Table ofContents

 

 

 

**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 SecuritiesExchange Act of 1934**

** **

**For the quarterly period ended June 30,2009**

** **

**o****         Transition report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

** **

**For the transition period from             to             **

 

**CommissionFile Number: 000-19889**

 

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**South Hertfordshire United KingdomFund, Ltd.**

(Exact name of registrant asspecified in its charter)

 

| **Colorado**  (State or other jurisdiction of incorporation or organization)                                                   | ** ** | **84-1145140**  (I.R.S. employer identification no.)                                         |
|--------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|
| ** **                                                                                                                     | ** ** | ** **                                                                                   |
| **Media House, Bartley Wood Business Park, Hook,  Hampshire,  RG27 9UP, England**(Address of principal executive offices) | ** ** | ** **

**+ 44 1256 75 2000**  (Registrant’s telephone number, including area code) |

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o No o

 

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

 

| Large accelerated filer o              |   | Accelerated filer o         |
|---------------------------------------------|--------|----------------------------------|
|                                        |   |                             |
| Non-accelerated filer x                |   | Smaller reporting company o |
| (Do not check if smaller reporting company) |   |                             |

 

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

 

The number of limited partnership units of the registrant outstandingas of August 4, 2009 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 June 30, 2009 and December 31,  2008                     | 5                |
|                                    | Condensed Consolidated Statements of Operations for  the Three and Six Months Ended June 30, 2009 and 2008 | 6                |
|                                    | Condensed Consolidated Statements of Cash Flows for  the Six Months Ended June 30, 2009 and 2008           | 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                                                     | 18               |
| 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 context otherwise requires, theterms “we”, “us”, “our” and similar terms refer to South Hertfordshire UnitedKingdom Fund, Ltd. and its subsidiaries, and “Virgin Media” refers to theconsolidated business of Virgin Media Inc. and its subsidiaries, asfurther described herein.

 

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**“Safe Harbor” Statement under the Private Securities LitigationReform Act of 1995:**

 

Various statements contained in this document constitute “forward-lookingstatements” as that term is defined under the Private Securities LitigationReform Act of 1995.  Words like “believe”,“anticipate”, “should”, “intend”, “plan”, “will”, “expect”, “estimate”, “project”,“positioned”, “strategy” and similar expressions identify these forward-lookingstatements, which involve known and unknown risks, uncertainties and otherfactors that may cause our actual results, performance or achievements orindustry results to be materially different from those contemplated, projected,forecasted, estimated or budgeted, whether expressed or implied, by theseforward-looking statements.  These factors,among others, include:

 

·                       our reliance onthe continued support of Virgin Media Inc., the ultimate parent company of ourgeneral partner;

 

·                       the lack of anestablished trading market for our partnership interests;

 

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

 

·                       our reliance ona limited franchise area;

 

·                       the risks to Virgin Media’sbusiness set forth below, which are risks that we share as a result of ourreliance on, and integration with, Virgin Media;

 

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

 

·                       Virgin Media’s ability tomanage customer churn;

 

·                       Virgin Media’s ability tomaintain and upgrade its networks in a cost-effective and timely manner;

 

·                       Virgin Media’s ability toimplement its restructuring plan successfully and realize the anticipatedbenefits;

 

·                       the general deterioration ineconomic conditions;

 

·                       Virgin Media’s continuedright to use the Virgin name and logo;

 

·                       possible losses in VirginMedia’s revenues due to systems failures;

 

·                       Virgin Media’s ability toprovide attractive programming at a reasonable cost;

 

·                       Virgin Media’s ability tocontrol unauthorized access to its network;

 

·                       the effect of technologicalchanges on Virgin Media’s businesses;

 

·                       Virgin Media’s reliance onsingle-source suppliers for some equipment, software and services and thirdparty distributors of its mobile services;

 

·                       currency and interest ratefluctuations;

 

·                       Virgin Media’s ability tofund debt service obligations through operating cash flow and refinance itsdebt obligations;

 

·                       Virgin Media’s ability toobtain additional financing in the future;

 

·                       Virgin Media’s ability tocomply with restrictive covenants in its indebtedness agreements; and

 

·                       the extent towhich Virgin Media’s future cash flow will be sufficient to cover its fixedcharges.

 

These and other factors are discussed in more detail under “RiskFactors” and elsewhere in our annual report on Form 10-K for the yearended December 31, 2008, as filed with the Securities and ExchangeCommission, or SEC, on March 16, 2009. We assume no obligation to update our forward-looking statements toreflect actual results, changes in assumptions or changes in factors affectingthese statements.

 

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**Exchange Rates**

 

The following table sets forth, for the periods indicated, the high,low, period average and period end noon buying rate in the City of New York forcable transfers as certified for customs purposes by the Federal Reserve Bankof New York expressed as U.S. dollars per £1.00.  The noon buying rate of the pound sterling onJune 30, 2009 was $1.6452 per £1.00.

 
| ** **                               | ** ** | **U.S. dollars per £1.00** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| **Six months  ended June 30,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2008                                     |       | $                                              | 1.9906     |   | $ | 1.9860 |   | $ | 2.0311 |   | $ | 1.9405 |   |
| 2009                                     |       | 1.6452                                         |       | 1.5067 |   | 1.6547 |   | 1.3658 |   |
|                                          |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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

 

The above rates may differ from the actual ratesused in the preparation of the condensed consolidated financial statements andother financial information appearing in this quarterly report.  Our inclusion of these exchange rates is notmeant to suggest that the pound sterling amounts actually represent these U.S.dollar amounts or that these amounts could have been converted into U.S.dollars at any particular rate, if at all.

 

Unless we otherwise indicate, all U.K. pound sterling amounts as of June 30,2009 are translated to U.S. dollars at an exchange rate of $1.6452 to £1.00,all amounts disclosed for the six months ended June 30, 2009 are based onan average exchange rate of $1.4929 to £1.00, and all amounts disclosed for thesix months ended June 30, 2008 are based on an average exchange rate of$1.9749 to £1.00.  All amounts disclosedas of December 31, 2008 are based on an exchange rate of $1.4619 to£1.00.  U.S. dollar amounts for the threemonths ended June 30, 2009 and 2008 are determined by subtracting the U.S.dollar converted financial result for the three months ended March 31,2009 and 2008 from the U.S. dollar converted financial result for the sixmonths ended June 30, 2009 and 2008, respectively. All rates are based onthe noon buying rate in the City of New York for cable transfers ascertified for customs purposes by the Federal Reserve Bank ofNew York.  The variation among theexchange rates for 2009 and 2008 has affected the U.S. dollar comparisonssignificantly.

