Table of Contents

 

 

 

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 

| **x**                                                                                                                                                                                                | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                 |                                                                                                     |
| **For the quarterly period ended March 31,  2010**                                                                                                                                              |
|                                                                                                                                                                                                 |                                                                                                     |
| **o**                                                                                                                                                                                                | **Transition  report pursuant to Section 13 or 15(d) of the Securities 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 markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such 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 May 5, 2010 was 56,935.

 

 

 

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**TABLE OFCONTENTS**

** **
| ** **                               | ** **                                                                                               | **Page  Number** |
|------------------------------------------|----------------------------------------------------------------------------------------------------------|------------------|
| **PART I.   FINANCIAL INFORMATION** | 5                                                                                                        |
| Item 1.                             | Financial Statements                                                                                     | 5                |
|                                     | Condensed Consolidated Balance Sheets as of  March 31, 2010 and December 31, 2009              | 5                |
|                                     | Condensed Consolidated Statements of Operations for  the Three Months Ended March 31, 2010 and 2009 | 6                |
|                                     | Condensed Consolidated Statements of Cash Flows for  the Three Months Ended March 31, 2010 and 2009 | 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                                              | 17               |
| Item 4.                             | Controls and  Procedures                                                                                 | 17               |
| **PART II.    OTHER INFORMATION**   | 18                                                                                                       |
| Item 1.                             | Legal Proceedings                                                                                        | 18               |
| Item 1A.                            | Risk Factors                                                                                             | 18               |
| Item 2.                             | Unregistered  Sales of Equity Securities and Use of Proceeds                                             | 18               |
| Item 3.                             | Defaults Upon  Senior Securities                                                                         | 18               |
| Item 4.                             | (Removed and Reserved)                                                                                   | 18               |
| Item 5.                             | Other Information                                                                                        | 18               |
| Item 6.                             | Exhibits                                                                                                 | 18               |
| SIGNATURES                               | 19                                                                                                       |

 

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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 SecuritiesLitigation Reform 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”, “expects”, “estimates”, “projects”, “positioned”, “strategy” andsimilar expressions identify these forward-looking statements, which involveknown and unknown risks, uncertainties and other factors that may cause ouractual results, performance or achievements or industry results to bematerially different from those contemplated, projected, forecasted, estimatedor budgeted, whether expressed or implied, by these forward-looking statements.These factors, among others, include:

 

·                  our reliance on thecontinued support of Virgin Media;

 

·                  the lack of an establishedtrading market for our partnership interests;

 

·                  conflicts of interestbetween us and Virgin Media and its affiliates;

 

·                  our reliance on a limitedfranchise 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’s ability tocompete with a range of other communications and content providers;

 

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

 

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

 

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

 

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

 

·                  Virgin Media’s reliance onthird-party suppliers and contractors to provide necessary hardware, softwareor operational support;

 

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

 

·                  Virgin Media’s ability tomanage customer churn;

 

·                  general economic conditions;

 

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

 

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

 

·                  currency and interest ratefluctuations;

 

·                  Virgin Media’s ability tofund debt service obligations and refinance its debt obligations;

 

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

 

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

 

These and other factors are discussed in more detailunder “Risk Factors” and elsewhere in our annual report on Form 10-K forthe year ended December 31, 2009, as filed with the Securities andExchange Commission, or SEC, on March 17, 2010. We assume no obligation toupdate our forward-looking statements to reflect actual results, changes inassumptions or changes in factors affecting these statements.

 

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** **

**Exchange Rates**

 

The following table sets forth, for the periodsindicated, the high, low, period average and period end noon buying rate in theCity of New York for cable transfers as certified for customs purposes by theFederal Reserve Bank of New York expressed as U.S. dollars per £1.00.  The noon buying rate of the pound sterling onMarch 31, 2010 was $1.5186 per £1.00.

 
| ** **                                  | ** ** | **U.S. dollars per £1.00** | ** ** |
|---------------------------------------------|------------|------------------------------------------------|------------|
| **Three  months ended March 31,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2009                                        |       | $                                              | 1.4300     |   | $ | 1.4330 |   | $ | 1.5254 |   | $ | 1.3658 |   |
| 2010                                        |       | 1.5186                                         |       | 1.5478 |   | 1.6370 |   | 1.4884 |   |
|                                             |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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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 inclusionof these exchange rates is not meant to suggest that the pound sterling amountsactually represent these U.S. dollar amounts or that these amounts could havebeen converted into U.S. dollars at any particular rate, if at all.

 

Unless we otherwise indicate, all U.K. poundsterling amounts as of March 31, 2010 are translated to U.S. dollars at anexchange rate of $1.5186 to £1.00, all amounts disclosed for the three monthsended March 31, 2010 are based on an average exchange rate of $1.5612 to£1.00, and all amounts disclosed for the three months ended March 31, 2009are based on an average exchange rate of $1.4351 to £1.00. All amountsdisclosed as of December 31, 2009 are based on an exchange rate of $1.6167to £1.00. All rates are based on the noon buying rate in the City ofNew York for cable transfers as certified for customs purposes by theFederal Reserve Bank of New York. The variation among the exchange rates for 2010 and 2009 has affectedthe U.S. dollar comparisons significantly.

