**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-Q**

** **

**(MarkOne)**

 

**x**                              Quarterlyreport pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934

 

**For the quarterly periodended September 30, 2007**

** **

**o**                                 Transitionreport pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934

 

**For the transitionperiodfrom             to            **

** **

**Commission File Number:000-19889**

** **

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**SouthHertfordshire United Kingdom Fund, Ltd.**

Exactname of registrant as specified in charter

 

| **Colorado**          | ** ** | **84-1145140**        |
|-----------------------|------------|-----------------------|
| State of organization |       | I.R.S. employer I.D.# |

 

**Media House, BartleyWood Business Park, Hook, Hampshire, RG27 9UP, England**

Addressof principal executive office

 

**011 44 1256 752000**

Registrant’stelephone number

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was requiredto file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.(Check one):

 
| Large  accelerated filer o | Accelerated filer o | Non-accelerated filer x |
|---------------------------------|--------------------------|------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct). Yes o  No x

 

The number of limitedpartnership units of the registrant outstanding as of November 12, 2007was 56,935.

 

 

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**TABLEOF CONTENTS**

 
| PART I.  | FINANCIAL INFORMATION | ** **                                                                                                                  | ** ** |
|---------------|-----------------------|-----------------------------------------------------------------------------------------------------------------------------|------------|
|          | Item 1.               | Financial Statements                                                                                                        |       |   |
|          |                  | Condensed  Consolidated Balance Sheets as of September 30, 2007 and  December 31, 2006                            |       |   |
|          |                  | Condensed  Consolidated Statements of Operations for the Three and Nine Months  Ended September 30, 2007 and 2006 |       |   |
|          |                  | Condensed  Consolidated Statements of Cash Flows for the Nine Months Ended  September 30, 2007 and 2006           |       |   |
|          |                  | Notes to Condensed Consolidated Financial Statements                                                                        |       |   |
|          | Item 2.               | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                 |       |   |
|          | Item 3.               | Quantitative  and Qualitative Disclosures About Market Risk                                                                 |       |   |
|          | Item 4.               | Controls and  Procedures                                                                                                    |       |   |
| PART II. | OTHER INFORMATION     |                                                                                                                        |       |
|          | Item 1.               | Legal Proceedings                                                                                                           |       |   |
| *** ***  | ***Item 1A.***        | Risk Factors                                                                                                                |       |   |
| *** ***  | ***Item 2.***         | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                |       |   |
| *** ***  | ***Item 3.***         | Defaults  Upon Senior Securities                                                                                            |       |   |
|          | Item 4.               | Submission  of Matters to a Vote of Security Holders                                                                        |       |   |
|          | Item 5.               | Other Information                                                                                                           |       |   |
|          | Item 6.               | Exhibits                                                                                                                    |       |   |
|          | SIGNATURES            |                                                                                                                        |       |

 

2

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**“SafeHarbor” Statement under the Private Securities Litigation Reform Act of 1995:**

** **

Various statementscontained in this document constitute “forward-looking statements” as that termis defined under the Private Securities Litigation Reform Act of 1995. Wordslike “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”,“projects”, “positioned”, “strategy” and similar expressions identify theseforward-looking statements, which involve known and unknown risks,uncertainties and other factors that may cause our actual results, performanceor achievements or industry results to be materially different from thosecontemplated, projected, forecasted, estimated or budgeted, whether expressedor implied, by these forward-looking statements. These factors among others,include:

 

•       our relianceon the continued support of Virgin Media Inc. (“Virgin Media”);

 

•       the lack ofan established trading market for our partnership interests;

 

•       conflicts ofinterest between us and Virgin Media and its affiliates;

 

•       our relianceon a limited franchise area;

 

•       the risks toVirgin Media’s business set forth below, which are risks that we share as aresult of our reliance on, and integration with, Virgin Media;

 

•       Virgin Media’sability to compete with a range of other communications and content providers;

 

•       Virgin Media’sability to manage customer churn;

 

•       the effectof technological changes on Virgin Media’s businesses;

 

•       Virgin Media’scontinued right to use the Virgin name and logo;

 

•       Virgin Media’sability to maintain and upgrade its networks in a cost-effective and timelymanner;

 

•       possiblelosses in Virgin Media’s revenues due to systems failures;

 

•       Virgin Media’sability to provide attractive programming at a reasonable cost;

 

•       Virgin Media’sreliance on single-source suppliers for some equipment, software and servicesand third party distributors of its mobile services;

 

•       the  functionality or market acceptance of newproducts that Virgin Media may introduce;

 

•       Virgin Media’sability to obtain and retain expected synergies from the merger of legacy NTLand Telewest businesses and the acquisition of Virgin Mobile;

 

•       Virgin Media’sability to achieve business plans for the combined company;

 

•       Virgin Media’sability to fund debt service obligations through operating cash flow;

 

•       Virgin Media’sability to obtain additional financing in the future and react to competitiveand technological changes;

 

•       Virgin Media’sability to comply with restrictive covenants in its indebtedness agreements;and

 

•       the extentto which Virgin Media’s future earnings will be sufficient to cover its fixedcharges.

 

These and other factorsare discussed in more detail under “Risk Factors” and elsewhere in ourForm 10-K that was filed with the SEC on March 29, 2007. We assume noobligation to update the forward-looking statements to reflect actual results,changes in assumptions or changes in factors affecting these statements.

 

3

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**NoteConcerning Virgin Media Inc.**

** **

On March 3, 2006,Virgin Media Holdings Inc. (then known as NTL Incorporated) merged, with asubsidiary of Virgin Media Inc., or Virgin Media (then known as Telewest GlobalInc., or Telewest). Following the merger, Telewest changed its name to NTLIncorporated and, subsequently, to Virgin Media Inc.

 

Virgin Media enteredinto a license agreement with Virgin Enterprises Limited under which it islicensed to use certain Virgin trademarks within the United Kingdom and theRepublic of Ireland. As a result, in February 2007, Virgin Media rebrandedits consumer and a large part of its content businesses to “Virgin Media”. Italso changed the name of its corporate parent from NTL Incorporated to VirginMedia Inc. and the name of one of its principal operating subsidiaries from NTLGroup Limited to Virgin Media Limited.

 

In this quarterlyreport, unless the context otherwise requires, the term “we”, “us”, “our” andsimilar terms refers to South Hertfordshire United Kingdom Fund, Ltd. and itssubsidiaries.

 

**ExchangeRates**

** **

The following table setsforth, for the periods indicated, the high, low, period average and period endnoon buying rate in the City of New York for cable transfers as certified forcustoms purposes by the Federal Reserve Bank of New York expressed as U.S.dollars per £1.00. 

 
| ** **                                              | ** ** | **U.S. Dollars per £1.00** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------|------------|
| **Nine months ended September 30,** | ** ** | **Period End**                            | ** ** | **Average**** ****(1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2006                                                    |       | 1.87                                           |       | 1.82 |   | 1.91 |   | 1.73 |   |
| 2007                                                    |       | 2.04                                           |       | 2.00 |   | 2.06 |   | 1.92 |   |

 

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(1)             The averagerate is the average of the noon buying rates on the last day of each monthduring the relevant period.