 

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**PART I.  FINANCIALINFORMATION**

 

**ITEM1.  FINANCIAL STATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                             | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                             | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| ** **                                                                                             | ** ** | **(unaudited)**   | ** ** | **(Adjusted)**        | ** ** |
| **Assets**                                                                                             |       |              |       |                  |       |
| Fixed  assets, net                                                                                     |       | $                 | 44,620,026 |                  | $          | 41,405,661 |   |
| **Total assets**                                                                                       |       | 44,620,026        |       | 41,405,661            |       |
|                                                                                                   |       |              |       |                  |       |
| **Liabilities and Partners’ Deficit**                                                             |       |              |       |                  |       |
| Current  liabilities                                                                                   |       |              |       |                  |       |
| Accounts  payable to affiliates and related parties                                                    |       | $                 | 45,885,431 |                  | $          | 43,807,690 |   |
| Total  liabilities                                                                                     |       | 45,885,431        |       | 43,807,690            |       |
|                                                                                                   |       |              |       |                  |       |
| **Partners’ Capital (Deficit)**                                                                   |       |              |       |                  |       |
| General  Partner                                                                                       |       |              |       |                  |       |
| Contributed  capital                                                                                   |       | 1,000             |       | 1,000                 |       |
| Accumulated  deficit                                                                                   |       | (506,883          | )          | (511,003              | )          |
|                                                                                                   |       | (505,883          | )          | (510,003              | )          |
| Limited  Partners                                                                                      |       |              |       |                  |       |
| Contributed  capital, net (56,935 units outstanding at June 30, 2009 and  December 31, 2008) |       | 48,817,997        |       | 48,817,997            |       |
| Accumulated  deficit                                                                                   |       | (49,900,432       | )          | (50,308,283           | )          |
|                                                                                                   |       | (1,082,435        | )          | (1,490,286            | )          |
|                                                                                                   |       |              |       |                  |       |
| Partners’  Deficit                                                                                |       | (1,588,318        | )          | (2,000,289            | )          |
|                                                                                                   |       |              |       |                  |       |
| Accumulated  other comprehensive loss                                                                  |       | (713,125          | )          | (927,229              | )          |
| Total  South Hertfordshire United Kingdom Fund, Ltd. Partners’ deficit                            |       | (2,301,443        | )          | (2,927,518            | )          |
|                                                                                                   |       |              |       |                  |       |
| Noncontrolling  interest                                                                               |       | 1,036,038         |       | 525,489               |       |
| Total  Partners’ deficit                                                                          |       | (1,265,405        | )          | (2,402,029            | )          |
|                                                                                                   |       |              |       |                  |       |
| **Total Liabilities and Partners’ Deficit**                                                       |       | $                 | 44,620,026 |                  | $          | 41,405,661 |   |

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                                                                                     | ** ** | **Three  months ended** | ** ** | **Six  months ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                     | ** ** | **June 30,**       | ** ** | **June 30,**     | ** ** |
| ** **                                                                                                                                     | ** ** | **2009**                | ** ** | **2008**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                                                                                     | ** ** | ** **              | ** ** | **(Adjusted)**        | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** |
| **Revenues**                                                                                                                                   |       | $                       | 7,207,941  |                  | $          | 8,694,107 |   | $ | 13,830,045 |   | $ | 18,060,705 |   |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| **Costs and expenses**                                                                                                                         |       |                    |       |                  |       |   |   |   |   |
| Operating  costs                                                                                                                               |       | (2,850,604              | )          | (3,970,178            | )          | (5,567,007 | ) | (7,893,989 | ) |
| Allocated  overhead                                                                                                                            |       | (2,647,252              | )          | (2,858,439            | )          | (4,948,892 | ) | (6,027,743 | ) |
| Management  fees                                                                                                                               |       | (360,397                | )          | (434,705              | )          | (691,502 | ) | (903,035 | ) |
| Selling,  general and administrative expenses                                                                                                  |       | (24,788                 | )          | (23,537               | )          | (64,177 | ) | (44,224 | ) |
| **Operating income**                                                                                                                           |       | 1,324,900               |       | 1,407,248             |       | 2,558,467 |   | 3,191,714 |   |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| **Other expenses**                                                                                                                             |       |                    |       |                  |       |   |   |   |   |
| Interest  payable to General Partner and affiliates                                                                                            |       | (758,850                | )          | (1,135,840            | )          | (1,511,490 | ) | (2,367,105 | ) |
| Exchange  losses                                                                                                                               |       | (271,236                | )          | (6,206                | )          | (231,508 | ) | (7,661 | ) |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| **Net profit**                                                                                                                                 |       | 294,814                 |       | 265,202               |       | 815,469 |   | 816,948 |   |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| Less:  Profit attributable to noncontrolling interest                                                                                          |       | (213,825                | )          | (119,380              | )          | (403,498 | ) | (227,157 | ) |
| **Net profit attributable to South Hertfordshire United****Kingdom  Fund, Ltd.**                                                               |       | $                       | 80,989     |                  | $          | 145,822 |   | $ | 411,971 |   | $ | 589,791 |   |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| **Allocation of net profit attributable to South  Hertfordshire****United Kingdom Fund, Ltd.**                                                 |       |                    |       |                  |       |   |   |   |   |
| General  Partner                                                                                                                               |       | $                       | 810        |                  | $          | 1,458 |   | $ | 4,120 |   | $ | 5,898 |   |
| Limited  Partners                                                                                                                              |       | 80,179                  |       | 144,364               |       | 407,851 |   | 583,893 |   |
| **Net profit attributable to South Hertfordshire United****Kingdom  Fund, Ltd.**                                                               |       | $                       | 80,989     |                  | $          | 145,822 |   | $ | 411,971 |   | $ | 589,791 |   |
|                                                                                                                                           |       |                    |       |                  |       |   |   |   |   |
| **Net profit attributable to South Hertfordshire United****Kingdom  Fund, Ltd. allocated to limited partners****per limited partnership unit** |       | $                       | 1.41       |                  | $          | 2.54 |   | $ | 7.16 |   | $ | 10.26 |   |
| **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 CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Six  months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **June 30,**     | ** ** |
| ** **                                                                         | ** ** | **2009**              | ** ** | **2008** | ** ** |
| ** **                                                                         | ** ** | ** **            | ** ** | **(Adjusted)** | ** ** |
| **Cash flows from operating activities**                                           |       |                  |       |   |   |
| Net  profit                                                                        |       | $                     | 815,469    |   | $ | 816,948 |   |
|                                                                               |       |                  |       |   |   |   |   |
| Adjustments  to reconcile net profit to net cash provided by operating activities: |       |                  |       |   |   |
| Depreciation                                                                       |       | 2,077,979             |       | 3,441,208 |   |
| Change  in operating assets and liabilities:                                       |       |                  |       |   |   |
| Decrease  in accounts payable to affiliates and related parties                    |       | (2,581,457            | )          | (3,565,058 | ) |
| **Net cash provided by operating activities**                                      |       | 311,991               |       | 693,098 |   |
|                                                                               |       |                  |       |   |   |
| **Cash flows from investing activities**                                           |       |                  |       |   |   |
| Purchase  of fixed assets                                                          |       | (311,991              | )          | (693,098 | ) |
| **Net cash used in investing activities**                                          |       | (311,991              | )          | (693,098 | ) |
| 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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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**Note 1 — Basis of Presentation**

 

***Formation and Business***

 

South Hertfordshire United Kingdom Fund, Ltd., or the Partnership,a Colorado limited partnership, was formed on December 23, 1991, inconnection with a public offering of its limited partnership interests.  The Partnership was formed to acquire,construct, develop, own and operate cable television/telephone systems in theU.K. NTL Fawnspring Limited, a U.K. corporation and a subsidiary of VirginMedia Inc., or Virgin Media, is the general partner, or the GeneralPartner, of the Partnership.

 

We hold 66.7% of the shares of NTL (South Hertfordshire) Limited, orNTL South Herts, 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 ownership of 66.7% of theshares of NTL South Herts, for accounting purposes, we have consolidated theresults of NTL South Herts with our results. Virgin Media indirectly holds the remaining 33.3% of the shares of NTLSouth Herts.  We are reliant on thesupport of Virgin Media, the ultimate parent company of the General Partner, tocontinue our operations as a going concern.

 

***Basis of Presentation***

 

We have prepared the accompanying unaudited condensed consolidatedfinancial statements in accordance with U.S. generally accepted accountingprinciples, or U.S. GAAP, for interim financial information and with the rules andregulations of the SEC.  Accordingly,they do not include all of the information and footnotes required by U.S. GAAPfor complete financial statements.  Inthe opinion of our management, all adjustments (consisting only of normalrecurring adjustments) considered necessary for a fair presentation have beenincluded.  Results of operations for thethree and six months ended June 30, 2009 are not necessarily indicative ofresults to be expected for the full year ending December 31, 2009.  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, 2008, as filedwith the SEC on March 16, 2009.

