UK equities fell sharply at the end of July as concerns grew about the effects of turmoil in the debt markets, specifically emanating from the US sub-prime (higher risk) mortgage sector. The FTSE All-Share index fell 3.3% in total return terms. Real estate companies were among the poorest performing stocks, as the outlook for property groups remains challenging against a backdrop of higher interest rates.The UK Equity Income Portfolio lagged its benchmark over the month. The weaker relative returns of the Artemis Income and Rensburg UK Equity Income funds detracted from performance.The Artemis fund was undermined by its holding in German insurance giant Allianz, which fell sharply at month end in response to the volatility in equity markets. Meanwhile, the Axa Framlington Equity Income and Schroder Income Maximiser funds performed well relative to peers.In terms of activity, we further reduced our exposure to the Rensburg UK Equity Income Fund.The UK Equity Income portfolio remains defensively positioned and has a very strong value bias.