 1 –
   
 Select Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09   3/31/08    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    9.49       9.68       8.80       5.34       9.31       10.00      
   
Income (loss) from investment operations:
                                                   
Net investment income (loss)
    0.13 2     0.18 2     0.17 2     0.10 2     0.08       0.02      
Net realized and unrealized gains (losses)
    (0.32 )     (0.19 )     0.90       3.47       (3.97 )     (0.70 )    
   
Total from investment operations
    (0.19 )     (0.01 )     1.07       3.57       (3.89 )     (0.68 )    
Less distributions:
                                                   
Distributions from net investment income
    —       (0.11 )     (0.19 )     (0.11 )     (0.08 )     (0.01 )    
Distributions from net realized gains
    —       (0.07 )     —       —       —       —      
   
Total distributions
    —       (0.18 )     (0.19 )     (0.11 )     (0.08 )     (0.01 )    
   
Net asset value at end of period
    9.30       9.49       9.68       8.80       5.34       9.31      
   
Total return (%)
    (2.00 ) 3     0.15       12.18       66.91       (41.82 )     (6.75 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                                   
Net operating expenses
    1.52 4     1.52       1.52       1.53 7     1.52       1.54 4,8    
Gross operating expenses
    1.64 4     1.66       1.66       1.78       2.23       2.74 4    
Net investment income (loss)
    3.02 4     1.94       1.83       1.17       1.70       0.69 4    
Portfolio turnover rate
    13 3     43       33       44       52       49 3    
Net assets, end of period ($ x 1,000)
    6,423       5,993       5,554       4,531       559       760      
 

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Not annualized.
4  Annualized.
5  The ratio of net operating expenses would have been 1.80% if certain non-routine expenses (proxy expense) had not been incurred.
6  The ratio of net operating expenses would have been 1.80%, if interest expense had not been incurred.
7  The ratio of net operating expenses would have been 1.52% if certain non-routine expenses (proxy expense) had not been incurred.
8  The ratio of net operating expenses would have been 1.52%, if interest expense had not been incurred.
 
 
 
See financial notes  33

 

 
 Laudus Mondrian Emerging Markets Fund
 

 
Financial Highlights  continued
 
                                                     
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  4/1/08–
  11/2/07 1 –
   
 Institutional Shares   9/30/12*   3/31/12   3/31/11   3/31/10   3/31/09   3/31/08    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    9.49       9.68       8.80       5.33       9.29       10.00      
   
Income (loss) from investment operations:
                                                   
Net investment income (loss)
    0.14 2     0.19 2     0.15 2     0.14 2     0.10       0.02      
Net realized and unrealized gains (losses)
    (0.33 )     (0.19 )     0.92       3.44       (3.98 )     (0.71 )    
   
Total from investment operations
    (0.19 )     —       1.07       3.58       (3.88 )     (0.69 )    
Less distributions:
                                                   
Distributions from net investment income
    —       (0.12 )     (0.19 )     (0.11 )     (0.08 )     (0.02 )    
Distributions from net realized gains
    —       (0.07 )     —       —       —       —      
   
Total distributions
    —       (0.19 )     (0.19 )     (0.11 )     (0.08 )     (0.02 )    
   
Net asset value at end of period
    9.30       9.49       9.68       8.80       5.33       9.29      
   
Total return (%)
    (2.00 ) 3     0.23       12.25       67.27       (41.78 )     (6.94 ) 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                                   
Net operating expenses
    1.45 4     1.45       1.45       1.46 5     1.45       1.47 4,6    
Gross operating expenses
    1.49 4     1.50       1.51       1.70       2.13       2.62 4    
Net investment income (loss)
    3.13 4     2.07       1.69       1.79       1.94       0.59 4    
Portfolio turnover rate
    13 3     43       33       44       52       49 3    
Net assets, end of period ($ x 1,000)
    143,839       148,187       171,432       90,486       25,234       19,414      

* Unaudited.

1  Commencement of operations.
2  Calculated based on the average shares outstanding during the period.
3  Not annualized.
4  Annualized.
5  The ratio of net operating expenses would have been 1.45% if certain non-routine expenses (proxy expense) had not been incurred.
6  The ratio of net operating expenses would have been 1.45%, if interest expense had not been incurred.
 
 
 
34  See financial notes

 

 
 Laudus Mondrian Emerging Markets Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  90 .4%   Common Stock     125,115,653       144,976,233  
  8 .5%   Preferred Stock     14,067,021       13,587,678  
  2 .7%   Other Investment Company     4,253,545       4,253,545  
 
 
  101 .6%   Total Investments     143,436,219       162,817,456  
  (1 .6)%   Other Assets and Liabilities, Net             (2,503,830 )
 
 
  100 .0%   Net Assets             160,313,626  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  90.4% of net assets
 
Brazil 7.3%
                 
 
Materials 0.5%
Vale S.A. ADR
    43,300       775,070  
                 
 
Software & Services 2.7%
Redecard S.A.
    249,500       4,301,406  
                 
 
Transportation 2.4%
CCR S.A.
    337,200       3,052,223  
EcoRodovias Infraestrutura e Logistica S.A.
    97,700       850,613  
                 
              3,902,836  
                 
 
Utilities 1.7%
CPFL Energia S.A. ADR
    123,400       2,703,694  
                 
              11,683,006  
 
Chile 2.2%
                 
 
Utilities 2.2%
Enersis S.A. ADR
    213,900       3,505,821  
 
China 18.4%
                 
 
Banks 2.1%
China Construction Bank Corp., Class H
    4,823,950       3,327,031  
                 
 
Capital Goods 1.7%
Beijing Enterprises Holdings Ltd.
    413,000       2,747,891  
                 
 
Energy 2.2%
China Shenhua Energy Co., Ltd., Class H
    926,500       3,580,087  
                 
 
Food, Beverage & Tobacco 1.7%
Want Want China Holdings Ltd.
    2,129,000       2,710,129  
                 
 
Household & Personal Products 1.4%
Hengan International Group Co., Ltd.
    233,000       2,195,089  
                 
 
Retailing 3.1%
Belle International Holdings Ltd.
    2,777,392       5,019,150  
                 
 
Telecommunication Services 2.5%
China Mobile Ltd.
    361,500       4,007,554  
                 
 
Transportation 1.9%
China Merchants Holdings International Co., Ltd.
    978,000       2,997,295  
                 
 
Utilities 1.8%
China Resources Power Holdings Co., Ltd.
    1,324,000       2,895,708  
                 
              29,479,934  
 
Hong Kong 2.5%
                 
 
Consumer Services 2.5%
Sands China Ltd.
    1,070,000       3,961,539  
 
India 10.5%
                 
 
Automobiles & Components 2.0%
Tata Motors Ltd.
    641,355       3,267,343  
                 
 
Banks 3.8%
Axis Bank Ltd.
    131,889       2,832,222  
Housing Development Finance Corp., Ltd.
    223,283       3,270,866  
                 
              6,103,088  
                 
 
Capital Goods 3.0%
Larsen & Toubro Ltd.
    156,501       4,727,837  
                 
 
Diversified Financials 1.7%
Rural Electrification Corp., Ltd.
    671,330       2,771,568  
                 
              16,869,836  
 
Indonesia 6.7%
                 
 
Automobiles & Components 2.1%
PT Astra International Tbk
    4,458,000       3,436,061  
                 
 
Banks 2.4%
PT Bank Rakyat Indonesia (Persero) Tbk
    4,931,500       3,822,251  
                 
 
Utilities 2.2%
PT Perusahaan Gas Negara (Persero) Tbk
    8,212,500       3,529,771  
                 
              10,788,083  
 
Kazakhstan 1.5%
                 
 
Energy 1.5%
KazMunaiGas Exploration Production GDR
    132,397       2,442,725  
 
Mexico 7.2%
                 
 
Banks 2.6%
Grupo Financiero Santander Mexico SAB de CV, Class B  *
    307,900       4,218,230  
 
 
 
See financial notes  35

 

 
 Laudus Mondrian Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
                 
 
Materials 2.8%
Grupo Mexico S.A.B. de C.V., Series B
    1,351,733       4,461,058  
                 
 
Telecommunication Services 1.8%
America Movil SAB de C.V., Series L ADR
    109,100       2,775,504  
                 
              11,454,792  
 
Peru 3.2%
                 
 
Banks 3.2%
Credicorp Ltd.
    41,194       5,160,784  
 
Philippines 2.6%
                 
 
Telecommunication Services 2.6%
Philippine Long Distance Telephone Co. ADR
    62,900       4,152,029  
 
Republic of Korea 8.7%
                 
 
Automobiles & Components 3.4%
Hyundai Mobis
    19,352       5,379,952  
                 
 
Banks 1.9%
KB Financial Group, Inc.
    87,460       3,100,055  
                 
 
Semiconductors & Semiconductor Equipment 3.4%
Samsung Electronics Co., Ltd.
    4,576       5,514,529  
                 
              13,994,536  
 
Russia 4.4%
                 
 
Energy 4.4%
Gazprom ADR
    309,724       3,125,115  
LUKOIL ADR
    64,300       3,957,022  
                 
              7,082,137  
 
South Africa 2.9%
                 
 
Energy 1.5%
Sasol Ltd.
    51,928       2,315,453  
                 
 
Food, Beverage & Tobacco 1.4%
Tiger Brands Ltd.
    69,805       2,289,762  
                 
              4,605,215  
 
Taiwan 2.9%
                 
 
Semiconductors & Semiconductor Equipment 2.9%
Taiwan Semiconductor Manufacturing Co., Ltd.
    1,510,719       4,647,385  
 
Thailand 4.4%
                 
 
Banks 1.8%
Kasikornbank Public Co., Ltd. NVDR
    494,600       2,925,514  
                 
 
Energy 2.6%
PTT PCL
    390,500       4,173,961  
                 
              7,099,475  
 
Turkey 5.0%
                 
 
Banks 2.1%
Turkiye Garanti Bankasi A/S
    791,735       3,307,591  
                 
 
Energy 2.4%
Tupras-Turkiye Petrol Rafinerileri A/S
    170,365       3,890,038  
                 
 
Telecommunication Services 0.5%
Turk Telekomunikasyon A/S
    213,729       851,307  
                 
              8,048,936  
                 
Total Common Stock
(Cost $125,115,653)     144,976,233  
         
                 
                 
 
 Preferred Stock  8.5% of net assets
 
Brazil 8.5%
                 
 
Banks 2.3%
Itausa - Investimentos Itau S.A.
    814,023       3,625,911  
                 
 
Energy 2.4%
Petroleo Brasileiro S.A.
    344,200       3,798,127  
                 
 
Food, Beverage & Tobacco 1.7%
Companhia de Bebidas das Americas ADR
    73,100       2,797,537  
                 
 
Materials 2.1%
Vale S.A. ADR
    193,900       3,366,103  
                 
Total Preferred Stock
(Cost $14,067,021)     13,587,678  
         
                 
                 
 
 Other Investment Company  2.7% of net assets
 
United States 2.7%
State Street Institutional U.S. Government Money Market Fund
    4,253,545       4,253,545  
                 
Total Other Investment Company
(Cost $4,253,545)     4,253,545  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $147,863,396 and the unrealized appreciation and depreciation were $19,666,469 and ($4,712,409) respectively, with a net unrealized appreciation of $14,954,060.
 
At 09/30/12, the values of certain foreign securities held by the fund aggregating $95,320,978 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)
 
* Non-income producing security.
 
     
ADR —
  American Depositary Receipt
GDR —
  Global Depositary Receipt
NVDR —
  Non-Voting Depositary Receipt
 
 
 
 
36  See financial notes

 

 
 Laudus Mondrian Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total 2
 
Common Stock 1
    $—       $92,395,464       $—       $92,395,464  
Brazil 1
    11,683,006       —       —       11,683,006  
Chile 1
    3,505,821       —       —       3,505,821  
Kazakhstan 1
    2,442,725       —       —       2,442,725  
Mexico 1
    11,454,792       —       —       11,454,792  
Peru 1
    5,160,784       —       —       5,160,784  
Philippines 1
    4,152,029       —       —       4,152,029  
Russia 1
    7,082,137       —       —       7,082,137  
Thailand 1
    —       2,925,514       —       2,925,514  
Energy
    4,173,961       —       —       4,173,961  
Preferred Stock
                               
Brazil 1
    13,587,678       —       —       13,587,678  
Other Investment Company 1
    4,253,545       —       —       4,253,545  
                                 
Total
    $67,496,478       $95,320,978       $—       $162,817,456  
                                 
 
     
1
  As categorized in Portfolio Holdings.
2
  The fund had no Other Financial Instruments.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
See financial notes  37

 

 
 Laudus Mondrian Emerging Markets Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $143,436,219)
        $162,817,456  
Foreign currency, at value (cost $699,911)
        708,780  
Receivables:
           
Investments sold
        938,149  
Dividends
        304,703  
Fund shares sold
        181,406  
Interest
        95  
Prepaid expenses
  +     2,345  
   
Total assets
        164,952,934  
 
Liabilities
Payables:
           
Investments bought
        4,028,546  
Fund shares redeemed
        338,229  
Foreign capital gains tax
        179,888  
Investment adviser fees
        16,061  
Trustees’ retirement plan
        12,140  
Distribution and shareholder services fees
        2,017  
Accrued expenses
  +     62,427  
   
Total liabilities
        4,639,308  
 
Net Assets
Total assets
        164,952,934  
Total liabilities
  −     4,639,308  
   
Net assets
        $160,313,626  
 
Net Assets by Source
Capital received from investors
        150,306,442  
Net investment income not yet distributed
        2,445,993  
Net realized capital losses
        (11,648,337 )
Net unrealized capital gains
        19,209,528  
 
Net Asset Value (NAV) by Shares Class
 
                             
            Shares
             
Share Class   Net Assets   ÷   Outstanding   =   NAV      
Investor Shares
  $10,051,799       1,083,546         $9.28      
Select Shares
  $6,422,618       690,551         $9.30      
Institutional Shares
  $143,839,209       15,468,745         $9.30      
 
 
 
38  See financial notes

 

 
 Laudus Mondrian Emerging Markets Fund
 

Statement of
Operations
For April 1, 2012 through September 30, 2012; unaudited
 
             
 
Investment Income
Dividends (net of foreign withholding taxes of $398,659)
        $3,508,187  
Interest
  +     333  
   
Total investment income
        3,508,520  
 
Expenses
Investment adviser fees
        920,026  
Custodian fees
        90,041  
Registration fees
        28,363  
Accounting and administration fees
        27,608  
Transfer agent fees
        25,573  
Professional fees
        24,072  
Distribution and shareholder services fees (Investor Shares)
        11,516  
Shareholder reports
        8,519  
Trustees’ fees
        5,301  
Interest expense
        35  
Sub-Accounting fees:
           
Investor Shares
        6,910  
Select Shares
        4,539  
Other expenses
  +     12,434  
   
Total expenses
        1,164,937  
Expense reduction by adviser
  −     34,963  
Custody credits
  −     3  
   
Net expenses
  −     1,129,971  
   
Net investment income
        2,378,549  
 
Realized and Unrealized Gains (Losses)
Net realized losses on investments (net of foreign capital gain tax of $59,790)
        (4,627,269 )
Net realized losses on foreign currency transactions
  +     (15,137 )
   
Net realized losses
        (4,642,406 )
Net unrealized losses on investments (net of foreign capital gain tax of ($84,570))
        (1,234,004 )
Net unrealized gains on foreign currency translations
  +     11,390  
   
Net unrealized losses
  +     (1,222,614 )
   
Net realized and unrealized losses
        (5,865,020 )
             
Decrease in net assets resulting from operations
        ($3,486,471 )
 
 
 
See financial notes  39

 

 
 Laudus Mondrian Emerging Markets Fund
 

Statement of
Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
 
                     
 
Operations
                     
4/1/12-9/30/12     4/1/11-3/31/12  
Net investment income
        $2,378,549       $3,500,032  
Net realized losses
        (4,642,406 )     (3,564,236 )
Net unrealized losses
  +     (1,222,614 )     (3,373,353 )
   
Decrease in net assets from operations
        (3,486,471 )     (3,437,557 )
 
Distributions to Shareholders
Distributions from net investment income
                   
Investor Shares
        —       (82,516 )
Select Shares
        —       (59,709 )
Institutional Shares
  +     —       (2,048,494 )
   
Total distributions from net investment income
        —       (2,190,719 )
                     
                     
Distributions from net realized gains
                   
Investor Shares
        —       (65,430 )
Select Shares
        —       (35,369 )
Institutional Shares
  +     —       (1,142,733 )
   
Total distributions from net realized gains
        —       (1,243,532 )
                     
Total distributions
        $—       ($3,434,251 )
 
Transactions in Fund Shares
                                     
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       VALUE       SHARES       VALUE  
Shares Sold
                                   
Investor Shares
        140,530       $1,241,987       256,309       $2,331,282  
Select Shares
        153,378       1,369,414       187,962       1,759,882  
Institutional Shares
  +     1,260,643       11,177,604       6,203,079       55,733,439  
   
