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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

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**FORM 10-Q**

 

| **(Mark One)** | ** ** | ** **                                                                                                                                                      |
|----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **x**          | ** ** | **Quarterly report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934**                                                          |
|           |       | ** **                                                                                                                                                      |
|           |       | **For the quarterly period  ended September 30, 2008**                                                                                                     |
|           |       | ** **                                                                                                                                                      |
| **o**          | ** ** | **Transition report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934**                                                         |
|           |       | ** **                                                                                                                                                      |
|           |       | **For the transition period  from            to          ** |

 

**Commission FileNumber: 000-19889**

 

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**South Hertfordshire United Kingdom Fund, Ltd.**

(Exact name of registrant asspecified in charter)

 

| **Colorado**                                                                           | ** ** | **84-1145140**                                             |
|----------------------------------------------------------------------------------------|------------|------------------------------------------------------------|
| (State of organization)                                                                |       | (I.R.S. employer  identification no.)                      |
|                                                                                   |       |                                                       |
| **Media House, Bartley Wood  Business Park, Hook, Hampshire,  RG27 9UP, England** | ** ** | **011 44 1256 752000**                                     |
| (Address of principal  executive offices)                                              |       | (Registrant’s telephone  number, including area code) |

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past90 days. Yes x No o

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company. See definitions of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

 
| Large  accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o |
|---------------------------------|--------------------------|------------------------------|----------------------------------|

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

 

The number of limited partnership units ofthe registrant outstanding as of November 10, 2008 was 56,935.

 

 

 

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**TABLE OFCONTENTS**

 
| ** **                               | **Page  Number**                                                                                                       |
|------------------------------------------|------------------------------------------------------------------------------------------------------------------------|
| **PART I.   FINANCIAL INFORMATION** |                                                                                                                   |
| Item 1.                             | Financial Statements                                                                                                   | 5 |
|                                     | Condensed Consolidated Balance Sheets as of September 30, 2008  and December 31, 2007                        | 5 |
|                                     | Condensed Consolidated Statements of  Operations for the Three and Nine Months Ended September 30, 2008 and  2007 | 6 |
|                                     | Condensed Consolidated Statements of Cash  Flows for the Nine Months Ended September 30, 2008 and 2007            | 7 |
|                                     | Notes to Condensed Consolidated Financial  Statements                                                                  | 8 |
| Item 2.                             | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                            | 11 |
| Item 3.                             | Quantitative and Qualitative Disclosures  About Market Risk                                                            | 19 |
| Item 4.                             | Controls and Procedures                                                                                                | 19 |
| **PART II.   OTHER INFORMATION**    |                                                                                                                   |
| Item 1.                             | Legal Proceedings                                                                                                      | 20 |
| Item 1A.                            | Risk Factors                                                                                                           | 20 |
| Item 2.                             | Unregistered Sales of Equity Securities and  Use of Proceeds                                                           | 20 |
| Item 3.                             | Defaults Upon Senior Securities                                                                                        | 20 |
| Item 4.                             | Submission of Matters to a Vote of Security  Holders                                                                   | 20 |
| Item 5.                             | Other Information                                                                                                      | 20 |
| Item 6.                             | Exhibits                                                                                                               | 20 |
| SIGNATURES                               | 21                                                                                                                     |

 

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**Introductory Note**

 

In this quarterly report, unless the contextotherwise requires, the term “we”, “us”, “our” and similar terms refers toSouth Hertfordshire United Kingdom Fund, Ltd. and its subsidiaries, andVirgin Media refers to Virgin Media Inc., the parent of our generalpartner, as further described herein.

 

** ****“Safe Harbor” Statement underthe Private Securities Litigation Reform Act of 1995:**

 

Various statements contained in this documentconstitute “forward-looking statements” as that term is defined under thePrivate Securities Litigation Reform Act of 1995. Words like “believe”, “anticipate”,“should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”,“strategy” and similar expressions identify these forward-looking statements,which involve known and unknown risks, uncertainties and other factors that maycause our actual results, performance or achievements or industry results to bematerially different from those contemplated, projected, forecasted, estimatedor budgeted, whether expressed or implied, by these forward-looking statements.These factors, among others, include:

 

•                    our reliance on the continued support of VirginMedia;

 

•                    the lack of an established trading market forour partnership interests;

 

•                    conflicts of interest between us and VirginMedia and its affiliates;

 

•                    our reliance on a limited franchise area;

 

•                    the risks to Virgin Media’s business set forthbelow, which are risks that we share as a result of our reliance on, andintegration with, Virgin Media;

 

•                    Virgin Media’s ability to compete with a rangeof other communications and content providers;

 

•                    Virgin Media’s ability to manage customerchurn;

 

•                    Virgin Media’s continued right to use theVirgin name and logo;

 

•                    Virgin Media’s ability to maintain and upgradeits networks in a cost-effective and timely manner;

 

•                    possible losses in Virgin Media’s revenues dueto systems failures;

 

•                    Virgin Media’s ability to provide attractiveprogramming at a reasonable cost;

 

•                    Virgin Media’s ability to control unauthorizedaccess to its network;

 

•                    the effect of technological changes on VirginMedia’s businesses;

 

•                    Virgin Media’s reliance on single-sourcesuppliers for some equipment, software and services and third partydistributors of its mobile services;

 

•                    Virgin Media’s ability to achieve its businessplans;

 

•                    Virgin Media’s ability to fund debt serviceobligations through operating cash flow;

 

•                    Virgin Media’s ability to obtain additionalfinancing in the future and react to competitive and technological changes;

 

•                    Virgin Media’s ability to comply withrestrictive covenants in its indebtedness agreements;

 

•                    the extent to which Virgin Media’s future cashflow will be sufficient to cover its fixed charges; and

 

•                    general economic conditions.

 

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These and other factors are discussed in moredetail under “Risk Factors” and elsewhere in our Annual Report on Form 10-Kfor the year ended December 31, 2007, as filed with the Securities andExchange Commission, or SEC, on March 27, 2008. We assume no obligation toupdate our forward-looking statements to reflect actual results, changes inassumptions or changes in factors affecting these statements.

 

**Note ConcerningVirgin Media Inc.**

 

On March 3, 2006, Virgin MediaHoldings Inc. (then known as NTL Incorporated) merged with a subsidiary ofVirgin Media Inc., or Virgin Media (then known as TelewestGlobal Inc., or Telewest). Following the merger, Telewest changed its nameto NTL Incorporated and, subsequently to Virgin Media Inc.

 

Virgin Media entered into a license agreementwith Virgin Enterprises Limited under which it is licensed to use certainVirgin trademarks within the U.K. and the Republic of Ireland. As a result, in February 2007,Virgin Media rebranded its consumer and a large part of its content businessesto “Virgin Media”. It also changed the name of its corporate parent from NTLIncorporated to Virgin Media Inc. and the name of one of its principaloperating subsidiaries from NTL Group Limited to Virgin Media Limited.

 

**Exchange Rates**

 

The following table sets forth, for theperiods indicated, the high, low, period average and period end noon buyingrate in the City of New York for cable transfers as certified for customspurposes by the Federal Reserve Bank of New York expressed as U.S. dollars per£1.00. The noon buying rate of the pound sterling on September 30, 2008was $1.7804 per £1.00.

 
| ** **                                              | ** ** | **U.S. Dollars per £1.00** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------|------------|
| **Nine months ended September 30,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2007                                                    |       | $                                              | 2.0389     |   | $ | 1.9965 |   | $ | 2.0626 |   | $ | 1.9235 |   |
| 2008                                                    |       | 1.7804                                         |       | 1.9440 |   | 2.0311 |   | 1.7497 |   |
|                                                         |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  The average rate isthe average of the noon buying rates on the last day of each month during therelevant period.

