Equities climbed during the second quarter amid signs that the U.S. economy was recovering from a first-quarter weather-driven contraction and hopes that new stimulus measures in Europe would boost eurozone economies. Corporate merger activity was supportive, and signs of a de-escalating Ukraine crisis were encouraging. Among major segments within the media and telecommunications universe, media shares fared best, while telecommunications equipment stocks lagged.
The Media & Telecommunications Fund returned 5.33% in the quarter compared with 3.72% for the Lipper Telecommunication Funds Average. For the 12 months ended June 30, 2014, the fund returned 28.96% versus 19.96% for the Lipper Telecommunication Funds Average. The fund's average annual total returns were 28.96%, 24.93%, and 15.77% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2013.
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The telecommunication services sector represents about one-quarter of the portfolio but over half of the index. Our considerable underweight is driven by a challenging telecom environment, as operators in most markets are facing either regulatory or competitive issues. Within the sector, we have a sizable investment in cellular tower companies given the ongoing 3G to 4G wireless technology transition and rapidly growing wireless demand for games, music, and video services. Conversely, media represents more than half of the portfolio and is a significant overweight relative to the benchmark. The portfolio continues to have the vast majority of its exposure to the sector in the Internet media, media and entertainment, cable/satellite, and Internet e-commerce industries.
Our outlook has not changed materially since the end of 2013, and we still expect more muted returns for media and telecom shares in 2014. We remain optimistic about fundamentals in the sector and continue to think that many of the fast-growing companies in the portfolio will enjoy more durable growth than skeptics expect. As patient investors focus on the long term, we think this should offer some convincing opportunities for future growth. We also believe the fund is well positioned for the rest of the year given that a large portion of the portfolio is allocated to areas with good secular tailwinds, such as the increasing adoption of cloud-based software services.