Total shares sold
        1,554,551       $13,789,005       6,647,350       $59,824,603  
                                     
                                     
Shares Reinvested
                                   
Investor Shares
        —       $—       16,520       $134,146  
Select Shares
        —       —       6,727       54,686  
Institutional Shares
  +     —       —       268,366       2,179,133  
   
Total shares reinvested
        —       $—       291,613       $2,367,965  
                                     
                                     
Shares Redeemed
                                   
Investor Shares
        (73,333 )     ($639,946 )     (380,186 )     ($3,415,881 )
Select Shares
        (93,996 )     (857,382 )     (137,130 )     (1,250,573 )
Institutional Shares
  +     (1,407,841 )     (12,309,642 )     (8,566,475 )     (74,683,725 )
   
Total shares redeemed
        (1,575,170 )     ($13,806,970 )     (9,083,791 )     ($79,350,179 )
                                     
Net transactions in fund shares
        (20,619 )     ($17,965 )     (2,144,828 )     ($17,157,611 )
 
Shares Outstanding and Net Assets
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       NET ASSETS       SHARES       NET ASSETS  
Beginning of period
        17,263,461       $163,818,062       19,408,289       $187,847,481  
Total decrease
  +     (20,619 )     (3,504,436 )     (2,144,828 )     (24,029,419 )
   
End of period
        17,242,842       $160,313,626       17,263,461       $163,818,062  
   
                                     
Net investment income not yet distributed
                $2,445,993               $67,444  
 
 
 
40  See financial notes

 

Laudus Mondrian International Fixed Income Fund
 
 
Financial Statements
 
Financial Highlights
 
                                                     
    4/1/12–
  4/1/11–
  4/1/10–
  4/1/09–
  4/1/08–
  11/2/07 2 –
   
    9/30/12*   3/31/12   3/31/11   3/31/10 1   3/31/09   3/31/08    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    11.61       11.86       11.20       10.32       11.29       10.00      
   
Income (loss) from investment operations:
                                                   
Net investment income (loss)
    0.07       0.20       0.16       0.26       0.27       0.07      
Net realized and unrealized gains (losses)
    0.54       0.09       0.71       1.06       (0.86 )     1.27      
   
Total from investment operations
    0.61       0.29       0.87       1.32       (0.59 )     1.34      
Less distributions:
                                                   
Distributions from net investment income
    (0.09 )     (0.46 )     (0.20 )     (0.42 )     (0.38 )     (0.05 )    
Distributions from net realized gains
    —       (0.08 )     (0.01 )     (0.02 )     —       —      
   
Total distributions
    (0.09 )     (0.54 )     (0.21 )     (0.44 )     (0.38 )     (0.05 )    
   
Net asset value at end of period
    12.13       11.61       11.86       11.20       10.32       11.29      
   
Total return (%)
    5.28 3     2.48       7.86       12.85       (5.40 )     13.42 3    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                                   
Net operating expenses
    0.69 4     0.71       0.74       0.76 5     0.75       0.75 4    
Gross operating expenses
    0.69 4     0.71       0.74       0.79       0.87       1.23 4    
Net investment income (loss)
    1.27 4     1.51       1.67       2.42       2.24       1.98 4    
Portfolio turnover rate
    20 3     68       58       67       92       1 3    
Net assets, end of period ($ x 1,000)
    877,041       881,405       966,800       279,274       64,562       52,214      

* Unaudited.

1  Effective July 27, 2009, all outstanding Investor Shares and Select Shares were converted into Institutional Shares. The figures in the Financial Highlights reflect only the remaining share class.
2  Commencement of operations.
3  Not annualized.
4  Annualized.
5  The ratio of net operating expenses would have been 0.75% if certain non-routine expenses (proxy expense) had not been incurred.
 
 
 
See financial notes  41

 

 
 Laudus Mondrian International Fixed Income Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. The maturity date shown for all the securities is the final legal maturity.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  63 .7%   Government Bonds     539,283,136       558,640,918  
  16 .8%   Government Agency Obligations     139,911,002       147,691,169  
  4 .4%   Corporate Bonds     36,434,879       38,521,948  
  13 .1%   Supranational     100,746,249       114,851,085  
  2 .2%   Other Investment Company     19,434,584       19,434,584  
 
 
  100 .2%   Total Investments     835,809,850       879,139,704  
  (0 .2)%   Other Assets and Liabilities, Net             (2,098,765 )
 
 
  100 .0%   Net Assets             877,040,939  
 
                 
Security
  Face Amount
  Value
    Rate, Maturity Date   (local currency)   ($)
 
 Government Bonds  63.7% of net assets
 
Austria 4.6%
Austria Government Bond
6.25%, 07/15/27 (EUR)
    21,500,000       40,493,730  
 
Denmark 4.4%
Denmark Government International Bond
3.13%, 03/17/14 (EUR)
    29,000,000       38,854,216  
 
Finland 4.7%
Finland Government Bond
5.38%, 07/04/13 (EUR)
    25,334,000       33,876,843  
3.50%, 04/15/21 (EUR)
    4,600,000       6,839,587  
                 
              40,716,430  
 
France 3.8%
France Government Bond OAT
5.75%, 10/25/32 (EUR)
    18,400,000       33,480,112  
 
Germany 3.4%
Bundesobligation
2.75%, 04/08/16 (EUR)
    12,000,000       16,806,523  
Bundesrepublik Deutschland
3.75%, 01/04/17 (EUR)
    5,700,000       8,384,094  
3.50%, 07/04/19 (EUR)
    3,300,000       4,975,363  
                 
              30,165,980  
 
Japan 20.6%
Japan Government Five Year Bond
0.40%, 09/20/15 (JPY)
    3,500,000,000       45,244,093  
Japan Government Ten Year Bond
1.90%, 06/20/16 (JPY)
    2,900,000,000       39,600,830  
1.50%, 09/20/18 (JPY)
    3,700,000,000       50,786,719  
1.30%, 06/20/20 (JPY)
    600,000,000       8,156,233  
Japan Government Thirty Year Bond
2.40%, 12/20/34 (JPY)
    2,560,000,000       36,866,854  
                 
              180,654,729  
 
Mexico 4.4%
Mexico Government Bond
9.50%, 12/18/14 (MXN)
    30,800,000       2,636,445  
8.50%, 12/13/18 (MXN)
    40,000,000       3,670,516  
6.50%, 06/10/21 (MXN)
    350,000,000       29,750,360  
7.50%, 06/03/27 (MXN)
    30,500,000       2,743,873  
                 
              38,801,194  
 
Poland 7.9%
Poland Government Bond
6.25%, 10/24/15 (PLN)
    22,000,000       7,285,659  
5.50%, 10/25/19 (PLN)
    71,000,000       23,583,241  
5.75%, 09/23/22 (PLN)
    112,000,000       37,908,101  
                 
              68,777,001  
 
South Africa 2.9%
South Africa Government Bond
8.25%, 09/15/17 (ZAR)
    105,000,000       13,898,654  
10.50%, 12/21/26 (ZAR)
    78,000,000       11,864,838  
                 
              25,763,492  
 
Sweden 3.0%
Sweden Government Bond
4.50%, 08/12/15 (SEK)
    67,000,000       11,263,585  
3.50%, 06/01/22 (SEK)
    82,000,000       14,763,183  
                 
              26,026,768  
 
United Kingdom 4.0%
United Kingdom Gilt
4.75%, 09/07/15 (GBP)
    7,000,000       12,792,923  
5.00%, 03/07/18 (GBP)
    4,600,000       9,105,032  
5.00%, 03/07/25 (GBP)
    6,000,000       13,009,311  
                 
              34,907,266  
                 
Total Government Bonds
(Cost $539,283,136)     558,640,918  
         
                 
                 
 
 
 
42  See financial notes

 

 
 Laudus Mondrian International Fixed Income Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
Security
  Face Amount
  Value
    Rate, Maturity Date   (local currency)   ($)
 
 Government Agency Obligations  16.8% of net assets
 
Germany 13.2%
Bayerische Landesbank
1.40%, 04/22/13 (JPY)
    3,550,000,000       45,711,845  
Kreditanstalt fuer Wiederaufbau
0.30%, 03/20/13 (JPY) (c)
    2,100,000,000       26,930,940  
1.35%, 01/20/14 (JPY) (c)
    140,000,000       1,822,910  
2.05%, 02/16/26 (JPY) (c)
    2,860,000,000       41,031,508  
                 
              115,497,203  
 
Japan 1.8%
Development Bank of Japan, Inc.
1.75%, 03/17/17 (JPY)
    1,160,000,000       15,895,909  
 
Netherlands 1.8%
Bank Nederlandse Gemeenten
1.85%, 11/07/16 (JPY)
    1,200,000,000       16,298,057  
                 
Total Government Agency Obligations
(Cost $139,911,002)     147,691,169  
         
                 
                 
 
 Corporate Bonds  4.4% of net assets
 
Netherlands 0.8%
ING Bank N.V.
6.13%, 05/29/23 (EUR)  (a)(b)
    5,420,000       7,139,094  
 
Norway 2.2%
Eksportfinans ASA
1.60%, 03/20/14 (JPY)
    1,500,000,000       18,945,534  
 
United Kingdom 1.4%
HSBC Holdings plc
6.25%, 03/19/18 (EUR)
    500,000       739,032  
6.00%, 06/10/19 (EUR)
    4,500,000       6,650,295  
Lloyds TSB Bank plc
5.38%, 09/03/19 (EUR)
    3,300,000       5,047,993  
                 
              12,437,320  
                 
Total Corporate Bonds
(Cost $36,434,879)     38,521,948  
         
                 
                 
 
 Supranational  13.1% of net assets
                 
                 
Asian Development Bank
2.35%, 06/21/27 (JPY)
    2,230,000,000       33,248,231  
European Investment Bank
1.40%, 06/20/17 (JPY)
    2,270,000,000       30,759,635  
1.90%, 01/26/26 (JPY)
    640,000,000       8,660,945  
Nordic Investment Bank
1.70%, 04/27/17 (JPY)
    3,050,000,000       42,182,274  
                 
Total Supranational
(Cost $100,746,249)     114,851,085  
         
                 
                 
    Number
  Value
Security   of Shares   ($)
 
 Other Investment Company  2.2% of net assets
 
United States 2.2%
State Street Institutional U.S. Government Money Market Fund
    19,434,584       19,434,584  
                 
Total Other Investment Company
(Cost $19,434,584)     19,434,584  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $836,404,377 and the unrealized appreciation and depreciation were $49,361,187 and ($6,625,860), respectively, with a net appreciation of $42,735,327.
 
(a) Variable-rate security.
(b) The effective maturity may be shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or as the result of embedded demand features (puts or calls).
(c) Guaranteed by the Republic of Germany.
 
     
EUR —
  euro currency
GBP —
  Great British pound
JPY —
  Japanese yen
MXN —
  Mexican peso
PLN —
  Polish zloty
SEK —
  Swedish krona
USD —
  U.S. dollar
ZAR —
  South African rand
 
 
 
See financial notes  43

 

 
 Laudus Mondrian International Fixed Income Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
In addition to the above, the fund held the following at 09/30/12:
 
 
                                             
            Amount of
      Amount of
  Unrealized
        Currency
  Currency
  Currency
  Currency
  Gains /
        to be
  to be
  to be
  to be
  (Losses)
Expiration Date   Counterparty   Received   Received   Delivered   Delivered   ($)
 
 Forward Foreign Currency Exchange Contracts
                                         
                                             
10/31/2012
  State Street Bank London     GBP       45,012,500       EUR       57,410,974       (1,117,064 )
10/31/2012
  State Street Bank London     EUR       29,335,965       GBP       23,251,000       166,441  
10/04/2012
  State Street Bank London     ZAR       219,954,183       USD       26,419,991       (466,644 )
                                     
Net unrealized losses on Forward Foreign Currency Exchange Contracts
    (1,417,267 )
         
 
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
Assets Valuation Input
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Government Bonds 1
    $—       $558,640,918       $—       $558,640,918  
Government Agency Obligations 1
    —       147,691,169       —       147,691,169  
Corporate Bonds 1
    —       38,521,948       —       38,521,948  
Supranational
    —       114,851,085       —       114,851,085  
Other Investment Company 1
    19,434,584       —       —       19,434,584  
                                 
Total
    $19,434,584       $859,705,120       $—       $879,139,704  
                                 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    $166,441       $—       $—       $166,441  
                                 
                                 
Liabilities Valuation Input
                 
 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    ($1,583,708 )     $—       $—       ($1,583,708 )
 
     
1
  As categorized in Portfolio Holdings.
2
  Forward foreign currency exchange contracts are not included in Investments and are valued at unrealized appreciation or depreciation.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
44  See financial notes

 

 
 Laudus Mondrian International Fixed Income Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $835,809,850)
        $879,139,704  
Receivables:
           
Investments sold
        95,043,117  
Interest
        8,192,016  
Fund shares sold
        2,254,991  
Foreign tax reclaims
        90,365  
Unrealized gains on forward foreign currency exchange contracts
        166,441  
Prepaid expenses
  +     15,397  
   
Total assets
        984,902,031  
 
Liabilities
Payables:
           
Investments bought
        104,939,523  
Distributions to shareholders
        648,180  
Fund shares redeemed
        525,385  
Investment adviser fees
        43,606  
Trustees’ retirement plan
        30,409  
Unrealized losses on forward foreign currency exchange contracts
        1,583,708  
Accrued expenses
  +     90,281  
   
Total liabilities
        107,861,092  
 
Net Assets
Total assets
        984,902,031  
Total liabilities
  −     107,861,092  
   
Net assets
        $877,040,939  
 
Net Assets by Source
Capital received from investors
        827,423,842  
Net investment income not yet distributed
        1,829,918  
Net realized capital gains
        5,759,002  
Net unrealized capital gains
        42,028,177  
 
Net Asset Value (NAV)
 
                         
        Shares
             
Net Assets   ÷   Outstanding   =   NAV      
$877,040,939
      72,328,151         $12.13      
 
 
 
See financial notes  45

 

 
 Laudus Mondrian International Fixed Income Fund
 

Statement of
Operations
For April 1, 2012 through September 30, 2012; unaudited
 
             
 
Investment Income
Interest
        $8,833,071  
 
Expenses
Investment adviser fees
        2,716,220  
Custodian fees
        148,774  
Transfer agent fees
        79,583  
Registration fees
        43,467  
Accounting and administration fees
        34,157  
Professional fees
        30,558  
Shareholder reports
        29,170  
Trustees’ fees
        12,434  
Other expenses
  +     8,222  
   
Total expenses
  −     3,102,585  
   
Net investment income
        5,730,486  
 
Realized and Unrealized Gains (Losses)
Net realized gains on investments
        2,231,630  
Net realized gains on foreign currency transactions
  +     3,999,085  
   
Net realized gains
        6,230,715  
Net unrealized gains on investments
        35,335,787  
Net unrealized losses on foreign currency translations
  +     (1,585,564 )
   
Net unrealized gains
  +     33,750,223  
   
Net realized and unrealized gains
        39,980,938  
             
Increase in net assets resulting from operations
        $45,711,424  
 
 
 
46  See financial notes

 

 
 Laudus Mondrian International Fixed Income Fund
 

Statement of
Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
 
                     
 
Operations
                     
4/1/12-9/30/12     4/1/11-3/31/12  
Net investment income
        $5,730,486       $14,073,069  
Net realized gains
        6,230,715       33,121,436  
Net unrealized gains (losses)
  +     33,750,223       (14,298,273 )
   
Increase in net assets from operations
        45,711,424       32,896,232  
 
Distributions to Shareholders
Distributions from net investment income
        (6,973,996 )     (33,490,040 )
Distributions from net realized gains
  +     —       (6,005,136 )
   
Total distributions
        ($6,973,996 )     ($39,495,176 )
 
Transactions in Fund Shares
                                     
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       VALUE       SHARES       VALUE  
Shares sold
        12,801,785       $150,972,535       32,819,253       $397,601,899  
Shares reinvested
        155,352       1,823,172       859,444       10,035,066  
Shares redeemed
  +     (16,558,200 )     (195,896,809 )     (39,254,809 )     (486,433,210 )
   
Net transactions in fund shares
        (3,601,063 )     ($43,101,102 )     (5,576,112 )     ($78,796,245 )
 
Shares Outstanding and Net Assets
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       NET ASSETS       SHARES       NET ASSETS  
Beginning of period
        75,929,214       $881,404,613       81,505,326       $966,799,802  
Total decrease
  +     (3,601,063 )     (4,363,674 )     (5,576,112 )     (85,395,189 )
   
End of period
        72,328,151       $877,040,939       75,929,214       $881,404,613  
   
                                     
Net investment income not yet distributed
                $1,829,918               $3,073,428  
 
 
 
See financial notes  47

 

Laudus Mondrian Global Fixed Income Fund
 
 
Financial Statements
 
Financial Highlights
 
             
    7/10/12 1 –
   
    9/30/12*    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    10.00      
   
Income (loss) from investment operations:
           
Net investment income (loss)
    0.03      
Net realized and unrealized gains (losses)
    0.26      
   
Total from investment operations
    0.29      
Less distributions:
           
Distributions from net investment income
    (0.01 )    
   
Net asset value at end of period
    10.28      
   
Total return (%)
    2.86 2    
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
           
Net operating expenses
    (0.00 ) 3,4    
Gross operating expenses
    1.05 3    
Net investment income (loss)
    1.25 3    
Portfolio turnover rate
    16 2    
Net assets, end of period ($ x 1,000)
    43,186      

* Unaudited.