 

The above rates may differ from the actualrates used in the preparation of the condensed consolidated financialstatements and other financial information appearing in this quarterly report. Ourinclusion of these exchange rates is not meant to suggest that the poundsterling amounts actually represent these U.S. dollar amounts or that theseamounts could have been converted into U.S. dollars at any particular rate, ifat all.

 

Unless we otherwise indicate, all U.S. dollaramounts as of September 30, 2008 are translated to U.S. dollars at anexchange rate of $1.7804 to £1.00, all amounts disclosed for the nine monthsended September 30, 2008 are based on an average exchange rate of $1.9469to £1.00, and all amounts disclosed for the nine months ended September 30,2007 are based on an average exchange rate of $1.9876 to £1.00. All amountsdisclosed as of December 31, 2007 are based on an exchange rate of $1.9843to £1.00. U.S. dollar amounts for the three months ended September 30,2008 and 2007 are determined by subtracting the U.S. dollar converted financialresult for the six months ended June 30, 2008 and 2007 from the U.S.dollar converted financial result for the nine months ended September 30,2008 and 2007, respectively. All rates are based on the noon buying rate in theCity of New York for cable transfers as certified for customs purposes by theFederal Reserve Bank of New York. The variation among the exchange rates for2008 and 2007 has affected the dollar comparisons.

 

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**PART I. FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIALSTATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                        | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                        | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| ** **                                                                                        | ** ** | **(unaudited)**        | ** ** | **(see note)**   | ** ** |
| **Assets**                                                                                        |       |                   |       |                  |       |
| Fixed assets, net                                                                                 |       | $                      | 51,415,191 |                  | $          | 61,517,485 |   |
| **Total assets**                                                                                  |       | 51,415,191             |       | 61,517,485            |       |
|                                                                                              |       |                   |       |                  |       |
| **Liabilities and Partners’  Deficit**                                                       |       |                   |       |                  |       |
| Current liabilities                                                                               |       |                   |       |                  |       |
| Accounts payable to affiliates and related  parties                                               |       | $                      | 54,540,593 |                  | $          | 66,040,564 |   |
| Total liabilities                                                                                 |       | 54,540,593             |       | 66,040,564            |       |
|                                                                                              |       |                   |       |                  |       |
| **Minority interest**                                                                             |       |                   |       |                  |       |
| Minority interest                                                                                 |       | 361,048                |       | —                |       |
|                                                                                              |       |                   |       |                  |       |
| **Partners’ Capital (Deficit)**                                                              |       |                   |       |                  |       |
| General Partner                                                                                   |       |                   |       |                  |       |
| Contributed capital                                                                               |       | 1,000                  |       | 1,000                 |       |
| Accumulated deficit                                                                               |       | (518,574               | )          | (529,556              | )          |
|                                                                                              |       | (517,574               | )          | (528,556              | )          |
| Limited Partners                                                                                  |       |                   |       |                  |       |
| Contributed capital, net (56,935 units  outstanding at  September 30, 2008 and December 31, 2007) |       | 48,817,997             |       | 48,817,997            |       |
| Accumulated deficit                                                                               |       | (51,057,780            | )          | (52,145,026           | )          |
|                                                                                              |       | (2,239,783             | )          | (3,327,029            | )          |
|                                                                                              |       |                   |       |                  |       |
| Partners’ Capital (Deficit)                                                                  |       | (2,757,357             | )          | (3,855,585            | )          |
|                                                                                              |       |                   |       |                  |       |
| Accumulated other comprehensive loss                                                              |       | (729,093               | )          | (667,494              | )          |
| Total Partners’ deficit                                                                      |       | (3,486,450             | )          | (4,523,079            | )          |
|                                                                                              |       |                   |       |                  |       |
| **Total Liabilities and  Partners’ Deficit**                                                 |       | $                      | 51,415,191 |                  | $          | 61,517,485 |   |

 

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Note: The balance sheet at December 31,2007 has been derived from audited financial statements at that date.

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                        | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                        | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                        | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Revenue**                                                                       | ** ** | $                                | 8,504,333  |                            | $          | 9,505,134 |   | $ | 26,565,038 |   | $ | 29,445,255 |   |
|                                                                              |       |                             |       |                            |       |   |   |   |   |
| **Costs and expenses**                                                            |       |                             |       |                            |       |   |   |   |   |
| Cost of goods sold (exclusive of  depreciation shown separately below)            |       | (2,021,240                       | )          | (2,213,040                      | )          | (6,474,021 | ) | (7,297,833 | ) |
| Selling, general and administrative  expenses                                     |       | (20,227                          | )          | (17,808                         | )          | (64,451 | ) | (72,199 | ) |
| Management fees and allocated overhead from  the General Partner                  |       | (3,315,639                       | )          | (3,910,244                      | )          | (10,220,728 | ) | (12,905,093 | ) |
| Restructuring and other (charges) income                                          |       | (78                              | )          | 202,849                         |       | (25,767 | ) | 58,003 |   |
| Depreciation                                                                      |       | (1,567,503                       | )          | (1,769,141                      | )          | (5,008,711 | ) | (5,319,248 | ) |
| **Operating income**                                                              |       | 1,579,646                        |       | 1,797,750                       |       | 4,771,360 |   | 3,908,885 |   |
| **Other expenses**                                                                |       |                             |       |                            |       |   |   |   |   |
| Interest payable to General Partner and affiliates                                |       | (1,161,084                       | )          | (1,417,387                      | )          | (3,528,189 | ) | (4,043,295 | ) |
| Exchange gains (losses)                                                           |       | 257,531                          |       | (38,830                         | )          | 249,870 |   | (95,425 | ) |
| **Profit (loss) before minority  interest**                                       |       | 676,093                          |       | 341,533                         |       | 1,493,041 |   | (229,835 | ) |
| Minority interest expense                                                         |       | (167,656                         | )          | —                          |       | (394,813 | ) | — |   |
| **Net profit (loss)**                                                             |       | $                                | 508,437    |                            | $          | 341,533 |   | $ | 1,098,228 |   | $ | (229,835 | ) |
| **Allocation of net profit  (loss)**                                              |       |                             |       |                            |       |   |   |   |   |
| General Partner                                                                   |       | $                                | 5,084      |                            | $          | 3,415 |   | $ | 10,982 |   | $ | (2,299 | ) |
| Limited Partner                                                                   |       | 503,353                          |       | 338,118                         |       | 1,087,246 |   | (227,536 | ) |
| **Net profit (loss)**                                                             |       | $                                | 508,437    |                            | $          | 341,533 |   | $ | 1,098,228 |   | $ | (229,835 | ) |
|                                                                              |       |                             |       |                            |       |   |   |   |   |
| **Net profit (loss) allocated  to limited partners per limited partnership unit** |       | $                                | 8.84       |                            | $          | 5.94 |   | $ | 19.10 |   | $ | (4.00 | ) |
| **Average number of limited  partnership units outstanding**                      |       | 56,935                           |       | 56,935                          |       | 56,935 |   | 56,935 |   |

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(Unaudited)**

 
| ** **                                                                                | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                | ** ** | **September 30,**          | ** ** |
| ** **                                                                                | ** ** | **2008**                        | ** ** | **2007** | ** ** |
| **Cash flows from operating  activities**                                                 |       |                            |       |   |   |
| Net profit (loss)                                                                         |       | $                               | 1,098,228  |   | $ | (229,835 | ) |
| Adjustments to reconcile net profit (loss)  to net cash provided by operating activities: |       |                            |       |   |   |
| Minority interest expense                                                                 |       | 394,813                         |       | — |   |
| Depreciation                                                                              |       | 5,008,711                       |       | 5,319,248 |   |
| Loss on disposal of fixed assets                                                          |       | —                          |       | 19,765 |   |
| Change in operating assets and liabilities:                                               |       |                            |       |   |   |
| Decrease in accounts payable to affiliates  and related parties                           |       | (5,659,197                      | )          | (2,584,013 | ) |
| **Net cash provided by  operating activities**                                            |       | 842,555                         |       | 2,525,165 |   |
|                                                                                      |       |                            |       |   |   |
| **Cash flows from investing  activities**                                                 |       |                            |       |   |   |
| Purchase of fixed assets                                                                  |       | (842,555                        | )          | (2,525,165 | ) |
| **Net cash used in investing  activities**                                                |       | (842,555                        | )          | (2,525,165 | ) |
| Movement in cash                                                                          |       | —                          |       | — |   |
| Cash and cash equivalents at beginning of  period                                         |       | —                          |       | — |   |
| Cash and cash equivalents at end of period                                                |       | $                               | —     |   | $ | — |   |

