The large-cap benchmarks managed modest gains for the quarter after overcoming a sharp sell-off in July and despite renewed selling pressure as the period came to a close. The smaller-cap indexes fared much worse, however. Information technology stocks outperformed most other sectors in the Standard & Poor's 500 Index, but hardware and health care-related tech shares fared best. Software shares lagged, and telecommunications-oriented tech stocks performed the worst among the major segments.
The Science & Technology Fund returned 2.03% in the quarter compared with 1.13% for the S&P 500 Index and 0.51% for the Lipper Science & Technology Funds Index. For the 12 months ended September 30, 2014, the fund returned 24.19% versus 19.73% for the S&P 500 Index and 17.89% for the Lipper Science & Technology Funds Index. The fund's average annual total returns were 24.19%, 15.41%, and 9.88% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.86% as of its fiscal year ended December 31, 2013.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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The portfolio is significantly overweight in the media segment, and we share our benchmark's substantial weighting in the software sector. We have significant but underweight positions in semiconductors and hardware, while we are notably underweight in IT services. We conduct extensive research into industry trends, but the fundamental analysis of individual firms, often involving company visits and meeting with managements, remains central to our approach.
The strong performance of technology stocks over the past few years has made it more difficult to find companies that are attractively valued relative to free cash flow and other metrics that we emphasize in our bottom-up stock selection. Nevertheless, we continue to find pockets where we see opportunities. The market appears to be underestimating the durability of profit growth for some prominent Internet firms, for example, including a few of these that are serving the booming Chinese market. We are also keeping a close eye on emerging technologies, such as wearable computing and home automation. We see opportunities for several leading firms to benefit from these new markets, such as by providing low-power semiconductors for use in connecting a range of everyday devices to the Internet, the so-called Internet of Things. Finally, we continue to broaden our approach somewhat by investing in companies in other areas where we see technology and innovation creating business value.