1  Commencement of operations.
2  Not annualized.
3  Annualized.
4  Less than 0.005%.
 
 
 
48  See financial notes

 

 
 Laudus Mondrian Global Fixed Income Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date. The maturity date shown for all the securities is the final legal maturity.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  62 .7%   Government Bonds     26,383,950       27,065,275  
  7 .5%   Government Agency Obligations     3,203,672       3,256,444  
  4 .7%   Corporate Bonds     1,929,693       2,015,462  
  5 .2%   Supranational     2,164,917       2,253,696  
  18 .0%   U.S. Government and Government Agencies     7,766,834       7,763,466  
  2 .0%   Other Investment Company     863,547       863,547  
 
 
  100 .1%   Total Investments     42,312,613       43,217,890  
  (0 .1)%   Other Assets and Liabilities, Net             (31,965 )
 
 
  100 .0%   Net Assets             43,185,925  
 
                 
Security
  Face Amount
  Value
    Rate, Maturity Date   (local currency)   ($)
 
 Government Bonds  62.7% of net assets
 
Australia 7.8%
Australia Government Bond
4.50%, 10/21/14 (AUD)
    310,000       334,639  
4.75%, 06/15/16 (AUD)
    450,000       504,940  
5.25%, 03/15/19 (AUD)
    580,000       693,534  
4.50%, 04/15/20 (AUD)
    730,000       847,735  
5.75%, 05/15/21 (AUD)
    800,000       1,014,817  
                 
              3,395,665  
 
Brazil 4.0%
Brazil Notas do Tesouro Nacional
10.00%, 01/01/14 (BRL)
    400,000       207,233  
10.00%, 01/01/17 (BRL)
    1,400,000       731,987  
10.00%, 01/01/21 (BRL)
    1,500,000       774,553  
                 
              1,713,773  
 
Colombia 0.4%
Colombia Government International Bond
7.75%, 04/14/21 (COP)
    230,000,000       158,285  
 
Denmark 2.2%
Denmark Government International Bond
3.13%, 03/17/14 (EUR)
    705,000       944,559  
 
Germany 2.3%
Bundesrepublik Deutschland
2.50%, 01/04/21 (EUR)
    470,000       668,789  
3.25%, 07/04/42 (EUR)
    220,000       347,500  
                 
              1,016,289  
 
Hungary 2.1%
Hungary Government Bond
5.50%, 02/12/14 (HUF)
    4,200,000       18,746  
5.50%, 02/12/16 (HUF)
    25,500,000       111,494  
6.75%, 02/24/17 (HUF)
    65,000,000       293,534  
6.50%, 06/24/19 (HUF)
    9,600,000       42,348  
7.50%, 11/12/20 (HUF)
    65,000,000       298,467  
6.00%, 11/24/23 (HUF)
    33,000,000       134,321  
                 
              898,910  
 
Israel 1.2%
Israel Government Bond
4.25%, 08/31/16 (ILS)
    800,000       215,865  
6.00%, 02/28/19 (ILS)
    610,000       182,907  
5.50%, 01/31/22 (ILS)
    420,000       121,637  
                 
              520,409  
 
Japan 21.9%
Japan Government Ten Year Bond
1.30%, 12/20/14 (JPY)
    65,000,000       855,137  
1.30%, 03/20/15 (JPY)
    9,300,000       122,696  
1.50%, 03/20/15 (JPY)
    60,000,000       795,362  
1.40%, 03/20/18 (JPY)
    120,000,000       1,634,313  
1.50%, 09/20/18 (JPY)
    95,000,000       1,303,983  
1.40%, 06/20/19 (JPY)
    115,000,000       1,573,313  
0.80%, 09/20/20 (JPY)
    109,000,000       1,425,183  
Japan Government Thirty Year Bond
2.50%, 06/20/36 (JPY)
    40,900,000       598,781  
Japan Government Twenty Year Bond
1.90%, 03/22/21 (JPY)
    80,000,000       1,135,087  
                 
              9,443,855  
 
Malaysia 1.0%
Malaysia Government Bond
3.74%, 02/27/15 (MYR)
    200,000       66,344  
3.31%, 10/31/17 (MYR)
    370,000       120,973  
4.24%, 02/07/18 (MYR)
    420,000       143,365  
3.42%, 08/15/22 (MYR)
    290,000       93,891  
                 
              424,573  
 
Mexico 2.4%
Mexican Bonos
8.00%, 12/17/15 (MXN)
    4,200,000       356,720  
7.25%, 12/15/16 (MXN)
    1,900,000       160,914  
7.75%, 12/14/17 (MXN)
    2,200,000       192,771  
8.00%, 12/07/23 (MXN)
    2,200,000       208,007  
 
 
 
See financial notes  49

 

 
 Laudus Mondrian Global Fixed Income Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
Security
  Face Amount
  Value
    Rate, Maturity Date   (local currency)   ($)
Mexico Government Bond
7.50%, 06/03/27 (MXN)
    1,250,000       112,454  
                 
              1,030,866  
 
Poland 3.1%
Poland Government Bond
5.50%, 04/25/15 (PLN)
    700,000       225,901  
6.25%, 10/24/15 (PLN)
    160,000       52,987  
5.25%, 10/25/17 (PLN)
    1,000,000       326,875  
5.50%, 10/25/19 (PLN)
    1,310,000       435,127  
5.25%, 10/25/20 (PLN)
    140,000       45,718  
5.75%, 09/23/22 (PLN)
    770,000       260,618  
                 
              1,347,226  
 
Qatar 0.9%
Qatar Government International Bond
5.25%, 01/20/20 (USD) (c)
    320,000       380,000  
 
South Africa 2.0%
South Africa Government Bond
13.50%, 09/15/15 (ZAR)
    2,000,000       292,939  
8.00%, 12/21/18 (ZAR)
    1,550,000       203,988  
6.75%, 03/31/21 (ZAR)
    3,000,000       364,978  
                 
              861,905  
 
Sweden 6.3%
Sweden Government Bond
4.50%, 08/12/15 (SEK)
    3,750,000       630,425  
3.75%, 08/12/17 (SEK)
    2,750,000       473,729  
4.25%, 03/12/19 (SEK)
    5,000,000       907,181  
3.50%, 06/01/22 (SEK)
    3,900,000       702,151  
                 
              2,713,486  
 
Turkey 0.4%
Turkey Government Bond
10.50%, 01/15/20 (TRY)
    260,000       163,834  
 
United Kingdom 4.7%
United Kingdom Gilt
2.75%, 01/22/15 (GBP)
    360,000       615,173  
4.00%, 09/07/16 (GBP)
    315,000       579,691  
4.50%, 03/07/19 (GBP)
    260,000       513,562  
4.25%, 06/07/32 (GBP)
    170,000       343,214  
                 
              2,051,640  
                 
Total Government Bonds
(Cost $26,383,950)     27,065,275  
         
                 
                 
 
 Government Agency Obligations  7.5% of net assets
 
Germany 4.5%
Bayerische Landesbank
1.40%, 04/22/13 (JPY)
    90,000,000       1,158,892  
Kreditanstalt fuer Wiederaufbau
1.35%, 01/20/14 (JPY) (d)
    62,000,000       807,289  
                 
              1,966,181  
 
Netherlands 3.0%
Bank Nederlandse Gemeenten
1.85%, 11/07/16 (JPY)
    95,000,000       1,290,263  
                 
Total Government Agency Obligations
(Cost $3,203,672)     3,256,444  
         
                 
                 
 
 Corporate Bonds  4.7% of net assets
 
Germany 2.8%
Landwirtschaftliche Rentenbank
1.38%, 04/25/13 (JPY)
    95,000,000       1,225,331  
 
Netherlands 1.0%
ING Bank N.V.
3.90%, 03/19/14 (USD)
    150,000       157,180  
6.13%, 05/29/23 (EUR)  (a)(b)
    200,000       263,435  
                 
              420,615  
 
United Kingdom 0.9%
HSBC Holdings plc
6.25%, 03/19/18 (EUR)
    250,000       369,516  
                 
Total Corporate Bonds
(Cost $1,929,693)     2,015,462  
         
                 
                 
 
 Supranational  5.2% of net assets
                 
                 
European Investment Bank
1.90%, 01/26/26 (JPY)
    110,000,000       1,488,600  
European Union Notes
2.75%, 06/03/16 (EUR)
    550,000       765,096  
                 
Total Supranational
(Cost $2,164,917)     2,253,696  
         
                 
                 
 
 U.S. Government and Government Agencies  18.0% of net assets
 
United States 18.0%
U.S. Treasury Notes
1.38%, 11/15/12 (USD)
    669,800       670,925  
0.63%, 02/28/13 (USD)
    600,000       601,290  
1.75%, 01/31/14 (USD)
    440,000       449,024  
4.13%, 05/15/15 (USD)
    870,000       956,932  
1.88%, 08/31/17 (USD)
    55,000       58,390  
4.00%, 08/15/18 (USD)
    865,000       1,025,498  
1.25%, 04/30/19 (USD)
    950,000       967,961  
3.63%, 08/15/19 (USD)
    1,140,000       1,339,144  
3.63%, 02/15/21 (USD)
    600,000       710,391  
2.13%, 08/15/21 (USD)
    930,000       983,911  
                 
Total U.S. Government and Government Agencies
(Cost $7,766,834)     7,763,466  
         
                 
                 
 
 
 
50  See financial notes

 

 
 Laudus Mondrian Global Fixed Income Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Other Investment Company  2.0% of net assets
 
United States 2.0%
State Street Institutional U.S. Government Money Market Fund
    863,547       863,547  
                 
Total Other Investment Company
(Cost $863,547)     863,547  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $42,312,613, and the unrealized appreciation and depreciation were $924,420 and ($19,143), respectively, with a net appreciation of $905,277.
 
(a) Variable-rate security.
(b) The effective maturity may be shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or as the result of embedded demand features (puts or calls).
(c) Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $380,000 or 0.9% of net assets.
(d) Guaranteed by the Republic of Germany.
 
     
AUD —
  Australian dollar
BRL —
  Brazilian real
CLP —
  Chilean peso
CNY —
  Chinese yuan renminbi
COP —
  Colombian peso
EUR —
  euro currency
GBP —
  Great British pound
HUF —
  Hungarian forint
ILS —
  Israeli shekel
INR —
  Indian rupee
JPY —
  Japanese yen
MXN —
  Mexican peso
MYR —
  Malaysian ringgit
PLN —
  Polish zloty
SEK —
  Swedish krona
TRY —
  Turkish lira
USD —
  U.S. dollar
ZAR —
  South African rand
 
In addition to the above, the fund held the following at 09/30/12:
 
 
                                             
            Amount of
      Amount of
  Unrealized
        Currency
  Currency
  Currency
  Currency
  Gains /
        to be
  to be
  to be
  to be
  (Losses)
Expiration Date   Counterparty   Received   Received   Delivered   Delivered   ($)
 
 Forward Foreign Currency Exchange Contracts
                                         
                                             
10/31/2012
  ConvergEx Execution Solutions, LLC     CLP       82,481,500       USD       173,105       (1,275 )
10/31/2012
  State Street Bank London     CLP       82,399,000       USD       172,932       8,002  
10/31/2012
  Northern Trust International Banking Corp.     CNY       6,021,500       USD       956,363       7,572  
10/31/2012
  State Street Bank London     GBP       1,414,500       EUR       1,804,117       (35,103 )
10/31/2012
  State Street Bank London     EUR       1,782,546       GBP       1,414,500       7,375  
10/31/2012
  State Street Bank London     INR       28,060,500       USD       529,024       39,654  
10/31/2012
  State Street Bank London     USD       3,352,547       AUD       3,240,000       13,716  
10/31/2012
  State Street Bank London     USD       529,024       INR       28,060,500       (4,480 )
                                     
Net unrealized gains on Forward Foreign Currency Exchange Contracts
    35,461  
         
 
 
 
 
See financial notes  51

 

 
 Laudus Mondrian Global Fixed Income Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
Assets Valuation Input
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Government Bonds 1
    $—       $27,065,275       $—       $27,065,275  
Government Agency Obligations 1
    —       3,256,444       —       3,256,444  
Corporate Bonds 1
    —       2,015,462       —       2,015,462  
Supranational
    —       2,253,696       —       2,253,696  
U.S. Government and Government Agencies 1
    —       7,763,466       —       7,763,466  
Other Investment Company 1
    863,547       —       —       863,547  
                                 
Total
    $863,547       $42,354,343       $—       $43,217,890  
                                 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    $76,319       $—       $—       $76,319  
                                 
                                 
Liabilities Valuation Input
                 
 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    ($40,858 )     $—       $—       ($40,858 )
 
     
1
  As categorized in Portfolio Holdings.
2
  Forward foreign currency exchange contracts are not included in Investments and are valued at unrealized appreciation or depreciation.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
52  See financial notes

 

 
 Laudus Mondrian Global Fixed Income Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $42,312,613)
        $43,217,890  
Foreign currency, at value (cost $16,683)
        16,834  
Receivables:
           
Investments sold
        6,024,098  
Interest
        378,384  
Fund shares sold
        90,205  
Foreign tax reclaims
        1,476  
Due from investment adviser
        577  
Unrealized gains on forward foreign currency exchange contracts
        76,319  
Prepaid expenses
  +     9,265  
   
Total assets
        49,815,048  
 
Liabilities
Payables:
           
Investments bought
        6,578,944  
Distributions to shareholders
        5,644  
Fund shares redeemed
        2,595  
Trustees’ retirement plan
        1,082  
Unrealized losses on forward foreign currency exchange contracts
  +     40,858  
   
Total liabilities
        6,629,123  
 
Net Assets
Total assets
        49,815,048  
Total liabilities
  −     6,629,123  
   
Net assets
        $43,185,925  
 
Net Assets by Source
Capital received from investors
        42,030,534  
Net investment income not yet distributed
        96,241  
Net realized capital gains
        146,597  
Net unrealized capital gains
        912,553  
 
Net Asset Value (NAV)
 
                         
        Shares
             
Net Assets   ÷   Outstanding   =   NAV      
$43,185,925
      4,200,719         $10.28      
 
 
 
See financial notes  53

 

 
 Laudus Mondrian Global Fixed Income Fund
 

Statement of
Operations
For July 10, 2012* through September 30, 2012; unaudited
 
             
 
Investment Income
Interest
        $120,147  
 
Expenses
Investment adviser fees
        64,397  
Accounting and administration fees
        11,919  
Sub-Accounting fees
        9,474  
Professional fees
        8,764  
Custodian fees
        2,040  
Shareholder reports
        1,584  
Trustees’ fees
        1,082  
Transfer agent fees
        705  
Other expenses
  +     233  
   
Total expenses
        100,198  
Expense reduction by adviser
  −     100,198  
Custody credits
  −     1  
   
Net expenses
  −     (1 )
   
Net investment income
        120,148  
 
Realized and Unrealized Gains (Losses)
Net realized gains on investments
        237,914  
Net realized losses on foreign currency transactions
  +     (91,317 )
   
Net realized gains
        146,597  
Net unrealized gains on investments
        905,277  
Net unrealized gains on foreign currency translations
  +     7,276  
   
Net unrealized gains
  +     912,553  
   
Net realized and unrealized gains
        1,059,150  
             
Increase in net assets resulting from operations
        $1,179,298  
 
 
 
     
*
  Commencement of operations.
 
 
 
54  See financial notes

 

 
 Laudus Mondrian Global Fixed Income Fund
 

Statement of
Changes in Net Assets
For the current period only.
Figures for the current period are unaudited
 
             
 
Operations
             
7/10/12*-9/30/12  
Net investment income
        $120,148  
Net realized gains
        146,597  
Net unrealized gains
  +     912,553  
   
Increase in net assets from operations
        1,179,298  
 
Distributions to Shareholders
Distributions from net investment income
        ($23,907 )
 
Transactions in Fund Shares
                     
        7/10/12*-9/30/12  
          SHARES       VALUE  
Shares sold
        4,389,182       $43,934,642  
Shares reinvested
        1,777       18,263  
Shares redeemed
  +     (190,240 )     (1,922,371 )
   
Net transactions in fund shares
        4,200,719       $42,030,534  
 
Shares Outstanding and Net Assets
        7/10/12*-9/30/12  
          SHARES       NET ASSETS  
Beginning of period
        —       $—  
Total increase
  +     4,200,719       43,185,925  
   
End of period
        4,200,719       $43,185,925  
   
                     
Net investment income not yet distributed
                $96,241  
 
 
 
     
*
  Commencement of operations.
 