 

The noon buying rate ofthe pound sterling on September 30, 2007 was $2.0389 per £1.00.

 

The above rates maydiffer from the actual rates used in the preparation of the condensedconsolidated financial statements and other financial information appearing inthis quarterly report. Our inclusion of these exchange rates is not meant tosuggest that the pound sterling amounts actually represent these U.S. dollaramounts or that these amounts could have been converted into U.S. dollars atany particular rate, if at all.

 

Unless we otherwiseindicate, all U.S. dollar amounts as of September 30, 2007 are translatedto U.S. dollars at an exchange rate of $2.0389 to £1.00, all amounts disclosedfor the nine months ended September 30, 2007 are based on an averageexchange rate of $1.9876 to £1.00, and all amounts disclosed for the ninemonths ended September 30, 2006 are based on an average exchange rate of$1.8182 to £1.00. All amounts disclosed as of December 31, 2006 are basedon an exchange rate of $1.9586 to £1.00. U.S. dollar amounts for the threemonths ended September 30, 2007 and 2006 are determined by subtracting theU.S. dollar converted financial results for the six months ended June 30,2007 and 2006 from the U.S. dollar converted financial results for the ninemonths ended September 30, 2007 and 2006, respectively. All rates arebased on the noon buying rate in the City of New York for cable transfers ascertified for customs purposes by the Federal Reserve Bank of New York. Thevariation between the 2007 and 2006 exchange rates has affected the dollarcomparisons.

 

4

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**PART I.FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIALSTATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LIMITED (A LIMITED PARTNERSHIP)**

 

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                       | ** ** | **2007**               | ** ** | **2006**              | ** ** |
| ** **                                                                                       | ** ** | **(unaudited)**        | ** ** | **(see note)**   | ** ** |
| **Assets**                                                                                       |       |                   |       |                  |       |
| Fixed assets, net                                                                                |       | $                      | 65,890,146 |                  | $          | 66,079,566 |   |
| **Total assets**                                                                                 |       | 65,890,146             |       | 66,079,566            |       |
|                                                                                             |       |                   |       |                  |       |
| **Liabilities and Partners’ Deficit**                                                       |       |                   |       |                  |       |
| Current liabilities                                                                              |       |                   |       |                  |       |
| Accounts payable to affiliates and related  parties                                              |       | $                      | 71,286,738 |                  | $          | 71,196,561 |   |
| Total liabilities                                                                                |       | 71,286,738             |       | 71,196,561            |       |
|                                                                                             |       |                   |       |                  |       |
| **Partners’ capital (Deficit)**                                                             |       |                   |       |                  |       |
| General Partner                                                                                  |       |                   |       |                  |       |
| Contributed capital                                                                              |       | 1,000                  |       | 1,000                 |       |
| Accumulated deficit                                                                              |       | (538,050               | )          | (535,751              | )          |
|                                                                                             |       | (537,050               | )          | (534,751              | )          |
| Limited Partners                                                                                 |       |                   |       |                  |       |
| Contributed capital, net (56,935 units  outstanding at September 30, 2007 and December 31, 2006) |       | 48,817,997             |       | 48,817,997            |       |
| Accumulated deficit                                                                              |       | (52,985,888            | )          | (52,758,352           | )          |
|                                                                                             |       | (4,167,891             | )          | (3,940,355            | )          |
| Accumulated comprehensive loss                                                                   |       | (691,651               | )          | (641,889              | )          |
| Total Partners’ deficit                                                                     |       | (5,396,592             | )          | (5,116,995            | )          |
|                                                                                             |       |                   |       |                  |       |
| **Total Liabilities and Partners’ Deficit**                                                 |       | $                      | 65,890,146 |                  | $          | 66,079,566 |   |

 

Note: The balance sheet atDecember 31, 2006 has been derived from audited financial statements at thatdate.

 

Seeaccompanying notes.

 

5

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**SOUTH HERTFORDSHIREUNITED KINGDOM FUND, LIMITED(A LIMITED PARTNERSHIP)**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                             | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                             | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                             | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Revenue**                                                            | ** ** | $                                | 9,505,134  |                            | $          | 9,922,154 |   | $ | 29,445,255 |   | $ | 28,757,734 |   |
|                                                                   |       |                             |       |                            |       |   |   |   |   |
| **Costs and expenses**                                                 |       |                             |       |                            |       |   |   |   |   |
| Cost of goods sold (exclusive of  depreciation shown separately below) |       | (2,213,040                       | )          | (2,528,392                      | )          | (7,297,833 | ) | (7,502,681 | ) |
| Selling, general and administrative  expenses                          |       | (17,808                          | )          | (20,076                         | )          | (72,199 | ) | (65,706 | ) |
| Management fees and allocated overhead from  the General Partner       |       | (3,910,244                       | )          | (4,404,489                      | )          | (12,905,093 | ) | (12,910,084 | ) |
| Other income (charges)                                                 |       | 202,849                          |       | (616,954                        | )          | 58,003 |   | (1,015,091 | ) |
| Depreciation                                                           |       | (1,769,141                       | )          | (1,781,727                      | )          | (5,319,248 | ) | (5,272,613 | ) |
| **Operating income**                                                   |       | 1,797,750                        |       | 570,516                         |       | 3,908,885 |   | 1,991,559 |   |
| **Other expenses**                                                     |       |                             |       |                            |       |   |   |   |   |
| Interest payable to General Partner and affiliates                     |       | (1,417,387                       | )          | (1,538,286                      | )          | (4,043,295 | ) | (4,487,126 | ) |
| Exchange losses                                                        |       | (38,830                          | )          | (26,101                         | )          | (95,425 | ) | (175,582 | ) |
| **Profit (loss) before minority interest**                             |       | 341,533                          |       | (993,871                        | )          | (229,835 | ) | (2,671,149 | ) |
| Minority interest income                                               |       | —                           |       | 287,237                         |       | — |   | 748,119 |   |
| **Net profit (loss)**                                                  |       | $                                | 341,533    |                            | $          | (706,634 | ) | $ | (229,835 | ) | $ | (1,923,030 | ) |
| **Allocation of net profit (loss)**                                    |       |                             |       |                            |       |   |   |   |   |
| General Partner                                                        |       | $                                | 3,415      |                            | $          | (7,066 | ) | $ | (2,299 | ) | $ | (19,230 | ) |
| Limited Partner                                                        |       | 338,118                          |       | (699,568                        | )          | (227,536 | ) | (1,903,800 | ) |
| **Net profit (loss)**                                                  |       | $                                | 341,533    |                            | $          | (706,634 | ) | $ | (229,835 | ) | $ | (1,923,030 | ) |
|                                                                   |       |                             |       |                            |       |   |   |   |   |
| **Net profit (loss) per limited partnership  unit**                    |       | $                                | 5.94       |                            | $          | (12.29 | ) | $ | (4.00 | ) | $ | (33.44 | ) |
| **Average number of limited partnership units  outstanding**           |       | 56,935                           |       | 56,935                          |       | 56,935 |   | 56,935 |   |

 

Seeaccompanying notes.