 

**Note 2 — Comprehensive Profit**

 

Comprehensive profit includes net profit as well asother comprehensive profit.  Our othercomprehensive profit consists of changes in cumulative foreign currencytranslation adjustments.  Comprehensiveprofit comprises:

 
| ** **                               | ** ** | **Three  months ended**                                             | ** ** | **Three  months ended**       | ** ** |
|------------------------------------------|------------|---------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                               | ** ** | **June 30,  2009**                                             | ** ** | **June 30,  2008**       | ** ** |
| ** **                               | ** ** | **Partners  of  South  Hertfordshire  United Kingdom   Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | ** **                                                          | ** ** | ** **                    | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** |
| Net profit                               |       | $                                                                   | 80,989     |                          | $          | 213,825 |   | $ | 294,814 |   | $ | 265,202 |   |
| Foreign currency translation adjustments |       |                                                                | 238,385    |                          | 119,192    |   | 357,577 |   | 4,943 |   |
| Comprehensive profit                     |       | $                                                                   | 319,374    |                          | $          | 333,017 |   | $ | 652,391 |   | $ | 270,145 |   |
| ** **                               | ** ** | ** **                                                          | ** ** | ** **                    | ** ** |
| ** **                               | ** ** | **Six  months ended**                                               | ** ** | **Six  months ended**         | ** ** |
| ** **                               | ** ** | **June 30,  2009**                                             | ** ** | **June 30,  2008**       | ** ** |
| ** **                               | ** ** | **Partners  of  South  Hertfordshire  United Kingdom  Fund, Ltd.**  | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | ** **                                                          | ** ** | ** **                    | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** |
| Net profit                               |       | $                                                                   | 411,971    |                          | $          | 403,498 |   | $ | 815,469 |   | $ | 816,948 |   |
| Foreign currency translation adjustments |       |                                                                | 214,104    |                          | 107,051    |   | 321,155 |   | 6,909 |   |
| Comprehensive profit                     |       | $                                                                   | 626,075    |                          | $          | 510,549 |   | $ | 1,136,624 |   | $ | 823,857 |   |

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

**Note 3 — Investment in Subsidiary**

 

NTL South Herts is a U.K. corporation which is principally engaged inthe development, construction, management and operation of broadbandcommunication networks for telephone, cable television and internet services inthe South Hertfordshire franchise area, located adjacent to the northwestperimeter of Greater London, England (the “South Herts System”).   NTL South Herts is owned 66.7% by thePartnership and 33.3% by Virgin Media. Virgin Media also owns the General Partner.  The General Partner provides consultingservices to the Partnership and may delegate some or all of the consultingservices to Virgin Media or to other affiliates.

 

**Note 4 — Transactions with the General Partnerand Affiliated Entities**

 

***Consulting and Management Fees***

 

An affiliate of the General Partner is entitled to be paid a consultingfee by NTL South Herts.  During theconstruction phases of the South Herts System, this consulting fee was 2% ofconstruction costs.  Since completion ofconstruction of each portion of the system, the consulting fee for thecompleted portion has been 5% of the gross revenue, excluding revenue from thesale of cable television/telephone systems. The consulting fee is calculated and payable monthly.  Consulting fees paid or payable by NTL SouthHerts for the three months ended June 30, 2009 and 2008 were $360,397 and$434,705, respectively.  Consulting feespaid or payable by NTL South Herts for the six months ended June 30, 2009and 2008 were $691,502 and $903,035, respectively. These amounts were expensedin the condensed consolidated statement of operations.

 

***Distribution Ratios and Reimbursement***

 

Any Partnership distributions made from cash flows (defined as cashreceipts derived from routine operations, less debt principal and interestpayments and cash expenses) are allocated 99% to the limited partners and 1% tothe General Partner.  Any distributionsother than interest income on limited partner subscriptions earned prior to theacquisition of the Partnership’s first cable television system or from cashflows, such as from the sale or refinancing of a system or upon dissolution ofthe Partnership, will be made as follows: 99% to the limited partners and 1% tothe General Partner until any negative balances in the limited partners’capital accounts are reduced to zero; 100% to the General Partner until anynegative balance in its capital account is reduced to zero; 99% to the limitedpartners and 1% to the General Partner until the balance in the limitedpartners’ capital accounts is equal to their adjusted capital contribution plusa 12% return; 100% to the General Partner until the balance in its capitalaccount is equal to its adjusted capital contribution, and any remaining incomeor gain shall be allocated 75% to the limited partners and 25% to the GeneralPartner.

 

The General Partner and its affiliates are entitled to reimbursementfrom NTL South Herts for direct and indirect expenses allocable to theoperation of the South Herts System, and from the Partnership for direct andindirect expenses allocable to the operation of the Partnership which include,but are not limited to, salaries of any full or part-time employees, rent,supplies, telephone, travel, and restructuring and other charges.  The General Partner believes that themethodology used in allocating these expenses is fair and reasonable.  During the three months ended June 30,2009 and 2008, reimbursement made by NTL South Herts and the Partnership to theGeneral Partner or its affiliates for any allocable direct and indirectexpenses totaled $2,647,252 and $2,858,439, respectively.  During the six months ended June 30,2009 and 2008, reimbursement made by NTL South Herts and the Partnership to theGeneral Partner or its affiliates for any allocable direct and indirectexpenses totaled $4,948,892 and $6,027,743, respectively.

 

The General Partner and its affiliates may make advances to, and defercollection of fees and allocated expenses owed by, the Partnership, althoughthey are not required to do so.  ThePartnership is charged interest on such advances and deferred amounts at a rateequal to the General Partner’s or certain affiliates’ effective average cost ofdebt financing from unaffiliated entities, which does not differ from theirweighted average cost of debt financing. For the three months ended June 30, 2009 and 2008, affiliates ofthe General Partner charged the Partnership aggregated interest, bank fees andfinance charges of $724,742 and $1,089,797, respectively, relating tonon-permanent loans, and an affiliate of the General Partner charged thePartnership interest on advances of $34,108 and $46,043, respectively.  For the six months ended June 30, 2009and 2008, affiliates of the General Partner charged the Partnership aggregatedinterest, bank fees and finance charges of $1,445,211 and $2,274,414,respectively, relating to non-permanent loans, and an affiliate of the GeneralPartner charged the Partnership interest on advances of $66,279 and $92,691,respectively. The General Partner and its affiliates are entitled to recoverinterest on the full amount of non-permanent loans they provide to thePartnership or NTL South Herts and the portion of bank fees and deferredfinancing costs relating to Virgin Media’s senior credit facility allocable tothe Partnership or NTL South Herts.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

**Note 5 — Recent Accounting Pronouncements**

 

InDecember 2007, the Financial Accounting Standards Board, or FASB, issuedStatement No. 160*, Noncontrolling Interestsin Consolidated Financial Statements—an Amendment of ARB No. 51*,or FAS 160. FAS 160 establishes requirements for ownership interests insubsidiaries held by parties other than ourselves (sometimes called ‘‘minorityinterests’’) to be clearly identified, presented, and disclosed in theconsolidated statement of financial position within equity, but separate fromthe parent’s equity. All changes in the parent’s ownership interests arerequired to be accounted for consistently as equity transactions and anynoncontrolling equity investments in unconsolidated subsidiaries must bemeasured initially at fair value. Additionally, FAS 160 requires that netincome or loss and comprehensive income or loss be attributed to the parententity and the noncontrolling interest. Before the adoption of FAS 160, the portion of operations relating tothe noncontrolling interest was reflected in the statement of operations as anincome or expense item in the calculation of net income or loss.  FAS 160 is effective, on a prospective basis,for fiscal years beginning after December 15, 2008; however, presentationand disclosure requirements must be retrospectively applied to comparativefinancial statements. We adopted FAS 160 effective January 1, 2009 andhave classified noncontrolling interest (previously minority interest) as acomponent of equity for all periods presented.  We also made the required adjustments to reflect the net profit or lossand comprehensive profit or loss as being attributable to the Partnership forall periods presented.  Such adjustmentshad the following impact on our previously reported condensed consolidatedstatement of operations for the three and six months ended June 30, 2008.