 

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**PART I.  FINANCIALINFORMATION**

 

**ITEM1.  FINANCIAL STATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                              | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                                                                                              | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
| **Assets**                                                                                              |       |               |       |                  |       |
|                                                                                                    |       |               |       |                  |       |
| Deferred  tax asset                                                                                     |       | $                  | 1,218,502  |                  | $          | 1,626,861 |   |
| Fixed  assets, net                                                                                      |       | 39,533,524         |       | 42,685,169            |       |
| **Total assets**                                                                                        |       | 40,752,026         |       | 44,312,030            |       |
|                                                                                                    |       |               |       |                  |       |
| **Liabilities and Partners’ Capital**                                                              |       |               |       |                  |       |
| Current  liabilities                                                                                    |       |               |       |                  |       |
| Accounts  payable to affiliates and related parties                                                     |       | $                  | 37,616,882 |                  | $          | 41,618,716 |   |
| Total  liabilities                                                                                      |       | 37,616,882         |       | 41,618,716            |       |
|                                                                                                    |       |               |       |                  |       |
| **Partners’ Capital**                                                                              |       |               |       |                  |       |
| General  Partner                                                                                        |       |               |       |                  |       |
| Contributed  capital                                                                                    |       | 1,000              |       | 1,000                 |       |
| Accumulated  deficit                                                                                    |       | (474,822           | )          | (481,112              | )          |
|                                                                                                    |       | (473,822           | )          | (480,112              | )          |
| Limited  Partners                                                                                       |       |               |       |                  |       |
| Contributed  capital, net (56,935 units outstanding at March 31, 2010 and  December 31, 2009) |       | 48,817,997         |       | 48,817,997            |       |
| Accumulated  deficit                                                                                    |       | (46,726,330        | )          | (47,349,062           | )          |
|                                                                                                    |       | 2,091,667          |       | 1,468,935             |       |
|                                                                                                    |       |               |       |                  |       |
| Partners’  capital                                                                                 |       | 1,617,845          |       | 988,823               |       |
|                                                                                                    |       |               |       |                  |       |
| Accumulated  other comprehensive loss                                                                   |       | (1,006,697         | )          | (700,000              | )          |
| Total  South Hertfordshire United Kingdom Fund, Ltd. Partners’ capital                             |       | 611,148            |       | 288,823               |       |
|                                                                                                    |       |               |       |                  |       |
| Noncontrolling  interest                                                                                |       | 2,523,996          |       | 2,404,491             |       |
| Total  Partners’ capital                                                                           |       | 3,135,144          |       | 2,693,314             |       |
|                                                                                                    |       |               |       |                  |       |
| **Total Liabilities and Partners’ Capital**                                                        |       | $                  | 40,752,026 |                  | $          | 44,312,030 |   |

 

Seeaccompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                                                                                                               | ** ** | **Three  months ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                                                               | ** ** | **March 31,**      | ** ** |
| ** **                                                                                                                               | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                                                                                                               | ** ** | ** **              | ** ** | ** ** | ** ** |
| **Revenue**                                                                                                                              |       | $                       | 6,976,998  |   | $ | 6,622,104 |   |
|                                                                                                                                     |       |                    |       |   |   |
| **Costs and expenses**                                                                                                                   |       |                    |       |   |   |
| Operating  costs                                                                                                                         |       | (2,338,100              | )          | (2,716,403 | ) |
| Allocated  overhead                                                                                                                      |       | (2,500,725              | )          | (2,301,640 | ) |
| Management  fees                                                                                                                         |       | (348,850                | )          | (331,105 | ) |
| Selling,  general and administrative expenses                                                                                            |       | (97,036                 | )          | (39,389 | ) |
| **Operating income**                                                                                                                     |       | 1,692,287               |       | 1,233,567 |   |
|                                                                                                                                     |       |                    |       |   |   |
| **Other expenses**                                                                                                                       |       |                    |       |   |   |
| Interest  payable to General Partner and affiliates                                                                                      |       | (747,154                | )          | (752,640 | ) |
| Exchange  gains                                                                                                                          |       | 275,070                 |       | 39,728 |   |
|                                                                                                                                     |       |                    |       |   |   |
| **Net profit before taxes**                                                                                                              |       | 1,220,203               |       | 520,655 |   |
| Income  tax expense                                                                                                                      |       | (318,329                | )          | — |   |
|                                                                                                                                     |       |                    |       |   |   |
| **Net profit**                                                                                                                           |       | 901,874                 |       | 520,655 |   |
| ** **                                                                                                                               |       |                    |       |   |   |
| Less:  Profit attributable to noncontrolling interest                                                                                    |       | (272,852                | )          | (189,673 | ) |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd.**                                                            |       | $                       | 629,022    |   | $ | 330,982 |   |
|                                                                                                                                     |       |                    |       |   |   |
|                                                                                                                                     |       |                    |       |   |   |
| **Allocation of net profit attributable to South  Hertfordshire United Kingdom Fund, Ltd.**                                              |       |                    |       |   |   |
| General  Partner                                                                                                                         |       | $                       | 6,290      |   | $ | 3,310 |   |
| Limited  Partners                                                                                                                        |       | 622,732                 |       | 327,672 |   |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd.**                                                            |       | $                       | 629,022    |   | $ | 330,982 |   |
| ** **                                                                                                                               |       |                    |       |   |   |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd. allocated to limited partners per limited partnership unit** |       | $                       | 10.94      |   | $ | 5.76 |   |
| **Average number of limited partnership units outstanding**                                                                              |       | 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)**