 
 
See financial notes  55

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited
 
 
1. Business Structure of the Funds:
 
Each of the Laudus Mondrian Funds in this report is a series of Laudus Trust, (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust as of the end of the period, including the funds discussed in this report, which are highlighted:
 
         
 
Laudus Mondrian International Equity Fund
       
Laudus Mondrian Global Equity Fund (closed to new investors)
       
Laudus Mondrian Emerging Markets Fund
       
Laudus Mondrian International Fixed Income Fund
       
Laudus Mondrian Global Fixed Income Fund
       
Laudus Growth Investors U.S. Large Cap Growth Fund
       
 
 
Each fund, with the exception of Laudus Mondrian International Fixed Income Fund and Laudus Mondrian Global Fixed Income Fund, offers three share classes: Investor Shares, Select Shares and Institutional Shares. Laudus Mondrian Global Fixed Income Fund commenced operations on July 10, 2012.
 
Each class of shares generally has identical rights and preferences, except that each class is subject to different eligibility conditions, bears different distribution and sub-transfer agent expenses, and separate voting rights on matters pertaining solely to that class of shares.
 
Shares are bought and sold (subject to a redemption fee, see financial note 10) at closing net asset value per share (“NAV”), which is the price for all outstanding shares of the funds.
 
Each fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, each fund may also keep certain assets in segregated accounts, as required by securities law.
 
2. Significant Accounting Policies:
 
The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
 
(a) Security Valuation:
 
Under procedures approved by the funds’ Board of Trustees (the Board), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the funds to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
 
The funds value the securities in their portfolios every business day. The funds use the following policies to value various types of securities:
 
  •  Securities traded on an exchange or over-the-counter: valued at the closing value for the day, or, on days when no closing value has been reported at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
 
  •  Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing
 
 
 
56 

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
  Committee regularly reviews these inputs and assumptions to calibrate the valuations. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the procedures.
 
  •  Bonds and notes: valued at halfway between the most recent bid and asked quotes or, if such quotes are unavailable, at prices for securities of comparable maturity, credit quality and type. Valuations for bonds and notes are provided by an independent bond-pricing service.
 
  •  International fair valuation: The Board of Trustees has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the net asset value of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board of Trustees regularly reviews fair value determinations made by the funds pursuant to the procedures.
 
  •  Forward foreign currency exchange contracts: valued at a value based on that day’s exchange rates.
 
  •  Short-term securities (60 days or less to maturity): valued at amortized cost, which approximates market value.
 
  •  Underlying funds: valued at their respective net asset values.
 
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If the funds determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
 
The three levels of the fair value hierarchy are as follows:
 
  •  Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The funds do not adjust the quoted price for such investments, even in situations where the funds hold a large position and a sale could reasonably impact the quoted price. Investments in underlying funds are valued at their NAV daily and are classified as Level 1 prices.
 
  •  Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board of Trustees has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
 
 
  57

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
  •  Level 3 — significant unobservable inputs (including the funds’ own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
 
The levels associated with valuing the funds’ investments as of September 30, 2012 are disclosed in the Portfolio Holdings.
 
(b) Accounting Policies for certain Portfolio Investments (if held):
 
Forward Foreign Currency Exchange Contracts: “Forwards”, as they are known, are contracts to buy and sell a currency at a set price on a future date. The value of the forwards is accounted for as unrealized gains or losses until the contracts settle, at which time the gains or losses are realized.
 
(c) Security Transactions:
 
Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains or losses from security transactions are based on the identified costs of the securities involved.
 
Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the differences between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are reported in foreign currency transactions or translations on the Statement of Operations. The funds do not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
 
Gains realized by the funds on the sale of securities in certain foreign countries may be subject to non-U.S. taxes. In those instances, the funds record a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
 
When a fund closes out a forwards position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.
 
(d) Investment Income:
 
Interest income is recorded as it accrues. If a fund buys a debt security at a discount (less than face value) or a premium (more than face value), it amortizes premiums and accretes discounts from the current date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. If the security is callable (meaning that the issuer has the option to pay it off before its maturity date), then the fund amortizes the premium to the security’s call date and price, rather than the maturity date and price. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the funds record certain foreign security dividends on the day they learn of the ex-dividend date.
 
 
 
58 

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax rate is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.
 
(e) Expenses:
 
Expenses that are specific to a fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets.
 
For funds offering multiple share classes, the net investment income, other than class specific expenses, and the realized and unrealized gains or losses, are allocated daily to each class in proportion to their average daily net assets.
 
(f) Distributions to Shareholders:
 
The funds make distributions from net investment income and net realized capital gains, if any, once a year with the exception of Laudus Mondrian International Fixed Income Fund and Laudus Mondrian Global Fixed Income Fund which pay quarterly dividends.
 
(g) Custody Credit:
 
The funds have an arrangement with their custodian bank, State Street Bank and Trust Company (“State Street”), under which the funds receive a credit for their uninvested cash balance to offset their custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the funds’ operating expenses.
 
(h) Accounting Estimates:
 
The accounting policies described in this report conform to accounting principles generally accepted in the United States of America. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.
 
(i) Federal Income Taxes:
 
The funds intend to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the funds distribute substantially all of their net investment income and realized net capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.
 
(j) Foreign Taxes:
 
The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges, capital gains on investments on currency repatriation. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of September 30, 2012, if any, are reflected in the funds’ Statements of Assets and Liabilities.
 
(k) Indemnification:
 
Under the funds’ organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote.
 
(l) New Accounting Pronouncements:
 
In December 2011, Accounting Standards Update (“ASU”) No. 2011-11, “Disclosures about Offsetting Assets and Liabilities,” was issued and is effective for interim and annual periods beginning after January 1, 2013. The ASU enhances disclosure
 
 
 
  59

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
requirements with respect to an entity’s rights of offset and related arrangements associated with its financial and derivative instruments. Management is currently evaluating the impact the adoption of ASU 2011-11 may have on the funds’ financial statement disclosures.
 
3. Risk factors:
 
Investing in the funds may involve certain risks, as discussed in the funds’ prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.
 
Stock and bond markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the fund will fluctuate, which means that the investors could lose money.
 
The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
 
Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap stocks fall behind other types of investments — mid- or small-cap stocks, for instance — a fund’s large-cap holdings could reduce performance.
 
A fund’s investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may be heightened in connection with investments in emerging markets.
 
Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the fund’s investments in emerging market countries.
 
A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and could cause the fund to lose more than the principal amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on a fund.
 
Interest rates rise and fall over time, which will affect a fund’s yield and share price. The credit quality of a portfolio investment could also cause the fund’s share price to fall. A fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed income securities may be paid off earlier or later than expected. Either situation could cause the fund to hold securities paying lower than market rates of interest, which could hurt the fund’s yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.
 
Please refer to the funds’ prospectus for a more complete description of the principal risks of investing in the funds.
 
4. Affiliates and Affiliated Transactions:
 
Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as each fund’s investment adviser pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between CSIM and the trust. Mondrian Investment Partners Limited (“Mondrian”), the funds’ sub-adviser, provides day-to-day portfolio management services to the funds, subject to the supervision of CSIM.
 
 
 
60 

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
4. Affiliates and Affiliated Transactions (continued):
 
For its advisory services to the following funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets described as follows:
 
                 
 
 
First $1 billion
 
Over $1 billion
 
Laudus Mondrian International Equity Fund
    0.85%       0.80%  
Laudus Mondrian Global Equity Fund
    0.85%       0.80%  
Laudus Mondrian Emerging Markets Fund
    1.20%       1.15%  
Laudus Mondrian International Fixed Income Fund
    0.60%       0.60%  
Laudus Mondrian Global Fixed Income Fund
    0.68%       0.68%  
 
CSIM (not the funds) pays a portion of the management fees it receives to Mondrian in return for its services.
 
For the period July 11, 2012 through January 10, 2013, the investment adviser has agreed to waive the Laudus Mondrian Global Fixed Income Fund’s net operating expenses to 0.00%.
 
CSIM has contractually agreed, until at least July 30, 2014, to waive a portion of its management fee and bear certain expenses of each fund. As such, CSIM further agrees to reimburse the funds to limit the annual expenses, exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest (overdraft charges), taxes, brokerage commissions, other expenditures which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the funds’ business as follows:
 
                         
    Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
   
Equity Fund
 
Equity Fund
 
Markets Fund
 
Investor Shares
    1.40%       1.40%       1.80%  
Select Shares
    1.12%       1.12%       1.52%  
Institutional Shares
    1.05%       1.05%       1.45%  
 
In addition to the funds listed above, the annual expenses of the Laudus Mondrian International Fixed Income Fund and the Laudus Mondrian Global Fixed Income Fund will be limited to 0.75% and 0.85%, respectively.
 
Any amounts waived or reimbursed in a particular fiscal year will be subject to repayment through the next two fiscal years, to the extent that the repayment will not cause the funds’ net expenses to exceed the current limit (as stated in CSIM’s contractual undertaking) during the respective year. For the period ended September 30, 2012, there were no prior year amounts recouped. As of September 30, 2012, the balance of recoupable expenses and the respective years of expiration are as follows:
 
                                         
    Laudus
  Laudus
  Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
  International Fixed
  Global Fixed
Expiration Date
 
Equity Fund
 
Equity Fund
 
Markets Fund
 
Income Fund
 
Income Fund
 
March 31, 2013
    $135,683       $155,976       $95,858       $—       $—  
March 31, 2014
    209,921       178,953       95,552       —       —  
March 31, 2015
    44,996       88,449       34,963       —       100,198  
                                         
Total
    $390,600       $423,378       $226,373       $—       $100,198  
                                         
 
5. Transfer Agent, Distribution and Shareholders Services:
 
Boston Financial Data Services, Inc. (“BFDS”) provides transfer agent services for each fund.
 
The trust has a Distribution and Shareholder Service Plan with respect to its Investor Shares pursuant to Rule 12b-1 under the 1940 Act. The Investor Shares of the funds are sold on a continuous basis by the trust’s distributor, ALPS Distributors, Inc. Under the Distribution and Shareholder Services Plan, the funds pay distribution and shareholder servicing fees in connection with the sale and servicing of the Investor Shares. The annual Distribution and Shareholder Service Fee consists of up to 0.25% of the respective average daily net assets of the Investor Shares. In addition, the trustees have authorized each fund to reimburse,
 
 
 
  61

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
5. Transfer Agent, Distribution and Shareholders Services (continued):
 
out of the Investor and Select Shares assets of the funds, financial intermediaries that provide sub-accounting and sub-transfer agency services in connection with Investor or Select Class shares an amount of up to 0.15% of the average daily net assets of that class on an annual basis. Further, the trustees have authorized the Laudus Mondrian Global Fixed Income Fund to reimburse, out of the assets of the fund, financial intermediaries that provide sub-accounting and sub-transfer agency services in connection with the fund’s shares in an amount of up to 0.10% of the average daily net assets of the fund on an annual basis.
 
6. Board of Trustees:
 
The Trust’s Board of Trustees oversees the general conduct of the trust and the funds.
 
Trustees may include people who are officers and/or directors of the investment adviser or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund’s Statement of Operations.
 
Until September 2006, a Retirement Plan existed for the independent trustees. After the Retirement Plan closed to new independent trustees, the previously accrued and unpaid benefits continue to be adjusted by performance of the funds. As a result, the amount of the retirement benefits payable to certain independent trustees may increase or decrease based on the performance of the funds.
 
7. Borrowing from Banks:
 
The funds have access to custodian overdraft facilities and to an uncommitted line of credit of $100 million with State Street. The funds pay interest on the amounts they borrow at rates that are negotiated periodically.
 
There were no borrowings from the lines of credit by the funds during the period. However, the funds may have utilized their overdraft facility and incurred interest expense, which is disclosed on the Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
 
8. Purchases and Sales/Maturities of Investment Securities:
 
For the period ended September 30, 2012, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:
 
                 
   
Purchases of Securities
 
Sales/Maturities of Securities
 
Laudus Mondrian International Equity Fund
    $21,734,302       $8,717,098  
Laudus Mondrian Global Equity Fund
    781,068       721,418  
Laudus Mondrian Emerging Markets Fund
    24,568,240       19,866,811  
Laudus Mondrian International Fixed Income Fund
    173,569,775       207,391,915  
Laudus Mondrian Global Fixed Income Fund
    48,204,349       6,879,082  
 
9. Derivatives:
 
The funds invested in forward foreign currency exchange contracts (“forwards”) during the report period. The funds invested in forwards to defensively hedge part of the funds’ exposure to currencies that were deemed to be overvalued by the sub-adviser. Refer to financial note 2(b) for the funds’ accounting policies with respect to forwards and financial note 3 for disclosures
 
 
 
62 

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
9. Derivatives (continued):
 
concerning the risks of investing in forwards. During the period, the month-end average notional amount of forwards and the month-end average unrealized gains (losses) were as follows:
 
                 
    Forward Foreign Currency
  Net Unrealized
   
Exchange Contracts
 
Gains (Losses)
 
Laudus Mondrian International Equity Fund
    $4,882,112       $34,681  
Laudus Mondrian Global Equity Fund
    149,853       946  
Laudus Mondrian Emerging Markets Fund
    168       2  
Laudus Mondrian International Fixed Income Fund
    85,239,365       148,393  
Laudus Mondrian Global Fixed Income Fund
    5,309,493       10,123  
 
The fair value of forwards held by the funds is presented in unrealized gains (losses) on forward foreign currency exchange contracts on the Statement of Assets and Liabilities as follows:
 
                                         
    Laudus
  Laudus
  Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
  International Fixed
  Global Fixed
   
Equity Fund
 
Equity Fund
 
Markets Fund
 
Income Fund
 
Income Fund
Asset Derivatives
  Fair Value
 
Forward Foreign Currency Exchange Contracts 1
    $—       $—       $—       $166,441       $76,319  
                                         
                                         
Liability Derivatives
  Fair Value
 
Forward Foreign Currency Exchange Contracts 2
    $1,723       $46       $—       $1,583,708       $40,858  
 
     
1
  Statement of Assets and Liabilities location: Unrealized gains on forward foreign currency exchange contracts.
2
  Statement of Assets and Liabilities location: Unrealized losses on forward foreign currency exchange contracts.
 
During the period ending September 30, 2012, the forwards held by the funds, categorized by primary risk exposure, were:
 
                                         
    Forward Foreign Currency Exchange Contracts
    Laudus
  Laudus
  Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
  International Fixed
  Global Fixed
   
Equity Fund
 
Equity Fund
 
Markets Fund
 
Income Fund
 
Income Fund
 
Realized Gain (Losses) 1
    ($91,741 )     ($3,011 )     ($1,398 )     $4,872,144       $20,090  
Change in Unrealized Gains (Losses) 2
    (102,709 )     (2,530 )     —       (1,771,280 )     35,461  
 
     
1
  Statement of Operations location: Net realized gains/losses on foreign currency transactions.
2
  Statement of Operations location: Net unrealized gains/losses on foreign currency translations.
 
10. Redemption Fee:
 
The funds charge a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts are netted against the redemption proceeds on the Statement of Changes in Net Assets. The redemption fees charged during the current and prior periods are:
 
                 
    Current Period
  Prior Period
   
(4/1/12-9/30/12)
 
(4/1/11-3/31/12)
 
Laudus Mondrian International Equity Fund
    $234       $1,562  
Laudus Mondrian Global Equity Fund
    10       —  
Laudus Mondrian Emerging Markets Fund
    24       2,920  
Laudus Mondrian International Fixed Income Fund
    17,500       50,054  
Laudus Mondrian Global Fixed Income Fund
    3,067       —  
 
 
 
  63

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
11. Federal Income Taxes:
 
Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of March 31, 2012, the following funds had capital loss carryforwards available to offset future net capital gains before the expiration dates:
 
                                 
    Laudus
  Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
  International Fixed
Expiration Date
 
Equity Fund
 
Equity Fund
 
Markets Fund
 
Income Fund
 
March 31, 2017
    $—       $4,137       $—       $—  
March 31, 2018
    —       331,513       —       —  
March 31, 2019
    —       92,150       —       —  
No expiration
    —       54,747       —       —  
                                 
Total
    $—       $482,547       $—       $—  
                                 
 
For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended March 31, 2012, the funds had aggregate deferred realized net capital losses and capital losses utilized as follows:
 
                                 
    Laudus
  Laudus
  Laudus
  Laudus
    Mondrian
  Mondrian
  Mondrian
  Mondrian
    International
  Global
  Emerging
  International Fixed
   
Equity Fund
 
Equity Fund
 
Markets Fund
 
Income Fund
 
Capital losses deferred
    $1,454,633       $11,200       $2,206,251       $5,201  
Capital losses utilized
    430,440       —       —       —  
 
As of March 31, 2012, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and state purpose, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statement. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended March 31, 2012, the funds did not incur any interest or penalties.
 