 

See accompanying notes.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

 

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

 

**Note 1. Basis ofPresentation**

 

**Organization andBusiness**

 

South Hertfordshire United KingdomFund, Ltd., or the Partnership, a Colorado limited partnership, was formedon December 23, 1991, in connection with a public offering of its limitedpartnership interests. The Partnership was formed to acquire, construct,develop, own and operate cable television/telephone systems in the U.K. NTLFawnspring Limited, a U.K. corporation, a subsidiary of Virgin Media Inc.,or Virgin Media, is the general partner (the “General Partner”) of the Partnership.Upon acquisition of our system, our primary investment objective was to obtaincapital appreciation in the value of our investment in the system over the termthat such investment is held by us.

 

We hold 66.7% of the shares of NTL (SouthHertfordshire) Limited, or NTL South Herts, which is principally engaged in thedevelopment, construction, management and operation of broadband communicationsnetworks for telephone, cable television and internet services in the U.K. As aresult of our ownership of 66.7% of the shares of NTL South Herts, foraccounting purposes, we have consolidated the results of NTL South Herts withour results. Virgin Media indirectly holds the remaining 33.3% of the shares ofNTL 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 Virgin Media, file annual,quarterly, and current reports with the SEC. You may read and copy anymaterials we or Virgin Media file with the SEC at the SEC’s Public Reference Room at100 F Street, N.E., Washington D.C. 20549. You may obtain information onthe operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. You may also access electronically the information we file withthe SEC via its website, located at *http://www.sec.gov*.

 

**Basis of Presentation**

 

We have prepared the accompanying unauditedcondensed consolidated financial statements in accordance with U.S. generallyaccepted accounting principles, or GAAP, for interim financial information andwith the instructions to Form 10-Q and Rule 10-01 ofRegulation S-X. Accordingly, they do not include all of the informationand footnotes required by GAAP for complete financial statements. In theopinion of our management, all adjustments (consisting only of normal recurringadjustments) considered necessary for a fair presentation have been included.Results of operations for the three and nine months ended September 30,2008 are not necessarily indicative of results to be expected for the full yearending December 31, 2008. 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, 2007 as filedwith the SEC on March 27, 2008.

 

**Note 2. ComprehensiveProfit (Loss)**

 

Comprehensive profit (loss) includes netprofit (loss) as well as other comprehensive profit (loss). Our othercomprehensive profit (loss) consists of changes in cumulative foreign currencytranslation adjustments. Comprehensive profit (loss) comprises:

 
| ** **                               | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                               | ** ** | **2008**                         | ** ** | **2007**                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                               | ** ** | ** **                       | ** ** | **(Restated)**                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net profit (loss)                        |       | $                                | 508,437    |                            | $          | 341,533 |   | $ | 1,098,228 |   | $ | (229,835 | ) |
| Foreign currency translation adjustments |       | (66,702                          | )          | (12,151                         | )          | (61,599 | ) | (49,762 | ) |
| Comprehensive profit (loss)              |       | $                                | 441,735    |                            | $          | 329,382 |   | $ | 1,036,629 |   | $ | (279,597 | ) |

 

The prioryear comparative amounts for the three months ended September 30, 2007 inthe above table have been restated to reflect a mathematical error in thepreviously reported note. This restatement has no impact on the previouslyissued balance sheet, statement of operations or statement of cash flows forall periods presented.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

 

**NOTES TO THECONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

**Note 3. Investmentin Subsidiary**

 

NTL South Herts is a U.K. corporation whichis principally engaged in the development, construction, management andoperation of broadband communication networks for telephone, cable televisionand internet services in the South Hertfordshire franchise area, locatedadjacent to the northwest perimeter of Greater London, England (the “SouthHerts System”).

 

NTL South Herts is owned 66.7% by thePartnership and 33.3% by Virgin Media. Virgin Media also owns the GeneralPartner. The General Partner provides consulting services to the Partnershipand may delegate some or all of the consulting services to Virgin Media or toother affiliates.

 

Virgin Media, through its subsidiaries,including its interest in NTL South Herts, provides broadband internet access,telephone and television services to approximately 4.7 million residentialon-net cable customers as at September 30, 2008.

 

**Note 4. Transactionswith the General Partner and Affiliated Entities**

 

**Consulting and ManagementFees**

 

An affiliate of the General Partner isentitled to be paid a consulting fee by NTL South Herts. During theconstruction phases of the South Herts System, this consulting fee was 2% ofconstruction costs. Since completion of construction of each portion of thesystem, the consulting fee for the completed portion has been 5% of the grossrevenue, excluding revenue from the sale of cable television/telephone systems.The consulting fee is calculated and payable monthly. Consulting fees paid or payableby NTL South Herts for the three months ended September 30, 2008 and 2007were $425,217 and $475,257, respectively. Consulting fees paid or payable byNTL South Herts for the nine months ended September 30, 2008 and 2007 were$1,328,252 and $1,472,263, respectively. These amounts were expensed in thestatement of operations for each period.

 

**Distribution Ratiosand Reimbursement**

 

Any partnership distributions made from cashflow (defined as cash receipts derived from routine operations, less debt principaland interest payments and cash expenses) are allocated 99% to the limitedpartners and 1% to the General Partner. Any distributions other than interestincome on limited partner subscriptions earned prior to the acquisition of thePartnership’s first cable television system or from cash flow, such as from thesale or refinancing of a system or upon dissolution of the Partnership, will bemade as follows: 99% to the limited partners and 1% to the General Partneruntil any negative balances in the limited partners’ capital accounts arereduced to zero; 100% to the General Partner until any negative balance in itscapital account is reduced to zero; 99% to the limited partners and 1% to theGeneral Partner until the balance in the limited partners’ capital accounts isequal to their adjusted capital contribution plus a 12% return; 100% to theGeneral Partner until the balance in its capital account is equal to itsadjusted capital contribution, and any remaining income or gain shall beallocated 75% to the limited partners and 25% to the General Partner.

 

The General Partner and its affiliates areentitled to reimbursement from NTL South Herts for direct and indirect expensesallocable to the operation of its network and from us for direct and indirectexpenses allocable to our operation which include, but are not limited to,rent, supplies, telephone, travel, and salaries of any full or part-timeemployees. The General Partner believes that the methodology used in allocatingthese expenses is fair and reasonable. During the three months ended September 30,2008 and 2007, reimbursement made by NTL South Herts and the Partnership to theGeneral Partner or its affiliates for any allocable direct and indirectexpenses totaled $2,890,422 and $3,434,987, respectively. During the ninemonths ended September 30, 2008 and 2007, reimbursement made by NTL SouthHerts and the Partnership to the General Partner or its affiliates for anyallocable direct and indirect expenses totaled $8,892,476 and $11,432,830,respectively.