 
| ** **                                                                         | ** ** | **Three  months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                         | ** ** | **March 31,**      | ** ** |
| ** **                                                                         | ** ** | **2010**                | ** ** | **2009** | ** ** |
|                                                                               | ** ** | ** **              | ** ** |   | ** ** |
| **Cash flows from operating activities**                                           |       |                    |       |   |   |
| Net  profit                                                                        |       | $                       | 901,874    |   | $ | 520,655 |   |
| Adjustments  to reconcile net profit to net cash provided by operating activities: |       |                    |       |   |   |
| Depreciation                                                                       |       | 1,117,774               |       | 1,006,777 |   |
| Deferred  income taxes                                                             |       | 318,329                 |       | — |   |
| Change  in operating assets and liabilities:                                       |       |                    |       |   |   |
| Decrease  in accounts payable to affiliates and related parties                    |       | (1,811,133              | )          | (1,386,647 | ) |
| **Net cash provided by operating activities**                                      |       | 526,844                 |       | 140,785 |   |
|                                                                               |       |                    |       |   |   |
| **Cash flows from investing activities**                                           |       |                    |       |   |   |
| Purchase  of fixed assets                                                          |       | (526,844                | )          | (140,785 | ) |
| **Net cash used in investing activities**                                          |       | (526,844                | )          | (140,785 | ) |
| Increase  (decrease) in cash and cash equivalents                                  |       | —                  |       | — |   |
| Cash  and cash equivalents at beginning of period                                  |       | —                  |       | — |   |
| Cash  and cash equivalents at end of period                                        |       | $                       | —     |   | $ | — |   |

 

Seeaccompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

 

**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, in connection with a public offering of its limited partnershipinterests.  The Partnership was formed toacquire, construct, develop, own and operate cable television/telephone systemsin the U.K. NTL Fawnspring Limited, a U.K. corporation and an indirect whollyowned subsidiary of Virgin Media Inc., is the general partner, or theGeneral Partner, of the Partnership.

 

We hold 66.7% of the shares of NTL (SouthHertfordshire) Limited, or NTL South Herts, which is principally engaged in thedevelopment, construction, management and operation of broadband communicationsnetworks for telephone, cable television and internet services in the U.K.  As 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 Inc. indirectly holds the remaining 33.3% of the shares ofNTL South Herts.  We are reliant on thesupport of Virgin Media Inc., the ultimate parent company of the GeneralPartner, to continue our operations as a going concern.

 

***Basis of Presentation***

 

We have prepared the accompanying unauditedcondensed consolidated financial statements in accordance with U.S. generallyaccepted accounting principles, or U.S. GAAP, for interim financial informationand with the rules and regulations of the Securities and ExchangeCommission, or SEC.  Accordingly, they donot include all of the information and footnotes required by U.S. GAAP forcomplete financial statements.  In theopinion of our management, all adjustments (consisting only of normal recurringadjustments) considered necessary for a fair presentation have been included.  Results of operations for the three monthsended March 31, 2010 are not necessarily indicative of results to beexpected for the full year ending December 31, 2010. For furtherinformation, refer to the consolidated financial statements and footnotesthereto included in our annual report on Form 10-K for the year ended December 31,2009, as filed with the SEC on March 17, 2010.

 

**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**                                                                                | ** ** |
|-------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **March 31,  2010**                                                                               | ** ** |
| ** **                                | ** ** | **Partners of South   Hertfordshire   United Kingdom   Fund, Ltd.** | ** ** | **Noncontrolling   interests** | ** ** | **Total** | ** ** |
|                                      |       |                                                                                                   |       |   | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                                                      | 629,022    |   | $ | 272,852 |   | $ | 901,874 |   |
| Foreign  currency translation adjustments |       | (306,697                                                                                               | )          | (153,347 | ) | (460,044 | ) |
| Comprehensive  profit                     |       | $                                                                                                      | 322,325    |   | $ | 119,505 |   | $ | 441,830 |   |

 
| ** **                                | ** ** | **Three  months ended**                                             | ** ** |
|-------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                | ** ** | **March 31,  2009**                                            | ** ** |
| ** **                                | ** ** | **Partners  of South   Hertfordshire   United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling    interests** | ** ** | **Total** | ** ** |
|                                      |       |                                                                |       |   | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                   | 330,982    |   | $ | 189,673 |   | $ | 520,655 |   |
| Foreign  currency translation adjustments |       | (24,281                                                             | )          | (12,141 | ) | (36,422 | ) |
| Comprehensive  profit                     |       | $                                                                   | 306,701    |   | $ | 177,532 |   | $ | 484,233 |   |

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

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

**(unaudited)**

 

**Note 3 — Transactions with the General Partnerand Affiliated Entities**

 

***Consulting and Management Fees***

 

An affiliate of the General Partner is entitled tobe paid a consulting fee by NTL South Herts. During the construction phases of the South Herts System, thisconsulting fee was 2% of construction costs. Since completion of construction of each portion of the system, theconsulting fee for the completed portion has been 5% of the gross revenue,excluding revenue from the sale of cable television/telephone systems.  The consulting fee is calculated and payablemonthly. Consulting fees paid or payable by NTL South Herts for the threemonths ended March 31, 2010 and 2009 were $348,850 and $331,105,respectively. These amounts were expensed in the condensed consolidated statementsof operations.

 

***Distribution Ratios and Reimbursement***

 

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

 

The General Partner and its affiliates are entitledto reimbursement from NTL South Herts for direct and indirect expensesallocable to the operation of the South Herts System, and from the Partnershipfor direct and indirect expenses allocable to the operation of the Partnershipwhich include, but are not limited to, salaries of any full or part-timeemployees, rent, supplies, telephone, travel, and restructuring and othercharges.  The General Partner believesthat the methodology used in allocating these expenses is fair andreasonable.  During the three monthsended March 31, 2010 and 2009, reimbursement made by NTL South Herts andthe Partnership to the General Partner or its affiliates for any allocabledirect and indirect expenses totaled $2,500,725 and $2,301,640, respectively.

