Welcome To OneAmerica Funds

A Message From The Fund President

Welcome to the OneAmerica Funds website. OneAmerica Funds, Inc. has been in operation since 1989 and currently offers five portfolios: Value, Money Market, Investment Grade Bond, Asset Director and Socially Responsive. This website includes financial information, prospectuses and annual reports for each portfolio as well as insights from each portfolio's investment managers. I trust that you will find this information useful as you review your investments.

As we began 2013, the markets were both relieved and worried. Congress successfully handled the fiscal cliff, but still faced three major deadlines: sequestration, the continuing resolution and the federal debt ceiling. Investors were particularly concerned as to how these negotiations would impact our economic recovery and investment markets. 

Surprisingly, our U.S. economy has shown remarkable resilience in the face of substantial fiscal austerity. Second quarter GDP increased at a 1.7 percent annualized rate, driven primarily by a recovery in the housing market, stronger consumer sentiment and sporadic improvement in the labor market. 

But the Federal Reserve startled investors during the second quarter in an attempt to provide “transparent” communication. Chairman Ben Bernanke announced that the Fed could taper bond purchases as early as year-end 2013 and halt purchases altogether by mid-2014, as long as U.S. economic growth and labor improvements performed in line with Fed projections. 

Financial markets, which have become overly dependent on Federal Open Market Committee stimulus, did not take the news well. The U.S. equity market sold off while fixed income yields increased. After observing the negative reaction by investment markets, senior Fed officials have sought to reassure investors that the central bank will withdraw its assistance gradually and only if U.S. economic growth remains intact. 

During the second half of 2013, we expect macro uncertainty to continue. Decisions by the Fed regarding changes in monetary policy will also be a key driver of investment returns. If the Fed changes monetary policy because they have become more optimistic about the economic outlook, then equities may be able to continue their advance during the second half of the year. However, the fixed income market may not fare as well. Once monetary policy becomes more restrictive, we can expect additional upward movement in interest rates and downward pressure on bond prices. 

Investment performance for each portfolio in OneAmerica Funds, Inc. for the first half of 2013 has been listed below.

Portfolio Class O Advisor Class
Value Portfolio 14.5% 14.3%
Money Market Portfolio 0.0% 0.0%
Investment Grade Bond Portfolio -2.5% -2.6%
Asset Director Portfolio 7.7% 7.6%
Socially Responsive Portfolio 13.2% 13.0%


During the first half of 2013, the Value and Asset Director Portfolios outperformed their respective benchmarks while the Investment Grade Bond Portfolio provided returns commensurate to the Barclays U.S. Aggregate Bond Index. Long-term performance is also attractive as the Value, Asset Director and Investment Grade Bond Portfolios have outperformed their 10-year benchmarks. 

Performance numbers for the OneAmerica portfolios are net of investment advisory fees and other expenses paid by each portfolio, but do not reflect specified contract, mortality and expense risk charges.

As always, I am grateful for the confidence you have placed in us and your continued investment in OneAmerica Funds, Inc.

J. Scott Davison
President
OneAmerica Funds, Inc.

August 12, 2013

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