 
| ** **                                | ** ** | **As Reported** | ** ** | **Adjustments** | ** ** | **As Adjusted** | ** ** |
|-------------------------------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
|                                      |       |            |       |            |       |            |       |
| **Three months ended June 30, 2008** |       |            |       |            |       |            |       |
| Net  profit                               |       | $               | 145,822    |            | $          | 119,380         |       | $ | 265,202 |   |
|                                      |       |            |       |            |       |            |       |
| **Six months ended June 30, 2008**   |       |            |       |            |       |            |       |
| Net  profit                               |       | $               | 589,791    |            | $          | 227,157         |       | $ | 816,948 |   |

 

Thefollowing table presents a reconciliation of the beginning and the endingcarrying amounts of total equity attributable to the Partnership and equityattributable to the noncontrolling interests.

 
| ** **                       | ** ** | ** ** | ** ** | **Accumulated**   | ** ** | ** **          | ** ** | ** **           | ** ** | ** **      | ** ** | ** **      | ** ** | ** **      | ** ** |
|----------------------------------|------------|------------|------------|-------------------|------------|---------------------|------------|----------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **other**         | ** ** | **General Partner** | ** ** | **Limited Partners** | ** ** | **Non-**        | ** ** |
| ** **                       | ** ** | ** ** | ** ** | **comprehensive** | ** ** | **Contributed**     | ** ** | **Accumulated**      | ** ** | **Contributed** | ** ** | **Accumulated** | ** ** | **controlling** | ** ** |
| ** **                       | ** ** | **Total**  | ** ** | **income**        | ** ** | **capital**         | ** ** | **deficit**          | ** ** | **capital**     | ** ** | **deficit**     | ** ** | **interest**    | ** ** |
|                             |       |       |       |              |       |                |       |                 |       |            |       |            |       |            |       |
| December 31,  2008          |       | $          | (2,402,029 | )                 | $          | (927,229            | )          | $                    | 1,000      |            | $          | (511,003        | )          | $               | 48,817,997 |   | $ | (50,308,283 | ) | $ | 525,489 |   |
|                             |       |       |       |              |       |                |       |                 |       |            |       |            |       |            |       |
| Net  profit                      |       | 815,469    |       | —            |       | —              |       | 4,120                |       | —          |       | 407,851         |       | 403,498         |       |
| Currency  translation adjustment |       | 321,155    |       | 214,104           |       | —              |       | —               |       | —          |       | —          |       | 107,051         |       |
| June 30,  2009              |       | $          | (1,265,405 | )                 | $          | (713,125            | )          | $                    | 1,000      |            | $          | (506,883        | )          | $               | 48,817,997 |   | $ | (49,900,432 | ) | $ | 1,036,038 |   |

 

In May 2009, theFASB issued Statement No. 165, *SubsequentEvents*, or FAS 165, which is effective for financial statementsissued for all periods ending after June 15, 2009.  FAS 165 establishes general standards ofaccounting for, and requires disclosure of, events that occur after the balancesheet date but before financial statements are issued or are available to beissued. We adopted FAS 165 during the second quarter of 2009.  In accordance with FAS 165, we have evaluatedsubsequent events through the date and time the financial statements wereissued on August 7, 2009.

 

InJune 2009, the FASB issued Statement No. 168, *The**FASB Accounting Standards Codification**TM** **andthe Hierarchy of Generally Accepted Accounting Principles—a replacement of FASBStatement No. 162*, or FAS 168, confirming that the *FASB Accounting Standards Codification,* or Codification,will become the single official source of authoritative U.S. GAAP (other thanguidance issued by the SEC), superseding existing FASB, American Institute ofCertified Public Accountants, Emerging Issues Task Force (EITF), and relatedliterature. After that date, only one level of authoritative U.S. GAAP willexist. All other literature will be considered non-authoritative. TheCodification does not change U.S. GAAP; instead, it introduces a new structurethat is organized in an easily accessible, user-friendly online researchsystem. The Codification becomes effective for interim and annual periodsending on or after September 15, 2009. We will apply the Codificationbeginning in the third quarter of fiscal year 2009 and do not expect theadoption to have a material effect on our consolidated financial statements.

 

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**Item 2.  Management’s Discussionand Analysis of Financial Condition and Results****ofOperations**

 

**Overview**

 

We are a Colorado limited partnership that was formed in December 1991pursuant to the public offering of our limited partnership interests for thepurpose of acquiring one or more cable television/telephone systems in theU.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 South Herts, which is principallyengaged in the development, construction, management and operation of broadbandcommunications networks for telephone, cable television and internet servicesin 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 indirectly holds the remaining33.3% of the shares of NTL South Herts. We are reliant on the support of Virgin Media, the ultimate parentcompany of the General Partner, to continue our operations as a going concern.

 

We derive our revenue principally from monthly fees and usagecharges.  Our packaging of services andpricing are designed to encourage our residential customers to use multipleservices like “double-play” telephone and broadband, “double-play” telephoneand television or “triple-play” telephone, television and broadband.

 

Our expenses include certain costs that are charged to us by asubsidiary of Virgin Media for the provision of network services and support,the use of Virgin Media’s national backbone telephone network for carriage ofour telephone traffic, as well as the provision of technical infrastructure andnetwork capacity by Virgin Media for our subscription internet access serviceand digital television services, the provision of corporate services, includingfinance, legal, human resources and facility services, and for the provision ofIT services, including our use of the related IT systems and equipment.  The principal components of Virgin Media’sexpenses include payroll and other employee-related costs; televisionprogramming costs; interconnect costs paid to other carriers relating to calltermination; facility-related costs, such as rent, utilities and rates;marketing and selling costs; repairs and maintenance costs; and allowances fordoubtful accounts.

 

During the threemonths ended June, 30 2009, the General Partner agreed to the transfer of customerand supplier contracts relating to NTL South Herts’ premium TV services,resulting in a transfer of revenue and costs to Future Entertainment Sarl, awholly owned subsidiary of Virgin Media, which as of June 1, 2009 carriedsubstantially all Virgin Media’s premium TV channels and associated revenue andcosts.  This is not expected to bedetrimental to the results of operations or financial position of NTL South Herts.

 

**Factors Affecting Our Business**

 

Our residential customers account for the majority of our totalrevenue.  The number of residentialcustomers, the number and types of services that each customer uses and theprices we charge for these 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 more profitable than our television services and, onaverage, our “triple-play” customers are more profitable than “double-play” or “single-play”customers.  Our packaging of services andour pricing are designed to encourage our customers to use multiple servicessuch as television, telephone and broadband at a lower price than eachstand-alone product on a combined basis. Factors particularly affecting our business include generalmacroeconomic factors, currency movements, integration and restructuringactivities, churn, average revenue per user, competition, capital expendituresand seasonality.

 

***General Macroeconomic Factors. ***General macroeconomicfactors in the U.K. have an impact on our business.  For example, during an economic slowdown,potential and existing customers may be less willing, or able to purchase ourproducts or upgrade their services.  Wemay also experience increased churn and higher bad debt expense.