 

The General Partner and its affiliates may makeadvances to, and defer collection of fees and allocated expenses owed by, thePartnership, although they are not required to do so. The Partnership ischarged interest on such advances and deferred amounts at a rate equal to theGeneral Partner’s or certain affiliates’ effective average cost of debtfinancing from unaffiliated entities, which does not differ from their weightedaverage cost of debt financing.  For thethree months ended March 31, 2010 and 2009, affiliates of the GeneralPartner charged the Partnership aggregated interest, bank fees and financecharges of $668,969 and $720,469, respectively, relating to non-permanentloans, and an affiliate of the General Partner charged the Partnership intereston advances of $78,185 and $32,171 respectively. The General Partner and itsaffiliates are entitled to recover interest on the full amount of non-permanentloans they provide to the Partnership or NTL South Herts and the portion ofbank fees and deferred financing costs relating to Virgin Media’s senior creditfacility allocable to the Partnership or NTL South Herts.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

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

**(unaudited)**

 

**Note 4 — Recent Accounting Pronouncements**

 

In September 2009, the Financial Accounting Standards Board, orFASB, ratified new accounting guidance for existing multiple-element revenuearrangements. The revised multiple-element revenue arrangements guidance willbe effective for the first annual reporting period beginning on or after June 15,2010 and may be applied retrospectively for all periods presented orprospectively to arrangements entered into or materially modified after theadoption date. Early adoption is permitted provided that the revised guidanceis retroactively applied to the beginning of the year of adoption. We have notyet adopted the provisions of this guidance and are evaluating the impact onour consolidated financial statements.

 

**Note 5 — Income taxes**

 

For the three months ended March 31, 2010, income tax expense was$318,329. The income tax expense relates to the partial utilization of thedeferred tax asset in respect of carried forward tax losses and taxdepreciation of NTL South Herts recognized as at December 31, 2009. Therewas no income tax expense for the three months ended March 31, 2009.

 

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**Item 2. Management’s Discussion and Analysis of Financial Condition andResults****of Operations**

 

**Overview**

 

We are a Colorado limitedpartnership that was formed in December 1991 pursuant to the publicoffering of our limited partnership interests for the purpose of acquiring oneor more cable television/telephone systems in the U.K. Upon acquisition of oursystem, our primary investment objective was to obtain capital appreciation inthe value of our investment in the system over the term that the investment isheld by us.

 

We hold 66.7% of the sharesof NTL South Herts, which is principally engaged in the development,construction, management and operation of broadband communications networks fortelephone, cable television and internet services in the U.K. As a result ofour ownership of 66.7% of the shares of NTL South Herts, for accountingpurposes we have consolidated the results of NTL South Herts with our results.Virgin Media Inc. indirectly holds the remaining 33.3% of the shares of NTLSouth Herts. We are reliant on the support of Virgin Media Inc., the ultimateparent company of the General Partner, to continue our operations as a goingconcern.

 

We derive our revenueprincipally from monthly fees and usage charges. 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 certaincosts that are charged to us by a subsidiary of Virgin Media Inc. for theprovision of network services and support, the use of Virgin Media’s nationalbackbone telephone network for carriage of our telephone traffic, as well asthe provision of technical infrastructure and network capacity by Virgin Mediafor our subscription internet access service and digital television services,the provision of corporate services, including finance, legal, human resourcesand facility services, and for the provision of IT services, including our useof the related IT systems and equipment. The principal components of VirginMedia’s expenses 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.

 

In the second quarter of2009, the General Partner agreed to the transfer of customer and suppliercontracts relating to NTL South Herts’ premium TV services, resulting in atransfer of revenue and costs to Future Entertainment Sarl, a wholly ownedsubsidiary of Virgin Media, which with effect from June 1, 2009, carriessubstantially all Virgin Media’s premium TV channels and associated revenue andcosts. This has resulted in a decline in revenues earned by NTL South Hertsalong with a decline in the costs incurred, but as these services were lossmaking, it has not been detrimental to the results of operations or financialposition of NTL South Herts.

 

**FactorsAffecting Our Business**

 

Our residential customersaccount for the majority of our total revenue. 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 bythe relative margins on the types of services we provide to these customers andby the number of services that we provide to them. For example, broadbandinternet is more profitable than our television services and, on average, our “triple-play”customers are more profitable than “double-play” or “single-play” customers. Ourpackaging of services and our pricing are designed to encourage our customersto use multiple services such as television, telephone and broadband at a lowerprice than each stand-alone product on a combined basis. Factors particularlyaffecting our business include general macroeconomic factors, currencymovements, integration and restructuring activities, churn, average revenue peruser, competition, capital expenditures and seasonality.

 

***General Macroeconomic Factors.***  General macroeconomic factors 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. We may also experience increased churn andhigher bad debt expense.

 

***Currency Movements.***  Because substantially all of our revenue andoperating costs are earned and paid in U.K. pounds sterling, but we report ourfinancial results in U.S. dollars, our financial results are impacted bycurrency fluctuations which are unrelated to our underlying results ofoperations.