 

The General Partner and its affiliates maymake advances to, and defer collection of fees and allocated expenses owed by,the Partnership, although they are not required to do so. The Partnership ischarged interest on such advances and

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A LIMITEDPARTNERSHIP)**

 

**NOTES TO THECONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

**Note 4. Transactionswith the General Partner and Affiliated Entities (Continued)**

 

deferred amounts at a rate equal to theGeneral Partner’s or certain affiliates’ effective average cost of debtfinancing from unaffiliated entities, which does not differ from their weightedaverage cost of debt financing. For the three months ended September 30,2008 and 2007, aggregated interest, bank fees and finance charges of $1,117,873and $1,370,044, respectively, relating to non-permanent loans was charged byaffiliates of the General Partner, and interest on advances of $43,211 and$47,343, respectively, was charged by an affiliate of the General Partner. Forthe nine months ended September 30, 2008 and 2007, aggregated interest,bank fees and finance charges of $3,392,287 and $3,912,149, respectively,relating to non-permanent loans was charged by affiliates of the GeneralPartner, and interest on advances of $135,902 and $131,146, respectively, wascharged by an affiliate of the General Partner.

 

Our General Partner and its affiliates areentitled to recover interest on the full amount of non-permanent loans theyprovide to the Partnership or NTL South Herts and they are also entitled torecover the portion of bank fees and deferred financing costs relating toVirgin Media’s long term debt allocable to the Partnership or NTL South Herts. Theyhave elected to recover these amounts commencing in the fourth quarter of 2005.

 

**Note 5. RecentAccounting Pronouncements**

 

In December 2007, the FASB issuedFAS No. 160, *NoncontrollingInterests in Consolidated Financial Statements,*or FAS 160.FAS 160 establishes requirements for ownership interests in subsidiariesheld by parties other than ourselves (sometimes called “minority interests”) tobe clearly identified, presented, and disclosed in the consolidated statementof financial position within equity, but separate from the parent’s equity. Allchanges in the parent’s ownership interests are required to be accounted forconsistently as equity transactions and any non-controlling equity investmentsin unconsolidated subsidiaries must be measured initially at fair value. FAS 160is effective, on a prospective basis, for fiscal years beginning after December 15,2008; however, presentation and disclosure requirements must be retrospectivelyapplied to comparative financial statements. We are currently assessing theimpact of FAS 160 on our consolidated financial position and results ofoperations.

 

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**ITEM 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Overview**

 

We are a Colorado limited partnership thatwas formed in December 1991 pursuant to the public offering of our limitedpartnership interests for the purpose of acquiring one or more cabletelevision/telephone systems in the U.K. Upon acquisition of our system, ourprimary investment objective was to obtain capital appreciation in the value ofour investment in the system over the term that the investment is held by us.

 

We hold 66.7% of the shares of NTL SouthHerts, which is principally engaged in the development, construction,management and operation of broadband communications networks for telephone,cable television and internet services in the U.K. As a result of our ownershipof 66.7% of the shares of NTL South Herts, for accounting purposes we haveconsolidated the results of NTL South Herts with our results. Virgin Media indirectlyholds the remaining 33.3% of the shares of NTL South Herts. We are reliant onthe support of Virgin Media, the ultimate parent company of the GeneralPartner, to continue our operations as a going concern.

 

We derive our revenue principally from monthlyfees and usage charges. Our packaging of services and pricing are designed toencourage our residential customers to use multiple services like “double-play”telephone and broadband, “double-play” telephone and television or “triple-play”telephone, television and broadband.

 

Our expenses include certain costs that arecharged to us by a subsidiary of Virgin Media for the provision of networkservices and support, the use of Virgin Media’s national backbone telephonenetwork for carriage of our telephone traffic, as well as the provision oftechnical infrastructure and network capacity by Virgin Media for oursubscription internet access service and digital television services, theprovision of corporate services, including finance, legal, human resources andfacility services, and for the provision of IT services, including our use ofthe related IT equipment. The principal components of Virgin Media’s expensesinclude payroll and other employee-related costs; television programming costs;interconnect costs paid to other carriers relating to call termination;facility-related costs, such as rent, utilities and rates; marketing andselling costs; repairs and maintenance costs; and allowances for doubtfulaccounts.

 

**Factors Affecting OurBusiness**

 

Our residential customers account for themajority of our total revenue. The number of residential customers, the numberand types of services that each customer uses and the prices we charge forthese services drive our revenue. Our profit is driven by the relative marginson the types of services we provide to these customers and by the number ofservices that we provide to them. For example, broadband internet is moreprofitable than our television services and, on average, our “triple-play”customers are more profitable than “double-play” or “single-play” customers. Ourpackaging of services and our pricing are designed to encourage our customersto use multiple services such as television, telephone and broadband at a lowerprice than each stand-alone product on a combined basis. Factors particularlyaffecting our profitability include general macroeconomic factors, currencymovements, integration and restructuring activities, customer churn, averagerevenue per user, competition, capital expenditures and seasonality.

 

***GeneralMacroeconomic Factors.***General macroeconomic factors in the U.K. may have an impact on ourbusiness. For example, as consumers generally have less discretionary spendingto purchase goods and services during an economic slowdown, consumers may beless willing to subscribe to additional products or upgrade their existingservices.

 

***CurrencyMovements.***Becausesubstantially all of our revenue and operating costs are earned and paid inU.K. pounds sterling, but we report our financial results in U.S. dollars, ourfinancial results are impacted by currency fluctuations which are unrelated toour underlying results of operations.

 

***Integrationand Restructuring Activities.***Virgin Media will becompleting the final stages of the integration of its cable billing platformsduring 2008. During the fourth quarter, Virgin Media also intends to commencethe implementation of a restructuring plan aimed at driving furtherimprovements in its operational performance and eliminating inefficiencies. Thisplan will involve the incurrence of substantial operating and capitalexpenditures, including certain costs which Virgin Media expects to treat asrestructuring costs under Statement of Financial Accounting Standards No. 146,*Accounting for Costs Associated with Exit orDisposal Activities*. While Virgin Media anticipates significant costsavings from the plan and that the annual savings from and after 2010 willexceed the annual costs, it expects that 2008 and 2009 costs will exceed 2009savings. Virgin Media and our financial performance may be negatively affectedif Virgin Media is unable to implement its restructuring plan successfully andrealize the anticipated benefits.

 

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***CustomerChurn.***Customerchurn is a measure of the number of customers who stop subscribing to ourservices. An increase in our customer churn can lead to increased costs andreduced revenue. We continue to focus on improving our customer service andenhancing and expanding our service offerings to existing customers in order tomanage our customer churn rate. Our ability to reduce our customer churn ratebeyond a base level is limited by factors like competition and customers movingoutside our network service area, in particular during the summer season. Managingour customer churn rate is a significant component of our business plan. Ourcustomer churn rate may increase if our customer service is seen asunsatisfactory, if we are unable to deliver our services over our networkwithout interruption, or if we fail to match offerings by our competitors.

 

***ARPU.***Averagerevenue per user, or ARPU, is a measure we use to evaluate how effectively weare realizing potential revenue from our residential cable customers on ournetwork. We believe that our “triple-play” cable offering of television,broadband and fixed line telephone services is attractive to our existingcustomer base and generally allows us to increase our ARPU by facilitating thesale of multiple services to each customer.

 

***Competition.***Our abilityto acquire and retain customers and increase revenue depends on our competitivestrength. There is significant and increasing competition in the market for ourconsumer services, including broadband and telephone services offered byBritish Telecom, or BT, and resellers or local loop unbundlers, such as BritishSky Broadcasting Group plc, or BSkyB, and Carphone Warehouse (Talk Talk),alternative internet access services like DSL, satellite television servicesoffered by BSkyB and by BBC and ITV through Freesat, digital terrestrialtelevision offered through Freeview, internet protocol television offered byTiscali S.p.A. and BT. Our business services also face a range ofcompetitors, including BT and Cable & Wireless. Certain competitors,such as BT and BSkyB, are dominant in markets in which we compete and may usetheir dominance in those markets to offer bundled services that compete withour product offerings. As a result of increased competition, we have had to,and may be required to continue to, adjust our pricing and offer discounts tonew and existing customers in order to attract and retain customers.