 

***Currency Movements. ***Because substantially all ofour revenue and operating costs are earned and paid in U.K. pounds sterling,but we report our financial results in U.S. dollars, our financial results areimpacted by currency fluctuations which are unrelated to our underlying resultsof operations.

 

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***Integration and RestructuringActivities. ***In the fourth quarter of 2008, VirginMedia commenced the implementation of a restructuring plan aimed at drivingfurther improvements in Virgin Media’s and our operational performance andeliminating inefficiencies in order to create a fully-integrated,customer-focused organization.  WhileVirgin Media anticipates significant cost savings from the plan and that the annualsavings from and after 2010 will exceed the annual costs, it expects that 2009costs will exceed 2009 savings.  Thesecosts will include purchases of fixed assets, lease and contract exit costs,employee termination costs, and other restructuring and restructuring-relatedexpenses.  In total, Virgin Media expectsto incur operating expenditures of between £140 million to£160 million and capital expenditures of between £30 million to£40 million in connection with this plan over a three-year period.  Virgin Media’s and our financial performancemay be negatively affected if Virgin Media is unable to implement itsrestructuring plan successfully and realize the anticipated benefits.

 

***Churn***.  Churn is a measure of the number of customerswho stop subscribing to our services.  Anincrease in our churn can lead to increased costs and reduced revenue.  We continue to focus on improving ourcustomer service and enhancing and expanding our service offerings to existingcustomers in order to manage our churn rate. Our ability to reduce our churn rate beyond a base level is limited byfactors such as competition, the economy and customers moving outside ournetwork service area, in particular during the summer season.  Managing our churn rate is a significant componentof our business plan.  Our churn rate mayincrease if our customer service is seen as unsatisfactory, if we are unable todeliver our services over our network without interruption, if we fail to matchofferings by our competitors, if we increase our prices, if there is an improvement in the U.K.housing market or if there is a prolonged economic downturn.

 

***ARPU***.  Average revenue per user, or ARPU, is ameasure Virgin Media uses to evaluate how effectively it is realizing potentialrevenue from its residential cable customers on its network.  Virgin Media believes that its “triple-play”cable offering of television, broadband and fixed line telephone services isattractive to its existing customer base and generally allows Virgin Media toincrease its ARPU by facilitating the sale of multiple services to eachcustomer.

 

***Competition****.*  Our ability to acquire and retain customersand increase revenue depends on our competitive strength.  There is significant and increasingcompetition in the market for our consumer services, including broadband andtelephone services offered by British Telecom, or BT; resellers or local loopunbundlers, such as British Sky Broadcasting Group plc, or BSkyB, andCarphone Warehouse (Talk Talk); alternative internet access services like DSL;satellite television services offered by BSkyB and by BBC and ITV throughFreesat; free-to-air digital terrestrial television offered through Freeview;and internet protocol television offered by BT. Our business services also face a range of competitors, includingservices offered by BT and Cable & Wireless plc.  In addition, certain competitors, such as BTand BSkyB, are dominant in markets in which we compete and may use theirdominance in those markets to offer bundled services that compete with ourproduct offerings.  As a result ofincreased competition, we have had to, and may be required to continue to,adjust our pricing and offer discounts to new and existing customers in orderto attract and retain customers.

 

***Capital Expenditures***.  Our business requires substantial capitalexpenditures on a continuing basis for various 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, Virgin Media’s and our liquidityand the availability of cash to fund capital projects are important drivers ofour revenue.  When Virgin Media’s and ourliquidity is restricted, so is our ability to meet our capital expenditurerequirements.

 

***Seasonality****.*  Some revenue streams are subject to seasonalfactors.  For example, telephone usagerevenue by residential customers and businesses tends to be slightly lowerduring summer holiday months.  Our churnrates include persons who disconnect their service because of moves, resultingin a seasonal increase in our churn rates during the summer months when higherlevels of U.K. house moves occur and students leave their accommodation betweenacademic years.

 

# **CriticalAccounting Policies**

#  

Thepreparation of our consolidated financial statements requires us to makeestimates that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and contingentliabilities. We base our judgments on historical experience and on variousother assumptions that we believe are reasonable under the circumstances, theresults of which form the basis for making estimates about the carrying valuesof assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions orconditions.

 

For a discussion of the accounting judgments and estimates that we haveidentified as critical in the preparation of our consolidated financialstatements, please refer to our annual report on Form 10-K for the yearended December 31, 2008, as filed with the SEC on March 16, 2009.

 

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**Consolidated Results of Operations**

 

***Three Months Ended June 30,2009 and 2008***

 

We present below summarized consolidated financial information in U.S.dollars and U.K. pounds sterling for the three months ended June 30, 2009and 2008:

 
| ** **                                                                | ** ** | **Three  months ended** | ** ** | ** **     | ** ** | **Three  months ended** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------|------------|----------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                | ** ** | **June   30,**     | ** ** | **%**          | ** ** | **June   30,**     | ** ** | **%**      | ** ** |
| ** **                                                                | ** ** | **2009**                | ** ** | **2008**       | ** ** | **Change**              | ** ** | **2009**   | ** ** | **2008** | ** ** | **Change** | ** ** |
| ** **                                                                | ** ** | ** **              | ** ** | **(Adjusted)** | ** ** | ** **              | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** | ** ** | ** ** |
| Revenue                                                                   |       | $                       | 7,207,941  |           | $          | 8,694,107               |       | (17.1      | )          | £ | 4,649,494 |   | £ | 4,411,650 |   | 5.4 |   |
| Operating  costs                                                          |       | (2,850,604              | )          | (3,970,178     | )          | (28.2                   | )          | (1,836,157 | )          | (2,014,235 | ) | (8.8 | ) |
| Allocated  overhead                                                       |       | (2,647,252              | )          | (2,858,439     | )          | (7.4                    | )          | (1,711,133 | )          | (1,450,548 | ) | 18.0 |   |
| Management  fees                                                          |       | (360,397                | )          | (434,705       | )          | (17.1                   | )          | (232,475   | )          | (220,582 | ) | 5.4 |   |
| Selling,  general and administrative expenses                             |       | (24,788                 | )          | (23,537        | )          | 5.3                     |       | (15,541    | )          | (11,939 | ) | 30.2 |   |
| Operating  income                                                         |       | 1,324,900               |       | 1,407,248      |       | (5.9                    | )          | 854,188    |       | 714,346 |   | 19.6 |   |
| Interest  expense                                                         |       | (758,850                | )          | (1,135,840     | )          | (33.2                   | )          | (488,001   | )          | (576,367 | ) | (15.3 | ) |
| Exchange  losses                                                          |       | (271,236                | )          | (6,206         | )          |                    |       | (182,756   | )          | (3,144 | ) |   |   |
|                                                                      |       |                    |       |           |       |                    |       |       |       |   |   |   |   |
| Net  profit                                                               |       | 294,814                 |       | 265,202        |       | 11.2                    |       | 183,431    |       | 134,835 |   | 36.0 |   |
| Noncontrolling  interest                                                  |       | (213,825                | )          | (119,380       | )          | 79.1                    |       | (138,111   | )          | (60,556 | ) | 128.1 |   |
| Net  profit attributable to South Hertfordshire United Kingdom Fund, Ltd. |       | $                       | 80,989     |           | $          | 145,822                 |       | (44.5      | )          | £ | 45,320 |   | £ | 74,279 |   | (39.0 | ) |

 

*Revenue*

 

For the three months ended June 30, 2009, revenue decreased by17.1% to $7.2 million from $8.7 million for the three months ended June 30,2008, and revenue expressed in pounds sterling increased by 5.4% to £4.6million for the three months ended June 30, 2009 from £4.4 millionfor the three months ended June 30, 2008. The increase was primarily driven by selective price increases togetherwith a continued increase in triple-play customers.