 

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***Integration and Restructuring Activities.***  In the fourth quarter of 2008, Virgin Mediacommenced the implementation of a restructuring plan aimed at driving furtherimprovements in Virgin Media’s and our operational performance and eliminatinginefficiencies in order to create a fully-integrated, customer-focusedorganization.  Virgin Media anticipatessignificant cost savings from the plan and that the annual savings from andafter 2010 will exceed the annual costs incurred in connection with the plan.These costs will include purchases of fixed assets, lease and contract exitcosts, employee termination costs and other restructuring andrestructuring-related expenses, some of which will be classified asrestructuring costs. In total, Virgin Media expects to incur operatingexpenditures of between £140 million to £155 million and capitalexpenditures of between £40 million to £45 million in connection withthis plan over a three-year period. Virgin Media’s and our financialperformance may be negatively affected if Virgin Media is unable to implementits restructuring plan successfully and realize the anticipated benefits.

 

***Capital Expenditures.***  Our business requires substantial capitalexpenditures on a continuing basis for various purposes, including expanding,maintaining and upgrading our cable network, investing in new customeracquisitions, and offering new services. If Virgin Media and we do not continueto invest in our network and in new technologies, our ability to retain andacquire 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 our liquidity is restricted, so is ourability to meet our capital expenditure requirements.

 

***Churn.***  Churn is theproportion of customers who stop subscribing to any of our services. Anincrease in our churn can lead to increased costs and reduced revenue. Wecontinue to focus on improving our customer service and enhancing and expandingour service offerings to existing customers in order to manage our churn rates.Our ability to reduce our churn rates beyond a base level is limited by factorssuch as competition, the economy and customers moving outside our networkservice area, in particular during the summer season. Managing our churn ratesis a significant component of our business plan. Our churn rates may increaseif our customer service is seen as unsatisfactory, if we are unable to delivera service without interruption, if we fail to match offerings by ourcompetitors, 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.***  Averagerevenue per user, or ARPU, is a measure Virgin Media uses to evaluate howeffectively it is realizing potential revenue from its residential cablecustomers on its network. Virgin Media believes that its “triple-play” cableoffering 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.***  Ourability to acquire and retain customers and increase revenue depends on ourcompetitive strength. There is significant and increasing competition in themarket for our consumer services, including broadband and telephone servicesoffered by BT Group plc, or BT; resellers or local loop unbundlers, such asBritish Sky Broadcasting Group plc, or BSkyB, and Talk Talk Telecom GroupPLC; alternative internet access services like DSL; satellite televisionservices offered by BSkyB and by BBC and ITV through Freesat; free-to-airdigital terrestrial television offered through Freeview; and internet protocoltelevision offered by BT. In addition, certain competitors, such as BT andBSkyB, are dominant in markets in which we compete and may use their dominancein those markets to offer bundled services that compete with our productofferings. As a result of increased competition, we have had to, and may berequired to continue to, adjust our pricing and offer discounts to new andexisting customers in order to attract and retain customers.

 

***Seasonality.***  Somerevenue streams are subject to seasonal factors. For example, telephone usagerevenue by residential customers tends to be slightly lower during summerholiday months. Our churn rates include persons who disconnect their servicebecause of moves, resulting in a seasonal increase in our churn rate during thesummer months when higher levels of U.K. house moves occur and students leavetheir accommodation between academic years.

 

# **Critical Accounting Policies**

#  

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

 

For a discussion of theaccounting judgments and estimates that we have identified as critical in thepreparation of our consolidated financial statements, please refer to ourannual report on Form 10-K for the year ended December 31, 2009, asfiled with the SEC on March 17, 2010.

 

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**ConsolidatedResults of Operations**

 

***Three Months Ended March 31, 2010 and 2009***

 

We present below summarizedconsolidated financial information in U.S. dollars and U.K. pounds sterling forthe three months ended March 31, 2010 and 2009:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | ** ** | ** ** | **Three months ended** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|------------------------|------------|------------|------------|------------------------|------------|------------|------------|
| ** **                                   | ** ** | **March  31,**    | ** ** | **%**      | ** ** | **March  31,**    | ** ** | **%**      | ** ** |
| ** **                                   | ** ** | **2010**               | ** ** | **2009**   | ** ** | **Change**             | ** ** | **2010**   | ** ** | **2009** | ** ** | **Change** | ** ** |
|                                         | ** ** | ** **             | ** ** | ** ** | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                      |       | $                      | 6,976,998  |       | $          | 6,622,104              |       | 5.4        |       | £ | 4,468,997 |   | £ | 4,614,385 |   | (3.2 | ) |
| Operating costs                              |       | (2,338,100             | )          | (2,716,403 | )          | (13.9                  | )          | (1,497,630 | )          | (1,892,832 | ) | (20.9 | ) |
| Allocated overhead                           |       | (2,500,725             | )          | (2,301,640 | )          | 8.6                    |       | (1,601,797 | )          | (1,603,819 | ) | (0.1 | ) |
| Management fees                              |       | (348,850               | )          | (331,105   | )          | 5.4                    |       | (223,450   | )          | (230,719 | ) | (3.2 | ) |
| Selling, general and administrative expenses |       | (97,036                | )          | (39,389    | )          | 146.4                  |       | (62,155    | )          | (27,447 | ) | 126.5 |   |
| Operating income                             |       | 1,692,287              |       | 1,233,567  |       | 37.2                   |       | 1,083,965  |       | 859,568 |   | 26.1 |   |
| Interest expense                             |       | (747,154               | )          | (752,640   | )          | (0.7                   | )          | (478,577   | )          | (524,451 | ) | (8.7 | ) |
| Exchange gains                               |       | 275,070                |       | 39,728     |       |                   |       | 176,191    |       | 27,683 |   |   |   |
| Income tax expense                           |       | (318,329               | )          | —     |       |                   |       | (203,900   | )          | — |   |   |   |
|                                         |       |                   |       |       |       |                   |       |       |       |   |   |   |   |
| Net profit                                   |       | 901,874                |       | 520,655    |       | 73.2                   |       | 577,679    |       | 362,800 |   | 59.2 |   |
| Noncontrolling interest                      |       | (272,852               | )          | (189,673   | )          | 43.9                   |       | (174,771   | )          | (132,167 | ) | 32.2 |   |
| Net profit attributable to South Herts       |       | $                      | 629,022    |       | $          | 330,982                |       | 90.0       |       | £ | 402,908 |   | £ | 230,633 |   | 74.7 |   |

