Stocks enjoyed strong gains in the third quarter. Buoyed by hopes for continued monetary stimulus and a rebound in the global economy, investors bid up stocks despite slowing profit growth. Most of the major stock indexes moved further into record territory before pulling back late in the period. Telecommunication services stocks fared poorly in the quarter, but media and Internet-related shares were strong.
The Media & Telecommunications Fund returned 12.86% in the quarter compared with 6.97% for the Lipper Telecommunication Funds Average. For the 12 months ended September 30, 2013, the fund returned 24.43% versus 14.91% for the Lipper Telecommunication Funds Average. The fund's average annual total returns were 24.43%, 20.07%, and 17.39% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.81% as of its fiscal year ended December 31, 2012.
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Media represents more than half of the portfolio and a significant overweight relative to the benchmark. The fund continues to have the vast majority of its sector exposure in the Internet media, media and entertainment, Internet e-commerce, and cable/satellite industries. During the quarter, we trimmed our exposure to media and entertainment and cable/satellite and moved some of the proceeds into Internet media. Conversely, as the smartphone and tablet market has become more saturated over time, we have shifted our focus away from hardware in favor of areas that we believe offer better growth opportunities.
Global economic conditions remain difficult, as consumer growth in China has shown signs of deceleration and consumer spending in emerging markets remains depressed. However, we are seeing a slow but steady improvement in the U.S. economy, and the European economy appears to have leveled off. Earnings performance by media and telecommunications companies has been largely favorable. Many companies in our investment universe have proven resilient in the face of numerous challenges and have improved their balance sheets over the past several years. The rapid pace of change and evolution in the segment of the market reinforces our rigorous investment process, which has served us well over a variety of economic environments. We are engaged in identifying multiyear, secular trends that will evolve across the broader technology, media, and telecom landscapes.