 

*Expenses*

 

*Operatingcosts*

 

Operatingcosts include cost of goods sold and depreciation of fixed assets related tothe network. For the three months ended June 30, 2009, operating costsdecreased by 28.2% to $2.9 million from $4.0 million for the threemonths ended June 30, 2008, and operating costs expressed in poundssterling decreased by 8.8% to £1.8 million for the three months ended June 30,2009 from £2.0 million for the three months ended June 30, 2008.  The reduction in operating costs wasprimarily a reflection of lower depreciation, primarily as a result of fixedassets becoming fully depreciated. For the three months ended June 30,2009 and 2008, depreciation expense included in operating costs was $1,071,202,or £690,370, and $1,788,585, or £907,308, respectively.

 

*Allocatedoverhead*

 

Forthe three months ended June 30, 2009, allocated overhead decreased by 7.4%to $2.6 million from $2.9 million for the three months ended June 30,2008.  For the three months ended June 30,2009, allocated overhead expressed in pounds sterling increased by 18.0% to£1.7 million from £1.5 million for the three months ended June 30, 2008.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 group, including NTL South Herts, on a consistent andproportional basis according to the level of trading in that entity. Allocated overheadexpressed in pounds sterling increased in line with Virgin Media’s overall costbase as a result of higher network and other operating costs incurred by VirginMedia and also as a result of higher restructuring and other charges inconnection with Virgin Media’s restructuring program initiated in the fourthquarter of 2008.

 

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*Managementfees*

 

Forthe three months ended June 30, 2009, management fees decreased by 17.1%to $360,397 from $434,705 for the three months ended June 30, 2008,and management fees expressed in pounds sterling increased by 5.4% to £232,475for the three months ended June 30, 2009 from £220,582 for the threemonths ended June 30, 2008. Management fees are charged as a percentage of revenue and changes inmanagement fees are therefore a direct reflection of changes in revenue.

 

*Selling,general and administrative expenses*

 

For the three months ended June 30, 2009, selling, general andadministrative expenses increased to $24,788, or £15,541, from $23,537, or£11,939, for the three months ended June 30, 2008.  The increase was due to higher audit feespartially offset by a lower cost of investor relations’ services.

 

*Interest expense*

 

For the three months ended June 30, 2009, interest expensedecreased by 33.2% to $0.8 million from $1.1 million for the threemonths ended June 30, 2008, and interest expense expressed in poundssterling decreased by 15.3% to £0.5 million for the three months ended June 30,2009 from £0.6 million for the three months ended June 30, 2008.  This decrease was primarily due to a loweraccounts payable to affiliates and related parties balance, arising from increasedprofitability, together with lower interest rates.

 

We paid no cash interest for the three months ended June 30, 2009and 2008.

 

*Exchange losses*

 

For the three months ended June 30, 2009, foreign currencyexchange losses were $271,236, or £182,756, as compared with $6,206, or £3,144, for the three months ended June 30,2008.  The change in foreign currencyexchange losses was primarily attributable to fluctuations in the value of theU.S. dollar on certain of our liabilities and transactions.  The value of the U.S. dollar weakened byapproximately 11% against the pound sterling from December 31, 2008 to June 30,2009.  Our results of operations willcontinue to be affected by foreign exchange rate fluctuations.

 

*Noncontrolling interest*

 

During the three months ended June 30, 2009, the profitattributable to the noncontrolling interest was $213,825, or £138,111, comparedwith $119,380, or £60,556, for the three months ended June 30, 2008.

 

*Net profit attributable to South Hertfordshire UnitedKingdom Fund, Ltd.*

 

For the three months ended June 30, 2009, net profit attributableto South Hertfordshire United Kingdom Fund, Ltd. was $80,989, or £45,320, ascompared with $145,822, or £74,279, for the three months ended June 30,2008, primarily due to the reasons described above.

 

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***Six Months Ended June 30, 2009and 2008***

 

We present below summarizedconsolidated financial information in U.S. dollars and U.K. pounds sterling forthe six months ended June 30, 2009 and 2008:

 
| ** **                                                                | ** ** | **Six  months ended** | ** ** | ** **     | ** ** | **Six  months ended** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|-----------------------|------------|------------|------------|
| ** **                                                                | ** ** | **June   30,**   | ** ** | **%**          | ** ** | **June   30,**   | ** ** | **%**      | ** ** |
| ** **                                                                | ** ** | **2009**              | ** ** | **2008**       | ** ** | **Change**            | ** ** | **2009**   | ** ** | **2008** | ** ** | **Change** | ** ** |
| ** **                                                                | ** ** | ** **            | ** ** | **(Adjusted)** | ** ** | ** **            | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** | ** ** | ** ** |
| Revenue                                                                   |       | $                     | 13,830,045 |           | $          | 18,060,705            |       | (23.4      | )          | £ | 9,263,879 |   | £ | 9,145,124 |   | 1.3 |   |
| Operating  costs                                                          |       | (5,567,007            | )          | (7,893,989     | )          | (29.5                 | )          | (3,728,989 | )          | (3,997,159 | ) | (6.7 | ) |
| Allocated  overhead                                                       |       | (4,948,892            | )          | (6,027,743     | )          | (17.9                 | )          | (3,314,952 | )          | (3,052,177 | ) | 8.6 |   |
| Management  fees                                                          |       | (691,502              | )          | (903,035       | )          | (23.4                 | )          | (463,194   | )          | (457,256 | ) | 1.3 |   |
| Selling,  general and administrative expenses                             |       | (64,177               | )          | (44,224        | )          | 45.1                  |       | (42,988    | )          | (22,393 | ) | 92.0 |   |
| Operating  income                                                         |       | 2,558,467             |       | 3,191,714      |       | (19.8                 | )          | 1,713,756  |       | 1,616,139 |   | 6.0 |   |
| Interest  expense                                                         |       | (1,511,490            | )          | (2,367,105     | )          | (36.1                 | )          | (1,012,452 | )          | (1,198,595 | ) | (15.5 | ) |
| Exchange  losses                                                          |       | (231,508              | )          | (7,661         | )          |                  |       | (155,073   | )          | (3,879 | ) |   |   |
|                                                                      |       |                  |       |           |       |                  |       |       |       |   |   |   |   |
| Net  profit                                                               |       | 815,469               |       | 816,948        |       | (0.2                  | )          | 546,231    |       | 413,665 |   | 32.0 |   |
| Noncontrolling  interest                                                  |       | (403,498              | )          | (227,157       | )          | 77.6                  |       | (270,278   | )          | (115,022 | ) | 135.0 |   |
| Net  profit attributable to South Hertfordshire United Kingdom Fund, Ltd. |       | $                     | 411,971    |           | $          | 589,791               |       | (30.1      | )          | £ | 275,953 |   | £ | 298,643 |   | (7.6 | ) |

 

*Revenue*

 

For the six months ended June 30, 2009, revenue decreased by 23.4%to $13.8 million from $18.1 million for the six months ended June 30,2008, and revenue expressed in pounds sterling increased by 1.3% to £9.3million for the six months ended June 30, 2009 from £9.1 million forthe six months ended June 30, 2008. The increase was primarily driven by selective price increases togetherwith a continued increase in triple-play customers.

 

*Expenses*

 

*Operatingcosts*

 

Operatingcosts include cost of goods sold and depreciation of fixed assets related tothe network. For the six months ended June 30, 2009, operating costsdecreased by 29.5% to $5.6 million from $7.9 million for the sixmonths ended June 30, 2008, and operating costs expressed in poundssterling decreased by 6.7% to £3.7 million for the six months ended June 30,2009 from £4.0 million for the six months ended June 30, 2008.  The reduction in operating costs wasprimarily a reflection of lower depreciation, primarily as a result of fixedassets becoming fully depreciated. For the six months ended June 30, 2009and 2008, depreciation expense included in operating costs was $2,077,979, or£1,391,908, and $3,441,208, or £1,742,472, respectively.