 

*Revenue*

 

For the three months ended March 31,2010, revenue increased by 5.4% to $7.0 million from $6.6 million for thethree months ended March 31, 2009, and revenue expressed in poundssterling decreased by 3.2% to £4.5 million for the three months ended March 31,2010 from £4.6 million for the three months ended March 31, 2009. Thedecrease in sterling revenue was primarily driven by the impact on revenue ofthe transfer, in the second quarter of 2009, of customer and supplier contractsrelating to the NTL South Herts’ premium TV services to Future EntertainmentSarl, a wholly owned subsidiary of Virgin Media Inc., partially offset by theimpact of continued growth in customer numbers and triple-play customers.

 

*Expenses*

 

*Operating costs*

 

Operating costs include cost of goods sold anddepreciation of fixed assets related to the network. For the three months endedMarch 31, 2010, operating costs decreased by 13.9% to $2.3 millionfrom $2.7 million for the three months ended March 31, 2009, andoperating costs expressed in pounds sterling decreased by 20.9% to£1.5 million for the three months ended March 31, 2010 from£1.9 million for the three months ended March 31, 2009. The reductionin operating costs was primarily driven by the impact on cost of goods sold ofthe transfer, in the second quarter of 2009, of customer and supplier contractsrelating to NTL South Herts’ premium TV services to Future Entertainment Sarl,a wholly owned subsidiary of Virgin Media Inc. For the three months ended March 31,2010 and 2009, depreciation expense included in operating costs was $1,117,774,or £715,971, and $1,006,777, or £701,538, respectively.

 

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* *

*Allocated overhead*

 

For the three months ended March 31, 2010,allocated overhead increased by 8.6% to $2.5 million from $2.3 million for thethree months ended March 31, 2009 and allocated overhead expressed inpounds sterling, of £1.6 million, was unchanged.  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 sterling wasunchanged which is in line with Virgin Media’s cost base which was alsorelatively unchanged.

 

*Management fees*

 

For the three months ended March 31, 2010,management fees increased by 5.4% to $348,850 from $331,105 for the threemonths ended March 31, 2009, and management fees expressed in poundssterling decreased by 3.2% to £223,450 for the three months ended March 31,2010 from £230,719 for the three months ended March 31, 2009. Managementfees are charged as a percentage of revenue and changes in management fees aretherefore a direct reflection of changes in revenue.

 

*Selling, general and administrative expenses*

 

For the three months ended March 31,2010, selling, general and administrative expenses increased to $97,036, or£62,155, from $39,389, or £27,447, for the three months ended March 31,2009. The increase was primarily due to higher audit fees.

 

*Interestexpense*

 

For the three months ended March 31,2010, interest expense decreased by 0.7% to $747,154 from $752,640 for thethree months ended March 31, 2009, and interest expense expressed inpounds sterling decreased by 8.7% to £478,577 for the three months ended March 31,2010 from £524,451 for the three months ended March 31, 2009. Thisdecrease was primarily due to a lower accounts payable to affiliates andrelated parties balance, arising from increased profitability of the operatingentity.

 

We paid no cash interest forthe three months ended March 31, 2010 and 2009.

 

*Exchangegains*

 

For the three months ended March 31,2010, foreign currency exchange gains were $275,070, or £176,191, as comparedwith gains of $39,728, or £27,683, for the three months ended March 31,2009. The change in foreign currency exchange gains was primarily attributableto fluctuations in the value of the U.S. dollar on certain of our liabilitiesand transactions. The value of the U.S. dollar strengthened by approximately 7%against the pound sterling from December 31, 2009 to March 31, 2010.Our results of operations will continue to be affected by foreign exchange ratefluctuations.

 

*Income tax expense*

 

For the three months ended March 31,2010, income tax expense was $318,329 or £203,900. The income tax expenserelates to the partial utilization of the deferred tax asset in respect ofcarried forward tax losses and tax depreciation of NTL South Herts recognizedas at December 31, 2009. There was no income tax expense for the threemonths ended March 31, 2009.

 

*Noncontrollinginterest*

 

During the three monthsended March 31, 2010, the profit attributable to the noncontrollinginterest was $272,852, or £174,771 compared with $189,673, or £132,167, for thethree months ended March 31, 2009. This was due to the increasedprofitability of the operating entity.

 

*Net profitattributable to South Hertfordshire United Kingdom Fund, Ltd.*

 

For the three months ended March 31,2010, net profit attributable to South Hertfordshire United Kingdom Fund, Ltd.was $629,022 or £402,908 as compared with $330,982, or £230,633, for the threemonths ended March 31, 2009, primarily due to the reasons described above.