 

***CapitalExpenditures.***Ourbusiness requires substantial capital expenditures on a continuing basis forvarious purposes, including expanding, maintaining and upgrading our network,investing in new customer acquisitions, and offering new services. If VirginMedia and we do not continue to invest in our network and in new technologies,our ability to retain and acquire customers may be hindered. Therefore, VirginMedia’s and our liquidity and the availability of cash to fund capital projectsare important drivers of our revenue. When Virgin Media’s and our liquidity isrestricted, so is our ability to meet our capital expenditure requirements.

 

***Seasonality.***Some revenuestreams are subject to seasonal factors. For example, telephone usage revenueby residential customers and businesses tends to be slightly lower duringsummer holiday months. Our customer churn rates include persons who disconnecttheir service because of moves, resulting in a seasonal increase in our churnrates during the summer months when higher levels of U.K. house moves occur andstudents leave their accommodation between academic years.

 

**Critical AccountingPolicies**

 

The preparation of our consolidated financialstatements requires us to make estimates that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and contingent liabilities. We base our judgments onhistorical experience and on various other assumptions that we believe arereasonable under the circumstances, the results of which form the basis for makingestimates about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions.

 

For a discussion of the accounting judgmentsand estimates that we have identified as critical in the preparation of ourconsolidated financial statements, please refer to our Annual Report on Form 10-Kfor the year ended December 31, 2007 as filed with the SEC on March 27,2008.

 

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**Consolidated Resultsof Operations**

 

***ThreeMonths Ended September 30, 2008 and 2007***

 

We present below summarized consolidatedfinancial information in U.S. dollars and U.K. pounds sterling for the threemonths ended September 30, 2008 and 2007:

 
| ** **                                    | ** ** | **Three months ended** | ** ** | ** ** | ** ** | **Three months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|------------|------------|----------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **September 30,**           | ** ** | **%**      | ** ** | **September 30,**           | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2008**                         | ** ** | **2007**   | ** ** | **Change**                       | ** ** | **2008**   | ** ** | **2007** | ** ** | **Change** | ** ** |
| Revenue                                       |       | $                                | 8,504,333  |       | $          | 9,505,134                        |       | (10.5      | )          | £ | 4,499,664 |   | £ | 4,695,670 |   | (4.2 | ) |
| Cost of goods sold                            |       | (2,021,240                       | )          | (2,213,040 | )          | (8.7                             | )          | (1,070,610 | )          | (1,091,354 | ) | (1.9 | ) |
| Selling, general and administrative  expenses |       | (20,227                          | )          | (17,808    | )          | 13.6                             |       | (10,711    | )          | (8,724 | ) | 22.8 |   |
| Management fees and allocated overhead        |       | (3,315,639                       | )          | (3,910,244 | )          | (15.2                            | )          | (1,753,320 | )          | (1,928,279 | ) | (9.1 | ) |
| Restructuring and other (charges) income      |       | (78                              | )          | 202,849    |       | (100.0                           | )          | (227       | )          | 102,686 |   | (100.2 | ) |
| Depreciation                                  |       | (1,567,503                       | )          | (1,769,141 | )          | (11.4                            | )          | (830,188   | )          | (874,681 | ) | (5.1 | ) |
| Operating income                              |       | 1,579,646                        |       | 1,797,750  |       | (12.1                            | )          | 834,608    |       | 895,318 |   | (6.8 | ) |
| Interest expense                              |       | (1,161,084                       | )          | (1,417,387 | )          | (18.1                            | )          | (613,614   | )          | (701,718 | ) | (12.6 | ) |
| Exchange gains (losses)                       |       | 257,531                          |       | (38,830    | )          | (763.2                           | )          | 132,221    |       | (19,290 | ) | (785.4 | ) |
| Profit before minority interest               |       | 676,093                          |       | 341,533    |       | 98.0                             |       | 353,215    |       | 174,310 |   | 102.6 |   |
| Minority interest                             |       | (167,656                         | )          | —     |       | —                           |       | (87,769    | )          | — |   | — |   |
| Net profit                                    |       | $                                | 508,437    |       | $          | 341,533                          |       | 48.9       |       | £ | 265,446 |   | £ | 174,310 |   | 52.3 |   |

 

*Revenue*

 

For the three months ended September 30,2008, revenue decreased by 10.5% to $8.5 million from $9.5 millionfor the three months ended September 30, 2007, and revenue expressed inpounds sterling decreased by 4.2% to £4.5 million for the three months ended September 30,2008, from £4.7 million for the three months ended September 30, 2007.The decrease was primarily driven by lower customer numbers, decliningtelephony usage and greater price discounting due to increased competition.

 

*Expenses*

 

*Cost of goods sold*

 

For the three months ended September 30,2008, cost of goods sold decreased by 8.7% to $2.0 million from$2.2 million for the three months ended September 30, 2007, and costof goods sold expressed in pounds sterling decreased by 1.9% to£1.1 million for the three months ended September 30, 2008 from£1.1 million for the three months ended September 30, 2007. Thereduction in cost of goods sold was primarily a reflection of reduced revenue.

 

On November 4, 2008, Virgin Media reached an agreement with BSkyBfor the return of its basic channels to Virgin Media’s platform for a licensefee of £30.0 million per annum, plus a capped performance-based adjustment(allowing for maximum additional payments of up to £6.0 million and £8.0million in years one and two, respectively, and up to £7.9 million in the finalseven months of the term). The new carriage agreement expires in June 2011.We will pay our pro rata share of Virgin Media’s costs under the agreement.

 

*Selling, general and administrative expenses*

 

For the three months ended September 30,2008, selling, general and administrative expenses increased to $20,227, or£10,711, from $17,808, or £8,724, for the three months ended September 30,2007. The increase is due to marginally higher investor relation costs and taxfees.

 

*Management fees and allocated overhead*

 

For the three months ended September 30,2008, management fees and allocated overhead decreased by 15.2% to$3.3 million from $3.9 million for the three months ended September 30,2007, and management fees and allocated overhead expressed in pounds sterlingdecreased by 9.1% to £1.8 million for the three months ended September 30,2008 from £1.9 million for the three months ended September 30, 2007.The business of NTL South Herts is managed as an integral part of Virgin Media.The combined costs of managing the larger group are allocated to each entitywithin the Virgin Media 

 

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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 quarter benefited from areduction in Virgin Media’s cable network operating expenses.

 

*Restructuring and other (charges) income*

 

For the three months ended September 30,2008, restructuring and other charges were $78 compared to other income of$202,849 for the same period in 2007, and restructuring and other chargesexpressed in pounds sterling were £227 compared to other income of £102,686 forthe same period in 2007. Restructuring and other charges for the three monthsended September 30, 2008 and restructuring and other income for the threemonths ended September 30, 2007 included restructuring costs allocated tous by a subsidiary of Virgin Media and related primarily to lease exit costsand employee termination costs in connection with restructuring programsinitiated in respect of historical acquisitions. Restructuring and othercharges allocated to us by a subsidiary of Virgin Media are made on the basisof an allocation formula appropriate to each category of charge based on areasonable methodology given the facts and circumstances.

 

*Depreciation*

 

For the three months ended September 30,2008, depreciation expense decreased to $1.6 million from$1.8 million for the same period in 2007. Depreciation expense expressedin pounds sterling decreased to £0.8 million from £0.9 million for the sameperiod in 2007. The decrease is primarily as a result of fixed assets becomingfully depreciated.

