Cu-In-O composite thin films were deposited by reactive DC magnetron sputtering with two composite targets. The films were annealed in air at 400 °C for 3 hours and the effect of annealing was investigated. The samples are polycrystalline and contain mainly In2O3 mixed with CuO. Annealing dose not further oxidize the samples, possibly due to the low annealing temperatures. Annealing slightly improves the crystalline quality of the films. Annealing increases the transmittances of almost all the samples by annihilating oxygen vacancies and hence widening the optical band gap. The conductivity of the samples is due to In2O3 but is compensated by CuO inside the films and annealing greatly reduces the conductivity by driving out the oxygen vacancies. The In target partly masked with a Cu plate provides more convenience in adjusting the composition and properties of Cu-In-O films.