June turned out to be fairly grim month for financial markets, as investors across the globe took fright at the prospect of rising inflation and higher interest rates. This confirmed the end of the brief, euphoric rally that followed the collapse of Bear Stearns in March and peaked mid-May. With most equity and bond markets dropping sharply, the Fund fell by 5.2% in June - a disappointing movement, but considerably less so than the 9.7% lost by the average global stock market.With markets hit hard the world over, picking the winners this month was about damage limitation, rather than generating positive returns. To this end, our geographical allocation proved useful, as our largest overweight - Japan - was the most resilient of the major markets over the month. Within bonds, our recent decision to reduce high -yield corporates in favour of investment grade also helped, as the latter proved particularly weak over the month.Within the equity section of the fund, few of our funds managed to beat their sector average in June. Of those that did, First State Asia Pacific Leaders and Marlborough UK Growth the most notable outperformers. At the other end of the scale, SG Japan Core Alpha had a poor month by its own recent high standards, while in the UK, Axa Framlington Monthly Income suffered from holding shares in car dealer Pendragon, which dropped sharply after reporting falling sales.