 

*Interest expense*

 

For the three months ended September 30,2008, interest expense decreased to $1.2 million from $1.4 millionfor the three months ended September 30, 2007, and interest expenseexpressed in pounds sterling decreased to £0.6 million for the three monthsended September 30, 2008 from £0.7 million for the three months endedSeptember 30, 2007. This decrease was primarily due to the lower overheadsand bank fees and deferred financing costs allocated to us by a subsidiary ofVirgin Media for the three months ended September 30, 2008, as comparedwith the three months ended September 30, 2007, together with lowerinterest rates and capital expenditure.

 

We paid no cash interest for the three monthsended September 30, 2008 and 2007.

 

*Exchange gains(losses)*

 

For the three months ended September 30,2008, foreign currency exchange gains were $257,531 as compared with losses of$38,830 for the three months ended September 30, 2007. The change inforeign currency exchange gains (losses) is primarily attributable tofluctuations in the value of the U.S. dollar on certain of our liabilities andtransactions. The value of the U.S. dollar strengthened by approximately tenpercent against the pound from December 31, 2007 to September 30,2008. Our results of operations will continue to be affected by foreignexchange rate fluctuations.

 

*Minority interest*

 

During the three months ended September 30,2008, we recognized a minority interest charge of $167,656, which has beencalculated on the net assets of our principal operating entity, NTL South Herts.For the three months ended September 30, 2007, NTL South Herts’liabilities exceeded its assets and therefore no minority interest wasrecognized.

 

*Net profit*

 

For the three months ended September 30,2008, net profit was $508,437 as compared with $341,533 for the three monthsended September 30, 2007, primarily due to the reasons described above.

 

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***NineMonths Ended September 30, 2008 and 2007***

 

We present below summarized consolidatedfinancial information in U.S. dollars and U.K. pounds sterling for the ninemonths ended September 30, 2008 and 2007:

 
| ** **                                    | ** ** | **Nine months ended** | ** ** | ** **  | ** ** | **Nine months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|---------------------------------|------------|-------------|------------|---------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **September 30,**          | ** ** | **%**       | ** ** | **September 30,**          | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2008**                        | ** ** | **2007**    | ** ** | **Change**                      | ** ** | **2008**   | ** ** | **2007** | ** ** | **Change** | ** ** |
| Revenue                                       |       | $                               | 26,565,038 |        | $          | 29,445,255                      |       | (9.8       | )          | £ | 13,644,788 |   | £ | 14,814,477 |   | (7.9 | ) |
| Cost of goods sold                            |       | (6,474,021                      | )          | (7,297,833  | )          | (11.3                           | )          | (3,325,297 | )          | (3,671,681 | ) | (9.4 | ) |
| Selling, general and administrative  expenses |       | (64,451                         | )          | (72,199     | )          | (10.7                           | )          | (33,104    | )          | (36,325 | ) | (8.9 | ) |
| Management fees and allocated overhead        |       | (10,220,728                     | )          | (12,905,093 | )          | (20.8                           | )          | (5,249,745 | )          | (6,492,802 | ) | (19.1 | ) |
| Restructuring and other (charges) income      |       | (25,767                         | )          | 58,003      |       | (144.4                          | )          | (13,235    | )          | 29,182 |   | (145.4 | ) |
| Depreciation                                  |       | (5,008,711                      | )          | (5,319,248  | )          | (5.8                            | )          | (2,572,660 | )          | (2,676,217 | ) | (3.9 | ) |
| Operating income                              |       | 4,771,360                       |       | 3,908,885   |       | 22.1                            |       | 2,450,747  |       | 1,966,634 |   | 24.6 |   |
| Interest expense                              |       | (3,528,189                      | )          | (4,043,295  | )          | (12.7                           | )          | (1,812,209 | )          | (2,034,260 | ) | (10.9 | ) |
| Exchange gains (losses)                       |       | 249,870                         |       | (95,425     | )          | (361.8                          | )          | 128,342    |       | (48,010 | ) | (367.3 | ) |
| Profit (loss) before minority interest        |       | 1,493,041                       |       | (229,835    | )          | 749.6                           |       | 766,880    |       | (115,636 | ) | 763.2 |   |
| Minority interest                             |       | (394,813                        | )          | —      |       | —                          |       | (202,791   | )          | — |   | — |   |
| Net profit (loss)                             |       | $                               | 1,098,228  |        | $          | (229,835                        | )          | 577.8      |       | £ | 564,089 |   | £ | (115,636 | ) | 587.8 |   |

 

*Revenue*

 

For the nine months ended September 30,2008, revenue decreased by 9.8% to $26.6 million from £29.4 millionfor the nine months ended September 30, 2007, and revenue expressed inpounds sterling decreased by 7.9% to £13.6 million from £14.8 millionin respect of the same periods in 2008 and 2007, respectively. The decrease wasprimarily driven by lower customer numbers, declining telephony usage andhigher price discounting due to increased competition.

 

*Expenses*

 

*Cost of goods sold*

 

For the nine months ended September 30,2008, cost of goods sold decreased by 11.3% to $6.5 million from$7.3 million for the nine months ended September 30, 2007, and costof goods sold expressed in pounds sterling decreased by 9.4% to£3.3 million for the nine months ended September 30, 2008 from£3.7 million for the nine months ended September 30, 2007. Thereduction in cost of goods sold was primarily a reflection of reduced revenue.Cost of goods sold as a percentage of revenue decreased to 24.4% from 24.8% forthe nine months ended September 30, 2008 and 2007, respectively, due to achange in the mix of services provided with an increase in higher-marginbroadband customers.

 

*Selling, general and administrative expenses*

 

For the nine months ended September 30,2008, selling, general and administrative expenses decreased to $64,451, or£33,104, from $72,199, or £36,325, in the nine months ended September 30,2007. This decrease is primarily attributable to the lower cost of investorrelations’ services.

 

*Management fees and allocated overhead*

 

For the nine months ended September 30,2008, management fees and allocated overhead decreased by 20.8% to $10.2 millionfrom $12.9 million for the nine months ended September 30, 2007, andmanagement fees and allocated overhead expressed in pounds sterling decreasedby 19.1% to £5.2 million for the nine months ended September 30, 2008from £6.5 million for the nine months ended September 30, 2007. 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 to the level of trading in that 

 

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entity. Management fees and allocatedoverhead in the nine months ended September 30, 2008 benefited from thereduction in Virgin Media’s overall cost base. This was primarily due to thenon-recurrence of marketing expenses incurred during the nine months ended September 30,2007 in relation to the rebrand to Virgin Media, together with lower employeerelated costs following the integration of the legacy NTL and Telewestbusinesses.

 

*Restructuring and other (charges) income*

 

For the nine months ended September 30,2008, restructuring and other charges were $25,767 compared to other income of$58,003 for the same period in 2007, and restructuring and other chargesexpressed in pounds sterling were £13,235 compared to other income of £29,182for the same period. Restructuring and other charges for the nine months ended September 30,2008 and other income in the nine months ended September 30, 2007 includedrestructuring costs allocated to us by a subsidiary of Virgin Media and relatedprimarily to lease exit costs and employee termination costs in connection withrestructuring programs initiated in respect of its historical acquisitions. Othercharges allocated to us by a subsidiary of Virgin Media are made on the basisof an allocation formula appropriate to each category of charge based on areasonable methodology given the facts and circumstances.

 

*Depreciation*

 

For the nine months ended September 30,2008, depreciation expense decreased to $5.0 million from$5.3 million for the same period in 2007. Depreciation expense expressedin pounds sterling decreased to £2.6 million for the nine months ended September 30,2008 from £2.7 million for the nine months ended September 30, 2007. Thedecrease is primarily as a result of fixed assets becoming fully depreciated.

 

*Interest expense*

 

For the nine months ended September 30,2008, interest expense decreased to $3.5 million from $4.0 millionfor the nine months ended September 30, 2007, and interest expenseexpressed in pounds sterling decreased to £1.8 million for the nine monthsended September 30, 2008 from £2.0 million for the nine months ended September 30,2007. This decrease was primarily due to the lower overheads and bank fees anddeferred financing costs allocated to us by a subsidiary of Virgin Media forthe nine months ended September 30, 2008 than for the nine months ended September 30,2007, together with lower capital expenditure.