 

6

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**SOUTH HERTFORDSHIREUNITED KINGDOM FUND, LIMITED(A LIMITED PARTNERSHIP)**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                | ** ** | **September 30,**          | ** ** |
| ** **                                                                                | ** ** | **2007**                        | ** ** | **2006** | ** ** |
| **Cash flows from operating activities**                                                  |       |                            |       |   |   |
| Net profit (loss)                                                                         |       | $                               | (229,835   | ) | $ | (1,923,030 | ) |
| Adjustments to reconcile net profit (loss)  to net cash provided by operating activities: |       |                            |       |   |   |
| Minority interest income                                                                  |       | —                          |       | (748,119 | ) |
| Depreciation                                                                              |       | 5,319,248                       |       | 5,272,613 |   |
| Loss on disposal of fixed assets                                                          |       | 19,765                          |       | — |   |
| Change in operating assets and liabilities:                                               |       |                            |       |   |   |
| Decrease in accounts payable to affiliates  and related parties                           |       | (2,584,013                      | )          | (1,656,241 | ) |
| **Net cash provided by operating activities**                                             |       | 2,525,165                       |       | 945,223 |   |
|                                                                                      |       |                            |       |   |   |
| **Cash flows from investing activities**                                                  |       |                            |       |   |   |
| Purchase of fixed assets                                                                  |       | (2,525,165                      | )          | (945,223 | ) |
| **Net cash used in investing activities**                                                 |       | (2,525,165                      | )          | (945,223 | ) |
| Movement in cash                                                                          |       | —                          |       | — |   |
| Cash and cash equivalents at beginning of  period                                         |       | —                          |       | — |   |
| Cash and cash equivalents at end of period                                                |       | $                               | —     |   | $ | — |   |

 

7

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**SOUTH HERTFORDSHIREUNITED KINGDOM FUND, LIMITED(A LIMITED PARTNERSHIP)**

 

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

**Note1.**   Basis ofPresentation

** **

**Organizationand Business**

** **

South HertfordshireUnited Kingdom Fund, Ltd., or the Partnership, a Colorado limited partnership,was formed on December 23, 1991, in connection with a public offering ofits limited partnership interests. The Partnership was formed to acquire,construct, develop, own and operate cable television/telephone systems in the U.K.NTL Fawnspring Limited, a U.K. corporation, a subsidiary of Virgin Media Inc.,or Virgin Media, is the general partner (the “General Partner”) of thePartnership. Upon acquisition of our system, our primary investment objectivewas to obtain capital appreciation in the value of our investment in the systemover the term that such investment is held by us.

 

We hold 66.7% of theshares of NTL (South Hertfordshire) Limited, or NTL South Herts, which isprincipally engaged in the development, construction, management and operationof broadband communications networks for telephone, cable television andinternet services in the United Kingdom. As a result of our ownership of 66.7%of the shares of NTL South Herts, for accounting purposes, we have consolidatedthe results of NTL South Herts with our results. Virgin Media Inc. (formerlyknown as NTL Incorporated) indirectly holds the remaining 33.3% of the sharesof NTL South Herts. We are reliant on the support of Virgin Media, the ultimateparent company of the General Partner, to continue our operations as a goingconcern.

 

We, as well as VirginMedia, file annual, quarterly, and current reports with the SEC. You may readand copy any materials we or Virgin Media files with the SEC at the SEC’sPublic Reference Room at 100 F Street, N.E., Washington D.C. 20549.You may obtain information on the operation of the Public ReferenceRoom by calling the SEC at 1-800-SEC-0330. You may also accesselectronically the information we file with the SEC via its website, located athttp://www.sec.gov*.*

 

**Basisof Presentation**

** **

We have prepared theaccompanying unaudited condensed consolidated financial statements inaccordance with U.S. generally accepted accounting principles, or GAAP, forinterim financial information and with the instructions to Form 10-Q andRule 10-01 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.In the opinion of our management, all adjustments (consisting only of normalrecurring adjustments) considered necessary for a fair presentation have beenincluded. Results of operations for the period ended September 30, 2007are not necessarily indicative of results to be expected for the full yearending December 31, 2007. For further information, refer to theconsolidated financial statements and footnotes thereto included in our AnnualReport on Form 10-K for the year ended December 31, 2006.

 

8

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**Note2.**   ComprehensiveProfit (loss)

** **

Comprehensive profit(loss) includes net profit (loss) as well as other comprehensive profit (loss).Our other comprehensive profit (loss) consists of changes in cumulativetranslation adjustment. Comprehensive profit (loss) comprises:

 
| ** **                               | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                               | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                               | ** ** | ** **                       | ** ** | **(Restated)**                  | ** ** | ** ** | ** ** | **(Restated)** | ** ** |
| Net profit (loss)                        |       | $                                | 341,533    |                            | $          | (706,634 | ) | $ | (229,835 | ) | $ | (1,923,030 | ) |
| Foreign currency translation adjustments |       | 12,151                           |       | 3,836                           |       | (49,762 | ) | 80,742 |   |
| Comprehensive profit (loss)              |       | $                                | 353,684    |                            | $          | (702,798 | ) | $ | (279,597 | ) | $ | (1,842,288 | ) |

 

The prior yearcomparative amounts in the above have been restated to reflect a mathematicalerror in the previously reported note. This restatement has no impact on thepreviously issued balance sheet, statement of operations or statement of cashflows for all periods presented.

 

**Note3.**   Investmentin Subsidiary

** **

NTL South Herts is aU.K. corporation which is principally engaged in the development, construction,management and operation of broadband communication networks for telephone,cable television and internet services in the South Hertfordshire franchisearea, located adjacent to the northwest perimeter of Greater London, England(the “South Herts System”).

 

NTL South Herts is owned66.7% by the Partnership and 33.3% by Virgin Media. Virgin Media also owns theGeneral Partner. The General Partner provides consulting services to thePartnership and may delegate some or all of the consulting services to VirginMedia or to other affiliates.

 

Virgin Media, throughits subsidiaries, including its interest in NTL South Herts, provides broadbandinternet access, telephone and television services to approximately 4.8 millionresidential on-net cable customers as at September 30, 2007.

 

**Note4.**   Transactionswith the General Partner and Affiliated Parties

** **

*Consultingand Management Fees*

* *

An affiliate of theGeneral Partner is entitled to be paid a consulting fee by NTL South Herts.During the construction phases of the South Herts System, this consulting feewas 2% of construction costs. Since completion of construction of each portionof the system, the consulting fee for the completed portion has been 5% of thegross revenue, excluding revenue from the sale of cable television/telephonesystems. The consulting fee is calculated and payable monthly. Consulting feespaid or payable by NTL South Herts for the three months endedSeptember 30, 2007 and 2006 were $475,257 and $496,108, respectively.Consulting fees paid or payable by NTL South Herts for the nine months endedSeptember 30, 2007 and 2006 were $1,472,263 and $1,437,887, respectively.These amounts are recognized in the statement of operations as management feesand allocated overhead from the General Partner.