 

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***SelectedOperating Data***

 

The following table setsforth certain data concerning our residential cable customers for the last fivequarters:

 
| ** **                     | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March 31,** | ** ** |
|--------------------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|
| ** **                     | ** ** | **2010**           | ** ** | **2009**              | ** ** | **2009**               | ** ** | **2009**          | ** ** | **2009**           | ** ** |
|                           | ** ** | ** **         | ** ** | ** **            |       |                   |       |              |       |               |       |
| Total customers                |       | 34,160             |       | 33,668                |       | 33,476                 |       | 33,399            |       | 33,457             |       |
| Digital television subscribers |       | 27,418             |       | 26,911                |       | 26,602                 |       | 26,217            |       | 26,048             |       |
| Analog television subscribers  |       | —             |       | —                |       | —                 |       | —            |       | 5                  |       |
| Broadband internet subscribers |       | 28,235             |       | 27,511                |       | 27,090                 |       | 26,785            |       | 26,613             |       |
| Telephony subscribers          |       | 30,059             |       | 29,646                |       | 29,424                 |       | 29,284            |       | 29,245             |       |
| Average monthly churn (1)      |       | 1.1                | %          | 1.4                   | %          | 1.5                    | %          | 1.3               | %          | 1.2                | %          |

 

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(1)          Churn is calculated by takingthe total number of customers disconnecting from our services during the monthand dividing them by the average number of customers during the month. Averagemonthly churn during the quarter is the average of the three monthly churncalculations within the quarter.

 

**CondensedConsolidated Statement of Cash Flows**

 

In the three months ended March 31,2010, we generated $526,844 from our operating activities compared with$140,785 in the three months ended March 31, 2009, which was used topurchase fixed assets including equipment for customer installations. Our cashprovided by operating activities increased primarily due to an improvedoperating result.

 

**Liquidity and Capital Resources**

 

***Outstanding Indebtedness***

 

We have no financingindependent of Virgin Media. We are reliant upon the support of Virgin Media tocontinue our operations. As of March 31, 2010, we had consolidated currentliabilities of $37.6 million due to Virgin Media group companies comparedwith $41.6 million as of December 31, 2009 and $41.6 million as of March 31,2009.

 

Historically, our source ofcash has been the net proceeds of our offerings of limited partnershipinterests along with funding from Virgin Media and our principal uses of cashhave been capital contributions to NTL South Herts in order to fund ourproportionate share of the construction costs of the South Herts System andongoing operations.

 

Accordingly, until such timeas NTL South Herts begins to pay dividends on its ordinary shares (which is notexpected in the foreseeable future) we will be required to fund ouradministrative expenses from borrowings or, theoretically, additional issuancesof limited partnership interests. It is unlikely that we will be able to selldebt or equity securities in the public markets, at least in the short term, orto obtain financing from commercial banks. Accordingly, we are dependent onVirgin Media for funds to cover operating expenses, and will continue to be dependentupon Virgin Media to meet our liquidity requirements for the foreseeablefuture. We expect that cash from our operations in 2010 will be utilized fullyfor the purchase of fixed assets including connecting new customers to ournetworks.

 

Virgin Media’s business iscapital intensive and it is highly leveraged. Virgin Media has significant cashrequirements for operating costs, capital expenditures and interest expense.Virgin Media believes that it will be able to meet its current and medium-termliquidity and capital requirements, including fixed charges, through cash onhand, cash from operations, available borrowing under its revolving creditfacility, and its ability to obtain future external financing.

 

Virgin Media had£6,146.9 million of debt outstanding as of March 31, 2010, comparedto £5,974.7 million as of December 31, 2009 and £6,180.0 millionas of March 31, 2009, and £420.7 million of cash and cashequivalents, compared to £430.5 million as of December 31, 2009 and£139.6 million as of March 31, 2009. The decrease in debt since March 31,2009 is due to repayments offset by adverse movements in exchange rates. Theincrease in debt from December 31, 2009 is primarily due to adversemovements in exchange rates.

 

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On January 19, 2010,Virgin Media issued approximately £1.5 billion equivalent aggregate principalamount of senior secured notes in a private placement to qualifiedinstitutional buyers pursuant to Rule 144A under the U.S. Securities Actof 1933, as amended, or, the Securities Act, and outside the United States tocertain non-U.S. persons pursuant to Regulation S under the Securities Act. Thenotes were issued by Virgin Media’s wholly owned subsidiary Virgin MediaSecured Finance PLC in two tranches: $1.0 billion of 6.50% senior secured notesdue 2018 and £875 million of 7.00% senior secured notes due 2018,collectively referred to as the senior secured notes. For more information see “Management’sDiscussion and Analysis of Financial Condition and Results of Operations —Liquidityand Capital Resources —Senior Secured Notes” in Virgin Media’s quarterly reporton Form 10-Q as filed with the SEC on May 6, 2010. The net proceedsfrom the issuance of the senior secured notes were used to repay£1,453.0 million of Virgin Media’s obligations under its senior facilitiesagreement dated March 3, 2006, as amended and restated, or the old seniorcredit facility.

 

On April 19, 2010,Virgin Media drew down an aggregate principal amount of £1,675.0 million undera new senior facilities agreement dated March 16, 2010, as amended andrestated, or the new senior credit facility, and applied the proceeds towardsthe repayment in full of all amounts outstanding under its old senior creditfacility and for general corporate purposes. The new senior credit facilitycomprises a term loan A facility in an aggregate principal amount of£1,000 million, a term loan B facility in an aggregate principal amount of£675 million and a revolving credit facility in an aggregate principal amountof £250 million. For more information see *“*Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Liquidityand Capital Resources — Senior Credit Facility” in Virgin Media’s quarterlyreport on Form 10-Q as filed with the SEC on May 6, 2010.

