Stocks recorded strong returns for the quarter, but markets were volatile after a period of relatively stable gains. After enduring some of their largest daily declines in over two years, most of the major benchmarks reached new highs shortly before the end of the year. Breaking with the pattern for the year as a whole, small-caps performed best for the quarter. Technology shares modestly outperformed the overall market, which helped them end the year as the third-best-performing sector for 2014 as a whole, trailing only utilities and health care.
The Science & Technology Fund returned 2.93% in the quarter compared with 4.93% for the S&P 500 Index and 5.05% for the Lipper Science & Technology Funds Index. For the 12 months ended December 31, 2014, the fund returned 12.59% versus 13.69% for the S&P 500 Index and 12.26% for the Lipper Science & Technology Funds Index. The fund's average annual total returns were 12.59%, 14.76%, and 8.71% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 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 software sector is a large allocation for the portfolio, as companies within it generally offer better and more durable businesses. Our holdings are predominantly in the infrastructure and applications software industries. We hold a large overweight in the media sector, where our holdings are concentrated in the Internet industry. We particularly like market-leading companies that benefit from the massive secular shift to online advertising.
The Internet continues to be a source of value creation, and cloud computing continues to be a growing influence in the enterprise technology world. However, the market appears to be underestimating the durability of profit growth for some prominent Internet firms, including a few that are serving the highly promising Chinese market. As we head into 2015, we remain dedicated to applying rigorous analysis and fundamental research to achieve in-depth knowledge of companies and the industry dynamics in an effort to uncover attractive stocks.