 

9

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*DistributionRatios and Reimbursement*

* *

Any Partnershipdistributions made from cash flow (defined as cash receipts derived fromroutine operations, less debt principal and interest payments and cashexpenses) are allocated 99% to the limited partners and 1% to the GeneralPartner. Any distributions other than interest income on limited partnersubscriptions earned prior to the acquisition of the Partnership’s first cabletelevision system or from cash flow, such as from the sale or refinancing of asystem or upon dissolution of the Partnership, will be made as follows: 99% tothe limited partners and 1% to the General Partner until any negative balancesin the limited partners’ capital accounts are reduced to zero; 100% to theGeneral Partner until any negative balance in its capital account is reduced tozero; 99% to the limited partners and 1% to the General Partner until thebalance in the limited partners’ capital accounts is equal to their adjustedcapital contribution plus a 12% return; 100% to the General Partner until thebalance in its capital account is equal to its adjusted capital contribution,and any remaining income or gain shall be allocated 75% to the limited partnersand 25% to the General Partner.

 

Our General Partner andits affiliates are entitled to reimbursement from NTL South Herts for directand indirect expenses allocable to the operation of its network and from us fordirect and indirect expenses allocable to our operation which include, but arenot limited to, rent, supplies, telephone, travel, and salaries of any full orpart-time employees. Allocable direct and indirect expenses during the threemonths ended September 30, 2007 and 2006 totaled $3,434,987 and$3,908,381, respectively. Allocable direct and indirect expenses during thenine months ended September 30, 2007 and 2006 totaled $11,432,830 and$11,472,197, respectively. These amounts are recognized in the statement ofoperations as management fees and allocated overhead from the General Partner.

 

Our General Partner andits affiliates may make advances to, and defer collection of fees and allocatedexpenses owed by us, although they are not required to do so. The Partnershipis charged interest on such advances and deferred amounts. For the three monthsended September 30, 2007 and 2006, aggregated interest, bank fees andfinance charges of $1,370,044 and $1,502,121, respectively, relating tonon-permanent loans was charged by affiliates of the General Partner. For thenine months ended September 30, 2007 and 2006, aggregated interest, bankfees and finance charges of $3,912,149 and $4,384,502, respectively, relatingto non-permanent loans was charged by affiliates of the General Partner.Interest on advances for the three months ended September 30, 2007 and2006 of $47,343 and $36,165, respectively, and for the nine months endedSeptember 30, 2007 and 2006 of $131,146 and $102,624, respectively, wascharged by an affiliate of the General Partner at a rate equal to the GeneralPartner’s or certain affiliates’ effective average cost of debt financing fromunaffiliated entities, which does not differ from their weighted average costof debt financing.

 

Our General Partner andits affiliates are entitled to recover interest on the full amount ofnon-permanent loans they provide to the Partnership or NTL South Herts and theyare also entitled to recover the portion of bank fees and deferred financingcosts relating to Virgin Media’s senior credit facilities allocable to thePartnership or NTL South Herts.

 

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| **ITEM 2.** | ** ** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|------------|-------------------------------------------------------------------------------------------------|

** **

**Overview**

** **

We are a Coloradolimited partnership that was formed in December 1991 pursuant to thepublic offering of our limited partnership interests for the purpose ofacquiring one or more cable television/telephone systems in the U.K. Uponacquisition of our system, our primary investment objective was to obtaincapital appreciation in the value of our investment in the system over the termsuch investment is held by us.

 

We hold 66.7% of theshares of NTL South Herts, which is principally engaged in the development,construction, management and operation of broadband communications networks fortelephone, cable television and internet services in the U.K. As a result ofour ownership of 66.7% of the shares of NTL South Herts, for accountingpurposes we have consolidated the results of NTL South Herts with our results.Virgin Media indirectly holds the remaining 33.3% of the shares of NTL SouthHerts. We are reliant on the support of Virgin Media, the indirect parentcompany of NTL Fawnspring Limited, our General Partner, to continue ouroperations as a going concern.

 

We derive our revenueprincipally from monthly fees and usage charges. Our packaging of services andpricing are designed to encourage our customers to use multiple services likedual telephone and broadband, dual telephone and television or tripletelephone, television and internet access.

 

The principal componentsof our expenses include payroll and other employee related costs;interconnection costs paid to other carriers related to telephone services;television programming costs; marketing and selling costs; repairs andmaintenance; facility related costs, such as rent, utilities and rates; andallowances for doubtful accounts. Our expenses include certain costs that arecharged by a subsidiary of Virgin Media for the provision of network servicesand support, the use of Virgin Media’s national backbone telephone network forcarriage of our telephone traffic, as well as the provision of technical infrastructureand network capacity by Virgin Media for our subscription internet accessservices and digital television services, the provision of corporate services,including finance, legal, human resources and facility services, and for theprovision of IT services, including our use of the related IT equipment.

 

**FactorsAffecting Our Business**

** **

Our residentialcustomers account for the majority of our total revenue. The number ofresidential customers, the number and types of services that each customer usesand the prices we charge for these services drive our revenue. Our net profitis driven by the relative margins on the types of services we provide to thesecustomers and by the number of services that we provide to them. For example,broadband internet is more profitable than our television services and, onaverage, our “triple-play” customers are more profitable than “double-play” or “single-play”customers. Our packaging of services and our pricing are designed to encourageour customers to use multiple services such as television, telephone andbroadband at a lower price than each stand-alone product on a combined basis.Factors particularly affecting our profitability include customer churn,competition, the success of our integration efforts, capital expenditures,currency movements and seasonality.

 

11

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***SelectedOperating Data***

*** ***

The following table setsforth certain data concerning our franchise at September 30, 2007 andDecember 31, 2006:

 
| ** **                         | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2007**               | ** ** | **2006**              | ** ** |
| Homes marketable (1)               |       | 96,663                 |       | 96,886                |       |
| Total customers                    |       | 35,021                 |       | 36,863                |       |
| Digital television subscribers     |       | 23,755                 |       | 22,971                |       |
| Analog television subscribers      |       | 626                    |       | 1,007                 |       |
| Broadband internet subscribers     |       | 24,482                 |       | 22,642                |       |
| Telephony subscribers              |       | 28,991                 |       | 30,715                |       |
| Penetration (homes marketable) (2) |       | 36.2                   | %          | 38.0                  | %          |
| Average monthly churn (3)          |       | 1.6                    | %          | 1.8                   | %          |

 

----

(1)             Homesmarketable refers to the number of homes within our service area that have hadducting buried outside and can potentially be served by our network withminimal connection costs.

 

(2)             Penetrationmeasures the number of customers for our services divided by the number ofhomes marketable.

 

(3)             Customerchurn is calculated by taking the total number of customers disconnecting fromour services during the month and dividing them by the average number ofcustomers during the month. Average monthly churn during the quarter is theaverage of the three monthly churn calculations within the quarter.

 

***CustomerChurn.******  ***Customer churn is a measure of the numberof customers who stop subscribing to our services. An increase in our customerchurn can lead to increased costs and reduced revenue. We continue to focus onimproving our customer service and enhancing and expanding our serviceofferings to existing customers in an effort to manage our customer churn rate.Our ability to reduce our customer churn rate beyond a base level is limited byfactors like customers moving outside our network service area, in particular duringthe summer season. Managing our customer churn rate is a significant componentof our business plan. Our customer churn rate may increase if our customerservice is seen as unsatisfactory, if we are unable to deliver our servicesover our network without interruption, or if we fail to match offerings by ourcompetitors.