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (“the Act”) was signed by the President. The Act is the first major piece of legislation affecting Regulated Investment Companies (“RICs”) since 1986 and it modernizes several of the federal income and excise tax provisions related to RICs.
 
Certain of the enacted provisions include:
 
Post-enactment capital losses may now be carried forward indefinitely, but must retain the character of the original loss. However, such losses must be utilized prior to the pre-enactment capital losses, which increases the likelihood that the pre-enactment capital losses will expire unused. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as a short-term capital loss, irrespective of the character of the original loss. The Act contains simplification provisions, which are aimed at preventing disqualification of a RIC for “inadvertent” failures of the asset diversification and/or qualifying income tests. Additionally, the Act exempts RICs from the preferential dividend rule, and repeals the 60-day designation requirement for certain types of pay-through income and gains.
 
Finally, the Act contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions.
 
12. Other: 
 
At a meeting held on September 25, 2012, the Board of Trustees of the Trust approved the closing and liquidation of the Laudus Mondrian Global Equity Fund (the “Fund”). Accordingly, effective October 2, 2012 (the “Closing Date”), the Fund was closed to new investors.
 
 
 
64 

 

 
 Laudus Mondrian Funds
 

 
Financial Notes, unaudited (continued)
 
The Fund will redeem all of its outstanding shares on or shortly after November 30, 2012 (the “Liquidation Date”), and distribute the proceeds to the Fund’s shareholders (subject to maintenance of appropriate reserves for liquidation and other expenses).
 
Effective September 28, 2012, through the Liquidation Date, the Fund’s investment adviser will waive fees and reimburse the Fund for all operating expenses. In addition, the Fund will waive its redemption fees.
 
13. Subsequent Events: 
 
Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.
 
 
 
  65

 

 
Approval of Investment Advisory and Sub-Advisory Agreements
 
Initial Approval of Investment Advisory and Sub-Advisory Agreements
 
The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreements be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreements.
 
The Board of Trustees (the “Board” or the “Trustees”, as appropriate) called and held a meeting on September 14, 2011, in part, for the purpose of considering whether to appoint Charles Schwab Investment Management, Inc. (“CSIM”) as investment adviser to Laudus Mondrian Global Fixed Income Fund (the “Fund”) under the investment advisory agreement between Laudus Trust (the “Trust’) and CSIM (the “Agreement”) and Mondrian Investment Partners Limited (“Mondrian”) as investment subadviser to the Fund under the subadvisory agreement between CSIM and Mondrian (such investment advisory and sub-advisory agreements, collectively, the “Agreements”). In preparation for the meeting, the Board requested and reviewed a variety of materials provided by CSIM and Mondrian with respect to the services to be provided to the Fund under the Agreements. In recognition of the fact that the Fund had not yet commenced operations, the Board also took into account the detailed information about other funds within the Trust that the Board reviews during the course of each year, including information that relates to fund operations and fund performance. In addition, the Independent Trustees met in executive session outside the presence of fund management and participated in question and answer sessions with representatives of CSIM.
 
The Board, including a majority of the Independent Trustees, approved the Agreements with respect to the Fund at the meeting on September 14, 2011. The Board’s approval was based on consideration and evaluation of a variety of factors, including:
 
1.  the nature, extent and quality of the services to be provided to the Fund under the Agreements, including the resources of CSIM and its affiliates, and Mondrian, that will be dedicated to the Fund;
 
2.  CSIM’s and Mondrian’s investment performance in managing other funds having relevant investment objectives and strategies;
 
3.  the Fund’s estimated expenses and how those expenses compare to those of certain other comparable mutual funds;
 
4.  the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to management of other funds, including both direct and indirect benefits that may accrue to CSIM and its affiliates, as well as the profitability of Mondrian; and
 
5.  the extent to which economies of scale would be realized as the Fund grows, and whether fee levels in the Agreements relating to the Fund reflect those economies of scale for the benefit of Fund investors.
 
Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services to be provided by CSIM to the Fund and the resources CSIM and its affiliates will dedicate to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered investments in CSIM’s mutual fund infrastructure. The Trustees also considered Schwab’s excellent reputation in connection with the OneSource mutual fund offering and its overall financial condition. The Board also considered the nature, extent and quality of the sub-advisory services to be provided by Mondrian to the Fund and the resources it plans to dedicate to the Fund. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services to be provided by CSIM and Mondrian to the Fund and the resources of CSIM and its affiliates and the resources of Mondrian that will be dedicated to the Fund supported approval of the Agreements with respect to the Fund.
 
Performance. With regard to Fund performance, since the Fund had not commenced operations and therefore did not have any performance of its own, the Board considered performance of other funds advised by CSIM and Mondrian having comparable investment objectives in determining whether to approve the Agreements with respect to the Fund. The Trustees also considered both risk and shareholder risk expectations for the Fund. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of CSIM and Mondrian supported approval of the Agreements with respect to the Fund.
 
Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreements, and the Fund’s estimated net operating
 
 
 
66 

 

expense ratio in comparison to those of other comparable mutual funds. The Trustees also considered CSIM’s commitment to waive management and other fees to prevent total Fund expenses from exceeding a specified cap. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported approval of the Agreements with respect to the Fund.
 
Profitability. With regard to profitability, the Trustees considered the compensation that may flow to CSIM and its affiliates directly or indirectly and the compensation that may flow to Mondrian, directly or indirectly. The Trustees also considered any other benefits that may be derived by CSIM and Mondrian from their relationships with the Fund, such as whether, by virtue of their management of the Fund, CSIM or Mondrian obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the varied levels of compensation and profitability under the Agreements and other service agreements were reasonable and justified in light of the quality of all services to be rendered to the Fund by CSIM and Mondrian and their respective affiliates. With respect to the profitability of Mondrian, the Board also considered that Mondrian would be compensated by CSIM, and not by the Fund directly, and such compensation reflects an arms-length negotiation between the parties. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the expected profitability of CSIM, albeit uncertain, is reasonable and supported approval of the Agreements with respect to the Fund.
 
Economies of Scale. Recognizing that the Fund had not yet commenced operations and had no assets, the Trustees considered the possible development of any economies of scale and whether those could be expected to be passed along to the Fund’s shareholders through various efficiencies that may result from increases in the Fund’s assets. Consistent with their consideration of Fund expenses, the Trustees considered that CSIM would commit resources to minimize the effects on shareholders of diseconomies of scale during periods when Fund assets are relatively small through contractual expense waivers. The Trustees also considered contractual investment advisory fee schedule with respect to the Fund that includes lower fees at higher graduated asset levels, and Mondrian’s agreement to a contractual sub-advisory fee schedule that includes lower fees at higher graduated asset levels as measured on a complex wide basis. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund may be expected to obtain reasonable benefit from economies of scale if such economies develop.
 
In the course of their deliberations, the Trustees did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, unanimously approved the Agreements as they relate to the Fund and concluded that the compensation under the Agreements relating to the Fund is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.
 
Approval of Renewal of Investment Advisory and Sub-Advisory Agreements
 
The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreements be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreements.
 
The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in part, to considering whether to renew the investment advisory agreements between Laudus Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”), and the subadvisory agreements between CSIM and Mondrian Investment Partners Limited (“Mondrian”) (such investment advisory and sub-advisory agreements, collectively, the “Agreements”) with respect to Laudus Mondrian International Equity Fund, Laudus Mondrian Global Equity Fund, Laudus Mondrian Emerging Markets Fund, Laudus Mondrian International Fixed Income Fund and Laudus Mondrian Global Fixed Income Fund (the “Funds”). In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM and Mondrian, including information about their affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to fund operations and fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM and Mondrian, as appropriate.
 
As part of the renewal process and ongoing oversight of the advisory and sub-advisory relationships, Independent
 
 
 
  67

 

Trustees’ legal counsel sends an information request letter to CSIM and CSIM sends an information request letter to Mondrian seeking certain relevant information. The responses by CSIM and Mondrian are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials.
 
The Board, including a majority of the Independent Trustees, considered information relating to its consideration of the continuance of the Agreements at meetings held on April 24, 2012, and June 5, 2012, and approved the renewal of the Agreements for an additional one year term at the meeting held on June 5, 2012. The Board’s approval of the Agreements was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:
 
1.  the nature, extent and quality of the services provided to the Funds under the Agreements, including the resources of CSIM and its affiliates, and Mondrian, dedicated to the Funds;
 
2.  each Fund’s investment performance and how it compared to that of certain other comparable mutual funds;
 
3.  each Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;
 
4.  the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to each Fund, including both direct and indirect benefits accruing to CSIM and its affiliates, as well as the profitability of Mondrian; and
 
5.  the extent to which economies of scale would be realized as the Funds grow, and whether fee levels in the Agreements reflect those economies of scale for the benefit of Fund investors.
 
Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered investments in CSIM’s mutual fund infrastructure. The Trustees also considered Schwab’s excellent reputation in connection with the OneSource mutual fund offering and its overall financial condition. The Board also considered the nature, extent and quality of the sub-advisory services provided by Mondrian to the Funds and the resources it dedicates to the Funds. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM and Mondrian to the Funds and the resources of CSIM and its affiliates and the resources of Mondrian dedicated to the Funds supported renewal of the Agreements.
 
Fund Performance. The Board considered Fund performance in determining whether to renew the Agreements. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other mutual funds and appropriate indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the peer category analysis. In evaluating the performance of each Fund, the Trustees considered both risk and shareholder risk expectations for such Fund and the appropriateness of the benchmark used to compare the performance of each Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Although, the Funds had performance that lagged that of a relevant peer group for certain (although not necessarily all) periods considered, the Board concluded that other factors relevant to performance supported renewal of the Agreements. These factors included the following: (1) that the underperformance was attributable, to a significant extent, to investment decisions by Mondrian that were reasonable and consistent with Mondrian’s investment style and the investment objective and policies of each Fund; and (2) that recent performance for the Funds showed improvement. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreements.
 
Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreements, and each Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer categories and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s contractual waivers of management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and fees charged by Mondrian to other mutual funds and to other types of accounts, such as separate accounts and wrap accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreements.
 
Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly and the compensation flowing to Mondrian, directly or indirectly. In this connection, with
 
 
 
68 

 

respect to the profitability of CSIM and its affiliates, the Trustees reviewed management’s profitability analyses. The Trustees also considered any other benefits derived by CSIM and Mondrian from their relationships with the Funds, such as whether, by virtue of their management of the Funds, CSIM or Mondrian obtains investment information or other research resources that aid it in providing advisory services to other clients. With respect to CSIM and Mondrian, and their respective affiliates, the Trustees considered whether the varied levels of compensation and profitability under the Agreements and other service agreements were reasonable and justified in light of the quality of all services rendered to each Fund by CSIM and Mondrian, and their respective affiliates. With respect to the profitability of Mondrian, the Board also considered that Mondrian is compensated by CSIM, and not by the Funds directly, and such compensation reflects an arms-length negotiation between the parties. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM and Mondrian is reasonable and supported renewal of the Agreements.
 
Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to a Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by CSIM and its affiliates. In this regard, and consistent with their consideration of Fund expenses, the Trustees considered that CSIM has committed resources to minimize the effects on shareholders of diseconomies of scale during periods when Fund assets are relatively small through contractual expense waivers. The Trustees also considered CSIM’s agreements to contractual investment advisory fee schedules that, for all Funds, other than Laudus Mondrian International Fixed Income Fund, include lower fees at higher graduated asset levels, and Mondrian’s agreement to contractual sub-advisory fee schedules that, for all Funds, include lower fees at higher graduated asset levels as measured on a complex wide basis. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Funds obtain reasonable benefit from economies of scale.
 
In the course of their deliberations, the Trustees did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreements and concluded that the compensation under the Agreements is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.
 
 
 
  69

 

 
Trustees and Officers
 
 
The tables below give information about the trustees and officers for the Laudus Trust which includes the funds covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 91 funds.
 
The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.
 
 Independent Trustees
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served 1 )   During the Past Five Years   the Trustee   Other Directorships
 
Mariann Byerwalter
1960
Trustee
(Trustee of Laudus Trust since 2004.) 		  Chairman of JDN Corporate Advisory LLC.   74   Director, Redwood Trust, Inc. (1998 – present)
Director, PMI Group Inc. (2001 – 2009)
 
John F. Cogan
1947
Trustee
(Trustee of Laudus Trust since 2010.) 		  Senior Fellow: The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 1994 – present).   74   Director, Gilead Sciences, Inc. (2005 – present)
Director, Monaco Coach Corporation (2005 – 2009)
 
William A. Hasler
1941
Trustee
(Trustee of Laudus Trust since 2004.) 		  Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).   74   Director, TOUSA (1998 – present)
Director, Mission West Properties (1998 – present)
Director, Globalstar, Inc. (2009 – present)
Director, Aviat Networks (2001 – present)
Director, Ditech Networks Corporation (1997 – 2012)
Director, Aphton Corp. (1991 – 2007)
Director, Solectron Corporation (1998 – 2007)
Director, Genitope Corporation (2000 – 2009)
 
David L. Mahoney
1954
Trustee
(Trustee of Laudus Trust since 2011.) 		  Private Investor.   74   Director, Symantec Corporation (2003 – present)
Director, Corcept Therapeutics Incorporated (2004 – present)
Director, Tercica Inc. (2004 – 2008)
 
Kiran M. Patel
1948
Trustee
(Trustee of Laudus Trust since 2011.) 		  Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).   74   Director, KLA-Tencor Corporation (2008 – present)
Director, BEA Systems, Inc. (2007 – 2008)
Director, Eaton Corp. (2003 – 2006)
 
Gerald B. Smith
1950
Trustee
(Trustee of Laudus Trust since 2010.) 		  Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).   74   Lead Independent Director, Board of Cooper Industries (2002 – present)
Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present)
Director, Oneok, Inc. (2009 – present)
 
 
 
 
70 

 

 
 Independent Trustees (continued)
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served 1 )   During the Past Five Years   the Trustee   Other Directorships
 
Joseph H. Wender
1944
Trustee
(Trustee of Laudus Trust since 2010.) 		  Senior Consultant, Goldman Sachs & Co., Inc. (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present); Senior Director, Chairman of the Finance Committee, GSC Group (July 2005 – Dec. 2007); General Partner, Goldman Sachs & Co., Inc. (Oct. 1982 – June 2005).   74   Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)
 
 
 Interested Trustees
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served )   During the Past Five Years   the Trustee   Other Directorships
 
Charles R. Schwab 2
1937
Chairman and Trustee
(Chairman and Trustee of Laudus Trust since 2010.) 		  Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N.A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; Through June 2007, Director, U.S. Trust Company, N.A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, Charles Schwab & Co., Inc.   74   None
 
Walter W. Bettinger II 2
1960
Trustee
(Trustee of Laudus Trust since 2010.) 		  As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.   91   None
 
 
 
 
  71

 

 Officers of the Trust
 
     
Name, Year of Birth, and Position(s)
   
with the trust; (Terms of office, and
   
length of Time Served 3 )   Principal Occupations During the Past Five Years
 
Marie Chandoha
1961
President and Chief Executive Officer
(Officer of Laudus Trust since 2010.) 		  Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President and Chief Executive Officer (Dec. 2010 – present) and Chief Investment Officer (Dec. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010); Co-Head and Senior Portfolio Manager, Wells Capital Management (June 1999 – March 2007).
 
George Pereira
1964
Treasurer and Chief Financial Officer
(Officer of Laudus Trust since 2004.) 		  Senior Vice President and Chief Financial Officer (Nov. 2004 – present); Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., and Excelsior Funds Trust (June 2006 – June 2007).
 
Omar Aguilar
1970
Senior Vice President and Chief Investment Officer – Equities
(Officer of Laudus Trust since 2011.) 		  Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
 
Brett Wander
1961
Senior Vice President and Chief Investment Officer – Fixed Income
(Officer of Laudus Trust since 2011.) 		  Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008); Managing Director, Head of Market-Based Strategies, State Street Research (August 2003 – Jan. 2005).
 
Catherine MacGregor
1964
Vice President, Chief Legal Officer and Clerk
(Officer of Laudus Trust since 2005.) 		  Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).
 
David Lekich
1964
Vice President and Assistant Clerk
(Officer of Laudus Trust since 2011.) 		  Senior Vice President, Charles Schwab & Co., Inc., (Sept. 2011 – present); Senior Vice President, Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary, Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
 
 
 
1 Trustees remain in office until they resign, retire or are removed by shareholder vote. The Laudus Funds retirement policy requires that independent trustees retire at age 72 or after 20 years of service as a trustee, whichever comes first. In addition, the Laudus Funds retirement policy also requires any independent trustee of the Laudus Funds who also serves as an independent trustee of the Schwab Funds to retire from the Boards of Trustees of the Laudus Funds upon their required retirement date from either the Boards of Trustees of the Laudus Funds or the Schwab Funds, whichever comes first.
2 Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of Schwab and the investment adviser.
3 The President, Treasurer and Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.
 