 

We paid no cash interest for the nine monthsended September 30, 2008 and 2007.

 

*Exchange gains(losses)*

 

For the nine months ended September 30,2008, foreign currency exchange gains were $249,870 as compared with losses of$95,425 for the nine months ended September 30, 2007. The change inforeign currency exchange gains (losses) is primarily attributable tofluctuations in the valuation of the U.S. dollar on certain of our liabilitiesand transactions. The value of the U.S. dollar strengthened by approximatelyten percent against the pound from December 31, 2007 to September 30,2008. Our results of operations will continue to be affected by foreignexchange rate fluctuations.

 

*Minority interest*

 

During the nine months ended September 30,2008, we recognized a minority interest charge of $394,813, which has beencalculated on the net assets of our principal operating entity, NTL South Herts.For the nine months ended September 30, 2007, NTL South Herts’ liabilitiesexceeded its assets and therefore no minority interest was recognized.

 

*Net profit (loss)*

 

For the nine months ended September 30,2008, net profit was $1,098,228 as compared with a net loss of $229,835 for thenine months ended September 30, 2007, primarily due to the reasonsdescribed above.

 

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***SelectedOperating Data***

 

The following table sets forth certain dataconcerning our residential cable customers for the last five quarters:

 
| ** **                         | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** |
|------------------------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                         | ** ** | **2008**               | ** ** | **2008**          | ** ** | **2008**           | ** ** | **2007**              | ** ** | **2007**               | ** ** |
| Homes marketable (1)               |       | 96,197                 |       | 95,983            |       | 96,405             |       | 95,514                |       | 96,663                 |       |
| Total customers                    |       | 33,742                 |       | 34,326            |       | 34,787             |       | 34,858                |       | 35,021                 |       |
| Digital television subscribers     |       | 25,057                 |       | 24,763            |       | 24,406             |       | 24,152                |       | 23,755                 |       |
| Analog television subscribers      |       | 350                    |       | 437               |       | 483                |       | 545                   |       | 626                    |       |
| Broadband internet subscribers     |       | 26,026                 |       | 25,982            |       | 25,910             |       | 25,285                |       | 24,482                 |       |
| Telephony subscribers              |       | 29,082                 |       | 29,055            |       | 29,097             |       | 29,012                |       | 28,991                 |       |
| Penetration (homes marketable) (2) |       | 35.1                   | %          | 35.8              | %          | 36.1               | %          | 36.5                  | %          | 36.2                   | %          |
| Average monthly churn (3)          |       | 1.8                    | %          | 1.6               | %          | 1.2                | %          | 1.5                   | %          | 1.6                    | %          |

 

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(1)                                  Homes marketablerepresents management’s estimate of the number of homes within our service areathat can potentially be served by our network with minimal connection costs.

 

(2)                                  Penetration measuresthe total number of customers for our services divided by the number of homesmarketable.

 

(3)                                  Customer churn iscalculated by taking the total number of customers disconnecting from our servicesduring the month and dividing them by the average number of customers duringthe month. Average monthly churn during the quarter is the average of the threemonthly churn calculations within the quarter.

 

**CondensedConsolidated Statement of Cash Flows**

 

In the nine months ended September 30,2008, we generated $0.8 million from our operating activities comparedwith $2.5 million in the nine months ended September 30, 2007, andused it to purchase fixed assets including equipment for customer installations.Our cash provided by operating activities decreased primarily due to areduction in accounts payable to affiliates and related parties, partiallyoffset by an improved operating result.

 

**Liquidity and CapitalResources**

 

We have no financing independent of VirginMedia. We are reliant upon the support of Virgin Media to continue ouroperations. As of September 30, 2008, we had consolidated currentliabilities of $54.5 million due to Virgin Media group companies comparedwith $66.0 million as of December 31, 2007 and $71.3 million asof September 30, 2007.

 

Historically, our source of cash has been thenet proceeds of our offerings of limited partnership interests along withfunding from Virgin Media and our principal uses of cash have been capitalcontributions to NTL South Herts in order to fund our proportionate share ofthe construction costs of the South Herts System and ongoing operations.

 

Accordingly, until such time as NTL SouthHerts begins to pay dividends on its ordinary shares (which is not expected inthe foreseeable future) we will be required to fund our administrative expensesfrom borrowings or, theoretically, additional issuances of limited partnershipinterests. It is unlikely that we will be able to sell debt or equitysecurities in the public markets, at least in the short term, or to obtainfinancing from commercial banks. Accordingly, we are dependent on Virgin Mediafor funds to cover operating expenses, and will continue to be dependent uponVirgin Media to meet our liquidity requirements for the foreseeable future. Weexpect that cash from our operations in 2008 will be utilized fully for thepurchase of fixed assets including connecting new customers to our networks.

 

Virgin Media had £6,198.3 million ofdebt outstanding as of September 30, 2008, compared to£5,958.5 million as of December 31, 2007 and £6,099.8 million asof September 30, 2007, and £521.4 million of cash and cashequivalents, compared to £321.4 million as of December 31, 2007 and£364.0 million as of September 30, 2007. All amounts shown are inU.K. pounds sterling. The increase in Virgin Media’s debt since September 30,2007 was primarily attributable to exchange rate movements on its debtdenominated in currencies other than the pound sterling together with a greateruse of finance leases, offset by a voluntary prepayment of £200.0 millionin December 2007 utilizing cash reserves. The increase in debt since December 31,2007 was primarily attributable to exchange rate movements on Virgin Media’sdebt denominated in currencies other than the pound sterling together with agreater use of finance leases.

 

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On April 16, 2008, Virgin Media issued$1.0 billion of 6.5% convertible senior notes and used the net proceedsand cash on hand to repay £504.0 million of its obligations under itssenior credit facility that were originally scheduled to be paid in 2009, 2010and 2012.

 

On November 10, 2008, Virgin Mediaamended its senior credit facility to, among other things, (i) subject tothe prepayment condition described below, defer the remaining principalpayments due to consenting lenders under the A tranches to June 2012, and (ii) effectiveimmediately, suspend the right of consenting lenders under the B tranches toreceive a pro rata share of prepayments. Lenders who individually consented tothe new provisions governing the new A tranches and revolving facility willenjoy a margin increase of 1.375% compared to the margins on the existing Atranches and revolving facility, with effect from the satisfaction of therepayment condition, and the lenders who individually consented to the newprovisions governing the new B tranches enjoy a margin increase of 1.50%compared to the margins on the existing B tranches, effective immediately. The amendmentsare described in more detail under “Liquidity and Capital Resources – Long TermDebt’’ in Virgin Media’s Quarterly Report on Form 10-Q for the threemonths ended September 30, 2008 as filed with the SEC on November 10,2008.

 

The changes to the repayment schedule underthe new A tranches will only become effective after Virgin Media has madecertain principal prepayments under the senior credit facility totaling £487.0million. Virgin Media has until May 10, 2009, subject to a furtherthree-month extension option, to satisfy this prepayment condition. VirginMedia anticipates using cash generated from operations and cash on its balancesheet, which may be supplemented by proceeds from debt offerings or othersources, to meet this prepayment condition. Although Virgin Media had £521.4million of cash on its balance sheet as at September 30, 2008, if VirginMedia does not generate additional cash from operations or raise cash throughother means, it may not be able to satisfy this prepayment condition. If VirginMedia fails to meet the prepayment condition, the current debt amortizationschedule under its senior credit facility will remain unchanged, withsubstantial repayments due in 2010 and 2011. Even if Virgin Media does satisfythe prepayment condition, significant amortization payments remain due in 2010and 2011.