 

***Competition.******  ***Our abilityto acquire and retain customers and increase revenue depends on Virgin Media’sand our competitive strength. There is significant and increasing competitionin the market for our consumer services, including broadband and telephoneservices offered by British Telecom (“BT”) and resellers or local loopunbundlers, such as British Sky Broadcasting Group plc (“BSkyB”) and CarphoneWarehouse (Talk Talk), alternative internet access services like DSL, satellitetelevision services offered by BSkyB, digital terrestrial television offeredthrough Freeview, internet protocol television offered by Tiscali S.p.A. (“Tiscali”)and BT. Certain competitors, such as BT and BSkyB, are dominant in markets inwhich Virgin Media and we compete and may use their dominance in those marketsto offer bundled services that include two or more of our product offerings. Ifcompetitive forces prevent us from charging the prices for these services thatwe plan to charge, or if our competition is able to attract our customers orpotential customers we are targeting, our results of operations will beadversely affected.

 

***Integration.******  ***Virgin Mediacontinues to integrate its legacy NTL and Telewest cable businesses. Thisinvolves the incurrence of substantial operating and capital expenditures and,in some cases, involves the outsourcing of key functions in an effort toachieve synergies through the integration of the two businesses. For example,the principal billing platform used by us has recently been migrated to a newsystem as part of 

 

12

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Virgin Media’s programto consolidate all of its billing platforms. Any issues that may arise inconnection with the integration could have a material negative effect on ourfinancial performance.

 

***CapitalExpenditures.******  ***Our businessrequires substantial capital expenditures on a continuing basis for variouspurposes, including expanding, maintaining and upgrading our network, investingin new customer acquisitions, and offering new services. If Virgin Media and wedo not continue to invest in the network and in new technologies, our abilityto retain and acquire customers may be hindered. Therefore, Virgin Media’s andour liquidity and the availability of cash to fund capital projects areimportant drivers of our revenue. When Virgin Media’s and our liquidity isrestricted, so is our ability to meet our capital expenditure requirements.

 

***CurrencyMovements.******  ***Becausesubstantially all of our revenue and operating costs are earned and paidprimarily in U.K. pounds sterling, but we report our financial results in U.S.dollars, our financial results are affected by currency fluctuations that areunrelated to our underlying results of operations.

 

***Seasonality.******  ***Some revenuestreams are subject to seasonal factors. For example, telephone usage revenueby customers tends to be slightly lower during summer holiday months. Ourcustomer churn rates include persons who disconnect their service because ofmoves, resulting in a seasonal increase in our churn rates during the summermonths when higher levels of U.K. house moves occur and students leave theiraccommodation between academic years.

 

**CriticalAccounting Policies**

** **

The preparation of ourconsolidated financial statements requires us to make estimates that affect thereported amounts of assets, liabilities, revenues and expenses, and relateddisclosure of contingent assets and contingent liabilities. We base our judgmentson historical experience and on various other assumptions that we believe arereasonable under the circumstances, the results of which form the basis formaking estimates about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions.

 

For a discussion of theaccounting judgments and estimates that we have identified as critical in thepreparation of our consolidated financial statements, please refer to ourAnnual Report on Form 10-K for the year ended December 31, 2006 asfiled with the SEC on March 29, 2007.

 

**Resultsof Operations**

** **

***Threemonths ended September 30, 2007 and 2006***

*** ***

We present belowsummarized consolidated financial information, in U.S. dollars and U.K. poundssterling for the three months ended September 30, 2007 and 2006:

 

13

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| ** **                                    | ** ** | **Three months ended** | ** ** | ** ** | ** ** | **Three months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|------------|------------|----------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **September 30,**           | ** ** | **%**      | ** ** | **September 30,**           | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2007**                         | ** ** | **2006**   | ** ** | **Change**                       | ** ** | **2007**   | ** ** | **2006** | ** ** | **Change** | ** ** |
| Revenue                                       |       | $                                | 9,505,134  |       | $          | 9,922,154                        |       | (4.2       | )          | £ | 4,695,670 |   | £ | 5,295,970 |   | (11.3 | ) |
| Cost of goods sold                            |       | (2,213,040                       | )          | (2,528,392 | )          | 12.5                             |       | (1,091,354 | )          | (1,348,038 | ) | 19.0 |   |
| Selling, general and administrative  expenses |       | (17,808                          | )          | (20,076    | )          | 11.3                             |       | (8,724     | )          | (10,651 | ) | 18.1 |   |
| Management fees and allocated overhead        |       | (3,910,244                       | )          | (4,404,489 | )          | 11.2                             |       | (1,928,279 | )          | (2,349,668 | ) | 17.9 |   |
| Other income (charges)                        |       | 202,849                          |       | (616,954   | )          | 132.9                            |       | 102,686    |       | (335,927 | ) | 130.6 |   |
| Depreciation                                  |       | (1,769,141                       | )          | (1,781,727 | )          | 0.7                              |       | (874,681   | )          | (950,070 | ) | 7.9 |   |
| Operating income                              |       | 1,797,750                        |       | 570,516    |       | 215.1                            |       | 895,318    |       | 301,616 |   | 196.8 |   |
| Interest expense                              |       | (1,417,387                       | )          | (1,538,286 | )          | 7.9                              |       | (701,718   | )          | (820,817 | ) | 14.5 |   |
| Exchange losses                               |       | (38,830                          | )          | (26,101    | )          | (48.8                            | )          | (19,290    | )          | (13,075 | ) | (47.5 | ) |
| Net profit (loss) before minority interests   |       | 341,533                          |       | (993,871   | )          | 134.4                            |       | 174,310    |       | (532,276 | ) | 132.7 |   |
| Minority interests                            |       | —                           |       | 287,237    |       | —                           |       | —     |       | 154,037 |   | — |   |
| Net profit (loss)                             |       | $                                | 341,533    |       | $          | (706,634                         | )          | 148.3      |       | £ | 174,310 |   | £ | (378,239 | ) | 146.1 |   |

 

*Revenue*

 

For the three monthsended September 30, 2007, revenue decreased by 4.2% to $9.5 million from$9.9 million for the three months ended September 30, 2006 and revenueexpressed in pounds sterling decreased by 11.3% to £4.7 million for the threemonths ended September 30, 2007 from £5.3 million for the three monthsended September 30, 2006. The decrease is primarily due to increasedcompetition that has given rise to reduced customer numbers and lower pricing throughincreased discounts partly offset by higher broadband revenue due to anincrease in the numbers of broadband subscribers.

 

*Expenses*

* *

*Cost of goods sold.**  *For the three months endedSeptember 30, 2007, cost of goods sold decreased by 12.5% to $2.2 millionfrom $2.5 million for the three months ended September 30, 2006 and costof goods sold expressed in pounds sterling decreased by 19.0% to £1.1 millionfor the three months ended September 30, 2007 from £1.3 million for thethree months ended September 30, 2006. The majority of the reduction in costof goods sold in pounds sterling is attributable to the decline in revenue. Achange in the mix of services provided, with fewer telephony customers andincreased, higher margin, broadband customers, has contributed towards areduction in cost of goods sold as a percentage of revenue to 23.3% from 25.5%for the three months ended September 30, 2007 and 2006 respectively.