 
 
72 

 

 
Glossary
 
 
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-back securities (agency fixed-rate and hybrid ARM passthroughs), asset-backed securities, and commercial mortgage-backed securities.
 
Bond is a security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the “coupon rate”) until a specified date (the “maturity date”), at which time the issuer returns the money borrowed (“principal” or “face value”) to the bondholder. Because of their structure, bonds are sometimes called “fixed income securities” or “debt securities.”
 
An individual bond is subject to the credit risk of the issuer. Bond credit ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Changes in interest rates can affect a bond’s market value prior to call or maturity. There is no guarantee that a bond’s yield to call or maturity will provide a positive return over the rate of inflation.
 
Citigroup non-U.S. Dollar World Government Bond Index measures the total rate of return performance for the government bonds of 23 countries, excluding the U.S., with a remaining maturity of at least one year.
 
Dividend yield is an expression of a stock’s market value in relationship to its dividend amount as a percentage. It is calculated by dividing the stock’s annual dividends by the market price of the stock.
 
Duration A measure of an individual bond’s sensitivity to interest rates. Calculations of duration generally take into account the bond’s yield, interest payments, maturity date and call features.
 
Weighted Average Duration  A measure of the duration of all bonds in a fund’s portfolio, based on the market value weighted average duration of each bond in the portfolio.
 
Maturity The maturity of a bond will generally be determined using a portfolio security’s final maturity date (date on which the final principal payment of a bond is scheduled to be paid); however, for securitized products, such as mortgage-backed securities and certain other asset-backed securities, maturity will be determined on an average life basis (weighted average time to receipt of all principal payments) by the investment adviser. Because pre-payment rates of individual mortgage pools vary widely, the average life of a particular pool cannot be predicted precisely. For securities with embedded demand features, such as puts or calls, either the demand date or the final maturity date will be used depending on interest rates, yields and other market conditions. The average portfolio maturity of a fund is dollar-weighted based upon the market value of a fund’s securities at the time of the calculation.
 
MSCI EAFE Index ® (Net) is a free float-adjusted market capitalization index that is designed to measure market equity performance in 22 developed market countries, excluding the U.S. and Canada. This series approximates the minimum possible dividend reinvestment.
 
MSCI Emerging Markets Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment.
 
MSCI World ® Index (Net) is a free float-adjusted market capitalization index that is designed to measure global developed markets equity performance. This series approximates the minimum possible dividend reinvestment.
 
Price to earnings ratio is the price of a stock divided by its historical earnings per share.
 
Price to book ratio compares the stock’s market value to the value of the total assets less the total liabilities.
 
Russell 1000 Index an index that measures the performance of the large-cap segment of the U.S. equity universe.
 
S&P 500 Index is a market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.
 
Sovereign debt refers to debt issued by a national government within a given country and denominated in a foreign currency.
 
Trading Activity is one of several risk factors commonly used to attribute a portfolio’s return relative to its benchmark. Specifically, trading activity measures a stock’s trailing 12 month trading volume relative to its total shares outstanding. It measures how actively traded a stock has been in the last 12 months.
 
 
 
Proxy Voting
 
A description of the policies and procedures that each fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request by visiting www.laudus.com, or the Securities and Exchange Commission’s website at www.sec.gov, or by contacting Laudus Funds at 866.452.8387.
 
Information regarding how each fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request by visiting www.laudus.com, or the Securities and Exchange Commission’s website at www.sec.gov.
 
Quarterly Disclosure of Portfolio Holdings
 
Each fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington DC. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The information filed on each fund’s most recent Form N-Q is also available at www.laudus.com.
 
 
 
  73

 

 
Notes

 

 
Notes

 

(LAUDUS FUNDS LOGO)
 
 
 
For More Information about the Funds:
 
Investment Adviser
Charles Schwab Investment Management, Inc.
211 Main Street, San Francisco, CA 94105
 
Shareholder Services
1.877.824.5615 Investment Professionals
1.800.447.3332 Individual Investors
www.laudus.com
 
 
 
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
 
MFR45085-04
00089290

 

     
Semiannual Report
September 30, 2012 		  (LAUDUS FUNDS LOGO)
 
 
 
 
 
COMMAND PERFORMANCE TM  

 
Laudus Growth Investors U.S. Large Cap Growth Fund
 
Adviser
Charles Schwab Investment Management, Inc.
 
Subadviser
UBS Global Asset Management (Americas) Inc.
 
 

 

 
THIS SUPPLEMENT IS NOT PART OF THE SHAREHOLDER REPORT.
 
LAUDUS TRUST
(the “Trust”)
 
Laudus Growth Investors U.S. Large Cap Growth Fund
(the “Fund”)
 
Supplement dated November 13, 2012 to the
Summary Prospectus and Statutory Prospectus,
each dated July 29, 2012
 
This supplement provides new and additional information beyond that contained in the Statutory Prospectus and should be read in conjunction with the Summary Prospectus and Statutory Prospectus
 
Effective November 12, 2012, Paul A. Graham, Saverio (Sam) Console and Peter J. Bye replaced Lawrence Kemp as portfolio manager of the Fund. Mr. Graham, Mr. Console and Mr. Bye are co-portfolio managers of the Fund. Accordingly, the following changes are made to the Summary Prospectus and Statutory Prospectus:
 
The “Portfolio manager” section on page 3 of the Summary Prospectus and Page 3 of the Statutory Prospectus is deleted and replaced in its entirety with the following:
 
Portfolio managers
Paul A. Graham, Managing Director of UBS Global AM, has been a co-portfolio manager of the fund since November 12, 2012.
 
Saverio (Sam) Console, Executive Director of UBS Global AM, has been co-portfolio manager of the fund since November 12, 2012.
 
Peter J. Bye, Executive Director of UBS Global AM, has been co-portfolio manager of the fund since November 12, 2012.
 
Paragraphs 9 and 10 of the “Management of the fund” section on Page 8 of the Statutory Prospectus is deleted and replaced in its entirety with the following:
 
Paul A. Graham is responsible for the day-to-day co-management of the fund. Mr. Graham, as co-portfolio manager of the fund, is responsible for managing the portfolio and reviewing the overall composition of the portfolio to ensure its compliance with its stated investment objective and strategies. Mr. Graham joined UBS in 1994 and is currently a Managing Director of UBS Global AM. Mr. Graham has overall responsibility for all aspects of growth investing strategies at UBS Global AM.
 
Saverio (Sam) Console is responsible for the day-to-day co-management of the fund. Mr. Console, as co-portfolio manager of the fund, is responsible for managing the portfolio and reviewing the overall composition of the portfolio to ensure its compliance with its stated investment objective and strategies. Mr. Console joined UBS in 1997 and is currently an Executive Director of UBS Global AM. Prior to assuming his role on the U.S. Large Cap Growth Equity portfolio construction team in 2005, he was responsible for providing research and analytical support, including database management, development of valuation models and creation of trade communications systems for the Growth Investors group.
 
Peter J. Bye is responsible for the day-to-day co-management of the fund. Mr. Bye, as co-portfolio manager of the fund, is responsible for managing the portfolio and reviewing the overall composition of the portfolio to ensure its compliance with its stated investment objective and strategies. Mr. Bye is an Executive Director of UBS Global AM. Prior to joining UBS in 2010, Mr. Bye worked for 12 years in equity research covering healthcare sectors at Cowen & Co., Citigroup, Wachovia and most recently Jefferies and Co.
 
Additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the fund is available in the Statement of Additional Information (SAI).
 
 
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
 
REG70801-00 (11/12) © 2012 All Rights Reserved

 

 
 
In This Report
 
     
     
  3
     
  4
     
Performance and Fund Facts
  5
     
  6
     
  7
     
  13
     
  19
     
  21
     
  24
 
 
 
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM).
Distributor: ALPS Distributors, Inc.
 
The industry/sector classification of the funds’ portfolio holdings uses the Global Industry Classification Standard (GICS) which was developed by and is the exclusive property of MSCI and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by CSIM and certain affiliates. Charles Schwab & Co, Inc., UBS Global Asset Management (Americas) Inc. and ALPS Distributors, Inc. are unaffiliated entities.
 

 

 
Performance at a Glance
 
 
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value will fluctuate so that an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. To obtain performance information current to the most recent month end, please visit www.laudus.com .
 
         
Total Return for the Report Period  
   
Laudus Growth Investors U.S. Large Cap Growth Fund (Ticker Symbol: LGILX)     -0.07%  
 
 
Russell 1000 ® Growth Index     1.84%  
 
 
Performance Details     page 5  
 
 
 
 
 
All fund and index figures on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
Fund expenses may have been partially absorbed by CSIM. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
 
Please see prospectus for further detail and investor eligibility requirements.
 
 
 
Laudus Growth Investors U.S. Large Cap Growth Fund  3

 

 
From the President
 

CHANDOHA PHOTO
 
Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the fund covered in this report.
 
For the six months ended September 30, 2012, large-cap U.S. stocks generated modest gains, overcoming an economic soft patch and overseas headwinds as the Federal Reserve (Fed) worked to support a stronger economic recovery.

 
Dear Shareholder,
 
As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment objectives, and for reading this important report concerning the Laudus Growth Investors U.S. Large Cap Growth Fund. For the six months ended September 30, 2012, large-cap U.S. stocks generated modest gains, overcoming an economic soft patch and overseas headwinds as the Federal Reserve (Fed) worked to support a stronger economic recovery. The Russell 1000 Growth Index returned 1.8%, while large-cap stocks outperformed mid- and small-cap stocks, and value outperformed growth.
 
U.S. economic activity remained soft, prompting the Fed to take further steps. The U.S. unemployment rate was stubbornly high, finishing at 7.8% in September, and uncertainty arose regarding the November elections and the potential for governmental spending cuts and tax increases beginning in 2013. In an effort to strengthen economic prospects, the Fed extended its forecast for keeping short-term interest rates low from late 2014 to mid-2015. The Fed also extended “Operation Twist”—a policy of buying longer-term bonds and selling short-term Treasuries—and announced plans to purchase additional agency mortgage-backed securities each month.
 
The euro zone’s ongoing sovereign debt crisis represented a significant hurdle for stocks. With concerns rising due to Greek elections and worries that the crisis could spread, equities sold off in May. Stocks spent the remainder of the report period in intermittent recovery, as European leaders made meaningful progress and the Fed reaffirmed its commitment to support U.S. growth. Profits at large U.S. companies generally surpassed estimates in spite of such challenges, although a decelerating trend in earnings growth became apparent.
 
Thank you for investing in Laudus Growth Investors U.S. Large Cap Growth Fund. We encourage you to review your investment portfolio regularly to ensure that it meets your current financial plan. For answers to frequently asked questions or for more information about the Laudus Growth Investors U.S. Large Cap Growth Fund, please visit www.laudus.com. We are also happy to hear from you at 1-800-447-3332.
 
Sincerely,
 
-S- MARIE CHANDOHA

 
Indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Index figures assume dividends and distributions were reinvested.
 
For definitions of the referenced indices, please see the Glossary.

 
 
 
4  Laudus Growth Investors U.S. Large Cap Growth Fund

 

 
Laudus Growth Investors U.S. Large Cap Growth Fund
 
 
Performance and Fund Facts as of 09/30/12
 
Past performance does not guarantee future results. The performance data quoted represents past performance, and current returns may be lower or higher. The performance information does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, visit www.laudus.com .
 
 Average Annual Total Returns
 
                                         
Fund and Inception Date   6 Months   1 Year   5 Years   10 Years
 
 
Fund: Laudus Growth Investors U.S. Large Cap Growth Fund (10/14/97) 1
    -0.07 %       29.50 %       5.14 %       11.02 %  
Russell 1000 ® Growth Index 2
    1.84 %       29.19 %       3.24 %       8.41 %  
 
Fund Expense Ratios 3 : Net 0.78%; Gross 0.88%
 
 
 Fund Characteristics
         
Number of Securities 4
    48  
Weighted Average Market Cap ($ x 1,000,000)
    $102,430  
Price/Earnings Ratio (P/E)
    22.85  
Price/Book Ratio (P/B)
    4.67  
Portfolio Turnover
(One year trailing)
    97%  
 
 Fund Overview
 
     
    Fund
 
 
Minimum Initial Investment
  $100
Inception Date
  10/14/1997 1
Ticker Symbol
  LGILX
Cusip
  51855Q549
NAV
  $14.82
 
 
 Sector Weightings % of Equities
         
Information Technology
    38.1%  
Consumer Discretionary
    21.0%  
Health Care
    13.0%  
Industrials
    10.0%  
Energy
    8.3%  
Consumer Staples
    6.8%  
Materials
    1.5%  
Telecommunication Services
    1.3%  
Total
    100.0%  
 
 Top Equity Holdings % of Net Assets 5
         
Apple, Inc.
    8.8%  
Visa, Inc., Class A
    4.5%  
Amazon.com, Inc.
    3.9%  
Google, Inc., Class A
    3.6%  
QUALCOMM, Inc.
    3.5%  
Allergan, Inc.
    3.5%  
The Estee Lauder Cos., Inc., Class A
    2.9%  
UnitedHealth Group, Inc.
    2.6%  
Las Vegas Sands Corp.
    2.6%  
Priceline.com, Inc.
    2.6%  
Total
    38.5%  
 
Total returns include change in share price and reinvestment of distributions. Total returns may reflect the waiver of a portion of a fund’s advisory fees for certain periods since the inception date. In such instances, and without the waiver of fees, total returns would have been lower. Performance results less than one year are not annualized. Performance data quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 30 days of the purchase date. If these fees were reflected, the performance data quoted would be lower.
 
Portfolio holdings may have changed since the report date.
 
1 Inception date is that of the fund’s predecessor fund, the Y Class of the UBS U.S. Large Cap Growth Fund. Effective July 13, 2009, all outstanding Class A, B and C shares of the UBS U.S. Large Cap Growth Fund (UBS Growth Fund) were converted to Class Y shares, and the UBS Growth Fund’s assets were acquired by the Laudus Growth Investors U.S. Large Cap Growth Fund. The performance and financial history prior to July 13, 2009 are that of the Class Y shares of the predecessor fund.
2 Russell 1000 ® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Investors cannot invest directly in any index and index figures do not include trading and management costs.
3 As stated in the prospectus. Net Expenses: Reflects expenses expected to be charged to shareholders through at least 7/30/14. Adviser expects to hold expenses at this level by waiving its management fees and/or bearing other expenses. Gross Expenses: Reflects the total annual fund operating expenses without the effect of contractual fee waivers. Please see the prospectus for more information. For actual rates during the period, refer to the Financial Highlights section of the Financial Statements.
4 Short-term investments are not included.
5 This list is not a recommendation of any security by the investment adviser.
 
 
 
Laudus Growth Investors U.S. Large Cap Growth Fund  5

 

 
Fund Expenses  (Unaudited)
 
 Examples for a $1,000 Investment
 
As a fund shareholder, you incur two types of costs: transaction costs, such as redemption fees; and, ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.
 
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for the period beginning April 1, 2012 and held through September 30, 2012.
 
Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ¸  $1,000 = 8.6), then multiply the result by the number given for your fund under the heading entitled “Expenses Paid During Period.”
 
Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.
 
You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
 
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as redemption fees. If these transactional costs were included, your costs would have been higher.
 
 
                                 
            Ending
   
        Beginning
  Account Value
  Expenses Paid
    Expense Ratio 1
  Account Value
  (Net of Expenses)
  During Period 2
    (Annualized)   at 4/1/12   at 9/30/12   4/1/12–9/30/12
 
Laudus Growth Investors U.S. Large Cap Growth Fund                                
Actual Return
    0.78%     $ 1,000     $ 999.30     $ 3.91  
Hypothetical 5% Return
    0.78%     $ 1,000     $ 1,021.16     $ 3.95  
 
 
1 Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
2 Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 183 days of the period, and divided by 365 days of the fiscal year.
 