 

Virgin Media has alsonotified the holders of its senior notes due 2014 of its intention to redeemthe full outstanding principal amount of such senior notes on May 12,2010, using cash from its balance sheet. For more information see “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Liquidityand Capital Resources**—**Unsecured Senior Notes” in Virgin Media’s quarterly reporton Form 10-Q as filed with the SEC on May 6, 2010.

 

Virgin Media’s long termdebt was issued by Virgin Media Inc. and certain of its subsidiaries thathave no independent operations or significant assets other than investments intheir respective subsidiaries and receivables under intercompany loans.  As a result, they depend upon the receipt ofsufficient funds from their respective subsidiaries or payments underintercompany loans to meet their obligations. In addition, the terms of VirginMedia’s existing and future indebtedness and the laws of the jurisdictionsunder which its subsidiaries are organized limit the payment of dividends, loanrepayments and other distributions from them under many circumstances.

 

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

 

For further informationconcerning Virgin Media’s liquidity and capital resources and the terms of itsvarious debt facilities, including the new senior credit facility, see itsannual report on Form 10-K for the year ended December 31, 2009 asfiled with the SEC on February 26, 2010, and its quarterly report on Form 10-Qfor the three months ended March 31, 2010, as filed with the SEC on May 6,2010.

 

**Off-BalanceSheet Transactions**

 

As of March 31, 2010and 2009, we had no off-balance sheet arrangements as defined inItem 303(a)(4) of Regulation S-K under the Securities ExchangeAct of 1934, as amended.

 

**ContractualObligations and Commercial Commitments**

 

There have been no materialchanges in the three months ended March 31, 2010 to the informationrequired under this Item from what was disclosed in our annual report on Form 10-Kfor the year ended December 31, 2009, as filed with the SEC on March 17,2010.

 

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**Item3. ****Quantitativeand Qualitative Disclosures about Market Risk**

 

The functional currency ofNTL South Herts is pounds sterling and all revenue and substantially all costsare incurred in pounds sterling.  We reportin U.S. dollars and are therefore exposed to fluctuations in the pound sterlingto U.S. dollar exchange rate.

 

The aggregate potential lossfrom a hypothetical one-percent decrease in the pound sterling/U.S. dollarexchange rate is approximately $36,000 for the three months ended March 31,2010.

 

We have no debt other thanamounts due to affiliates.  As of March 31,2010 and 2009, we had approximately $37.6 million and $41.6 million,respectively, in amounts due to Virgin Media group companies. Interest onamounts due to affiliates is at a variable rate based on the average rateincurred by Virgin Media.  Therefore weare exposed to changes in Virgin Media’s borrowing rate.  The aggregate potential loss from ahypothetical one-percentage point increase in the interest rate isapproximately $99,000 for the three months ended March 31, 2010.

 

**Item4.  Controls and Procedures**

 

*(a) DisclosureControls and Procedures. *Our management,with the participation of the chief executive officer and chief financial officerof Virgin Media*, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended, which we refer to as theExchange Act) as of the end of the period covered by this report. Based on thisevaluation, Virgin Media’s chief executive officer and chief financial officerhave concluded that, as of the end of such period, these controls andprocedures are effective to ensure that information required to be disclosed byus in the reports we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission’s rules and forms. These disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by us in thereports that we file or submit is accumulated and communicated to ourmanagement, including Virgin Media’s chief executive officer and chieffinancial 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 tomaterially affect, our internal control over financial reporting.

 

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*                                         The Partnershiphas no principal executive officer or principal financialofficer. Robert Mackenzie and Robert Gale are Directors of NTL FawnspringLimited, the General Partner of the Partnership.

 

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**PART II. OTHER INFORMATION**

 

**Item1.  Legal Proceedings**

 

We are involved invarious disputes and litigation arising in the ordinary course of ourbusiness.  While we do not believe any ofthese litigation matters alone or in the aggregate will have a material adverseeffect on our financial position or results of operation, any adverse outcomein one or more of these matters could be material to our consolidated financialstatements for any one period.

 

**Item1A.  Risk Factors**

 

There have been nomaterial changes in the risk factors discussed under “Risk Factors” andelsewhere in our annual report on Form 10-K for the year ended December 31,2009, as filed with the SEC on March 17, 2010.

 

**Item2.  Unregistered Sales of EquitySecurities and use of Proceeds**

 

None.

 

**Item3.  Defaults Upon Senior Securities**

 

None.

 

**Item4.  (Removed and Reserved)**

 

**Item5.  Other Information**

 

None.

 

**Item6.  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  Chief 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 executiveofficer or principal financial officer. Robert Mackenzie and Robert Galeare Directors of NTL Fawnspring Limited, the General Partner of thePartnership.

 

**                                  Filed herewith.

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

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

 

Date: May 11, 2010

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated.

 
|                    | By:    | /s/ ROBERT MACKENZIE                                                                                                                    |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                    |   | Robert Mackenzie *Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire United Kingdom Fund, Ltd.** |
|                    |   |                                                                                                                                    |
| Date: May 11, 2010 |   |                                                                                                                                    |
|                    |   |                                                                                                                                    |
|                    | By:    | /s/ ROBERT GALE                                                                                                                         |
|                    |   | Robert Gale*Director of NTL Fawnspring Limited, the  General Partner of South Hertfordshire United Kingdom Fund, Ltd.**       |

 

Date: May 11, 2010

 

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*                                         The Partnershiphas no principal executive officer or principal financialofficer. Robert Mackenzie and Robert Gale are Directors of NTL FawnspringLimited, the General Partner of the Partnership.

 

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