 

*Selling, general and administrative expenses.**  *For the three months endedSeptember 30, 2007, selling, general and administrative expenses decreasedto $17,808, or £8,724, from $20,076, or £10,651, for the three months endedSeptember 30, 2006 due to lower investor relations costs.

 

*Management fees and allocated overhead.**  *For the three months ended September 30,2007, management fees and allocated overhead decreased by 11.2% to $3.9 millionfrom $4.4 million for the three months ended September 30, 2006, andmanagement fees and allocated overhead expressed in pounds sterling decreasedby 17.9% to £1.9 million for the three months ended September 30, 2007from £2.4 million for the three months ended September 30, 2006. Thebusiness of NTL South Herts is managed as an integral part of Virgin Media. Thecombined costs of managing the larger group are allocated to each entity withinthe Virgin Media group, including NTL South Herts, on a consistent andproportional basis according 

 

14

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to the level of tradingin that entity. Management fees and allocated overhead in the quarter benefitedfrom Virgin Media’s lower selling, general and administration expenses whichincluded lower employee incentive and share based compensation expenses, aswell as a reduction in bad debt expense due to operational improvements in itsbilling and collections resulting from the integration of its systems andprocesses.

 

*Other income (charges).**  *For the three months endedSeptember 30, 2007, other income was $202,849 compared to other charges of$616,954 for the three months ended September 30, 2006. Other income forthe three months ended September 30, 2007 and other charges for the threemonths ended September 30, 2006 included restructuring costs allocated to us bya subsidiary of Virgin Media in respect of lease exit costs in connection withproperties that have been vacated and redundancy costs following the merger ofthe legacy NTL and Telewest business by Virgin Media. Other income in the threemonths ended September 30, 2007 relates primarily to a revision in the VirginMedia lease exit provision due to the successful sublease of  one of its larger vacant properties. Otherincome (charges) are allocated to us by a subsidiary of Virgin Media on thebasis of an allocation formula appropriate to each category of income (charge)based on a reasonable methodology given the facts and circumstances.

 

*Depreciationexpense*

* *

Depreciation expenseremained constant at $1.8 million for the three months ended September 30,2007 and 2006. Depreciation expense expressed in pounds sterling decreased to£0.9 million for the three months ended September 30, 2007 from £1.0 millionfor the three months ended September 30, 2006. The decrease is due to thecessation of depreciation on assets that have become fully depreciated duringthe period.

 

*Interestexpense*

* *

For the three monthsended September 30, 2007, interest expense decreased to $1.4 million from$1.5 million for the three months ended September 30, 2006 and interestexpressed in pounds sterling decreased to £701,718 for the three months endedSeptember 30, 2007 from £820,817 for the three months endedSeptember 30, 2006. This decrease is due to the lower bank fees anddeferred financing costs allocated to us for the three months endedSeptember 30, 2007 than for the three months ended September 30, 2006by a subsidiary of Virgin Media following Virgin Media’s refinancing inconnection with its reverse acquisition of Telewest, offset partly by increasedinterest rates.

 

We paid no cash interestfor the three months ended September 30, 2007 and 2006.

 

*Exchangelosses*

* *

For the three monthsended September 30, 2007, foreign currency exchange losses were $38,830 ascompared with losses of $26,101 for the three months ended September 30,2006. The change in exchange losses is primarily attributable to fluctuationsin the valuation of the U.S. dollar on certain of our liabilities andtransactions. The U.S. dollar weakened by approximately eight percent againstthe pound from September 30, 2006 to September 30, 2007. Our resultsof operations will continue to be affected by foreign exchange ratefluctuations.

 

*MinorityInterest*

* *

During the three monthsended September 30, 2007, South Herts generated a profit. Since itsliabilities exceeded its assets as at period end, no minority interest wasrecognized. For the three months ended September 30, 2006, we recognized aminority interest credit of $287,237 which represented the release of theminority interest built up in profitable periods.

 

*Netprofit (loss)*

* *

For the three monthsended September 30, 2007, net profit was $341,533 as compared with a netloss of $706,634 for the three months ended September 30, 2006 primarilydue to the reasons described above.

 

15

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***Ninemonths ended September 30, 2007 and 2006***

*** ***

We present belowsummarized consolidated financial information in U.S. dollars and U.K. poundssterling for the nine months ended September 30, 2007 and 2006:

 
| ** **                                    | ** ** | **Nine months ended** | ** ** | ** **  | ** ** | **Nine months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|---------------------------------|------------|-------------|------------|---------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **September 30,**               | ** ** | **%**       | ** ** | **September 30,**               | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2007**                        | ** ** | **2006**    | ** ** | **Change**                      | ** ** | **2007**   | ** ** | **2006** | ** ** | **Change** | ** ** |
| Revenue                                       |       | $                               | 29,445,255 |        | $          | 28,757,734                      |       | 2.4        |       | £ | 14,814,477 |   | £ | 15,817,465 |   | (6.3 | ) |
| Cost of goods sold                            |       | (7,297,833                      | )          | (7,502,681  | )          | 2.7                             |       | (3,671,681 | )          | (4,126,660 | ) | 11.0 |   |
| Selling, general and administrative  expenses |       | (72,199                         | )          | (65,706     | )          | (9.9                            | )          | (36,325    | )          | (36,140 | ) | (0.5 | ) |
| Management fees and allocated overhead        |       | (12,905,093                     | )          | (12,910,084 | )          | 0.0                             |       | (6,492,802 | )          | (7,100,866 | ) | 8.6 |   |
| Other income (charges)                        |       | 58,003                          |       | (1,015,091  | )          | 105.7                           |       | 29,182     |       | (558,325 | ) | 105.2 |   |
| Depreciation                                  |       | (5,319,248                      | )          | (5,272,613  | )          | (0.9                            | )          | (2,676,217 | )          | (2,900,068 | ) | 7.7 |   |
| Operating income                              |       | 3,908,885                       |       | 1,991,559   |       | 96.3                            |       | 1,966,634  |       | 1,095,406 |   | 79.5 |   |
| Interest expense                              |       | (4,043,295                      | )          | (4,487,126  | )          | 9.9                             |       | (2,034,260 | )          | (2,468,030 | ) | 17.6 |   |
| Exchange losses                               |       | (95,425                         | )          | (175,582    | )          | 45.7                            |       | (48,010    | )          | (96,575 | ) | 50.3 |   |
| Net loss before minority interests            |       | (229,835                        | )          | (2,671,149  | )          | 91.4                            |       | (115,636   | )          | (1,469,199 | ) | 92.1 |   |
| Minority interests                            |       | —                          |       | 748,119     |       | —                          |       | —     |       | 411,484 |   | — |   |
| Net loss                                      |       | $                               | (229,835   | )           | $          | (1,923,030                      | )          | 88.0       |       | £ | (115,636 | ) | £ | (1,057,715 | ) | 89.1 |   |

 

*Revenue*

 

For the nine monthsended September 30, 2007, revenue increased by 2.4% to $29.4 million from$28.8 million for the nine months ended September 30, 2006 andrevenue expressed in pounds sterling decreased by 6.3% to £14.8 million from£15.8 million in respect of the same periods in 2007 and 2006, respectively.The decrease is primarily due to lower telephony usage together with increasedcompetition that has given rise to reduced customer numbers and lower pricingthrough increased discounts partly offset by higher broadband revenue due to anincrease in the numbers of broadband subscribers.