 

*Allocatedoverhead*

 

Forthe six months ended June 30, 2009, allocated overhead decreased by 17.9%to $4.9 million from $6.0 million for the six months ended June 30, 2008.For the six months ended June 30, 2009, allocated overhead expressed inpounds sterling increased by 8.6% to £3.3 million from £3.1 million for the sixmonths ended June 30, 2008. The business of NTL South Herts is managed asan integral part of Virgin Media. The combined costs of managing the largergroup are allocated to each entity within the Virgin Media group, including NTLSouth Herts, on a consistent and proportional basis according to the level oftrading in that entity. Allocated overhead expressed in pounds sterlingincreased in line with Virgin Media’s overall cost base as a result of highernetwork and other operating costs incurred by Virgin Media and also as a resultof higher restructuring and other charges in connection with Virgin Media’srestructuring program initiated in the fourth quarter of 2008.

 

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*Managementfees*

 

Forthe six months ended June 30, 2009, management fees decreased by 23.4% to$691,502 from $903,035 for the six months ended June 30, 2008, andmanagement fees expressed in pounds sterling increased by 1.3% to £463,194 forthe six months ended June 30, 2009 from £457,256 million for the sixmonths ended June 30, 2008. Management fees are charged as a percentage of revenue and changes inmanagement fees are therefore a direct reflection of changes in revenue.

 

*Selling,general and administrative expenses*

 

For the six months ended June 30, 2009, selling, general andadministrative expenses increased to $64,177, or £42,988, from $44,224, or£22,393, for the six months ended June 30, 2008.  The increase was primarily due to higheraudit fees.

 

*Interest expense*

 

For the six months ended June 30, 2009, interest expense decreasedby 36.1% to $1.5 million from $2.4 million for the six months ended June 30,2008, and interest expense expressed in pounds sterling decreased by 15.5% to£1.0 million for the six months ended June 30, 2009 from £1.2 millionfor the six months ended June 30, 2008. This decrease was primarily due to a lower accounts payable toaffiliates and related parties balance, arising from increased profitability,together with lower interest rates.

 

We paid no cash interest for the six months ended June 30, 2009and 2008.

 

*Exchange losses*

 

For the six months ended June 30, 2009, foreign currency exchangeloses were $231,508, or £155,073, as compared with $7,661, or £3,879, for thesix months ended June 30, 2008.  Thechange in foreign currency exchange losses was primarily attributable tofluctuations in the value of the U.S. dollar on certain of our liabilities andtransactions.  The value of the U.S.dollar weakened by approximately 11% against the pound sterling from December 31,2008 to June 30, 2009.  Our resultsof operations will continue to be affected by foreign exchange ratefluctuations.

 

*Noncontrolling interest*

 

During the six months ended June 30, 2009, the profit attributableto the noncontrolling interest was $403,498, or £270,278, compared with$227,157, or £115,022, for the six months ended June 30, 2008.

 

*Net profit attributable to South Hertfordshire UnitedKingdom Fund, Ltd.*

 

For the six months ended June 30, 2009, net profit attributable toSouth Hertfordshire United Kingdom Fund, Ltd. was $411,971, or £275,953, ascompared with $589,791, or £298,643, for the six months ended June 30,2008, primarily due to the reasons described above.

 

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***Selected Operating Data***

 

The following table sets forth certain data concerning our residentialcable customers for the last five quarters:

 
| ** **                          | ** ** | **June 30,** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|-------------------------------------|------------|-------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|-------------------|------------|
| ** **                          | ** ** | **2009**          | ** ** | **2009**           | ** ** | **2008**              | ** ** | **2008**               | ** ** | **2008**          | ** ** |
| Homes  marketable (1)               |       | 95,603            |       | 95,554             |       | 96,178                |       | 96,197                 |       | 95,983            |       |
| Total  customers                    |       | 33,399            |       | 33,457             |       | 33,495                |       | 33,742                 |       | 34,326            |       |
| Digital  television subscribers     |       | 26,217            |       | 26,048             |       | 25,809                |       | 25,057                 |       | 24,763            |       |
| Analog  television subscribers      |       | —            |       | 5                  |       | 6                     |       | 350                    |       | 437               |       |
| Broadband  internet subscribers     |       | 26,785            |       | 26,613             |       | 26,355                |       | 26,026                 |       | 25,982            |       |
| Telephony  subscribers              |       | 29,284            |       | 29,245             |       | 29,232                |       | 29,082                 |       | 29,055            |       |
| Penetration  (homes marketable) (2) |       | 34.9              | %          | 35.0               | %          | 34.8                  | %          | 35.1                   | %          | 35.8              | %          |
| Average  monthly churn (3)          |       | 1.3               | %          | 1.2                | %          | 1.3                   | %          | 1.8                    | %          | 1.6               | %          |

 

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| (1)    | Homes marketable  represents management’s estimate of homes within our service area that can  potentially be served by our network with minimal connection costs.                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                        |
| (2)    | Penetration measures the  total number of customers for our services divided by the number of homes  marketable.                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                        |
| (3)    | Churn is calculated by  taking the total number of customers disconnecting from our services during  the month and dividing them by the average number of customers during the  month. Average monthly churn during the quarter is the average of the three  monthly churn calculations within the quarter. |

 

**Condensed Consolidated Statement of Cash Flows**

 

In the six months ended June 30, 2009, we generated $0.3 millionfrom our operating activities compared with $0.7 million in the six monthsended June 30, 2008, and used it to purchase fixed assets includingequipment for customer installations. Our cash provided by operating activities decreased primarily due to areduction in accounts payable to affiliates and related parties.

 

**Liquidity and Capital Resources**

 

We have no financing independent of Virgin Media.  We are reliant upon the support of VirginMedia to continue our operations.  As of June 30,2009, we had consolidated current liabilities of $45.9 million due to VirginMedia group companies compared with $43.8 million as of December 31, 2008and $62.6 million as of June 30, 2008.

 

Historically, our source of cash has been the net proceeds of ourofferings of limited partnership interests along with funding from Virgin Mediaand our principal uses of cash have been capital contributions to NTL SouthHerts in order to fund our proportionate share of the construction costs of theSouth Herts System and ongoing operations.

 

Until such time as NTL South Herts begins to pay dividends on itsordinary shares (which is not expected in the foreseeable future) we will berequired to fund our administrative expenses from borrowings or, theoretically,additional issuances of limited partnership interests.  It is unlikely that we will be able to selldebt or equity securities in the public markets, at least in the short term, orto obtain financing from commercial banks. Accordingly, we are dependent on Virgin Media for funds to coveroperating expenses, and will continue to be dependent upon Virgin Media to meetour liquidity requirements for the foreseeable future.  We expect that cash from our operations in 2009will be utilized fully for the purchase of fixed assets including connectingnew customers to our networks.

 

VirginMedia had £5,898.2 million of debt outstanding as of June 30, 2009,compared to £6,170.1 million as of December 31, 2008 and£5,918.0 million as of June 30, 2008, and £246.0 million of cashand cash equivalents as of June 30, 2009, compared to £181.6 million as ofDecember 31, 2008 and £426.8 million as of June 30, 2008.  The decrease in debt since June 30, 2008is primarily attributable to the voluntary prepayment of £300 million of seniorbank debt in December 2008 partially offset by movements in exchangerates.  The decrease in debt fromDecember 31, 2008 is primarily due to movements in exchange rates.