 
 
6  Laudus Growth Investors U.S. Large Cap Growth Fund

 

 
Laudus Growth Investors U.S. Large Cap Growth Fund
 
 
Financial Statements
 
Financial Highlights
 
                                                             
    4/1/12–
  4/1/11–
  4/1/10–
  7/1/09–
  7/1/08–
  7/1/07–
  7/1/06–
   
    9/30/12*   3/31/12   3/31/11   3/31/10 1   6/30/09   6/30/08   6/30/07    
 
 
Per-Share Data ($)
Net asset value at beginning of period
    14.83       13.36       11.23       8.68       11.45       10.94       9.02      
   
Income (loss) from investment operations:
                                                           
Net investment income (loss)
    (0.01 ) 2     (0.02 ) 2     0.01 2     0.01 2     0.03 2     0.01 2     0.04 2    
Net realized and unrealized gains (losses)
    0.00 3     1.77       2.13       2.58       (2.80 )     0.59       1.90      
   
Total from investment operations
    (0.01 )     1.75       2.14       2.59       (2.77 )     0.60       1.94      
Less distributions:
                                                           
Distributions from net investment income
    —       —       (0.01 )     (0.04 )     —       (0.01 )     (0.02 )    
Distributions from net realized gains
    —       (0.28 )     —       —       —       (0.08 )     —      
   
Total distributions
    —       (0.28 )     (0.01 )     (0.04 )     —       (0.09 )     (0.02 )    
   
Net asset value at end of period
    14.82       14.83       13.36       11.23       8.68       11.45       10.94      
   
Total return (%)
    (0.07 ) 4     13.58       19.07       30.02 4     (24.19 )     5.52       21.51      
 
Ratios/Supplemental Data (%)
Ratios to average net assets:
                                                           
Net operating expenses
    0.78 5     0.78       0.78       0.78 5     0.80       0.80       0.80      
Gross operating expenses
    0.81 5     0.88       0.94       0.99 5     1.23       1.21       1.25      
Net investment income (loss)
    (0.09 ) 5     (0.17 )     0.06       0.12 5     0.41       0.05       0.35      
Portfolio turnover rate
    48 4     96       98       72 4     132       102       112      
Net assets, end of period ($ x 1,000)
    1,367,883       1,029,502       468,963       214,872       54,344       76,175       62,529      

* Unaudited.

1  Effective July 13, 2009, all outstanding Class A, B, and C shares in the UBS U.S. Large Cap Growth Fund (UBS Growth Fund) were converted to Class Y shares, and the UBS Growth Fund’s assets were acquired by Laudus Growth Investors U.S. Large Cap Growth Fund which commenced operations on that day. The Financial Highlights above present the Y Class shares of the UBS Growth Fund prior to the acquisition date of July 13, 2009 and Laudus Growth Investors U.S. Large Cap Growth Fund subsequent to that date. (Note that the UBS Growth Fund had a fiscal year ending June 30 whereas the Laudus Growth Investors U.S. Large Cap Growth Fund has a fiscal year ending March 31).
2  Calculated based on the average shares outstanding during the period.
3  Amount is less than $0.01.
4  Not annualized.
5  Annualized.
 
 
 
See financial notes  7

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Portfolio Holdings  as of September 30, 2012 (Unaudited)
 
 
This section shows all the securities in the fund’s portfolio and their values as of the report date.
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting the fund’s website at www.laudus.com.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  96 .8%   Common Stock     1,136,223,579       1,323,891,763  
  1 .9%   Other Investment Companies     26,438,032       26,855,743  
 
 
  98 .7%   Total Investments     1,162,661,611       1,350,747,506  
  1 .3%   Other Assets and Liabilities, Net             17,135,072  
 
 
  100 .0%   Net Assets             1,367,882,578  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  96.8% of net assets
 
Capital Goods 7.1%
Cummins, Inc.
    198,200       18,276,022  
Danaher Corp.
    579,000       31,931,850  
Roper Industries, Inc.
    119,100       13,087,899  
United Technologies Corp.
    437,300       34,236,217  
                 
              97,531,988  
 
Commercial & Professional Supplies 0.6%
IHS, Inc., Class A  *
    79,900       7,778,265  
 
Consumer Durables & Apparel 6.7%
Lululemon Athletica, Inc.  *
    307,200       22,714,368  
Michael Kors Holdings Ltd.  *
    200,800       10,678,544  
NIKE, Inc., Class B
    281,400       26,707,674  
Ralph Lauren Corp.
    211,100       31,924,653  
                 
              92,025,239  
 
Consumer Services 2.6%
Las Vegas Sands Corp.
    757,700       35,134,549  
 
Energy 8.0%
Cabot Oil & Gas Corp.
    315,800       14,179,420  
Concho Resources, Inc.  *
    326,900       30,973,775  
EOG Resources, Inc.
    99,400       11,137,770  
FMC Technologies, Inc.  *
    738,700       34,201,810  
Schlumberger Ltd.
    263,400       19,051,722  
                 
              109,544,497  
 
Food & Staples Retailing 2.4%
CVS Caremark Corp.
    682,500       33,046,650  
 
Food, Beverage & Tobacco 1.2%
Monster Beverage Corp.  *
    306,000       16,572,960  
 
Health Care Equipment & Services 3.4%
Intuitive Surgical, Inc.  *
    21,700       10,755,171  
UnitedHealth Group, Inc.
    647,200       35,861,352  
                 
              46,616,523  
 
Household & Personal Products 2.9%
The Estee Lauder Cos., Inc., Class A
    652,000       40,143,640  
 
Materials 1.5%
The Sherwin-Williams Co.
    136,800       20,370,888  
 
Media 2.2%
DIRECTV  *
    519,700       27,263,462  
Discovery Communications, Inc., Class A  *
    40,000       2,385,200  
                 
              29,648,662  
 
Pharmaceuticals, Biotechnology & Life Sciences 9.2%
Agilent Technologies, Inc.
    756,000       29,068,200  
Allergan, Inc.
    516,500       47,301,070  
Biogen Idec, Inc.  *
    113,500       16,937,605  
Gilead Sciences, Inc.  *
    493,600       32,740,488  
                 
              126,047,363  
 
Retailing 8.9%
Amazon.com, Inc.  *
    207,600       52,796,832  
Dollar General Corp.  *
    645,100       33,248,454  
Priceline.com, Inc.  *
    56,700       35,081,991  
                 
              121,127,277  
 
Software & Services 22.2%
Baidu, Inc. ADR  *
    222,900       26,039,178  
eBay, Inc.  *
    369,400       17,882,654  
Facebook, Inc., Class A  *
    943,300       20,422,445  
Google, Inc., Class A  *
    65,000       49,042,500  
MasterCard, Inc., Class A
    59,900       27,043,652  
MercadoLibre, Inc.
    143,700       11,862,435  
Salesforce.com, Inc.  *
    183,600       28,033,884  
Teradata Corp.  *
    269,600       20,330,536  
Verisign  *
    229,800       11,188,962  
Visa, Inc., Class A
    454,300       61,003,404  
VMware, Inc., Class A  *
    319,700       30,927,778  
                 
              303,777,428  
 
Technology Hardware & Equipment 14.7%
Apple, Inc.
    179,700       119,906,622  
NetApp, Inc.  *
    901,300       29,634,744  
QUALCOMM, Inc.
    771,700       48,223,533  
Riverbed Technology, Inc.  *
    141,500       3,292,705  
                 
              201,057,604  
 
 
 
8  See financial notes

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
Telecommunication Services 1.2%
Crown Castle International Corp.  *
    263,700       16,903,170  
 
Transportation 2.0%
Union Pacific Corp.
    223,800       26,565,060  
                 
Total Common Stock
(Cost $1,136,223,579)     1,323,891,763  
         
                 
                 
 
 Other Investment Companies  1.9% of net assets
                 
                 
iShares Russell 1000 Growth Index Fund
    101,000       6,736,700  
State Street Institutional U.S. Government Money Market Fund
    20,119,043       20,119,043  
                 
Total Other Investment Companies
(Cost $26,438,032)     26,855,743  
         
 
End of Investments.
 
At 09/30/12, the tax basis cost of the fund’s investments was $1,167,270,462 and the unrealized appreciation and depreciation were $209,528,051 and ($26,051,007), respectively, with a net unrealized appreciation of $183,477,044.
 
* Non-income producing security.
 
     
ADR —
  American Depositary Receipt
 
 
The following is a summary of the inputs used to value the fund’s investments as of September 30, 2012 (see financial note 2(a) for additional information):
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total 2
 
Common Stock 1
    $1,323,891,763       $—       $—       $1,323,891,763  
Other Investment Companies
    26,855,743       —       —       26,855,743  
                                 
Total
    $1,350,747,506       $—       $—       $1,350,747,506  
                                 
 
     
1
  As categorized in Portfolio Holdings.
2
  The fund had no Other Financial Instruments.
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended September 30, 2012.
 
 
 
See financial notes  9

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

Statement of
Assets and Liabilities
As of September 30, 2012; unaudited
 
             
 
Assets
Investments, at value (cost $1,162,661,611)
        $1,350,747,506  
Receivables:
           
Investments sold
        49,004,630  
Fund shares sold
        5,898,033  
Dividends
        482,684  
Foreign tax reclaims
        782  
Interest
        645  
Prepaid expenses
  +     18,850  
   
Total assets
        1,406,153,130  
 
Liabilities
Payables:
           
Investments bought
        37,198,763  
Fund shares redeemed
        617,220  
Investment adviser fees
        73,737  
Trustees’ retirement plan
        2,014  
Accrued expenses
  +     378,818  
   
Total liabilities
        38,270,552  
 
Net Assets
Total assets
        1,406,153,130  
Total liabilities
  −     38,270,552  
   
Net assets
        $1,367,882,578  
 
Net Assets by Source
Capital received from investors
        1,158,242,932  
Net investment loss
        (1,050,036 )
Net realized capital gains
        22,603,787  
Net unrealized capital gains
        188,085,895  
 
Net Asset Value (NAV)
 
                         
        Shares
             
Net Assets   ÷   Outstanding   =   NAV      
$1,367,882,578
      92,314,514         $14.82      
 
 
 
10  See financial notes

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

Statement of
Operations
For April 1, 2012 through September 30, 2012; unaudited
 
             
 
Investment Income
Dividends
        $3,969,682  
Interest
  +     3,382  
   
Total investment income
        3,973,064  
 
Expenses
Investment adviser fees
        3,851,207  
Sub-Accounting and sub-transfer agent fees
        579,198  
Transfer agent fees
        79,081  
Registration fees
        44,975  
Shareholder reports
        39,231  
Professional fees
        34,785  
Accounting and administration fees
        31,825  
Custodian fees
        18,478  
Trustees’ fees
        12,936  
Interest expense
        55  
Other expenses
  +     8,870  
   
Total expenses
        4,700,641  
Expense reduction by adviser
  −     182,845  
Custody credits
  −     30  
   
Net expenses
  −     4,517,766  
   
Net investment loss
        (544,702 )
 
Realized and Unrealized Gains (Losses)
Net realized gains on investments
        19,761,065  
Net unrealized losses on investments
  +     (5,108,062 )
   
Net realized and unrealized gains
        14,653,003  
             
Increase in net assets resulting from operations
        $14,108,301  
 
 
 
See financial notes  11

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

Statement of
Changes in Net Assets
For the current and prior report periods
Figures for the current period are unaudited
 
                     
 
Operations
                     
4/1/12-9/30/12     4/1/11-3/31/12  
Net investment loss
        ($544,702 )     ($1,063,653 )
Net realized gains
        19,761,065       21,300,714  
Net unrealized gains (losses)
  +     (5,108,062 )     101,657,302  
   
Increase in net assets from operations
        14,108,301       121,894,363  
 
Distributions to Shareholders
Distributions from net realized gains
        $—       ($14,438,073 )
 
Transactions in Fund Shares
                                     
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       VALUE       SHARES       VALUE  
Shares sold
        29,772,318       $421,903,582       44,218,087       $582,923,031  
Shares reinvested
        —       —       795,982       9,639,343  
Shares redeemed
  +     (6,889,745 )     (97,630,934 )     (10,674,523 )     (139,479,987 )
   
Net transactions in fund shares
        22,882,573       $324,272,648       34,339,546       $453,082,387  
 
Shares Outstanding and Net Assets
        4/1/12-9/30/12     4/1/11-3/31/12  
          SHARES       NET ASSETS       SHARES       NET ASSETS  
Beginning of period
        69,431,941       $1,029,501,629       35,092,395       $468,962,952  
Total increase
  +     22,882,573       338,380,949       34,339,546       560,538,677  
   
End of period
        92,314,514       $1,367,882,578       69,431,941       $1,029,501,629  
   
                                     
Net investment loss
                ($1,050,036 )             ($505,334 )
 
 
 
12  See financial notes

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited
 
 
1. Business Structure of the Funds:
 
Laudus Growth Investors U.S. Large Cap Growth Fund is a series of Laudus Trust, (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:
 
         
 
Laudus Growth Investors U.S. Large Cap Growth Fund
       
Laudus Mondrian International Equity Fund
       
Laudus Mondrian Global Equity Fund (closed to new investors)
       
Laudus Mondrian Emerging Markets Fund
       
Laudus Mondrian International Fixed Income Fund
       
Laudus Mondrian Global Fixed Income Fund
       
 
 
The Laudus Growth Investors U.S. Large Cap Growth Fund offers one share class.
 
Shares are bought and sold (subject to a redemption fee, see financial note 9) at closing net asset value per share (“NAV”), which is the price for all outstanding shares of the fund. The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law.
 
2. Significant Accounting Policies:
 
The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
 
(a) Security Valuation:
 
Under procedures approved by the fund’s Board of Trustees (the Board), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
 
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
 
  •  Securities traded on an exchange or over-the-counter: valued at the closing value for the day, or, on days when no closing value has been reported at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
 
  •  Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the procedures.
 
  •  Short-term securities (60 days or less to maturity): valued at amortized cost, which approximates market value.
 
  •  Underlying funds: valued at their respective net asset values.
 
 
 
  13

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
 
The three levels of the fair value hierarchy are as follows:
 
  •  Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The fund does not adjust the quoted price for such investments, even in situations where the fund holds a large position and a sale could reasonably impact the quoted price. Investments in underlying funds are valued at their NAV daily and are classified as Level 1 prices.
 
  •  Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the fund values its holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board of Trustees has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
  •  Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
 
The levels associated with valuing the fund’s investments as of September 30, 2012 are disclosed in the Portfolio Holdings.
 
(b) Security Transactions:
 
Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains or losses from security transactions are based on the identified costs of the securities involved.
 
Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and
 
 
 
14 

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are reported in foreign currency transactions or translations on the Statement of Operations. The fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
 
Gains realized by the fund on the sale of securities in certain foreign countries may be subject to non-U.S. taxes. In those instances, the fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.
 
(c) Investment Income:
 
Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the fund records certain foreign security dividends on the day it learns of the ex-dividend date.
 
(d) Expenses:
 
Expenses that are specific to a fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets.
 
(e) Distributions to Shareholders:
 
The fund makes distributions from net investment income and net realized capital gains, if any, once a year.
 
(f) Custody Credit:
 
The fund has an arrangement with its custodian bank, State Street Bank and Trust Company (“State Street”), under which the fund receives a credit for its uninvested cash balance to offset its custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the fund’s operating expenses.
 
(g) Accounting Estimates:
 
The accounting policies described in this report conform to accounting principles generally accepted in the United States of America. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.
 
(h) Federal Income Taxes:
 
The fund intends to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the fund distributes substantially all of its net investment income and realized net capital gains, if any, to its respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.
 
(i) Indemnification:
 
Under the fund’s organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote.
 
(j) New Accounting Pronouncements:
 
In December 2011, Accounting Standards Update (“ASU”) No. 2011-11, “Disclosures about Offsetting Assets and Liabilities,” was issued and is effective for interim and annual periods beginning after January 1, 2013. The ASU enhances disclosure
 
 
 
  15

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited (continued)
 
2. Significant Accounting Policies (continued):
 
requirements with respect to an entity’s rights of offset and related arrangements associated with its financial and derivative instruments. Management is currently evaluating the impact the adoption of ASU 2011-11 may have on the fund’s financial statement disclosures.
 
3. Risk factors:
 
Investing in the fund may involve certain risks, as described in the fund’s prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.
 
Stock markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the fund will fluctuate, which means that the investors could lose money.
 
The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
 
The fund will principally invest in large-cap segments of the U.S. stock market. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. stocks fall behind other types of investments — mid-or small-cap stocks, for instance — the fund’s large-cap holdings could reduce performance.
 
Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.
 
Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund.
 
4. Affiliates and Affiliated Transactions:
 
Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as the fund’s investment adviser pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between CSIM and the trust. UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the fund’s sub-adviser, provides day-to-day portfolio management services to the fund, subject to the supervision of CSIM.
 
For its advisory services to the fund, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of the fund’s average daily net assets described as follows:
 
         
Average daily net assets
   
 
First $500 million
    0.70%  
$500 million to $1 billion
    0.65%  
$1 billion to $1.5 billion
    0.60%  
$1.5 billion to $2 billion
    0.575%  
Over $2 billion
    0.55%  
 
CSIM (not the fund) pays a portion of the management fees it receives to UBS Global AM in return for its services.
 
CSIM has contractually agreed, until at least July 30, 2014, to waive a portion of its management fee and bear certain expenses of the fund. As such, CSIM further agrees to reimburse the fund to limit the annual expenses to 0.78% of the fund’s average daily net assets value, exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest (overdraft charges), taxes, brokerage commissions other expenditures which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of the fund’s business.
 