 

*Expenses*

* *

*Cost of goods sold.*   For the nine months endedSeptember 30, 2007, cost of goods sold decreased by 2.7% to $7.3 millionfrom $7.5 million for the nine months ended September 30, 2006 and cost ofgoods sold expressed in pounds sterling decreased by 11.0% to £3.7 million forthe nine months ended September 30, 2007 from £4.1 million for the nine monthsended September 30, 2006. Cost of goods sold as a percentage of revenuedecreased to 24.8% from 26.1% for the nine months ended September 30, 2007and 2006, respectively, primarily due to a change in the mix of servicesprovided with fewer telephony customers and increased, higher margin, broadbandcustomers. The reduction in cost of goods sold in pounds sterling is primarilya reflection of reduced revenue.

 

*Selling, general and administrative expenses.**  *For the nine months endedSeptember 30, 2007, selling, general and administrative expenses increasedto $72,199, or £36,325, from $65,706, or £36,140, in the nine months endedSeptember 30, 2006.

 

*Management fees and allocated overhead.**  *Management fees and allocated overheadremained at $12.9 million for the nine months ended September 30, 2007 and2006, and management fees and allocated 

 

16

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overhead expressed inpounds sterling decreased by 8.6% to £6.5 million for the nine months endedSeptember 30, 2007 from £7.1 million for the nine months ended September 30,2006. The business of NTL South Herts is managed as an integral part of VirginMedia. The combined costs of managing the larger group are allocated to eachentity within the Virgin Media group, including NTL South Herts, on aconsistent and proportional basis according to the level of trading in thatentity. Management fees and allocated overhead in the nine months ended September30, 2007 benefited from Virgin Media’s lower selling, general andadministration expenses in the three months ended September 30, 2007 asdescribed above.

 

*Other income (charges)**  *For the nine months endedSeptember 30, 2007, other income was $58,003 compared to other charges of$1.0 million for the nine months ended September 30, 2006. Other income inthe nine months ended September 30, 2007 and other charges in the ninemonths ended September 30, 2006 included restructuring costs allocated to us bya subsidiary of Virgin Media in respect of lease exit costs in connection withproperties that have been vacated and redundancy costs following the merger ofthe legacy NTL and Telewest business by Virgin Media. Other income in the ninemonths ended September 30, 2007 relates primarily to a revision in the VirginMedia lease exit provision due to the successful sublease of one of its largervacant properties. Other income (charges) are allocated to us by a subsidiaryof Virgin Media on the basis of an allocation formula appropriate to eachcategory of income (charge) based on a reasonable methodology given the factsand circumstances.

 

*Depreciationexpense*

* *

Depreciation expenseremained broadly flat at $5.3 million for the nine months endedSeptember 30, 2007 and 2006. Depreciation expense expressed in poundssterling decreased to £2.7 million in the nine months ended September 30,2007 from £2.9 million in the nine months ended September 30,2006, primarily due to the cessation of depreciation on assets that havebecome fully depreciated during the period.

 

*Interestexpense*

* *

For the nine monthsended September 30, 2007, interest expense decreased to $4.0 million from$4.5 million for the nine months ended September 30, 2006, and interestexpense expressed in pounds sterling decreased to £2.0 million for the ninemonths ended September 30, 2007 from £2.5 million for the nine monthsended September 30, 2006. This decrease is due to the lower bank fees anddeferred financing costs allocated to us for the nine months endedSeptember 30, 2007 than for the nine months ended September 30, 2006by a subsidiary of Virgin Media following Virgin Media’s refinancing inconnection with its reverse acquisition of Telewest, offset partly by increasedinterest rates.

 

We paid no cash interestfor the nine months ended September 30, 2007 and 2006.

 

*Exchangelosses*

* *

For the nine monthsended September 30, 2007, foreign currency exchange losses were $95,425 ascompared with losses of $175,582 for the nine months ended September 30,2006. The change in exchange losses are primarily attributable to fluctuationsin the valuation of the U.S. dollar on certain of our liabilities andtransactions. The U.S. dollar weakened approximately eight percent against thepound from September 30, 2006 to September 30, 2007. Our results ofoperations will continue to be affected by foreign exchange rate fluctuations.

 

*MinorityInterest*

* *

During the nine monthsended September 30, 2007, South Herts generated a net loss. Since itsliabilities exceeded its assets as at period end, no minority interest wasrecognized. For the nine months ended September 30, 2006, we recognized aminority interest credit of $748,119 which represented the release of theminority interest built up in profitable periods.

 

17

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*Net  loss*

* *

For the nine monthsended September 30, 2007, net loss was $229,835 as compared with a netloss of $1.9 million for the nine months ended September 30, 2006primarily due to the reasons described above.

 

**CondensedConsolidated Statement of Cash Flows**

** **

In the nine months endedSeptember 30, 2007, we generated $2.5 million from our operatingactivities compared with $945,223 in the nine months ended September 30,2006, and used it to purchase fixed assets including equipment for customerinstallations. Our cash provided by operating activities increased primarilydue to an improved operating result and a reduction in minority interestincome.

 

**Liquidityand Capital Resources**

** **

We have no financingindependent of Virgin Media. We are reliant upon the support of Virgin Media tocontinue our operations. As of September 30, 2007, we had consolidatedcurrent liabilities of $71.3 million due to Virgin Media group companiescompared with $71.2 million as of December 31, 2006.

 

Historically, our sourceof cash was the net proceeds of our offerings of limited partnership interestsand our principal uses of cash have been capital contributions to NTL SouthHerts in order to fund our proportionate share of the construction costs of theSouth Herts System.

 

Accordingly, until suchtime as NTL South Herts begins to pay dividends on its ordinary shares (whichis not expected in the foreseeable future), we will be required to fund ouradministrative expenses from borrowings or, theoretically, additional issuancesof limited partnership interests. It is unlikely that we will be able to selldebt or equity securities in the public markets, at least in the short term, orto obtain financing from commercial banks. Accordingly, we are dependent onVirgin Media for funds to cover operating expenses, and will continue to bedependent upon Virgin Media to meet our liquidity requirements for theforeseeable future. We expect that cash from our operations in 2007 will beutilized fully for the purchase of fixed assets including the cost of customerinstallations.

 

**Off-BalanceSheet Transactions**

** **

As of September 30,2007, we had no off-balance sheet transactions.

 

**ContractualObligations and Commercial Commitments**

** **

There have been nomaterial changes in the nine months ended September 30, 2007 to theinformation required under this Item from what was disclosed in our AnnualReport on Form 10-K for the year ended December 31, 2006 as filedwith the SEC on March 29, 2007.

 

**ITEM 3.**                    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

** **

The functional currencyof NTL South Herts is pounds sterling and all of its revenue and substantiallyall of its costs are incurred in pounds sterling. We report in U.S. dollars.Therefore, we are exposed to fluctuations in the pound sterling to U.S. dollarexchange rate.

 

The aggregate potential gainfrom a hypothetical one-percent fall in the pound sterling/U.S. dollar exchangerate is approximately $23,000 for the nine months ended September 30, 2007.