 

On June 3, 2009, Virgin Media issued $750 million aggregateprincipal amount of 9.50% senior notes due 2016 and €180 million aggregateprincipal amount of 9.50% senior notes due 2016.  On July 21, 2009, Virgin Media issued anadditional $600 million aggregate principal amount of 9.50% senior notes due2016 under the same terms as the notes issued on June 3, 2009.  Virgin Media used the net proceeds from the June 2009note issuance and the July 2009 note issuance, together with additionalcash reserves, to repay £608.5 million and £403.6 million, respectively, ofobligations under its senior credit facility that were originally scheduled tobe paid in 2010 and 2012.

 

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Virgin Media’s businessis capital intensive and it is highly leveraged. Virgin Media has significantcash requirements for operating costs, capital expenditures and interestexpense.  Virgin Media also hassignificant principal payments under its senior credit facility due from 2011to 2013, as described below. The levels of Virgin Media’s capital expendituresand operating expenditures are affected by the significant amounts of capitalrequired to connect customers to its network, expand and upgrade its networkand offer new services.  Virgin Mediaexpects that its cash on hand, together with cash from operations and amountsundrawn on its revolving credit facility, will be sufficient for its cashrequirements through June 30, 2010. However, Virgin Media’s cash requirements after June 30, 2010 mayexceed these sources of cash.

 

Significantprincipal payments under Virgin Media’s senior credit facility were due in 2010and 2011.  However, following theamendment of the terms of Virgin Media’s senior credit facility in November 2008,and subsequent satisfaction of the applicable prepayment conditions in June 2009,a significant portion of these payments was deferred to 2012.  Virgin Media expects to be able to addressthe remaining scheduled principal payments due in 2010 and 2011 through cashflow from operations.  However, if VirginMedia were unable to service these obligations through cash flow fromoperations, then it would need to secure additional funding such as raisingadditional debt or equity, refinancing its existing facility, selling assets orusing other means.  Virgin Media may notbe able to obtain financing or sell assets, at all or on favorable terms, ormay be contractually prevented by the terms of its senior notes or its seniorcredit facility from incurring additional indebtedness or selling assets. Virgin Mediaalso has significant principal payments due in 2012 under its senior creditfacility that it can address only by a comprehensive refinancing of its seniordebt and possibly other debt instruments. Virgin Media’s ability to implementsuch a refinancing successfully is significantly dependent on sustainedimprovements in the debt capital markets.

 

Virgin Media’s long term debt was issued by Virgin Media Inc. andcertain of its subsidiaries that have no independent operations or significantassets other than investments in their respective subsidiaries. As a result,Virgin Media will depend upon the receipt of sufficient funds from theirrespective subsidiaries to meet their obligations. In addition, the terms ofVirgin Media’s existing and future indebtedness and the laws of thejurisdictions under which its subsidiaries are organized limit the payment ofdividends, loan repayments and other distributions from them under manycircumstances.

 

Virgin Media’s debtagreements contain restrictions on its ability to transfer cash between groupsof its subsidiaries or to us.  As aresult of these restrictions, although its overall liquidity may be sufficientto satisfy its obligations, it may be limited by covenants in some of its debtagreements from transferring cash to other subsidiaries that might requirefunds.  In addition, cross defaultprovisions in its other indebtedness may be triggered if it defaults on any ofthese debt agreements.

 

For further information concerning Virgin Media’s liquidity and capitalresources and the terms of its various debt facilities, see the annual reportof Virgin Media Inc. on Form 10-K for the year ended December 31,2008, as filed with the SEC on February 26, 2009, and revised by thecurrent report on Form 8-K filed with the SEC on May 27, 2009, andits quarterly report on Form 10-Q for the three and six months ended June 30,2009, as filed with the SEC on August 7, 2009.

 

**Off-Balance Sheet Transactions**

 

As of June 30, 2009 and 2008, we had no off-balance sheetarrangements as defined in Item 303(a)(4) of Regulation S-Kunder the Securities Exchange Act of 1934, as amended.

 

**Contractual Obligations and Commercial Commitments**

 

There have been no material changes in the six months ended June 30,2009 to the information required under this Item from what was disclosed in ourannual report on Form 10-K for the year ended December 31, 2008, asfiled with the SEC on March 16, 2009.

 

**Item 3. ****Quantitativeand Qualitative Disclosures about Market Risk**

 

The functional currency of NTL South Herts is pounds sterling and allrevenue and substantially all costs are incurred in pounds sterling.  We report in U.S. dollars and are therefore,exposed to fluctuations in the pound sterling to U.S. dollar exchange rate.

 

The aggregate potential gain from a hypothetical one-percent decreasein the pound sterling/U.S. dollar exchange rate is approximately $9,000 for thesix months ended June 30, 2009.

 

We have no debt other than amounts due to affiliates.  As of June 30, 2009 and 2008, we hadapproximately $45.9 million and $62.6 million, respectively, in amountsdue to Virgin Media group companies. Interest on amounts due to affiliates is at a variable rate based on theaverage rate incurred by Virgin Media. Therefore we are exposed to changes in Virgin Media’s borrowingrate.  The aggregate potential loss froma hypothetical one-percentage point increase in the interest rate isapproximately $195,000 for the six months ended June 30, 2009.

 

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**Item 4. Controls and Procedures**

 

*(a) DisclosureControls and Procedures. *Our management,with the participation of the chief executive officer and principal financialofficer of Virgin Media*, has evaluated the effectiveness of our disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended, which werefer to as the Exchange Act) as of the end of the period covered by thisreport. Based on this evaluation, Virgin Media’s chief executive officer andprincipal financial officer have concluded that, as of the end of such period,these controls and procedures are effective to ensure that information requiredto be disclosed by us in the reports we file or submit under the Exchange Actis recorded, processed, summarized, and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms.These disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed byus in the reports that we file or submit is accumulated and communicated to ourmanagement, including Virgin Media’s chief executive officer and principalfinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

(b) *Changes in Internal Control Over FinancialReporting.*There were no changes in our internal control overfinancial 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 to materiallyaffect, our internal control over financial reporting.

 

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| * | The Partnership has no principal executive officer or  principal financial officer. Robert Mackenzie and Robert Gale are Directors  of Virgin Media Directors Limited, which is a Corporate Director 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 various disputes and litigationarising in the ordinary course of our business. While we do not believe any of these litigation matters alone or in theaggregate will have a material adverse effect on our financial position orresults of operation, any adverse outcome in one or more of these matters couldbe material to our consolidated financial statements for any one period.

 

**Item 1A.  RiskFactors**

 

There have been no material changes to the risk factors disclosed inour annual report on Form 10-K for the year ended December 31, 2008,as filed with the SEC on March 16, 2009.

 

**Item 2. Unregistered Sales of Equity Securities and use of Proceeds**

 

None.

 

**Item 3. Defaults Upon Senior Securities**

 

None.

 

**Item 4. Submission of Matters to a Vote of Security Holders**

 

No matters were submitted to a vote of our security holders in thequarter ended June 30, 2009.

 

**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 no principal executive officer or principal financial  officer. Robert Mackenzie and Robert Gale are Directors of Virgin Media  Directors Limited, which is a Corporate Director of NTL Fawnspring Limited,  the General Partner of the Partnership. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                      |
| **     | Filed herewith.                                                                                                                                                                                                                                                           |

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned 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:August 7, 2009

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates 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:August 7, 2009

 
|   | 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:August 7, 2009

 

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| * | The Partnership has no  principal executive officer or principal financial officer. Robert Mackenzie  and Robert Gale are Directors of Virgin Media Directors Limited, which is a  Corporate Director of NTL Fawnspring Limited, the General Partner of the  Partnership. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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