 

Virgin Media’s business is capital intensiveand it is highly leveraged. Virgin Media has significant cash requirements foroperating costs, capital expenditure, interest expense and debt amortization. Thelevels of Virgin Media’s capital expenditures and operating expenditures areaffected by the significant amounts of capital required to connect customers toits network, expand and upgrade its network, offer new services and integrateits billing systems and customer databases. Virgin Media expects that its cashon hand, together with cash from operations and undrawn credit facility, willbe sufficient for its cash requirements through the next twelve months. However,Virgin Media’s cash requirements after the next twelve months may exceed thesesources of cash. Virgin Media believes it will need to address its amortizationobligations, whether in their pre-amendment form or as deferred to 2012pursuant to the amendments, through means other then reliance on cash flow fromoperations, such as refinancing its existing facility, raising additional debtor equity, possible asset sales, or other means. Virgin Media may not be ableto obtain financing, or sell assets, at all or on favorable terms, or it may becontractually prevented by the terms of its senior notes or its senior creditfacility from incurring additional indebtedness or selling assets.

 

Virgin Media’s debt agreements containrestrictions on its ability to transfer cash between groups of its subsidiariesor to us. As a result of these restrictions, although its overall liquidity maybe sufficient to satisfy its obligations, it may be limited by covenants insome of its debt agreements from transferring cash to other subsidiaries thatmight require funds. In addition, cross default provisions in its otherindebtedness may be triggered if it defaults on any of these debt agreements.

 

For further information concerning VirginMedia’s liquidity and capital resources and the terms of its various debtfacilities, see its Annual Report on Form 10-K for the year ended December 31,2007 as filed with the SEC on February 29, 2008, as amended, and itsQuarterly Report on Form 10-Q for the three months ended September 30,2008, as filed with the SEC on November 10, 2008.

 

**Off-Balance SheetTransactions**

 

As part of our ongoing business we have notparticipated in transactions that generate relationships with unconsolidatedentities or financial partnerships, such as entities frequently referred to asspecial purpose entities, or SPEs, which would have been established for thepurpose of facilitating off-balance sheet arrangements or other contractuallynarrow or limited purposes. As of September 30, 2008 we are not involvedwith any material unconsolidated SPEs.

 

**ContractualObligations and Commercial Commitments**

 

There have been no material changes in thenine months ended September 30, 2008 to the information required underthis Item from what was disclosed in our Annual Report on Form 10-K forthe year ended December 31, 2007 as filed with the SEC on March 27,2008.

 

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

 

The functional currency of NTL South Herts ispounds sterling and all revenue and substantially all costs are incurred inpounds sterling. We report in U.S. dollars. Therefore, we are exposed tofluctuations in the pound sterling to U.S. dollar exchange rate.

 

The aggregate potential gain from ahypothetical one-percent decrease in the pound sterling/U.S. dollar exchangerate is approximately $7,000 for the nine months ended September 30, 2008.

 

We have no debt other than amounts due toaffiliates. As of September 30, 2008 and 2007, we had approximately $54.5 millionand $71.3 million, respectively, 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 a hypotheticalone-percentage point increase in the interest rate is approximately $437,000for the nine months ended September 30, 2008.

 

**ITEM 4. CONTROLSAND PROCEDURES**

 

 (a) *Disclosure Controls andProcedures.*Our management, with the participation of the principalexecutive officer and principal financial officer of Virgin Media*, hasevaluated the effectiveness of our disclosure controls and procedures (as suchterm is defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, as amended, or the Exchange Act) as of the endof the period covered by this report. Based on such evaluation, Virgin Media’sprincipal executive officer and principal financial officer have concludedthat, as of the end of such period, these controls and procedures are effectiveto ensure that information required to be disclosed by the registrant in thereports the registrant files or submits under the Exchange Act is recorded,processed, summarized, and reported within the time periods specified in theSEC’s rules and forms. These disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by the registrant in the reports that it files orsubmits is accumulated and communicated to the registrant’s management,including Virgin Media’s principal executive officer and principal financialofficer, as appropriate to allow timely decisions regarding requireddisclosure.

 

 (b) *Changes in Internal ControlOver Financial Reporting.*There were no changes in our internalcontrol over financial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the fiscal quarter to which thisreport relates that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

 

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*                                         The Partnership has noprincipal executive officer or principal financial officer. Robert Mackenzieand Robert Gale are Directors of Virgin Media Directors Limited, which is a corporatedirector of NTL Fawnspring Limited, the general partner of the Partnership.

 

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**PART II. OTHER INFORMATION**

 

**ITEM 1. LEGALPROCEEDINGS**

 

We are involved in disputes and litigationarising in the ordinary course of our business. We have no material legalproceeding outside of the ordinary course of business.

 

**ITEM 1A. RISKFACTORS**

 

There have been no material changes in thenine months ended September 30, 2008 in the risk factors discussed under “RiskFactors” and elsewhere in our Annual Report on Form 10-K for the yearended December 31, 2007 as filed with the SEC on March 27, 2008;except for the following risk factor:

 

***Virgin Media may be unable toimplement its restructuring plan successfully and realize the anticipatedbenefits, and this could negatively affect Virgin Media’s and our financialperformance.***

 

During the fourth quarter, Virgin Mediaintends to commence the implementation of a restructuring plan aimed at drivingfurther improvements in its operational performance and eliminatinginefficiencies in order to create a fully integrated, customer focusedorganization that is capable of competing effectively for the long term. Therestructuring process could cause an interruption of, or loss of, momentum inthe activities of one or more of Virgin Media’s businesses and the loss of keypersonnel. The diversion of management’s attention and any delays or difficultiesincurred in connection with the restructuring activity could result in thedisruption of Virgin Media’s ongoing businesses or inconsistencies in itsstandards, controls, product offerings, level of customer service, proceduresand policies that could negatively affect its ability to maintain relationshipswith customers, suppliers, employees and others with whom it has businessdealings. The implementation of the plan will involve the incurrence ofsubstantial operating and capital expenditures to achieve long term savings,including purchases of fixed assets, lease and contract exit costs, employeetermination costs and other restructuring and restructuring-related expenses.Additional unanticipated costs may also be incurred. Although Virgin Mediaexpects that the elimination of costs, as well as the realization ofefficiencies and other benefits related to the implementation of the plan, willoffset the restructuring-related costs over time, this net benefit may not beachieved in the near term, or at all.

** **

**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 were submitted to a vote of oursecurity holders in the quarter ended September 30, 2008.

 

**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 Person Performing Function  Similar to the Functions of Principal Executive Officer,* pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934, as  amended.                                                                                                                        |
| 31.2** | Certification of Person Performing Function  Similar to the Functions of Principal Financial Officer,* pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934, as  amended.                                                                                                                        |
| 32.1** | Certifications of Persons Performing  Function Similar to the Functions of Principal Executive Officer and  Principal Financial Officer, respectively,* pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                               |

 

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*                                         The Partnership has noprincipal executive officer or principal financial officer. Robert Mackenzieand Robert Gale are Directors of Virgin Media Directors Limited, which is aCorporate Director of NTL Fawnspring Limited, the General Partner of thePartnership.

 

**                                  Filed herewith.

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|   | 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.* |

 

Date: November 12, 2008

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on thedates indicated.

 
|   | 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.** |

 

Date: November 12, 2008

 
|     | By:      | /s/ ROBERT GALE                                                                                                                                                                 |
|----------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |     |                                                                                                                                                                            |
|     |     | Robert Gale                                                                                                                                                                     |
| * * | * * | *Director of Virgin  Media Directors Limited,  Corporate Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.** |

 

Date: November 12, 2008

 

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*                                         The Partnership has noprincipal executive officer or principal financial officer. Robert Mackenzie andRobert Gale are Directors of Virgin Media Directors Limited, which is aCorporate Director of NTL Fawnspring Limited, the General Partner of thePartnership.

 

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