 

We have no debt otherthan amounts due to affiliates and related parties. As of September 30,2007, we had approximately $71.3 million in amounts due to Virgin Media groupcompanies. Interest on amounts due to affiliates is at a variable rate based onthe average rate incurred by Virgin Media. Therefore we are exposed to changesin Virgin Media’s borrowing rate. The aggregate potential loss from ahypothetical one-percentage point increase in the interest rate is $497,238 forthe nine months ended September 30, 2007.

 

18

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**ITEM 4.**                    CONTROLS ANDPROCEDURES

** **

(a)  *Disclosure Controls and Procedures.*   Ourmanagement, with the participation of the Chief Executive Officer and ChiefFinancial Officer of Virgin Media*, has evaluated the effectiveness of ourdisclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934, as amended, or the Exchange Act) as of the end of the period coveredby this report. Based on such evaluation, Virgin Media’s Chief ExecutiveOfficer and Chief Financial Officer have concluded that, as of the end of suchperiod, these controls and procedures are effective to ensure that informationrequired to be disclosed by the registrant in the reports the registrant filesor submits under the Exchange Act is recorded, processed, summarized, andreported within the time periods specified in the SEC’s rules and forms.These disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed bythe registrant in the reports that it files or submits is accumulated andcommunicated to the registrant’s management, including Virgin Media’s ChiefExecutive Officer and Chief Financial Officer, as appropriate to allow timelydecisions regarding required disclosure.

 

(b)  *Changes in Internal Control Over FinancialReporting.  **On March 3, 2006, Virgin Mediacompleted the reverse acquisition of Telewest and on July 4, 2006,Virgin Media completed the acquisition of Virgin Mobile. As a consequence ofVirgin Media’s integration of these acquisitions, Virgin Media has made andexpects to make further material changes to its internal control over financialreporting. Other than as stated above, there were no changes in our internalcontrol over financial reporting (as such term is defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act)during the fiscal quarter to which this report relates that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.*

 

----

*                    ThePartnership has no Chief Executive Officer or Chief Financial Officer. RobertMackenzie and Robert Gale are Directors of Virgin Media Directors Limited,which is a corporate director of NTL Fawnspring Limited, the general partner ofthe Partnership.

 

19

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**PART II.OTHER INFORMATION**

** **

**ITEM 1.**                    LEGALPROCEEDINGS

** **

We are involved indisputes and litigation arising in the ordinary course of our business. We haveno material legal proceeding outside of the ordinary course of business.

 

**ITEM 1A.**           RISK FACTORS

** **

There have been nomaterial changes in the nine months ended September 30, 2007 in the riskfactors discussed under “Risk Factors” and elsewhere in our Form 10-K forthe year ended December 31, 2006 as filed with the SEC on March 29,2007.

 

**ITEM 2.**                    UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

** **

None.

 

**ITEM 3.**                    DEFAULTSUPON SENIOR SECURITIES

** **

None.

 

**ITEM 4.**                    SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

** **

No matters weresubmitted to a vote of our security holders in the quarter endedSeptember 30, 2007.

 

**ITEM 5.**                    OTHERINFORMATION

** **

None.

 

**ITEM 6.**                    EXHIBITS

 
| 3.1    |   | Certificate  of Limited Partnership dated December 31, 1991 (Incorporated by  reference to Exhibit 3.1 to the Registrant’s Form 10-K for the year  ended December 31, 1994, filed with the Securities and Exchange  Commission on March 31, 1995, File No. 000-19889).                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 3.2    |   | Amendment  to the Certificate of Limited Partnership dated January 31, 1995  (Incorporated by reference to Exhibit 3.2 to the Registrant’s  Form 10-K for the year ended December 31, 1994, filed with the  Securities and Exchange Commission on March 31, 1995, File  No. 000-19889).   |
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 4.1    |   | Limited  Partnership Agreement dated December 31, 1991 (Incorporated by reference  to the Registrant’s Post-Effective Amendment No. 2 to Form S-1,  filed with the Securities and Exchange Commission on May 6, 1993, File  No. 33-48400).                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 4.2    |   | Amendment  No. 1 to Limited Partnership Agreement dated October 20, 1992  (Incorporated by reference to Exhibit 4.2 to the Registrant’s  Form 10-K for the year ended December 31, 1994, filed with the  Securities and Exchange Commission on March 31, 1995, File  No. 000-19889). |
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 31.1   |   | Certification  of Chief Executive Officer,* pursuant to Rule 13(a)-14(a) and  Rule 15d-14(a) of the Exchange Act.                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 31.2   |   | Certification  of Chief Financial Officer,* pursuant to Rule 13(a)-14(a) and  Rule 15d-14(a) of the Exchange Act.                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                         |
| 32.1   |   | Certifications  of Chief Executive Officer,* and Chief Financial Officer,* pursuant to 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes Oxley Act of 2002.                                                                                                                             |

 

20

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*                    ThePartnership has no Chief Executive Officer or Chief Financial Officer. RobertMackenzie and Robert Gale are Directors of Virgin Media Directors Limited,which is a Corporate Director of NTL Fawnspring Limited, the General Partner ofthe Partnership.

 

21

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**SIGNATURES**

** **

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                              | SOUTH  HERTFORDSHIRE UNITED KINGDOM FUND, LTD. |
|------------------------------|-----------------------------------------------------|
|                         |                                                | a  Colorado limited partnership |
|                         |                                                |   |
|                         | By:                                                 | NTL  FAWNSPRING LIMITED,   its General Partner |
|                         |                                                |   |
|                         |                                                |   |
|                         | By:                                                 | /s/  ROBERT MACKENZIE |   |
|                         |                                                | Robert  Mackenzie |
| * *                     | * *                                            | *Director  of Virgin Media Directors Limited,   Corporate Director of NTL Fawnspring Limited,   the General Partner of South Hertfordshire   United Kingdom Fund, Ltd.* |
|                         |                                                |   |
| Dated:November 14, 2007 |                                                |   |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.

 
| **Name**             | ** ** | **Title**                                                                                                             | ** ** | **Date**                |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|-------------------------|
| ** **           | ** ** | ** **                                                                                                            | ** ** | ** **              |
| /s/ ROBERT MACKENZIE |       | Director  of Virgin Media Directors Limited,                                                                          |       | November 14,  2007 |
|                 |       |                                                                                                                  |       |                    |
| Robert Mackenzie     |       | Corporate  Director of NTL Fawnspring Limited, the General Partner of South  Hertfordshire United Kingdom Fund, Ltd.* |       |                    |
|                 |       |                                                                                                                  |       |                    |
| /s/ ROBERT GALE      |       | Director  of Virgin Media Directors Limited,                                                                          |       | November 14,  2007 |
|                 |       |                                                                                                                  |       |                    |
| Robert Gale          |       | Corporate  Director of NTL Fawnspring Limited, the General Partner of South  Hertfordshire United Kingdom Fund, Ltd.* |       |                    |

 

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*                    ThePartnership has no Chief Executive Officer or Chief Financial Officer. RobertMackenzie and Robert Gale are Directors of Virgin Media Directors Limited,which is a Corporate Director of NTL Fawnspring Limited, the GeneralPartner of the Partnership.

 

22

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