Any amounts waived or reimbursed in a particular fiscal year will be subject to repayment through the next two fiscal years, to the extent that the repayment will not cause the fund’s net expenses to exceed the current limit (as stated in CSIM’s contractual
 
 
 
16 

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited (continued)
 
4. Affiliates and Affiliated Transactions (continued):
 
undertaking) during the respective year. For the period ended September 30, 2012, there were no prior year amounts recouped. As of September 30, 2012, the balance of recoupable expenses and the respective years of expiration are as follows:
 
         
Expiration Date
   
 
March 31, 2013
    $537,214  
March 31, 2014
    650,228  
March 31, 2015
    182,845  
         
Total
    $1,370,287  
         
 
The fund may, from time to time, execute portfolio trades with affiliated brokers/dealers. For the period ended September 30, 2012, the fund paid no brokerage fees on the execution of portfolio trades with affiliated brokers/dealers.
 
5. Transfer Agent and Shareholders Services:
 
Boston Financial Data Services, Inc. (“BFDS”) provides transfer agent services for the fund.
 
The trustees have authorized the fund to reimburse, out of the assets of the fund, financial intermediaries that provide sub-accounting and sub-transfer agency services in connection with the fund’s shares in an amount of up to 0.10% of the average daily net assets of the fund on an annual basis.
 
6. Board of Trustees:
 
The Trust’s Board of Trustees oversees the general conduct of the trust and the fund.
 
Trustees may include people who are officers and/or directors of the investment adviser or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted in the fund’s Statement of Operations.
 
Until September 2006, a Retirement Plan existed for the independent trustees. After the Retirement Plan closed to new independent trustees, the previously accrued and unpaid benefits continue to be adjusted by performance of the fund. As a result, the amount of the retirement benefits payable to certain independent trustees may increase or decrease based on the performance of the fund.
 
7. Borrowing from Banks:
 
The fund has access to custodian overdraft facilities and to an uncommitted line of credit of $100 million with State Street. The fund pays interest on the amounts it borrows at rates that are negotiated periodically.
 
There were no borrowings from the lines of credit by the fund during the period. However, the fund may have utilized its overdraft facility and incurred interest expense, which is disclosed on the Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
 
8. Purchases and Sales/Maturities of Investment Securities:
 
For the period ended September 30, 2012, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:
 
             
Purchases of Securities
 
Sales/Maturities of Securities
 
  $843,848,938       $545,391,662  
 
 
 
  17

 

 
 Laudus Growth Investors U.S. Large Cap Growth Fund
 

 
Financial Notes, unaudited (continued)
 
9. Redemption Fee:
 
The fund charges a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts are netted against redemption proceeds in the Statement of Changes in Net Assets. The redemption fees charged during the current and prior periods are:
 
             
Current Period
  Prior Period
(4/1/12-9/30/12)
 
(4/1/11-3/31/12)
 
  $38,390       $40,006  
 
10. Federal Income Taxes:
 
Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of March 31, 2012, the fund had no capital loss carryforwards.
 
For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended March 31, 2012, the fund had aggregate deferred realized net ordinary losses and capital losses utilized as follows:
 
         
Ordinary losses deferred
    $503,466  
Capital losses utilized
    2,212,999  
 
As of March 31, 2012, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended March 31, 2012, the fund did not incur any interest or penalties.
 
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (“the Act”) was signed by the President. The Act is the first major piece of legislation affecting Regulated Investment Companies (“RICs”) since 1986 and it modernizes several of the federal income and excise tax provisions related to RICs.
 
Certain of the enacted provisions include:
 
Post-enactment capital losses may now be carried forward indefinitely, but must retain the character of the original loss. However, such losses must be utilized prior to the pre-enactment capital losses, which increases the likelihood that the pre-enactment capital losses will expire unused. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as a short-term capital loss, irrespective of the character of the original loss. The Act contains simplification provisions, which are aimed at preventing disqualification of a RIC for “inadvertent” failures of the asset diversification and/or qualifying income tests. Additionally, the Act exempts RICs from the preferential dividend rule, and repeals the 60-day designation requirement for certain types of pay-through income and gains.
 
Finally, the Act contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions.
 
11. Subsequent Events: 
 
Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.
 
 
 
18 

 

 
Approval of Investment Advisory and Sub-Advisory Agreements
 
The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreements be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreements.
 
The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in part, to considering whether to renew the investment advisory agreement between Laudus Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”), and the sub-advisory agreement between CSIM and UBS Global Asset Management (Americas) Inc. (“UBS”) (such investment advisory and sub-advisory agreements, collectively, the “Agreements”), in each case, with respect to Laudus Growth Investors U.S. Large Cap Growth Fund (the “Fund”). In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM and UBS, including information about their affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to fund operations and fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM and UBS, as appropriate.
 
As part of the renewal process and ongoing oversight of the advisory and sub-advisory relationships, Independent Trustees’ legal counsel sends an information request letter to CSIM and CSIM sends an information request letter to UBS seeking certain relevant information. The responses by CSIM and UBS are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials.
 
The Board, including a majority of the Independent Trustees, considered information relating to its consideration of the continuance of the Agreements at meetings held on April 24, 2012, and June 5, 2012, and approved the renewal of the Agreements for an additional one year term at the meeting held on June 5, 2012. The Board’s approval of the Agreements with was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:
 
1.  the nature, extent and quality of the services provided to the Fund under the Agreements, including the resources of CSIM and its affiliates, and UBS, dedicated to the Fund;
 
2.  the Fund’s investment performance and how it compared to that of certain other comparable mutual funds;
 
3.  the Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;
 
4.  the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Fund, including both direct and indirect benefits accruing to CSIM and its affiliates, as well as the profitability of UBS; and
 
5.  the extent to which economies of scale would be realized as the Fund grows, and whether fee levels in the Agreements reflect those economies of scale for the benefit of Fund investors.
 
Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered investments in CSIM’s mutual fund infrastructure. The Trustees also considered Schwab’s excellent reputation in connection with the OneSource mutual fund offering and its overall financial condition. The Board also considered the nature, extent and quality of the sub-advisory services provided by UBS to the Fund and the resources it dedicates to the Fund. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM and UBS to the Fund and the resources of CSIM and its affiliates and the resources of UBS dedicated to the Fund supported renewal of the Agreements.
 
Fund Performance. The Board considered Fund performance in determining whether to renew the Agreements. Specifically, the Trustees considered the Fund’s performance relative to a peer category of other mutual funds and an appropriate index/benchmark, in light of total return and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the peer category analysis. In evaluating the performance of the Fund,
 
 
 
  19

 

the Trustees considered both risk and shareholder risk expectations for the Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreements.
 
Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreements, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer category and comparison having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s contractual waivers of management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and fees charged by UBS to other mutual funds and to other types of accounts, such as separate accounts and offshore funds, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreements.
 
Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly and the compensation flowing to UBS, directly or indirectly. In this connection, with respect to the profitability of CSIM and its affiliates, the Trustees reviewed management’s profitability analyses. The Trustees also considered any other benefits derived by CSIM and UBS from their relationships with the Fund, such as whether, by virtue of their management of the Fund, CSIM or UBS obtains investment information or other research resources that aid it in providing advisory services to other clients. With respect to CSIM and UBS, and their respective affiliates, the Trustees considered whether the varied levels of compensation and profitability under the Agreements and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund by CSIM and UBS, and their respective affiliates. With respect to the profitability of UBS, the Board also considered that UBS is compensated by CSIM, and not by the Fund directly, and such compensation reflects an arms-length negotiation between the parties. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM and UBS is reasonable and supported renewal of the Agreements.
 
Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by CSIM and its affiliates. In this regard, and consistent with their consideration of Fund expenses, the Trustees considered that CSIM has committed resources to minimize the effects on shareholders of diseconomies of scale during periods when Fund assets are relatively small through contractual expense waivers. The Trustees also considered existing contractual investment advisory fee schedule for the Fund that includes lower fees at higher graduated asset levels, and UBS’s agreement to a contractual sub-advisory fee schedule that includes lower fees at higher graduated asset levels. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund obtains reasonable benefit from economies of scale.
 
In the course of their deliberations, the Trustees did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreements and concluded that the compensation under the Agreements is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.
 
 
 
20 

 

 
Trustees and Officers
 
 
The tables below give information about the trustees and officers for the Laudus Trust which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 91 funds.
 
The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.
 
 Independent Trustees
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served 1 )   During the Past Five Years   the Trustee   Other Directorships
 
Mariann Byerwalter
1960
Trustee
(Trustee of Laudus Trust since 2004.) 		  Chairman of JDN Corporate Advisory LLC.   74   Director, Redwood Trust, Inc. (1998 – present)
Director, PMI Group Inc. (2001 – 2009)
 
John F. Cogan
1947
Trustee
(Trustee of Laudus Trust since 2010.) 		  Senior Fellow: The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 1994 – present).   74   Director, Gilead Sciences, Inc. (2005 – present)
Director, Monaco Coach Corporation (2005 – 2009)
 
William A. Hasler
1941
Trustee
(Trustee of Laudus Trust since 2004.) 		  Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).   74   Director, TOUSA (1998 – present)
Director, Mission West Properties (1998 – present)
Director, Globalstar, Inc. (2009 – present)
Director, Aviat Networks (2001 – present)
Director, Ditech Networks Corporation (1997 – 2012)
Director, Aphton Corp. (1991 – 2007)
Director, Solectron Corporation (1998 – 2007)
Director, Genitope Corporation (2000 – 2009)
 
David L. Mahoney
1954
Trustee
(Trustee of Laudus Trust since 2011.) 		  Private Investor.   74   Director, Symantec Corporation (2003 – present)
Director, Corcept Therapeutics Incorporated (2004 – present)
Director, Tercica Inc. (2004 – 2008)
 
Kiran M. Patel
1948
Trustee
(Trustee of Laudus Trust since 2011.) 		  Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).   74   Director, KLA-Tencor Corporation (2008 – present)
Director, BEA Systems, Inc. (2007 – 2008)
Director, Eaton Corp. (2003 – 2006)
 
Gerald B. Smith
1950
Trustee
(Trustee of Laudus Trust since 2010.) 		  Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).   74   Lead Independent Director, Board of Cooper Industries (2002 – present)
Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present)
Director, Oneok, Inc. (2009 – present)
 
 
 
 
  21

 

 
 Independent Trustees (continued)
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served 1 )   During the Past Five Years   the Trustee   Other Directorships
 
Joseph H. Wender
1944
Trustee
(Trustee of Laudus Trust since 2010.) 		  Senior Consultant, Goldman Sachs & Co., Inc. (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present); Senior Director, Chairman of the Finance Committee, GSC Group (July 2005 – Dec. 2007); General Partner, Goldman Sachs & Co., Inc. (Oct. 1982 – June 2005).   74   Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)
 
 
 Interested Trustees
 
             
Name, Year of Birth,
      Number of
   
and Position(s) with
      Portfolios in
   
the trust; (Terms of
      Fund Complex
   
office, and length of
  Principal Occupations
  Overseen by
   
Time Served )   During the Past Five Years   the Trustee   Other Directorships
 
Charles R. Schwab 2
1937
Chairman and Trustee
(Chairman and Trustee of Laudus Trust since 2010.) 		  Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N.A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; Through June 2007, Director, U.S. Trust Company, N.A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, Charles Schwab & Co., Inc.   74   None
 
Walter W. Bettinger II 2
1960
Trustee
(Trustee of Laudus Trust since 2010.) 		  As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.   91   None
 
 
 
 
22 

 

 Officers of the Trust
 
     
Name, Year of Birth, and Position(s)
   
with the trust; (Terms of office, and
   
length of Time Served 3 )   Principal Occupations During the Past Five Years
 
Marie Chandoha
1961
President and Chief Executive Officer
(Officer of Laudus Trust since 2010.) 		  Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President and Chief Executive Officer (Dec. 2010 – present) and Chief Investment Officer (Dec. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010); Co-Head and Senior Portfolio Manager, Wells Capital Management (June 1999 – March 2007).
 
George Pereira
1964
Treasurer and Chief Financial Officer
(Officer of Laudus Trust since 2004.) 		  Senior Vice President and Chief Financial Officer (Nov. 2004 – present); Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc., and Excelsior Funds Trust (June 2006 – June 2007).
 
Omar Aguilar
1970
Senior Vice President and Chief Investment Officer – Equities
(Officer of Laudus Trust since 2011.) 		  Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
 
Brett Wander
1961
Senior Vice President and Chief Investment Officer – Fixed Income
(Officer of Laudus Trust since 2011.) 		  Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008); Managing Director, Head of Market-Based Strategies, State Street Research (August 2003 – Jan. 2005).
 
Catherine MacGregor
1964
Vice President, Chief Legal Officer and Clerk
(Officer of Laudus Trust since 2005.) 		  Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).
 
David Lekich
1964
Vice President and Assistant Clerk
(Officer of Laudus Trust since 2011.) 		  Senior Vice President, Charles Schwab & Co., Inc., (Sept. 2011 – present); Senior Vice President, Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary, Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
 
 
 
1 Trustees remain in office until they resign, retire or are removed by shareholder vote. The Laudus Funds retirement policy requires that independent trustees retire at age 72 or after 20 years of service as a trustee, whichever comes first. In addition, the Laudus Funds retirement policy also requires any independent trustee of the Laudus Funds who also serves as an independent trustee of the Schwab Funds to retire from the Boards of Trustees of the Laudus Funds upon their required retirement date from either the Boards of Trustees of the Laudus Funds or the Schwab Funds, whichever comes first.
2 Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of Schwab and the investment adviser.
3 The President, Treasurer and Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.
 
 
 
  23

 

 
Glossary
 
 
Bond is a security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the “coupon rate”) until a specified date (the “maturity date”), at which time the issuer returns the money borrowed (“principal” or “face value”) to the bondholder. Because of their structure, bonds are sometimes called “fixed income securities” or “debt securities.”
 
An individual bond is subject to the credit risk of the issuer. Bond credit ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Changes in interest rates can affect a bond’s market value prior to call or maturity. There is no guarantee that a bond’s yield to call or maturity will provide a positive return over the rate of inflation.
 
Dividend yield is an expression of a stock’s market value in relationship to its dividend amount as a percentage. It is calculated by dividing the stock’s annual dividends by the market price of the stock.
 
Price to earnings ratio is the price of a stock divided by its historical earnings per share.
 
Price to book ratio compares the stock’s market value to the value of the total assets less the total liabilities.
 
Russell 1000 Growth Index is an index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
 
Russell 2000 Index is an index that measures the performance of the small-cap segment of the U.S. equity universe.
 
S&P 500 Index is a market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.
 
Sovereign debt refers to debt issued by a national government within a given country and denominated in a foreign currency.
 
Trading Activity is one of several risk factors commonly used to attribute a portfolio’s return relative to its benchmark. Specifically, trading activity measures a stock’s trailing 12 month trading volume relative to its total shares outstanding. It measures how actively traded a stock has been in the last 12 months.
 
 
 
Proxy Voting
 
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request by visiting www.laudus.com, or the Securities and Exchange Commission’s website at www.sec.gov, or by contacting Laudus Funds at 866.452.8387.
 
Information regarding how the fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request by visiting www.laudus.com, or the Securities and Exchange Commission’s website at www.sec.gov.
 
Quarterly Disclosure of Portfolio Holdings
 
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington DC. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The information filed on a fund’s most recent Form N-Q is also available at www.laudus.com.
 
 
 
24 

 

 
Notes

 

 
Notes

 

(LAUDUS FUNDS LOGO)
 
 
 
For More Information about the Funds:
 
Investment Adviser
Charles Schwab Investment Management, Inc.
211 Main Street, San Francisco, CA 94105
 
Shareholder Services
1.877.824.5615 Investment Professionals
1.800.447.3332 Individual Investors
www.laudus.com
 
 
 
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
 
MFR51736-03
00089292

 

Item 2: Code of Ethics.
Not applicable to this semi-annual report.
Item 3: Audit Committee Financial Expert.
Not applicable to this semi-annual report.
Item 4: Principal Accountant Fees and Services.
Not applicable to this semi-annual report.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: Schedule of Investments.
The schedules of investments are included as part of the report to shareholders filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11: Controls and Procedures.
(a)   Based on their evaluation of Registrant’s disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant’s Chief Executive Officer, Marie Chandoha and Registrant’s Principal Financial Officer, George Pereira, have concluded that Registrant’s disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is

 

 

    appropriately communicated to Registrant’s officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above.
(b)   During the second fiscal quarter of the period covered by this report, there have been no changes in Registrant’s internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting.
Item 12: Exhibits.
(a)   (1)     Code of ethics — not applicable to this semi-annual report.
   (2)   Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the 1940 Act, are attached.
 
   (3)   Not applicable.
(b)   A certification for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the 1940 Act, is attached. This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. section 1350 and is not being filed as part of the Form N-CSR with the Commission.
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.
(Registrant ) The Laudus Trust
         
By:
  /s/ Marie Chandoha
 
Marie Chandoha 		   
 
  President and Chief Executive Officer    
 
       
Date:
  11/16/12    
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
By:
  /s/ Marie Chandoha
 
Marie Chandoha 		   
 
  President and Chief Executive Officer    
 
       
Date:
  11/16/12    
         
By:
  /s/ George Pereira
 
George Pereira 		   
 
  Principal Financial Officer    
 
       
Date:
  11/14/12